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
September 14, 1998
Date of Report (Date of earliest event reported)
APPLE SOUTH, INC.
(Exact name of registrant as specified in its charter)
`
Georgia Commission File No. 0-19542 59-2778983
- ------------------------ ------------------------------- -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
Hancock at Washington
Madison, Georgia 30650
- ------------------------ -------------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (706) 342-4552
<PAGE>
ITEM 2. DISPOSITION OF ASSETS
As of September 14, 1998, the Registrant had sold 191 of its 279 franchised
Applebee's Neighborhood Grill & Bar ("Applebee's") restaurants through 12
separate asset purchase agreements. Total consideration from the sales, based on
arm's-length negotiations between the parties, was $360.0 million resulting in
an estimated gain before tax effect of $121.6 million ($75.4 million gain after
tax effect). At closing, the Registrant relinquished its rights to develop
Applebee's restaurants in the related markets. The following table summarizes
the completed sales transactions:
================ ================================== ============================
Closing Date Purchaser Restaurants
================ ================================== ============================
March 29, 1998 Applebee's International, Inc. 33 restaurants in Virginia
- ---------------- ---------------------------------- ----------------------------
June 15, 1998 TSSO, Inc. 1 restaurant in Illinois
- ---------------- ---------------------------------- ----------------------------
June 28, 1998 Quality Restaurant Concepts, LLC 26 restaurants in east
Tennessee and Mississippi
- ---------------- ---------------------------------- ----------------------------
June 28, 1998 Whit-Mart, Inc. 12 restaurants in South
Carolina
- ---------------- ---------------------------------- ----------------------------
August 3, 1998 Florida Apple, LLC 35 restaurants in Georgia
and Florida
- ---------------- ---------------------------------- ----------------------------
August 3, 1998 U.S. Restaurant Properties, Inc. 16 restaurants in Iowa and
and Darrel L. Rolph (two separate northwestern Illinois
agreements)
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 WHG Real Estate South, LLC and 9 restaurants in Wisconsin
Wisconsin Hospitality Group, LLC
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 WHG Real Estate East, LLC and 10 restaurants in Wisconsin
Wisconsin Hospitality Group, LLC
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 Woodland Group, Inc. 16 restaurants in Tennessee
and Kentucky
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 Bloomin' Apple, LLC 4 restaurants in Illinois
and Wisconsin
- ---------------- ---------------------------------- ----------------------------
Sept. 14, 1998 Apple J, L.P. 29 restaurants in South
Carolina, North Carolina
and Georgia
- ---------------- ---------------------------------- ----------------------------
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Statements.
Basis of Presentation
The accompanying pro forma consolidated statements of earnings for the year
ended December 28 1997, and the six months ended June 28, 1998 present the
results of Apple South, Inc. (the "Company"), excluding the operations of its
sold Applebee's restaurants, 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 dispositions took place as of June 28, 1998.
The 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
28, 1997.
The 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.
Page 2
<PAGE>
<TABLE>
Apple South, Inc.
Pro Forma Consolidated Statement of Earnings
(Unaudited)
(In thousands, except per share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
Year Ended Year Ended
December 28, Pro Forma December 28,
1997 Adjustments 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant sales:
Applebee's $ 454,127 (324,558)(B) 129,569
Don Pablo's 196,457 - 196,457
Hops 49,511 - 49,511
McCormick & Schmick's 67,373 - 67,373
Canyon Cafes 18,577 - 18,577
Harrigans 19,560 - 19,560
Other 2,715 - 2,715
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 808,320 (324,558) 483,762
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 225,302 (89,897)(B) 135,405
Payroll and benefits 249,356 (99,034)(B) 150,322
Depreciation and amortization 31,441 (12,969)(B) 18,472
Other operating expenses 187,781 (74,631)(B) 113,150
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 693,880 (276,531) 417,349
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 39,617 (8,762)(B) 30,855
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 74,823 (39,265) 35,558
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (20,575) 19,090 (C) (1,485)
Distributions on preferred securities (6,412) - (6,412)
Interest income 71 1,008 (C) 1,079
Other, primarily goodwill amortization (5,834) 40 (B) (5,794)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (32,750) 20,138 (12,612)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 42,073 (19,127) 22,946
Income taxes 13,625 (6,200)(D) 7,425
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 28,448 (12,927) 15,521
====================================================================================================================================
Basic earnings per common share $ 0.74 0.40
============================================================================================= ===========
Diluted earnings per common share $ 0.73 0.40
============================================================================================= ===========
Average number of common shares used in basic calculation 38,620 38,620
============================================================================================= ===========
Average number of common shares used in diluted calculation 44,927 44,927
============================================================================================= ===========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
Page 3
<PAGE>
<TABLE>
Apple South, Inc.
