UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended March 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
Commission File Number: 0-19542
APPLE SOUTH, INC.
(Exact name of registrant as specified in its charter)
Georgia 59-2778983
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Hancock at Washington, Madison, GA 30650
(Address of principal executive offices) (Zip Code)
706-342-4552
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
- --------------------------------------------------------------------------------
As of May 14, 1997, there were 38,337,143 shares of common stock of the
Registrant outstanding.
<PAGE>
APPLE SOUTH, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 30, 1997
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements:
Consolidated Statements of Earnings.............. ...........3
Consolidated Balance Sheets....................... ..........4
Consolidated Statements of Shareholders' Equity..............5
Consolidated Statements of Cash Flows........................6
Notes to Consolidated Financial Statements......... .........7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations...............10
Part II - Other Information
Item 2 - Changes in Securities.......................................12
Item 6 - Exhibits and Reports on Form 8-K............................13
Signatures............................................................14
Page 2
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Statements of Earnings
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Quarter Ended
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Mar. 30, Mar. 31,
1997 1996
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<S> <C> <C>
Restaurant sales:
Applebee's $ 111,784 89,577
Don Pablo's 40,402 27,095
McCormick & Schmick's 7,324 -
Hops 4,729 -
Harrigan's 5,140 5,773
Other 2,074 3,888
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Total restaurant sales 171,453 126,333
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Restaurant operating expenses:
Food and beverage 47,847 34,732
Payroll and benefits 52,338 37,666
Depreciation and amortization 6,845 5,295
Other operating expenses 39,558 28,621
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Total restaurant operating expenses 146,588 106,314
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General and administrative expenses 8,614 6,442
Asset revaluation charges - 19,800
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Operating income (loss) 16,251 (6,223)
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Other income (expense):
Interest expense (4,302) (1,943)
Interest income 51 57
Other, net (657) (478)
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Total other income (expense) (4,908) (2,364)
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Earnings (loss) before income taxes 11,343 (8,587)
Income taxes 4,075 (3,100)
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Net earnings (loss) $ 7,268 (5,487)
====================================================================================================================================
Primary earnings (loss) per common share $ 0.19 (0.14)
====================================================================================================================================
Average number of common shares used in primary calculation 38,888 39,905
===================================================================================================================================
Fully-diluted earnings (loss) per common share $ 0.19 (0.14)
====================================================================================================================================
Average number of common shares used in fully-diluted calculation 38,902 40,197
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Mar. 30, Dec. 29,
1997 1996
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 9,435 3,923
Short-term investments 37 52
Accounts receivable 7,937 4,568
Inventories 8,581 6,364
Prepaid expenses and other 10,805 9,780
- ------------------------------------------------------------------------------------------------------------------------------
Total current assets 36,795 24,687
Premises and equipment, net 440,036 380,523
Franchise costs, net 6,023 5,880
Goodwill, net 135,534 36,351
Other assets 16,844 10,386
- ------------------------------------------------------------------------------------------------------------------------------
$ 635,232 457,827
==============================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 18,365 16,688
Accrued liabilities 38,399 22,887
Current installments of long-term debt 233 286
Income taxes - 320
- ------------------------------------------------------------------------------------------------------------------------------
Total current liablilites 56,997 40,181
Long-term debt 249,996 215,891
Deferred income taxes 10,326 10,326
Interest of minority partners 2,067 -
- ------------------------------------------------------------------------------------------------------------------------------
Total liabilities 319,386 266,398
- ------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities
of Apple South Financing I 115,000 -
Shareholders' equity:
Preferred stock, $0.01 par value. Authorized 10,000,000 shares;
none issued - -
Common stock, $0.01 par value. Authorized 75,000,000 shares;
40,456,106 issued in 1997 and 39,124,925 issued in 1996 404 391
Additional paid-in capital 146,073 132,976
Retained earnings 77,936 70,981
Treasury stock at cost; 2,138,479 shares in 1997 and 677,508
shares in 1996 (23,567) (12,919)
- ------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 200,846 191,429
- ------------------------------------------------------------------------------------------------------------------------------
$ 635,232 457,827
==============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Statements of Shareholders' Equity
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Additional Total
Common Stock Paid-in Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 29, 1996 39,125 $391 $132,976 $70,981 ($12,919) $191,429
Net earnings - - - 7,268 - 7,268
Purchase of common stock - - - - (15,640) (15,640)
Issuance of common stock for acquisitions 1,298 13 16,323 - - 16,336
Common stock issued to ESOP 23 - 300 - - 300
Exercise of options 10 - (4,374) - 4,992 618
Tax effect of exercise of options by employees - - 848 - - 848
Cash dividends ($0.008 per share) - - - (313) - (313)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at March 30, 1997 40,456 $404 $146,073 $77,936 ($23,567) $200,846
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
Quarter Ended
- ----------------------------------------------------------------------------------------------------------------------------------
Mar. 30, Mar. 31,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 7,268 (5,487)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,825 6,201
Deferred income taxes - (2,692)
Asset revaluation charges - 17,842
(Increase) decrease in assets:
Accounts receivable (1,954) 184
Inventories (571) (630)
Prepaid expenses and other (45) (951)
Increase (decrease) in liabilities:
Accounts payable (4,584) (712)
Accrued liabilities 2,700 3,661
Income taxes (210) (815)
Other long-term liabilities 164 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 10,593 16,601
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Cash flows from investing activities:
Capital expenditures (26,369) (26,871)
Acquisition of businesses, net of cash acquired (106,240) -
Proceeds from sale of land and equipment - 429
Decrease in short-term investments 15 192
Additions to franchise costs (239) (302)
Additions to other assets (5,341) (2,490)
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Net cash used in investing activities (138,174) (29,042)
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Cash flows from financing activities:
Net proceeds from revolving credit agreements 33,500 22,000
Proceeds from issuance of preferred securities 115,000 -
Principal payments on long-term debt (372) (1,217)
Proceeds from issuance of common stock 918 820
Dividends declared and paid (313) (235)
Purchase of treasury stock (15,640) (8,215)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 133,093 13,153
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents during the period 5,512 712
Cash and cash equivalents at the beginning of the period 3,923 4,806
----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $ 9,435 5,518
==================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 30, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual financial statement
reporting purposes. However, there has been no material change in the
information disclosed in the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 29, 1996,
except as disclosed herein. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the quarter ended March
30, 1997 are not necessarily indicative of the results that may be expected for
the year ending December 28, 1997.
NOTE 2 - BUSINESS COMBINATIONS
On March 3, 1997, the Company acquired all of the outstanding shares of
McCormick & Schmick Holding Corp. ("McCormick & Schmick's"), an Oregon-based
restaurant company, for $53.3 million, including $50.1 million in cash and
248,139 shares of Apple South, Inc. common stock, plus the assumption of
approximately $15.0 million in debt. McCormick & Schmick's operates 16
full-service upper-end casual seafood restaurants in four states plus
Washington, D.C.
On March 13, 1997, the Company acquired the Hops Grill & Bar restaurant
system ("Hops Grill & Bar"), for $29.5 million which included $16.3 million in
cash and 1.05 million shares of Apple South, Inc. common stock, plus the
assumption of approximately $28.9 million in debt. The accompanying consolidated
financial statements reflect minority interest equal to the proportionate share
of the subsidiary's net assets not owned by Apple South. The Florida-based
company operates 21 full-service casual dining restaurants in four states.
Both acquisitions were accounted for using the purchase method of
accounting. Accordingly, a portion of the purchase price was allocated to the
net assets acquired based on their estimated fair values. At March 30, 1997 the
Company had not finalized its evaluation of the fair value of tangible and
intangible assets acquired and liabilities assumed. Based on the preliminary
estimates, the fair value of tangible assets acquired and liabilities assumed
was $49.4 million and $22.4 million, respectively. The remaining estimated
excess of purchase price over net assets acquired, $99.7 million, was recorded
as goodwill and is being amortized on a straight-line basis over 40 years. The
40 year amortization period represents the estimated future periods to be
benefited and was determined to be appropriate based on the absence of any legal
or contractual provisions which would indicate a shorter useful life.
The following pro forma information presents a summary of consolidated
results of operations of the Company and the acquired businesses as if the
acquisitions had occurred as of the beginning of the periods presented, after
the impact of certain adjustments, such as: expensing rather than capitalizing
and amortizing preopening expenses, amortization of goodwill, interest expense
on the proceeds of the Convertible Preferred Securities (see Note 5),
elimination of interest on a portion of the acquisition debt assumed, and the
related income tax effects (amounts in thousands, except per share data):
March 30, March 31,
1997 1996
-------- ---------
Total restaurant sales $190,438 $150,218
Income from restaurant operations $ 26,883 $ 23,918
Net earnings (loss) $ 7,012 $ (5,311)
Primary earnings (loss) per common share $ 0.18 $ (0.14)
Fully-diluted earnings (loss) per common share $ 0.18 $ (0.14)
Page 7
<PAGE>
NOTE 3 - SHAREHOLDERS' EQUITY
In 1996, the Board of Directors authorized the purchase of up to two
million shares of the Company's common stock through open market transactions to
satisfy obligations under stock option and employee stock ownership plans. In
March 1997, this repurchase program was completed and the Company announced a
separate 750,000 share repurchase program. As of March 30, 1997, the Company had
purchased an aggregate 2.6 million shares of its common stock under these
programs at an average price of $17.61 per share. In April 1997, the Company
completed its announced stock repurchase programs.
Cash dividends declared and paid in the quarter ended March 30, 1997 were
$313,000, or $0.008 per share. On April 29, 1997, the Company declared a cash
dividend of $0.01 per share, payable on May 30, 1997, to shareholders of record
on May 15, 1997.
NOTE 4 - LONG-TERM DEBT
At March 30, 1997, approximately $123 million was outstanding under the
Company's $190 million unsecured revolving bank credit facilities.
NOTE 5 - TERM CONVERTIBLE SECURITIES
In March 1997, the Company issued 2,300,000, $3.50 Term Convertible
Securities, Series A (the "Convertible Preferred Securities"). Proceeds to the
Company, after deducting underwriters' fees of approximately $3.7 million, were
$111.3 million. These securities are convertible at an initial rate of 3.3801
shares of Apple South common stock for each Convertible Preferred Security. The
proceeds of the offering were used to repay revolving loan advances used for the
acquisition of McCormick & Schmick's and to finance the acquisition of Hops
Grill & Bar, including in each case retirement of acquired company debt.
NOTE 6 - INCOME TAXES
The Company's effective tax rate for the first quarter of 1997 and 1996 was
approximately 36%. The Company's effective tax rate for the full year 1997 is
expected to be 36%, which approximates the effective tax rate on 1996 earnings
before asset revaluation charges.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
For the quarters ended March 30, 1997 and March 31, 1996, the following
supplements the consolidated statements of cash flows (amounts in thousands):
1997 1996
- --------------------------------------------------------------------------------
Interest paid $ 675 2,079
- --------------------------------------------------------------------------------
Income taxes paid $ 3,907 407
- --------------------------------------------------------------------------------
Business acquisitions, net of cash acquired
Fair value of assets acquired, other than cash $ 47,166 -
Liabilities assumed (22,379) -
Merger consideration payable (1,891) -
Stock issued (16,335) -
Purchase price in excess of the net assets acquired 99,679 -
- --------------------------------------------------------------------------------
Net cash used for acquisitions $ 106,240 -
================================================================================
Page 8
<PAGE>
NOTE 8 - COMMITMENTS
At March 30, 1997, the Company was obligated under development agreements
with Applebee's International, Inc., the franchisor of Applebee's restaurants,
to open 27 additional Applebee's restaurants by the end of 1997.
NOTE 9 - EARNINGS PER SHARE
Primary earnings per common share equals net earnings divided by the
weighted average number of common shares outstanding after giving effect to
dilutive stock options. Fully diluted earnings per common share is computed by
giving effect to dilutive stock options and by adjusting both net earnings and
shares outstanding as if the Convertible Preferred Securities were converted at
the date of issuance. The Company expects the Convertible Preferred Securities
to be slightly dilutive (on a fully-dilutive basis) beginning in the second
quarter of 1997.
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"), is effective for financial statements issued for periods ending
after December 15, 1997. SFAS 128 requires all entities to provide dual
disclosure of earnings per share, basic and fully-diluted. Basic earnings per
share equals net earnings divided by the weighted average number of common
shares outstanding and does not include the dilutive effect of stock options.
Fully diluted earnings per share is essentially the same as under APB 15 as
discussed above. The Company has evaluated the impact of this pronouncement for
1997 and expects a slight increase in basic earnings per share, as compared to
primary earnings per share, and no impact on fully diluted earnings per share.
Page 9
<PAGE>
Item 2.
APPLE SOUTH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 30, 1997
Comparison of Historical Results - Fiscal quarters ended March 30, 1997 and
March 31, 1996
Restaurant sales for the first quarter of 1997 increased 36% to $171
million from $126 million for the same period in 1996. This $45 million increase
for 1997 is primarily due to sales from 7 Applebee's and 3 Don Pablo's opened in
the first quarter of 1997 and 34 Applebee's and 15 Don Pablo's opened in the
last three quarters of 1996. In addition, sales for the quarter included one
month of sales for 16 McCormick & Schmick's restaurants and 21 Hops Grill & Bar
restaurants, acquired during the first quarter of 1997. First quarter sales were
also slightly effected by the closing of two Harrigan's restaurants, one due to
fire damage and one coinciding with a lease expiration. In addition, sales for
the first quarter of 1996 included fifteen restaurants in the Tomato Rumba's
division which were closed in March 1996 and six additional locations which were
closed in July 1996.
Average weekly sales at base restaurants (those open for a full 12 months
at the beginning of 1997) were approximately 3% and 6% higher for Applebee's and
Don Pablo's respectively, in the first quarter of 1997 as compared with the same
period in 1996. Average weekly sales at all restaurants were approximately 2%
higher for Applebee's and 6% higher for Don Pablo's for the first quarter of
1997 compared to the first quarter of 1996. Management believes that the sales
increases are attributable to initiatives begun in the third quarter of 1996 to
refocus the Applebee's division on guest and employee satisfaction, as well as
increased advertising in both the Applebee's and Don Pablo's divisions.
For the first quarter of 1997 restaurant operating expenses as a percent of
sales increased 1.3% to 85.5% as compared with the 84.2% for the same period in
1996. The resulting decrease in restaurant operating margins is principally due
to (i) higher food and beverage costs as a percentage of sales at Applebee's,
attributable to higher cost steak promotions in 1997, (ii) an increase in labor
costs at Applebee's related to higher staffing levels in conjunction with the
increased customer focus initiative begun in the third quarter of 1996 and (iii)
increased advertising expenses as a percent of sales in both the Applebee's and
Don Pablo's divisions.
The asset revaluation charge in 1996 is related to the Company's decision
to redeploy its assets in the Tomato Rumba's division and to accelerate its
efforts to sell the Hardee's division . The resulting pre-tax charge of $19.8
million consisted primarily of asset impairment loss recorded in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of" and
included certain operating losses related to the Tomato Rumba's division.
Interest expense increased to $4.3 million compared to $1.9 million for the
same period in 1996 due to the net effect of (i) higher average borrowings as a
result of Company expansion, (ii) higher average borrowing rates associated with
longer-term financing instruments and (iii) the favorable results of an interest
rate contract. The higher average borrowing rates are due to the May 1996
issuance of $125 million of 9.75% senior notes. In addition, the Company issued
$115 million of 7.0% Convertible Preferred Securities during March 1997 to
finance acquisitions, for which the 7% carrying cost is included in interest
expense.
The Company's effective tax rate for the full year 1997 is expected to be
36%, which approximates the effective tax rate on 1996 earnings before asset
revaluation charges.
Net earnings as a percent of sales increased to 4.2% in 1997 from a net
loss of 4.3% for the same period in 1996. In addition to the factors discussed
above, the increase was primarily a result of the $19.8 million of asset
revaluation expenses (15.7% of sales, before tax) recorded during the first
quarter of 1996.
Page 10
<PAGE>
Liquidity and Capital Resources
The Company's cash and cash equivalents increased approximately $5.5
million in the quarter ended March 30, 1997. Principal sources of funds in the
first quarter of 1997 consisted of (i) cash flow from operations ($10.6
million), (ii) proceeds from the issuance of the Convertible Preferred
Securities ($115.0 million) and (iii) additional borrowings under the Company's
revolving credit facilities ($33.5 million). The primary uses of funds consisted
of (i) costs associated with expansion, principally land, building and equipment
associated with the construction of new Applebee's and Don Pablo's restaurants
($26.4 million), (ii) additions to other assets, including issuance costs
related to the Convertible Preferred Securities, ($5.3 million), (iii) the
acquisitions of McCormick & Schmick's and Hops Grill & Bar ($106.2 million) and
(iv) the purchase of 1.1 million shares of treasury stock ($15.6 million).
In March 1997, the Company acquired all of the outstanding shares of
McCormick & Schmick's and a majority of the outstanding shares of Hops Grill &
Bar restaurants. McCormick & Schmick's, based in Oregon, is one of the nation's
largest upper-end seafood restaurant groups, operating 16 restaurants in Oregon,
Washington, California, Colorado and Washington, D.C. McCormick & Schmick's was
acquired for $53.3 million, including $50.1 million in cash and 248,139 shares
of Apple South common stock, plus the assumption of approximately $15.0 million
in debt. Hops Grill & Bar, based in Florida and consisting of 21 restaurants
that feature an on-premises microbrewery, was acquired for $29.5 million in cash
and 1.05 million shares of Apple South common stock, plus the assumption of
approximately $28.9 million in debt.
Since substantially all sales in the Company's restaurants are for cash and
accounts payable are generally due in 15 to 45 days, the Company is able to
operate with negative working capital. The increases in inventory, premises and
equipment, franchise costs, and accrued liabilities are primarily attributable
to the 10 restaurants opened during the first quarter. In addition, the first
quarter acquisitions of McCormick & Schmick's and Hops Grill & Bar also had a
significant impact on balance sheet accounts, resulting in increases to accounts
receivable ($1.1 million), inventories ($1.8 million), premises and equipment
($41.6 million), goodwill ($99.7 million), accounts payable ($5.8 million) and
accrued liabilities ($6.4 million). The increase in other assets is principally
due to issuance costs related to the Convertible Preferred Securities ($3.8
million) and an increase in cash surrender value of an officer's life insurance
policy ($0.9 million). Interest of minority partners represents the minority
portion of Hops Grill & Bar not owned by Apple South. Further increases in
current assets and liabilities are expected as the Company continues its
restaurant development program.
At March 30, 1997, Apple South was obligated, under development agreements
with Applebee's International, Inc., the franchisor of Applebee's restaurants,
to open 122 additional Applebee's restaurants by the end of the year 2000,
including a total of 34 required to be opened during 1997. As of March 30, 1997,
the Applebee's division had opened seven new restaurants.
In March 1997, the Company issued $115 million of tax deductible,
Convertible Preferred Securities. The Company has available unsecured revolving
bank credit agreements totaling $190 million with interest payable at a margin
above LIBOR or at prime. At March 30, 1997, approximately $123 million was
outstanding under the revolving bank credit agreements. Management believes that
cash flow from operations and remaining borrowings available under the existing
credit facilities will provide funding sufficient to enable Apple South to carry
out current expansion plans through the third quarter of 1998.
Page 11
<PAGE>
New Accounting Pronouncement
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"), is effective for financial statements issued for periods ending
after December 15, 1997. SFAS 128 requires all entities to provide dual
disclosure of earnings per share, basic and fully-diluted. Basic earnings per
share equals net earnings divided by the weighted average number of common
shares outstanding and does not include the dilutive effect of stock options.
Fully diluted earnings per share is essentially the same as under APB 15 (see
Note 9). The Company has evaluated the impact of this pronouncement for 1997 and
expects a slight increase in basic earnings per share, as compared to primary
earnings per share, and no impact on fully diluted earnings per share.
Forward-Looking Information
Management believes that inflation has not had a material effect on
earnings during the past several years. Inflationary increases in the cost of
labor, food and other operating costs could adversely affect the Company's
restaurant operating margins. In the past, however, the Company generally has
been able to modify its operations to offset increases in its operating costs.
The information contained herein includes certain forward-looking
information regarding restaurant openings, operating margins, capital
requirements, cash flow from operations and assumptions regarding the
availability of new credit facilities. This forward looking information could be
affected by changes in monetary and fiscal policies, laws and regulations, and
social and economic conditions, such as inflation or a recession, increased
competition in the restaurant industry, the current trend toward "dining out"
and the amount, type and cost of financing available to the Company.
Part II. Other Information
Item 2. Changes in Securities
(a) Not applicable.
(b) In connection with the issuance of $3.50 Term Convertible Securities
by Apple South Financing I, on March 11, 1997, the Company issued 7%
Convertible Subordinated Debentures due March 1, 2027 ("Convertible
Debentures") to Apple South Financing I. See paragraph (c) below for a
description of this transaction. The company, at its option, may defer
interest payments on the Convertible Debentures for up to twenty
consecutive quarters. If such interest payments are deferred, the
Company will be prohibited from paying any dividend on, or making any
other distribution with respect to, the Company's Common Stock until
all deferred interest is paid.
(c) On March 3, 1997, the Company issued 248,139 shares of the Company's
common stock,$0.01 par value per share, to five stockholders of
McCormick & Schmick Holding Corp. as partial consideration for a
merger transaction whereby McCormick & Schmick Holding Corp. became a
wholly-owned subsidiary of the Company. The Company also paid
approximately $50.1 million in cash to the stockholders of McCormick &
Schmick Holding Corp. These shares of common stock were issued in an
unregistered, non-public offering in which no underwriters
participated. The shares were issued pursuant to exemptions under
Sections 4(2) and 4(6) of the Securities Act of 1933 and Rule 506
promulgated thereunder. The shares were issued only to accredited
investors without any general solicitation or advertising and the
Company took reasonable care to assure the purchasers were not
underwriters. See Note 2 of the Notes to Financial Statements for
further information regarding this transaction.
Page 12
<PAGE>
On March 11, 1997, Apple South Financing I, a Delaware statutory
business trust created by the Company for the purpose of such
financing (the "Trust"), issued and sold 2,300,000 $3.50 Term
Convertible Securities, Series A ("Convertible Preferred Securities")
for $115 million ($50 per Preferred Security). The Convertible
Preferred Securities were not registered under the Securities Act of
1933 in reliance upon Rule 144A and Regulation S of the Securities and
Exchange Commission. The Convertible Preferred Securities were sold
only (i) to qualified institutional buyers ( as defined in Rule 144A
and (ii) to persons other than U.S. persons outside the United States.
The Trust used the proceeds of the sale of the Convertible Preferred
Securities to purchase from the Company $115 million in 7% convertible
Subordinated Debentures due March 12, 2027 (Convertible Debentures) of
the Company. The Company has guaranteed certain obligations of the
Trust to holders of the Convertible Preferred Securities. The Company
owns all of the common securities of the Trust. The Convertible
Preferred Securities are convertible (through the conversion of the
Convertible Debentures by the Trust) into common stock of the Company
at the rate of 3.3801 shares of common stock for each Convertible
Preferred Security. The Convertible Preferred Securities were offered
by J.P. Morgan Securities, Inc., and Smith Barney Inc. as initial
purchasers. Compensation of $3,737,500 ($1.625 per Convertible
Preferred Security) was paid to the initial purchasers by the Company.
On March 13, 1997, the Company issued 1,050,000 shares of Apple South,
Inc. common stock, $0.01 par value, to the four shareholders of
several corporations owning portions of the Hops Grill & Bar
restaurant group ("Hops") as partial consideration for a transaction
whereby those corporations merged into a wholly-owned subsidiary of
the Company. The Company also paid approximately $16.3 million in cash
to the owners of Hops. These shares of common stock were issued in an
unregistered, non-public offering in which no underwriters
participated. The shares were issued pursuant to exemptions under
Sections 4(2) and 4(6) of the Securities Act of 1933 and Rule 506
promulgated thereunder. The shares were issued only to accredited
investors without any general solicitation or advertising and the
Company took reasonable care to assure that the purchasers were not
underwriters. See Note 2 to the Notes to Financial Statements for
further information regarding this transaction.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
2.1 Agreement and Plan of Merger among Apple South, Inc., M&S Acquisition
of Delaware Inc., and McCormick & Schmick Holding Corp., et.al.,dated
February 6, 1997.
2.2 Agreements and Plan of Merger among Apple South, Inc., HG Acquisition
Corp., and Mason and Schelldorf Leasing Company, Hops Restaurants,
Inc., et. al., dated February 6, 1997.
27.1 Financial Data Schedule
(b) The Company filed a Current Report on Form 8-K, dated February 7, 1997,
which disclosed, pursuant to Rule 135c promulgated under the Securities
Act of 1933 (the "Act"), the Company's intention to make an offering of
securities not registered under the Act.
The Company filed a Current Report on Form 8-K, dated February 19,
1997, which disclosed, pursuant to Item 5 of Form 8-K, the Company's
acquisition of McCormick & Schmick's for approximately $53 million plus
the assumption of $15 million in debt and the acquisition of Hops Grill
& Bar for approximately $31.5 million plus the assumption of $26.5
million of debt. The Form 8-K included financial statements of the
businesses acquired and pro forma financial information.
Page 13
<PAGE>
Signature
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.
Apple South, Inc.
(Registrant)
Date: May 21, 1997 By: /s/ Erich J. Booth
---------------------
Erich J. Booth
Chief Financial Officer, Treasurer
/s/ Philip L. Ammons
---------------------
Philip L. Ammons
Chief Accounting Officer
Page 14
<PAGE>
EXHIBIT INDEX
2.1 Agreement and Plan of Merger among Apple South, Inc., M&S Acquisition
of Delaware Inc., and McCormick & Schmick Holding Corp., et.al.,dated
February 6, 1997.
2.2 Agreements and Plan of Merger among Apple South, Inc., HG Acquisition
Corp., and Mason and Schelldorf Leasing Company, Hops Restaurants,
Inc., et. al., dated February 6, 1997.
27.1 Financial Data Schedule
Page 15
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made
and entered into as of the 6th day of February, 1997, by and among (1) APPLE
SOUTH, INC., a Georgia corporation ("Apple South"), (2) M&S ACQUISITION OF
DELAWARE, INC., a Delaware corporation wholly owned by Apple South ("Merger
Sub"), (3) McCORMICK & SCHMICK HOLDING CORP., a Delaware corporation (the
"Company"), (4) WILLIAM P. McCORMICK ("McCormick"), WILLIAM McCORMICK
IRREVOCABLE TRUST, WILLIAM McCORMICK CHARITABLE REMAINDER TRUST NO. 2, DOUGLAS
SCHMICK IRREVOCABLE TRUST, and DOUGLAS SCHMICK CHARITABLE REMAINDER TRUST NO. 2,
who hold a majority of the Class B Common Stock of the Company (collectively the
"Accredited Class B Shareholders"), and (4)THE OTHER SHAREHOLDERS OF THE COMPANY
ALL OF WHOM APPEAR AS SIGNATORIES AT THE FOOT OF THIS AGREEMENT (collectively
with the Accredited Class B Shareholders, the "Shareholders " ), and
(5) DOUGLAS L. SCHMICK ("Schmick"),
W I T N E S S E T H:
WHEREAS, Company is engaged in the business of owning and
operating seventeen upper-end casual seafood restaurants (collectively, the
"Business"); and
WHEREAS, Apple South desires to acquire the Company, and the
Shareholders desire to sell the Company to Apple South;
WHEREAS, Apple South, Shareholders, and the Company deem it
advisable and in their respective best interests to effect the sale of the
Company through the merger of Merger Sub with and into the Company, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the premises, and
the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. THE MERGER
1.1. The Merger. At the Effective Time, as defined in
Paragraph 3.4, upon the terms and subject to the conditions set forth herein,
and in accordance with the corporate Laws of the State of Delaware (the
"Corporate Laws"), Merger Sub shall be merged with and into the Company, the
separate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (the "Merger"). Merger Sub and the Company are
sometimes hereafter referred to as the "Constituent Corporations" and the
Company after the Merger is sometimes hereafter referred to as the "Surviving
Corporation."
<PAGE>
1.2. Effect of the Merger. At the Effective Time, the
Surviving Corporation shall continue its corporate existence under the Laws of
the State of Delaware and shall possess all the rights, privileges, powers, and
franchises of a public as well as of a private nature, and be subject to all the
restrictions, disabilities, and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers, and franchises of each of the
Constituent Corporations, and all property, real, personal, and mixed, and all
debts due to either of the Constituent Corporations on whatever account, as well
as for stock subscriptions and all other things in action or belonging to each
of the Constituent Corporations, shall be vested in the Surviving Corporation,
and all property, rights, privileges, powers, and franchises, and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise in either of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of either of the Constituent
Corporations shall be preserved unimpaired, and all debts, liabilities, and
duties of the Constituent Corporations shall thereafter attach to the Surviving
Corporation, and may be enforced against it to the same extent as if such debts
and liabilities had been incurred by it.
2. THE SURVIVING CORPORATION
2.1. Articles. The certificate of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the certificate of
incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable Law.
2.2. Bylaws. The bylaws of the Company as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable Law.
2.3. Board of Directors. The persons whose names are set forth on Exhibit A
shall constitute the board of directors of the Surviving Corporation immediately
following the Merger.
2.4. Officers. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation.
3. MERGER CONSIDERATION; CONVERSION
3.1. Company Shares. (a) At the Effective Time, by virtue of the Merger,
and without any action on the part of the Holders, all of the issued and
outstanding shares (other than treasury shares) of capital stock of the Company
(the "Shares") shall be canceled and retired and shall be converted into and
become the right to receive the Merger Consideration described in this Article
3, and the Holders shall have no further rights with respect to the Shares
except the right to receive the Merger Consideration. All shares of the
Company's capital stock that are held by the Company
<PAGE>
as treasury shares shall be canceled at the Effective Time and no Merger
Consideration shall be paid with respect thereto.
(b) At the Closing, as defined in Paragraph 3.4, Apple South
shall deliver the Merger Consideration (less that amount delivered to the Escrow
Agent pursuant to Paragraph 3.5 and less expenses under Paragraphs 4.1 and 4.2)
due to those Holders who have surrendered for cancellation certificates
representing their Shares accompanied by blank stock powers. The Merger
Consideration due to any Holder who does not so surrender certificates
evidencing his Shares at Closing (less two percent thereof which shall be
delivered to the Escrow Agent at Closing in accordance with Paragraph 3.5) shall
be held by Apple South for such Holder pending the surrender of such
certificates.
3.2. Merger Consideration. (a) The "Merger Consideration"
shall be (A) $43,006,550 delivered by wire transfer to accounts designated in
writing to Apple South by Holders or by check, and (B) the number of shares of
Apple South's common stock, $0.01 par value per share ("Apple South Stock"),
determined by dividing (i) $3,210,327 by (ii) the average of the closing sales
prices (the "Average Price"), without regard to volume (adjusted for any stock
splits or other reclassification during the applicable time period) for shares
of Apple South's common stock on the Nasdaq Stock Market as reported by The Wall
Street Journal, for each of the five consecutive trading days preceding the
trading day prior to the Closing Date. No fractional shares shall be issued, and
an amount in cash (if any) shall be paid in lieu thereof equal to such
fractional part of a share multiplied by the Average Price.
b) The Merger Consideration shall be allocated among the Holders as
follows:
(i) $7,500,000 in cash to the Holders of the Company's Preferred Stock;
(ii) $30,319,754 in cash to the Holders of the Company's Class A Common
Stock;
(iii) $3,210,327 in Apple South Stock (valued at the Average Price) to the
Accredited Class B Shareholders, $1,605,163 in cash to the Accredited Class B
Shareholders, and $535,055 in cash to the other holders of the Company's Class B
Common Stock; and
(iv) $3,046,578 in cash to the Holders of the Company's Class C Common
Stock.
(c) Each payment of Merger Consideration allocated to the Holders of each
class of capital stock of the Company shall be allocated among the Holders pro
rata in accordance with their respective ownership of shares of such class.
However, in no event shall any Apple South Stock be allocated or issued to any
Holder who is not an "accredited investor" as defined in Rule 501 of Regulation
D of the Securities and Exchange Commission ("SEC"). Any such non-accredited
Holder
<PAGE>
shall receive all cash and the portion of the Merger Consideration consisting of
Apple South Stock shall be allocated proportionately among the Holders of such
class who are accredited investors.
3.3. Merger Sub Shares. Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one fully paid and nonassessable share of Class A Common Stock of
Surviving Corporation.
3.4. Closing. Subject to termination of this Agreement pursuant to Article
11, the consummation of the transactions contemplated in this Agreement (the
"Closing") shall take place at the offices of Kilpatrick Stockton LLP, 1100
Peachtree Street, Suite 2800, Atlanta, Georgia, at 10:00 a.m., Atlanta time, on
the second Business Day after all the conditions set forth in Articles 8 and 9
hereof have been satisfied or waived or on such other date upon which parties
hereto may mutually agree. On the date of the Closing, the Company and Merger
Sub shall file the documents required by the Corporate Laws to effect the
Merger. The Merger shall become effective at the time of filing of such
documents (the "Effective Time").
