UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
January 15 , 1998
Date of Report (Date of earliest event reported)
APPLE SOUTH, INC.
(Exact name of registrant as specified in its charter)
Commission File No. 0-19542
Georgia 59-2778983
(State of Incorporation) (I.R.S. Employer Identification No.)
Hancock at Washington
Madison, Georgia 30650
(Address of Principal Executive Offices and zip code)
Registrant's telephone number, including area code: (706) 342-4552
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ITEM 5. OTHER EVENTS
The Registrant has decided to sell its franchised Applebee's Neighborhood Grill
& Bar ("Applebee's") restaurants in order to focus on the continued development
of its proprietary restaurant concepts and the acquisition of new proprietary
concepts, if available. The Registrant currently operates 264 Applebee's
restaurants pursuant to development and franchise agreements with Applebee's
International, Inc., the franchisor of the Applebee's concept. The Registrant's
proprietary restaurant concepts consist of Don Pablo's Mexican Kitchen
restaurants, McCormick & Schmick seafood dinner houses, Hops Restaurant Bar &
Brewery restaurants, and Canyon Cafe restaurants.
In furtherance of its divestiture strategy, the Registrant has entered into an
Asset Purchase Agreement dated December 23, 1997 (the "Agreement") with
Applebee's International whereby the Registrant has agreed to sell 31 of its
existing Applebee's Neighborhood Grill & Bar restaurants and one restaurant
under construction to Applebee's International for a purchase price of
approximately $93.4 million in cash. The restaurants to be sold to Applebee's
International are located in the Charlottesville, Norfolk, Richmond, and
Roanoke, Virginia areas, and at the time of the sale, the Registrant will
relinquish its rights to develop Applebee's restaurants in these territories.
The Agreement provides that the Registrant will use its reasonable best efforts
to dispose of all its remaining Applebee's restaurants by the end of 1999, and
Applebee's International has agreed to co-operate in accomplishing the
disposition. Applebee's International will have an option to acquire Applebee's
restaurants not disposed of by the end of 1999. Existing covenants of the
Registrant not to compete with the Applebee's concept, which are contained in
franchise and development agreements with Applebee's International, will be
eliminated by the end of 1998.
The Registrant has also executed letters of intent with three purchasers for
approximately $115 million in cash for the sale of 61 Applebee's restaurants and
related territorial development rights in the Mississippi; Knoxville,
Chattanooga, Tri-Cities, Memphis, and Jackson, Tennessee; and Washington, D.C.
development territories. These transactions are contingent upon completion and
signing of definitive purchase agreements and satisfaction of customary closing
conditions, including purchaser financing.
The Registrant expects completion of its divestiture plan to be accomplished
over the next 12 to 18 months and believes that total gross proceeds from the
sale of its Applebee's restaurants will exceed $500 million. Proceeds from the
proposed transactions will be used first to pay down the Registrant's revolving
credit facilities. The remainder is expected to be used for additional
development of the Registrant's proprietary restaurant concepts and for selected
acquisitions of additional concepts, if available. The Registrant may also
consider common stock repurchases.
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Certain of the statements set forth above, including the expected timing of and
projected level of proceeds from the sale of the Registrant's Applebee's
restaurants, are forward-looking statements. Factors that could affect the
Registrant's ability to dispose of the Applebee's restaurants within the desired
time frame for the anticipated gross sales price include, among others, national
and regional economic conditions, the financial performance of the Registrant's
Applebee's restaurants and the Applebee's system in general, turnover of
Applebee's restaurant employees prior to sale, the availability of purchasers
qualified to meet applicable franchise standards, and the availability of
appropriate financing for qualified prospective purchasers.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Statements.
Apple South, Inc.
Unaudited Pro Forma Consolidated Financial Statements
Basis of Presentation
The pro forma consolidated statements of earnings for the year ended December
29, 1996, and for the nine months ended September 28, 1997, present the
operating results of Apple South, Inc. (the "Company"), excluding the operations
of its Applebee's restaurants in the Norfolk, Richmond, Roanoke, and
Charlottesville, Virginia; Knoxville, Chattanooga, Tri-Cities, Memphis, and
Jackson, Tennessee; Washington, D.C.; and Mississippi markets, as if such
operations had been disposed of at the beginning of the respective periods. The
pro forma consolidated balance sheet has been prepared assuming the Applebee's
restaurant dispositions took place as of September 28, 1997.
The unaudited pro forma consolidated statements of earnings, balance sheet and
notes thereto should be read in conjunction with the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 29, 1996, and the Company's Quarterly Reports on Form 10-Q for
the unaudited fiscal quarters ended March 30, 1997, June 29, 1997 and September
28, 1997.
The unaudited pro forma information is not necessarily indicative of the
consolidated results of operations or the consolidated financial position that
would have resulted had the Applebee's restaurant dispositions occurred as
described above, nor is it necessarily indicative of the results of operations
of future periods or future consolidated financial position.
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<TABLE>
Apple South, Inc.
Pro Forma Consolidated Statement of Earnings
(In thousands, except per share data)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
Year Ended Year Ended
December 29, Pro Forma December 29,
1996 Adjustments 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant sales:
Applebee's $ 379,042 (147,650)(B) 231,392
Don Pablo's 133,261 - 133,261
Harrigan's 21,991 - 21,991
Other 11,728 - 11,728
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 546,022 (147,650) 398,372
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 150,090 (41,041)(B) 109,049
Payroll and benefits 162,017 (42,600)(B) 119,417
Depreciation and amortization 22,509 (5,686)(B) 16,823
Other operating expenses 125,781 (33,626)(B) 92,155
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 460,397 (122,953) 337,444
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 26,329 (4,149)(B) 22,180
Asset revaluation charges 27,700 - 27,700
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 31,596 (20,548) 11,048
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (11,417) 9,019 (C) (2,398)
Interest income 69 - 69
Other, primarily goodwill amortization (2,024) 28 (B) (1,996)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (13,372) 9,047 (4,325)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 18,224 (11,501) 6,723
Income taxes 6,550 (4,129)(D) 2,421
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 11,674 (7,372) 4,302
====================================================================================================================================
Primary earnings per common share $ 0.30 0.11
============================================================================================== ==============
Fully diluted earnings per common share $ 0.30 0.11
============================================================================================== ==============
Average number of common shares used in primary calculation 39,369 39,369
============================================================================================== ==============
Average number of common shares used in fully diluted calculation 39,417 39,417
============================================================================================== ==============
</TABLE>
See accompanying notes
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<TABLE>
Apple South, Inc.
Pro Forma Consolidated Statement of Earnings
(In thousands, except per share data)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Nine Pro Forma Nine
Months Ended Months Ended
September 28, Pro Forma September 28,
1997 Adjustments 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant sales:
Applebee's $ 341,796 (126,313)(B) 215,483
Don Pablo's 143,400 - 143,400
McCormick & Schmick's 47,297 - 47,297
Hops 32,393 - 32,393
Canyon Cafes 8,082 - 8,082
Harrigan's 14,398 - 14,398
Other 2,715 - 2,715
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 590,081 (126,313) 463,768
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 163,710 (34,773)(B) 128,937
Payroll and benefits 178,613 (37,159)(B) 141,454
Depreciation and amortization 22,905 (4,815)(B) 18,090
Other operating expenses 133,759 (28,428)(B) 105,331
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 498,987 (105,175) 393,812
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 28,773 (3,549)(B) 25,224
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 62,321 (17,589) 44,732
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (13,181) 8,315 (C) (4,866)
Distributions on preferred securities (4,400) - (4,400)
Interest income 68 - 68
Other, primarily goodwill amortization (3,176) 45 (B) (3,131)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (20,689) 8,360 (12,329)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 41,632 (9,229) 32,403
Income taxes 13,480 (2,986)(D) 10,494
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 28,152 (6,243) 21,909
====================================================================================================================================
Primary earnings per common share $ 0.73 0.57
============================================================================================= =============
Fully diluted earnings per common share $ 0.70 0.56
============================================================================================= =============
Average number of common shares used in primary calculation 38,657 38,657
============================================================================================= =============
Average number of common shares used in fully diluted calculation 44,505 44,505
============================================================================================= =============
</TABLE>
See accompanying notes
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<TABLE>
Apple South, Inc
Pro Forma Consolidated Balance Sheet
(In thousands, except share data)
(Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
September 28, Pro Forma September 28,
1997 Adjustments 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,801 34,936 (A)
(146)(A) 36,591
Short-term investments 37 - 37
Accounts receivable 5,797 - 5,797
Inventories 9,485 (1,300)(A) 8,185
Prepaid expenses and other 12,338 (152)(A) 12,186
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 29,458 33,338 62,796
Premises and equipment, net 528,399 (96,230)(A) 432,169
Franchise costs, net 6,109 (2,134)(A) 3,975
Goodwill, net 174,550 - 174,550
Other assets 20,926 - 20,926
- ------------------------------------------------------------------------------------------------------------------------------------
$ 759,442 (65,026) 694,416
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 17,429 - 17,429
Accrued liabilities 33,791 - 33,791
Current installments of long-term debt 194 - 194
Income taxes 195 34,936 (A) 35,131
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 51,609 34,936 86,545
Long-term debt 351,151 (156,964)(A) 194,187
Deferred income taxes 14,956 - 14,956
Other long-term liabilities 7,355 - 7,355
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 425,071 (122,028) 303,043
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities
of subsidiary Apple South Financing I, holding solely
Apple South, Inc. 7% convertible subordinated debentures
due March 1, 2027 115,000 - 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;
40,478,760 issued in 1997 and 39,124,925 issued in 1996 405 - 405
Additional paid-in capital 145,086 - 145,086
Retained earnings 98,010 57,002 (A) 155,012
Treasury stock at cost; 1,759,775 shares in 1997 and 677,508
shares in 1996 (24,130) - (24,130)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 219,371 57,002 276,373
- ------------------------------------------------------------------------------------------------------------------------------------
$ 759,442 (65,026) 694,416
====================================================================================================================================
</TABLE>
See accompanying notes
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Apple South, Inc.
Notes to Unaudited Pro Forma
Consolidated Financial Statements
Note A. Pursuant to an Asset Purchase Agreement(the "Agreement") dated December
23, 1997, to sell 31 Applebee's restaurants plus one under construction, in
addition to three signed letters of intent for the sale of 61 additional
Applebee's restaurants, the Company expects to complete the sale of 93
Applebee's restaurants late in the first quarter or early in the second quarter
of 1998. The Company expects cash proceeds related to these sales to be
approximately $208.4 million, resulting in a gain on sale before tax effect of
approximately $91.9 million ($57.0 million gain after tax effect).
The pro forma adjustment to long term debt reflects the assumption that the
proceeds would have been used to pay down long term debt by $157.0 million
related to the Company's revolving credit agreements, with the remaining
proceeds maintained as cash and cash equivalents.
The pro forma adjustment to income tax liability reflects the tax liability
relating to the gain on sale using a 38.0% effective rate.
The remaining pro forma adjustments to cash and cash equivalents, inventories,
prepaid expenses and other, premises and equipment and franchise costs reflect
the sale of certain assets related to the 93 Applebee's restaurants expected to
be disposed.
Note B. The pro forma adjustment eliminates the direct revenues and direct
operating expenses related to the Company's 93 Applebee's restaurant operations
expected to be disposed.
Note C. The proforma adjustment to interest expense reflects the decrease in
interest expense resulting from the assumed use of sales proceeds to reduce
long-term debt related to the Company's revolving credit agreements by $121.9
million in 1996 and $91.2 million in 1997. In addition, the adjustment assumes
that the Company's outstanding obligation under its 1996 Senior note offering
would have been reduced by $65.0 million in both 1996 and 1997.
Note D. The pro forma adjustment to income taxes reflects the income tax
effects of the above adjustments assuming a 35.9% and 32.4% effective rate for
1996 and 1997 respectively.
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(c) Exhibits
2.1 Asset Purchase Agreement dated December 23, 1997 by and among
Applebee's International, Inc. And Apple South, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
APPLE SOUTH, INC.
(Registrant)
Date: January 15, 1998 By: /s/ Erich J. Booth
--------------------
Erich J. Booth
Chief Financial Officer, Treasurer
/s/ Philip L. Ammons
--------------------
Philip L. Ammons
Chief Accounting Officer
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EXHIBIT INDEX
Exhibit Page
Number Description Number
2.1 Asset Purchase Agreement dated December 23, 1997 by and
among Applebee's International, Inc. And Apple South, Inc. 11
10
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APPLEBEE'S INTERNATIONAL, INC.
AND
APPLE SOUTH, INC.