Pro Forma Consolidated Statement of Earnings
(Unaudited)
(In thousands, except per share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
Six Months Six Months
Ended Ended
June 28, Pro Forma June 28,
1998 Adjustments 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant sales:
Applebee's $ 236,387 (160,124)(B) 76,263
Don Pablo's 125,679 - 125,679
Hops 48,887 - 48,887
McCormick & Schmick's 46,703 - 46,703
Canyon Cafes 23,863 - 23,863
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 481,519 (160,124) 321,395
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 134,697 (44,851)(B) 89,846
Payroll and benefits 155,975 (54,446)(B) 101,529
Depreciation and amortization 8,388 - 8,388
Other operating expenses 112,357 (37,539)(B) 74,818
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 411,417 (136,836) 274,581
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 25,196 (5,405)(B) 19,791
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 44,906 (17,883) 27,023
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (14,353) 9,072 (C) (5,281)
Distributions on preferred securities (4,025) - (4,025)
Gain on disposal of assets held for sale 46,697 - 46,697
Income from investments carried at equity 787 - 787
Other, primarily goodwill amortization (3,223) 31 (B) (3,192)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) 25,883 9,103 34,986
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 70,789 (8,780) 62,009
Income taxes 25,925 (2,975)(D) 22,950
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of change in accounting principle 44,864 (5,805) 39,059
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle, net of tax benefit 1,461 - 1,461
====================================================================================================================================
Net earnings $ 43,403 (5,805) 37,598
====================================================================================================================================
Basic earnings per common share:
Basic earnings before cumulative effect of
change in accounting principle $ 1.18 1.02
Cumulative effect of change in accounting principle (0.04) (0.04)
- --------------------------------------------------------------------------------------------- -----------
Basic earnings per common share $ 1.14 0.98
============================================================================================= ===========
Diluted earnings per common share:
Diluted earnings before cumulative effect of
change in accounting principle $ 1.03 0.91
Cumulative effect of change in accounting principle (0.03) (0.03)
- --------------------------------------------------------------------------------------------- -----------
Diluted earnings per common share $ 1.00 0.88
============================================================================================= ===========
Average number of common shares used in basic calculation 38,167 38,167
============================================================================================= ===========
Average number of common shares used in diluted calculation 45,975 45,975
============================================================================================= ===========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
Page 4
<PAGE>
<TABLE>
Apple South, Inc
Pro Forma Consolidated Balance Sheet
(Unaudited)
(In thousands, except share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
June 28, Pro Forma June 28,
1998 Adjustments 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,706 31,249 (A)
(174)(A) 34,781
Proceeds due from sale of assets 69,748 (69,748)(A) -
Short-term investments 27 - 27
Accounts receivable 14,684 - 14,684
Inventories 10,116 (1,864)(A) 8,252
Prepaid expenses and other 8,224 (554)(A) 7,670
Assets held for sale 252,020 (137,830)(A) 114,190
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 358,525 (178,921) 179,604
Premises and equipment, net 314,033 - 314,033
Goodwill, net 139,069 - 139,069
Other assets 41,271 - 41,271
- ------------------------------------------------------------------------------------------------------------------------------------
$ 852,898 (178,921) 673,977
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 30,343 - 30,343
Accrued liabilities 49,180 - 49,180
Current installments of long-term debt 19 - 19
Income taxes 16,043 16,568 (A) 32,611
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 95,585 16,568 112,153
Long-term debt 385,450 (222,521)(A) 162,929
Deferred income taxes 16,700 - 16,700
Other long-term liabilities 6,782 - 6,782
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 504,517 (205,953) 298,564
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities
of Apple South Financing I, a subsidiary holding solely
Apple South, Inc. 7% convertible subordinated debentures
due March 1, 2027 115,000 - 115,000
Equity forward contract pending settlement 3,400 - 3,400
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 405 - 405
Additional paid-in capital 141,842 - 141,842
Retained earnings 140,462 27,032 (A) 167,494
Treasury stock at cost; 3,636,535 shares in 1998 (52,728) - (52,728)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 229,981 27,032 257,013
- ------------------------------------------------------------------------------------------------------------------------------------
$ 852,898 (178,921) 673,977
====================================================================================================================================
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
Page 5
<PAGE>
Apple South, Inc.