3.5 Escrow. At the Closing, two percent of the Merger
Consideration (including two percent of those shares of Apple South Stock
constituting part of the Merger Consideration), in such amount for each Holder
as shall be set forth on a schedule to the Escrow Agreement, shall be delivered
to the Escrow Agent to be held and disbursed by it in accordance with the terms
of an Escrow Agreement in substantially the form attached hereto as Exhibit B
and mutually acceptable to Apple South and the Shareholders Representative on
behalf of the Holders (the "Escrow Agreement").
4. ADDITIONAL AGREEMENTS
4.1. Expenses. Except as otherwise provided herein, all
expenses incurred by Apple South and Merger Sub in connection with the
negotiations among the parties, and the authorization, preparation, execution,
and performance of this Agreement and the transactions contemplated hereby shall
be paid by Apple South. Except as otherwise provided herein, all expenses
incurred by the Holders or the Company in connection with the negotiations among
the parties, and the authorization, preparation, review, execution, and
performance of this Agreement and other related documents and the transactions
contemplated hereby (except for such expenses as relate to post-Closing
employment of any Holder or other employee of the Company, which shall be paid
by the Surviving Corporation) shall be paid by the Holders (in such proportion
as shall be indicated by the Holders) and no part thereof shall be paid by the
Company or the Surviving Corporation. The Holders (in such proportion as shall
be indicated by the Holders) and Apple South shall each pay one-half of the
filing fee required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, (the "HSR Act"). If the Company so directs, any of the foregoing
expenses or expenses under Paragraph 4.2 of the Holders or the Company required
to be paid hereunder by the Holders may be paid by Apple South at the Closing
and the amount so paid credited pro rata against the amount of cash and stock
due to the Holders as Merger Consideration; provided, that, such election
<PAGE>
shall be deemed to have been made with respect to any Holder expenses
payable pursuant to the preceding sentence. Any tax deduction or credit
allowable as the result of any such expenses shall be allocated to, and inure to
the benefit of, the Holders and shall not be claimed by Apple South. Apple South
or Surviving Corporation shall pay any costs associated with the transfer of
liquor licenses, consents of landlords, or the issuance of Apple South Stock.
4.2. Brokers. Except for Robertson Stephens & Company, which
shall be paid by the Holders (in such proportion as shall be indicated by the
Holders), each party hereby represents and warrants to the others that no broker
or finder has acted on its behalf in connection with this Agreement or the
transactions contemplated herein and agrees to indemnify the other parties from
and against any and all claims or demands for commissions or other compensation
by any broker, finder, or similar agent claiming to have been employed by or on
behalf of such party.
4.3. Publicity. All press releases and other public
announcements respecting the subject matter hereof shall be made only with the
mutual written agreement of Apple South and the Shareholders' Representative;
provided, however, that Apple South may make any disclosure required to be made
under any applicable securities Law or NASDAQ rule if Apple South has determined
in good faith that it is necessary to do so and used its best efforts, prior to
the issuance of the disclosure (i) to provide the Shareholders' Representative
with a copy of the proposed disclosure; (ii) to discuss the proposed disclosure
with the Shareholders' Representative; and (iii) to incorporate any reasonable
comments on the disclosure received from the Shareholders' Representative to the
extent consistent with Apple South's disclosure obligations.
4.4. Access and Inspection. The Company shall provide Apple
South, and its authorized representatives full access at reasonable times during
normal business hours from and after the date hereof until the Closing to the
books and records of the Company for the purpose of making such investigation as
they may reasonably desire, and the Company shall furnish such information
concerning the Company as they may reasonably request. The Company shall assist
Apple South in making such investigation and shall cause the Company's counsel,
accountants, consultants, and other non-employee representatives to be
reasonably available for such purposes. No investigation made heretofore or
hereafter by Apple South shall limit or affect the representations, warranties,
covenants, and indemnities of the Company hereunder, each of which shall survive
any such investigation.
4.5. Cooperation. The parties shall cooperate fully with each
other and with their respective counsel and accountants in connection with any
steps required to be taken as part of their respective obligations hereunder,
and all parties shall use commercially reasonable efforts to consummate the
transactions contemplated herein and to fulfill their obligations hereunder,
including, without limitation, causing to be fulfilled at the earliest practical
date the conditions precedent to the obligations of the parties to consummate
the transactions contemplated hereby. From time to time and at any time, at a
party's request and expense, whether on or after the date hereof, and without
further consideration, the other parties shall execute and deliver such further
documents and instruments of conveyance, assignment, and transfer and shall take
such further actions as may be necessary or desirable, in the reasonable opinion
of the requesting party, in connection with the consummation of the transactions
described herein. It shall be the responsibility of Apple South to seek any
consents of lessors required under Paragraph 8.11 and Government consents or
approvals with respect to liquor, beer, or wine licenses under Paragraph 8.5 and
Apple South shall use reasonable commercial efforts to obtain all such consents
and approvals prior to the Closing Date
4.6. Covenant Against Competition. (a) In order to induce Apple South
and Merger Sub to enter into this Agreement and for the additional consideration
set forth below, each of McCormick and Schmick agrees that for a period of three
years following the Closing Date, he shall not, directly or indirectly, for his
own account or on behalf of any other person or entity, as principal, agent,
executive, manager, officer, employee, or otherwise, own, manage, operate, or
control, or hold any ownership, financial, or beneficial interest in any
business that operates, manages, controls, or owns one or more Competing
Restaurants in the Territory. Ownership of an equity interest of less than five
percent of a corporation subject to the reporting requirements of the Exchange
Act shall not be prohibited by this Paragraph 4.6.
<PAGE>
(b) As used in this Section, "Territory" means the United States.
"Competing Restaurant" means a restaurant primarily offering entrees priced
between $10.00 and $20.00, including but not limited to a seafood or steak
oriented restaurant.
(c) McCormick and Schmick hereto specifically acknowledge and agree that
the remedy at law for any breach of the foregoing covenant not to compete will
be inadequate and that Apple South, in addition to any other relief available to
it, shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage.
(d) In consideration for the provisions of this Paragraph 4.6, Apple South
shall pay to each of McCormick and Schmick $166,666.67 on the Closing Date and
on the first and second anniversary thereof, for a total payment of $500,000 to
each of them.
(e) For a period of three years following the Closing neither McCormick nor
Schmick shall solicit or induce, or in any manner assist in the solicitation or
inducement of, any Person employed by Apple South or Surviving Corporation or
any of their Subsidiaries or other Affiliates to leave such employment, whether
or not such employment is pursuant to a contract and whether or not such
employment is at will.
(f) The obligations of Messrs. McCormick and Schmick under this Paragraph
4.6 shall terminate if Apple South has failed to make any installment payment
due hereunder within thirty days of written notice from McCormick and/or Schmick
that such payment has become due and has not been paid; provided, however, that
such termination shall not occur if such payment is not made by Apple South as a
result of the person to whom the payment is due being in violation of any
restriction imposed by this Paragraph 4.6.
(g) Although the parties have, in good faith, used their best efforts to
make the provisions of this Paragraph 4.6 reasonable in both geographic area and
in duration, and it is not anticipated, nor is it intended, by any of the
parties hereto that a court of competent jurisdiction would find it necessary to
reform the provisions hereof to make it reasonable in both geographic area and
in duration, or otherwise, the parties understand and agree that if a court of
competent jurisdiction determines it necessary to reform the scope of this
Paragraph 4.6 in order to make it reasonable in either geographic area or
duration, or otherwise, damages, if any, for a breach hereof, as so reformed,
would be deemed to accrue to Apple South as of and from the date of such a
breach only insofar as the damages for such breach relate to an action which
occurred within the scope of the geographic area and duration as so reformed.
4.7. Apple South's Public Documents and Access to Information. Apple South
has delivered to each of the Accredited Class B Shareholders a true and complete
copy of (i) Apple South's Annual Reports on Form 10-K and its Annual Reports to
Shareholders for the years ended December 31, 1994, and 1995; (ii) Apple South's
Quarterly Reports on Form 10-Q for its first three quarters of fiscal 1996;
(iii) Apple South's definitive proxy statements relating to its 1995 and 1996
annual shareholders meetings; (iv) that certain Prospectus offering $125,000,000
of 9 3/4% Senior Notes due 2006; and (v) all other filings (other than Form D's
and preliminary registration and proxy statements) made by Apple South with the
SEC between December 31, 1995, and the date hereof (collectively, the "SEC
Documents"). Apple South agrees to provide to the Accredited Class B
Shareholders a true and complete copy of each other document filed with the SEC
between the date hereof and the date of the Closing (other than Form D's and
preliminary material) ("Current SEC Documents"). In addition to the SEC
Documents and the Current SEC Documents, Apple South will provide, through its
Chief Financial Officer, each of the Accredited Class B Shareholders with
opportunities to become familiar with the business, financial condition,
management, prospects, and operations of Apple South, including reasonable
opportunities to ask questions of, receive answers from and obtain information
regarding Apple South and its business which is material to their investment
decision.
<PAGE>
4.8. Legending of Apple South Stock. There shall be placed on
all certificates representing the shares of Apple South Stock issued to the
Accredited Class B Shareholders pursuant to this Agreement appropriate
restrictive legends referencing the restrictions imposed by applicable
securities Laws. Each of the Accredited Class B Shareholders agrees that he will
not offer to sell, sell, or otherwise dispose of any of the Apple South Stock
issued to him except pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the " Securities Act"), and any applicable
state securities Law or an exemption from the registration requirements of the
Securities Act and any applicable state securities Law. With respect to any such
sale or disposition, each of the Accredited Class B Shareholders agrees to
furnish to Apple South upon request such information as its counsel may
reasonably deem necessary to assure that such sale or disposition is made in
full compliance with applicable federal and state securities Laws.
4.9. Non-Solicitation of Third Party Offers. Each Shareholder,
for itself, agrees that neither the Shareholder nor any of his Relatives,
Affiliates, agents, or representatives, and the Company agrees that neither the
Company, or any of its officers, directors, management, Affiliates, related
persons, or entities or agents, will (a) negotiate or discuss with any other
Person any other transaction involving a merger of the Company, or the sale of
any shares in or assets of the Company (except for sales of inventory in the
ordinary course of business) or any other business combination involving the
Company, (b) reveal the terms of this Agreement to any Person except for the
purpose of carrying out the transactions contemplated herein and except to the
extent not prohibited by Section 4.3 or permitted by Section 4.10, or (c)
solicit, encourage, consider, entertain, or accept any offer, bid, or proposal
from any other Person respecting any transaction involving a merger of the
Company, or the sale of any shares in or assets of the Company (except for sales
of inventory in the ordinary course of business) or any other business
combination involving the Company. If the Company or any Shareholder receives a
proposal of the kind described in the preceding clause (c) prior to the date of
the Closing, then the Company or such Shareholder (as the case may be) shall
immediately notify Apple South of the receipt of such proposal and shall
promptly provide Apple South with a copy of such proposal (or if such proposal
is not in writing, a written summary of its terms).
4.10. Confidentiality. In connection with the negotiation of
this Agreement and the consummation of the transactions contemplated hereby, a
party hereto and its Affiliates, directors, employees, attorneys, and
accountants (the "Disclosing Party") may disclose Confidential Information, as
defined below, to one of the other parties hereto (the "Disclosee"). Each
Disclosee agrees that if the transactions contemplated herein are not
consummated, it will return to the Disclosing Party all documents and other
written information furnished to it. Each Disclosee further agrees to maintain
the confidentiality of any and all Confidential Information of a Disclosing
Party and not disclose any Confidential Information to any Person other than its
Affiliates, directors, employees, attorneys, or accountants performing services
with respect to the transactions contemplated hereby, or use such Confidential
Information for any purpose other than the evaluation and consummation of the
transactions contemplated hereby; provided, however, the foregoing obligations
shall not apply to (i) any information which was independently developed by the
Disclosee prior to its disclosure by the Disclosing Party without violating any
rights of the Disclosing Party; (ii) any information in the public domain
through no fault or action of the Disclosee; (iii) any information which is
disclosed to the Disclosee by a third party, other than an Affiliate, director,
employee, attorney, or accountant performing services with respect to the
matter, having the legal right to make such disclosure; or (iv) any information
which is required to be disclosed by Order of any Forum. Should Disclosee become
legally compelled to disclose any portion of the Confidential Information by
Order of any Forum, Disclosee shall give Disclosing Party prompt notice of such
fact, including in its notice the legal basis for the required disclosure and
the nature of the Confidential Information that must be disclosed. Disclosee
shall cooperate fully with Disclosing Party in obtaining a protective order or
other appropriate protection relating to the disclosure and subsequent use of
the Confidential Information. Disclosee will disclose only that portion of the
Confidential Information that is legally required to be disclosed. For purposes
of this Paragraph 4.10, " Confidential Information" shall mean any and all
<PAGE>
technical, business, and other information which is possessed or hereafter
acquired by a Disclosing Party and disclosed to the Disclosee, including,
without limitation, technical or nontechnical data, compositions, devices,
methods, techniques, drawings, inventions, processes, financial data, financial
plans, product plans, lists of actual or potential customers or suppliers, and
information regarding the business plans and operations of the Disclosing Party.
If the transactions contemplated herein are consummated, "Confidential
Information" of Apple South shall be deemed to include all Confidential
Information of Company and Surviving Corporation, and the Shareholders shall be
subject to the obligations of non-use and non-disclosure contained in this
Agreement with respect to all of such information; provided that,
notwithstanding any other provision of this Agreement, Castle Harlan Partners
II, L.P. may disclose financial information of the Company relating to the
period prior to the Closing and the terms of the transactions contemplated
hereby to its partners. The provisions of this Paragraph 4.10 shall survive any
termination of this Agreement for any reason. The restrictions of this Paragraph
4.10 shall expire three years from the date hereof with respect to any
Confidential Information that does not constitute a trade secret under
applicable law.
4.11. Reports Under the Exchange Act. With a view to making
available to the Accredited Class B Shareholders the benefits of Rule 144
promulgated under the Securities Act and any other rule or regulation of the SEC
that may at any time permit them to sell Apple South Stock to the public without
registration, Apple South shall furnish to them, forthwith upon request (i) a
written statement by Apple South stating whether it has complied with the
reporting requirements of the Securities Exchange Act of 1934 (the "Exchange
Act"), (ii) a copy of the most recent annual or quarterly report of Apple South
filed by Apple South with the SEC, and (iii) such other information as may be
reasonably requested in availing them of any rule or regulation of the SEC which
permits the selling of any shares of Apple South Stock without registration.
4.12. Section 338 Election. Apple South shall not make any election
pursuant to Section 338 of the Internal Revenue Code of 1986, as amended, or any
similar provision of state or local law, with respect to the transactions
contemplated hereby. --------------------
4.13 Indemnification. Apple South shall not amend or repeal any
provision of the certificate of incorporation or bylaws of the Surviving
Corporation or any Subsidiary in any manner that would adversely affect the
indemnification or exculpatory provisions therein insofar as they pertain to the
present officers and directors of the Company or any Subsidiary. Following the
Closing, each of such officers and directors who continue to serve as an officer
or director of the Surviving Corporation or any Subsidiary shall be entitled to
the benefit of all exculpation and indemnification provisions generally made
available by Apple South to persons serving in similar capacities with Surviving
Corporation or any other subsidiary of Apple South.
4.14 Shareholders' Representative. Each Holder hereby irrevocably
appoints Castle Harlan Partners II, L.P. as its duly authorized representative
to act as such Holder's attorney-in-fact and representative (the "Shareholders'
Representative"), to do any and all things and to execute any and all documents,
including, but not limited to, the Escrow Agreement, in such Holder's name,
place and stead, in any way in which such Holder could do if personally present,
in connection with this Agreement and the Escrow Agreement and the transactions
contemplated hereby and thereby, including, without limitation, to accept on
such Holder's behalf any amount payable to such Holder under this Agreement or
the Escrow Agreement, or to amend, cancel, extend, or waive the terms of this
Agreement or the Escrow Agreement. The Shareholders' Representative shall have
the sole and exclusive right on behalf of the Holders to take any action
pursuant to Paragraph 4.3 or Article 10 (other than, with respect to Article 10,
any matter, claim, action or proceeding in respect of which liability of the
Shareholders' Representative and/or its officers, directors, and employees, is
not asserted).
<PAGE>
4.15 Cancellation of Agreements. The Company and McCormick and Schmick
agree that the employment agreements between the Company and each of McCormick
and Schmick shall terminate automatically at the Closing.
--------------------------
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE COMPANY
The Company represents and warrants to Apple South and Merger Sub that
the statements contained in this Article 5 are true and correct, except as set
forth in the disclosure schedule delivered by the Company to Apple South and
Merger Sub on the date of this Agreement, as amended or supplemented by the
Company on or prior to the Closing Date to reflect any event occurring
subsequent to the date hereof ("Disclosure Memorandum"). The Disclosure
Memorandum shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article 5 and the disclosures in any
paragraph shall apply to each other paragraph in this Article 5.
5.1. Organization, Authority and Qualification. (a) The
Company is a corporation duly organized and validly existing under the Laws of
the State of Delaware. Each of the Subsidiaries is a corporation duly organized
and validly existing under the Laws of its state of incorporation as shown in
the Disclosure Memorandum. The Company has offices and Restaurants at the
locations specified in the Disclosure Memorandum. Each of the Company and its
Subsidiaries has full corporate power and authority and is entitled to own or
lease its properties and to carry on its business as presently conducted.
Company has previously made available to Apple South true, correct, and complete
copies of the articles of incorporation and bylaws of Company and each
Subsidiary and true, correct, and complete copies of the minutes and other
similar records of meetings of the shareholders of Company and each Subsidiary
and their boards of directors, which contain all written records of meetings of,
and written actions taken in lieu thereof by shareholders, board of directors,
or any committees thereof.
(b) The Company has all requisite corporate power and
authority to enter into this Agreement and the Escrow Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the Escrow Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized, or will
be duly authorized prior to the Closing, by all necessary corporate action on
the part of Company, including the approval of the Merger by Company's
shareholders. This Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the rights of
creditors generally and general principles of equity.
(c) The execution and delivery of this Agreement by Company
does not, and the execution and delivery of the Escrow Agreement and the
consummation of the transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any provision of the
articles of incorporation or bylaws of Company, (ii) result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to any right of termination, cancellation, or acceleration
of any obligation or loss of any benefit) under any of the terms, conditions, or
provisions of any Company Contract, or (iii) conflict with or violate any
permit, concession, franchise, or license held by the Company or any Subsidiary,
or any Order or Law.
(d) Each of the Company and its Subsidiaries is qualified to transact
business as a foreign corporation in all those states and jurisdictions in which
its activities require it to so qualify. A list of states and jurisdictions
where the Company or a Subsidiary is so qualified to transact business as a
foreign corporation is set forth in the Disclosure Memorandum.
5.2. Ownership of Shares; Subsidiaries. (a) The total authorized capital
stock of Company is as set forth in the Disclosure Memorandum.
<PAGE>
(b) All of the Shares and the issued and outstanding shares of
capital stock of each Subsidiary ("Subsidiary Shares") are owned of record and
beneficially held by the Persons listed in the Disclosure Memorandum, free and
clear of any Liens (including, without limitation, free and clear of any adverse
claims of any Persons). There are no outstanding contracts, demands,
commitments, or other agreements or arrangements under which any holder of
Shares or Subsidiary Shares is or may become obliged to sell, transfer, or
assign any of the Shares or Subsidiary Shares. There are no Persons with any
claims or rights to any Shares or Subsidiary Shares.
(c) All the Shares and Subsidiary Shares are duly authorized,
validly issued, fully paid, and nonassessable and were authorized, offered,
issued, and sold in accordance with all applicable securities and other Laws and
all rights of shareholders and other persons. No person has any preemptive
rights or other rights to acquire, or adverse claims with respect to, any
unissued shares of capital stock of Company or any Subsidiary. There are no
outstanding securities convertible into the capital stock or rights to subscribe
for or to purchase, or any options for the purchase of, or any agreements or
arrangements providing for the issuance (contingent or otherwise) of, or any
Actions relating to, the capital stock of Company or any Subsidiary. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Company or any Subsidiary. Neither the
Company nor any Subsidiary is subject to any obligation to repurchase or
otherwise acquire or retire any of its capital stock or has any liability for
dividends declared or accrued, but unpaid, with respect to its capital stock.
Company has not purchased or redeemed any of its capital stock, and has not paid
any dividend or made any other distribution or payment in respect of such stock
to any Person since the Reference Date.
(d) The Subsidiaries of the Company and the ownership thereof
are listed in the Disclosure Memorandum. Each Subsidiary is, directly or
indirectly, wholly owned by the Company. Except for the Subsidiaries set forth
in the Disclosure Memorandum, Company does not, directly or indirectly, own and
has no interest, direct or indirect, or any commitment to purchase or otherwise
acquire, any capital stock or other equity interest, direct or indirect, in any
other Person.
5.3. Consents. No consent, approval, order, or authorization
of, or registration, declaration, or filing with, any Government is required by
or with respect to Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Escrow Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the pre-merger notification report under the HSR Act; (ii) the filing of
Articles of Merger with the Secretary of State of the State of Delaware; and
(iii) consents or approvals of the Governments issuing liquor licenses in the
jurisdictions where the Restaurants are located.
5.4. Legal Compliance. Neither the Company nor any Subsidiary
is in default under or in violation of (a) its articles of incorporation or
bylaws or (b) any Order. The operations of Company, the Subsidiaries, and their
respective predecessors, if any, have been conducted in all material respects in
compliance with all applicable Laws. (For purposes of this paragraph, any
violation of applicable Law that could result in imposition of a fine or other
monetary penalty shall be deemed to be a material non-compliance.) Neither
Company nor any Subsidiary has received any notification of any asserted past or
present failure to comply with any applicable Law.
5.5. Possession of Permits. Each of the Company and its
Subsidiaries possesses all franchises, certificates, licenses, permits, bonds,
and other authorizations from Governments and all other Persons that are
necessary for the ownership, maintenance, and operation of its properties and
assets and the conduct of its business ("Permits") and is not in violation
thereof. Each of the Company and its Subsidiaries holds such Permits free of any
claims or restrictions (other than any restrictions in existence at the time
such Permits were issued) and has fulfilled and performed all of its material
obligations with respect to such Permits and no event has occurred which allows,
nor after notice of lapse of time or both would allow, revocation or early
termination thereof or would result in any other impairment of the rights of the
holder of any such Permits. Except as set forth in the Disclosure Memorandum,
the consummation of the Merger will not result in the revocation, termination,
or impairment of any Permit or require the consent of any Person in order to
avoid any such revocation, termination, or impairment.
<PAGE>
5.6. Financial Statements. Prior to the date hereof, the
Company has delivered to Apple South copies of the unaudited consolidated
balance sheet of Company (the "Reference Balance Sheet") dated January 4, 1997
("Reference Date"), and the unaudited consolidated statements of operations,
stockholders' equity, and cash flow of the Company for the fiscal year ended
January 4, 1997 (such financial statements being hereafter collectively referred
to as the "Financial Statements"). The Financial Statements have been prepared
in accordance with GAAP consistently applied, present fairly the financial
condition of the Company as at the date thereof and the results of the Company's
operations and cash flows for the periods then ended, and are consistent with
the books and records of the Company, which are true, correct, and complete in
all material respects.
5.7. Liabilities. Except for (i) liabilities incurred in the
ordinary course of business since the Reference Date consistent with past
experience of the Company and its Subsidiaries during the period covered by the
Financial Statements (none of which results from, arises out of, relates to, is
in the nature of, or was caused by any breach of contract, breach of
representation or warranty, tort, product liability, "dram shop" liability,
infringement, or violation of any Law or Order) and (ii) liabilities reflected
in the Reference Balance Sheet, neither the Company nor any Subsidiary has any
liability.
5.8. Events Subsequent to Reference Date. Since the Reference
Date, neither Company nor any Subsidiary has: (i) issued any stock, bond,
options, warrants, rights, or other corporate securities; (ii) borrowed any
amount or incurred any obligations or liabilities (absolute or contingent),
except current obligations and liabilities incurred in the ordinary course of
business of the type and in the amounts consistent with the period covered by
the Reference Balance Sheet; (iii) sold, assigned, mortgaged, pledged, subjected
to lien or otherwise transferred any interest in any of the assets (other than
inventory and other than as a result of wear and tear in the ordinary course of
business) reflected in the Financial Statements or canceled any debts or claims;
(iv) suffered any casualty losses in excess of $25,000, or waived any rights in
excess of $25,000 in value; (v) made any changes in employee compensation
generally or in compensation of any executive officer; (vi) materially reduced
its level of inventory or supplies; (vii) materially changed the number of
employees or management personnel; (viii) canceled, entered into, or amended any
Company Contract or agreement except in the ordinary course of business and
consistent with past practice; and (ix) materially changed the manner in which
the business of the Company is operated.
5.9. Taxes. Company and any entity at any time eligible or
required to file a consolidated or combined Tax return with Company
(individually, an "Affiliated Entity" and collectively, the "Affiliated
Entities"), have duly and timely filed all federal, state, municipal, local, and
foreign, if any, Tax returns and reports (including returns for estimated tax),
and all reports and returns of all other Governments having jurisdiction
(collectively, "Returns") with respect to all Taxes (including, without
limitation, consolidated or combined Tax returns of some or all of Company and
the Affiliated Entities). Company has previously provided to Apple South true,
correct, and complete copies of all Returns filed with respect to the three tax
years preceding the date hereof. All Taxes imposed on Company and its Affiliated
Entities by any Government (including all deposits in connection therewith
required by applicable Law, and all interest and penalties thereon) which have
become due and payable by Company for all periods through the date hereof either
have been paid in full or adequate reserves have been set up on the books of
Company with respect to such Taxes. Company has not received any proposed
assessment against Company or any Affiliated Entity of additional Taxes of any
kind. Company is not a party to any Tax sharing or Tax allocation agreement,
understanding, arrangement, or commitment that includes any party other than the
Company or any Subsidiary. There is no dispute or Action concerning any Tax
Liability of Company raised by a Government in writing.
<PAGE>
5.10. Title to Properties. Company or its Subsidiaries has
good title to all properties and assets reflected in the Reference Balance
Sheet, except inventories and other immaterial assets which have been disposed
of in the ordinary course of business since the Reference Date, and all other
properties and assets necessary to conduct its business as currently being
conducted and as conducted during the period covered by the Financial Statements
(other than any leased property), free and clear of Liens, except as may be set
forth in the notes to the Reference Balance Sheet.
5.11. Real Estate.
(a) The water, electric, gas, and sewer utility services, and
storm drainage facilities currently available to the real property owned or
leased by Company and its Subsidiaries (the "Real Property") are adequate for
the conduct of the business of the Company and its Subsidiaries, and to
Company's knowledge, there is no condition which will result in the termination
of the present access from the Real Property to such utility services and other
facilities.
(b) Company or its Subsidiaries have obtained, or, to the
knowledge of the Company, landlords have obtained on their behalf, all
authorizations and rights-of-way, which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the Real Property. There are no
restrictions on entrance to or exit from the Real Property to adjacent public
streets, roadways, or parking lots presently used and to the knowledge of
Company no conditions which will result in the termination of the present access
from the Real Property to existing highways and roads and parking lots or
private drives presently used.
(c) Neither the Company nor any Subsidiary has received any notices, oral
or written, that any Government having the power of eminent domain over the Real
Property has commenced or intends to exercise the power of eminent domain or a
similar power with respect to all or any part of the Real Property.
(d) The Real Property and the present uses thereof by the Company and its
Subsidiaries comply with all regulations of any Government having jurisdiction
over the Real Property.
(e) The improvements located on the Real Property used by the
Company or its Subsidiaries are in good condition and are structurally sound,
and all mechanical and other systems located therein are in good operating
condition, in each case, subject to normal wear and tear, and no condition
exists requiring material repairs, alternations, improvements, or corrections.
(f) The site of each Restaurant located on owned Real Property provides,
and, to the knowledge of the Company, the site of each Restaurant located on
leased real property provides, adequate access and parking for the operation of
the Restaurant located thereon in accordance with all applicable Laws.
(g) No work for municipal improvements has been commenced on
or in connection with the Real Property or any street adjacent thereto and to
the knowledge of Company no such improvements are contemplated. No assessment
for public improvements has been made against the owned Real Property, or, to
the knowledge of the Company, the leased Real Property, which remains unpaid. No
notice from any county, township, or Government has been served upon the owned
Real Property or received by Company or any Subsidiary, or to Company's
knowledge received by the owner of the leased Real Property, requiring or
calling attention to the need for any work, repair, construction, alteration, or
installation on or in connection with the Real Property which has not been
complied with.
<PAGE>
5.12. Leased Real Property. The Disclosure Memorandum
identifies each parcel or tract of real property which is used by Company or any
Subsidiary in its business which is subject to a lease or sublease to which
Company or any Subsidiary is a party as lessee or sublessee (individually, a
"Real Property Lease"). All Real Property Leases are valid and in full force and
effect in accordance with their terms. The Company has made available to Apple
South true, correct, and complete copies of all Real Property Leases. There is
not, with respect to any Real Property Lease (a) any default by Company or any
Subsidiary, or any event of default or event which with notice or lapse of time,
or both, would constitute a default by Company or any Subsidiary or (b) to
Company's knowledge, any existing default by any other party to any Real
Property Lease, or event of default or event which with notice or lapse of time,
or both, would constitute a default by any other party to any Real Property
Lease.
5.13. Personal Property. (a) All machinery, equipment,
vehicles, and other items of tangible personal property which are owned or
leased by Company or any Subsidiary are in good condition and repair, subject to
normal wear and tear, suited for the use intended, and are and have been
operated in conformity with applicable Laws. To Company's knowledge, there are
no defects or conditions which would cause such tangible personal property to be
or become inoperable or unsafe.
(b) Neither the Company nor any Subsidiary is in default under
any lease of machinery, equipment, or other tangible personal property. To
Company's knowledge, all lessors of machinery, equipment, or other tangible
personal property leased by Company or any Subsidiary have performed and
satisfied their respective duties and obligations under such leases. Neither the
Company nor any Subsidiary has brought or threatened any unresolved Action
against any such lessor for failure to perform and satisfy its duties and
obligations thereunder.
5.14. Intellectual Property Rights. (a) All of the patents,
copyrights, trademarks, service marks, trade names, and applications therefor or
registrations thereof which are owned or used by the Company or any Subsidiary
are set forth in the Disclosure Memorandum. Neither the Company nor any
Subsidiary is a party to, either as a licensor or licensee, and/or is bound by
or subject to, any license agreement (except for software licenses) for any
patent, process, trademark, service mark, trade name, copyright, trade secret,
or confidential information that is material to the operation of the
Restaurants. Company and the Subsidiaries have complied with all applicable Laws
relating to the filing or registration of "fictitious names" or trade names.
(b) To the knowledge of Company, neither Company nor any
Subsidiary has interfered with, infringed, misappropriated, or otherwise come
into conflict with any intellectual property rights of any other person, and
neither Company, any Subsidiary, nor any of their officers and directors has
within the last five years received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation. To Company's knowledge, no Person has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with the proprietary
inventions, designs, ideas, processes, methods and other know-how, trademarks,
service marks, trade names, copyrights, or other intellectual property of
Company or any Subsidiary which are owned or used in the operation of its
business.
5.15. Contracts. (a) All Company Contracts are valid and
enforceable in all material respects in accordance with their terms, are in full
force and effect, and will continue to be valid and enforceable and in full
force and effect on identical terms immediately following Closing. All Company
Contracts are listed in the Disclosure Memorandum, and true, correct, and
complete copies of all Company Contracts have been delivered or made available
to Apple South.
(b) There are no existing material defaults, events of default or events
which, with the giving of notice or lapse of time or both, would constitute a
material default by Company or any Subsidiary under any Company Contract. No
event has occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any Company Contract.
(c) To Company's knowledge, neither this Agreement, the Closing or the
relationship between Company and Apple South has caused or will cause the
termination or nonrenewal of any Company Contract.
<PAGE>
5.16. Insurance. The Disclosure Memorandum lists the types,
amounts of coverage, and deductibles of all insurance policies of the Company
and its Subsidiaries, and true, correct, and complete copies thereof have been
delivered or made available to Apple South. All premiums due on such policies
have been paid, and neither Company nor any Subsidiary has received any notice
of cancellation with respect thereto. Neither Company nor any Subsidiary has any
Liability for premiums past due or to the knowledge of Company for retrospective
premium adjustments for any period through the date hereof.
5.17. Environmental Matters. Company and its Subsidiaries hold
all Environmental Permits necessary for conducting their business and operations
and have conducted, and are presently conducting, their business and operations
in full compliance with all applicable Environmental Laws and Environmental
Permits held by them, including, without limitation, all record keeping and
filing requirements. To the knowledge of Company, there is no existing or
pending Environmental Law with a future compliance date that will require
operational changes, business practice modifications, or capital expenditures at
any Real Property (or any other property presently or formerly owned, operated,
or controlled by Company or as to which Company or any Subsidiary may bear
responsibility or Liability), or any Improvements thereon. There are no
presently pending, or to Company's knowledge, threatened Actions or Orders
against or involving Company or any Subsidiary (including any other Person for
whose acts or omissions Company or any Subsidiary is responsible) relating to
any alleged past or ongoing violation of any Environmental Laws or Environmental
Permits, nor is Company or any Subsidiary subject to any Liability for any such
past or ongoing violation.