ASSET PURCHASE AGREEMENT
DECEMBER 23, 1997
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TABLE OF CONTENTS
Page
ARTICLE I......................................................................1
PURCHASE AND SALE OF ASSETS...........................................1
Section 1.1 Assets.....................................1
ARTICLE II.....................................................................3
PURCHASE PRICE OF ASSETS..............................................3
Section 2.1 Purchase Price.............................3
Section 2.2 Adjustment of Purchase Price. ............3
Section 2.3 Obligations Satisfied by Seller............3
Section 2.4 Certain Liabilities and Obligations........3
Section 2.5 Taxes......................................3
Section 2.6 Allocation of Purchase Price...............4
ARTICLE III....................................................................4
CLOSING .............................................................4
Section 3.1 Date, Time and Place of Closing............4
Section 3.2 Deliveries by Seller at Closing............4
Section 3.3 Deliveries by Buyer at Closing.............6
Section 3.4 Transfer of Operations.....................7
ARTICLE IV....................................................................7
REPRESENTATIONS AND WARRANTIES OF SELLER..............................7
Section 4.1 Existence..................................7
Section 4.2 Power and Authority........................7
Section 4.3 Execution and Delivery Permitted;
Consents...............................7
Section 4.4 The Assets.................................8
Section 4.5 Binding Effect.............................9
Section 4.6 Condition of Assets........................9
Section 4.7 Absence of Other Assets...................10
Section 4.8 Ownership of Assets.......................10
Section 4.9 Real Property.............................10
Section 4.10 Multi-Unit Contracts......................11
Section 4.11 Documents Sufficient......................11
Section 4.12 Litigation or Condemnation................11
Section 4.13 Taxes.....................................11
Section 4.14 Contracts.................................12
Section 4.15 Accuracy of Information and
Representations and Warranties........12
Section 4.16 Employment Matters........................12
Section 4.17 Employee Benefit Plans....................13
(i)
12
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Page
Section 4.18 Licensure.................................14
Section 4.19 Insurance Coverage........................15
Section 4.20 Environmental Matters.....................15
Section 4.21 Restaurant................................16
Section 4.22 Development Efforts.......................17
Section 4.23 Affiliated Transactions...................17
Section 4.24 Subsidiaries..............................17
Section 4.25 Seller Appraisals.........................17
Section 4.26 Employee Transfers........................17
Section 4.27 ADI Financial Statements..................17
ARTICLE V.....................................................................18
COVENANTS OF SELLER..................................................18
Section 5.1 Employee Benefit Plans....................18
Section 5.2 Performance of Real Property Leases
and Assumed Contracts.................18
Section 5.3 Transfer of Licenses and Permits..........18
Section 5.4 Liabilities of Seller.....................18
Section 5.5 Agreements Respecting Employees
of Seller.............................19
Section 5.6 Conduct of Business.......................19
Section 5.7 Broker's Fees.............................21
Section 5.8 Access to Information.....................21
Section 5.9 DR Holdings Properties....................21
Section 5.10 No Sale Negotiations......................21
Section 5.11 RESERVED..................................21
Section 5.12 Financial Statements......................22
Section 5.13 Change of Name............................22
Section 5.14 Insurance.................................22
Section 5.15 Renegotiation of Assumed Leases...........22
Section 5.16 Confidentiality...........................22
Section 5.17 Management of Development Efforts.........22
Section 5.18 RESERVED..................................23
Section 5.19 Survey and Title Report...................23
Section 5.20 RESERVED..................................24
Section 5.21 Reporting Requirements....................24
Section 5.22 Cooperation...............................24
Section 5.23 Subsequent Contracts......................24
Section 5.24 Proration and Purchase Price
Adjustment Data.......................25
Section 5.25 Seller Franchising........................25
Section 5.26 RESERVED..................................25
Section 5.27 Transition Services.......................25
(ii)
13
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Page
ARTICLE VI....................................................................26
REPRESENTATIONS AND WARRANTIES OF BUYER..............................26
Section 6.1 Corporate Existence.......................26
Section 6.2 Corporate Power and Authority.............26
Section 6.3 Execution and Delivery Permitted..........26
Section 6.4 Binding Effect............................26
ARTICLE VII...................................................................27
COVENANTS OF BUYER...................................................27
Section 7.1 Buyer Performance.........................27
Section 7.2 Confidentiality...........................27
Section 7.3 Seller Employees..........................27
Section 7.4 Development Efforts.......................28
Section 7.5 Remediation List..........................28
Section 7.6 Cooperation...............................28
Section 7.7 Broker's Fees.............................28
ARTICLE VIII..................................................................28
PRORATIONS AND PURCHASE PRICE ADJUSTMENT;
CONDITIONS TO CLOSING.......................................28
Section 8.1 Prorations and Purchase Price
Adjustments...........................28
Section 8.2 Post-Closing Adjustments..................29
Section 8.3 Buyer's Conditions to Closing.............30
Section 8.4 Seller's Conditions to Closing............31
ARTICLE IX....................................................................32
INDEMNIFICATION AGAINST LOSS.........................................32
Section 9.1 Indemnification by Seller.................32
Section 9.2 Indemnification by Buyer..................33
Section 9.3 Limitation on Indemnification.............33
Section 9.4 Time to Assert Claims.....................33
Section 9.5 Resolution of Claims......................34
Section 9.6 Third Party Claim Indemnification
Procedure.............................34
Section 9.7 Exclusive Remedies........................34
ARTICLE X.....................................................................34
MISCELLANEOUS........................................................34
Section 10.1 Notices...................................34
Section 10.2 Applicable Law............................35
Section 10.3 Binding on Successors; Assignment.........35
Section 10.4 Payment of Costs; Post-Closing Payments...35
(iii)
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Page
Section 10.5 Closing Not to Prejudice Claim for Damages....37
Section 10.6 Survival of Representations, Warranties,
Covenants and Undertakings............37
Section 10.7 Additional Documents......................37
Section 10.8 Time is of the Essence....................37
Section 10.9 Interpretation............................37
Section 10.10 Entire Agreement..........................37
Section 10.11 Counterparts..............................38
Section 10.12 Termination...............................38
Section 10.13 Public Announcements......................38
ARTICLE XI
DIVESTITURE OF REMAINDER RESTAURANTS.................................39
Section 11.1 Seller Exit from Applebee's System........39
Section 11.2 Seller Financing Guarantee................39
Section 11.3 Continued Operation of Remaining
Restaurants...........................39
Section 11.4 Employee Solicitation by Seller...........40
Section 11.5 Continued Restaurant Development..........40
Section 11.6 Buyer Financing Guarantee.................41
Section 11.7 Approval of Qualified Buyers..............41
Section 11.8 Seller De-identification of Remaining
Restaurants...........................42
Section 11.9 Employee Solicitation by Buyer............43
Section 11.10 Covenant Not to Compete...................43
Section 11.11 Seller Put Rights.........................43
Section 11.12 Buyer Call Rights.........................44
LIST OF EXHIBITS AND SCHEDULES................................................48
(iv)
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 23rd day of December, 1997, by and among APPLE SOUTH, INC., a Georgia
corporation (the "Seller"), and APPLEBEE'S INTERNATIONAL, INC., a Delaware
corporation ("Buyer").
WHEREAS, Seller owns various items of personal property and interests in
real property (the "Assets" as more fully defined below) used in the operation
or development of the Applebee's Neighborhood Grill & Bar restaurants listed on
Exhibit 1.1 ("Restaurants") pursuant to the Development Agreements and Franchise
Agreements (together the "Franchise Agreements") listed on Exhibit 1.1(a) to
this Agreement;
WHEREAS, Seller operates the Restaurants in four Arbitron Ratings Areas of
Dominant Influence (the "ADIs"), consisting of Charlottesville, Norfolk,
Richmond and Roanoke, Virginia;
WHEREAS, Seller desires to sell the Assets to Buyer and Buyer desires to
purchase the Assets from Seller; and
WHEREAS, Seller desires to dispose of all of its Applebee's Neighborhood
Grill & Bar restaurants through the sale to Buyer of the Restaurants and the
sale of the remainder of Seller's Applebee's Neighborhood Grill & Bar
restaurants (the "Remaining Restaurants") to various third parties.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, covenants, representations, warranties and promises set forth
herein, and in order to prescribe the terms and conditions of such purchase and
sale, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
Section 1.1 Assets. Subject to the terms and conditions set forth in this
Agreement, Seller hereby agrees that at the Closing (as defined in Section 3.1,
below) it shall sell, transfer, convey, and assign to Buyer free and clear of
all mortgages, liens, security interests, pledges and encumbrances, except for
Permitted Encumbrances, as defined in Section 3.2(a), and Buyer hereby agrees at
the Closing to purchase and accept from Seller all of Seller's right, title and
interest in and to the following items of personal property, whether tangible or
intangible, and interests in real estate, whether owned in fee or held under
lease or license (the "Assets"):
(a) The Franchise Agreements as listed on Exhibit 1.1(a) and the items
described in Section 3.2(i), below;
1
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(b) Seller's interest as lessee in and to the Real Property Leases (as
defined in Section 4.4(c), below), including all of Seller's interest under the
Real Property Leases in the buildings, fixtures, signs, parking facilities,
trash facilities, fences, other leasehold improvements, appurtenances and
hereditaments subject to such Real Property Leases;
(c) All Owned Real Property (as defined in Section 4.4(a), below),
including all of Seller's interest in the buildings, fixtures, signs, parking
facilities, trash facilities, fences, other improvements, appurtenances and
hereditaments related to the Owned Real Property;
(d) All Minor Contracts and Material Contracts;
(e) All equipment and leasehold improvements installed or normally
installed in the Restaurants, including but not limited to the furniture,
machinery, equipment, tables, chairs, cash registers, computer equipment and
licenses of related software (subject to Seller's ability to assign or transfer
such licenses), ovens, refrigerators, display cases, shelves, utensils, tools,
pans, lights, uniforms, signs, menus, glasses, plates, dishes, silverware,
pitchers, books, cabinets, racks, towels, ornaments, bars, and bar equipment
(the "Equipment");
(f) All inventories of foodstuffs, beverages, paper products, cleaning
supplies and other supplies (the "Inventories") which are in the Restaurants on
the Closing Date (as defined in Section 3.1, below);
(g) All of Seller's other rights and property interests of any nature which
are customarily and exclusively used in the operation of the Restaurants,
including, but not limited to rights to use existing Restaurant telephone
numbers and rights arising under equipment warranties;
(h) All data transmission equipment and related software and software
licenses ("Transferred Licenses"), computer software (subject to Seller's
ability to assign or transfer such software) and related manuals and portable
computers used by field personnel and used only in connection with the operation
of the Restaurants, including those items set forth on Schedule 1.1(h) hereto;
(i) All records and files related to the Real Property (as defined in
Section 4.4(b), below) such as rent calculations, landlord correspondence,
purchase agreements, deeds, construction documents, title reports, environmental
and engineering reports, appraisals, surveys, etc., and all personnel records
and files related to Seller employees in or assigned to the ADIs who accept
employment with Buyer as of the Effective Time (as defined below in Section 3.4
below); and
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(j) All rights under all warranties, express or implied, or other claims
for damages or loss related to any of the Assets; and
(k) All cash in amounts normally used to open the Restaurants (not
including prior day's receipts held for deposit).
ARTICLE II
PURCHASE PRICE OF ASSETS
Section 2.1 Purchase Price. The purchase price paid for the Assets shall be
Ninety- Three Million Four Hundred Thousand Dollars ($93,400,000), adjusted as
set forth in Section 2.2, below (the "Purchase Price"). The Purchase Price shall
be paid at Closing by wire transfer of federal funds.
Section 2.2 Adjustment of Purchase Price. At the Closing, Buyer and Seller
shall prepare and sign an itemized statement of purchase price adjustments and
prorations as set forth in Section 8.1 of this Agreement. A statement with
respect to the items in Section 8.2 shall be prepared and signed within 60 days
of the Closing.
Section 2.3 Obligations Satisfied by Seller. With respect to the Assets or
the ADIs, Seller shall pay all trade payables, accounts payable, utility
payments, tax withholding, payroll taxes, wages and similar operating expenses
and all accrued liabilities which, in each such case, are incurred or related to
a time on or before the Effective Time.
Section 2.4 Certain Liabilities and Obligations.
(a) Liabilities Not Assumed. Except for the liabilities and obligations
specifically assumed pursuant to and referred to in Section 2.4(b), Buyer shall
not take subject to and shall not be liable for, any liabilities or obligations
of any kind or nature, whether absolute, contingent, accrued, known or unknown,
of Seller.
(b) Assumed Liabilities. On the Closing Date, Buyer shall assume all of the
Seller's obligations with respect to the Real Property Leases, Transferred
Licenses and the Minor Contracts and Material Contracts (the "Assumed
Liabilities"); however, Buyer shall not be responsible for any obligation,
whether under the Real Property Leases, Equipment Leases, Transferred Licenses,
the Minor Contracts, the Material Contracts, or otherwise, relating to events or
operation of the Restaurants occurring on or prior to the Closing Date.
Section 2.5 Taxes. Seller and Buyer equally shall be liable for and shall
pay all transfer or sales taxes and all filing fee and documentary fees or taxes
related to the recording of all deeds and lease assignments payable in
connection with the purchase, sale or transfer of the Assets to, and the
assumption of the Assumed Liabilities by, Buyer pursuant to this Agreement.
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Section 2.6 Allocation of Purchase Price. Buyer and Seller agree that the
Purchase Price shall be allocated to the Assets pursuant to an appraisal to be
performed after the Closing by a reputable third-party appraiser or appraisers
selected by Buyer (the "Buyer Appraisals"); provided, however, if Seller has had
any appraisals performed by reputable appraisers acceptable to Buyer on any of
the Assets and the valuations set forth in such appraisals were completed within
twenty-four (24) months of the Closing Date ("Seller Appraisals"), Buyer may, in
its sole discretion, use such appraisals for the purpose of the post-Closing
appraisal. The post-Closing appraisal is anticipated to be Asset by Asset. Buyer
will pay the cost of the Buyer Appraisals. Buyer will have completed its
valuation of the Assets based on such appraisal no later than December 31, 1998.
The amount of the Purchase Price that is in excess of the value of the tangible
assets as determined by the appraisal will be allocated to goodwill. Such
allocation shall be binding on Buyer and Seller for all purposes including the
reporting of gain or loss and determination of basis for income tax purposes,
and each of the parties hereto agrees that it or they will file a statement
setting forth such allocation with its or their federal income tax returns and
will also file such further information or take such further actions as may be
necessary to comply with the Treasury Regulations that have been promulgated
pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code").
ARTICLE III
CLOSING
Section 3.1 Date, Time and Place of Closing. The consummation of the
transactions contemplated hereby (the "Closing") shall be held on the Monday
first following the fifth business day following the day on which all conditions
to closing described in Sections 8.3 and 8.4 have been satisfied or waived (the
"Closing Date"), beginning at 9:00 a.m. eastern time in the offices of [Seller's
counsel] or at such other place, time or date as the parties hereto shall
mutually agree.
Section 3.2 Deliveries by Seller at Closing. At the Closing, and thereafter
as may be reasonably requested by Buyer, Seller shall convey, transfer, assign,
and deliver all of its right, title and interest in and possession of the Assets
to Buyer, and shall also deliver to Buyer the following:
(a) Such bills of sale, assignments, lease assignments and acceptances,
estoppel certificates, consents to assignments (if consent to assignment is
required under the terms of any Material Contract or Real Property Lease),
special warranty deeds regarding the real property and improvements to be
conveyed in fee simple, and other appropriate instruments of transfer as Buyer
has reasonably requested, all in recordable form, of content reasonably
acceptable to Buyer and Seller and their respective counsel and sufficient to
vest in Buyer good and marketable title to all of the Assets which, with regard
to interests in Real Property, is subject to no exception to title insurance
coverage, other than Permitted Encumbrances, which could substantially affect
the operation of the subject Restaurant, and, with regard to both real and
personal property, is free and clear of all
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mortgages, deeds of trust, liens, security agreements, charges, or other
encumbrances, except for Permitted Encumbrances. For the purposes of this
Agreement, "Permitted Encumbrances" shall mean: (i) the standard or printed
exclusions and standard or printed exceptions in the form of owner's policy of
title insurance generally in use in the jurisdiction in which the subject Owned
Real Property is located; (ii) such matters as disclosed by a survey of the
subject Owned Real Property as reviewed and accepted by Buyer in accordance with
Section 5.19; (iii) the lien for real property ad valorem taxes and other taxes
and assessments, and for private assessments, not due and payable on or before
the Closing Date; (iv) zoning ordinances affecting the subject Owned Real
Property; (v) all easements, covenants, restrictions, reservations,
rights-of-way and other similar matters of record as shown on the title policy
for each parcel of Owned Real Property [as reviewed and accepted by Buyer in
accordance with Section 5.19;
(b) Certified copies of duly adopted resolutions of the Seller's Board of
Directors authorizing, approving, and consenting to the execution and delivery
of this Agreement, to the consummation of the transactions contemplated herein,
and to performance of the agreements set forth herein;
(c) The waiver, release, consent, estoppel certificate or other document of
any person, corporation, association, or other entity of any nature whatsoever
which is necessary to consummate the transactions contemplated hereby, and to
make the warranties and representations made in this Agreement true;
(d) Proof that all real and personal property taxes upon the Assets which
are due and payable as of the Closing Date have been paid;
(e) Certificates of good standing dated within thirty (30) days of the
Closing Date for Seller from the states listed on Schedule 4.1;
(f) An opinion of Seller's counsel dated as of the Closing Date in
substantially the form set forth on Exhibit 3.2(f) to this Agreement;
(g) An ALTA policy of title insurance regarding each Restaurant, insuring
fee or leasehold title, as applicable, to each such property and containing only
such exceptions and exclusions as could not, in Buyer's reasonable judgment,
substantially adversely affect the operation of the Restaurant or the transfer
of title to Buyer;
(h) A duly executed Cross-Receipt;
(i) As related to the Restaurants, all operating manuals, recipes,
proprietary information (excluding Seller's corporate crisis procedures and
corporate operations manual) and similar documents and information held by
Seller in connection with Seller's status as a franchisee of Buyer and all
copies and extracts therefrom;
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(j) To the extent necessary pursuant to Section 8.3(h) below, a mutually
acceptable liquor license management agreement or agreements;
(k) Wire transfer instructions regarding delivery of the Purchase Price;
(l) A copy on computer disk, or other electronic medium acceptable to
Buyer, of (1) Seller's detailed fixed asset records related to the Assets
updated through the Closing Date and (2) the payroll records of the ADI
Personnel, as defined in Section 5.5, below;
(m) A duly executed Mutual Release in the form attached as Exhibit 3.2(m)
hereto; and
(n) Any waiver or modification requested by Buyer pursuant to Section 5.9
hereof.