Notes to Pro Forma
Consolidated Financial Statements
Note A
Pursuant to 12 separate Asset Purchase Agreements (the "Agreements"),the
Company has sold 191 of its 279 franchised Applebee's Neighborhood Grill & Bar
restaurants as of September 14, 1998. Total consideration from the sales was
$360.0 million resulting in an estimated gain before tax effect of $121.6
million ($75.4 million gain after tax effect). Four of the Agreements were
closed prior to June 28, 1998 and were thus reflected in the Company's
consolidated balance sheet for the period ending June 28, 1998. As such, the pro
forma adjustments in the accompanying pro forma consolidated balance sheet
reflect the pro forma effects of the remaining eight agreements which were
closed subsequent to June 28, 1998. Total consideration from these eight
transactions was $193.4 million resulting in an estimated gain before tax effect
of $43.6 million ($27.0 million gain after tax effect).
The pro forma adjustment to long-term debt reflects the assumption that net
sales proceeds of $167.5 million from the transactions closed subsequent to June
28, 1998 would have been used to reduce revolving credit agreements, with the
remaining proceeds maintained as cash and cash equivalents to pay deal costs and
taxes. An additional pro forma adjustment was made to reflect the assumption
that a portion of the proceeds due from sale of assets of $69.7 million
(received from transactions closed prior to June 28, 1998 and reflected in the
"Historical June 28, 1998" balance sheet) would also have been used to reduce
long-term debt. After selling expenses and income taxes, the assumed debt
reduction was $55.0 million, 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, and assets held for sale reflect the
sale of certain assets and assumption of certain liabilities related to the
eight transactions closed subsequent to June 28, 1998.
Note B
The pro forma adjustments to revenues and operating expenses eliminate the
activity of the 191 sold Applebee's restaurants including revenues and expenses
related to restaurants opened during the period (such openings would not have
occurred had the transactions actually been completed at the beginning of the
periods presented).
Note C
The pro forma adjustments to interest expense and interest income reflect
the changes resulting from the assumed use of sales proceeds to reduce long-term
debt related to revolving credit agreements and the outstanding obligation under
the 1996 Senior note offering by $295.2 million. Any proceeds in excess of
long-term debt amounts were assumed to be held in short-term investment
accounts.
Note D
The pro forma adjustment to income taxes reflects the income tax effects of
the above adjustments assuming a 32.4% and 34.0% effective rate for 1997 and
1998, respectively.
Page 6
<PAGE>
(c) Exhibits.
2.1 Asset purchase agreement dated April 23, 1998, by and among Apple
South, Inc. and Whit-Mart, Inc.*
2.2 Asset purchase agreement dated May 1, 1998, by and among Apple South,
Inc. and T.S.S.O., Inc., and Lois Sedowicz.*
2.3 Asset purchase agreement dated May 4, 1998, by and among Apple South,
Inc. and Florida Apple North, LLC., Florida Apple South, LLC., Florida Apple
West, LLC, and Wigel Partnership.*
2.4 Asset purchase agreement dated June 19, 1998, by and among Apple South,
Inc. and U.S. Restaurant Properties Operating LP.*
2.5 Asset purchase agreement dated June 19, 1998, by and among Apple South,
Inc. and Darrel L. Rolph.*
2.6 Asset purchase agreement dated December 23, 1997 by and among Apple
South, Inc. and Applebee's International, Inc.**
2.7 Asset purchase agreement dated March 16, 1998 by and among Apple South,
Inc. and Quality Restaurant Concepts, LLC.***
2.8 Asset purchase agreement dated August 20, 1998 by an among Apple South,
Inc. and WHG Real Estate South, LLC and Wisconsin Hispitality Group, LLC.