5.18. Conditions Affecting Business. There is no fact,
development, or threatened development with respect to the markets, products,
services, customers, facilities, personnel, vendors, suppliers, operations, or
assets of the business of the Company and its Subsidiaries which are known to
Company and which may reasonably be expected to materially adversely affect the
business of the Company or the prospects of the business of the Company, other
than such conditions as may affect the local, regional, or national economy
generally or any industry segment in which the Company and its Subsidiaries
compete. Company does not have any reason to believe that any loss of any
employee in senior management, agent, customer, or supplier or other
advantageous arrangement will result because of the consummation of the
transactions contemplated hereby.
5.19. Litigation. There is no Action or investigation pending
or, to the knowledge of Company, threatened against Company or any Subsidiary,
or any of their properties or rights before any court or by or before any Forum.
To the knowledge of Company, there does not exist any basis for any such Action,
or investigation. There are no unsatisfied judgments or Orders against Company,
any Subsidiary, or any of their predecessors or to which any of them or their
assets and properties are subject.
5.20. Labor Matters. Neither the Company nor any Subsidiary is
or has ever been a party to any collective bargaining or other labor agreement.
There is not pending or, to the knowledge of the Company, threatened any labor
dispute, strike, work stoppage, union representation, election, negotiation of
collective bargaining agreement, or similar labor matter. To the knowledge of
Company, neither Company nor any Subsidiary is involved in any controversy with
any of its employees or any organization representing any such employees of
Company, and Company and its Subsidiaries are in compliance with all applicable
Laws concerning the employer/employee relationship. Company and its Subsidiaries
are in compliance with all of their agreements relating to the employment of
their respective employees, including, without limitation, provisions thereof
relating to wages, bonuses, hours of work, and the payment of Social Security
taxes, and, to the extent already due and payable, neither Company nor any
Subsidiary is liable for any unpaid wages, bonuses, or commissions, or any tax,
penalty, assessment, or forfeiture for failure to comply with any of the
foregoing.
<PAGE>
5.21. Employee Benefits.
(a) The Disclosure Memorandum hereto contains a true and complete list of
all the following agreements or plans of Company or any Subsidiary which are
presently in effect:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Securities Act of 1974, as amended ("ERISA"); -----
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Company or any Subsidiary maintains or to
which Company or any Subsidiary has any outstanding, present, or future
obligation to contribute to or make payments under, whether voluntary,
contingent, or otherwise (the plans, programs, policies or arrangements
described in clauses (i) or (ii) are herein collectively referred to as the
"ERISA Plans").
(b) Except as described on the Disclosure Memorandum, neither Company nor
any Subsidiary has an employee stock ownership plan as defined in Sections
4975(e)(7) or 409 of the Code.
(c) Company does not presently contribute and has never contributed or been
obligated to contribute to a multi-employer pension plan as defined in section
3(37)(A) of ERISA.
(d) No ERISA Plan is subject to Title IV of ERISA.
5.22. Agreements and Transactions with Related Parties. Neither Company nor
any Subsidiary is directly or indirectly a party to any contract, agreement, or
lease with, or any other commitment to, (a) a Shareholder, (b) any Affiliate or
Relative of a Shareholder, (c) any director or officer of Company, (d) any
Person in which any of the foregoing Persons has, directly or indirectly, at
least a 5% beneficial interest in the capital stock or other type of equity
interest of such Person, or (e) any partnership in which any of the foregoing
Persons is a general partner or has at least a 5% beneficial interest (any or
all of the foregoing being referred to herein as "Related Parties"). Without
limiting the generality of the foregoing, (x) no Related Party, directly or
indirectly, owns or controls any assets or properties which are used in
Company's business, except as set forth in the Disclosure Memorandum, and (y)
except as set forth in the Disclosure Memorandum, no Related Party, directly or
indirectly, engages in or has any significant interest in or in connection with
any business which is or which within the last three years has been a supplier
of Company or any Subsidiary or has done business with Company or any
Subsidiary.
5.23. Securities Law Matters.
(a) Each of the Accredited Class B Shareholders understands
and acknowledges (i) that the Apple South Stock has not been registered under
the Securities Act or under applicable state securities laws in reliance upon
the exemptions provided by Section 4(2) of the Securities Act and in reliance
upon the relevant exemptions provided by applicable state securities laws and
that the Apple South Stock may not be resold, transferred, assigned, pledged,
hypothecated, or any interest therein otherwise disposed of unless the Apple
South Stock is registered under the Securities Act and applicable state
securities laws or unless the shares are the subject of an opinion of counsel,
which opinion and counsel are reasonably acceptable to Apple South, addressed to
Apple South that such registration is not required; (ii) that the stock
certificates evidencing the Apple South Stock will bear legends setting forth
the restrictions on transfer described above and stop-transfer instructions will
be delivered by Apple South to the Apple South's stock transfer agent reflecting
such restrictions; (iii) each of them must bear the risk of an investment in the
Apple South Stock for an indefinite period of time and the financial condition
of each of them is currently adequate to bear the risk of an investment in the
Apple South Stock; (iv) they have received copies of the SEC Documents and
Current SEC Documents; and (v) they have had the opportunity to ask questions of
and receive answers from the officers of Apple South concerning the Apple South
Stock, Apple South, and Apple South's business, plans, and prospects.
<PAGE>
(b) Each of the Accredited Class B Shareholders is acquiring the Apple
South Stock issuable to him hereunder for his own account for investment with no
intention of dividing his participation with others or otherwise participating,
directly or indirectly, in a distribution of the Apple South Stock.
(c) Each of the Accredited Class B Shareholders has such experience in
business, financial, and investment matters as to be able to evaluate the merits
and risks of an investment in the Apple South Stock.
(d) Each of the Accredited Class B Shareholders is an "accredited investor"
as defined in Rule 501 of Regulation D of the SEC.
6. REPRESENTATIONS AND WARRANTIES OF APPLE SOUTH
As an inducement to the Company and the Holders to enter into
and perform this Agreement, Apple South hereby represents and warrants to the
Holders as follows:
6.1. Organization. Apple South is a corporation duly organized and validly
existing under the Laws of the State of Georgia. Merger Sub is a corporation
duly organized and validly existing under the Laws of the State of Delaware.
Each of Apple South and its subsidiaries has ------------ full corporate power
and authority to own or lease its properties and carry on its business as
presently conducted.
6.2. Authorization; No Inconsistent Agreements. Each of Apple
South and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and, in the case of Apple South, the Escrow Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and, in the case of Apple South, the Escrow Agreement
and the consummation of the transactions contemplated by this Agreement and the
Escrow Agreement have been duly authorized by all necessary corporate action on
the part of Apple South and Merger Sub. This Agreement and the Escrow Agreement
have, to the extent applicable, been duly executed and delivered by each of
Apple South and Merger Sub and constitute the valid and binding obligation of
each of them, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the rights of creditors generally and general principles of equity.
The execution and delivery of this Agreement by Apple South and Merger Sub does
not, and the execution and delivery of the Escrow Agreement by Apple South and
the consummation of the transactions contemplated by this Agreement and the
Escrow Agreement will not, (i) conflict with, or result in any violation or
breach of any provision of the articles of incorporation or bylaws of Apple
South or Merger Sub, (ii) result in any violation or breach of, or constitute
(with or without notice or lapse of time, or both) a default (or give rise to
any right of termination, cancellation, or acceleration of any obligation or
loss of any benefit) under any of the terms, conditions, or provisions of any
material agreement of Apple South or Merger Sub, or (iii) conflict with or
violate any permit, concession, franchise, or license held by Apple South or
Merger Sub or any Order or Law.
6.3. Authorization of Apple South Stock. The shares of the Apple South
Stock to be issued pursuant to Paragraph 3.2 have been duly authorized for
issuance at the Closing and upon issuance in accordance with this Agreement will
constitute duly authorized, fully paid and non-
- ---------------------------------- assessable shares of Common Stock of Apple
South.
6.4. Apple South Documents. The SEC Documents, together with
the Current SEC Documents when filed, constitute all of the documents (other
than Form D's and preliminary filings and material) that Apple South was or will
be required by applicable securities Laws and regulations to file with the SEC
since December 31, 1995 through the Effective Time. The financial statements of
Apple South included in the SEC Documents and, to the extent applicable, the
Current SEC Documents were prepared in accordance with GAAP and fairly present,
in all material respects in accordance with GAAP, the financial condition and
results of operations and changes in financial position as of the dates thereof
and for the periods then ended. The SEC Documents do not, and the Current SEC
Documents will not when filed, contain any misstatement of a material fact or
omit to state a material fact necessary to make the statements contained therein
not misleading.
6.5 Consents. No consent, approval, order, or authorization
of, or registration, declaration, or filing with, any Government is required by
or with respect to Apple South or Merger Sub in connection with the execution
and delivery of this Agreement or the Escrow Agreement or the consummation of
the transactions contemplated hereby or thereby, except for (i) the filing of
the pre-merger notification report under the HSR Act; (ii) the filing of
Articles of Merger with the Secretary of State of the State of Delaware; and
(iii) consents to approvals of the Governments issuing liquor licenses in the
jurisdictions where the Restaurants are located.
<PAGE>
7. CONDUCT OF BUSINESS OF THE COMPANY, APPLE SOUTH AND MERGER SUB PENDING
CLOSING
The Company covenants and agrees that, except as may otherwise
be provided herein, without the prior written consent of Apple South, between
the date hereof and the date of the Closing:
7.1. Business in the Ordinary Course. McCormick and Schmick and Company
shall ensure that the business of Company and its Subsidiaries is conducted only
in the ordinary course and consistent with its prior practices. Without limiting
the generality of the foregoing: -------------------------------
(a) Except for the sale of inventory in the ordinary course of
its business and consistent with prior practices, neither Company nor any
Subsidiary shall sell, assign, transfer, convey, pledge, mortgage, encumber, or
otherwise dispose of, or cause the sale, assignment, transfer, conveyance,
pledge, mortgage, encumbrance, or other disposition of, any asset or property.
(b) Company and each Subsidiary shall protect, preserve, and maintain all
its assets in good condition, except for ordinary wear and tear; and shall use
commercially reasonable efforts to maintain in full force and effect all
insurance coverage described in the Disclosure Memorandum.
(c) The books, records, and accounts of Company shall be maintained in the
ordinary course of business on a basis consistent with prior practices and in
accordance with GAAP.
(d) Company shall use its commercially reasonable efforts, and
shall cause its Subsidiaries to use respective commercially reasonable efforts,
to preserve the business and assets of Company and its Subsidiaries, including,
without limitation, the Company Contracts (subject to any expiration date
contained in any such Company Contract), and the goodwill of suppliers,
customers, and others having business relations with them which relate to their
business, and subject to existing performance standards applied by the Company
and its Subsidiaries, to retain the services of the employees, agents, and
contractors of Company and its Subsidiaries.
(e) Company and its Subsidiaries shall continue to replenish its
inventories in the ordinary course and consistent with prior practices.
(f) Holders and Company shall not take, or agree to take, any
action that would make any representation or warranty of them contained herein,
untrue, incorrect, or misleading in any material respect as of the date when
made or at any time through Closing, or that would cause any covenant by them or
any of them contained herein not to be fulfilled in any material respect.
<PAGE>
7.2. No Material Changes. Except as expressly provided in this
Agreement or as the result of the exercise of any warrant, option, or other
right the existence of which is disclosed in the Disclosure Memorandum, neither
Company, any Subsidiary, nor any Holder shall take any action which shall
materially alter the organization, capitalization, financial structure,
practices, or operations of Company or any Subsidiary. Without limiting the
generality of the foregoing:
(a) No change shall be made in the articles of incorporation or bylaws of
Company or any Subsidiary.
(b) No change shall be made in the authorized or issued capital stock of
Company or any Subsidiary.
(c) Neither Company nor any Subsidiary shall issue or grant any right or
option to purchase or otherwise acquire any capital stock or other security of
Company or create or suffer any Lien on any Share or any share of capital stock
of any Subsidiary.
(d) No dividend or other distribution or payment shall be declared or made
with respect to any capital stock of Company, and Company shall not, directly or
indirectly, redeem, purchase or otherwise acquire any capital stock.
(e) Company shall not liquidate or voluntarily declare bankruptcy or seek
the appointment of a receiver, trustee or custodian.
7.3 Apple South Actions. Apple South and Merger Sub shall not
take, or agree to take, or cause or permit any other subsidiary of Apple South
to take, or agree to take any action that would make any representation or
warranty of Apple South or Merger Sub contained herein, untrue, incorrect, or
misleading in any material respect as of the date when made or at any time
through Closing, or that would cause any covenant by them contained herein not
to be fulfilled in any material respect.
8. CONDITIONS TO OBLIGATIONS OF APPLE SOUTH AND MERGER SUB
All obligations of Apple South and Merger Sub hereunder are
subject to the fulfillment and satisfaction of each and every one of the
following conditions on or prior to the Closing, any or all of which may be
waived in whole or in part by Apple South, provided that no such waiver shall be
effective unless it is set forth in a writing executed by Apple South:
8.1. Representations and Warranties. Subject to the exceptions
and supplemental information set forth in the Disclosure Memorandum, the
representations and warranties contained in Article 5 shall be true and correct
in all material respects as of the date when made and shall be deemed to be made
again at and as of the date of the Closing and shall be true and correct in all
material respects at and as of such time.
8.2. Compliance with Agreements and Conditions. The Company and the Holders
shall have materially performed and complied with all agreements and conditions
required hereby to be performed or complied with by them prior to or on the date
of the Closing. -----------------------------------------
8.3. Certificate of the Holders. Company shall have delivered
to Apple South a certificate executed by Messrs. McCormick and Schmick, dated
the date of the Closing, certifying as to the fulfillment and satisfaction of
the conditions specified in Paragraphs 8.1 and 8.2 (except as to the accuracy of
the representations and warranties set forth in Paragraph 5.23, as to which
McCormick and Schmick shall provide a separate certificate).
<PAGE>
8.4. Resolutions. Apple South shall have received duly adopted
resolutions of the board of directors and the shareholders of the Company,
certified by the Secretary of the Company as of the date of the Closing,
authorizing and approving the execution hereof and all other documents executed
by it including, without limitation, the Escrow Agreement, and the taking of any
and all other actions necessary to enable the Company to comply with the terms
hereof and to consummate the Merger.
8.5. Government Consents. Apple South and Merger Sub shall
have received all necessary Government consents or approvals with respect to
liquor, beer or wine licenses, and the Company shall have received from any and
all Governments or Forums having jurisdiction over the transactions contemplated
hereby, or any part hereof, any and all other necessary consents and approvals
for the consummation of the transactions contemplated hereunder; provided, that,
with respect to any consent or approval of any Government with respect to any
liquor, wine or beer license, any such consent or approval shall constitute a
condition to the obligations of Apple South and Merger Sub hereunder only to the
extent that the failure to obtain such consent or approval (alone or together
with any other such consents or approvals that are not obtained) would have a
material adverse effect on the Company and the Subsidiaries, taken together as a
whole.
8.6. No Material Adverse Change. There shall have been no material adverse
change in the financial condition, results of operations, business, or assets of
the Company since the date hereof. --------------------------
8.7. No Inconsistent Requirements. No Action shall be pending
by any Government or Person (i) against a party hereto to restrain or prohibit
the consummation of the transactions herein or (ii) to the extent not disclosed
in the Disclosure Memorandum on the date hereof, which could reasonably be
expected to have a material adverse effect on the Company.
8.8. Opinion. Schulte Roth & Zabel, LLP and James, Denecke & Harris,
counsel to Company, shall have delivered to Apple South its opinion in
substantially the form of Exhibit C hereto (in each case to the extent indicated
therein), subject to customary assumptions, limitations ------- --------- and
qualifications.
8.9. Escrow Agreement. The Escrow Agreement shall have been fully executed
and delivered by the other parties thereto.
8.10. Hart-Scott-Rodino. Any applicable filings under the HSR shall have
been made, and all applicable waiting periods thereunder shall have expired or
been terminated.
8.11 Consents of Lessors. The consent and approval to the Merger and/or the
resulting change of control of the Company (to the extent required to avoid any
default, penalty, or acceleration of obligations) of the lessors of all
Restaurant sites, buildings, and fixtures leased to the Company or any
Subsidiary, any lessors of personal property to the Company or any Subsidiary,
and the other parties to any Company Contract shall have been obtained;
provided, that, with respect to any such consent or approval, such consent and
approval shall constitute a condition to the obligations of Apple South and
Merger Sub hereunder only to the extent that the failure to obtain such consent
or approval (alone or together with any other such consents or approvals that
are not obtained) would have a material adverse effect on the Company and the
Subsidiaries, taken together as a whole.
<PAGE>
8.12 Audit. The Company's audited consolidated balance sheet dated
January 4, 1997, and the audited consolidated statements of operations,
stockholders' equity, and cash flow of the Company for the fiscal year ended
January 4, 1997, shall not reflect any material adverse change from the
Financial Statements.
8.13 Exercise of Options. All options, warrants, and other rights to
acquire any security of the Company shall have been exercised or canceled prior
to or simultaneously with the Closing. -------------------
8.14 Stock Certificates. Company shall have obtained affidavits and/or
indemnities reasonably acceptable to Apple South with respect to all stock
certificates that have been issued and subsequently canceled or transferred but
which have not been returned to Company for ------------------ cancellation.
9. CONDITIONS TO OBLIGATIONS OF THE HOLDERS AND THE COMPANY
All obligations of the Holders and the Company hereunder are
subject to the fulfillment and satisfaction of each and every one of the
following conditions on or prior to the Closing, any or all of which may be
waived in whole or in part by the Holders:
9.1. Representations and Warranties. The representations and
warranties contained in Article 6 hereof shall be true and correct in all
material respects on and as of the date when made and shall be deemed to be made
again at and as of the date of the Closing and shall be true and correct in all
material respects at and as of such time.
9.2. Compliance with Agreements and Conditions. Apple South and Merger Sub
shall have materially performed and complied with all agreements and conditions
required hereby to be performed or complied with by Apple South and Merger Sub
prior to or on the date of the Closing.
- -----------------------------------------
9.3. Certificate. Each of Apple South and Merger Sub shall have delivered
to Company and the Holders a certificate executed by an executive officer, dated
the date of the Closing, as to the fulfillment and satisfaction of the
conditions specified in Paragraphs 9.1 and 9.2.
-----------
9.4 Escrow Agreement. The Escrow Agreement shall have been fully executed
and delivered by the parties thereto. ----------------
9.5 Hart-Scott-Rodino. Any applicable filings under the HSR shall have been
made, and all applicable waiting periods thereunder shall have expired or been
terminated. -----------------
9.6. Consents. Apple South, Merger Sub, and the Company shall
have received from any and all Governments or Forums having jurisdiction over
the transactions contemplated hereby, or any part hereof, and from all lessors
of real property any and all necessary consents and approvals for the
consummation of the transactions contemplated hereunder (including, but not
limited to, consents or approvals required in order to maintain liquor, beer and
wine licenses for sale of the same at the Restaurants and consents to the Merger
and/or the resulting change of control of the Company under real property leases
to the extent required to avoid any default, penalty or acceleration of
obligations).
9.7. No Material Adverse Change. There shall have been no material adverse
change in the financial condition, results of operations, business, or assets of
Apple South since the date hereof. --------------------------
9.8. No Inconsistent Requirements. No Action shall have been instituted by
any Government or Person (i) against a party hereto to restrain or prohibit the
consummation of the transactions herein or (ii) which could reasonably be
expected to have a material adverse effect on ---------------------------- Apple
South.
<PAGE>
9.9. Opinion. Kilpatrick Stockton, LLP counsel to Apple South, shall have
delivered to Holders its opinion in substantially the form of Exhibit D hereto.
10. INDEMNITIES
10.1. Indemnification by Holders. (a) In accordance with and subject to the
provisions of this Article 10, the Holders shall indemnify and hold harmless,
Apple South, its Affiliates (including the Surviving Corporation), and the
officers, directors, agents and -------------------------- employees of Apple
South and its Affiliates (collectively, the "Apple South Indemnitees") from and
against and in respect of any and all loss, damage, Liability, cost, and
expense, including reasonable attorneys' fees and amounts paid in settlement
(collectively, "Apple South's Indemnified Losses"), suffered or incurred by any
one or more of the Apple South Indemnitees by reason of, or arising out of (i)
any breach of a representation or warranty contained in this Agreement or the
Disclosure Memorandum or any certificate, instrument, agreement, or other
writing delivered by or on behalf of any Holder or the Company pursuant to this
Agreement or in connection with the transactions contemplated herein; (ii) the
breach of any covenant or agreement of any Holder or the Company contained in
this Agreement or any certificate, instrument, agreement, or other writing
delivered to Apple South by or on behalf of any Holder or the Company pursuant
to this Agreement or in connection with the transactions contemplated herein; or
(iii) enforcement of this indemnification (provided that only the breaching
party with respect to an underlying breach shall be liable for enforcement costs
with respect thereto).
(b) Notwithstanding any other provision of this Agreement, the
Apple South Indemnitees shall not be entitled to recover from any Person as a
result of Apple South's Indemnified Losses that result from a breach of a
representation or warranty set forth in Article 5 (other than Paragraphs 5.1(b),
5.2, and 5.23), any amount in excess of the value of the funds or Apple South
Stock held in escrow on behalf of such Person pursuant to the Escrow Agreement
and such escrowed funds or Apple South Stock shall be the sole source of
recovery from such Person for Apple South's Indemnitees on account of any such
Apple South Indemnified Losses that result from a breach of a representation or
warranty set forth in Article 5 (other than Paragraphs 5.1(b), 5.2, and 5.23).
(c) The indemnification by the Holders pursuant to this Paragraph
10.1 shall be joint (but only up to each Holder's pro rata share of such loss)
and several with respect to a breach of a representation or warranty contained
in this Agreement except as set forth in this subparagraph. The indemnification
provided by this Paragraph 10.1 shall be made severally by (i) each Holder as to
the individual security holdings of such Holder, (ii) the Accredited Class B
Shareholders with respect to the representations and warranties set forth in
Paragraph 5.23 and the other Holders shall have no liability with respect
thereto and (iii) any Holder whose agreement or action or any claim or right
affecting such Holder or any of its securities (in each case, to which the
Company or any Subsidiary is not a party and does not join in) gives rise to a
breach of a representation or warranty set forth in Paragraph 5.2. Liability for
breach of any representation or warranty in a certificate, instrument, other
agreement, or other writing to the extent not delivered on behalf of the
Company, shall be the several liability of the breaching party and there shall
be no joint liability therefore. The Holders shall have several liability only
for any indemnification under this Paragraph 10.1 arising out of any breach of a
covenant or agreement contained in this Agreement or any certificate,
instrument, agreement, or other writing delivered to Apple South by or on behalf
of any Holder pursuant to this Agreement or in connection with the transactions
contemplated herein, and each Holder shall be liable for its own breach of such
covenant or agreement and not for a breach by the Company or any other Holder.
<PAGE>
10.2 Indemnification by Surviving Corporation. Apple South
shall indemnify Holders, and their officers, directors, agents, employees, and
Affiliates, from and against (i) any losses, damages, Liabilities, costs and
expenses, including reasonable attorneys' fees and amounts paid in settlement to
a third party, that they may incur or suffer as a result of the actions or
omissions to act of the Surviving Corporation or any of its Affiliates following
Closing and (ii) any damages, losses, Liabilities, costs, and expenses,
including reasonable attorneys' fees and amounts paid in settlement, that result
from a breach of any representation, warranty, covenant, or agreement of Apple
South contained in this Agreement or any certificate, instrument, agreement or
other writing delivered by or on behalf of Apple South or Merger Sub pursuant to
this Agreement or in connection with the transactions contemplated herein or in
enforcing this indemnification (collectively "Shareholders' Indemnified Losses",
and together with Apple South's Indemnified Losses, "Indemnified Losses").
10.3. No Liability or Contribution by the Surviving
Corporation. The Surviving Corporation shall not have any Liability to any
Holder as a result of any misrepresentation or breach of representation or
warranty by the Company contained in this Agreement, the Disclosure Memorandum,
or any certificate, instrument, agreement, or other writing delivered by or on
behalf of any Holder or the Company pursuant to this Agreement or in connection
with the transactions contemplated herein, or the breach of any covenant or
agreement of any Holder or the Company contained in this Agreement or in the
Disclosure Memorandum, or in any certificate, instrument, agreement, or other
writing delivered to Apple South by or on behalf of any Holder or the Company
pursuant to the provisions of this Agreement or in connection with the
transactions contemplated herein, and, subject to Paragraph 4.13 hereof, no
Shareholder shall have any right of indemnification or contribution against the
Surviving Corporation on account of any event or condition occurring or existing
prior to or on the date hereof.
10.4. Survival. The representations and warranties of the
Company (and the indemnification by the Holders relating thereto) and of Apple
South contained in Article 5 of this Agreement or in the Disclosure Memorandum
or any certificate, instrument, agreement, or other writing delivered by or on
behalf of the Company or Apple South pursuant to this Agreement or in connection
with the transactions contemplated herein shall survive any investigation
heretofore or hereafter made by another party and the consummation of the
transactions contemplated herein and shall continue in full force and effect
through the later of January 31, 1998, or the date of completion of the audit of
Apple South for fiscal year 1997, but no later than March 31, 1998 ("Survival
Period"). Anything herein to the contrary notwithstanding, the Survival Period
shall be extended automatically to include any time period necessary to resolve
a claim for indemnification which was made before expiration of the Survival
Period but not resolved prior to its expiration, and any such extension shall
apply only as to the claims asserted and not so resolved within the Survival
Period.
10.5 Defense of Third Party Claims. With respect to any claim
under Paragraph 10.1 relating to a third party claim or demand (including any
third party claims for Taxes relating to a breach of Paragraph 5.9), Apple South
shall provide the Holders with prompt written notice thereof and the
indemnifying parties may defend, in good faith and at their expense, by legal
counsel chosen by them and reasonably acceptable to Apple South, any such claim
or demand, and Apple South, at its expense, shall have the right to participate
in the defense of any such third party claim.
So long as the indemnifying parties are defending in good faith any such third
party claim, Apple South shall not settle or compromise such third party claim;
provided, that, Apple South shall not settle or compromise any third party claim
being defended by the indemnifying parties except (i) upon 20 days' prior
written notice and (ii) if the indemnifying parties do not object to such
settlement or compromise. In any event Apple South shall cooperate in the
settlement or compromise of, or defense against, any such asserted claim. If the
appropriate indemnifying parties do not so elect to defend any such third party
claim, Apple South shall have no obligation to do so.
<PAGE>
10.6 Limitation of Liability. Except for breach of any
representation or warranty contained in Paragraph 5.1(a), 5.1(b), and 5.2 of
this Agreement, for which a claim for Apple South's Indemnified Losses may be
made regardless of the amount of all claimed Apple South's Indemnified Losses,
Apple South Indemnitees shall not be entitled to any recovery under this Article
10 with respect to a breach of any representation or warranty unless and to the
extent that the aggregate amount of Apple South's Indemnified Losses exceeds
$250,000. Notwithstanding any other provision of this Agreement, the amount of
Apple South's Indemnified Losses shall be computed on an after-tax basis and
shall be net of any insurance proceeds received with respect to the matter out
of which the Apple South Indemnified Losses arose.
10.7 Exclusivity The rights and remedies afforded by the parties
under this Article 10 shall be the sole and exclusive rights and remedies
available in the event of a breach or default under this Agreement or in any
certificate, instrument, agreement or writing delivered by any party pursuant to
this Agreement or in connection with the transactions contemplated herein and
shall be in lieu of any other common law or statutory rights; provided, however,
that any such rights and remedies as a party may have to seek and obtain
injunctive relief for specific performance with respect to any breach of any
covenant or failure to fulfill any agreement hereunder shall remain available to
the parties and none of such rights or remedies shall be affected or diminished
hereby.
11. TERMINATION
11.1 Termination. This Agreement may be terminated prior to
the Closing (i) at the election of the Shareholders' Representative if any one
or more of the conditions to the obligations of the Holders to close has not
been fulfilled as of the Termination Date; (ii) at the election of Apple South,
if any one or more of the conditions to its obligations to close has not been
fulfilled as of the Termination Date; (iii) upon at least five days' prior
written notice, at the election of the Shareholders' Representative, if Apple
South has breached any material representation, warranty, covenant or agreement
contained in this Agreement, which breach cannot be or is not cured by the
Termination Date; (iv) upon at least five days' prior written notice, at the
election of Apple South, if any of the Holders has breached any material
representation, warranty, covenant, or agreement contained in this Agreement,
which breach cannot be or is not cured by the Termination Date; (v) at the
election of Apple South if any amendment or supplement to the Disclosure
Memorandum delivered subsequent to the date of this Agreement reflects any
material adverse change to the business, assets, financial condition, or
prospects of the Company and the Subsidiaries taken together as a whole, any
material increase in a Liability of the Company and the Subsidiaries taken
together as a whole, or any material adverse change in the ownership rights of a
Holder with respect to the ownership of Shares or the right to convey the same
free of any Lien or claim; or (vi) at any time or prior to the Closing Date, by
mutual written consent of the Shareholders' Representative and Apple South. Upon
any such termination, no party shall have any further rights, Liabilities, or
obligations hereunder (except with respect to Paragraphs 4.1, 4.2, 4.3, 4.10,
4.14, and Article 12, all of which shall survive the termination of this
Agreement); provided, however, if any of the terms and conditions contained
herein have been breached by any party, the non-breaching
parties may pursue whatever rights and remedies they may have at Law, in equity
or otherwise by reason of such breach regardless of such termination, and such
termination shall not constitute an election of remedies.
12. MISCELLANEOUS
12.1. Notices. All notices or other communications required or
permitted to be given or made hereunder shall be in writing and delivered
personally, by courier service or sent by pre-paid, first class certified or
registered mail, return receipt requested, or by facsimile transmission, to the
intended recipient thereof at its address or facsimile number set out below with
copies to the Persons set forth below. Any such notice or communication shall be
deemed to have been duly given upon receipt (if given or made in person, by
delivery service or by facsimile confirmed by mailing a copy thereof to the
recipient in accordance with this Paragraph 12.1 on the date of such facsimile),
or four days after mailing (if given or made by mail), and in proving same it
shall be sufficient to show that the envelope containing the same was delivered
personally or by the delivery service to the recipient, or that receipt of a
facsimile was confirmed by the recipient. The addresses and facsimile numbers of
the parties for purposes of this Agreement are set forth on the signature page
hereto below their respective signatures. Any party may change the address to
which notices or other communications to such party shall be delivered or mailed
by giving notice thereof to the other parties hereto in the manner provided
herein.
<PAGE>
12.2. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. ------------
12.3. Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the Laws of the State
of Georgia, without regard to its conflicts of laws rules. -------------
12.4. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. No party may assign, delegate, or otherwise
transfer any of its rights or obligations under this Agreement without the
written consent of the other parties hereto. Notwithstanding the foregoing, at
any time prior to the Closing, any party may dispose of any of its Shares by
gift or charitable contribution, in which case the transferee shall be bound by
Article 10 of this Agreement only to the extent of any portion of the Merger
Consideration received by such transferee subject to the Escrow Agreement;
provided that the transferor shall continue to be bound by the provisions of
Article 10, except to the extent of any claim to be satisfied out of the escrow
contemplated herein, unless the transferee expressly assumes all of the
obligations of the transferor under Article 10 hereof.
12.5. Partial Invalidity and Severability. All rights and
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any applicable Laws and are
intended to be limited to the extent necessary to render this Agreement legal,
valid and enforceable. If any term of this Agreement, or part thereof shall be
held to be illegal, invalid, or unenforceable by a Forum of competent
jurisdiction, it is the intention of the parties that the remaining terms
hereof, or part thereof, shall constitute their agreement with respect to the
subject matter hereof and all such remaining terms, or parts thereof, shall
remain in full force and effect.
12.6. Waiver. Any term or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, but
only if such waiver is evidenced by a writing signed by such party. No failure
on the part of any party hereto to exercise, and no delay in exercising any
right, power, or remedy created hereunder, shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power, or remedy by any
party preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy. No waiver by any party hereto of any breach of or
default in any term or condition of this Agreement shall constitute a waiver of
or assent to any succeeding breach of or default in the same or any other term
or condition hereof.
12.7. Headings. The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement. --------
12.8. Number and Gender. Where the context requires, the use of the
singular form herein shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall include any and all
genders. -----------------
12.9. Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties (including, but not limited to,
the letter of intent dated January 7, 1997) with respect to the subject matter
hereof, and this Agreement contains the sole and entire agreement between the
parties with respect to the matters covered hereby. This Agreement shall not be
altered or amended except by an instrument in writing signed by or on behalf of
the party entitled to the benefit of the provision against whom enforcement is
sought.
<PAGE>
13. DEFINITIONS
For purposes of this Agreement, the following capitalized
terms shall have the meanings specified with respect thereto below:
"Accredited Class B Shareholders" shall have the meaning set forth in the
preamble.
"Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative proceeding,
whether at Law, in equity, in arbitration or otherwise, and whether conducted by
or before any Government or other Person.
"Affiliate" of any Person shall mean any other Person directly
or indirectly Controlling, Controlled by, or under direct or indirect common
Control with, the former Person.
"Affiliated Entity" or "Affiliated Entities"13.3.Affiliated
Entity or Affiliated Entities shall have the meaning set forth in Paragraph 5.9.
"Apple South"13.36.Apple South shall have the meaning set forth in the
Preamble.