Section 3.3 Deliveries by Buyer at Closing. Buyer shall deliver to Seller
at Closing:
(a) The Purchase Price;
(b) Assignments and Acceptances of the Real Property Leases, Minor
Contracts and Material Contracts in form reasonably satisfactory to Seller;
(c) A duly executed Cross-Receipt;
(d) An opinion of Buyer's counsel dated as of the Closing Date in
substantially the form set forth on Exhibit 3.3(d) to this Agreement;
(e) Certified copies of duly adopted resolutions of Buyer's Board of
Directors authorizing, approving, and consenting to the execution and delivery
of this Agreement, to the consummation of the transactions contemplated herein,
and to performance of the agreements set forth herein;
(f) To the extent necessary pursuant to Section 8.3(h) below, a mutually
acceptable liquor license management agreement or agreements; and
(g) A duly executed Mutual Release in the form attached as Exhibit 3.2(m)
hereto.
Section 3.4 Transfer of Operations. Buyer shall be entitled to immediate
possession of, and to exercise all rights arising under, the Assets from and
after the time that the Restaurants open for business on the Closing Date, and
operation of the Restaurants shall transfer at such time (the "Effective Time").
Except as provided hereby, all profits, losses, liabilities, claims, or
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injuries arising before the Effective Time shall be solely to the benefit or the
risk of Seller. All such occurrences after the Effective Time shall be solely to
the benefit or the risk of Buyer. The risk of loss or damage by fire, storm,
flood, theft, or other casualty or cause shall be in all respects upon Seller
prior to the Effective Time and upon the Buyer thereafter.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter this Agreement and to consummate the
transactions contemplated hereby, Seller represents and warrants to Buyer as
follows:
Section 4.1 Existence. Seller is duly organized, validly existing, and in
good standing under the laws of the State of Georgia and is qualified to do
business and is in good standing in the states listed in Schedule 4.1, which
Schedule includes all jurisdictions within the ADIs.
Section 4.2 Power and Authority. Seller has the corporate power and
authority to own its properties and assets, specifically including but not
limited to the Assets, and to carry on its business as now conducted. Seller has
the requisite corporate power and authority to convey, assign, and transfer the
Assets as set forth in this Agreement.
Section 4.3 Execution and Delivery Permitted; Consents. The execution,
delivery and performance of this Agreement will not violate or result in a
breach of any term of Seller's Articles of Incorporation or Bylaws, result in a
breach of or constitute a default under any term in any agreement or other
instrument to which Seller is a party (except for defaults under Minor Contracts
where the consent to assignment thereof of the other party or parties to such
contract is not obtained), such default having not been previously waived by the
other party to any such agreement, or violate any law or any order, rule or
regulation applicable to Seller, of any court or of any regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over Seller or its properties; and will not result in the creation or imposition
of any lien, charge, or encumbrance of any nature whatsoever upon any of the
Assets. The Board of Directors has taken all action required by law and by
Seller's Articles of Incorporation and Bylaws to authorize the execution and
delivery of this Agreement, and the transfer of the Assets to Buyer in
accordance with this Agreement. Except as set forth on Schedule 4.3, and except
for consents required under Minor Contracts, the execution, delivery and
performance of this Agreement and the other agreements executed in connection
herewith, and the consummation of the transactions contemplated hereby and
thereby do not require any filing with, notice to or consent, waiver or approval
of any third party, including but not limited to, any governmental body or
entity other than any filing required under the Hart-Scott-Rodino Antitrust
Improvement Act of 1977, as amended (the "HSR Act"), and the expiration of any
applicable waiting period thereunder. Schedule 4.3 identifies separately each
notice, consent, waiver or approval by reference to each Real Property Lease and
to each Material Contract to which it is applicable.
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Section 4.4 The Assets.
(a) Attached hereto as Schedule 4.4(a) is a complete and accurate list of
each parcel of real property owned by Seller on which a Restaurant is located or
which is being held for development of a Restaurant (the "Owned Real Property"),
separated by ADI, listing the street address and providing the true legal
description of each such parcel, and stating whether any improvements are
located thereon and, if so, whether such improvements are owned or leased by
Seller;
(b) Attached hereto as Schedule 4.4(b) is a complete and accurate list of
each parcel of real estate leased by Seller or in which it has a leasehold or
other interest on which a Restaurant is located or which is being held for
development of a Restaurant (the "Leased Real Property"), and stating whether
any improvements are located thereon and, if so, whether such improvements are
owned or leased by Seller, separated by ADI, listing the street address of such
property and the name and address of the landlord's agent to which Seller is
obligated to provide notices regarding the Leased Real Property, (collectively,
the Owned Real Property and the Leased Real Property are referred to as the
"Real Property");
(c) Attached hereto as Schedule 4.4(c) is a complete and accurate list of
all agreements or documents under which Seller claims or holds such leasehold or
other interest or right to the use of the Leased Real Property (the "Real
Property Leases") separated by ADI and showing the street address, exact name of
the parties to such Real Property Lease, the date of such Lease, each amendment,
modification or extension thereof and the exact name of the parties thereto, and
the dates of each such amendment, modification or extension;
(d) Attached hereto as Schedule 4.4(d) is a complete and accurate list by
Restaurant of the original basis and accumulated depreciation for financial
reporting purposes of (i) fixed assets (other than inventory and supplies) being
conveyed hereunder as of September 28, 1997, and (ii) land, buildings and
leaseholds being conveyed hereunder as of September 28, 1997;
(e) Attached hereto as Schedule 4.4(e) is a complete and accurate list of
all material liens, claims, encumbrances and restrictions on the Equipment;
(f) Attached hereto as Schedule 4.4(f) is a complete and accurate list of
all material leases of personal property used in the operation of the
Restaurants (the "Equipment Leases"), identified by parcel of Owned Real
Property or Leased Real Property where the leased equipment is located,
separated by ADI and identifying the parties thereto, the property leased
thereunder, the rental and other payment terms, expiration date and cancellation
and renewal terms thereof;
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(g) Attached hereto as Schedule 4.4(g) is a complete and accurate list of
all loan agreements, indentures, mortgages, pledges, security agreements,
guarantees, leases or lease purchase agreements (not listed on Schedule 4.4(c)
or 4.4(f)) to which Seller is a party and by which any of the Assets are bound;
(h) Attached hereto as Schedule 4.4(h) is a complete and accurate list of
all other contracts, agreements, commitments or other understandings or
arrangements to which Seller is a party that relate only to the Restaurants and
by which any of the Assets are bound or affected, (other than the Minor
Contracts which are such contracts, agreements or commitments terminable on
thirty (30) days' notice or having annual payment obligations of less than
$10,000, identified by parcel of Owned Real Property or Leased Real Property to
which such is applicable; and each item on such Schedule that applies to any
restaurants or assets of Seller that are not being conveyed to Buyer hereunder
is so noted. The contracts listed on Schedules 4.4(f) and 4.4(h) are the
Material Contracts, which will be transferred to Buyer hereunder.
(i) There are no contracts, agreements, commitments, understandings or
arrangements affecting or relating to the Assets or the Restaurants to which any
Affiliate of Seller is a party or by which any such Affiliate is bound; and
(j) The items listed in the above Schedules constitute all of the matters
required to be shown on such Schedules. A true and complete copy, or with
respect to oral agreements an accurate summary, of each item listed on the above
Schedules has been made available to Buyer. Each Real Property Lease separately
is acknowledged by Seller to be material to operation of the applicable
Restaurant, and to the Assets and financial condition of Seller's business in
the ADIs.
Section 4.5 Binding Effect. This Agreement and each other agreement
required to be executed and delivered by Seller in connection herewith, when
executed and delivered, will be the legal, valid and binding obligation of
Seller, enforceable against it in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally, and (ii) general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Section 4.6 Condition of Assets.
(a) Each Restaurant contains all Equipment and Inventories required by the
applicable Franchise Agreement or necessary to operate the Restaurant in
accordance with Seller's historical practices. The Equipment is in good
operating condition, commensurate with its age, with reasonable wear and tear
excepted, and the Equipment complies with all material federal, state and local
laws, rules and regulations, and all material occupational safety and health act
regulations.
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(b) Substantially all Inventories are saleable or usable in the ordinary
course of business for their intended use and exist in such quantity as
necessary to operate the Restaurants in accordance with Seller's historical
practices.
(c) The buildings, fixtures, parking facilities, trash facilities, fences
and other improvements, appurtenances and hereditaments at or on each Restaurant
are in good condition, commensurate with their age, with reasonable wear and
tear excepted, and in compliance in all material respects with all federal,
state and local laws, rules and regulations and leases and lease provisions.
Section 4.7 Absence of Other Assets. Except as specifically provided in
this Agreement, there is no asset, property, or right of any nature which is not
being transferred to Buyer hereunder that has been customarily employed, owned,
held, or used exclusively in connection with the operation or ownership of any
Restaurant, other than permits that are not transferable or assignable. All
Equipment and Inventories used in the operation of any Restaurant are situated
entirely upon the premises of such Restaurant.
Section 4.8 Ownership of Assets. Seller has good title to the Assets (other
than the Owned Real Property), which title is, or will be at Closing, free and
clear of all deeds of trust, mortgages, liens, security interests, charges, and
encumbrances of any nature whatsoever; Seller has the full, absolute and
unrestricted right to assign, transfer and convey to Buyer the Assets, subject
only to such consents as Seller shall deliver to Buyer at Closing (except for
such consents as may be required under the Minor Contracts that are not being
obtained); no person or entity other than the Seller has any interest in the
Assets other than the lessors under Real Property Leases and Equipment Leases
and the other parties to the Minor Contracts and Material Contracts.
Section 4.9 Real Property. Seller has good and marketable title to all of
the Owned Real Property, subject to Permitted Encumbrances, and has the full,
absolute and unrestricted right to assign, transfer and convey to Buyer said
Owned Real Property, subject only to such consents as Seller shall deliver to
Buyer at Closing. Each Real Property Lease is in full force and effect; the
terms contained in the Real Property Leases have not been modified or amended in
any respect except as disclosed on Schedule 4.4(c), and each constitutes the
legal, valid, binding and enforceable obligation of the parties thereto. Seller
is current in all material obligations under each Real Property Lease. There
have been no events of default since January 1, 1995, and, to the best of
Seller's knowledge, no state of facts exists which with notice or the passage of
time, or both, would constitute an event of default under any Real Property
Lease. Subject to the consents listed on Schedule 4.3, the consummation of the
transactions contemplated by this Agreement will not (and will not give any
person a right to) terminate or modify any rights of, or accelerate or increase
any obligation of Seller under any Real Property Lease.
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Section 4.10 Multi-Unit Contracts. Schedule 4.10 hereto sets forth a
complete and accurate list of all material agreements under which any goods or
services are currently being provided both to the Restaurants and (i) the
Remaining Restaurants or (ii) other restaurants operated by the Seller
("Multi-Unit Contracts"), setting forth (1) a brief description of the goods or
services provided, (2) the number of Restaurants and Remaining Restaurants or
other restaurants covered by the agreement, and (3) whether such agreement is
being transferred to Buyer hereunder. Seller shall provide complete copies of
the Multi-Unit Contracts to Buyer no later than January 5, 1998.
Section 4.11 Documents Sufficient. The documents delivered by Seller to
Buyer pursuant to Section 3.2 of this Agreement will be valid, sufficient and
effective to completely transfer to Buyer all of Seller's right, title and
interest in and to all of the Assets.
Section 4.12 Litigation or Condemnation. Except as set forth on Schedule
4.12(a) to this Agreement, there are no suits, actions, condemnation actions,
investigations, complaints, or other proceedings of any nature whatsoever in law
or in equity, which are pending or, to the best of Seller's knowledge,
threatened against Seller, which affect any of the Assets, by or before any
federal, state, municipal, or other governmental court, department, commission,
board, bureau, agency, or other instrumentality (whether domestic or foreign).
Seller is not in default with respect to any order, writ, injunction,
garnishment, levy, or decree of any federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency, or
instrumentality, and the use, occupancy, ownership, or transfer of the Assets do
not constitute a default thereunder. To the best of Seller's knowledge, the
operations of the Restaurants and the condition of the Assets do not violate in
any material respect any federal, state, or municipal law, regulation or rule
(including any applicable zoning or similar use regulation or law). Except as
set forth on Schedule 4.12(b), (which Schedule, is not attached hereto but shall
be provided to Buyer no later than January 5, 1998) since January 1, 1996,
Seller's operations of the Restaurants have not received a citation, warning, or
reprimand for, or otherwise been notified of, any violation of any law, rule or
regulation governing alcoholic beverages, or any health, environmental, or
similar municipal, state, or federal law or regulation. To the best of its
knowledge, Seller has not served any food or foodstuff which is adulterated,
spoiled, or contains foreign substances, nor has Seller served any food item
which has or, except as set forth on Schedule 4.12(c) (which Schedule, is not
attached hereto but shall be provided to Buyer no later than January 5, 1998),
is claimed to have caused any illness or injury to the consumer thereof.
Section 4.13 Taxes. All ad valorem and other property taxes relating to the
Assets have been fully paid for 1996 and all prior tax years and there are no
delinquent property tax liens or assessments. Seller has also timely filed (or
will timely file) all federal, state, local and other tax returns and reports of
whatever kind pertaining to the Assets and required to be filed by Seller for
all periods up to and including the Closing Date. Seller has paid (or will
timely pay) all taxes of whatever kind, including any interest, penalties,
governmental charges, duties, fees, and fines imposed by the United States,
foreign countries, states, counties, municipalities, and subdivisions, and by
all other governmental entities or taxing authorities, which are due and payable
(or which
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relate to any period prior to the Closing Date) or for which assessments
relating to any period prior to the Closing Date have been received, the
nonpayment of which would result in a lien on any of the Assets. There are no
audits, suits, actions, claims, investigations, inquiries, or proceedings
pending or to the best of its knowledge, threatened against Seller with respect
to taxes, interest, penalties, governmental charges, duties, or fines, nor are
any such matters under discussion with any governmental authority, nor have any
claims for additional taxes, interest, penalties, charges, fines, fees or duties
been received by or assessed against Seller that in any such case affect the
Assets.