2.9 Asset purchase agreement dated August 20, 1998 by and among Apple
South, Inc. and WHG Real Estate East, LLC and Wisconsin Hospitality Group, LLC.
2.10 Asset purchase agreement dated April 6, 1998 by and among Apple South,
Inc. and Woodland Group, Inc.
2.11 Asset purchase agreement dated May 15, 1998 by and among Apple South,
Inc. and Bloomin' Apple, LLC.
2.12 Asset purchase agreement dated June 26, 1998 by and among Apple South,
Inc. and Apple J, L.P.
*Incorporated by reference to the corresponding exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 28, 1998.
**Incorporated by reference to Exhibit 2.1 to the Registrant's 8-K filed on
January 15, 1998.
***Incorporated by reference to Exhibit 2.9 to the registrants 10-K for the
year ended December 28, 1997.
Page 7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
APPLE SOUTH, INC.
(Registrant)
Date: September 25, 1998 By: /s/ Philip L. Ammons
---------------------------
Philip L. Ammons
Chief Accounting Officer
Page 8
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
2.1 Asset purchase agreement dated April 23, 1998, by and among Apple
South, Inc. and Whit-Mart, Inc.*
2.2 Asset purchase agreement dated May 1, 1998, by and among Apple South,
Inc. and T.S.S.O., Inc., and Lois Sedowicz.*
2.3 Asset purchase agreement dated May 4, 1998, by and among Apple South,
Inc. and Florida Apple North, LLC., Florida Apple South, LLC., Florida
Apple West, LLC, and Wigel Partnership.*
2.4 Asset purchase agreement dated June 19, 1998, by and among Apple
South, Inc. and U.S. Restaurant Properties Operating LP.*
2.5 Asset purchase agreement dated June 19, 1998, by and among Apple
South, Inc. and Darrel L. Rolph.*
2.6 Asset purchase agreement dated December 23, 1997 by and among Apple
South, Inc. and Applebee's International, Inc.**
2.7 Asset purchase agreement dated March 16, 1998 by and among Apple
South, Inc. and Quality Restaurant Concepts, LLC.***
2.8 Asset purchase agreement dated August 20, 1998 by an among Apple
South, Inc. and WHG Real Estate South, LLC and Wisconsin Hispitality
Group, LLC.
2.9 Asset purchase agreement dated August 20, 1998 by and among Apple
South, Inc. and WHG Real Estate East, LLC and Wisconsin Hospitality
Group, LLC.
2.10 Asset purchase agreement dated April 6, 1998 by and among Apple South,
Inc. and Woodland Group, Inc.
2.11 Asset purchase agreement dated May 15, 1998 by and among Apple South,
Inc. and Bloomin' Apple, LLC.
2.12 Asset purchase agreement dated June 26, 1998 by and among Apple South,
Inc. and Apple J, L.P.
*Incorporated by reference to the corresponding exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 28, 1998.
**Incorporated by reference to Exhibit 2.1 to the Registrant's 8-K filed on
January 15, 1998.
***Incorporated by reference to Exhibit 2.9 to the registrants 10-K for the
year ended December 28, 1997.
Page 9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of August 20, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller"), WHG REAL ESTATE SOUTH, LLC,
a Wisconsin limited liability company ("Purchaser"), and WISCONSIN HOSPITALITY
GROUP, LLC, a Wiscosin limited liability company ("Hospitality"),
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
WHEREAS, Hospitality will provide certain management services to Purchaser
after such sale and purchase, and in connection therewith, Hospitality desires
to make certain agreements with Seller as set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADIs" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials; as set forth in Schedule 1.1(i).