"Apple South Indemnitees"13.36.Apple South shall have the
meaning set forth in the Paragraph 10.1.
"Apple South's Indemnified Losses"13.36.Apple South shall have
the meaning set forth in Paragraph 10.1.
"Apple South Stock"13.37.Apple South Stock shall have the
meaning set forth in Paragraph 3.2.
"Average Price" shall have the meaning set forth in Paragraph 3.2.
"Business Day"13.7.Business Day shall mean any day other than a Saturday, a
Sunday, or a day on which commercial banks in the United States are required or
authorized to be closed. ------------
"Closing"13.8.Closing shall have the meaning set forth in Paragraph 3.4.
"Closing Date" shall mean the day on which the Closing occurs.
"Company"13.9.Company shall have the meaning set forth in the Preamble.
"Company Contracts"13.11.Company Contracts means all existing
written and oral agreements and commitments of the Company or any Subsidiary,
including without limitation all employment and consulting contracts, union
contracts, agreements with suppliers and customers, personal property leases,
licenses, employee benefit plans, deferred compensation agreements, indentures,
notes, bonds, mortgages, security agreements, loan agreements, guarantees,
franchise agreements, agreements in respect of the issuance, sale, repurchase or
transfer of the Company's or any Subsidiary's capital, stock, bonds or other
securities or powers of attorney, which involve a payment of more than $25,000
annually and are not cancellable upon notice of thirty days or less.
"Confidential Information"13.11.Company Contracts shall have the meaning
set forth in Paragraph 4.10.
"Control"13.12.Control means a Person possesses, directly or indirectly,
the power to direct or cause the direction of the management and policies of
another Person, whether through the ownership of voting securities, by contract
or otherwise. -------
"Corporate Laws"13.13.Corporate Laws shall have the meaning set forth in
Paragraph 1.1.
"Current SEC Documents"13.14.Current SEC Documents shall have
the meaning set forth in Paragraph 4.7.
"Disclosee"13.14.Current SEC Documents shall have the meaning set forth in
Paragraph 4.10.
"Disclosing Party"13.14.Current SEC Documents shall have the
meaning set forth in Paragraph 4.10.
"Disclosure Memorandum"13.14.Current SEC Documents shall have
the meaning set forth in Section 5.
"Effective Time"13.16.Effective Time shall have the meaning set forth in
Paragraph 3.4.
<PAGE>
"Environmental Laws"13.17.Environmental Laws shall mean all
federal, state, provincial, municipal, and local Laws, statutes, ordinances,
rules, regulations, general or particular conditions, conventions, requirements,
and decrees relating to health, safety, and the environment, including without
limitation, those relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic, or
Hazardous Materials or wastes of every kind and nature into the environment
(including without limitation ambient air, surface water, ground water, soil,
and subsoil), or otherwise relating to the manufacture, generation, processing,
distribution, application, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic, or
hazardous substances or wastes, or to occupational or worker safety and health,
and any and all Laws, rules, regulations, codes, directives, orders, decrees,
judgments, injunctions, consent agreements, stipulations, provisions, and
conditions of Environmental Permits, licenses, injunctions, consent agreements,
stipulations, certificates of authorization, and other operating authorizations,
entered, promulgated, or approved thereunder.
"Environmental Permits"13.18.Environmental Permits shall mean
all permits, licenses, certificates, approvals, authorizations, regulatory plans
or compliance schedules required by applicable Environmental Laws, or issued by
a Government pursuant to applicable Environmental Laws, or entered into by
agreement of the party to be bound, relating to activities that affect human
health or the environment, including without limitation, permits, licenses,
certificates, approvals, authorizations, regulatory plans and compliance
schedules for air emissions, water discharges, pesticide and herbicide or other
agricultural chemical storage, use or application, and Hazardous Material or
Solid Waste generation, use, storage, treatment and disposal.
"ERISA13.19.ERISA " shall have the meaning set forth in Paragraph
5.21(a)(i).
"ERISA Plans"13.14.Current SEC Documents shall have the
meaning set forth in Paragraph 5.21(a)(ii).
"Escrow Agent" shall mean the bank agreed upon by Apple South
and Shareholders' Representative.
"Escrow Agreement" shall have the meaning set forth in Paragraph 3.5.
"Exchange Act" shall have the meaning set forth in Paragraph 4.11.
"Forum"13.20.Forum shall mean any federal, state, local, municipal, or
foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel. -----
"Financial Statements"13.14.Current SEC Documents shall have
the meaning set forth in Paragraph 5.6.
"GAAP"13.21.GAAP shall mean generally accepted accounting principles,
consistently applied.
"Government"13.22.Government shall mean any federal, state,
provincial, local, municipal, or foreign government or any department,
commission, board, bureau, agency, instrumentality, unit, or taxing authority
thereof.
<PAGE>
"HSR Act" shall have the meaning set forth in Paragraph 4.1.
"Hazardous Material"13.23.Hazardous Material shall mean any
substance or material, including, without limitation, raw materials, commercial
products and wastes or waste products that, because of its quantity,
concentration, or physical, chemical or infectious characteristics may cause or
significantly contribute to an increase in mortality or an increase in serious,
irreversible or incapacitating illness, or pose a substantial hazard to human
health or the environment, including without limitation all substances and
materials designated as hazardous or toxic under any applicable Environmental
Law.
"Holders"13.24.Hereof, herein, hereunder shall mean the Shareholders and
any Person becoming a stockholder of the Company as the result of the exercise
of any warrant, option, or other right or otherwise becoming a stockholder of
the Company subsequent to the date of this ------- Agreement.
"Hereof," "herein," "hereunder"13.24.Hereof, herein, hereunder and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and "Article,"
"Paragraph," "Disclosure Memorandum," "Exhibit" ------ ------ --------- and like
references are to this Agreement unless otherwise specified.
"Improvements"13.25.Improvements shall mean all buildings, structures and
other improvements of any and every nature located on the Real Property and all
fixtures attached or affixed, actually or constructively, to the Real Property
or to any such buildings, structures or other ------------ improvements.
"Indemnified Losses"13.27.Indemnified Losses shall have the meaning set
forth in Paragraph 10.2.
"Known,"13.28.Known, "to the knowledge of," "to the best
knowledge of," "aware" or words of similar import employed in this Agreement
with reference to any individual or entity shall mean the actual knowledge of
the individual or entity and, in the case of the Company, such words or words or
similar import shall be deemed to be the actual individual or collective
knowledge of Messrs. McCormick and Schmick, Jerry R. Kelso, Gerald Barron, Saed
Mohseni, Jeff Skele, and Bill King.
"Law"13.29.Law shall mean all federal, state, provincial,
local, municipal or foreign constitutions, statutes, rules, regulations,
ordinances, acts, codes, legislation, treaties, conventions, judicial decisions,
and similar laws and legal requirements, whether of the United States of America
or any other jurisdiction as in effect from time to time.
"Liability"13.30.Liability shall mean, to the extent
applicable in the context used, any liability or obligation whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, and whether due or to become due, to the extent
required by the accounting principles followed by the Company to be set forth in
a financial statement or in the notes thereto.
"Lien"13.31.Lien shall mean any mortgage, pledge,
hypothecation, security interest, encumbrance, claim, restriction on use, lien
or charge of any kind, or any rights of others, however evidenced or created
(including any agreement to give any of the foregoing, any conditional sale or
other title retention agreement, any lease in the nature thereof, and the filing
of or agreement to give any financing statement under the lien notice records or
other similar legislation of any jurisdiction).
<PAGE>
"Merger"13.32.Merger shall have the meaning set forth in Paragraph 1.1.
"Orders"13.34.Orders shall mean all applicable orders, writs, judgments,
decrees, rulings, consent agreements, and awards of or by any Forum or entered
by consent of the party to be bound. ------
"Person"13.38.Person shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, a Government, and any other legal entity. ------
"Real Property"13.42.Real Property shall have the meaning set forth in
Paragraph 5.11(a).
"Real Property Lease"13.43.Real Property Lease shall have the meaning set
forth in Paragraph 5.12.
"Reference Balance Sheet"13.14.Current SEC Documents shall
have the meaning set forth in Paragraph 5.6.
"Reference Date"13.44.Reference Date shall have the meaning set forth in
Paragraph 5.6.
"Related Parties"13.45.Related Parties shall have the meaning set forth in
Paragraph 5.22.
"Relative" shall mean (i) the spouse of a Shareholder or (ii) any sibling,
parent, grandparent, child, or grandchild of a Shareholder or Shareholder's
spouse and any spouse of any of the foregoing persons.
"Restaurants" means those restaurants contemplated by the first recital to
this Agreement.
"SEC"13.46.SEC shall have the meaning set forth in Paragraph 3.2(c).
"SEC Documents"13.47.SEC Documents shall have the meaning set forth in
Paragraph 4.7.
"Securities Act"13.48.Securities Act shall have the meaning set forth in
Paragraph 4.8.
"Shareholders"13.49.Shareholders shall have the meaning set forth in the
Preamble.
"Shareholders' Indemnified Losses"13.36.Apple South shall have the meaning
set forth in Paragraph 10.2.
"Shareholders' Representative" shall have the meaning set forth in
Paragraph 4.14.
"Shares"13.50.Shares shall have the meaning set forth in Paragraph 3.1.
"Solid Waste"13.51.Solid Waste shall mean any garbage, refuse,
sludge from a waste treatment plant, water supply treatment plant, or air
pollution control facility, and other discarded material, including solid,
liquid, semisolid, or contained gaseous material resulting from industrial,
commercial, mining, and agricultural operations, and from community activities.
"Subsidiaries" shall mean the corporations listed in the
Disclosure Memorandum pursuant to Paragraph 5.2(d).
"Subsidiary Shares" shall have the meaning set forth in Paragraph 5.2(b).
"Survival Period"13.53.Survival Period shall have the meaning set forth in
Paragraph 10.4.
"Surviving Corporation"13.54.Surviving Corporation shall have the meaning
set forth in Paragraph 1.1.
<PAGE>
"Taxes"13.55.Taxes shall mean any present or future taxes,
levies, imposts, duties, fees, assessments, deductions, withholdings or other
charges of whatever nature, including without limitation income, gross receipts,
excise, property, sales, use, customs, value added, consumption, transfer,
license, payroll, employee income, withholding, social security, and franchise
taxes, imposed or levied by the United States of America or any Government or by
any department, agency or other political subdivision or taxing authority
thereof or therein, all deposits required in connection therewith, and all
interests, penalties, additions to tax, and other similar Liabilities with
respect thereto.
"Termination Date" shall mean sixty days following the date hereof.
[SIGNATURES ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
under seal or caused it to be executed by their duly authorized officers and
agents and their corporate seals affixed as of the day and year first above
written. Signatures of the parties transmitted by facsimile shall be valid and
binding for all purposes.
ATTEST: APPLE SOUTH:
___________________________________ APPLE SOUTH, INC.
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: MERGER SUB:
___________________________________ M&S ACQUISITION OF DELAWARE, INC.
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: COMPANY:
- -----------------------------------
McCORMICK & SCHMICK HOLDING CORP.
Name: By:
Title: Name:
Title:
(CORPORATE SEAL) Address:
Facsimile No.:
<PAGE>
CLASS A COMMON AND/OR PREFERRED STOCKHOLDERS:
CASTLE HARLAN PARTNERS II, L.P.
ATTEST: By:
Name:
___________________________________ Title:
Address:
Name:
Title:
Facsimile No.:
(CORPORATE SEAL)
ALLEN J. BERNSTEIN
Address:
Facsimile No.:
THOMAS J. BALDWIN
Address:
Facsimile No.:
DAVID B. PITTAWAY
Address:
Facsimile No.:
DAVID H. CHOW
Address:
Facsimile No.:
<PAGE>
SYLVIA F. ROSEN
Address:
Facsimile No.:
HOWARD WEISS
Address:
Facsimile No.:
ATTEST: QUANTUM RESTAURANT GROUP, INC.
By:
___________________________________ Name:
Title:
Name: Address:
Title:
(CORPORATE SEAL) Facsimile No.:
CLASS B COMMON STOCKHOLDERS:
WILLIAM P. McCORMICK
Address:
Facsimile No.:
<PAGE>
ATTEST: WILLIAM McCORMICK IRREVOCABLE
TRUST
- -----------------------------------
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: WILLIAM McCORMICK CHARITABLE
___________________________________ REMAINDER TRUST NO. 2
Name: By:
Title: Name:
Title:
(CORPORATE SEAL) Address:
Facsimile No.:
ATTEST: DOUGLAS SCHMICK CHARITABLE REMAINDER TRUST NO. 2
___________________________________ By:
Name:
Name: Title:
Title: Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: DOUGLAS SCHMICK IRREVOCABLE TRUST
___________________________________ By:
Name:
Name: Title:
Title: Address:
(CORPORATE SEAL)
Facsimile No.:
GERALD BARRON
Address:
Facsimile No.:
SCHMICK
DOUGLAS L. SCHMICK
Address:
Facsimile No.:
<PAGE>
EXHIBIT A
Directors of Surviving Corporation
Erich J. Booth
Tom E. DuPree, Jr.
Jerry Kelso
Kirk Kinsell
William P. McCormick
Douglas L. Schmick
1
341988.7
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
THIS AGREEMENT, dated as of ______________ __, 1997, by and among
______________________________________ ("Escrow Agent"); APPLE SOUTH, INC., a
Georgia corporation ("Parent"); M&S ACQUISITION OF DELAWARE, INC., a Delaware
corporation ("Merger Sub"); McCORMICK & SCHMICK HOLDING CORP., a Delaware
corporation (the "Company"); CASTLE HARLAN PARTNERS II, L.P., a Delaware limited
partnership and a principal stockholder of the Company ("Representative"); and
the other holders of capital stock of the Company, all of whom are signatories
hereof (together with Representative hereinafter collectively referred to as the
"Holders" and individually as a "Holder").
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), dated _____________ __, 1997, Company, Parent, and Merger Sub
agreed that Merger Sub was to merge with and into Company, with Company being
the surviving corporation in the merger (the "Merger") (Company after the Merger
is sometimes hereinafter referred to as the "Surviving Corporation"); and
WHEREAS, as a condition to the consummation of the Merger and the other
transactions contemplated by the Merger Agreement, Parent, Merger Sub, Company,
Representative, and Holders have agreed to enter into this Agreement in order to
secure certain indemnifications of Parent and Surviving Corporation by Holders
pursuant to Paragraph 10.1 of the Merger Agreement; and
WHEREAS, Escrow Agent is willing to act as escrow agent hereunder;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein, and intending to be legally bound,
the parties hereby agree as follows:
Article I - Establishment of Escrow
1.1 Delivery of Cash and Shares. Simultaneously with the execution
hereof, pursuant to Paragraph 3.5 of the Merger Agreement, (i) Parent has
delivered to Escrow Agent the sum of _________________ Dollars ($_____________)
(such sum together with any income or interest earned thereon being hereinafter
referred to as the "Escrow Fund") and (ii) Parent, Company, and the Accredited
Class B Shareholders (such term and other capitalized terms not defined herein
having the meanings set forth in the Merger Agreement) have delivered to the
Escrow Agent certificates evidencing _____ shares (hereinafter referred to as
the "Escrow Shares") of common stock of the Parent (the "Common Stock") issued
in the names of the Accredited Class B Shareholders along with stock transfer
powers executed by the Accredited Class B Shareholders with respect to the
Escrow Shares issued in their names, the amount of such Escrow Fund allocated to
each Holder and the number of such Escrow Shares issued in the name of each
Class B Shareholder being set forth on Schedule I hereto.
<PAGE>
1.2 Voting. The Accredited Class B Shareholders, as record holders, shall
have the right to vote the Escrow Shares during the period that the certificates
for such Escrow Shares are held by the Escrow Agent. ------
1.3 Dividends. Any cash dividends on the Escrow Shares shall be paid to
and retained by the Accredited Class B Shareholders, respectively, in accordance
with their record ownership thereof. Any shares of Common Stock issued as a
share dividend (as defined in ss. 14-2-623 of the Georgia Business Corporation
Code) with respect to the Escrow Shares shall be issued in the names of the
record holders of the underlying Escrow Shares, and certificates evidencing such
shares shall be delivered to the Escrow Agent to be held as Escrow Shares in
accordance with all the terms of this Escrow Agreement.
1.4 Investment of Escrow Fund. The Escrow Fund shall be invested by Escrow
Agent in _______________________________ [TO BE DETERMINED BY ESCROW AGENT AND
REPRESENTATIVE PRIOR TO EXECUTION HEREOF]. -------------------------
Article II - Claims and Disbursements
2.1 Claims. The Escrow Fund and the Escrow Shares shall secure the
obligations of the Holders to the Apple South Indemnitees under item (i) of
Paragraph 10.1(a) of the Merger Agreement (and item (iii) thereof to the extent
that such enforcement relates to item (i)); provided, however, that the Escrow
Fund and Escrow Shares shall not secure any indemnification under Paragraph 10.1
for a breach of a representation and warranty set forth in Paragraph 5.1(b),
5.2, or 5.23 of the Merger Agreement. If an Apple South Indemnitee shall assert
a claim secured by the Escrow Fund and/or Escrow Shares pursuant to the
preceding sentence (a "Claim"), such Apple South Indemnitee shall deliver
written notice of the Claim to the Escrow Agent and to Representative. As
promptly as possible after an Apple South Indemnitee has given such notice, the
Apple South Indemnitee and Representative shall establish the validity of the
Claim (by mutual agreement, arbitration, litigation, or otherwise), and, upon
final determination of the merits of the Claim, shall notify Escrow Agent
(either by means of a certified copy of the judgment, a certified copy of the
arbitration decision, or a written instrument executed by the Apple South
Indemnitee and Representative on behalf of the Holders), of the terms of such
determination. Upon receipt of such document, Escrow Agent shall thereupon cause
to be transferred to such Apple South Indemnitee out of the Escrow Fund and the
Escrow Shares amounts of cash and the number of shares which, when valued
according to this Article, equal the amount of the Claim as set forth in the
terms of such document. The portion of the amount delivered in satisfaction of
the Claim consisting of Escrow Shares shall be the percentage that Escrow Shares
(valued per this Article) constituted of the entire value of Escrow Shares and
cash delivered to the Escrow Agent at the time of establishment of the escrow
hereunder. If Escrow Shares are transferred to an Apple South Indemnitee
hereunder, Escrow Agent shall cause certificates for any shares not so
transferred to be reissued in the names of the Accredited Class B Shareholders
and such reissued certificates shall continue to be held in accordance with the
terms of this Agreement.
<PAGE>
2.2 Disbursement.
(a) Distribution Date. Upon the later of (i) the completion
(which shall not be later than March 31, 1998)of the audited financial
statements of Parent for fiscal year 1997 or (ii) January 31, 1998 (such later
date referred to as the "Distribution Date"), the Escrow Agent shall transfer to
one or more accounts designated by Representative pursuant to Paragraph 3.1
hereof (the "Disbursement Accounts") the amount of cash remaining in the Escrow
Fund and shall transfer to the Accredited Class B Shareholders the remaining
number of Escrow Shares issued in their respective names, (w) after any
transfers of amounts from the Escrow Fund and of shares from the Escrow Shares
to Apple South Indemnitees pursuant to Paragraph 2.1 hereof and (x) after
deducting (only for purposes of calculating the amount of this distribution)
from the Escrow Fund and the Escrow Shares any amounts and/or shares subject to
a Claim pending pursuant to Paragraph 2.1 and the last sentence of Section 10.4
of the Merger Agreement.
(b) Subsequent Distributions. Any amount of the Escrow Fund
and any shares of Escrow Shares that remain in escrow following the Distribution
Date shall be disbursed, respectively, to the Disbursement Accounts and to the
Accredited Class B Shareholders as soon thereafter as all Claims are resolved
and any transfers due to any Apple South Indemnitees as a result of such
resolution have been made.
(c) Termination of Escrow. The escrow provided for hereunder shall
terminate as soon as all of the Escrow Fund and all of the Escrow Shares are
disbursed in accordance with Paragraph 2.1 hereof and this Paragraph 2.2.
- ---------------------
2.3 Valuation of Escrow Shares. For the purpose of this Article II, each
Escrow Share shall be valued at the "Average Price" as defined in the Merger
Agreement, as adjusted to reflect any stock split, stock dividend,
consolidation, recapitalization or similar event occurring after
- -------------------------- ------------- date hereof.
2.4 Proportion of Escrow Fund to Escrow Shares. Whenever this Agreement
requires any payment to an Apple South Indemnitee or any disbursement to a
Holder, such payment or disbursement shall be made out of cash in the Escrow
Fund and out of shares of the Escrow Shares in the same proportion as the total
value of the Escrow Fund bears to the total value of the Escrow Shares delivered
pursuant to Paragraph 1.1 hereof.
<PAGE>
2.5 Representative. The Holders hereby appoint Representative as their
sole representative and agent, with full power and authority to act on their
behalf, with regard to (i) the resolution, settlement, arbitration, litigation,
or other disposition of any Claim and the execution and delivery of any
agreement, order, settlement, or other document in connection therewith and (ii)
the transfer or other distribution of any or all of the Escrow Fund and the
Escrow Shares pursuant to the terms hereof. Parent, Surviving Corporation, and
Escrow Agent may conclusively rely on any action by and any document executed by
or done by Representative in the name and on behalf of Holders, as the action or
document of Holders, and they shall not be required to seek or obtain any
further evidence of Representative's authority with regard thereto.
Article III - Disbursement Accounts and Addresses
3.1. Designation of Disbursement Accounts and Addresses. No later than
thirty days prior to the Distribution Date, Representative shall provide notice
to Escrow Agent of the designation of the Disbursement Accounts to receive
disbursements by Escrow Agent of amounts from the Escrow Fund and the addresses
of Accredited Class B Shareholders to receive shares from the Escrow Shares
pursuant to Paragraph 2.2 hereof.
3.2 Transfers to Disbursement Account. Escrow Agent, Parent, and Surviving
Corporation shall have no obligation, duty, or responsibility to direct or
insure that funds transferred to the Disbursement Accounts be actually
distributed to Holders, and may rely on transfers to the Disbursement Accounts
designated by Representative to satisfy any disbursement obligations under this
Agreement.
Article IV - Escrow Agent
4.1 Duties. Escrow Agent's obligations and duties in connection
herewith are confined to those specifically enumerated in this Agreement. Escrow
Agent shall not be in any manner liable or responsible for the sufficiency,
correctness, genuineness, or validity of any documents deposited with it or with
reference to the form of execution thereof, or the identity, authority, or
rights of any person executing or depositing same, and Escrow Agent shall not be
liable for any loss that may occur by reason of forgery, false representation,
or the exercise of its discretion in any particular manner or for any other
reason, except for its own gross negligence or willful misconduct. Except in
instances of Escrow Agent's own gross negligence or willful misconduct, each of
Parent, Surviving Corporation, Company, Representative, and Holders shall
indemnify, defend, and hold Escrow Agent harmless from any demands, suits, or
causes of action arising out of this Agreement instituted by such indemnifying
party.
4.2 Disputes. If a dispute occurs between the parties hereto sufficient
in the discretion of Escrow Agent to justify its doing so, Escrow Agent shall be
entitled to tender into the registry or custody of any court of competent
jurisdiction all of the Escrow Fund and Escrow Shares and other property in its
hands under this Agreement, together with such legal pleadings as it deems
appropriate, and thereupon be discharged from all further duties and liabilities
under this Agreement. Any such legal action may be brought in such court as
Escrow Agent shall properly determine to have jurisdiction thereof. The filing
of any such legal proceedings shall not deprive Escrow Agent of its compensation
earned prior to such filing.
<PAGE>
4.3 Fees. The Escrow Agent's fees hereunder shall be as set forth in
Schedule II hereto, which will be paid half by Parent and half by Holders. The
fee agreed to be paid by such parties is intended as full compensation for
Escrow Agent's services as contemplated by this Agreement; however, if the
conditions of this Escrow Agreement are not fulfilled or Escrow Agent renders
any material service not contemplated in this Agreement, or there is any
assignment of interest in the subject matter of this Escrow Agreement, or any
material modification hereof, or if any material controversy arises hereunder,
or Escrow Agent is made a party to or justifiably intervenes in any litigation
pertaining to this Escrow Agreement, or the subject matter hereof, Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs and expenses, including reasonable attorney's fees, occasioned by
any delay, controversy, litigation, or event, and the same may be recoverable
from Parent and Surviving Corporation.
4.4 Resignation. (a) The Escrow Agent may resign at any time from its
obligations under this Escrow Agreement by providing written notice to the
parties hereto. Such resignation shall be effective not less than thirty (30)
days after such written notice has been delivered. The ----------- Escrow Agent
shall have no responsibility for the appointment of a successor escrow agent.
(b) In the event of resignation of the Escrow Agent, a successor escrow
agent, which shall be a national bank, shall be appointed as soon as practicable
by Parent and Representative.
4.5 Termination. Apple South and Representative may terminate the
escrow (including in connection with the appointment of a new escrow agent) by
joint written notice which shall specify the disposition of the Escrow Fund and
Escrow Shares and Escrow Agent shall, upon receipt thereof, promptly disburse
the Escrow Fund and Escrow Shares in accordance with such specified disposition.
Article V - Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and shall
be binding upon Parent, Surviving Corporation, Company, Representative, and
Holders and their respective successors, personal representatives, executors,
heirs, beneficiaries and assigns. --------------
5.2 Governing Law. This Agreement shall be deemed to be made in, and in all
respects shall be interpreted, construed and governed by and in accordance with,
the laws of the State of Georgia. -------------
5.3 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. --------
5.4 Notices. All notices and communications provided for hereunder shall be
in writing and shall be deemed to be given only if delivered personally or sent
by first class, registered or certified United States Mail, with proper postage
prepaid, as follows: -------
(a) If to Parent, Surviving Corporation, With a required copy to: or Merger
Sub, addressed to: Apple South, Inc. Kilpatrick Stockton LLP Hancock at
Washington Suite 2800, 1110 Peachtree Street Madison, Georgia 30650 Atlanta,
Georgia 30309 Attention: Erich J. Booth Attention: Larry D. Ledbetter, Esq.
<PAGE>
(b) If to Representative, or With a required copy to: Holders, addressed
to:
Castle Harlan Partners II, L.P. Schulte, Roth & Zabel, L.L.P.
150 East 58th Street, 37th Floor 900 Third Avenue
New York, NY 10155 New York, NY 10022
Attention: David B. Pittaway Attention: Marc Weingarten, Esq.
(c) If to Escrow Agent, addressed to:
=========================
-------------------------
Attention: ________________
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notices and
communications will be deemed to have been given as of the date actually
delivered, or if mailed, three days after deposit in the U.S. Mail properly
addressed with adequate postage affixed.
5.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument. ------------
5.6 Modification. This Agreement may be modified only by a written
instrument signed by each of the parties hereto. ------------
[SIGNATURES LOCATED ON FOLLOWING PAGES]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
to the date first written above.
APPLE SOUTH:
APPLE SOUTH, INC.
By:___________________________________
Erich J. Booth, Chief Financial Officer
MERGER SUB (SURVIVING CORPORATION):
[--------------------]
By: ___________________________________
------------------, ----------------
REPRESENTATIVE:
[--------------------]
By: ___________________________________
------------------, ----------------
HOLDERS:
------------------------------------------------
[--------------------]
------------------------------------------------
[--------------------]
------------------------------------------------
[--------------------]
ESCROW AGENT:
By: _________________________________________
Name: _________________________________________
Title: _________________________________________
2
EXHIBIT 2.2
PART 1 OF 2.
------------------------
ASSET PURCHASE AGREEMENT
DATED AS OF FEBRUARY 6, 1997,
AMONG
APPLE SOUTH, INC.
AND
MASON AND SCHELLDORF LEASING COMPANY,
CYPRESS COAST CONSTRUCTION, INC.,
HOPS RESTAURANTS, INC., THOMAS A. SCHELLDORF, AND
DAVID L. MASON
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of February 6, 1997, by and
among MASON AND SCHELLDORF LEASING COMPANY, a general partnership formed under
the laws of the State of Florida ("M&S") and HOPS RESTAURANTS, INC., a Florida
corporation ("Hops") (M&S and Hops being sometimes collectively referred to as
the "Sellers"); THOMAS A. SCHELLDORF and DAVID L. MASON, the holders of all the
outstanding capital stock of Hops and all the partnership interests in M&S (the
"Shareholders"); and APPLE SOUTH, INC., a Georgia corporation (the "Purchaser"),
W I T N E S S E T H :
WHEREAS, Sellers own certain real estate and equipment and rights to
the "Hops Grill & Bar" restaurant concept, including trademarks, service marks,
trade names, trade secrets, and other intellectual property, which real
property, equipment, and intellectual property rights are leased or licensed to
one or more affiliated entities for use in connection with the operation of
eighteen existing Hops Grill & Bar restaurants and additional Hops Grill & Bar
restaurants under development; and
WHEREAS, the Sellers desire to sell to Purchaser substantially all of
Sellers' assets and Shareholders desire to sell to Purchaser all of the
outstanding stock of Cypress Construction, Inc., a Florida corporation
("Cypress"), and Hops Marketing, Inc., a Florida corporation ("Marketing"), and
Purchaser desires to purchase such assets and stock all on the terms and subject
to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants, and agreements set forth herein, and
intending to be legally bound, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For the purpose of this Agreement, the following terms
shall have the following meanings:
"Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, investigation, mediation contest, set-off, or
administrative proceeding, whether at law, in equity,
<PAGE>
in arbitration, or otherwise, and whether conducted by or before any
Government, any Tribunal or any other Person.
"Assets" shall mean all rights, interests, properties, and assets
of Sellers of whatever nature, tangible or intangible, real or personal, fixed
or contingent, except for the Excluded Assets. Assets shall include, but shall
not be limited to, the following:
(i) all brewing equipment and other personal property leased by M&S to
operating entities for use in connection with the Restaurants, including, but
not limited to, the items listed on SCHEDULE 1.1(A);
(ii) all rights, claims, or causes of action (including all rights under
express or implied warranties) of Sellers against third parties relating to the
Assets, except to the extent that they relate to liabilities of Sellers which
are not Assumed Liabilities;
(iii) all rights in and to the Hops Grill & Bar restaurant name and
concept, including any rights referred to as "trade dress", the service marks,
trademarks, and trade names listed on SCHEDULE 1.1(B) (which indicates the
registration status of each such item) and all other intellectual property
rights comprising such concept including, without limitation, any rights under
any patent, or copyright, whether registered or unregistered;
(iv) all methods, technologies, know-how, trade secrets, recipes, menu
items, formulations, copyrights, and other intellectual property used in
connection with the Restaurants;
(v) all advertising and promotional materials related to the Restaurants;
(vi) all rights and interests of Sellers in, to, and under the Assigned
Agreements;
(vii) all rights of Sellers under the Permits to the extent transferable;
(viii) the Transferred Real Property; and
(ix) cash and bank and other account balances.
"Assigned Agreements" shall mean the Contracts, Leases, and Equipment
Leases.
<PAGE>
"Assumed Liabilities" shall mean only (i) all liabilities and
obligations of the Sellers shown on the Financial Statements; (ii) all
liabilities and obligations of the Sellers that were incurred after the date of
the Financial Statements in the ordinary course of the Sellers' business; (iii)
all obligations of the Sellers under the Assigned Agreements; (iv) all
obligations of the Sellers under the Permits; (v) all obligations of the Sellers
under the notes and other liabilities listed on SCHEDULE 1.1(c); and (vi) all
other liabilities or obligations expressly assumed by Purchaser hereunder.
Assumed Liabilities shall not include any liability, obligation, payment, duty,
or responsibility of any nature except as expressly described above and
specifically shall not include (i) liabilities or obligations of Sellers arising
out of any breach by Sellers of any Assigned Agreement; (ii) any liability of
Sellers for product liability, personal injury, property damage, or otherwise
based on any tort claim or statutory liability (including but not limited to any
"dram shop" liability) prior to Closing, except to the extent covered by
insurance; (iii) any federal, state, or local tax liability of Sellers; (iv) any
contractual claim based on any lease, contract, or agreement of Sellers other
than the Assigned Agreements; and (v) any liability or obligation of Sellers
arising out of the negotiation, execution, or performance of this Agreement,
including fees and expenses of attorneys and accountants.
"Assumed Liens" shall mean any security interests, mortgages,
deeds of trust, security deeds, or other liens securing only the Assumed
Liabilities and obligations incidental thereto.
"Bill of Sale" shall mean an instrument in substantially the
form of the Bill of Sale and Assignment Agreement attached hereto as EXHIBIT A
pursuant to which the Assets (except for the Transferred Real Property) will be
transferred and assigned to Purchaser at the Closing and Purchaser will assume
the Assumed Liabilities.
"Closing" shall have the meaning set forth in Section 2.5
hereof.
"Closing Date" shall mean the time and date the Closing
occurs.
"Code" shall mean the United States Internal Revenue Code of
1986, as amended. Any reference herein to a specific section or sections of the
Code shall be deemed to include a reference to any corresponding provision of
future law.
"Consents" shall mean the consents and approvals of parties
other than Sellers, Shareholders, and Purchaser which are required to be
obtained to authorize and permit the assignment, transfer, and conveyance to
Purchaser of the Assigned Agreements and the other Assets without giving
<PAGE>
rise to any default, right of termination, or loss of any other right or
privilege pertaining to the Assigned Agreements or the Assets.