Section 4.14 Contracts. The Minor Contracts and the Material Contracts have
been entered into in the ordinary course of Seller's business and, to Seller's
knowledge, contain commercially reasonable terms. Subject to the consents
delivered to Buyer at Closing, Seller has full, absolute and unrestricted right
to assign, transfer and convey to Buyer the Material Contracts. Each Material
Contract is in full force and effect; the terms contained in the Material
Contracts have not been modified or amended in any respect except as disclosed
on Schedule 4.4(f) or (h) and each constitutes the legal, valid, binding and
enforceable obligation of the parties thereto. Seller is current in all
obligations under each Material Contract. There have been no events of default,
and, to the best knowledge of Seller, no state of facts exists which with notice
or the passage of time, or both, would constitute an event of default under any
Material Contract. The consummation of the transactions contemplated by this
Agreement will not (and will not give any person a right to) terminate or modify
any rights of, or accelerate or increase any obligation of Seller under any
Material Contract.
Section 4.15 Accuracy of Information and Representations and Warranties.
All representations and warranties made by Seller in this Agreement or any
Schedule or Exhibit hereto or in any certificate or other document furnished by
Seller pursuant to this Agreement are true and correct in all material respects
on and as of the date hereof. To Seller's knowledge all information other than
financial projections given to Buyer by Seller or its representatives, including
the information in the Schedules to this Agreement, is true, correct and
complete in all material respects.
Section 4.16 Employment Matters.
(a) No employees of the Restaurants are on strike, nor to the best
knowledge of Seller are such employees threatening to strike. Seller has no
knowledge that any labor union has recently attempted, or is presently
attempting, to organize the ADI Personnel into a collective bargaining unit, and
no group of ADI Personnel is presently organized into a collective bargaining
unit.
(b) Schedule 4.16(b) hereto is a true and complete list (i) of each person
employed in connection with the operation of the Restaurants, from and including
each assistant manager and assistant kitchen manager up through Vice President
of Operations for the ADIs; and (ii) of each other salaried employee whose
duties are primarily related
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to Seller's operation in the ADIs who could during the current fiscal year
receive, compensation (including all bonuses, perquisites, and other items of
value) in excess of Thirty Thousand Dollars ($30,000). For each such person,
Schedule 4.16(b) shows the full name, job title or duty, salary, bonus, ESOP and
401(k) plan contributions and account balances, and stock options.
(c) To Seller's knowledge, Seller has operated all Restaurants in
accordance with all local, state and federal laws and regulations related to
employment matters including, but not limited to, payment of wages and benefits
and employee discrimination.
Section 4.17 Employee Benefit Plans.
(a) Schedule 4.17(a) contains a true and complete list of each pension,
profit sharing, other deferred compensation, bonus, incentive compensation,
stock purchase, stock option, supplemental retirement, severance or termination
pay, medical, hospitalization, life insurance, dental, disability, salary
continuation, vacation, supplemental unemployment benefits plan, program,
arrangement or contract, and each other employee benefit plan, program,
arrangement or contract, maintained, contributed to, or required to be
contributed to, by Seller or any Related Party (hereinafter defined) for the
benefit of any current or former employee of Seller in the ADIs, whether or not
any of the foregoing is funded, whether or not subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (collectively, the
"Benefit Plans"). Seller and its Related Parties do not have any express or
implied plan or contract, whether legally binding or not, to create any
additional Benefit Plan or modify any existing Benefit Plan, other than as may
be required to comply with the Tax Reform Act of 1986. Seller has delivered or
made available to Buyer, with respect to each Benefit Plan to the extent
applicable (1) true and complete copies of all documents embodying or relating
to each Benefit Plan including, without limitation, the plan and trust or other
funding arrangement relating thereto, summary plan descriptions, employee
handbooks or personnel manuals and all amendments and supplements thereto; (2)
the most recent annual report (Series 5500 and all schedules thereto), if any,
required by ERISA; and (3) the most recent determination letter received from
the Internal Revenue Service ("IRS"), if any. "Related Party" means any member
of a controlled group of corporations, a group of trades or businesses under
common control or an affiliated service group, within the meaning of Section
414(b), (c), (m) or (o) of the Code, of Seller;
(b) The Benefit Plans that are intended by Seller or any Related Party to
meet the requirements of Section 401(a) of the Code now meet and since their
inception have met, the requirements for qualification under Section 401(a) of
the Code and the related trusts are now, and since their inception have been,
exempt from taxation under Section 501(a) of the Code and the transactions
contemplated by this Agreement will not have an adverse affect on the qualified
status of any such Benefit Plan.
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(c) Seller and any Related Party have performed in all material respects
obligations required to be performed by them under, and are not in default under
or in violation of, any and all of the Benefit Plans, and each Benefit Plan has
been operated in all material respects in accordance with its provisions and in
compliance with all applicable laws and regulations. Neither any Benefit Plan or
fiduciary nor Seller or any Related Party has taken any action, or failed to
take any action, that could subject it or any other person to any liability for
any excise tax under Chapter 43 of the Code or for breach of fiduciary duty with
respect to or in connection with a Benefit Plan;
(d) At no time since January 1, 1980, has Seller or any Related Party been
required to contribute to any "multi-employer plan" (within the meaning of
Section 3(37) of ERISA) and Seller and its Related Parties have no liability
(contingent or otherwise) relating to the withdrawal or partial withdrawal from
a multi-employer plan. Seller and its Related Parties do not participate in any
"multiple employer plans," within the meaning of ERISA;
(e) No Benefit Plan provides or is required to provide group health,
medical, death or survivor benefits to any former or retired employee of Seller
in the ADIs or beneficiary thereof, except to the extent (1) required under any
state insurance law providing for a conversion option under a group insurance
policy or (2) under Section 601 of ERISA; and
(f) No "reportable event" (as defined in ERISA) has occurred with respect
to any Benefit Plan. No liability to the Pension Benefit Guaranty Corporation
("PBGC") has been incurred, or is expected by Seller or any Related Party to be
incurred, by Seller or any Related Party with respect to any Benefit Plan and no
Benefit Plan has "unfunded benefit liabilities" within the meaning of Title IV
of ERISA. No steps have been taken to terminate any Benefit Plan which is
subject to Title IV of ERISA and no proceeding has been initiated by the PBGC to
terminate any such Benefit Plan or to appoint a Trustee to administer any such
Benefit Plan;
Section 4.18 Licensure. Seller possesses all material governmental permits
and licenses necessary to operate each Restaurant (the "Licenses"). Such
material permits and licenses are listed on Schedule 4.18 (which Schedule is not
attached hereto but shall be provided to Buyer no later than January 5, 1998),
identified by Restaurant and separated by ADI. Seller has all such Licenses
current and in full force and effect and is in material compliance with all
requirements and limitations set forth in such Licenses. All Licenses are now,
and at Closing will be, in full force and effect.
Section 4.19 Insurance Coverage. Schedule 4.19 is a true and accurate list
and brief description of all property, fire, casualty, liability, life, worker's
compensation, and other forms of insurance of any kind owned or held by Seller
regarding the Assets or the Restaurants. All such policies (a) are in full force
and effect, (b) are valid and outstanding policies, (c) insure
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against risks of the kind customarily insured against and in the amounts
customarily carried by entities similarly situated, and (d) provide that they
will remain in full force and effect through the respective dates set forth in
Schedule 4.19.
Section 4.20 Environmental Matters.
(a) Hazardous Materials (as defined below) have not been at any time during
Seller's ownership of the Owned Real Property or Seller's possession of the
Leased Real Property, and to Seller's best knowledge and belief have not been
during any other time, generated, stored, discharged, disposed of, spilled,
dumped, poured, emptied, or released and are not currently present at, on, in,
beside, above, or under the real estate underlying or used in connection with
the Restaurant Locations (the "Real Estate"). Underground storage tanks are not
and have not been at any time during Seller's ownership of the Owned Real
Property or Seller's possession of the Leased Real Property, and to Seller's
best knowledge and belief have not been during any other time, located on the
Real Estate. Seller has at all times operated the Real Estate in compliance with
all Environmental Laws (as defined below).
(b) Seller unconditionally agrees to indemnify and hold harmless Buyer, for
any and all losses, claims, damages, penalties, liabilities, costs and expenses
(including attorney's fees, administrative expenses, prejudgment interest and
court costs), fines, injuries, penalties, response costs (including the cost of
any required or necessary investigation, testing, monitoring, repair, clean up,
detoxification, decontamination, preparation of any closure or other required
plans, removal, response or remedial action at or relating to the Real Estate)
(collectively, "Claims and Costs"), with respect to, as a direct or indirect
result of, or arising out of any contamination, requirement, lawsuit, notice of
violation, notice letter, warning letter, administrative order, compliance
order, enforcement action, settlement, agreement, consent order, decree or
judgment, injunction, restraining order or prohibition (collectively "Action")
relating to the generation, presence, storage, management, disposal, release,
discharge, escape, emission, spilling, seepage, leakage, dumping, pumping,
pouring, emptying or clean up of Hazardous Materials (as herein defined) at, on,
in, beside, above, from or under all or a portion of the Real Estate which
occurs from activities undertaken during Seller's ownership or possession of the
Real Estate prior to Closing.
(c) For the purpose of this Agreement, the term "Hazardous Materials" shall
include, but not be limited to:
any substance defined as "hazardous substances," "hazardous air pollutant,"
"pollutants," "contaminants," "hazardous materials," "hazardous wastes," "toxic
chemicals," "petroleum or petroleum products," "toxics," "hazardous chemicals,"
"extremely hazardous substances," "pesticides" or related materials, including
but not limited to radon and asbestos, as now, in the past,
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or hereafter defined in any applicable federal, state or local law,
regulation, ordinance, policy or directive, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
ss. 9601 et. seq.; the Emergency Planning and Community Right-to-Know Act, 42
U.S.C. ss. 1101 et. seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et. seq.; the Hazardous Materials Transportation Act of 1974, 49 U.S.C.
ss. 1801 et. seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251
et. seq.; the Clean Air Act, 42 U.S.C. ss. 4701 et. seq.; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 136 et. seq.; the Safe
Drinking Water Act, 42 U.S.C. ss. 3001 et. seq.; the Toxic Substances Control
Act, 15 U.S.C. ss. 2601 et. seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.
2701 et. seq.; and any laws regulating the use of biological agents or
substances including medical or infectious wastes and the corresponding State
laws, regulations and local ordinances, etc. which may be applicable,
("Environmental Laws") as any such acts may be amended.
(d) Seller agrees and consents to the performance of environmental testing
on the Real Estate at Buyer's expense; provided, however, that neither the
performance of nor failure to perform such tests by Buyer will negate or affect
Seller's representations or warranties or agreement to indemnify contained
herein.
Section 4.21 Restaurant Operations. The activities carried on in all
buildings, structures or improvements included as part of, or located on or at
the Restaurants, and the buildings, structures and improvements themselves, are
not in material violation of, or in conflict with, any applicable zoning or
health regulation or ordinance or any other similar law. There is no pending, or
to the best of Seller's knowledge, threatened or proposed proceeding or
governmental action to modify the zoning classification of, or to condemn or
take by the power of eminent domain (or to purchase in lieu thereof), or to
impose special assessments on, or otherwise to take or restrict in any way the
right to use, alter or occupy all or any part of any of the Restaurants.
Section 4.22 Development Efforts. Schedule 4.22 contains a complete and
accurate list and description of each restaurant site ("Development Site" or,
collectively, "Development Sites") currently under development or consideration
for development by Seller in the ADIs (whether or not presented to Buyer for
approval), including the following information regarding each such Development
Site: (i) a legal description, if available, and address of the Development
Site, (ii) whether the Development Site is leased or owned by Seller or under
contract to be owned by Seller or, if none of those, whether it is intended to
be leased or owned, and the purchase price or rental terms, as appropriate,
(iii) whether the Development Site has been submitted to Buyer for approval
pursuant to the normal site approval process (but the lack of such submittal
shall not serve as a reason for a Development Site being excluded from this
Schedule), (iv) the status of
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the development of the Development Site, and (v) the projected opening date of
the Development Site. Said Schedule shall also identify all contracts, letters
of intent or interest, all transactions with Affiliates, pending negotiations,
amounts invested, budgeted expenditures and other such pertinent material
regarding each of such Development Sites.
Section 4.23 Affiliated Transactions. Except as set forth on Schedule 4.23,
since January 1, 1995, Seller has not been a party to, and there does not now
exist, any transaction affecting the Restaurants or the Assets (including
without limitation the purchase, sale or exchange of property or the rendering
of any service) with any Affiliate of Seller or any entity in which any of them
owns a beneficial interest. For purposes of this Agreement, "Affiliate" means
any person or entity that owns or controls more than a 10% interest in Seller (a
"Controlling Affiliate") or in which Seller or a Controlling Affiliate owns or
controls more than a 5% interest.
Section 4.24 Subsidiaries. No subsidiary of Seller nor any entity in which
Seller has a direct or indirect interest has any direct or indirect interest in
any of the Assets.
Section 4.25 Seller Appraisals. Schedule 4.25 is a complete and accurate
list of all Seller Appraisals as defined in Section 2.6.
Section 4.26 Employee Transfers. Since December 12, 1997, Seller has not
transferred or reassigned any ADI Personnel (as defined in Section 5.5, below)
to responsibilities outside of the ADIs.
Section 4.27 ADI Financial Statements. Attached hereto as Schedule 4.27,
identified by individual Restaurant and consolidated by ADI, are unaudited
financial statements, including statements of operations, a schedule of capital
expenditures and a schedule of the clearing account by quarters (to be delivered
no later than January 5, 1998) as of the end of the 1996 fiscal year and each of
the three fiscal quarters through September 28, 1997 and each fiscal month of
October and November, 1997, prepared in accordance with generally accepted
accounting principles, except for the absence of explanatory notes and except as
otherwise expressly described therein (the "Unaudited Financial Statements").
Such financial statements have been prepared in accordance with Seller's
historical practices and fairly present the operations and financial condition
of the ADIs for the periods presented and as of their respective dates, and the
books and records of Sellers from which such financial statements were prepared
are true, correct and complete in all material respects, and such financial
statements do not and will not reflect any adjustment for income or costs
related to the matters raised in the April 16, 1997 memorandum of Mary Puissegur
to Phil Ammons and Tim Ligon.
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ARTICLE V
COVENANTS OF SELLER
Seller covenants and agrees as follows:
Section 5.1 Employee Benefit Plans.
(a) Buyer is not obligated to assume any liability, obligation or other
responsibility under any Benefit Plan. The active participation in each Benefit
Plan of all ADI Personnel, as defined below, shall cease as of the Closing Date
for all periods of time on or after the Closing Date. Seller shall remain
responsible and liable for all payments required under the terms of any
"employee welfare benefit plan" as defined in Section 3(1) of ERISA for claims
incurred and expenses and payments accrued on and prior to the Closing Date.
(b) Seller and its Related Parties agree to indemnify and hold harmless
Buyer from and against all losses, expenses and liabilities, arising under
Section 4980B of the Code arising from Seller's failure to comply with the
continuation requirements of Section 4980B of the Code and sections 601 through
608 of ERISA with respect to ADI Personnel for events occurring on or prior to
the date of Closing.
(c) Seller shall pay at Closing approximately $2,500 to each of Randolph
Hill and Doug Staib, and $30,000 to John Kretzinger as compensation for
cancellation of unvested options.