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v)all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi)all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii) the Contracts and Leases;
1
<PAGE>
(viii) the Owned Real Property; and
(ix)all records and files related to the Real Property such as rent
calculations, landlord correspondence, purchase agreements, deeds, construction
documents, title reports, environmental and engineering reports, appraisals,
surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, or any other property, tangible or intangible, real
or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c), and (viii) all
obligations assumed by Purchaser with respect to Seller's development sites
under Section 4.7 not otherwise assumed hereunder or covered by an increase in
the purchase price pursuant to Section 2.3. Assumed Liabilities shall not
include any liability, obligation, payment, duty, or responsibility of any
nature except as expressly described above and specifically shall not include
(i) liabilities or obligations of Seller arising out of any breach by Seller of
any of the Contracts or Leases; (ii) except as provided in clauses (ii) or (iv)
above, liabilities or obligations of Seller under any of the Contracts or Leases
or with respect to the Owned Real Property or other Assets that accrue in any
such case prior to the Closing; (iii) any liabilities or obligations of Seller
under the Franchise Agreements; (iv) any liability of Seller for product
liability, personal injury, property damage, or otherwise based on any tort
claim or statutory liability (including but not limited to any "dram shop"
liability); (v) any federal, state, or local tax liability of Seller except to
the extent expressly assumed hereunder, (vi) any contractual claim based on any
lease, contract, or agreement other than the Contracts and Leases; (vii) any
liability, obligation, or responsibility of Seller to Seller's employees,
agents, or independent contractors with respect to wages, salaries, bonuses, or
other compensation or benefits earned or accrued prior to the Closing (except
for accrued but unvested vacation assumed pursuant to Section 6.3(c)); (viii)
any liability or obligation of Seller arising out of the negotiation, execution,
or performance of this Agreement, including fees and expenses of attorneys and
accountants, except as otherwise expressly provided herein, (ix) any liability
or obligation of the Seller which accrues in connection with the litigation set
forth on Schedule 3.10.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
2
<PAGE>
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds or limited warranty deeds to
convey good and marketable fee simple title to the Owned Real Property, with the
warranty of title contained therein limited to the claims of Persons claiming
by, through or under Seller, but not otherwise. "Development Costs" shall mean
(i) all of Seller's out-of-pocket costs paid in connection with the development
and acquisition of the new restaurant sites in the Territory set forth in
Schedule 4.7 capitalized in accordance with generally accepted accounting
principles and Seller's historical practices including, but not limited to, the
purchase price paid for real estate; acquisition and closing costs, such as
legal fees, engineering fees, surveys, transfer taxes, title policies, and the
like; environmental investigation costs; the cost of permits, approvals,
variances, or rezonings; construction period insurance; and (ii) Seller's
internal costs capitalized in connection with such development efforts in
accordance with Seller's historic practices.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"DR Holdings Tracts" shall mean the three parcels of real property located
at 5100 76th Street, Greendale, Wisconsin, 900 Hansen Road, Ashwaubenon,
Wisconsin and 660 S. Whitney Road, Madison, Wisconsin which are subject to
leases, but which Seller shall cause to be conveyed to Purchaser in fee simple
at the Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Employee Records" shall mean copies of Seller's employee records of those
current employees of Seller who are employed by Purchaser as of the Closing;
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
3
<PAGE>
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal. "Forum" shall mean any federal, state, local, municipal,
or foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Applebee's International, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Seller's directors of operations for the Territory and all management of Seller
senior thereto after due inquiry of the Restaurant managers in the Territory;
provided that Seller shall have no knowledge of any condition or circumstance
which would cause Seller to modify its representations and warranties.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B and any leases subsequently entered into and pertaining to new
restaurants being developed pursuant to Section 4.7.
"Liquidated Damages" shall have the meaning set forth in Section 2.10
hereof.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less without penalty or liquidated damages,
a list of which are set forth on Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located (all of which tracts and parcels are
described in Schedule 1.1C) or which is being held for development pursuant to
Section 4.7 and which Purchaser elects to acquire pursuant to Section 6.5 and
all buildings, fixtures, signs, parking facilities, and other improvements
located thereon and appurtenances thereto. For the purposes of this Agreement,
"Owned Real Property" will include the DR Holdings Tracts.