"Contracts" shall mean those contracts and agreements listed
on SCHEDULE 1.1 (D) attached hereto.
"Deeds" shall mean special warranty deeds (i) conveying fee
simple title to the Transferred Real Property to Purchaser free and clear of all
liens, mortgages, deeds of trust, easements, restrictive covenants, use
restrictions, and other encumbrances of any nature, except for Permitted
Encumbrances and (ii) sufficient for Purchaser to obtain Title Policies as
defined in Section 5.6 below.
"Environmental Law" shall mean a Law relating to health,
safety, or the environment, including, without limitation, a Law relating to the
manufacture, generation, processing, distribution, application, use, treatment,
transport, or handling, storage (whether above or below ground) of, or
emissions, discharges, releases, or threatened releases into the environment
(including, without limitation, ambient air, surface water, ground water, soil,
and subsoil) of, pollutants, contaminants, petroleum products, chemicals, or
industrial waste, Hazardous Materials, other solids, liquids, gases, or wastes
(including Solid Waste), heat, light, noise, radiation, electro-magnetic fields,
and other forms of matter or energy of every kind and nature and the proper
containment and disposal of the same, or to occupational or worker safety and
health.
"Environmental Permits" shall mean all permits, licenses,
certificates, approvals, authorizations, regulatory plans, and compliance
schedules required by applicable Environmental Laws, or issued by a Government
pursuant to applicable Environmental Law, or entered into by agreement of the
party to be bound, relating to activities that affect human health or the
environment, including, without limitation, permits, licenses, certificates,
approvals, authorizations, regulatory plans, and compliance schedules for air
emissions, water discharges, pesticide and herbicide or other agricultural
chemical storage, use, or application, and Hazardous Material or Solid Waste
generation, use, storage, treatment, and disposal.
"Equipment Leases" shall mean those leases of personal
property described on SCHEDULE 1.1 (E).
"Excluded Assets" shall mean Sellers' corporate organizational
documents and copies of books and records (the originals of same being
conveyed).
<PAGE>
"Financial Statements" shall mean the combined financial
statements of the Sellers and affiliated entities dated December 31, 1996.
"Government" shall mean any federal, national, state,
provincial, local, municipal, or foreign government or any department,
commission, board, bureau, agency, instrumentality, unit, or taxing authority
thereof.
"Hazardous Materials" shall mean all substances and materials
designated as hazardous or toxic under any applicable Environmental Law and
including, without limitation, gasoline, fuel oil, and other petroleum products.
"Hops Affiliates" means all the Constituent Corporations to
the Merger except for Merger Sub, as such terms are defined in the Merger
Agreement.
"Knowledge of Sellers" (or words of like effect), when used to
qualify a representation, warranty, or other statement, shall mean (i) the
actual knowledge of the Shareholders, and (ii) the knowledge that any of the
Shareholders would have possessed upon the exercise of reasonable diligence in
the operation of the businesses of Sellers.
"Laws" shall mean all federal, national, international, state,
provincial, local, municipal or foreign constitutions, statutes, rules,
regulations, ordinances, acts, codes, legislation, treaties, conventions,
judicial decisions, common law, equity, or similar laws or legal requirements as
in effect from time to time.
"Leases" shall mean (i) the nine leases described on SCHEDULE
1.1 (F) pursuant to which M&S, as lessor, leases the Restaurants.
"Material Adverse Effect" shall mean an adverse effect upon
the value of the Assets in an amount greater than or equal to $25,000.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated of
even date herewith by and among Purchaser, Shareholders, Timothy V. Curci, Kevin
Toomy, HG Acquisition Corp., et. al.
"Orders" shall mean any order, writ, judgment, decree, ruling,
consent agreement, or award of, or by, any Tribunal.
<PAGE>
"Permits" shall mean all permits, licenses, certificates of
occupancy, approvals, franchises, and authorizations from governmental and
regulatory authorities, of every kind and nature, which relate to the
Restaurants or the Transferred Real Property.
"Permitted Encumbrances" shall mean, in the case of all
Transferred Real Property, such easements, restrictions, covenants, and other
encumbrances which are shown as exceptions on the "Title Commitments" referred
to in Section 5.6 below, ordinances (municipal and zoning), and survey matters,
in each such case to which Purchaser does not timely object or which Purchaser
waives pursuant to Section 5.6 below, and such easements, restrictions,
covenants, and other encumbrances which become matters of public record after
the date of the "Title Commitments" and before the Closing, to the extent that
such are accepted by Purchaser in writing at the Closing either in writing or by
Purchaser's acceptance of the marked-up Title Commitments referencing such
exceptions. Permitted Encumbrances shall include all liens for taxes not yet due
and payable. Permitted Encumbrances shall also include the encumbrances set
forth on SCHEDULE I hereof.
"Person" shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, a Government, and any other legal entity.
"Purchase Price" shall mean the purchase price specified in
Section 2.3 hereof to be paid by Purchaser to Sellers and Shareholders.
"Restaurants" shall mean the nineteen Hops Grill & Bar
restaurants operated or under development by entities affiliated with Sellers at
the locations set forth on SCHEDULE 1.1 (G).
"Solid Waste" shall mean any garbage, refuse, sludge from a
waste treatment plant, water supply treatment plant, or air pollution control
facility and other discarded material, including solid, liquid, semi-solid, or
contained gaseous material resulting from industrial, commercial, mining and
agricultural operations, and from community activities.
"Stock" shall mean all the issued and outstanding shares of
capital stock of Cypress and Marketing.
"Trademark Assignments" shall mean such assignments as
Purchaser may reasonably require to transfer the copyrights, trademarks, trade
names, service marks, and other intangible property owned by Sellers and being
transferred hereunder.
<PAGE>
"Transferred Real Property" shall mean those parcels of land
for which legal descriptions are set forth on SCHEDULE 1.1 (H) and all
buildings, fixtures, and other improvements located thereon and described on
SCHEDULE 1.1(H).
"Tribunal" shall mean any federal, national, state, local,
municipal, or foreign court, governmental agency, administrative body or agency,
tribunal, private alternative dispute resolution system, or arbitration panel.
1.2 Singular/Plural; Gender. Where the context so requires or permits,
in this Agreement, the use of the singular form includes the plural, and the use
of the plural form includes the singular, and the use of any gender includes any
and all genders.
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing, (i) the Sellers shall sell, transfer,
and assign to Purchaser all of the Sellers' right, title, and interest in and to
the Assets, such assignments to be made free and clear of any and all mortgages,
deeds of trust, pledges, security interests, financing statements, liens,
charges, conditional sales agreements, title retention arrangements, easements,
use restrictions, restrictive covenants, or other encumbrances or claims, except
for the Permitted Encumbrances, and Assumed Liens and Purchaser shall purchase
and acquire the Assets from the Sellers, and (ii) the Shareholders shall sell,
transfer, and assign to Purchaser all of Shareholders' right, title, and
interest in and to the Stock free and clear of any lien, security interest, or
other encumbrance or claim.
2.2 Assumption of Liabilities. Effective as of the Closing, Purchaser
shall assume all of the Assumed Liabilities. Except as expressly provided herein
and in the Bill of Sale or in the Deeds, Purchaser does not assume or agree to
assume or pay any obligations, liabilities, indebtedness, duties,
responsibilities, or commitments of the Sellers of any nature whatsoever,
whether known or unknown, absolute or contingent, due or to become due.
2.3 Purchase Price. The purchase price ("Purchase Price") for the Assets
shall be $13,289,000.
<PAGE>
2.4 Payment of Purchase Price. The Purchase Price shall be paid by
Purchaser by wire transfer of immediately available funds to an account
designated by Shareholders. M&S shall have the right to notify Purchaser no
later than five days prior to the Closing Date of the amount of the Purchase
Price, if any, allocable to M&S with respect to the Transferred Real Property
that M&S desires to have Purchaser place into an escrow arrangement in order to
facilitate deferred like kind tax-free exchanges of properties between the
Purchaser and M&S under Section 1031 of the Code. Purchaser agrees to
participate in and to cooperate with M&S, at M&S's expense, in creating and
facilitating such arrangements, including executing any documents reasonably
necessary to accomplish any tax-free exchange of properties, and Shareholders
agree, jointly and severally, to indemnify and hold Purchaser harmless from any
and all liability, obligation, loss, cost, or expense (including, without
limitation, reasonable attorneys' fees) relating thereto.
2.5 Closing. The closing of the purchase and sale of the Assets (the
"Closing") shall take place at the offices of Kilpatrick Stockton LLP, 1100
Peachtree Street, Suite 2800, Atlanta, Georgia, 30309 on sixty days from the
date hereof, or on such other date or at such other location as the parties
hereto may mutually agree in writing.
2.6 Post-Closing Adjustment. The Purchase Price shall be adjusted after
the Closing to reflect (i) a proration of personal property taxes with respect
to the Assets that constitute personal property and ad valorem property taxes
with respect to the Transferred Real Property and the Leases as of midnight on
the day before the Closing Date; and (ii) any reimbursements due under Section
9.2 below.
The parties shall complete and execute a document setting forth the mutual
calculation of the foregoing adjustment and the party owing a net payment to the
other as a result thereof shall make such payment by check within sixty days
after the Closing Date. If any tax information is not available by that time,
such tax prorations will be based on estimates from the previous year and shall
be later adjusted based on actual tax amounts when available by a payment from
the party that underpaid its share.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Sellers and Shareholders and among various Assets and the Stock in
accordance with SCHEDULE 2.7 attached hereto. Each party hereby agrees that it
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax or in any judicial
proceeding, that is inconsistent with the terms of this Section unless otherwise
required by law or governmental order.
2.8 Further Assurances. Sellers and Shareholders from time to time after
the Closing, at Purchaser's reasonable request, shall execute, acknowledge, and
deliver to Purchaser such other
<PAGE>
instruments of conveyance and transfer and shall take such other actions and
execute and deliver such other documents, certifications and further assurances
as Purchaser may reasonably require to vest more effectively in Purchaser or to
put Purchaser more fully in possession of any of the Assets, or to better enable
Purchaser to complete, perform, and discharge the Assumed Liabilities. Each of
the parties hereto will cooperate with the other and execute and deliver to the
other party hereto such other instruments and documents and take such other
actions as may be reasonably requested from time to time by any other party
hereto as necessary to carry out, evidence, and confirm the intended purpose of
this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and Shareholders hereby, jointly and severally, represent and
warrant to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Each of Cypress,
Marketing and Hops is a corporation duly incorporated and organized, validly
existing, and in good standing under the laws of the State of Florida. M&S is a
general partnership duly organized and existing under the laws of the State of
Florida. Each Seller has the corporate or partnership power and authority to
execute, deliver, and perform this Agreement, the Bill of Sale, the Trademark
Assignments, and, in the case of M&S, the Deeds.
3.2 Authorization. The execution, delivery and performance by each
Seller of this Agreement, the Bill of Sale, the Trademark Assignments, and the
Deeds, has been duly authorized by all requisite corporate, or in the case of
M&S partnership, action and will not violate any provision of law, any order of
any court or other agency of government, the articles of incorporation or bylaws
of Hops, the partnership agreement of M&S, or any provision of any indenture,
agreement, or other instrument to which any Seller is a party or by which any
Seller or any of the Assets is bound or affected (excepting only leases to, or
guarantee of obligations of, Hops Affiliates), or conflict with, result in
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, or encumbrance of any nature,
whatsoever, upon any of the Assets.
3.3 Validity. This Agreement has been duly executed and delivered by
each Seller and Shareholder and constitutes the legal, valid, and binding
obligation of such Seller and Shareholder enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the
<PAGE>
enforcement of creditors' rights. When the Bill of Sale, the Trademark
Assignments, and the Deeds have been executed and delivered in accordance with
this Agreement, each of them will constitute the legal, valid, and binding
obligation of each Seller, enforceable in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws from time to time in effect
affecting the enforcement of creditors' rights.
3.4 Title to Assets. Except as set forth on SCHEDULE 3.4 hereto and
Permitted Encumbrances and Assumed Liens, the Sellers have good and valid title
(or in the case of Transferred Real Property, marketable title) to all of the
Assets, free and clear of any and all mortgages, deeds of trust, pledges,
security interests, financing statements, liens, charges, conditional sales
agreements, title retention arrangements, easements, use restrictions,
restrictive covenants, claims (other than pursuant to the Leases or Equipment
Leases) and other encumbrances. SCHEDULE 1.1 (A) hereto is a complete and
correct description of all the tangible personal property of Sellers having, in
the case of each item, a value on the books of the Sellers of greater than or
equal to $2,500. Each of the trademarks, trade names, and service marks shown on
SCHEDULE 1.1(B) as registered has been duly registered on a state or federal
basis as shown on SCHEDULE 1.1(B). Except for Hops Affiliates pursuant to
licenses granted by Sellers and as shown on SCHEDULE 1.1(B), no other Person has
any rights in or to the trade dress, service marks, trade names, trademarks, or
other intangible property that constitute the Hops Grill & Bar concept.
3.5 Assigned Agreements.
(a) Except as shown on SCHEDULE 3.5, each Assigned Agreement
is a valid and subsisting agreement, without any material default of Sellers
thereunder, and to the knowledge of Sellers, without any material default on the
part of the other party thereto. To Sellers' knowledge, no event or occurrence
has transpired which with the passage of time or giving of notice, or both, will
constitute a material default by Sellers under any Assigned Agreement. A true
and correct copy of each Assigned Agreement has been delivered to Purchaser.
Except as set forth on the Schedules attached hereto describing the Assigned
Agreements, there have been no amendments or modifications to any of the
Assigned Agreements. Except as set forth on SCHEDULE 3.5(A), at the time of
Closing, Sellers shall have paid all amounts and performed all required
obligations due from them through the Closing Date under each Assigned
Agreement.
(b) Except at set forth in the Assigned Agreements or SCHEDULE
3.4 or Permitted Encumbrances or Assumed Liens, no Assigned Agreement has been
assigned by Sellers or any interest granted therein by Sellers to any third
party, or is subject to any mortgage, pledge, hypothecation, security interest,
lien, or other encumbrance or claim. Except for personal guaranties of the
Shareholders and use
<PAGE>
rights by the Hops Affiliates, no other party has any interest to or rights
therein or thereunder, except the other named parties, to the Assigned
Agreements.
(c) Each Equipment Lease allows the lessee the use of the
equipment and other property described on SCHEDULE 1.1 (D) in accordance with
the terms of the respective Equipment Lease, and all of such equipment and other
property is present on the premises of the Restaurants or in the Hops Grill &
Bar corporate offices.
3.6 Transferred Real Property. Except as set forth in SCHEDULE 3.6
(a) The water, electric, gas, and sewer utility services, and
storm drainage facilities currently available to each parcel of Transferred Real
Property are legally sufficient for the operation of the Restaurant located
thereon, and to Sellers' knowledge, there is no condition which will result in
the termination of the present access from each parcel of Transferred Real
Property to such utility services and facilities.
(a) M&S has obtained all easements, authorizations, and
rights-of-way which are necessary to ensure vehicular and pedestrian ingress and
egress to and from the site of each Restaurant located on Transferred Real
Property, all of which are assignable and shall be assigned to Purchaser at the
Closing. Other than as contained in such easements, authorizations, and rights
of way, there are no restrictions on any existing entrance to or existing exit
from any Transferred Real Property to adjacent existing public streets,
roadways, or parking lots presently used and, to Sellers' knowledge, no
conditions exist which will result in the termination of the present access to
existing highways and roads and parking lots or private drives presently used.
(a) Sellers have received no written notices that any
Government having the power of eminent domain over any parcel of Transferred
Real Property has commenced or intends to exercise the power of eminent domain
with respect to any part of the Transferred Real Property.
(a) To Sellers' knowledge, the Transferred Real Property, and
the present uses thereof, comply in all material respects with all regulations
of all Governments having jurisdiction over the Transferred Real Property, and
Sellers have received no
<PAGE>
written notices from any Government, and have no knowledge that the Transferred
Real Property or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate in any material respect any laws or
regulations of any Government having jurisdiction over the Transferred Real
Property.
(a) Each parcel of Transferred Real Property provides legally
sufficient on or off-site (pursuant to applicable agreements) parking for the
current operation of the Restaurant located thereon.
(a) To Sellers' knowledge, no work for municipal improvements
has been commenced on, or in connection with, any parcel of Transferred Real
Property or any street adjacent thereto which is likely to result in a special
assessment on the Transferred Real Property or materially impede access to the
Transferred Real Property and, to the knowledge of Sellers, no such improvements
are contemplated. To Sellers' knowledge, no assessment for public improvements
has been made against the Transferred Real Property which remains unpaid. No
written notice from any Government has been served upon the Transferred Real
Property or received by Sellers requiring or calling attention to the need for
any work, repair, construction, alteration, or installation on, or in connection
with, the Transferred Real Property which has not been complied with in all
material respects.
(g) Each Seller holds all Environmental Permits necessary for
conducting its business and operations and, to the knowledge of Sellers, has
conducted, and is presently conducting, its business and operations in full
compliance with all applicable Environmental Laws and Environmental Permits,
including, without limitation, all record keeping and filing requirements. To
the knowledge of Sellers, there is no existing or pending Environmental Law with
a future compliance date that will require operational changes, business
practice modifications, or capital expenditures at any Transferred Real Property
(or any other property presently or formerly owned, operated or controlled by
Sellers or, as to, which Sellers may bear any responsibility or liability), or
any improvements thereon. All Hazardous Materials and Solid Waste, on, in, or
under any Transferred Real Property have been properly removed and disposed of,
and no past or present disposal, discharge, spill or other release of, or
treatment, transportation, or other handling of Hazardous Materials or Solid
Waste on, in, under or off-site from any Transferred Real Property, will subject
M&S or any subsequent owner, occupant, or operator of such Transferred Real
Property to corrective or compliance action or any other liability. There are no
presently pending, or to Sellers' knowledge, threatened Actions or Orders
against or involving Sellers (including
<PAGE>
any other Person for whose acts or omissions Sellers are responsible) relating
to any alleged past or ongoing violation of any Environmental Laws or
Environmental Permits, nor are Sellers subject to any liability for any such
past or ongoing violation.
3.7 Governmental Approvals. Except as set forth on SCHEDULE 3.7 and for
filing and clearance of the transaction set forth in this Agreement in
accordance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
other Consents and approvals necessary to assign the Permits, no registration or
filing with, or consent or approval of, or other action by, any federal, state,
or other Government or instrumentality is, or will be, necessary for the valid
execution, delivery, and performance by Sellers and Shareholders of this
Agreement that has not been or will not be obtained prior to Closing.
3.8 Litigation. Except as set forth on SCHEDULE 3.8, there are no
Actions or Orders pending or, to the knowledge of Sellers, threatened against
Sellers or affecting the Assets before any court or by or before any
governmental body or arbitration board or tribunal.
3.9 Defaults. Sellers are not in default under any material note,
mortgage, lease, contract, agreement, or obligation of any kind that pertains
to, or affects, the Assets.
3.10 Compliance with Law. No Seller is in default under any Order to
which it is, or was, subject, nor in violation of any Laws, including, but not
limited to, the Americans with Disabilities Act.
3.11 Condition of Assets. Except as set forth on SCHEDULE 3.11, all
Assets that constitute tangible personal property, all property subject to
Equipment Leases, and all improvements owned by M&S located on the Transferred
Real Property (including all mechanical, electrical, computerized, and other
systems located therein) are in good working condition, subject to normal wear
and tear, and, in the case of the improvements, structurally sound.
3.12 Geographic Scope of Operations. Sellers have conducted business
only in the States of Florida, North Carolina, and Kentucky, and only (i) in the
counties in such states where the Restaurants and the Transferred Real Property
are located and (2) in Hillsborough County, Florida, where each Seller's
principal place of business is located (collectively, such counties are referred
to as the "Geographic Area"). All of the Assets are located in the Geographic
Area and have been located in the Geographic Area at all times since their
acquisition by Sellers.
3.13 Stock. All the Stock is owned beneficially and of record by
Shareholders free and clear of any lien, security interest, claim, or
encumbrance.
<PAGE>
3.14 Distributions. From the date hereof, Sellers, Cypress, and
Marketing shall not make any distributions to their shareholders or partners, as
the case may be.
The representations and warranties set forth herein are made and given
subject to the disclosures contained in the Schedules to this Agreement. The
Sellers and Holders shall not be or be deemed to be in breach of any such
representations or warranties (and no claim shall lie in respect thereof) in
respect of any such matter so disclosed in the Schedules to this Agreement. As
requested by Apple South, the specific disclosures set forth in the Schedules to
this Agreement have been organized by the Sellers and Holders to correspond to
schedule references in the Agreement to which the disclosure may be most likely
to relate but such disclosure shall apply to and shall be deemed to be disclosed
for the purposes of the Agreement generally, and all of the representations and
warranties contained herein. Apple South is deemed to be aware of and there are
deemed to have been disclosed to Apple South as if herein set out (a) all
matters fairly disclosed or referred to or contained in the Agreement and in all
documents specifically referred to therein; (b) the contents of and all matters
referred to in the documents specifically listed in the Schedules to this
Agreement; (c) all matters contained in the Financial Statements, and (d) all
matters disclosed in the Registration Statement on Form S-1 and Amendment No. 1
to Form S-1 filed by Hops Grill & Bar, Inc. with the United States Securities
Exchange Commission on
<PAGE>
October 15, 1996 and December 5, 1996, respectively. In the event that there is
any inconsistency between this Agreement and matters disclosed in the Schedules
to this Agreement, information contained in the Schedules to this Agreement
shall prevail and shall be deemed to be the relevant disclosure.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers and Shareholders as
follows:
4.1 Organization, Qualifications and Corporate Power. Purchaser is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Purchaser has the power to
execute, deliver, and perform this Agreement and the Bill of Sale and any other
documents ("Other Documents") reasonably required by the Closing Agent or the
Title Company.
4.2 Authorization. The execution, delivery, and performance by
Purchaser of this Agreement, the Bill of Sale, and the Other Documents have been
duly authorized by all requisite corporate action and will not violate any
provision of law, any order of any court or other agency of government, the
articles of incorporation, or bylaws of Purchaser, or any provision of any
indenture, agreement, or other instrument to which Purchaser is a party or by
which Purchaser or any of its properties or assets 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.
4.3 Validity. This Agreement has been duly executed and delivered by
Purchaser, and constitutes the legal, valid, and binding obligation of
Purchaser, enforceable in accordance with its terms, subject to general equity
principles and to applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws from, time to time, in effect, affecting the enforcement of
creditors' rights. When the Bill of Sale and the Other Documents have been
executed and delivered in accordance with this Agreement, they will constitute
the legal, valid, and binding obligation of Purchaser, enforceable in accordance
with its terms, subject to general equity principles and to applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws from, time
to time, in effect, affecting the enforcement of creditors' rights.
4.4 Governmental Approvals. No registration or filing with, or consent
or approval of, or other action by, any Government is, or will be, necessary for
the valid execution, delivery, and performance by Purchaser of this Agreement
that has not been or will not timely be done by the Closing.
<PAGE>
4.5 Non-Contravention. The execution and delivery of this Agreement and
the Bill of Sale and the Other Documents by Purchaser do not, and the
consummation by Purchaser of the transactions contemplated hereby and thereby
will not, violate any provision of the articles of incorporation or bylaws of
Purchaser, or violate, or result with the giving of notice or the lapse of time
or both in a violation of, any provision of any mortgage, lien, lease,
agreement, license, instrument, law, ordinance, regulation, order, arbitration
award, judgment or decree to which Purchaser is a party or by which it is bound,
and do not, and will not, violate or conflict with any other material
restriction of any kind or character to which Purchaser is subject.
ARTICLE V - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
All of the obligations of Purchaser under this Agreement are subject to
the fulfillment prior to, or at the Closing of, each of the following
conditions, each of which the Shareholders and Sellers, insofar as such matters
are within their control or influence, shall use their best efforts to cause to
be satisfied:
5.1 Accuracy of Representations and Warranties. The representations and
warranties of Sellers contained herein or in any certificate required to be
delivered under Section 5.9 shall be true and correct on, and as of, the Closing
Date in all material respects except for changes contemplated herein.
5.2 Compliance with Agreement. Sellers shall have in all material
respects performed and complied with all conditions and agreements required by
this Agreement to be performed or complied with by them prior to, or at, the
Closing.
5.3 No Material Adverse Change. There shall not have been any material
adverse change in the Assets since the date hereof, except changes contemplated
and permitted by this Agreement.
5.4 No Actions. Other than as provided in SCHEDULE 3.8, no Action shall
be pending or threatened against or affecting any of the Assets, or against or
affecting any of the transactions contemplated hereby, which, in the reasonable
judgment of Purchaser, renders it inadvisable to proceed with the transactions
contemplated herein.
5.5 Consents and Approvals. Sellers shall have obtained the Consents
and all other material consents and approvals required to effectuate the
transactions contemplated hereby, all of which consents, waivers, and approvals
shall be in form and substance reasonably satisfactory to the Purchaser.
Purchaser shall cooperate in obtaining all such consents and approvals,
including the Consents.
<PAGE>
5.6 Title and Objections to Title. Purchaser shall have obtained and
reviewed ALTA surveys and title insurance commitments with respect to the
Transferred Real Property ("Title Commitments") pursuant to which the Title
Company will agree to issue at Closing owner's policies of title insurance
("Title Policies") on American Land Title Association standard From B-1990 (or
comparable form), to be issued by a reputable title insurance company ("Title
Company") mutually acceptable to both Purchaser and Seller, at the minimum
promulgated rate available or otherwise negotiated agreed-upon rates, in an
amount in the case of each parcel of Transferred Real Property equal to the
purchase price allocated to each parcel of the Transferred Real Property. The
Title Policies shall insure, upon consummation of the purchase and sale herein
contemplated, Purchaser's fee simple, marketable title to the Transferred Real
Property, subject only to the Permitted Encumbrances or Assumed Liens. Purchaser
shall have ten (10) business days following receipt by Purchaser of the Title
Commitments, together with copies of all documents listed therein as title
exceptions and ALTA surveys, in which to furnish Shareholders a written
statement of reasonable objections to exceptions and matters of survey, which,
in Purchaser's reasonable judgment would materially interfere with or impair use
of the Transferred Real Property for the operation of Restaurants or materially
reduce the value of any of the Transferred Real Property. Shareholders shall
have until the Closing Date, but not less than fifteen (15) days, to satisfy
such objections (but with no obligation to do so) in all material respects, and
if Shareholders fail or elect not to satisfy all objections in all material
respects on or prior to the Closing Date, then Purchaser's sole right and remedy
shall be to either (i) waive the objections and elect to close, or (ii) extend
the Closing Date for a period of not more than thirty days until such objections
are satisfied in all material respects by giving written notice of such
extension to Shareholders, in which case the Closing Date shall be extended to
the date specified by Purchaser, or (iii) terminate this Agreement by giving
written notice of such termination to Shareholders, in which case all rights and
obligations of the parties shall expire and this Agreement shall become null and
void. In the event of an extension of the date of Closing under subparagraph
(ii) above and the subsequent failure or refusal of Shareholders to satisfy the
objections (but with no obligation to do so) in all material respects, then
Purchaser's sole right and remedy shall be to elect between the options set
forth in subparagraphs (i) and (iii) above. If Purchaser fails to furnish
Shareholders a written statement of objections within the ten (10) business day
time period specified above, any matters appearing as exceptions on such Title
Commitments shall be deemed waived by Purchaser. However, anything to the
contrary contained herein notwithstanding, if any matter objected to herein is a
valid mortgage, deed of trust, security interest, lien or money judgment, Seller
shall pay such amounts as are required to release or satisfy same at or prior to
Closing.
5.7 Hart-Scott-Rodino. Any applicable filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 shall have been made, and
all applicable waiting periods thereunder shall have expired or terminated.
<PAGE>
5.8 Removal of Encumbrances. All the encumbrances related to the Assets
listed on SCHEDULE 3.4 shall have been removed and released to Purchaser's
reasonable satisfaction, except for those encumbrances which are Permitted
Encumbrances or Assumed Liens.
5.9 Closing Deliveries. At the Closing, Shareholders and Sellers
shall deliver to Purchaser:
(a) A certificate executed by Shareholders and Sellers, dated
as of the Closing Date, certifying in such form as Purchaser may reasonably
request to the fulfillment of the conditions specified in Sections 5.1 through
5.5 hereof;
(b) A certificate of the Secretary or Assistant Secretary or
partner of each Seller, dated as of the Closing Date, certifying in such form as
Purchaser may reasonably request, (i) that attached thereto is a true and
complete copy of all resolutions adopted by the Board of Directors, or a consent
of the partners, of such Seller authorizing the execution, delivery, and
performance of this Agreement, the Bill of Sale, and the Deeds and that all such
resolutions are still in full force and effect and are all the resolutions
adopted in connection with the transactions contemplated by this Agreement, and
(ii) as to the incumbency and specimen signature of the officers of each
corporate Seller executing this Agreement, the Bill of Sale, the Deeds, and any
certificate required under Section 5.9, and a certification by another officer
of each corporate Seller as to the incumbency and signature of the officer
signing the certificate referred to in this Section;
(c) The opinion of Fowler, White, Gillen, Boggs,
Villareal and Banker, P.A., in substantially the form of EXHIBIT B hereto;
(d) The Bill of Sale duly executed by Sellers;
(e) The Deeds duly executed by those Sellers holding fee
simple title to the Transferred Real Property; and such other documents as are
necessary or customary to enable Purchaser to record the Deeds and to obtain
owner's title insurance policies from the Title Company, without exceptions,
other than the Permitted Encumbrances and Assumed Liens.
(f) The Trademark Assignments duly executed by Sellers;
(g) Copies of the Assigned Agreements and the obtained
Consents and any assignment documents reasonably deemed necessary or appropriate
by Purchaser to effect the assignment of the Assigned Agreements, in addition to
the Bill of Sale, and to record the assignments of the Leases;
<PAGE>
(h) Certificates evidencing the Shares duly endorsed for
transfer; and
(i) Any other documents that Purchaser or the Title
Company may reasonably request at, or prior to, the Closing.
5.10 Environmental Matters. Purchaser's due diligence investigation
shall not have discovered any conditions on the Transferred Real Property that
constitute a material violation of any Environmental Laws or that require
material clean-up, removal, or remediation efforts; provided, however, that
Purchaser shall notify Sellers immediately upon discovery of any circumstances
covered by this Section and Sellers shall have the opportunity (but not the
obligation) to cure or mitigate such condition or circumstance to Purchaser's
reasonable satisfaction.
5.11 Simultaneous Closing. The closing contemplated by the Merger
Agreement shall have occurred simultaneously with the Closing.
ARTICLE VI - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLERS
All of the obligations of Sellers and Shareholders under this Agreement
are subject to the fulfillment prior to, or at, the Closing of each of the
following conditions, each of which Purchaser, insofar as such matters are
within its control or influence, shall use its best efforts to cause to be
satisfied:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of Purchaser contained herein, or in any certificate, schedule, or
other document delivered pursuant to the provisions hereof, or in connection
herewith, shall be true and correct on, and as of, the Closing Date.
6.2 Compliance with Agreement. Purchaser shall have performed and
complied with all conditions and agreements required by this Agreement to be
performed or complied with by it prior to, or at, the Closing.
6.3 Consents and Approvals. Sellers shall have obtained the Consents and
all other material consents and approvals required to effectuate the
transactions contemplated hereby, all of which consents, waivers, and approvals
shall be in form and substance reasonably satisfactory to the Sellers. Purchaser
shall cooperate in obtaining all such consents and approvals.
<PAGE>
6.4 Hart-Scott-Rodino. Any applicable filings under the
Hart-Scot-Rodino Antitrust Improvements Act of 1976 shall have been made, and
all applicable waiting periods thereunder shall have expired or terminated.
6.5 Closing Deliveries. At the Closing, Purchaser shall deliver to Sellers:
(a) A certificate executed by an executive officer of
Purchaser, dated as of the Closing Date, in such form as Sellers may reasonably
request to the fulfillment of the conditions specified in Sections 6.1 through
6.2 hereof;
(b) A certificate of the Secretary or an Assistant Secretary
of the Purchaser, dated as of the Closing Date, certifying in such form as
Sellers may reasonably request (i) that attached thereto is a true and correct
copy of resolutions adopted by the Board of Directors of the Purchaser
authorizing the execution, delivery and performance of this Agreement, the Bill
of Sale, the Other Documents, and other transaction documents, and that all such
resolutions are still in full force and effect and are all the resolutions
adopted in connection with the transaction contemplated by this Agreement, and
(ii) as to the incumbency and specimen signature of each officer of Purchaser
executing this Agreement, the Bill of Sale, and other transaction documents, and
any certificate required to be furnished hereby, and a certification by another
officer of Purchaser as to the incumbency and signature of the officer signing
the certificate referred to in this Section;
(c) The Bill of Sale, duly executed by Purchaser;
(d) The funds payable to Sellers pursuant to Section 2.4 hereof;
(e) The opinion of Kilpatrick Stockton LLP in substantially the form
attached hereto as EXHIBIT C; and
(f) Any other documents Sellers may reasonably request at, or prior to, the
Closing.
6.6 No Actions. No Actions shall be pending or threatened against or
affecting the transactions contemplated hereby, which, in the reasonable
judgment of Sellers, renders it inadvisable to proceed with the transactions
contemplated hereunder.