Section 5.2 Performance of Real Property Leases and Assumed Contracts.
Seller shall, through the Closing Date, continue to faithfully and diligently
perform each and every continuing obligation of Seller, if any, under each of
the Real Property Leases, Minor Contracts and Material Contracts, where the
failure to do so would have a material adverse affect on the operations of a
Restaurant.
Section 5.3 Transfer of Licenses and Permits. Seller and its affiliates
shall use their reasonable efforts and cooperate in assisting Buyer with the
assumption, transfer or reissuance of any and all required state, county or city
licenses or permits required for the operation of the Restaurant Locations,
including those shown on Schedule 4.18.
Section 5.4 Liabilities of Seller. All liabilities of Seller related to the
Assets or Restaurants prior to the Effective Time will be promptly paid by
Seller as they come due; and all liabilities secured by the Assets not expressly
assumed by Buyer hereunder have been satisfied prior to, or will be satisfied in
conjunction with, the Closing.
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Section 5.5 Agreements Respecting Employees of Seller.
(a) Prior to the Effective Time, the prior written approval of Buyer,
Seller shall not transfer or reassign or otherwise employ or offer to employ,
any employee solely involved in the operation or supervision of the Restaurants
("ADI Personnel"). At the Effective Time, Seller shall terminate all ADI
Personnel. Through the earlier of (i) the end of the Seller Put Period (as
defined in Section 11.11, below), or (ii) December 31, 1999, Seller will not
solicit for employment any ADI Personnel without the prior written approval of
Buyer.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Buyer agree to cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance and other welfare
plans to plans maintained by Buyer.
(d) Seller agrees that the employee bonus plan recently implemented by
Seller as described on Schedule 5.5(d) will remain in place for all employees of
Restaurants so long as Seller continues to operate the Restaurants, and Seller
shall fully implement and fund such bonus plan in accordance with its terms
including paying any bonuses at Closing.
Section 5.6 Conduct of Business. From the execution of this Agreement until
Closing, Seller shall operate the Restaurants as they are currently being
operated and only in the ordinary course and in compliance with all terms and
conditions of the Franchise Agreements, using reasonable commercial efforts in
keeping with Seller's historical practices to preserve and maintain the services
of its employees, its relationships with suppliers and customers, and will use
reasonable commercial efforts to preserve its current level of sales volume and
historical operating margins, and shall continue to insure the Assets under
existing policies of insurance at current levels. Seller shall pay all bills and
debts incurred by it and related to the operation of the Restaurants promptly as
they become due. Seller shall consult in advance with Buyer on all extraordinary
decisions relating to the Assets or the Restaurants.
(a) In particular, and without limiting the foregoing, with respect to the
ADIs, Seller shall:
(i) continue to conduct the advertising activities and efforts as set forth
on Schedule 5.6(a)(i) (to be agreed upon prior to January 5, 1998);
(ii) maintain the Assets consistent with past practices and in accordance
with the maintenance capital expenditure budget set forth on Schedule
5.6(b)(ii);
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(iii) continue to conduct on a timely basis all normal periodic Asset
maintenance and implement Project Exceed for all restaurants and continue the
operation of Project Exceed;
(iv) continue to conduct on a timely basis all Restaurant remodeling and
refurbishments as set forth on Schedule 5.6(b)(iv), which Schedule shows the
remodel and refurbishment activities for Seller with respect to the ADIs as
budgeted or scheduled by Seller as of December 1, 1997, for the six (6) month
period following the execution hereof;
(v) continue to purchase and maintain inventories for each Restaurant in
such quantities and quality as necessary to operate the Restaurants in
accordance with Seller's historical practice; and
(vi) continue to operate the Restaurants in accordance with all material
applicable local, state and federal laws and regulations.
(b) Further, with respect to the ADIs, Seller shall not, without the
express prior written approval of Buyer:
(i) change in any material manner the ownership of the Assets;
(ii) increase the rate of compensation to employees in the ADI beyond the
usual and customary annual merit increases or bonuses under established
compensation plans, except for payments under the plan described on Schedule
5.5(d), which have been approved;
(iii) mortgage, pledge or subject to lien any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into or commit to enter into any contract, agreement or
commitment that would be required to be set forth on Schedule 4.4(h) hereto;
(vi) Other than in the ordinary course of business, cancel or terminate or
consent to or accept any cancellation or termination of any Material Contract or
any Real Property Lease, amend or otherwise modify any of its material terms or
provisions or give any consent, waiver or approval with respect to the
agreement, waive any breach
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of any of its material terms or provisions or take any other action in
connection with any Material Contract or any Real Property Lease that would
materially impair the interests or rights of Seller to be transferred to Buyer
hereunder.
Section 5.7 Broker's Fees. Seller shall indemnify and hold Buyer harmless
in respect to any claim for brokerage or finder's fees or commissions with
respect to the transactions contemplated herein by anyone claiming to have acted
on behalf of Seller.
Section 5.8 Access to Information. Seller shall afford Buyer, its counsel,
financial advisors, auditors, lenders, lenders' counsel and other authorized
representatives reasonable access for any purpose consistent with this Agreement
from the date hereof until the Closing, during normal business hours, to the
offices, properties, books, and records of Seller with respect to the Assets and
the Restaurants and shall furnish to Buyer such additional financial and
operating data and other information as Seller may possess and as Buyer may
reasonably request, subject to Buyer's obligations regarding the confidentiality
of such information as set forth in Section 7.2 hereof; provided, however, that
such access shall be arranged in advance by Buyer with Seller and will be
scheduled in a manner and with a frequency calculated to cause the minimum
disruption of the business of Seller.
Section 5.9 DR Holdings Properties. Seller shall be responsible for all
costs incurred in connection with obtaining any consents or waivers necessary
for the transfer of any Leased Real Property for which DR Holdings is the
landlord, either with respect to the lease or related Lease Participation
Agreement or Loan Agreement. Seller agrees to obtain prior to Closing any
waivers or modifications from the other parties to those agreements as Buyer may
reasonably request, including but not limited to a waiver of any cross-default
provisions or other provisions which could cause a default under the lease with
DR Holdings by the actions of Seller or any other third party not under the
control of Buyer.
Section 5.10 No Sale Negotiations. Seller and its representatives and
agents shall not solicit, entertain or undertake any negotiations, discussions
or contact with any party other than Buyer and their representatives, with
respect to the sale, transfer or other disposition of any of the Assets (other
than in the ordinary course of Restaurant operations), the Restaurants, or any
interest, legal, equitable or beneficial, in any of the above.
Section 5.11 RESERVED.
Section 5.12 Financial Statements. Seller shall obtain and deliver to Buyer
three days prior to Closing or within 60 days after the end of the 1997 fiscal
year, whichever is earlier, audited financial statements for the ADIs on a
consolidated basis, for the 1997 fiscal year, with an unqualified opinion
thereon from a Big 6 accounting firm acceptable to Buyer. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles and with
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Regulation S-X promulgated by the Securities and Exchange Commission. All
accounting services and reports related to the audited financial statements
shall be at the expense of Buyer.
Section 5.13 Change of Name. Seller shall change its corporate name and
shall cause to be changed the name of any affiliated entities, prior to December
31, 1998, to delete the use of the name "Apple," "Applebee's" and other similar
or derivative names.
Section 5.14 Insurance. Seller shall continuously keep in force through the
Closing Date the insurance policies listed on Schedule 4.19 at Seller's sole
cost.
Section 5.15 Renegotiation of Assumed Leases. Seller will provide
reasonable assistance as requested by Buyer in Buyer's efforts to renegotiate
the Real Property Leases.
Section 5.16 Confidentiality. Seller shall maintain all Confidential
Information (as defined below) gained from Buyer in strict confidence, and shall
take all precautions necessary to prevent disclosure, access to, or transmission
of the Confidential Information, or any part thereof, to any third party, except
as required by order of any court having competent jurisdiction or as may be
otherwise required by law or as may be necessary to consult with their
professional advisors in their capacity as such (provided that they shall use
their best efforts to ensure that their professional advisors shall keep the
Confidential Information confidential), regardless of the availability of any
such information from any other source. In the event the Closing does not occur
for any reason, Seller shall, immediately upon Buyer's request, return all
copies and recordings of the Confidential Information in its possession or under
its control and delete all records thereof in any data storage system maintained
by or for Seller. The term "Confidential Information" means the terms and
conditions of this Agreement or any related agreement and the negotiations,
discussions and understandings related hereto or thereto, including without
limitation the Purchase Price and any valuation methodology used in connection
with the transactions contemplated hereunder or thereunder.
Section 5.17 Management of Development Efforts. If any of the Development
Efforts are complete and new Restaurants are opened prior to the Closing Date,
Seller shall operate such Restaurants in the ordinary course of business. Seller
will keep Buyer fully informed with respect to the Development Efforts,
including but not limited to prompt notification of any significant cost
overruns or construction delays. Seller will obtain Buyer's prior written
consent before entering into any agreement with respect to any Development
Effort or agreeing to any modification of any significant existing agreement.
Seller shall use commercially reasonable efforts to complete on a timely basis
the Development Efforts. Seller shall pay all costs incurred in the Development
Efforts related to Chester, Virginia.
Section 5.18 RESERVED.
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Section 5.19 Survey and Title Report.
(a) Seller, at Seller's and Buyer's equally shared cost and expense, within
45 days after the date of this Agreement, will deliver to Buyer a current ALTA
on-the- ground/as built survey (collectively, the "Surveys" and each, a
"Survey") of each free-standing Restaurant, prepared by licensed surveyors who
are acceptable to Buyer and Buyer's selected title company (the "Title
Company"), for the modification to the extent permitted by insurance
regulations, of the survey exception to the title policies to be delivered
pursuant to the terms of this Agreement.
(b) If any Survey discloses that a portion of a Restaurant lies within a
100 year flood plain or any area having special flood hazards as designated by a
government agency, Seller shall provide information to Buyer of all flood
insurance in place with respect to such Restaurant.
(c) Seller, at Seller's and Buyer's equally shared cost and expense, within
thirty (30) days after the date of this Agreement, will deliver to Buyer a
preliminary title report or title policy commitment issued by the Title Company
for each parcel of Owned Real Property and Leased Real Property (collectively,
the "Title Reports" and each, a "Title Report"), describing such parcel, listing
Buyer and Buyer's designated lender as the prospective named insured and showing
as the proposed policy amount an amount to be determined by Buyer. Seller shall
also furnish to Buyer and Buyer's attorney a legible and true copy of all
documents and other instruments referenced in the Title Report.
(d) Buyer and Buyer's attorney shall have thirty (30) days after the date
of receipt of the Surveys, the Title Reports and copies of all documents to
review the same and to notify Seller in writing of any objections to condition
of the title or matters shown on the Survey or in the Title Report which, in
Buyer's reasonable judgment, could substantially adversely affect the operation
of the Restaurant or the transfer of title to Buyer. Seller shall have thirty
(30) days following receipt of Buyer's notice to rectify Buyer's objections at
Seller's sole cost. The parties agree that if necessary, the time of Closing
shall be extended accordingly.
(e) If Seller cannot rectify Buyer's objections within thirty (30) days,
Buyer, at Buyer's option, may: (a) with respect to any Restaurant for which the
objections have not been cured or the Surveys or Title Reports have not been
delivered, require Seller to De-identify (as defined in Section 11.8) such
Restaurant, in which case the Purchase Price shall be reduced by an amount equal
to 6.7 times the LTM Cash Flow (as defined in Schedule 11.11) for such
Restaurant; or (b) if there are 5 or more Restaurants referenced in (a) above,
terminate this Agreement.
Section 5.20 RESERVED.
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Section 5.21 Reporting Requirements. Through the Closing Date, Seller shall
furnish to Buyer:
(a) Adverse events. Promptly after the occurrence, or failure to occur, of
any such event, information respect to any event (i) which materially adversely
affected, or could materially adversely affect, the Assets or the operations of
the Restaurants in the ADIs or the ability of Seller to perform any of its
material obligations hereunder, (ii) which, if known as of the date of this
Agreement, would have been required to be disclosed to Buyer or (iii) which
causes any representation or warranty contained herein to be untrue or
inaccurate in any material respect;
(b) Monthly financial statements. As soon as available and in any event
within 15 business days after the end of each fiscal month, the statement of
operations of each Restaurant (singly and combined by ADI) for such month,
together with monthly information on the "clearing account" and a capital
expenditures statement, all in the Seller's regularly prepared format.
(c) Notice of litigation. Promptly after the commencement of each such
matter, notice of all actions, charges, orders or other directives affecting any
Restaurant that, if adversely determined, could materially adversely affect the
Assets, the operations, business, prospects or condition (financial or
otherwise) of the Restaurant or the ability of Seller to perform its obligations
hereunder;
(d) General information. Such other information respecting the Assets or
the operations, business prospects or condition (financial or otherwise) of the
ADIs as the Buyer may from time to time reasonably request.
Section 5.22 Cooperation. Seller will use its best efforts to facilitate
and cause the consummation of the transactions contemplated hereby; and obtain
from all persons, and take all other actions with respect to, all consent or
approvals required on the part of such party with respect to the consummation of
those transactions (except for the consent of other parties to Minor Contracts,
which consents shall not be required to be obtained hereunder even if required
by the terms of such Minor Agreements).
Section 5.23 Subsequent Contracts. From the date of this Agreement to the
Closing Date, Seller shall use its best efforts (a) to include in any agreements
entered into by Seller relating in any way to the ADI or the Restaurants
("Subsequent Contracts") a provision permitting the assignment of any such
Subsequent Contract to Buyer and providing that upon such assignment, Buyer
shall succeed to all of Seller's rights, title and interests thereunder subject
to the Buyer's assumption of all of Seller's duties, powers and obligations
under such Subsequent Contract, and (b) to ensure that no Subsequent Contract
contains any provision which would limit in any way the rights, title and
interests of Seller in the Assets.
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Section 5.24 Proration and Purchase Price Adjustment Data. At least 10 days
prior to the Closing Date, Seller shall deliver to Buyer all information and
documents necessary for the preparation of the itemized statement required under
Section 2.2, above, regarding the prorations and Purchase Price adjustments set
forth in Sections 8.1 below.
Section 5.25 Seller Franchising. Until August 31, 1998, Seller will not
franchise, license, lease or otherwise make available any restaurant concept to
any person or entity that is a franchisee of Buyer, or a Principal Shareholder
of any franchisee of Buyer as defined in Buyer's standard form franchise and
development agreement; provided, however that this Section 5.25 shall not apply
to any entity that is a franchisee of an entity which is acquired by Seller that
is also currently a franchisee of Buyer.
Section 5.26 RESERVED.
Section 5.27 Transition Services.
(a) For a period of six months after the Closing, if and to the extent
requested in writing by Buyer, Seller agrees to provide to Buyer restaurant
accounting, POS system support and other services related to the Restaurants and
the ADIs as mutually agreed upon between Seller and Buyer (the "Services").
Buyer shall give Seller 30 days advance written notice of the Services
requested. The Services shall be provided promptly as requested and shall be
provided in the same manner and with the same or similar personnel as Seller
previously utilized.
(b) Buyer will pay for the Services on a monthly basis, after receipt of an
invoice from Seller, at Seller's direct personnel cost incurred in connection
with providing the requested Service, plus an amount of reasonable overhead not
to exceed 85% of the base salaries of the personnel providing the Services.
Seller's invoice shall detail the personnel used, the amount of time spent and
its calculation of the cost thereof. Direct personnel cost shall include only
base salary and benefits normally paid to Seller employees in such capacities.
(c) Seller is not required to maintain the employment of any specific
personnel in connection with providing the Services; provided, however, that if
requested by Buyer, Seller shall offer to specifically designated personnel a
bonus incentive to remain for the six month period. The amount of such bonus
shall be at the discretion of Buyer. Such bonus, if accepted by the employee,
shall be paid by Buyer at the end of the six month period, or for such shorter
period as Buyer may determine.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:
Section 6.1 Corporate Existence. Buyer is a corporation validly existing
and in good standing under the laws of the State of Delaware.
Section 6.2 Corporate Power and Authority. Buyer has all requisite
corporate power and authority to own its properties and assets, and to carry on
the business in which it is now engaged. Buyer has the corporate power and
authority to perform the respective covenants of Buyer set forth in this
Agreement.
Section 6.3 Execution and Delivery Permitted. The execution, delivery and
performance of this Agreement will not violate or result in a breach of any term
of Buyer's Certificate of Incorporation or Bylaws or result in a breach of or
constitute a default under any term in any agreement or other instrument to
which Buyer is a party, such default having not been previously waived by the
other party to such agreements, or violate any law or any order, rule or
regulation applicable to Buyer, of any court or of any regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over Buyer or its properties, or result in the creation or imposition of any
mortgage, lien, charge, or encumbrance of any nature whatsoever upon any of the
Assets purchased by Buyer hereunder. Buyer's Board of Directors, or authorized
committees thereof, has taken all action required by law, and by Buyer's
Certificate of Incorporation, Bylaws, and otherwise to authorize the purchase of
the Assets in accordance with this Agreement.
Section 6.4 Binding Effect. This Agreement and each other agreement
required to be executed and delivered by Buyer in connection herewith, when
executed and delivered, will be the legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms, except as
enforceability may be limited by (i) applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally, and (ii) general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law). Except as set
forth on Schedule 6.4, the execution, delivery and performance of this Agreement
and the other agreements executed in connection herewith, and the consummation
by Buyer of the transactions contemplated hereby and thereby do not require any
filing with, notice to or consent, waiver or approval of any third party,
including but not limited to, any governmental body or entity other than any
filing required under the Hart-Scott- Rodino Antitrust Improvement Act of 1977,
as amended (the "HSR Act"), and the expiration of any applicable waiting period
thereunder.
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ARTICLE VII
COVENANTS OF BUYER
Section 7.1 Buyer Performance. Buyer hereby covenants and agrees to accept
conveyance of the Assets and assignment of the Real Property Leases, and to
assume and perform the obligations of Seller under the Minor Contracts and the
Material Contracts after the Closing Date and otherwise perform and fulfill all
other obligations with respect to the Assets pertaining to the period after the
Closing Date.
Section 7.2 Confidentiality. Buyer shall each maintain all information
gained from Seller in connection with its evaluation of the transactions
contemplated by this Agreement (the "Confidential Information") in strict
confidence, and shall take all precautions necessary to prevent disclosure,
access to, or transmission of the Confidential Information, or any part thereof,
to any third party, except for the exclusive purpose of evaluating the Assets
and the business of Seller. In the event the Closing does not occur for any
reason, Buyer shall, immediately upon Seller's request, return all copies and
recordings of the Confidential Information in its possession or under its
control and delete all records thereof in any data storage system maintained by
or for Buyer.
Section 7.3 Seller Employees.
(a) Buyer shall offer employment to all ADI Personnel upon terms and
conditions substantially equivalent to those provided by Seller of which Buyer
has been informed in writing.
(b) Buyer shall maintain employee records transferred to Buyer hereunder
for a period of not less than four years and during that period will afford
Seller reasonable access to such records during Buyer's normal business hours.
Buyer shall maintain the confidentiality of such records and limit access
thereto in a manner consistent with Buyer's treatment of its employee records.
(c) Buyer agrees with respect to Restaurant Employees hired by Buyer within
six (6) months of the Closing Date: (1) to give such Employees credit under
Buyer's benefits plans, programs, and arrangements, including credit for accrued
vacation which has been paid by Seller under Section 8.2(a) hereto, for such
Employees' period of service with Seller or any Related Party, provided that
such credit shall only be taken into account under any tax-qualified plan
maintained by Buyer for purposes of determining such employees' eligibility for
participation and eligibility to satisfy any hours of service requirement in
order to receive an allocation of an employer contribution; (2) to provide
coverage to such Employees who are eligible under Buyer's health, medical, life
insurance and other welfare plans (A) without the need to undergo a physical
examination or otherwise provide evidence of insurability; (B) any pre-existing
condition or similar limitations or exclusions will be applied by taking into
account the period of coverage under Seller's plan; (C) by applying and giving
credit for amounts paid for the plan year in which the Closing Date occurs as
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deductibles, out of pocket expenses and similar amounts paid by individuals and
their beneficiaries.
Section 7.4 Development Efforts. At Closing, Buyer shall reimburse Seller
for its reasonable and demonstrable out-of-pocket costs capitalized in
accordance with generally accepted accounting principles and Seller's historical
practices, directly related to any Development Effort listed on Schedule 4.22
that Buyer determines to purchase in its discretion (excluding any amounts
related to Chester, Virginia) not including any amounts paid or accrued to
Affiliates of Seller, plus a reasonable overhead allocation not to exceed
$70,000.00 per Restaurant site (which will be reduced proportionately depending
on the completeness of the development of a particular site).
Section 7.5 Remediation List. Buyer shall deliver to Seller a list setting
forth all remedial actions that would require repair and replacement within 60
days of the date thereof with respect to any of the Assets under reasonable
operating standards of a prudent operator, and the estimated cost of each such
action (the "Remediation List"); provided, however, that each remedial action
with respect to any Restaurant must be in excess of $10,000 per item. The
aggregate amount set forth on the Remediation List shall be a Purchase Price
adjustment pursuant to Section 8.1 of this Agreement, unless repaired by Seller
to Buyer's satisfaction prior to Closing. Buyer shall use its best efforts to
deliver the Remediation List by January 31, 1998.
Section 7.6 Cooperation. Buyer shall use its best efforts to cause the
conditions set forth in Section 8.3 to be satisfied and to facilitate and cause
the consummation of the transactions contemplated hereby. Specifically, Buyer
has obtained a "highly confident" letter from Merrill Lynch, Pierce, Fenner,
Smith Incorporated that the transactions contemplated hereby can be financed by
Buyer, which is attached as Schedule 7.6 hereto.
Section 7.7 Broker's Fees. Buyer shall indemnify and hold Seller harmless
in respect to any claim for brokerage or finder's fees or commissions with
respect to the transactions contemplated herein by anyone claiming to have acted
on behalf of Buyer.
ARTICLE VIII
PRORATIONS AND PURCHASE PRICE ADJUSTMENT;
CONDITIONS TO CLOSING
Section 8.1 Prorations and Purchase Price Adjustments. The items listed
below shall be prorated between Buyer and Seller as of the Closing Date, or paid
by one party, as set forth, and shall constitute an adjustment to the Purchase
Price.
(a) All ad valorem, real and personal property taxes, general and special
public and private assessments, and any other property taxes on the Assets for
the tax year in which the Closing occurs; however, if the amount of such tax for
tax year is not determinable, it shall be prorated on the basis of the tax for
the immediately preceding tax year;
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(b) All rentals or other amounts paid with respect to the Real Property
Leases which apply to periods past the Closing Date, including prepaid rentals,
percentage rents, and common area maintenance charges;
(c) All prepaid insurance premiums on insurance policies covering the
Assets and regarding welfare benefit programs, but only if Buyer elects to have
said coverage remain in effect;
(d) Any amounts paid with respect to the Minor Contracts and Material Con
tracts for services extending beyond the Closing Date;
(e) Any prepaid expenses including deposits, associated with the operation
of a Restaurant which were paid by Seller in the ordinary course of business,
including telephone expenses, billboard advertising expenses, cooperative fees,
advertising expenses, and utility charges, but only to the extent of appropriate
documentation of the transfer of the benefit of such item to Buyer; and
(f) All amounts on the Remediation List, as defined in Section 7.8, shall
be paid by Seller as a reduction to the Purchase Price, unless repaired to
Buyer's reasonable satisfaction prior to the Closing.
Seller shall bear the cost and expense of all prorated items applicable to
periods ending on or before the Closing Date, and shall receive the benefits
thereof, and Buyer shall bear the cost and expense of payment of all prorated
items applicable to periods from and after the Closing Date, and receive the
benefits thereof.
Section 8.2 Post-Closing Adjustments.
Within 60 days after the Closing Date, Seller and Buyer shall mutually
agree on the following items and the aggregate amount owed shall be paid by the
owing party within 10 days thereafter:
(a) Seller shall pay the value of all vacation and other paid time off
benefits, accrued in accordance with Seller's standard policy, and unused as of
the Closing, of all employees of Seller who are hired by Buyer;
(b) Seller shall pay the amount equal to the value of all outstanding gift
certificates, coupons, discounts, complimentary meal allowances and the like,
issued by Seller through the Closing Date and used at any Restaurant;
(c) Buyer or Seller, as the case may be, shall pay to the other the amount
by which Seller's account balance in the National Marketing Fund of Buyer
related to Applebee's Neighborhood Grill and Bar restaurants is more than or
less than expenditures made from such Fund through the Closing Date allocated to
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the ADIs in accordance with Buyer's historical practice; and
(d) Seller shall pay the replacement cost of any Assets that have been
substantially damaged as a result of fire, explosion, earthquake, disaster,
accident, any action by the United States or any other governmental authority,
earthquake, flood, drought, embargo, riot, civil disturbance, uprising, activity
of armed forces, act of God, or public enemies;
Section 8.3 Buyer's Conditions to Closing. The obligations of Buyer
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Buyer, be waived:
(a) All representations and warranties of Seller in this Agreement shall be
true in all material respects on and as of the Closing as if made as of the
Closing, and Seller shall have delivered to Buyer a certificate to such effect
dated as of the Closing Date; provided however, that Seller may, not later than
five days prior to the Closing, deliver to Buyer updated Schedules which may
only reflect matters that arise after the date hereof (and that Seller could not
reasonably have known or anticipated as of the date hereof) and, provided that
such Schedules are reasonably acceptable to Buyer, such Schedules shall
supersede and replace the Schedules delivered by Seller at the signing of this
Agreement;
(b) There shall be no material adverse change in the Assets or the
operations of the Seller at the Restaurants or the business, prospects and
financial condition of the ADIs from the date hereof to the Closing Date;
provided that (i) any such adverse change must affect more than five percent of
the Restaurants, (ii) any adverse change in the business and financial condition
of the ADIs resulting from national and regional economic conditions, events, or
other factors affecting the casual dining restaurant industry in general or the
Applebee's system in particular shall not be deemed to be a material adverse
change hereunder, and (iii) any such material adverse change resulting from the
actions or omissions of Buyer as franchisor or otherwise shall not be a
condition to Buyer's obligations hereunder;
(c) Seller shall have performed and complied in all material respects with
all of its obligations under this Agreement which are to be performed or
complied with by Seller prior to or on the Closing Date;
(d) Seller shall be willing and able to deliver all of the items required
to be delivered by it pursuant to Section 3.2 of this Agreement;
(e) The form and substance of the documents delivered by Seller pursuant to
this Agreement shall be reasonably acceptable to Buyer and Buyer's counsel;
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(f) Seller shall have terminated the employment of all employees as
described in Section 5.5;
(g) Buyer shall have obtained, either from Seller or directly from the
issuing authority, all permits, licenses, including liquor licenses, and
approvals of all governmental and quasi-governmental authorities necessary for
the operation of the Restaurants as intended by Buyer; provided, however, that
if Buyer is unable to obtain from local municipal or county authorities a permit
necessary for such operation of the Restaurants, and Buyer reasonably believes
that it will be able to obtain such a permit within two months of the Closing
Date, Closing of the transactions contemplated hereunder will not be delayed if
Seller delivers to Buyer a duly executed and mutually acceptable liquor license
management agreement or agreements;
(h) There shall be no claims, actions or suits pending or threatened
regarding the Assets or the Restaurants or that otherwise would restrict or
prohibit Seller from consummating the transactions contemplated herein;
(i) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Buyer;
(j) Seller shall have obtained and delivered to Buyer all necessary
consents to transfer the Assets and assign the Material Contracts to Buyer;
(k) Seller shall have delivered to Buyer audited financial statements
described in Section 5.12, in form and content sufficient to satisfy the
requirements of the Securities and Exchange Commission applicable to Buyer and
which are not substantially different from the Unaudited Financial Statements,
except for normal year end audit adjustments in amount and nature consistent
with Seller's historical practice and for divisional overhead allocations; and
(l) Buyer shall have obtained the financing necessary for Buyer to complete
this transaction upon terms and conditions reasonably acceptable to Buyer.
Section 8.4 Seller's Conditions to Closing. The obligations of Seller
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Seller, be waived:
(a) All representations and warranties of Buyer in this Agreement shall be
true on and as of the Closing, and Buyer shall have delivered to Seller a
certificate to such effect dated as of the Closing Date;
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(b) Buyer shall have performed and complied in all material respects with
all of its obligations under this Agreement which are to be performed or
complied with by Buyer prior to or on the Closing Date;
(c) Buyer shall be willing and able to deliver all of the documents
required to be delivered by it under Section 3.3 of this Agreement;
(d) The form and substance of the documents delivered by Buyer pursuant to
this Agreement shall be reasonably acceptable to Seller and Seller's counsel;
(e) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Buyer; and
(f) There shall be no claims, actions or suits pending or threatened that
would prohibit Seller from consummating the transactions contemplated herein.
ARTICLE IX
INDEMNIFICATION AGAINST LOSS
Section 9.1 Indemnification by Seller. Seller agrees to defend, indemnify,
and hold harmless Buyer and its officers, directors, agents, employees, and
affiliates (collectively "Buyer Indemnified Parties"), against and in respect of
any and all loss, liability, lien, damage, cost and expense (each, a "Claim")
incurred or resulting from:
(a) Any misrepresentation or breach of warranty made by Seller in this
Agreement or in any certificate or Schedule delivered hereunder;
(b) Any nonfulfillment of any covenant or agreement by Seller under this
Agreement or any liability related to noncompliance with any bulk sales laws;
(c) Any tax liability of Seller (including, without limitation, liabilities
for taxes, interest, penalties, governmental charges, duties, fees, and fines
imposed by the United States, foreign countries, states, counties,
municipalities, and subdivisions, and by all other governmental entities or
taxing authorities), except to the extent that such tax is expressly allocated
to Buyer hereunder;
(d) Any liability of Seller (not expressly assumed hereunder) to a third
party related to operation of the Restaurants through the Effective Time; and
(e) Any liability of Seller not expressly assumed by Buyer hereunder,
including but not limited to obligations arising with regard to Seller's
responsibilities under the Real Property Leases, Minor Contracts and Material
Contracts through the Effective Time.