6.7 Simultaneous Closing. The closing contemplated by the Merger Agreement
shall have occurred simultaneously with the Closing.
<PAGE>
ARTICLE VII - INDEMNIFICATION
7.1 General Indemnification Obligation of Sellers and Shareholders.
From and after the Closing, the Sellers and Shareholders shall jointly and
severally reimburse, indemnify, and hold harmless Purchaser against and in
respect of any and all out-of-pocket damages, diminution in value, losses,
liabilities, costs, and expenses, including reasonable attorneys fees and
amounts paid in settlement, incurred or suffered by Purchaser that result from,
relate to, or arise out of:
(a) any and all liabilities and obligations of Sellers, of any nature
whatsoever, to third parties, except for the Assumed Liabilities;
(b) any breach of any representation or warranty made by Sellers or
Shareholders in this Agreement (considering for the purpose of this subsection
such representations and warranties to be made as of the date hereof and as of
the Closing Date), or any nonfulfillment of any agreement or covenant on the
part of Sellers or Shareholders under this Agreement; and
(c) any and all Actions or demands incident to or incurred in investigating
or attempting to avoid any indemnifiable third party claims or to avoid the
imposition thereof or in enforcing the indemnification set forth in this Section
7.1.
7.2 General Indemnification Obligation of Purchaser. From and after the
Closing, Purchaser shall reimburse, hold harmless and indemnify Sellers and
Shareholders and their affiliates against and in respect of any and all damages,
losses, liabilities, costs, and expenses incurred or suffered by Sellers that
result from, relate to, or arise out of:
(a) the Assumed Liabilities, or any guarantees thereof, by a Seller or
Shareholder;
(b) any failure of any representation or warranty made by Purchaser in this
Agreement to be true and correct as of the Closing Date, or any nonfulfillment
of any agreement or covenant on the part of Purchaser under this Agreement; and
(c) any and all Actions incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to impose the imposition
thereof or in enforcing this indemnification.
<PAGE>
7.3 Payment. Upon the determination by Shareholders and Purchaser, or
failing their mutual agreement, by the decision of a court of competent
jurisdiction, of the amount of any liability of an indemnifying party under
Sections 7.1 or 7.2 hereof, the indemnifying party shall pay to the indemnified
party within ten days after such determination, the amount of any claim for
indemnification made hereunder. Any claim against Shareholders arising under
this ARTICLE VII shall be asserted first against the shares of common stock of
Purchaser held in escrow pursuant to the Escrow Agreement entered into pursuant
to the Merger Agreement and then against the Shareholders personally only to the
extent that the amount held in escrow is insufficient or the escrow has
terminated.
7.4 Tax Benefits; Insurance Proceeds; Types of Losses Not Indemnified.
All indemnification claims hereunder shall first be adjusted to take into
account any net tax benefits and insurance proceeds receivable by the
indemnified party as a result of such claim or the underlying reasons therefor.
Notwithstanding any other provision of this Agreement, Sellers and Shareholders
shall have no liability for any claim based on the working condition of any
Assets consisting of tangible personal property under Section 3.11 unless
Shareholders are notified of such claim in writing within thirty days following
the Closing Date.
7.5 Survival. The representations and warranties of the Sellers and
Shareholders contained in this Agreement shall survive any investigation
heretofore or hereafter made by Purchaser and the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period");
(a) the representations and warranties relating to environmental matters
shall survive until the expiration of any applicable statute or period of
limitations, and any extensions thereof; and
(b) all other representations and warranties of each Shareholder and Seller
(other than those contained in Sections 3.1 through 3.4 and 3.13 and 9.1, which
shall survive indefinitely) shall be of no further force and effect after the
expiration of the applicable statute of limitations or one (1) year from and
after the date hereof, whichever period is shorter.
Anything to the contrary notwithstanding, the Survival Period shall be extended
automatically to include any time period necessary to resolve a claim for
indemnification which was made before expiration of the Survival Period but not
resolved prior to its expiration, and any such extension shall apply only as to
the claims asserted and not so resolved within the Survival Period. Liability
for any such item shall continue until such claim shall have been finally
settled, decided or adjudicated.
<PAGE>
7.6 Limitation of Liability. Except for breach of any representation
or warranty contained in Sections 3.1 through 3.4, Section 3.13, or Section 9.1
of this Agreement, for which a claim for indemnification may be made regardless
of the amount of all claimed indemnified losses, Purchaser shall not be entitled
to any recovery under this Article VII with respect to a breach of any
representation or warranty unless and until the aggregate amount of indemnified
losses exceeds $50,000, in which case the indemnifying parties shall be liable
for all such indemnified losses from the first dollar. In no event shall the
aggregate liability of Sellers and Shareholders under this Article VII exceed
the Purchase Price.
7.7 Indemnification of Third-Party Claims. The obligations and liabilities
of any party to indemnify any other under this Article VII with respect to
claims relating to third parties shall be subject to the following terms and
conditions:
(a) Notice and Defense. The party or parties to be indemnified
(whether one or more, the "Indemnified Party") will give the party from whom
indemnification is sought (the "Indemnifying Party") prompt written notice of
any such claim, and the Indemnifying Party will undertake the defense thereof by
representatives chosen by it and reasonably acceptable to the Indemnified Party.
Failure to give such notice shall not affect the Indemnifying Party's duty or
obligations under this Article VII, except to the extent the Indemnifying Party
is prejudiced thereby. So long as the Indemnifying Party is defending any such
claim actively and in good faith, the Indemnified Party shall not settle such
claim. The Indemnified Party shall make available to the Indemnifying Party or
its representatives, without additional cost, all records and other materials
required by them and in the possession or under the control of the Indemnified
Party, for the use of the Indemnifying Party and its representatives in
defending any such claim, and shall in other respects give full cooperation in
such defense.
(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such claim, fails to defend such claim
actively and in good faith, the Indemnified Party will (upon further notice)
have the right to undertake the defense, compromise, or settlement of such claim
or consent to the entry of a judgment with respect to such claim, on behalf of,
and for the account and risk of, the Indemnifying Party, and the Indemnifying
Party shall thereafter have no right to challenge the Indemnified Party's
defense, compromise, settlement, or consent to judgment.
7.8 Exclusivity. The rights and remedies afforded to the parties under
this Article VII shall be the sole and exclusive rights and remedies available
in the event of a breach or default under this Agreement and shall be in lieu of
any other common law or statutory rights; provided, however, that any such
rights and remedies as a party may have to seek and obtain injunctive relief or
specific performance
<PAGE>
with respect to any breach of any covenant or failure to fulfill any agreement
hereunder shall remain available to the parties, and none of such rights or
remedies shall be affected or diminished hereby.
ARTICLE VIII - POST CLOSING MATTERS
8.1 Discharge of Business Obligations. From and after the Closing Date,
Sellers shall pay and discharge, in accordance with past practice but not less
than on a timely basis, all obligations and liabilities incurred prior to the
Closing Date with respect to their operations or the Assets, except for the
Assumed Liabilities.
8.2 Financial Statements. Sellers shall cooperate with Purchaser and
allow the auditors, designated by Purchaser, such access, during normal business
hours upon reasonable advance notice, to information as may be required for
Purchaser to produce, on a timely basis, financial statements satisfying any
requirements imposed on Purchaser by Form 8-K with respect to the transactions
contemplated hereby. Sellers' personnel shall undertake such tasks involved in
producing such financial statements and provide such assistance to the auditors
as are normally performed and provided by Sellers' internal personnel during an
audit. The auditors' fees and expenses for preparing such financial statements
shall be borne by Purchaser. Sellers shall bear the costs of involvement of
their internal personnel.
<PAGE>
ARTICLE IX - MISCELLANEOUS
9.1 Brokers' and Finders' Fees.
(a) Sellers and Shareholders, jointly and severally, represent
and warrant to Purchaser that all negotiations relative to this Agreement have
been carried on by it directly without the intervention of any person who may be
entitled to any brokerage or finder's fee or other commission in respect of this
Agreement or the consummation of the transactions contemplated hereby, and
Sellers and Shareholders, jointly and severally, agree to indemnify and hold
harmless Purchaser against any and all claims, losses, liabilities and expenses
which may be asserted against or incurred by it as a result of any dealings,
arrangements, or agreements of Sellers with any such person.
(b) Purchaser represents and warrants to Sellers that all
negotiations relative to this Agreement have been carried on by Purchaser
directly without the intervention of any person who may be entitled to any
brokerage or finder's fee or other commission in respect of this Agreement or
the consummation of the transactions contemplated hereby (other than Raymond
James & Associates, Inc., which shall be paid by Shareholders), and Purchaser
agrees to indemnify and hold harmless Sellers and Shareholders against any and
all claims, losses, liabilities and expenses which may be asserted against, or
incurred by them, as a result of Purchaser's dealing, arrangements, or
agreements with any such person.
9.2 Sales, Transfer and Documentary Taxes and Fees, etc.
(a) Purchaser shall pay all federal, state, and local
documentary and other transfer taxes and fees, if any, due as a result of the
purchase, sale, or transfer of the Assets (other than such taxes resulting from
the transfer of Transferred Real Property, which shall be split equally between
Purchaser and M&S) in accordance herewith whether imposed by law on Sellers or
Purchaser and Purchaser shall indemnify, reimburse, and hold harmless Sellers
and Shareholders in respect of the liability for payment of, or failure to pay,
any such taxes or the filing of, or failure to file, any reports required in
connection therewith. Sellers and Shareholders shall pay all sales taxes due as
a result of the purchase, sale, or transfer of Assets that do not constitute
real property.
(b) Purchaser shall pay one-half and Sellers and Shareholders
shall pay one-half of one filing fee required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976. Purchaser shall pay any additional such
fees.
<PAGE>
(c) Purchaser shall pay one-half and M&S shall pay one-half of
the title search and examination costs, fees for obtaining the Title
Commitments, and the premiums payable for the Title Policies.
9.3 Expenses. Except as otherwise provided herein, each party hereto
shall pay its own expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
9.4 Contents of Agreement; Parties in Interest; etc. This Agreement
sets forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be amended or modified except by
a written instrument duly executed by each of the parties hereto. Any and all
previous agreements and understandings among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement.
9.5 Assignment and Binding Effect. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other party. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by and against the successors and assigns of Sellers and Purchaser.
9.6 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given if delivered personally or sent by telecopy or by
registered or certified mail, postage prepaid, as follows:
If to Purchaser, to:
Apple South, Inc.
Hancock at Washington
Madison, Georgia 36050
Fax No.: 706-342-4057
Attention: Erich J. Booth
With a required copy to (which alone shall
not constitute notice):
Kilpatrick Stockton LLP
1100 Peachtree Street
<PAGE>
Suite 2800
Atlanta, Georgia 30309
Fax No.: (404) 815-6555
Attention: Larry D. Ledbetter, Esq.
<PAGE>
If to Sellers, to:
David L. Mason
3055 Turtle Brooke
Clearwater, Florida 34621
Fax No.: 813-781-3510
and
Thomas A. Schelldorf
170 Greenhaven Circle
Oldsmar, Florida 34677
Fax No.:
With a required copy to (which alone shall
not constitute Notice):
Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.
501 East Kennedy Boulevard
Suite 1700
Tampa, Florida 33601
Fax No.: 813-229-8313
Attention: R. Alan Higbee, Esq.
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date actually delivered or telecopied with confirmation, or if mailed, three
days after deposit in the U. S. Mail properly addressed with adequate first
class postage affixed.
9.7 Florida Law to Govern. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of Florida,
irrespective of the principal place of business, residence, or domicile of the
parties hereto, and without giving effect to otherwise applicable principles of
conflicts of law. Any and all service of process and any other notice in any
action, suit, or proceeding shall be effective against any party if given as
provided in Section 9.6 herein. Nothing contained in this
<PAGE>
Section 9.7, or elsewhere herein, shall be deemed to affect the right of any
party to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any other party in any jurisdiction.
9.8 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement and shall
not affect, in any way, the meaning or interpretation of this Agreement.
9.9 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
9.10. Publicity. Except as required by applicable Law, all press
releases and other public announcements respecting the subject matter hereof
shall be made only with the mutual written agreement of the Purchaser and the
Shareholders; provided, however, that any party hereto may make any disclosure
required to be made under applicable law or rule of the NASDAQ National Market
if such party has determined in good faith that it is necessary to do so and
used its best efforts, prior to the issuance of the disclosure, to provide the
other parties a copy of the proposed disclosure and to discuss the proposed
disclosure with the other parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
SELLERS:
MASON AND SCHELLDORF LEASING COMPANY
By:
David L. Mason, General Partner
By:__________________________________
Thomas A. Schelldorf, General Partner
HOPS RESTAURANTS, INC.
By:
Name:
Title:
<PAGE>
SHAREHOLDERS:
Name: Thomas A.
Schelldorf
Name: David L. Mason
PURCHASER:
APPLE SOUTH, INC.
By:
Name:
Title:
<PAGE>
EXHIBITS TO ASSET PURCHASE AGREEMENT
EXHIBIT DESCRIPTION
A Bill of Sale and Assignment Agreement
B Opinion of Counsel to Sellers
C Opinion of Counsel to Purchaser
<PAGE>
EXHIBIT A
BILL OF SALE AND ASSIGNMENT AGREEMENT
FOR VALUE RECEIVED, MASON AND SCHELLDORF LEASING COMPANY, a general
partnership formed under the laws of the State of Florida ("M&S"), and HOPS
RESTAURANTS, INC., a Florida corporation ("Hops") (M&S and Hops being sometimes
collectively referred to as the "Sellers") pursuant to that certain Asset
Purchase Agreement (the "Asset Purchase Agreement") dated February ___, 1997,
among Sellers, Thomas A. Schelldorf, David L. Mason, and APPLE SOUTH, INC., a
Georgia corporation ("Purchaser"), hereby bargain, sell, transfer, assign,
convey, and deliver to Purchaser and its successors and assigns, all of Sellers'
right, title and interest in, to, and under the Assets (as defined in Section
1.1 of the Asset Purchase Agreement), including without limitation all of
Sellers' rights under the Assigned Agreements (as defined in Section 1.1 of the
Asset Purchase Agreement), but excluding such Assets as constitute Transferred
Real Property which are being separately conveyed and Assets being conveyed by
the Trademark Assignments (as defined in Section 1.1 of the Asset Purchase
Agreement).
TO HAVE AND TO HOLD, all and singular, the Assets forever.
Purchaser hereby assumes and agrees to timely pay and fully satisfy and
perform all of Sellers' obligations under the Assumed Liabilities (as defined in
Section 1.1 of the Asset Purchase Agreement) when the same shall become due and
payable.
IN WITNESS WHEREOF, each of the Sellers and the Purchaser have caused
this Bill of Sale and Assignment Agreement to be duly executed and delivered as
of this _____ day of _____________, 1997.
SELLERS:
MASON AND SCHELLDORF LEASING COMPANY
By:
David L. Mason, General Partner
By:__________________________________
Thomas A. Schelldorf, General Partner
<PAGE>
HOPS RESTAURANTS, INC.
By:
Name:
Title:
PURCHASER:
APPLE SOUTH, INC.
By:
Name:
Title:
PART 2 OF 2.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of the 6th day of February, 1997, by and among (1) APPLE SOUTH, INC., a
Georgia corporation ("Apple South"), (2) HG ACQUISITION CORP., a Florida
corporation wholly owned by Apple South (the "Merger Sub"), (3) THE CORPORATIONS
WHICH APPEAR AS SIGNATORIES AT THE FOOT OF THIS AGREEMENT UNDER THE HEADING "THE
COMPANIES" (collectively the "Companies" and individually a "Company") and (4)
DAVID L. MASON, THOMAS A. SCHELLDORF, TIMOTHY V. CURCI, and KEVIN TOOMY
(collectively, the "Shareholders" and individually a "Shareholder"),
W I T N E S S E T H:
WHEREAS, the Companies are engaged in the business of owning
and operating eighteen full-service casual dining restaurants featuring
on-premises micro-breweries and operating under the name "Hops Grill & Bar" and
are in the process of opening additional restaurants (collectively, the
"Business"); and
WHEREAS, the Shareholders collectively own all the issued and
outstanding shares of capital stock of the Companies (the "Company Shares")
(such term and other capitalized terms used herein being defined either in
Article 13 or at the places in this Agreement indicated in Article 13); and
WHEREAS, Apple South and the Shareholders deem it advisable
and in their respective best interests to effect the merger of the Companies
with and into the Merger Sub all on the terms and subject to the conditions set
forth herein; and
WHEREAS, the parties intend that this Agreement be approved
and adopted by all relevant parties as a plan of reorganization within the
provisions of Section 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code
of 1986, as amended;
NOW, THEREFORE, for and in consideration of the premises, and
the mutual covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. THE MERGER
1.1. The Merger. At the Effective Time, as defined in
Paragraph 3.4, upon the terms and subject to the conditions set forth herein,
and in accordance with the Florida Business Corporation Act (the "Corporate
Laws"), each Company shall be independently merged with and into Merger Sub, the
separate existence of each Company shall cease, and Merger Sub shall continue as
the surviving corporation. The merger of all the Companies into Merger Sub is
hereafter referred to as the "Merger". Merger Sub and the Companies are
sometimes hereafter referred to as the "Constituent Corporations", and Merger
Sub after the Merger is sometimes hereafter referred to as the "Surviving
Corporation."
1.2. Effect of the Merger. At the Effective Time, the
Surviving Corporation shall continue its corporate existence under the Laws of
the State of Florida and shall possess all the rights, privileges, powers, and
franchises of a public as well as of a private nature, and be subject to all the
restrictions, disabilities, and duties of each of the Constituent Corporations;
and all and singular rights, privileges, powers, and franchises of each of the
Constituent Corporations, and all property, real, personal, and mixed, and all
debts due to any of the Constituent Corporations on whatever account, as well as
for stock subscriptions and all other things in action or belonging to each of
the Constituent Corporations, shall be vested in the Surviving Corporation, and
all property, rights, privileges, powers, and franchises, and all and every
other interest shall thereafter become the property of the Surviving Corporation
to the same extent as they were of the Constituent Corporations, and the title
to any real estate vested by deed or otherwise in any of the Constituent
Corporations, shall not revert or be in any way impaired; but all rights of
creditors and all liens upon any property of any of the Constituent Corporations
shall be preserved unimpaired, and all debts, liabilities, and duties of the
Constituent Corporations shall thereafter attach to the Surviving Corporation,
and may be enforced against it to the same extent as if such debts and
liabilities had been incurred by it.
2. THE SURVIVING CORPORATION
2.1. Articles. The articles of incorporation of Merger Sub as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation until thereafter amended in accordance with
applicable Law.
2.2. Bylaws. The bylaws of Merger Sub as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
amended in accordance with applicable Law.
2.3. Board of Directors. The directors of Merger Sub immediately prior to
the Effective Time shall constitute the initial board of directors of the
Surviving Corporation.
2.4. Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation.
3. MERGER CONSIDERATION; CONVERSION
3.1. Company Shares. (a) At the Effective Time, by virtue of
the Merger, and without any action on the part of the Shareholders, all the
Company Shares shall be canceled and retired and shall be converted into and
become the right to receive the Merger Consideration described in this Article
3, and the Shareholders shall have no further rights with respect to the Company
Shares except the right to receive the Merger Consideration. Any shares of the
Companies' capital stock that are held by a Company as treasury shares shall be
canceled at the Effective Time and no Merger Consideration shall be paid with
respect thereto.
(b) At the Closing, as defined in Paragraph 3.4, Merger Sub
shall deliver the Merger Consideration (less that amount delivered to the Escrow
Agent pursuant to Paragraph 3.5) to the Shareholders, and the Shareholders shall
surrender for cancellation all certificates representing the Company Shares
accompanied by blank stock powers and all necessary transfer taxes and other
revenue stamps.
3.2. Merger Consideration. The "Merger Consideration" shall
total $18,211,000, and shall be paid at Closing by Apple South and Merger Sub
delivering to Shareholders $2,461,000 in cash by wire transfer to an account
designated in writing by Shareholders and $15,750,000 in common stock of Apple
South, $.01 par value per share ("Apple South Stock"), a portion of which Apple
South Stock shall be placed in escrow pursuant to Paragraph 3.5. Apple South
Stock shall be valued for the purpose of determining the number of shares
necessary to make up the stock portion of the Merger Consideration at $15.00 per
share. No fractional shares of Apple South Stock shall be issued, and an amount
in cash, if any, shall be paid in lieu thereof equal to such fractional part of
a share based on the per share value determined pursuant to the proceeding
sentence. Disbursement of the cash portion of the Merger Consideration from the
account designated by Shareholders in accordance with Paragraph 3.3 below shall
be the responsibility of the Shareholders and Apple South shall have no
responsibility or liability with respect thereto.
3.3. Allocation. The Merger Consideration shall be allocated
among the Companies, and the Merger Consideration allocated to each Company
shall be further allocated among the Shareholders of each Company, in each such
case as set forth on EXHIBIT A attached hereto. If the allocation results in
fractional shares then no fractional shares shall be issued, and in lieu thereof
a Shareholder shall be paid an amount in cash equal to such fractional part of a
share multiplied by the value of Apple South Stock as determined pursuant to
Paragraph 3.2 above with respect to such payment.
3.4. Other Shares. Each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain outstanding as
one share of common stock of the Surviving Corporation.
3.5 Escrow. At the Closing, 42,000 shares of Apple South Stock constituting
part of the Merger Consideration shall be delivered to the Escrow Agent by the
Major Shareholders to be held and disbursed by the Escrow Agent in accordance
with the terms of the Escrow Agreement attached hereto as Exhibit B (the "Escrow
Agreement"). Such shares shall be withheld pro rata from the shares of Apple
South Stock allocated to each Major Shareholder hereunder in accordance with the
total number of shares allocated to each. Certificates evidencing the shares to
be placed in escrow shall be issued in the names of the Major Shareholders and
delivered to the Escrow Agent along with blank stock powers executed by the
Major Shareholders.
3.6. Closing. Subject to termination of this Agreement
pursuant to Article 11, the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Kilpatrick
Stockton, LLP, 1100 Peachtree Street, Suite 2800, Atlanta, Georgia, at 10:00
a.m., Atlanta time, on the third Business Day after all the conditions set forth
in Articles 8 and 9 hereof have been satisfied or waived or on such other date
upon which the parties hereto may mutually agree. On the date of the Closing,
the Companies and Merger Sub shall file the documents required by the Corporate
Laws to effect the Merger. The Merger shall become effective at the time of
filing of such documents (the "Effective Time").
4. ADDITIONAL AGREEMENTS
4.1. Expenses. Except as otherwise provided herein, all
expenses incurred by Apple South and Merger Sub in connection with the
negotiations among the parties, and the authorization, preparation, execution,
and performance of this Agreement and the transactions contemplated hereby shall
be paid by Apple South. Except as otherwise provided herein, all expenses
incurred by the Shareholders or the Companies in connection with the
negotiations among the parties, and the authorization, preparation, review,
execution, and performance of this Agreement and other related documents and the
transactions contemplated hereby shall be paid by the Shareholders and no part
thereof shall be paid by the Companies or the Surviving Corporation. The
Shareholders and Apple South shall each pay one-half of the filing fee required
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (the
"HSR Act"). If the Shareholders so direct, any of the foregoing expenses of the
Shareholders or the Companies required to be paid hereunder by the Shareholders
may be paid by Apple South and the amount so paid credited pro rata against the
amount of cash and Apple South Stock due to the Shareholders as Merger
Consideration at the Closing .
4.2. Brokers. Except for Raymond James & Associates, Inc. which has been
retained by and shall be paid by the Shareholders, each party hereby represents
and warrants to the others that no broker or finder has acted on its behalf in
connection with this Agreement or the transactions contemplated herein and
agrees to indemnify the other parties from and against any and all claims or
demands for commissions or other compensation by any broker, finder, or similar
agent claiming to have been employed by or on behalf of such party.
4.3. Publicity. All press releases and other public
announcements or disclosures respecting the subject matter hereof shall be made
only with the mutual written agreement of Apple South and the Shareholders;
provided, however, that any party hereto may make any disclosure required to be
made under applicable Law or rule of the NASDAQ National Market if such party
has determined in good faith that it is necessary to do so and used its best
efforts, prior to the issuance of the disclosure, to provide the other parties a
copy of the proposed disclosure and to discuss the proposed disclosure with the
other parties.
4.4. Access and Inspection. The Shareholders shall provide
Apple South, and its authorized representatives full access at reasonable times
during normal business hours from and after the date hereof until the Closing to
the books and records of the Companies for the purpose of making such
investigation as Apple South may reasonably desire, and the Shareholders shall
furnish such information concerning the Companies as Apple South may reasonably
request. The Shareholders shall assist Apple South in making such investigation
and shall cause their counsel, accountants, consultants, and other non-employee
representatives to be reasonably available for such purposes. No investigation
made heretofore or hereafter by Apple South shall limit or affect the
representations, warranties, covenants, and indemnities of the Shareholders
hereunder, each of which shall survive any such investigation.
4.5. Cooperation. The parties shall cooperate fully with each
other and with their respective counsel and accountants in connection with any
steps required to be taken as part of their respective obligations hereunder,
and all parties shall use commercially reasonable efforts to consummate the
transactions contemplated herein and to fulfill their obligations hereunder,
including, without limitation, causing to be fulfilled at the earliest practical
date the conditions precedent to the obligations of the parties to consummate
the transactions contemplated hereby. From time to time and at any time, at a
party's request and expense, whether on or after the date hereof, and without
further consideration, the other parties shall execute and deliver such further
documents and instruments of conveyance, assignment, and transfer and shall take
such further actions as may be necessary or desirable, in the reasonable opinion
of the requesting party, in connection with the consummation of the transactions
described herein.
4.6. Covenant Against Competition. (a) In order to induce Apple South
and Merger Sub to enter into this Agreement, each of the Major Shareholders
agrees that for a period of two years following the Closing Date, he shall not,
directly or indirectly, for his own account or on behalf of any other person or
entity, as principal, agent, executive, manager, officer, employee, or
otherwise, own, manage, operate, or control, or hold any ownership, financial,
or beneficial interest in any business that operates, manages, controls, or owns
one or more Competing Restaurants in the Territory. Ownership of an equity
ownership of less than three percent of a corporation subject to the reporting
requirements of the Exchange Act shall not be prohibited by this Paragraph 4.6.
(b) As used in this Section, "Territory" means the States of Florida,
Georgia, South Carolina, North Carolina, Tennessee, and Colorado. "Competing
Restaurant" means a casual dining restaurant with an on-premises micro-brewery.
(c) The parties hereto specifically acknowledge and agree that
the remedy at law for any breach of the foregoing covenant not to compete will
be inadequate and that Apple South, in addition to any other relief available to
it, shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage.
(d) For a period of two years following the Closing no Major
Shareholder shall solicit or induce, or in any manner assist in the solicitation
or inducement of, any Person employed by Apple South, Surviving Corporation, any
Subsidiary, or any other Affiliate of Apple South to leave such employment,
whether or not such employment is pursuant to a contract and whether or not such
employment is at will.
(e) Although the parties have, in good faith, used their best
efforts to make the provisions of this Section 4.6 reasonable in both geographic
area and in duration, and it is not anticipated, nor is it intended, by any of
the parties hereto that a court of competent jurisdiction would find it
necessary to reform the provisions hereof to make it reasonable in both
geographic area and in duration, or otherwise, the parties understand and agree
that if a court of competent jurisdiction determines it necessary to reform the
scope of this Section 4.6 in order to make it reasonable in either geographic
area or duration, or otherwise, damages, if any, for a breach hereof, as so
reformed, would be deemed to accrue to Apple South as of and from the date of
such a breach only insofar as the damages for such breach relate to an action
which occurred within the scope of the geographic area and duration as so
reformed.
4.7. Apple South's Public Documents and Access to Information.
Apple South has delivered to each of the Shareholders a true and complete copy
of (i) Apple South's Annual Reports on Form 10-K and its Annual Reports to
Shareholders for the years ended December 31, 1994, and 1995; (ii) Apple South's
Quarterly Reports on Form 10-Q for its first three quarters of fiscal 1996;
(iii) Apple South's definitive proxy statements relating to its 1995 and 1996
annual shareholders meetings; (iv) that certain Prospectus offering $125,000,000
of 9 3/4% Senior Notes due 2006; and (v) all other filings (other than Form D's
and preliminary registration and proxy statements) made by Apple South with the
Securities and Exchange Commission ("SEC") between December 31, 1995, and the
date hereof (collectively, the "SEC Documents"). Apple South shall provide to
the Shareholders a true and complete copy of each other document filed with the
SEC between the date hereof and the date of the Closing (other than Form D's and
preliminary material) ("Current SEC Documents"). In addition to the SEC
Documents and the Current SEC Documents, Apple South will provide, through its
Chief Financial Officer, each of the Shareholders with opportunities to become
familiar with the business, financial condition, management, prospects, and
operations of Apple South, including reasonable opportunities to ask questions
of, receive answers from and obtain information regarding Apple South and its
business which is material to their investment decision.
4.8. Legending of Apple South Stock. There shall be placed on
all certificates representing the shares of Apple South Stock issued to the
Shareholders pursuant to this Agreement appropriate restrictive legends
referencing the restrictions imposed by applicable securities Laws. Each of the
Shareholders agrees that he will not offer to sell, sell, or otherwise dispose
of any of the Apple South Stock issued to him except pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act") and any applicable state securities Law or an exemption from
the registration requirements of the Securities Act and any applicable state
securities Law. With respect to any such sale or disposition, each of the
Shareholders agrees to furnish to Apple South upon request such information as
its counsel may reasonably deem necessary to assure that such sale or
disposition is made in full compliance with applicable federal and state
securities Laws.
4.9. Reports Under the Exchange Act. With a view to making
available to the Shareholders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit them to sell Apple South Stock to the public without registration, Apple
South shall furnish to them, forthwith upon request (i) a written statement by
Apple South stating whether it has complied with the reporting requirements of
the Securities Exchange Act of 1934 (the "Exchange Act"), (ii) a copy of the
most recent annual or quarterly report of Apple South filed by Apple South with
the SEC, and (iii) such other information as may be reasonably requested in
availing them of any rule or regulation of the SEC which permits the selling of
any shares of Apple South Stock without registration.
4.10. Registration of Shares. In accordance with the terms and
conditions and at the time set forth in the Registration Rights Agreement
attached hereto as EXHIBIT C (the "Registration Rights Agreement") Apple South
shall file a registration statement with the SEC on such form as Apple South
shall then qualify for.
4.11. Non-Solicitation of Third Party Offers. Each Shareholder
and each Company agrees that no Shareholder nor any of his Relatives,
Affiliates, agents, or representatives, nor any Company, or any of its officers,
directors, management, Affiliates, related persons, or entities or agents, will
(a) negotiate or discuss with any other Person this Agreement or the terms and
conditions contained herein except for the purpose of carrying out the
transactions contemplated hereby, obtaining consents or approvals required
hereunder, or enforcing their rights hereunder, (b) negotiate or discuss with
any other Person any other transaction involving a merger of a Company, or the
sale of any shares in or assets of a Company (except for sales of inventory in
the ordinary course of business) or any other business combination involving a
Company, (c) reveal the terms of this Agreement to any Person except for the
purpose of carrying out the transactions contemplated herein, obtaining consents
or approvals required hereunder, or enforcing their rights hereunder and except
to the extent permitted by Section 4.3, or (d) solicit, encourage, consider,
entertain, or accept any offer, bid, or proposal from any other Person
respecting any transaction involving a merger of a Company, or the sale of any
shares in or assets of a Company (except for sales of inventory in the ordinary
course of business) or any other business combination involving a Company. If a
Company or any Shareholder receives a proposal of the kind described in the
preceding clause (d) prior to the date of the Closing, then such Company or such
Shareholder (as the case may be) shall immediately notify Apple South of the
receipt of such proposal and shall promptly provide Apple South with a copy of
such proposal (or if such proposal is not in writing, a written summary of its
terms).
4.12. Confidentiality. In connection with the negotiation of
this Agreement and the consummation of the transactions contemplated hereby, a
party hereto and its Affiliates, directors, employees, attorneys, and
accountants (the "Disclosing Party") may disclose Confidential Information, as
defined below, to one of the other parties hereto (the "Disclosee"). Each
Disclosee agrees that if the transactions contemplated herein are not
consummated, it will return to the Disclosing Party all documents and other
written information furnished to it. Each Disclosee further agrees to maintain
the confidentiality of any and all Confidential Information of a Disclosing
Party and not disclose any Confidential Information to any Person other than its
Affiliates, directors, employees, attorneys, or accountants performing services
with respect to the transactions contemplated hereby, or use such Confidential
Information for any purpose other than the evaluation and consummation of the
transactions contemplated hereby, obtaining consents or approvals required
hereunder, or enforcing their rights hereunder; provided, however, the foregoing
obligations shall not apply to (i) any information which was known by the
Disclosee prior to its disclosure by the Disclosing Party; (ii) any information
in the public domain through no fault of the Disclosee; (iii) any information
which is disclosed to the Disclosee by a third party having the legal right to
make such disclosure; or (iv) any information which is required to be disclosed
by Order of any Forum. Should Disclosee become legally compelled to disclose any
portion of the Confidential Information by Order of any Forum, Disclosee shall
give Disclosing Party prompt notice of such fact, including in its notice the
legal basis for the required disclosure and the nature of the Confidential
Information that must be disclosed. Disclosee shall cooperate fully with
Disclosing Party in obtaining a protective order or other appropriate protection
relating to the disclosure and subsequent use of the Confidential Information.
Disclosee will disclose only that portion of the Confidential Information that
is legally required to be disclosed. For purposes of this Paragraph 4.12,
"Confidential Information" shall mean any and all technical, business, and other
information which is (a) possessed or hereafter acquired by a Disclosing Party
and disclosed to the Disclosee and (b) derives economic value, actual or
potential, from not being generally known to Persons other than the Disclosing
Party, including, without limitation, technical or nontechnical data,
compositions, devices, methods, techniques, drawings, inventions, processes,
financial data, financial plans, product plans, lists of actual or potential
customers or suppliers, information regarding the business plans and operations
of the Disclosing Party, and the existence of discussions and negotiations
between the parties hereto relating to the terms hereof. If the transactions
contemplated herein are consummated, "Confidential Information" of Apple South
shall be deemed to include all Confidential Information of the Companies and
Surviving Corporation, and the Shareholders shall be subject to the obligations
of non-use and non-disclosure contained in this Agreement with respect to all of
such information. The provisions of this Paragraph 4.12 shall survive any
termination of this Agreement for any reason. The restrictions of this Paragraph
shall expire two years from the date hereof with respect to any Confidential
Information that does not constitute a trade secret under applicable law.
4.13. Section 338 Election. Apple South shall not make any election
pursuant to Section 338 of the Internal Revenue Code of 1986, as amended, or any
provision substituted therefor.
4.14. Release of Guaranties. Following the Closing, Apple South shall use
commercially reasonable efforts to cause the Shareholders to be released from
all personal guarantees on behalf of a Company or any Subsidiary. The efforts to
be undertaken by Apple South shall include, but shall not limited to, paying off
any indebtedness where no pre-payment penalty exists and offering to the
beneficiary of any other guarantee to replace the guarantee of any Shareholder
with a guarantee of Apple South. The above notwithstanding, Apple South hereby
agrees that it shall cause the Shareholders' guarantees to Trans Financial Bank,
N.A. to be released at Closing.
5. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE SHAREHOLDERS
The Major Shareholders, jointly and severally, represent and warrant to
Apple South and Merger Sub that the statements contained in this Article 5 are
true and correct, except as set forth in the disclosure schedule delivered by
the Companies to Apple South and Merger Sub on the date of this Agreement (the
"Disclosure Memorandum").
5.1. Organization, Authority and Qualification. (a) Each
Company is a corporation duly organized and validly existing under the Laws of
the State of Florida. Each of the Subsidiaries is a limited partnership or
general partnership joint venture duly organized and validly existing under the
Laws of the State of Florida. The location of each office of a Company or a
Subsidiary and each Restaurant is set forth in the Disclosure Memorandum. Each
of the Companies and the Subsidiaries has full corporate (or in the case of the
Subsidiaries, partnership) power and authority to own or lease its properties
and to carry on its business as presently conducted. The Shareholders have
previously made available to Apple South true, correct, and complete copies of
the articles of incorporation and bylaws of each Company and joint venture or
partnership agreements of each Subsidiary and true, correct, and complete copies
of: (i) the minutes and other similar records of meetings of the shareholders or
partners of each Company and each Subsidiary and, in the case of the Companies,
boards of directors, which contain all records of meetings of, and actions taken
in lieu thereof by, shareholders and show all actions taken by their
shareholders, boards of directors or any committees thereof or partners, and
(ii) their stock transfer records or any records of partnership interest, which
reflect fully all issuances, transfers, and redemptions of their shares or
partnership interests since the date of their respective incorporations or
organizations.
(b) Each Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of each Company,
including the approval of the Merger by such Company's shareholders. This
Agreement has been duly executed and delivered by each Company and constitutes
the valid and binding obligation of each Company, enforceable in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the rights of creditors generally
and general principles of equity.
(c) Except as set forth in the Disclosure Memorandum, the
execution and delivery of this Agreement by each Company does not, and the
consummation of the transactions contemplated by this Agreement will not (i)
conflict with, or result in any violation or breach of any provision of the
articles of incorporation or bylaws of such Company; (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to any right of termination, cancellation, or
acceleration of any obligation or loss of any benefit) under any of the terms,
conditions, or provisions of any Company Contract; (iii) conflict with, violate,
or result in the termination of any permit, concession, franchise, or license
held by a Company or any Subsidiary; or (iv) violate any Order or Law.
(d) Each Company and Subsidiary is qualified to transact
business as a foreign corporation or limited partnership in all those states and
jurisdictions in which its activities require it to so qualify. A list of states
and jurisdictions where a Company or a Subsidiary is so qualified to transact
business is set forth in the Disclosure Memorandum.
5.2. Ownership of Shares; Subsidiaries. (a) The total authorized capital
stock of each Company is as set forth in the Disclosure Memorandum.
(b) All of the Company Shares and the issued and outstanding
general partnership interests, limited partnership interests, joint venture
interests, or other outstanding equity interests of any nature in each
Subsidiary ("Subsidiary Interests") are owned of record and beneficially held by
the Persons listed in the Disclosure Memorandum, free and clear of any Liens
(including, without limitation, free and clear of any adverse claims of any
Persons), except as disclosed in the Disclosure Memorandum. There are no
outstanding contracts, demands, commitments, or other agreements or arrangements
under which any holder of Company Shares or Subsidiary Interests is or may
become obliged to sell, transfer, or assign any of the Company Shares or
Subsidiary Interests, except as disclosed in the Disclosure Memorandum. There
are no Persons with any claims or rights to any Company Shares or Subsidiary
Interests, except as disclosed in the Disclosure Memorandum.
(c) All the Company Shares and Subsidiary Interests are duly
authorized and validly issued, and, in the case of the Company Shares, fully
paid, and nonassessable and were authorized, offered, issued, and sold in
accordance with all applicable securities and other Laws and all rights of
shareholders, partners, and other Persons. Except as set forth in the Disclosure
Memorandum, no Person has any preemptive rights or other rights to acquire, or
adverse claims with respect to, any stock or other equity interest in a Company
or partnership interest, joint venture interest, or other equity interest in any
Subsidiary, whether issued and outstanding or otherwise. There are no
outstanding securities convertible into an equity interest or rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements or arrangements providing for the issuance (contingent or otherwise)
of, or any Actions relating to, a stock, partnership, or other equity interest
in a Company or any Subsidiary. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any interest in or
exercise of any control rights with respect to a Company or any Subsidiary.
Except as set forth in the Disclosure Memorandum, no Company nor any Subsidiary
is subject to any obligation to repurchase or otherwise acquire or retire any
equity interest therein or has any liability for distributions or dividends
declared or accrued, but unpaid, with respect to its equity interests. Except as
set forth in the Disclosure Memorandum, no Company has purchased or redeemed any
of its capital stock, paid any dividend, or made any other distribution or
payment in respect of such stock to any Person since the Reference Date.
(d) Each corporation, limited partnership, general
partnership, joint venture, limited liability company, or other entity in which
any Company holds directly or indirectly (including through one or more other
entities or a chain of entities) any stock, limited partnership interest,
general partnership interest, joint venture interest, or other equity interest
or security or any investment is listed in the Disclosure Memorandum. The
Disclosure Memorandum also lists all the equity owners of each such Subsidiary
and the nature and amount of equity interest owned by each such owner. There are
no equity interests in any Subsidiary except those owned by a Company or another
Subsidiary except as shown on the Disclosure Memorandum. Except for the
Subsidiaries set forth in the Disclosure Memorandum, no Company, directly or
indirectly, owns or has any interest, direct or indirect, or any commitment to
purchase or otherwise acquire, any capital stock, partnership interest or
security, or other equity interest, direct or indirect, in any other Person.
5.3. Consents. Except as set forth in the Disclosure
Memorandum, no consent, approval, order, or authorization of, or registration,
declaration, or filing with, any Government is required by or with respect to a
Company or any Subsidiary in connection with the execution and delivery of this
Agreement or the Escrow Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger notification
report under the HSR Act; (ii) the filing of Articles of Merger with the
Secretary of State of the State of Florida; and (iii) consents or approvals of
the Governments issuing liquor licenses and brewery related licenses and related
approvals in the jurisdictions where the Restaurants are located.
5.4. Legal Compliance. No Company nor any Subsidiary is in
default under or in violation of (a) its articles of incorporation, bylaws, or
partnership agreement or (b) any Order. Except as set forth in the Disclosure
Memorandum, the operations of the Companies, the Subsidiaries, and their
respective predecessors, if any, have been conducted in all material respects in
compliance with all applicable Laws. (For purposes of this paragraph, any
violation of applicable Law that could result in imposition of a material fine
or other monetary penalty shall be deemed to be a material non-compliance.)
Except as set forth in the Disclosure Memorandum, no Company nor any Subsidiary
has received any notification of any asserted past or present failure to comply
with any applicable Law.
5.5. Possession of Permits. Except where the failure to
possess such Permits or a violation of such Permits would not have a material
adverse effect upon the business of the Companies, taken as a whole, the
Companies and Subsidiaries possess all material franchises, certificates,
licenses, permits, bonds, and other authorizations from Governments and all
other Persons that are necessary for the ownership, maintenance, and operation
of their properties and assets and the conduct of the Business ("Permits") and
are not in violation thereof, Companies and Subsidiaries hold such Permits free
of any claims or restrictions (other than any restrictions in existence at the
time such Permits were issued) and have fulfilled and performed all of their
material obligations with respect to such Permits and no event has occurred
which allows, nor after notice of lapse of time or both would allow, revocation
or early termination thereof or would result in any other impairment of the
rights of the holder of any such Permits. Except as set forth in the Disclosure
Memorandum, the consummation of the Merger will not result in the revocation,
termination, or impairment of any Permit or require the consent of any Person in
order to avoid any such revocation, termination, or impairment.
5.6. Financial Statements. Prior to the date hereof, the
Companies have delivered to Apple South copies of a Combined Balance Sheet (the
"Reference Balance Sheet") as of December 31, 1996, ("Reference Date"), and a
Combined Income Statement for the twelve months ended December 31, 1996 (such
financial statements being hereafter collectively referred to as the "Financial
Statements"). The Financial Statements represent the financial condition of the
Company and the assets and liabilities being purchased or assumed by Apple South
pursuant to the Asset Purchase Agreement dated of even date herewith among Apple
South, Mason and Schelldorf Leasing Company, et. al. The Financial Statements
are true and correct, have been prepared in accordance with GAAP consistently
applied, present fairly the financial condition of the Companies and such assets
and liabilities as at the date thereof and the results of the Companies'
operations for the twelve-month period then ended, and are consistent with the
books and records of the Companies, which are true, correct, and complete in all
material respects.
5.7. Liabilities. No Company nor any Subsidiary has any
Liability, except (i) those reflected in the Reference Balance Sheet and (ii)
Liabilities incurred in the ordinary course of business since the Reference Date
consistent with past experience of the Companies and Subsidiaries during the
period covered by the Financial Statements (none of which results from, arises
out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of representation or warranty, tort, product liability, "dram
shop" liability, infringement, or violation of any Law or Order) or liabilities
shown on the Disclosure Memorandum.
5.8. Events Subsequent to Reference Date. Since the Reference
Date, except as shown on the Disclosure Memorandum, no Company nor any
Subsidiary has: (i) issued any stock, bond, options, warrants, rights,
partnership interests, other equity interests, or other securities; (ii)
borrowed any amount or incurred any obligations or liabilities (absolute or
contingent), except current obligations and liabilities incurred in the ordinary
course of business of the type and in the amounts consistent with the period
covered by the Reference Balance Sheet; (iii) sold, assigned, mortgaged,
pledged, subjected to lien or otherwise transferred any interest in any of the
assets reflected in the Financial Statements or canceled any debts or claims;
(iv) suffered any casualty losses in excess of $25,000, or waived any rights in
excess of $25,000 in value; (v) made any material changes in employee
compensation, except for usual and customary changes; (vi) materially reduced
its level of inventory or supplies; (vii) materially changed the number of
employees or management personnel, except as a result of the opening of new
restaurants; (viii) canceled, entered into, or amended any Company Contract or
agreement except in the ordinary course of business and consistent with past
practice; and (ix) materially changed the operation of the Business in any
fashion.
5.9. Taxes. Except as set forth on the Disclosure Memorandum,
each Company and Subsidiary and any entity at any time eligible or required to
file a consolidated or combined Tax return with a Company (individually, an
"Affiliated Entity" and collectively, the "Affiliated Entities"), have duly and
timely filed all federal, state, municipal, local, and foreign, if any, Tax
returns and reports (including returns for estimated tax), and all reports and
returns of all other Governments having jurisdiction required to have been filed
as of the date hereof (collectively, "Returns") with respect to all Taxes
(including, without limitation, consolidated or combined Tax returns of some or
all of the Companies and the Affiliated Entities); all such Tax returns and
reports show the correct and proper amount due; and the Taxes shown on all Tax
returns and reports and all Tax assessments received by a Company, a Subsidiary,
or any Affiliated Entity have been paid to the extent that such Taxes or
estimates are due. Each Company and Subsidiary has previously provided Apple
South with true, correct, and complete copies of all Returns filed with respect
to the three tax years preceding the date hereof. All Taxes imposed on a
Company, a Subsidiary, or Affiliated Entities by any Government (including all
deposits in connection therewith required by applicable Law, and all interest
and penalties thereon) which have become due and payable by a Company for all
periods through the date hereof have been paid in full. No reserves for future
Taxes of the Company and the Subsidiaries have been set up on the books of the
Companies or the Subsidiaries. Except as set forth in the Disclosure Memoranda,
no Company has received any proposed assessment against it or any Affiliated
Entity of additional Taxes of any kind. No Company is a party to any Tax sharing
or Tax allocation agreement, understanding, arrangement, or commitment that
include any party other than a Company or any wholly-owned Subsidiary. Except as
set forth in the Disclosure Memorandum, there is no dispute or Action concerning
any Tax Liability of a Company raised by a Government in writing.
5.10. Properties. The Companies have good title to all
properties and assets reflected in the Reference Balance Sheet, except
inventories and other immaterial assets which have been disposed of in the
ordinary course of business since the Reference Date, and all other properties
and assets necessary to conduct the Business as currently being conducted and as
conducted during the period covered by the Financial Statements (other than any
leased property), free and clear of Liens, except as may be set forth in the
notes to the Reference Balance Sheet.
5.11. Real Estate.
(a) No Company or Subsidiary owns any real property except as
shown in the Disclosure Memorandum.
(b) The water, electric, gas, and sewer utility services, and
storm drainage facilities currently available to the real property leased by any
Company or a Subsidiary are adequate for the conduct of the Business and the
operation of the Restaurants, and to the knowledge of the Major Shareholders,
there is no condition which will result in the termination of the present access
from the Real Property to such utility services and facilities; provided,
however, that such utility services and facilities are not to date available to
certain real property leased by any Company or Subsidiary upon which a
Restaurant has not to date opened for business.
(c) The Companies and Subsidiaries have obtained, or landlords
have obtained on their behalf, all easements, authorizations, and rights-of-way,
which are reasonably necessary to ensure reasonable vehicular and pedestrian
ingress and egress to and from the Real Property. There are no restrictions on
entrance to or exit from the Real Property to adjacent public streets, roadways,
or parking lots presently used other than as contained in such easements,
authorizations, and rights of way, and to the knowledge of Major Shareholders,
no conditions which will result in the termination of the present access from
the Real Property to existing highways and roads and parking lots or private
drives presently used other than as contained in such easements, authorizations,
and rights of way.
(d) Neither a Company nor any Subsidiary has received any
notices, oral or written, or has reason to believe, that any Government having
the power of eminent domain over the Real Property has commenced or intends to
exercise the power of eminent domain or a similar power with respect to all or
any part of the Real Property.
(e) The Real Property and the present uses thereof by the
Companies and Subsidiaries comply in all material respects with all regulations
of any Government having jurisdiction over the Real Property.
(f) The improvements located on the Real Property and used by
the Companies or Subsidiaries are in good condition and are structurally sound,
and all mechanical and other systems located therein are in good operating
condition, in each case, subject to normal wear and tear, and no condition
exists requiring material repairs, alternations, improvements, or corrections.
(g) Each Restaurant provides legally sufficient on or off-site
(pursuant to the applicable agreements) parking for the operation of the
Restaurant located thereon.
(h) To the knowledge of the Major Shareholders, no work for
municipal improvements has been commenced on, or in connection with, any parcel
of Real Property or any street adjacent thereto which is likely to result in a
special assessment on the Real Property or materially impede access to the Real
Property and, to the knowledge of the Major Shareholders, no such improvements
are contemplated. To the knowledge of the Major Shareholders, no assessment for
public improvements has been made against the Real Property which remains
unpaid. No written notice from any Government has been served upon the Real
Property or received by Sellers requiring or calling attention to the need for
any work, repair, construction, alteration, or installation on, or in connection
with, the Real Property which has not been complied with in all material
respects.
5.12. Owned and Leased Real Property. (a) The Company or a
Subsidiary has marketable title to all of the real property reflected on the
Reference Balance Sheet as owned by the Company or a Subsidiary. No options have
been granted to others to purchase, lease, or otherwise acquire any interest in
the owned Real Property or any part thereof. The present use, occupancy, and
operation of the owned Real Property are in compliance in all material respects
with all, and not in violation in any material respect of any, Laws and with all
private restrictive covenants of record. To the knowledge of the Major
Shareholders, there exists no conflict or dispute with any Government or other
Person relating to any owned Real Property or the activities thereon.
(b) The Disclosure Memorandum identifies each parcel or tract
of real property which is used by a Company or any Subsidiary in the Business
which is subject to a lease or sublease under which a Company or any Subsidiary
is lessee or sublessee (individually, a "Real Property Lease"). Except as
disclosed in the Disclosure Memorandum, all Real Property Leases are valid in
all material respects and in full force and effect in accordance with their
terms in all material respects. The Shareholders have furnished Apple South with
true, correct, and complete copies of all Real Property Leases. Except as
disclosed in the Disclosure Memorandum, there is not, with respect to any Real
Property Lease (a) any material default by a Company or any Subsidiary, or any
event of default or event which with notice or lapse of time, or both, would
constitute a default by a Company or any Subsidiary or (b) to knowledge of the
Major Shareholders, any existing material default by any other party to any Real
Property Lease, or event of default or event which with notice or lapse of time,
or both, would constitute a default by any other party to any Real Property
Lease.
5.13. Personal Property. (a) All machinery, equipment,
vehicles, and other items of tangible personal property which are owned or
leased by a Company or any Subsidiary having a fair market value of $2500 or
more, are in good condition and repair, subject to normal wear and tear, suited
for the use intended, and are and have been operated in material conformity with
applicable Laws. To the Major Shareholders' knowledge, there are no defects or
conditions which would cause such tangible personal property to be or become
inoperable or unsafe.
(b) No Company nor any Subsidiary is in default under any
lease of machinery, equipment, or other tangible personal property. To the Major
Shareholders' knowledge, all lessors of machinery, equipment, or other tangible
personal property leased by a Company or any Subsidiary have performed and
satisfied their respective duties and obligations under such leases. No Company
nor any Subsidiary has brought or threatened any Action against any such lessor
for failure to perform and satisfy its duties and obligations thereunder.
(c) All tangible personal property used in the Restaurants or
otherwise in the Business is owned by the Companies or Subsidiaries or is leased
pursuant to a written lease agreement. In the good faith opinion of the Major
Shareholders, such personal property is sufficient for the operation of the
Business and the Restaurants.
5.14. Intellectual Property Rights. (a) All of the patents,
copyrights, trademarks, service marks, trade names, and applications therefor or
registrations thereof which are owned or used by the Companies or any Subsidiary
are set forth in the Disclosure Memorandum which indicates which of the same are
owned and which are licensed from third parties. Except as set forth in the
Disclosure Memorandum, no Company nor any Subsidiary is a party to, either as a
licensor or licensee, and/or is bound by or subject to, any license agreement
for any patent, process, trademark, service mark, trade name, copyright, trade
secret, or confidential information that is material to the operation of the
Business or any Restaurant. Except as set forth in the Disclosure Memorandum,
there are no rights of third parties with respect to any trademark, service
mark, trade secret, confidential information, trade name, patent, patent
application, copyright, invention, device, or process utilized by a Company
which could reasonably be expected to have an adverse effect on the operations
of the Companies or any Subsidiary. Companies and the Subsidiaries have complied
with all applicable Laws relating to the filing or registration of "fictitious
names" or trade names.
(b) Except as set forth in the Disclosure Memorandum, to the
knowledge of Major Shareholders, neither any Company nor any Subsidiary has
interfered with, infringed, misappropriated, or otherwise come into conflict
with any intellectual property rights of any other person, and neither any
Company, any Subsidiary, nor any of their officers, directors, or partners has
within the last five years received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation. Except as set forth in the Disclosure Memorandum, to the Major
Shareholders' knowledge, no Person has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with the proprietary
inventions, designs, ideas, processes, methods and other know-how, trademarks,
service marks, trade names, copyrights, or other intellectual property of
Companies or any Subsidiary which are owned or used in the operation of its
business.
5.15. Contracts. (a) All Company Contracts are valid and
enforceable in all material respects in accordance with their terms, are in full
force and effect, and will continue to be valid and enforceable in all material
respects (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or other similar laws affecting the rights of creditors generally
and general principles of equity) and in full force and effect on identical
terms immediately following Closing. All Company Contracts are listed in the
Disclosure Memorandum, and true, correct, and complete copies of all Company
Contracts have been delivered or made available to Apple South.
(b) Except as set forth in the Disclosure Memorandum, there
are no existing material defaults, events of default or events which, with the
giving of notice or lapse of time or both, would constitute a material default
by a Company or any Subsidiary under any Company Contract. No event has occurred
which may hereafter give rise to any right of termination, acceleration, damages
or any other remedy under any Company Contract.
(c) To the Major Shareholders' knowledge, neither this
Agreement, the Closing or the relationship between any Company and Apple South
has caused or will automatically cause the termination or nonrenewal of any
Company Contract.
5.16. Insurance. The Disclosure Memorandum lists the types,
amounts of coverage, and deductibles of all insurance policies of the Companies
and Subsidiaries, and true, correct, and complete copies thereof have been
delivered or made available to Apple South. All premiums due on such policies
have been paid, and no Company nor any Subsidiary has received any notice of
cancellation with respect thereto. No Company nor any Subsidiary has any
Liability for premiums past due or to the knowledge of the Major Shareholders
for retrospective premium adjustments for any period through the date hereof.
5.17. Environmental Matters. The Companies and Subsidiaries
hold all Environmental Permits necessary for conducting the Business and their
operations and have conducted, and are presently conducting, the Business and
their operations in full compliance with all applicable Environmental Laws and
Environmental Permits held by them, including, without limitation, all record
keeping and filing requirements. To the knowledge of the Major Shareholders,
there is no existing or pending Environmental Law with a future compliance date
that will require operational changes, business practice modifications, or
capital expenditures at any Real Property (or any other property presently or
formerly owned, operated, or controlled by a Company or Subsidiary or as to
which a Company or any Subsidiary may bear responsibility or Liability), or any
Improvements thereon. All Hazardous Materials and Solid Waste, on, in, or under
Real Property, or any other property operated by a Company or any Subsidiary,
wherever located, have been properly removed and disposed of, and no past or
present disposal, discharge, spill, or other release of, or treatment,
transportation, or other handling of Hazardous Materials or Solid Waste on, in,
under or off-site from any Real Property, or adjacent property, will subject a
Company, any Subsidiary, or any subsequent owner, occupant, or operator of such
Real Property to corrective or compliance action or any other Liability. There
are no presently pending, or to Major Shareholders' knowledge, threatened
Actions or Orders against or involving a Company or any Subsidiary (including
any other Person for whose acts or omissions a Company or any Subsidiary is
responsible) relating to any alleged past or ongoing violation of any
Environmental Laws or Environmental Permits, nor is any Company or any
Subsidiary subject to any Liability for any such past or ongoing violation.
5.18. Conditions Affecting Business. There is no fact,
development, or threatened development with respect to the markets, products,
services, customers, facilities, personnel, vendors, suppliers, operations, or
assets of the Business which are known to the Major Shareholders and which may
reasonably be expected to materially adversely affect the Business or the
operations or performance of any Restaurant, other than such conditions as may
affect the local, regional, or national economy generally or the restaurant
industry generally. The Major Shareholders do not have any reason to believe
that any loss of any key employee, agent, or supplier or other advantageous
arrangement will result because of the consummation of the transactions
contemplated hereby.
5.19. Litigation. Except as set forth in the Disclosure
Memorandum, there is no Action or investigation pending or, to the knowledge of
the Major Shareholders, threatened against any Company or any Subsidiary, or any
of their properties or rights before any court or by or before any Forum. To the
knowledge of the Major Shareholders, there does not exist any basis for any such
Action, or investigation. There are no unsatisfied judgments or Orders against a
Company, any Subsidiary, or any of their predecessors or to which any of them or
their assets and properties are subject.
5.20. Labor Matters. No Company nor any Subsidiary is or has
ever been a party to any collective bargaining or other labor agreement. There
is not pending or threatened any labor dispute, strike, work stoppage, union
representation, election, negotiation of collective bargaining agreement, or
similar labor matter. To the knowledge of the Major Shareholders, no Company nor
any Subsidiary is involved in any controversy with any of its employees or any
organization representing any such employees of a Company, and each Company and
Subsidiary is in compliance with all applicable Laws concerning the
employer/employee relationship. Each Company and Subsidiary is in compliance
with all of its agreements relating to the employment of their respective
employees, including, without limitation, provisions thereof relating to wages,
bonuses, hours of work, and the payment of Social Security taxes, and no Company
nor any Subsidiary is liable for any unpaid wages, bonuses, or commissions, or
any tax, penalty, assessment, or forfeiture for failure to comply with any of
the foregoing.
5.21. Employee Benefits.
(a) The Disclosure Memorandum hereto contains a true and
complete list of all the following agreements or plans of any Company or any
Subsidiary which are presently in effect:
(i) "employee welfare benefit plans" and "employee
pension benefit plans," as defined in Sections 3(1) and 3(2),
respectively, of the Employee Retirement Income Securities Act of 1974,
as amended ("ERISA");
(ii) any other pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive, bonus,
vacation, severance, disability, health, hospitalization, medical, life
insurance, vision, dental, prescription drug, supplemental
unemployment, layoff, automobile, apprenticeship and training, day
care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, or arrangement, whether written or
unwritten, formal or informal, which a Company or any Subsidiary
maintains or to which a Company or any Subsidiary has any outstanding,
present, or future obligation to contribute to or make payments under,
whether voluntary, contingent, or otherwise (the plans, programs,
policies or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "ERISA Plans").
(b) Except as described on the Disclosure Memorandum, no
Company nor any Subsidiary has an employee stock ownership plan as defined in
Sections 4975(e)(7) or 409 of the Code.
(c) No Company presently contributes and/or has ever
contributed or been obligated to contribute to a multi-employer pension plan as
defined in section 3(37)(A) of ERISA.
(d) No ERISA Plan is subject to Title IV of ERISA.
5.22. Agreements and Transactions with Related Parties. Except
as set forth in the Disclosure Memorandum, no Company nor any Subsidiary is
directly or indirectly a party to any contract, agreement, or lease with, or any
other commitment to, (a) a Shareholder, (b) any Affiliate or Relative of a
Shareholder, (c) any director or officer of a Company, (d) any Person in which
any of the foregoing Persons has, directly or indirectly, at least a 5%
beneficial interest in the capital stock or other type of equity interest of
such Person, or (e) any partnership in which any of the foregoing Persons is a
general partner or has at least a 5% beneficial interest (any or all of the
foregoing being referred to herein as "Related Parties"). Without limiting the
generality of the foregoing, (x) no Related Party, directly or indirectly, owns
or controls any assets or properties which are used in a Company's business,
except as set forth in the Disclosure Memorandum, and (y) except as set forth in
the Disclosure Memorandum, no Related Party, directly or indirectly, engages in
or has any significant interest in or in connection with any business which is
or which within the last three years has been a supplier of a Company or any
Subsidiary or has done business with a Company or any Subsidiary.
5.23. Securities Law Matters.
(a) Each of Shareholders understands and acknowledges (i) that
the offer and sale of the Apple South Stock has not been registered under the
Securities Act or under applicable state securities laws in reliance upon the
exemptions provided by Section 4(2) of the Securities Act and in reliance upon
the relevant exemptions provided by applicable state securities laws and that
the Apple South Stock may not be resold, transferred, assigned, pledged,
hypothecated, or any interest therein otherwise disposed of unless the Apple
South Stock is registered under the Securities Act and applicable state
securities laws or unless the shares are the subject of an opinion of counsel,
which opinion and counsel are reasonably acceptable to Apple South, addressed to
Apple South that such registration is not required; (ii) that the stock
certificates evidencing the Apple South Stock will bear legends setting forth
the restrictions on transfer described above and stop-transfer instructions will
be delivered by Apple South to the Apple South's stock transfer agent reflecting
such restrictions; (iii) each of them must bear the risk of an investment in the
Apple South Stock for an indefinite period of time and the financial condition
of each of them is currently adequate to bear the risk of an investment in the
Apple South Stock; (iv) they have received copies of the SEC Documents and
Current SEC Documents; and (v) they have had the opportunity to ask questions of
and receive answers from the officers of Apple South concerning the Apple South
Stock, Apple South, and Apple South's business, plans, and prospects.
(b) Each of the Shareholders is acquiring the Apple South
Stock issuable to him hereunder for his own account for investment with no
intention of dividing his participation with others or otherwise participating,
directly or indirectly, in a distribution of the Apple South Stock.
(c) Each of the Shareholders has such experience in business,
financial, and investment matters as to be able to evaluate the merits and risks
of an investment in the Apple South Stock.
(d) Each of the Shareholders is an "accredited investor" as defined in Rule
501 of Regulation D of the SEC.
5.24. Disclosure. The Shareholders have fully provided Apple
South or its representatives with all the information and documentation that
Apple South has requested in analyzing whether to consummate the Merger, and the
Shareholders have made the books and records of the Companies and the
Subsidiaries available for inspection and review by Apple South and its
representatives and agents. None of the information and documentation so
provided or made available, when viewed in the aggregate, contains any
intentional misrepresentation by the Shareholders, or intentionally omits to
state any material fact necessary in order to make the aggregate of such
information, in light of the circumstances under which it was disclosed, not
misleading.
The representations and warranties set forth herein are made
and given subject to the disclosures contained in the Disclosure Memorandum. The
Shareholders shall not be or be deemed to be in breach of any such
representations or warranties (and no claim shall lie in respect thereof) in
respect of any such matter so disclosed in the Disclosure Memorandum. As
requested by Apple South, the specific disclosures set forth in the Disclosure
Memorandum have been organized by the Shareholders to correspond to schedule
references in the Agreement to which the disclosure may be most likely to relate
but such disclosure shall apply to and shall be deemed to be disclosed for the
purposes of the Agreement generally, and all of the representations and
warranties contained herein. Apple South and Merger Sub are deemed to be aware
of and there are deemed to have been disclosed to Apple South and Merger Sub as
if herein set out (a) all matters fairly disclosed or referred to or contained
in the Agreement and in all documents specifically referred to therein; (b) the
contents of and all matters referred to in the documents specifically listed in
the Disclosure Memorandum; (c) all matters contained in the Financial
Statements; and (d) all matters disclosed in the Registration Statement on Form
S-1 and Amendment No. 1 to Form S-1 filed by Hops Grill & Bar, Inc. with the
United States Securities Exchange Commission on October 15, 1996 and December 5,
1996, respectively. In the event that there is any inconsistency between this
Agreement and matters disclosed in the Disclosure Memorandum, information
contained in the Disclosure Memorandum shall prevail and shall be deemed to be
the relevant disclosure.
6. REPRESENTATIONS AND WARRANTIES OF APPLE SOUTH
As an inducement to the Companies and the Shareholders to
enter into and perform this Agreement, Apple South hereby represents and
warrants to the Shareholders as follows:
6.1. Organization. Apple South is a corporation duly organized and validly
existing under the Laws of the State of Georgia. Merger Sub is a corporation
duly organized and validly existing under the Laws of the State of Florida.
6.2. Authorization; No Inconsistent Agreements. Each of Apple
South and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and, in the case of Apple South, the Escrow Agreement,
Registration Rights Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and, in the case of
Apple South, the Escrow Agreement, and Registration Rights Agreement and the
consummation of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of Apple South and
Merger Sub. This Agreement has been duly executed and delivered by each of Apple
South and Merger Sub and constitutes the valid and binding obligation of each of
them, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the rights of creditors generally and general principles of equity.
The execution and delivery of this Agreement by Apple South and Merger Sub does
not, and the execution and delivery of the Escrow Agreement and Registration
Rights Agreement by Apple South and the consummation of the transactions
contemplated by this Agreement will not, (i) conflict with, or result in any
violation or breach of any provision of the articles of incorporation or bylaws
of Apple South or Merger Sub, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to any right of termination, cancellation, or acceleration of any
obligation or loss of any benefit) under any of the terms, conditions, or
provisions of any material agreement of Apple South or Merger Sub, or (iii)
conflict with or violate any permit, concession, franchise, or license held by
Apple South or Merger Sub or any Order or Law.