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Section 9.2 Indemnification by Buyer. Buyer agrees to defend, indemnify,
and hold harmless Seller and its officers, directors, agents, employees and
affiliates against and in respect of any and all loss, liability, lien, damage,
costs and expense (each a "Claim") incurred or resulting from:
(a) Any misrepresentation or breach of warranty made by Buyer in this
Agreement or in any certificate or Schedule delivered hereunder;
(b) Any nonfulfillment of any covenant or agreement by Buyer under this
Agreement;
(c) Any tax liability of Buyer (including, without limitation, liabilities
for taxes, interest, penalties, governmental charges, duties, fees, and fines
imposed by the United States, foreign countries, states, counties,
municipalities, and subdivisions, and by all other governmental entities or
taxing authorities), except to the extent that such tax is expressly allocated
to Seller hereunder;
(d) Any liability of Buyer (not expressly assumed hereunder) to a third
party related to operation of the Restaurants after the Effective Time; and
(e) Any liability of Buyer not expressly assumed by Seller hereunder,
including but not limited to obligations arising with regard to Seller's
responsibilities under the Real Property Leases, Minor Contracts and Material
Contracts after the Effective Time.
Section 9.3 Limitation on Indemnification.
(a) No Buyer Indemnified Party shall be entitled to make any Claim against
Seller pursuant to Section 9.1(a) unless and until all such Claims aggregate
$1,000,000 (the "Threshold Amount"); provided, however, that once such Claims
exceed the Threshold Amount, the Buyer Indemnified Parties may make all Claims
against the Seller from the first dollar of the first Allowed Claim. There shall
be no limitation imposed on the ability of Buyer Indemnified Parties to make
claims under any Section hereof other than Section 9.1(a).
(b) Notwithstanding subparagraph (a), above, there shall be no limits or
thresholds imposed on Claims made with respect to breaches of Sections 4.2, 4.3,
4.5, 4.6(b), 4.9, 4.13 and 4.27.
Section 9.4 Time to Assert Claims. Any Claims made pursuant to Section 9.1,
or otherwise hereunder, must be asserted by providing written notice to party
against which the Claim is made within the time period set forth on Schedule
9.4. Any matters as to which a Claim has been assetted on or before the
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applicable deadline shall continue to be covered by Section 9.1, until
finally terminated or resolved.
Section 9.5 Resolution of Claims. In the event any party seeks
indemnification from the other for any Claim, the parties agree to meet with
each other, in the absence of attorneys and other non-employee advisors, to
discuss the basis for the Claim and to attempt in good faith to reach a
negotiated settlement of the Claim. During this process, either party may
request that an independent third party be used to mediate the dispute. If the
Claim has not been resolved to either party's satisfaction within sixty (60)
days from when the claimant first notified the other party of the existence of
the Claim, either party may seek judicial action to enforce or declare its
rights.
Section 9.6 Third Party Claim Indemnification Procedure. An indemnified
person shall promptly notify the indemnifying party of the existence of any
Claim resulting from a claim made by a third party and shall give the
indemnifying party the opportunity to defend the same at its own expense and
with counsel of its own selection, provided that such indemnified person shall
at all times also have the right to participate fully in the defense of the
Claim at his, her or its own expense. If the indemnifying party shall, within
fifteen (15) days after such notice, fail to acknowledge its indemnification
obligation hereunder in writing or thereafter fail to defend such Claim
adequately and reasonably, and such indemnified person is entitled to such
defense, such indemnified person shall have the right, but not the obligation,
to undertake the defense of, and to compromise or settle (exercising reasonable
business judgment) such Claim on behalf, for the account, and the sole risk and
expense, of the indemnifying party.
Section 9.7 Exclusive Remedies. The rights and remedies of the parties
under this Article IX shall be the sole and exclusive rights and remedies that
either party may seek for any misrepresentation, breach of warranty or failure
to fulfill any covenant or agreement under this Agreement, except that either
party may seek specific performance or injunctive relief.
ARTICLE X
MISCELLANEOUS
Section 10.1 Notices. Except as otherwise expressly provided, all notices,
consents, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given (i) upon personal delivery,
(ii) upon facsimile transmission with confirmation of receipt, (iii) one day
after delivery to a commercial overnight delivery service with confirmed
receipt, or (iv) three days after delivery to the U.S. mail of notice sent by
certified U.S. mail, return receipt requested, with first class postage prepaid,
and in all cases, addressed as follows:
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(a) If to Seller: Apple South, Inc.
Hancock @ Washington
Madison, GA 30650-1304
Attn: Erich J. Booth
Fax: (706) 342-9283
With a copy to: Larry D. Ledbetter
Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, GA 30309
Fax: (404) 815-6555
(b) If to Buyer: Applebee's International, Inc.
4551 West 107th St., Suite 100
Overland Park, KS 66207
Attention: Robert T. Steinkamp
FAX: (913) 341-1696
With a copy to: James M. Ash
Blackwell Sanders Matheny Weary &
Lombardi LLP
2300 Main Street, Suite 1100
Kansas City, MO 64108
FAX: (816) 983-9137
or to such other address as Buyer or Seller shall have last designated by notice
to the other party.
Section 10.2 Applicable Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
Delaware.
Section 10.3 Binding on Successors; Assignment. All of the terms,
provisions and conditions of this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their respective successors, assigns
and legal representatives. Buyer may assign this Agreement or any of its rights
or obligations hereunder to any entity that controls, is controlled by, or is
under common control with Buyer; provided, however, such assignment shall not
relieve Buyer of its liabilities hereunder.
Section 10.4 Payment of Costs; Post-Closing Payments.
(a) Seller Costs. In addition to all other matters payable by Seller
hereunder, Seller shall pay:
(1) All of Seller's legal expenses;
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(2) One-half of all cost of the commitments to provide and the costs of
obtaining title insurance on the Real Property for benefit of Buyer, with
endorsements for surveys and mechanics' lien, except for costs related to
extraordinary endorsements required by Buyer's lenders;
(3) One-half of all sales, transfer or other taxes arising from the
transactions contemplated hereby arising under state law;
(4) One-half of all fees, costs and expenses incurred in recording all real
estate documents related to the transactions contemplated hereby;
(5) All other costs and expenses incurred by Seller in negotiating this
Agreement and in consummating the transactions contemplated hereby, including
any costs associated with obtaining any consent, waiver or approval shown on
Schedule 4.3, and fees or commissions payable to any party representing Seller
in connection with arranging or negotiating this Agreement and the transactions
contemplated hereby, including without limitation all investment banker or
financial advisor fees; and
(6) The costs required for Seller to perform any of its covenants under
Article V, hereof.
(b) Buyer Costs. In addition to all other matters payable by Buyer
hereunder, Buyer shall pay:
(1) All of Buyer's legal expenses;
(2) All of the cost of the appraisal described in Section 2.6 of this
Agreement;
(3) One-half of all fees, costs and expenses incurred in recording all real
estate documents related to the transactions contemplated hereby;
(4) One-half of all cost of the commitments to provide and the costs of
obtaining title insurance on the Real Property for benefit of Buyer, with
endorsements for surveys and mechanics' lien; and Buyer shall pay all costs
related to extraordinary endorsements required by Buyer's lenders;
(5) One-half of all sales, transfer or other taxes arising from the
transactions contemplated hereby arising under state law;
(6) The cost of any environmental investigations required by Buyer with
respect to the Real Property; and
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(7) All other costs and expenses incurred by Buyer in negotiating this
Agreement and in consummating the transactions contemplated hereby, including
any fees or commissions payable to any party representing Buyer in connection
with arranging or negotiating this Agreement and the transactions contemplated
hereby, including without limitation all investment banker or financial advisor
fees.
(c) Post-Closing Payments. Within 30 days after the end of each of the
first four fiscal quarters following the fiscal quarter in which the Closing
occurs, Buyer shall submit, in writing, a statement of any payments made by
Buyer in such quarter in satisfaction of any Seller obligation under Section
10.4(a), and giving Seller credit for any amounts paid by Seller in such quarter
in satisfaction of any Buyer obligation under Section 10.4(b), together with
supporting documentation in reasonable detail. The party shown as owing any
amount to the other on such statement shall pay such amount within 15 days of
the date of such statement.
Section 10.5 Closing Not to Prejudice Claim for Damages. Closing of the
transactions contemplated by this Agreement shall not prejudice any claim for
damages which either party may have hereunder, in law or in equity, due to a
material default in observance in the due and timely performance of any of the
covenants and agreements herein contained or for the breach of any warranty or
representation hereunder, unless such observance, performance, warranty, or
representation is specifically waived in writing by the party making such claim.
Section 10.6 Survival of Representations, Warranties, Covenants and
Undertakings. All of the representations, warranties, covenants and undertakings
not specifically addressed on Schedule 9.4, above, hereto shall survive the
execution of this Agreement and Closing indefinitely.
Section 10.7 Additional Documents. After Closing, each party agrees to
furnish such additional documents as are necessary to complete the transactions
contemplated hereby.
Section 10.8 Time is of the Essence. Time is of the essence in the
performance of the obligations of the parties hereunder.
Section 10.9 Interpretation. The title of the sections of this Agreement
are for convenience of reference only, and are not to be considered in
construing this Agreement. Whenever required by the context of this Agreement,
the singular shall include the plural and the masculine shall include the
feminine and vice versa.
Section 10.10 Entire Agreement. This Agreement and the Exhibits and
Schedules attached hereto and incorporated herein by this reference contain the
entire Agreement of the parties hereto with respect to the transactions
contemplated hereby and supersede any and all prior agreements, arrangements,
and understandings between the parties. No inducements contrary to the terms of
this Agreement exist. No waiver of any term, provision, or condition of this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be construed as a further or continuing waiver of any such term,
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provision or condition or any other term, provision or condition of this
Agreement. In connection with the execution and delivery of this Agreement,
neither party has relied on any promise, inducement, representation or warranty
of the other party not set forth in this Agreement, its Schedules and Exhibits.
This Agreement may not be modified orally and may only be amended in a writing
executed by all parties hereto.
Section 10.11 Counterparts. This Agreement may be executed in one or more
counterparts which in the aggregate shall comprise one Agreement.
Section 10.12 Termination.
(a) This Agreement may be terminated prior to the Closing as follows:
(i) At any time by the mutual consent of Seller and Buyer;
(ii) By either Seller or Buyer, at its sole election, at any time after
April 30, 1998, if the Closing shall not have occurred on or prior to such date;
(iii) By Buyer if any condition set forth in Section 8.3 hereof shall not
have been met as of the Closing; or
(iv) By Seller if any condition set forth in Section 8.4 hereof shall not
have been met as of the Closing.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (iii) or (iv) above because Seller or Buyer, as the case may be,
shall have willingly or in bad faith failed to satisfy a condition to the
Closing, the other party shall be entitled to pursue, exercise, and enforce any
and all remedies, rights, powers, and privileges available to it at law or in
equity.
Section 10.13 Public Announcements. Buyer and Seller will coordinate with
each other all press releases relating to the transactions contemplated by this
Agreement and, except to the extent required by law in the written opinion of
independent legal counsel (which opinion shall promptly be provided to the other
party), refrain from issuing any press release, publicity statement or other
public notice relating to this Agreement or the transactions contemplated hereby
without providing the other party reasonable opportunity to review and comment
thereon.
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ARTICLE XI
DIVESTITURE OF REMAINDER
RESTAURANTS
Section 11.1 Seller Exit from Applebee's System. After the Closing, Seller
will continue to operate the Remaining Restaurants as a part of Buyer's
Applebee's Neighborhood Grill & Bar franchise system (the "System") and, except
as otherwise provided herein, or in the Mutual Release delivered herewith, in
accordance with the terms and conditions of the Franchise Agreements and as a
separate division (the "Applebee's Division") in various Arbitron Ratings Areas
of Dominant Influence (the "Remaining ADIs"). Seller agrees that it will use its
reasonable best efforts to divest itself completely of all Remaining Restaurants
as soon as is practicable and in accordance with the terms and conditions of
this Agreement. In keeping with its obligation to divest the Remaining
Restaurants, Seller will diligently seek Qualified Buyers (as defined in
Schedule 11.2 attached hereto) for the Remaining Restaurants and will negotiate
with such parties in good faith to effect the intent of Seller's complete
divestiture of the Remaining Restaurants before December 31, 1999. In addition,
upon the execution of this Agreement, Seller shall no longer be a member of, or
be allowed to appoint or vote on any members of the Applebee's Franchise
Business Council.
Section 11.2 Seller Financing Guarantee. To facilitate its complete exit
from the System, Seller shall take the following actions:
(a) Seller shall provide financing assistance to Qualified Buyers
affiliated with Seller's existing management personnel in its Applebee's
Division consisting of a financial guarantee of up to 10% of the borrowings
being financed by such Qualified Buyer for any Remaining Restaurants;
(b) In no event shall Seller be required to guarantee more than $10,000,000
in the aggregate for all Qualified Buyers related to Applebee's Division
management;
(c) In no event shall Seller or any affiliate of Seller provide any equity
financing or debt financing convertible into equity to any Qualified Buyer,
regardless of its affiliation with Seller's Applebee's Division management;
(d) Seller's obligations under Section 11.2(a) are limited to (and required
to be of equal dollar value to) those instances in which Buyer has also provided
a guarantee to such Qualified Buyer under Section 11.6(a).
Section 11.3 Continued Operation of Remaining Restaurants. In order to
maintain the value of the Remaining Restaurants and to facilitate their sale to
and post-sale operation by Qualified Buyers, Seller shall operate each Remaining
Restaurant through the effective date of its
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sale in accordance with Seller's historical practices and at least in accordance
with the requirements of the applicable Applebee's franchise agreement, and, in
any event, Seller shall:
(a) Continue to implement in a timely fashion, as currently scheduled or
budgeted in 1998, or in 1999 in accordance with historical operating standards,
and in each year in accordance with System requirements, the restaurant
remodeling program on all Remaining Restaurants so long as they are owned by
Seller;
(b) Maintain advertising expenditures in the Remaining ADI's in accordance
with the franchise agreement obligations;
(c) Maintain field operation staffing at levels consistent with historical
practices;
(d) Not transfer any restaurant personnel from Seller's Applebee's Division
to any other concept or to a position in Seller's corporate offices; and
(e) Maintain in accordance with good business practice the smallwares,
inventories, furniture, fixtures and equipment and real estate improvements
related to each Remaining Restaurant.
Section 11.4 Employee Solicitation by Seller. From the date hereof until
the earlier of (i) the expiration of the Seller Put Period (as defined below) or
(ii) December 31, 1999, in both cases with respect to persons employed on the
date hereof or hired hereafter, and who are assigned to the Applebee's Division,
(A) Seller will encourage such persons to accept employment with the party that
acquires the Remaining Restaurant or is granted the Remaining ADI to which they
are assigned, and (B) once employed by such party or by another party operating
Applebee's restaurants, Seller shall not solicit such persons for employment by
Seller or any affiliated entity nor encourage in any manner such persons to
leave the employ of such Applebee's operator.
Section 11.5 Continued Restaurant Development.
(a) Seller shall continue to develop and open Applebee's restaurants in its
Remaining ADI's as set forth on Schedule 11.5 attached hereto. All such
development efforts will be undertaken by Seller in accordance with Applebee's
standard System specifications and its historical practice and level of effort
and Seller will continue to use its reasonable best efforts to maintain the
development and opening schedules of such restaurants as shown on Schedule 11.5.