6.3. Authorization of Apple South Stock. The shares of the
Apple South Stock to be issued pursuant to Paragraph 3.2 have been duly
authorized for issuance at the Closing and upon issuance in accordance with this
Agreement will constitute duly authorized, fully paid and non-assessable shares
of Common Stock of Apple South.
6.4. Apple South Documents. The SEC Documents, together with
the Current SEC Documents when filed, constitute all of the documents (other
than Form D's and preliminary filings and material) that Apple South was
required by applicable securities Laws and regulations to file with the SEC
since December 31, 1995. None of the SEC Documents or the Current SEC Documents,
as of the respective dates they were filed, contained any untrue statements of a
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
financial statements of Apple South included the SEC Documents and, to the
extent applicable, the Current SEC Documents were prepared in accordance with
GAAP and fairly present, in all material respects in accordance with GAAP, the
financial condition and results of operations and changes in financial position
as of the dates thereof.
6.5 Consents. No consent, approval, order, or authorization
of, or registration, declaration, or filing with, any Government is required by
or with respect to Apple South or Merger Sub in connection with the execution
and delivery of this Agreement, the Escrow Agreement, the Registration Rights
Agreement, or the consummation of the transactions contemplated hereby, except
for (i) the filing of the pre-merger notification report under the HSR Act; (ii)
the filing of Articles of Merger with the Secretary of State of the State of
Florida; (iii) consents to approvals of the Governments issuing liquor licenses
in the jurisdictions where the Restaurants are located; and (iv) filing with and
issuance of an order by the SEC with respect to the registration of Apple South
Stock pursuant to the Registration Rights Agreement.
7. CONDUCT OF BUSINESS OF THE COMPANY PENDING CLOSING
Shareholders covenant and agree that, except as may otherwise
be provided herein, without the prior written consent of Apple South, between
the date hereof and the date of the Closing:
7.1. Business in the Ordinary Course. Shareholders shall ensure that the
business of the Companies and Subsidiaries is conducted only in the ordinary
course and consistent with its prior practices. Without limiting the generality
of the foregoing:
(a) Except in the ordinary course of its business and
consistent with prior practices, no Company nor any Subsidiary shall sell,
assign, transfer, convey, pledge, mortgage, encumber, or otherwise dispose of,
or cause the sale, assignment, transfer, conveyance, pledge, mortgage,
encumbrance, or other disposition of, any asset or property.
(b) Each Company shall protect, preserve, and maintain all its
assets in good condition, except for ordinary wear and tear; and shall use
commercially reasonable efforts to maintain in full force and effect all
insurance coverage described in the Disclosure Memorandum.
(c) The books, records, and accounts of the Companies shall be
maintained in the ordinary course of business on a basis consistent with prior
practices and in accordance with GAAP.
(d) The Companies shall use their commercially reasonable
efforts, and shall cause the Subsidiaries to use respective commercially
reasonable efforts, to preserve their business and assets, including, without
limitation, the Company Contracts (subject to any expiration date contained in
any such Company Contract), and the goodwill of suppliers, customers, and others
having business relations with them which relate to their business, and subject
to existing performance standards applied by the Companies and Subsidiaries, to
retain the services of the employees, agents, and contractors of Companies and
Subsidiaries.
(e) The Companies and Subsidiaries shall continue to replenish
inventories in the ordinary course and consistent with prior practices.
(f) Shareholders and Companies shall not take, or agree to
take, any action that would make any representation or warranty of them
contained herein, untrue, incorrect, or misleading in any material respect as of
the date when made or at any time through Closing, or that would cause any
covenant by them or any of them contained herein not to be fulfilled in any
material respect.
7.2. No Material Changes. Except as expressly provided in this Agreement,
no Company, any Subsidiary, nor any Shareholder shall take any action which
shall materially alter the organization, capitalization, financial structure,
practices, or operations of a Company or any Subsidiary. Without limiting the
generality of the foregoing:
(a) No change shall be made in the articles of incorporation
or bylaws of a Company or the partnership agreement or joint venture agreement
of any Subsidiary.
(b) No change shall be made in the authorized or issued capital stock of a
Company or the partnership interests in Subsidiary.
(c) No Company nor any Subsidiary shall issue or grant any
right or option to purchase or otherwise acquire any capital stock or other
security of a Company or create or suffer any Lien on any Company Share or any
partnership or other equity interest in any Subsidiary.
(d) No dividend or other distribution or payment shall be
declared or made with respect to any capital stock of a Company, and no Company
shall, directly or indirectly, redeem, purchase or otherwise acquire any capital
stock, except that the Companies may make an aggregate distribution of $863,000
immediately prior to Closing.
(e) No Company shall liquidate or voluntarily declare bankruptcy or seek
the appointment of a receiver, trustee or custodian.
7.3 Maintenance of Services. The Companies will use
commercially reasonable efforts to keep available for Apple South the services
of the employees, agents, customers, and suppliers of Companies and Subsidiaries
active in the conduct of the business of the Companies and Subsidiaries.
8. CONDITIONS TO OBLIGATIONS OF APPLE SOUTH AND MERGER SUB
All obligations of Apple South and Merger Sub hereunder are
subject to the fulfillment and satisfaction of each and every one of the
following conditions on or prior to the Closing, any or all of which may be
waived in whole or in part by Apple South, provided that no such waiver shall be
effective unless it is set forth in a writing executed by Apple South:
8.1. Representations and Warranties. Subject to the exceptions
and supplemental information set forth in the Disclosure Memorandum, the
representations and warranties contained in Article 5 shall be true and correct
in all material respects as of the date when made and shall be deemed to be made
again at and as of the date of the Closing and shall be true and correct in all
material respects at and as of such time.
8.2. Compliance with Agreements and Conditions. The Companies shall have
materially performed and complied with all agreements and conditions required
hereby to be performed or complied with by them prior to or on the date of the
Closing.
8.3. Certificate of the Shareholders. The Companies shall have
delivered to Apple South a certificate executed by an executive officer of each
Company, dated the date of the Closing, certifying as to the fulfillment and
satisfaction of the conditions specified in Paragraphs 8.1 and 8.2.
8.4. Resolutions. Apple South shall have received duly adopted
resolutions of the board of directors and the shareholders of the Companies,
certified by the Secretary of each Company as of the date of the Closing,
authorizing and approving the execution hereof and all other documents executed
by it including, without limitation, the Escrow Agreement, and the taking of any
and all other actions necessary to enable the Companies to comply with the terms
hereof and to consummate the Merger.
8.5. Government Consents. Apple South, Merger Sub, and the Companies shall
have received from any and all Governments or Forums having jurisdiction over
the transactions contemplated hereby, or any part hereof, any and all necessary
consents and approvals for the consummation of the transactions contemplated
hereunder.
8.6. No Material Adverse Change. There shall have been no material adverse
change in the financial condition, results of operations, business, or assets of
the Companies since the date hereof.
8.7. No Inconsistent Requirements. No Action shall be pending by any
Government or Person (i) against a party hereto to restrain or prohibit the
consummation of the transactions herein or (ii) which could reasonably be
expected to have a material adverse effect on the Companies.
8.8. Opinion. Fowler, White, Gillen, Boggs, Villareal and Banker, P.A.,
counsel to the Companies and Shareholders, shall have delivered to Apple South
its opinion in substantially the form of Exhibit D hereto.
8.9. Other Agreements. The Escrow Agreement and Registration Rights
Agreement shall have been fully executed and delivered by the other parties
thereto.
8.10. Hart-Scott-Rodino. Any applicable filings under the HSR shall have
been made, and all applicable waiting periods thereunder shall have expired or
been terminated.
8.11 Consents. The Companies shall have obtained the consent
and approval (to the extent required) of the lessors of all Restaurant sites,
buildings, and fixtures, and any lessors of personal property to the Companies,
or any Subsidiary, and the other parties to any Company Contract to the Merger
and shall have obtained any consents and approvals or licenses required to sell
liquor, beer, and wine at the Restaurants.
8.12 Simultaneous Closing. The closing contemplated by that certain Asset
Purchase Agreement dated of even date herewith among Apple South, Mason, and
Schelldorf Leasing Company et. al. shall have occurred simultaneously with the
Closing.
9. CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS AND THE COMPANY
All obligations of the Shareholders and the Companies
hereunder are subject to the fulfillment and satisfaction of each and every one
of the following conditions on or prior to the Closing, any or all of which may
be waived in whole or in part by the Shareholders, provided that no such waiver
shall be effective unless it is set forth in a writing executed by each
Shareholder:
9.1. Representations and Warranties. The representations and
warranties contained in Article 6 hereof shall be true and correct in all
material respects on and as of the date when made and shall be deemed to be made
again at and as of the date of the Closing and shall be true and correct in all
material respects at and as of such time.
9.2. Compliance with Agreements and Conditions. Apple South
and Merger Sub shall have materially performed and complied with all agreements
and conditions required hereby to be performed or complied with by Apple South
and Merger Sub prior to or on the date of the Closing.
9.3. Certificate. Each of Apple South and Merger Sub shall have delivered
to Companies and the Shareholders a certificate executed by an executive
officer, dated the date of the Closing as to the fulfillment and satisfaction of
the conditions specified in Paragraphs 9.1 and 9.2.
9.4 Other Agreements. The Escrow Agreement and Registration Rights
Agreement shall have been fully executed and delivered by the parties thereto.
9.5 Hart-Scott-Rodino. Any applicable filings under the HSR
shall have been made, and all applicable waiting periods thereunder shall have
expired or been terminated.
9.6. Government Consents. Apple South, Merger Sub, and the Companies shall
have received from any and all Governments or Forums having jurisdiction over
the transactions contemplated hereby, or any part hereof, any and all necessary
consents and approvals for the consummation of the transactions contemplated
hereunder.
9.7. No Inconsistent Requirements. No Action shall have been instituted by
any Government or Person (i) against a party hereto to restrain or prohibit the
consummation of the transactions herein or (ii) which could reasonably be
expected to have a material adverse effect on the Companies.
9.8. Opinion. Kilpatrick Stockton LLP counsel to Apple South, shall have
delivered to Shareholders its opinion in substantially the form of Exhibit E
hereto.
9.9. No Material Adverse Change. There shall have been no material adverse
change in the financial condition, results of operations, business, or assets of
Apple South since the date hereof.
9.10. Simultaneous Closing. The closing contemplated by that certain Asset
Purchase Agreement dated of even date herewith among Apple South, Mason, and
Schelldorf Leasing Company et. al. shall have occurred simultaneously with the
Closing.
9.11 Indemnity. Shareholders shall have entered into an
indemnification agreement among themselves. Shareholders shall use their best
efforts to obtain this agreement within seven days from the date hereof and this
condition shall be waived unless Shareholders notify Apple South within seven
days that such condition cannot be satisfied.
10. INDEMNITIES
10.1. Indemnification by Major Shareholders. In accordance
with and subject to the provisions of this Article 10, the Major Shareholders
shall jointly and severally indemnify and hold harmless the Surviving
Corporation, Apple South, their Affiliates, and the officers, directors, agents,
and employees of the Surviving Corporation, Apple South, and their Affiliates
(collectively, the "Apple South Indemnitees") from and against and in respect of
any and all loss, damage, Liability, cost, and expense, including reasonable
attorneys' fees and amounts paid in settlement (collectively, "Apple South's
Indemnified Losses"), suffered or incurred by any one or more of the Apple South
Indemnitees by reason of, or arising out of:
(a) any misrepresentation or breach of representation or
warranty contained in this Agreement or the Disclosure Memorandum or any
certificate, instrument, agreement, or other writing delivered by or on behalf
of any Shareholder or a Company pursuant to this Agreement or in connection with
the transactions contemplated herein; and
(b) the breach of any covenant or agreement of any Shareholder
or a Company contained in this Agreement or the Disclosure Memorandum or any
certificate, instrument, agreement, or other writing delivered to Merger Sub or
Apple South by or on behalf of any Shareholder or a Company pursuant to this
Agreement or in connection with the transactions contemplated herein; and
(c) any and all Actions, and efforts reasonably undertaken in
attempting to avoid any of the foregoing losses, Liabilities, damages, etc., or
in enforcing this indemnification.
10.2. Indemnification by Apple South. In accordance with and
subject to the provisions of this Article 10, Apple South shall jointly and
severally indemnify and hold harmless the Shareholders from and against and in
respect of any and all loss, damage, Liability, cost, and expense, including
reasonable attorneys' fees and amounts paid in settlement ("Shareholders'
Indemnified Losses", and together with Apple South's Indemnified Losses,
"Indemnified Losses"), suffered or incurred by any one or more of the
Shareholders by reason of, or arising out of:
(a) any misrepresentation or breach of representation or
warranty contained in this Agreement or any certificate, instrument, agreement,
or other writing delivered by or on behalf of Apple South or Merger Sub pursuant
to this Agreement or in connection with the transactions contemplated herein;
and
(b) the breach of any covenant or agreement of Apple South or
Merger Sub Shareholder or a Company contained in this Agreement or any
certificate, instrument, agreement, or other writing delivered to Companies and
Shareholders by or on behalf of Apple South or Merger Sub pursuant to this
Agreement or in connection with the transactions contemplated herein;
(c) any guarantee by a Shareholder of any obligation of a Company or
Subsidiary; and
(d) any and all Actions, and efforts reasonably undertaken in
attempting to avoid any of the foregoing losses, Liabilities, damages, etc., or
in enforcing this indemnification.
10.3. No Liability or Contribution by the Surviving
Corporation. The Surviving Corporation shall not have any Liability to any
Shareholder as a result of any misrepresentation or breach of representation or
warranty by a Company contained in this Agreement, the Disclosure Memorandum, or
any certificate, instrument, agreement, or other writing delivered by or on
behalf of any Shareholder or a Company pursuant to this Agreement or in
connection with the transactions contemplated herein, or the breach of any
covenant or agreement of any Shareholder or any Company contained in this
Agreement or in the Disclosure Memorandum, or in any certificate, instrument,
agreement, or other writing delivered to Apple South by or on behalf of any
Shareholder or any Company pursuant to the provisions of this Agreement or in
connection with the transactions contemplated herein, and no Shareholder shall
have any right of indemnification or contribution against the Surviving
Corporation on account of any event or condition occurring or existing prior to
or on the date hereof.
10.4. Survival. The representations and warranties of the
Shareholders contained in this Agreement or in any Schedule, certificate,
instrument, agreement or other writing delivered by or on behalf of any
Shareholder or any Company pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive any investigation heretofore or
hereafter made by Merger Sub or Apple South and the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(a) the representations and warranties relating to
the reporting, payment or Liability for Taxes or relating to
labor, ERISA, or employment matters or environmental matters
shall survive until the expiration of any applicable statute
or period of limitations, and any extensions thereof; and
(b) all other representations and warranties of each
Shareholder (other than those contained in Paragraphs 5.1 and
5.2, which shall survive indefinitely) shall be of no further
force and effect after the expiration of the applicable statue
or limitations or one (1) year from and after the date hereof,
whichever period is shorter.
Anything to the contrary notwithstanding, the Survival Period shall be extended
automatically to include any time period necessary to resolve a claim for
indemnification which was made before expiration of the Survival Period but not
resolved prior to its expiration, and any such extension shall apply only as to
the claims asserted and not so resolved within the Survival Period. Liability
for any such item shall continue until such claim shall have been finally
settled, decided or adjudicated.
10.5 Defense of Third Party Claims. With respect to any claim
under Paragraph 10.1 (including any third party claims for Taxes relating to a
breach of Paragraph 5.9) relating to a third party claim or demand, Apple South
shall provide the Shareholders with prompt written notice thereof and the
indemnifying parties may defend, in good faith and at their expense, by legal
counsel chosen by them and reasonably acceptable to Apple South any such claim
or demand, and Apple South, at its expense, shall have the right to participate
in the defense of any such third party claim. So long as the indemnifying
parties are defending in good faith any such third party claim, Apple South
shall not settle or compromise such third party claim. In any event Apple South
shall cooperate in the settlement or compromise of, or defense against, any such
asserted claim. If the appropriate indemnifying parties do not so elect to
defend any such third party claim, Apple South shall have no obligation to do
so.
10.6 Limitation of Liability. Except for breach of any
representation or warranty contained in Paragraph 4.2, 5.1(a) and 5.23 of this
Agreement, for which a claim for Apple South's Indemnified Losses may be made
regardless of the amount of all claimed Apple South's Indemnified Losses, Apple
South Indemnitees shall not be entitled to any recovery under this Article 10
with respect to a breach of any representation or warranty unless and until the
aggregate amount of Apple South's Indemnified Losses exceeds $100,000, in which
case the indemnifying parties shall be liable for all such Apple South's
Indemnified Losses from the first dollar. Notwithstanding any other provision of
this Agreement, the amount of Apple South's Indemnified Losses shall be computed
on an after-tax basis and shall be net of any insurance proceeds received with
respect to the matter out of which the Apple South Indemnified Losses arose. In
no event shall the Shareholders have aggregate liability under this Article X in
excess of the amount of the Merger Consideration.
10.7 Escrow. Any claim for Apple South Indemnified Losses
against the Major Shareholders shall be asserted first against the shares of
common stock of Purchaser held in escrow pursuant to the Escrow Agreement and
then against the Major Shareholders personally only to the extent that the
amount held in escrow is insufficient or the escrow has terminated.
11. TERMINATION.
This Agreement may be terminated prior to the Closing (i) at
the election of the Shareholders if any one or more of the conditions to the
obligations of the Shareholders and the Company to close has not been fulfilled
as of the Termination Date; (ii) at the election of Apple South, if any one or
more of the conditions to its obligations to close has not been fulfilled as of
the Termination Date; (iii) upon at least five days' prior written notice, at
the election of the Shareholders, if Apple South has breached any material
representation, warranty, covenant or agreement contained in this Agreement,
which breach cannot be or is not cured by the Termination Date; (iv) upon at
least five days' prior written notice, at the election of Apple South, if any of
the Companies or Shareholders has breached any material representation,
warranty, covenant, or agreement contained in this Agreement, which breach
cannot be or is not cured by the Termination Date; or (v) at any time or prior
to the Closing Date, by mutual written consent of the Shareholders and Apple
South. Upon any such termination, no party shall have any further rights,
Liabilities, or obligations hereunder (except with respect to Paragraphs 4.1,
4.2, 4.3, 4.12, and Article 12, all of which shall survive the termination of
this Agreement); provided, however, if any of the terms and conditions contained
herein have been breached by any party, the non-breaching parties may pursue
whatever rights and remedies they may have at Law, in equity or otherwise by
reason of such breach regardless of such termination, and such termination shall
not constitute an election of remedies.
12. MISCELLANEOUS
12.1. Notices. All notices or other communications required or
permitted to be given or made hereunder shall be in writing and delivered
personally or sent by pre-paid, first class certified or registered mail, return
receipt requested, or by facsimile transmission, to the intended recipient
thereof at its address or facsimile number set out below with copies to the
Persons set forth below. Any such notice or communication shall be deemed to
have been duly given upon receipt (if given or made in person by delivery
service or by facsimile confirmed by mailing a copy thereof to the recipient in
accordance with this Paragraph 12.1 on the date of such facsimile), or four days
after mailing (if given or made by mail), and in proving same it shall be
sufficient to show that the envelope containing the same was delivered by the
delivery service to the recipient, or that receipt of a facsimile was confirmed
by the recipient. The addresses and facsimile numbers of the parties for
purposes of this Agreement are set forth on the signature page hereto below
their respective signatures. Any party may change the address to which notices
or other communications to such party shall be delivered or mailed by giving
notice thereof to the other parties hereto in the manner provided herein.
12.2. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
12.3. Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the Laws of the State
of Florida, without regard to its conflicts of laws rules.
12.4. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
permitted assigns. No party may assign, delegate, or otherwise transfer any of
its rights or obligations under this Agreement without the written consent of
the other parties hereto.
12.5. Partial Invalidity and Severability. All rights and
restrictions contained herein may be exercised and shall be applicable and
binding only to the extent that they do not violate any applicable Laws and are
intended to be limited to the extent necessary to render this Agreement legal,
valid and enforceable. If any term of this Agreement, or part thereof, not
essential to the commercial purpose of this Agreement shall be held to be
illegal, invalid, or unenforceable by a Forum of competent jurisdiction, it is
the intention of the parties that the remaining terms hereof, or part thereof,
shall constitute their agreement with respect to the subject matter hereof and
all such remaining terms, or parts thereof, shall remain in full force and
effect.
12.6. Waiver. Any term or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, but
only if such waiver is evidenced by a writing signed by such party. No failure
on the part of any party hereto to exercise, and no delay in exercising any
right, power, or remedy created hereunder, shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power, or remedy by
either party preclude any other or further exercise thereof or the exercise of
any other right, power, or remedy. No waiver by any party hereto of any breach
of or default in any term or condition of this Agreement shall constitute a
waiver of or assent to any succeeding breach of or default in the same or any
other term or condition hereof.
12.7. Headings. The headings of particular provisions of this Agreement are
inserted for convenience only and shall not be construed as a part of this
Agreement or serve as a limitation or expansion on the scope of any term or
provision of this Agreement.
12.8. Number and Gender. Where the context requires, the use of the
singular form herein shall include the plural, the use of the plural shall
include the singular, and the use of any gender shall include any and all
genders.
12.9. Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, and this Agreement contains the sole and entire agreement between
the parties with respect to the matters covered hereby. This Agreement shall not
be altered or amended except by an instrument in writing signed by or on behalf
of the party entitled to the benefit of the provision against whom enforcement
is sought.
13. DEFINITIONS
For purposes of this Agreement, the following capitalized
terms shall have the meanings specified with respect thereto below:
"Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative proceeding,
whether at Law, in equity, in arbitration or otherwise, and whether conducted by
or before any Government or other Person.
"Affiliate" of any Person shall mean any other Person directly
or indirectly Controlling, Controlled by, or under direct or indirect common
Control with, the former Person.
"Affiliated Entity" or "Affiliated Entities" shall have the
meaning set forth in Paragraph 5.9.
"Apple South" shall have the meaning set forth in the
Preamble.
"Apple South Indemnitees" shall have the meaning set forth in the Paragraph
10.1.
"Apple South's Indemnified Losses" shall have the meaning set
forth in Paragraph 10.1.
"Apple South Stock" shall have the meaning set forth in Paragraph 3.2.
"Business" shall have the meaning set forth in Preamble.
"Business Day" shall mean any day other than a Saturday, a
Sunday, or a day on which commercial banks in the United States are required or
authorized to be closed.
"Closing" shall have the meaning set forth in Paragraph 3.6.
"Company" shall have the meaning set forth in the Preamble.
"Company Contracts" shall mean all existing written and oral
agreements and commitments of a Company or any Subsidiary, including without
limitation all employment and consulting contracts, union contracts, agreements
with suppliers and customers, personal property leases, licenses, employee
benefit plans, deferred compensation agreements, indentures, notes, bonds,
mortgages, security agreements, loan agreements, guarantees, franchise
agreements, agreements in respect of the issuance, sale, repurchase or transfer
of such Company's or any Subsidiary's capital, stock, bonds or other securities,
powers of attorney, which involve a payment of more than $25,000 or have a term
or requires performance over a period of more 180 days, except for any such
agreements that do not require payments by a Company or any Subsidiary of more
than $500 per month.
"Company Shares" shall have the meaning set forth in the Recitals.
"Confidential Information" shall have the meaning set forth in Paragraph
4.12.
"Constituent Corporations" shall have the meaning set forth in Paragraph
1.1.
"Control" shall mean a Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of another Person, whether through the ownership of voting securities,
by contract or otherwise.
"Corporate Laws" shall have the meaning set forth in Paragraph 1.1.
"Current SEC Documents" shall have the meaning set forth in Paragraph 4.7.
"Disclosee" shall have the meaning set forth in Paragraph 4.12.
"Disclosing Party" shall have the meaning set forth in Paragraph 4.12.
"Disclosure Memorandum" shall have the meaning set forth in Section 5.
"Effective Time" shall have the meaning set forth in Paragraph 3.6.
"Environmental Laws" shall mean all federal, state,
provincial, municipal, and local Laws, statutes, ordinances, rules, regulations,
general or particular conditions, conventions, requirements, and decrees
relating to health, safety, and the environment, including without limitation,
those relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic, or Hazardous
Materials or wastes of every kind and nature into the environment (including
without limitation ambient air, surface water, ground water, soil, and subsoil),
or otherwise relating to the manufacture, generation, processing, distribution,
application, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic, or hazardous
substances or wastes, or to occupational or worker safety and health, and any
and all Laws, rules, regulations, codes, directives, orders, decrees, judgments,
injunctions, consent agreements, stipulations, provisions, and conditions of
Environmental Permits, licenses, injunctions, consent agreements, stipulations,
certificates of authorization, and other operating authorizations, entered,
promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses,
certificates, approvals, authorizations, regulatory plans or compliance
schedules required by applicable Environmental Laws, or issued by a Government
pursuant to applicable Environmental Laws, or entered into by agreement of the
party to be bound, relating to activities that affect human health or the
environment, including without limitation, permits, licenses, certificates,
approvals, authorizations, regulatory plans and compliance schedules for air
emissions, water discharges, pesticide and herbicide or other agricultural
chemical storage, use or application, and Hazardous Material or Solid Waste
generation, use, storage, treatment and disposal.
"ERISA" shall have the meaning set forth in Paragraph 5.21(a)(i).
"ERISA Plans" shall have the meaning set forth in Paragraph 5.31(a)(ii).
"Escrow Agent" shall mean such bank as the parties may agree upon.
"Escrow Agreement" shall have the meaning set forth in Paragraph 3.5.
"Exchange Act" shall have the meaning set forth in Paragraph 4.9.
"Forum" shall mean any federal, state, local, municipal, or foreign court,
governmental agency, administrative body or agency, tribunal, private
alternative dispute resolution system, or arbitration panel.
"Financial Statements" shall have the meaning set forth in Paragraph 5.6.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"Government" shall mean any federal, state, provincial, local,
municipal, or foreign government or any department, commission, board, bureau,
agency, instrumentality, unit, or taxing authority thereof.
"HSR Act" shall have the meaning set forth in Paragraph 4.1.
"Hazardous Material" shall mean all substances and materials
designated as hazardous or toxic under any applicable Environmental Law.
"Hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and "Article," "Paragraph,"
"Disclosure Memorandum," "Exhibit" and like references are to this Agreement
unless otherwise specified.
"Improvements" shall mean all buildings, structures and other
improvements of any and every nature located on the Real Property and all
fixtures attached or affixed, actually or constructively, to the Real Property
or to any such buildings, structures or other improvements.
"Indemnified Losses" shall have the meaning set forth in Paragraph 10.2.
"Known," "to the knowledge of," "to the best knowledge of,"
"aware" or words of similar import employed in this Agreement with reference to
any individual or entity shall be conclusively presumed to mean that the person
or entity has made reasonable and diligent efforts under the circumstances to
become knowledgeable; in the case of the Companies, "knowledge" shall be deemed
to be the individual and collective knowledge (as defined above) of the Major
Shareholders only.
"Law" shall mean all federal, state, provincial, local,
municipal or foreign constitutions, statutes, rules, regulations, ordinances,
acts, codes, legislation, treaties, conventions, judicial decisions, and similar
laws and legal requirements, whether of the United States of America or any
other jurisdiction as in effect from time to time.
"Liability" shall mean any liability or obligation whether
known or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and whether due or to become due.
"Lien" shall mean any mortgage, pledge, hypothecation,
security interest, encumbrance, claim, restriction on use, lien or charge of any
kind, or any rights of others, however evidenced or created (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the lien notice records or other
similar legislation of any jurisdiction).
"Major Shareholders" shall mean David L. Mason and Thomas A. Schelldorf.
"Merger" shall have the meaning set forth in Paragraph 1.1.
"Merger Consideration" shall have the meaning set forth in Paragraph 3.2.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Permits" shall have the meaning set forth in Paragraph 5.5.
"Person" shall include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization, a Government, and any other legal entity.
"Real Property" shall mean all real property owned or leased
by the Company or any Subsidiary.
"Real Property Lease" shall have the meaning set forth in Paragraph 5.12.
"Reference Balance Sheet" shall have the meaning set forth in Paragraph
5.6.
"Reference Date" shall have the meaning set forth in Paragraph 5.6.
"Registration Rights Agreement" shall have the meaning set forth in
Paragraph 4. 10.
"Related Parties" shall have the meaning set forth in Paragraph 5.22.
"Relative" shall mean (i) the spouse of a Shareholder or (ii)
any sibling, parent, grandparent, child, or grandchild of a Shareholder or
Shareholder's spouse and any spouse of any of the foregoing persons.
"Restaurants" shall mean the eighteen Hops Grill & Bar
restaurants located at the addresses set forth in the Disclosure Statement.
"SEC" shall have the meaning set forth in Paragraph 4.7.
"SEC Documents" shall have the meaning set forth in Paragraph 4.7.
"Securities Act" shall have the meaning set forth in Paragraph 4.8.
"Shareholders" shall have the meaning set forth in the Preamble.
"Shareholders' Indemnified Losses" shall have the meaning set forth in
Paragraph 10.2.
"Solid Waste" shall mean any garbage, refuse, sludge from a
waste treatment plant, water supply treatment plant, or air pollution control
facility, and other discarded material, including solid, liquid, semisolid, or
contained gaseous material resulting from industrial, commercial, mining, and
agricultural operations, and from community activities.
"Subsidiaries" shall mean the entities listed in the
Disclosure Memorandum pursuant to Paragraph 5.2(d).
"Subsidiary Interests" shall have the meaning set forth in Paragraph
5.2(b).
"Survival Period" shall have the meaning set forth in Paragraph 10.4.
"Surviving Corporation" shall have the meaning set forth in Paragraph 1.1.
"Taxes" shall mean any present or future taxes, levies,
imposts, duties, fees, assessments, deductions, withholdings or other charges of
whatever nature, including without limitation income, gross receipts, excise,
property, sales, use, customs, value added, consumption, transfer, license,
payroll, employee income, withholding, social security, and franchise taxes,
imposed or levied by the United States of America or any Government or by any
department, agency or other political subdivision or taxing authority thereof or
therein, all deposits required in connection therewith, and all interests,
penalties, additions to tax, and other similar Liabilities with respect thereto.
"Termination Date" shall mean sixty days from the date hereof.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the parties have executed this Agreement
under seal or caused it to be executed by their duly authorized officers and
agents and their corporate seals affixed as of the day and year first above
written. Signatures of the parties transmitted by facsimile shall be valid and
binding for all purposes.
ATTEST: APPLE SOUTH:
___________________________________ APPLE SOUTH, INC.
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: MERGER SUB
___________________________________ HG ACQUISITION CORP.
By:
Name: Name:
Title: Title:
Address:
(CORPORATE SEAL)
Facsimile No.:
ATTEST: COMPANIES:
___________________________________ HOPS GRILL & BREWERY, INC.
By:
Name: Name: David L. Mason
Title: Title: President
Address: 3030 North Rocky Point Drive West
(CORPORATE SEAL) Suite 650
Tampa, Florida 33607
Facsimile No.: (813) 282-9307
ATTEST: HOPS OF CARROLLWOOD, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF GREATER ORLANDO, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF GREATER WEST PALM BEACH, INC.
By:
__________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF NORTH TAMPA, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF NORTHEAST FLORIDA, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF PALM HARBOR, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF PORT RICHEY, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF ST. PETERSBURG, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF SOUTH FLORIDA, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF SOUTH TAMPA, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF SOUTHEAST FLORIDA, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: ddress: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF SOUTHWEST FLORIDA, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF THE CAROLINAS, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF THE OHIO VALLEY, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS OF THE ROCKIES, INC.
By:
__________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS PARTNERS, INC.
By:
__________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS PARTNERS II, INC.
By:
__________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: HOPS PARTNERS III, INC.
By:
___________________________________ Name: David L. Mason
Title: President
Name: Address: 3030 North Rocky Point Drive West
Title: Suite 650
Tampa, Florida 33607
(CORPORATE SEAL) Facsimile No.: (813) 282-9307
ATTEST: TOOMY LCN, INC.
By:
_________________________________ Name: Kevin Toomy
Title: President
Name: Address: 7701 Newport Lane
Title: Parkland, Florida 33067
Facsimile No.: ( ) ______________
--------------
(CORPORATE SEAL)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10Q FOR THE PERIOD ENDING MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.)
</LEGEND>
<CIK> 0000849101
<NAME> Apple South, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-28-1997
<PERIOD-START> Dec-30-1997
<PERIOD-END> Mar-30-1997
<CASH> 9,435
<SECURITIES> 37
<RECEIVABLES> 7,937
<ALLOWANCES> 0
<INVENTORY> 8,581
<CURRENT-ASSETS> 36,795
<PP&E> 440,036
<DEPRECIATION> 0
<TOTAL-ASSETS> 635,232
<CURRENT-LIABILITIES> 56,997
<BONDS> 249,996
115,000
0
<COMMON> 404
<OTHER-SE> 200,442
<TOTAL-LIABILITY-AND-EQUITY> 635,232
<SALES> 171,453
<TOTAL-REVENUES> 171,453
<CGS> 47,847
<TOTAL-COSTS> 146,588
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,302
<INCOME-PRETAX> 11,343
<INCOME-TAX> 4,075
<INCOME-CONTINUING> 7,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,268
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