(b) To the extent that Seller has identified or otherwise begun the process
of developing a location for an Applebee's restaurant in a Remaining ADI, Seller
shall offer the party that purchases the Remaining Restaurants in such Remaining
ADI the right to assume Seller's interest in such site at a cost no greater
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than Seller's out-of-pocket invested cost therein and a reasonable internal
overhead allocation.
(c) Buyer acknowledges that the development requirements set forth herein
are in place of the requirements set forth in the Development Agreements and the
Universal Agreement between Buyer and Seller and such requirements in such
Agreements are hereby terminated.
Section 11.6 Buyer Financing Guarantee. To facilitate the exit of Seller
from the System, Buyer shall take the following actions:
(a) Buyer, if requested by Seller and the Qualified Buyer, shall provide
financing assistance to Qualified Buyers (except for any entity set forth on
Schedule 11.6(a) hereto) consisting of a financial guarantee of up to 10% of the
third party borrowings with credible institutional lenders by such Qualified
Buyer used to purchase any Remaining Restaurants.
(b) In no event shall Buyer be required to guarantee more than 5% of such
borrowing with respect to any Qualified Buyer affiliated with any individual
identified on Schedule 11.6(b) attached hereto.
(c) In no event shall Buyer be required to guarantee more than $10,000,000
in the aggregate for all Qualified Buyers.
Section 11.7 Approval of Qualified Buyers.
(a) Buyer shall use its reasonable best efforts to consider for approval in
an expeditious manner sale transactions between Seller and Qualified Buyers
(which may include members of Seller's Applebee's Division management), provided
that such requests for approval are submitted by Seller and such Qualified Buyer
in accordance with the terms and conditions of the applicable franchise
agreement and together with all reasonably requested information and
documentation.
(b) Approval by Buyer of a sale by Seller to a Qualified Buyer shall be
dependent upon, among other matters, the agreement by the Qualified Buyer to
development obligations for Applebee's restaurants in the applicable Remaining
ADI no greater than the number set forth on Schedule 11.7(b) attached hereto, to
be developed in a reasonable and customary time period considering all factors
that the Buyer normally considers.
(c) In no event shall Buyer be required to approve a sale transaction by
Seller (i) to any person or entity who in the sole discretion of Buyer does not
meet the standard of a Qualified Buyer or (ii) that does not include all of the
Remaining Restaurants (exclusive of those to be de-identified by Seller in
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conjunction with such sale pursuant to Section 11.8) in the applicable
Remaining ADI, to the extent Seller controls all territory in the applicable
Remaining ADI.
(d) Buyer agrees that the entities listed on Schedule 11.7(d) are Qualified
Buyers and that they will be approved as purchasers of the Remaining Restaurants
described in and on the terms and conditions set forth in the letters of intent
dated December 10, 1997 and December 16, 1997, respectively, between Seller and
each of them, subject to (i) Buyer and such purchaser reaching an agreement as
to the development obligations shown on Schedule 11.7(b) hereto, and (ii)
Buyer's acceptance of such purchaser's financial structure and financing plans.
(e) Any Qualified Buyer who is approved by Buyer for the purchase of any
Remaining Restaurants and who completes such purchase prior to the earlier of
(i) the end of the Seller Put Period, or (ii) December 31, 1999, will be
required to execute Buyer's then standard form of franchise agreement except
that the royalty rates and advertising fees will not be greater for those
Qualified Buyers than the royalty rates and advertising fees described in
Schedule 11.7(e) attached hereto.
(f) Buyer will use its reasonable best efforts to provide or otherwise make
available to Seller any information received by Seller concerning requests for
acquisition of existing Applebee's restaurants.
(g) Seller agrees that in no event shall it institute litigation against
Buyer in connection with Buyer's failure to approve Rob Andreatolla or any
affiliated group as a buyer for any Remaining Restaurants.
Section 11.8 Seller De-identification of Remaining Restaurants. Solely in
connection with the sale to third parties of Remaining Restaurants, Seller may
remove all Applebee's logos and other identifying marks and take the other
actions described below ("De-identification" or "De- identify") for up to an
aggregate of eleven Remaining Restaurants. Upon such De-identification, the
franchise agreement with respect to such Remaining Restaurant shall be
terminated. Such De- identification shall only be effected upon the closing of a
transaction with a third party in which all Remaining Restaurants in that
Remaining ADI are sold. Whenever Seller is to De-identify a Remaining
Restaurant, either under this Section or another provision of this Agreement,
Seller must, at a minimum, take the following actions:
(i) within 5 days after closing of the third party sale, close such
restaurant to the public;
(ii) within 5 days following closure, remove all signage, menus, awnings,
smallwares and paper products containing any logos or otherwise trademarked
design of Buyer, and all decor items (such as lamps, wall decorations, statues,
plate glass, stained glass, etc.) that are required or suggested as a part of
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the standard or optional decor package for an Applebee's Neighborhood Grill
& Bar restaurant; and
(iii) within 180 days following removal, certify in writing to Buyer the
sale of such items to a then existing franchisee in the System or the
destruction of such items.
Section 11.9 Employee Solicitation by Buyer. From the date hereof until the
earlier of (i) the expiration of the Seller Put Period, or (ii) December 31,
1999, with respect to persons employed on the date hereof in Seller's Applebee's
Division, Buyer will not solicit such persons for employment by Buyer nor
encourage in any manner such persons to leave the employ of Seller, except with
respect to Seller's ADI Personnel.
Section 11.10 Covenant Not to Compete. Seller agrees that it will not, and
that it will cause its agents, affiliates, or employees not to on its behalf,
(i) for a period of six months following the execution of this Agreement,
conduct any discussion or negotiation with any representative of any person or
entity owning or operating, or that owns any interest in any entity that owns or
operates, any Chili's Grill & Bar restaurant business or any TGI Friday's
restaurant business, concerning any acquisition of or investment in such entity
or any of such person's or entity's assets related to the ownership of such
restaurant business, and (ii) during the period of one year following the
execution of this Agreement, announce or consummate any transaction with any
person or entity owning or operating, or that owns any interest in any entity
that owns or operates, any Houlihan's restaurant business or any Ruby Tuesday's
restaurant business, concerning any acquisition of or investment in any such
entity or any of such person's or entity's assets related to the ownership or
operation of such restaurant business.
Section 11.11 Seller Put Rights.
(a) Seller Put. At such time as Seller owns and operates 15 or fewer
Remaining Restaurants, Seller shall have up to six months, but in no event later
than December 31, 1999 (the "Seller Put Period') in which to exercise an option
(the "Seller Put"), subject to the conditions set forth in this Section below,
(i) to require Buyer to purchase each Remaining Restaurant at a price as set
forth on Schedule 11.11 hereto; or (ii) to De-identify up to 10 Remaining
Restaurants (in addition to those De-identified pursuant to Section 11.8 above)
in the aggregate, at Seller's expense but without payment of any amount to
Buyer.
(b) ADI Designation. Seller may exercise the Seller Put only on a Remaining
ADI by Remaining ADI basis, such that all Remaining Restaurants within a
particular Remaining ADI are either purchased by Buyer or De-identified by
Seller.
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(c) Notification of Exercise. Seller shall notify Buyer in writing of its
exercise of the Seller Put as soon as possible but in no event later than the
last day of the Seller Put Period. Such notice shall specify the Remaining
Restaurants being sold to Buyer or De- identified by Seller by Remaining ADI and
shall set forth Seller's calculation of the LTM Cash Flow (as defined on
Schedule 11.11) for each Remaining Restaurant and Remaining ADI being sold with
appropriate explanatory and supporting materials.
(d) Asset Purchase Agreement. The purchase of any Remaining Restaurants by
Buyer pursuant to the Seller Put is subject to the execution by Seller and Buyer
of an asset purchase agreement with respect to such Remaining Restaurants
substantially similar to this Agreement; provided, however, that the
indemnification basket will be equal to one percent of the purchase price.
Seller shall provide Buyer with a draft of the asset purchase agreement and
Seller and Buyer shall both use reasonable efforts to complete the transfer of
any Remaining Restaurants as soon as possible. If a Remaining Restaurant is not
purchased because of the failure to meet a closing condition of the asset
purchase agreement, such Remaining Restaurant shall be De-identified by Seller.
Section 11.12 Buyer Call Rights.
(a) Buyer Call. At the earlier of (i) the end of the Seller Put Period, if
Seller has not exercised the Seller Put, or (ii) January 1, 2000, if Seller
continues to own and operate in excess of 15 Remaining Restaurants, Buyer has
the option (the "Buyer Call") to purchase all of the Remaining Restaurants,
subject to the conditions set forth in this Section below, as follows:
(1) If Seller operates 15 or fewer Remaining Restaurants, such Remaining
Restaurants shall be purchased at a price as set forth on Schedule 11.12 hereto.
(2) If Seller operates in excess of 15 Remaining Restaurants, Buyer may
designate (a "Designation") up to 15 Remaining Restaurants as "A Restaurants",
which shall be purchased by Buyer at a price as set forth on Schedule 11.12
hereto.
(3) Buyer may then Designate up to an additional 35 Remaining Restaurants
as "B Restaurants", which shall be purchased by Buyer at a price as set forth on
Schedule 11.12 hereto.
(4) If Seller owns and operates in excess of 50 Remaining Restaurants,
Buyer may Designate any additional Remaining Restaurants over 50 as "C
Restaurants", which shall be purchased by Buyer at a price as set forth on
Schedule 11.12 hereto.
(b) Remaining ADI Designation. Buyer retains the exclusive right to
determine the Designation of any particular Remaining Restaurant as an A, B or C
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Restaurant. Buyer shall make such determination on a Remaining ADI by
Remaining ADI basis, so that all Remaining Restaurants in a particular Remaining
ADI are in the same Designation; provided, however, that Buyer may divide the
Remaining Restaurants among Designations in one Remaining ADI as needed to meet
the entire number of Remaining Restaurants in each Designation. Buyer may not
split a Remaining ADI with respect to a decision to purchase a Remaining
Restaurant. All Remaining Restaurants in a particular Remaining ADI must be (i)
purchased by Buyer, or (ii) De-identified as set forth in (d) below.
(c) Seller Selected Stores. Notwithstanding the forgoing, if Buyer
determines to purchase any Remaining Restaurants in accordance with the Buyer
Call, Seller may designate up to an aggregate of 10 Remaining Restaurants (the
"Selected Stores") for which the purchase price shall be the greater of the (i)
applicable LTM Cash Flow price or (ii) the liquidation appraised value of the
real estate, equipment and fixtures related to such Remaining Restaurants in the
aggregate (the "Floor Price"). The right to determine the Selected Stores shall
be exclusive to Seller and must be made on a Remaining ADI by Remaining ADI
basis. If the Floor Price is in excess of the LTM Cash Flow price, Buyer may
elect not to purchase the Selected Stores, in which case Seller may (i)
De-identify the Selected Stores, or (ii) offer to sell them to Buyer at the LTM
Cash Flow price. If Seller chooses to De-identify the Selected Stores, neither
Seller nor any affiliated entity may use any part of that location for another
restaurant concept. Seller shall utilize Cushman & Wakefield to perform a
liquidation valuation, at Seller's expense, to determine the Floor Price. The
items described in this Section 11.12(c) shall take no longer than 60 days to
complete, and shall have no effect on the completion of the remainder of the
Buyer Call.
(d) Buyer's Right to De-Identify. If Buyer exercises the Buyer Call, Buyer
may require Seller to De-identify, at Seller's cost, up to an aggregate of 5
Remaining Restaurants, on a Remaining ADI by Remaining ADI basis.
(e) Notification of Exercise. At the earlier of (i) the end of the Seller
Put Period, or (ii) January 1, 2000, Seller shall continue to provide Buyer with
a calculation of the LTM Cash Flow for the Remaining Restaurants and the
Remaining ADIs, on a monthly basis, with appropriate explanatory and supporting
materials. At any time thereafter, without expiration, Buyer may notify Seller
in writing of its intent to exercise the Buyer Call, specifying which Remaining
Restaurants, by Remaining ADI, will be purchased, De-identified, or remain with
Seller, and the A, B, or C Designation of each Remaining Restaurant. Seller
shall then have 10 days in which to notify Buyer of any designation of Selected
Stores.
(f) Asset Purchase Agreement. The purchase of any Remaining Restaurants by
Buyer pursuant to the Buyer Call is subject to the execution by Seller and Buyer
of an asset purchase agreement with respect to such Remaining Restaurants
substantially similar to this Agreement; provided, however, that the
indemnification basket will be equal to one percent of the purchase price. Buyer
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shall provide Seller with a draft of the asset purchase agreement and Buyer
and Seller shall use reasonable efforts to complete the tranfer of the Remaining
Restaurants as soon as practicable after exercise of the Buyer Call. If a
Remaining Restaurant is not purchased because of the failure to meet a closing
condition of the asset purchase agreement, such Remaining Restaurant shall be
De-identified by Seller.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day, month, and year first above written.
BUYER:
APPLEBEE'S INTERNATIONAL, INC.
By: ____________________________________
Name: ___________________________________
Title: _________________________________
SELLER:
APPLE SOUTH, INC.
By:______________________________________
Name: ___________________________________
Title:___________________________________
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LIST OF EXHIBITS AND SCHEDULES
Exhibits
1.1 Restaurants
1.1(a) Franchise Agreements
3.2(f) Opinion of Seller's Counsel
3.2(m) Mutual Release
3.3(d) Opinion of Buyer's Counsel
Schedules
1.1(h) Computer Software
4.1 Seller's Jurisdictions
4.3 Consents
4.4(a) Owned Real Property
4.4(b) Leased Real Property
4.4(c) Real Property Leases
4.4(d) Fixed Asset Data
4.4(e) Equipment Liens
4.4(f) Equipment Leases
4.4(g) Loan Agreements, etc.
4.4(h) Other Material Contracts
4.4(i) Affiliate Contracts
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4.10 Multi-Unit Contracts
4.12(a) Pending Claims and Litigation
4.12(b) Citations, etc.
4.12(c) Food Service Related Claims
4.16(b) Employee List
4.17(a) Employee Benefit Plans
4.18 Licenses and Permits
4.19 Insurance Coverage
4.22 Development Sites
4.23 Affiliated Transactions
4.25 Seller Appraisals
4.27 ADI Financial Statements
5.5(d) New Seller Bonus Plan
5.6(a)(i) Advertising Activities
5.6(b)(ii) Maintenance Capital Expenditure Budget
5.6(b)(iv) Remodel Schedule
6.4 Buyer Consents
7.6 Highly Confident Letter
9.4 Claim Time Limits
11.2 Qualified Buyer Criteria
11.5 Development in Remaining ADI's
11.6(a) 10% Guarantee
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11.6(b) 5% Guarantee
11.7(b) Remaining ADI Development Schedules
11.7(e) Royalty Rates and Advertising Fees
11.11 Seller Put Rights
11.12 Buyer Call Rights
Schedules to this Exhibit 2.1 are not filed pursuant to Item 601(b)(2) of
SEC Regulation S-K. By the filling of this Form 8-K, the Registrant hereby
agrees to furnish supplementally a copy of any omitted schedule to the Commision
upon request.
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