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"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from governmental and
regulatory authorities which relate exclusively to the Business, the
Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, in the case of all Real Property, (i)
such easements, restrictions, covenants, and other such encumbrances which are
shown as exceptions on the Title Commitments and any other encumbrances of
record as of the effective date of the Title Commitments, (ii) ordinances
(municipal and zoning), (iii) survey matters, and (iv) such easements,
restrictions, covenants, and other encumbrances which become matters of public
record after the effective date of the Title Commitments and before the Closing,
in each such case, to the extent that such encumbrances could not reasonably be
expected to materially interfere with or impair Purchaser's use of the Real
Property for Applebee's Neighborhood Grill & Bar Restaurants or that are waived,
or deemed to be waived, by Purchaser pursuant to Section 7.1(a). Permitted
Encumbrances shall include in the case of both Real Property and personal
property all liens for taxes not yet due and payable. Notwithstanding the
foregoing, Permitted Encumbrances shall not include (i) any judgments for money
against Seller relating to the Real Property nor (ii) any judgments for money
relating to the owned Real Property, which becomes matters of public record or
are known to the Seller prior to the Closing.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the 19 Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean August 24, 1998.
"Territory" shall mean portions of the ADIs consisting of Milwaukee,
Wisconsin, Greenbay/Appleton, Wisconsin and/or Madison, Wisconsin, as set forth
on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 7.1(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 7.1(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
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free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due. Seller covenants and agrees to pay and
discharge all liabilities and obligations of the Seller and/or the Business
which are not specifically assumed by the Purchaser hereunder.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $15,885,420 million as adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases that pertain to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to Seller's cost of
those Assets consisting of food, beverage (including beer, wine, and liquor),
new uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date provided
that the cost of such inventory shall not exceed $15,000 per restaurant; and (v)
if the Purchaser elects to acquire the development sites for new restaurants set
forth in Schedule 4.7 (the "Development Sites"), the amount of Seller's
Development Costs.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the cost of unused vacation accrued but
unvested as of the Closing Date by ADI Personnel hired by Hospitality the cost
of which is being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
(d) Notwithstanding the foregoing, the parties agree that with respect to
Property Taxes, such Property Taxes shall be prorated between Seller and
Purchaser in accordance with the amount of Property Taxes due for the same
period in 1997, as set forth in the taxes bills received by Seller from the
relevant governmental authorities. The parties agree to make any adjustments
necessary to ensure that the Property Taxes have been allocated in accordance
with clauses (a)(i) and (b)(i) above as soon as practicable upon receipt of
bills received from the relevant governmental authorities, for Property Taxes
due with respect to the Assets for 1998.
The foregoing adjustments shall be calculated by the parties and set forth
on Exhibit B which shall be signed by both parties at Closing. The Purchase
Price shall be paid by Purchaser on the Closing Date by wire transfer of
immediately available funds to an account designated by Seller and shall be
received by Seller in such designated account no later than 4:00 p.m. Eastern
Time on the Closing Date.
2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchaser the following:
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(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date as though
made on and as of the Closing Date and that Seller shall have performed in all
respects the covenants of the Seller contained in this Agreement required to be
performed on or prior to the Closing.
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit C hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller or in the case of the three DR
Holdings Tracts by the owner thereof;
(vii) Transfer returns for Wisconsin real estate transfers;
(viii) A non-foreign Status Affidavit duly executed by Seller;
(ix) An Owner's Affidavit duly executed by Seller;
(x) A Gap Affidavit duly executed by Seller;
(xi) A Cross-Receipt acknowledging receipt of the Purchase Price duly
executed by Seller; and
(xii) Any other documents that Purchaser may reasonably request at least
three days prior to the Closing in order to effectuate the transactions
contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof;
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(i) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Bill of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (ii) as to the incumbency and specimen signature of each officer
of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
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incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the Purchase Price;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Godfrey & Kahn, S.C., counsel to Purchaser, in
substantially the form of Exhibit D hereto;
(vi) A Cross-Receipt acknowledging receipt of the Assets duly executed by
Purchaser; and
(vii) Any other documents that Seller may reasonably request at least three
days prior to the Closing.
(c) At the Closing, Seller shall deliver to Hospitality the Employee
Records, subject to execution of a release by each affected employee allowing
for the disclosure of such files.
(d) At the Closing, Hospitality shall deliver to Seller:
(i) A certificate executed by Hopsitality, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof; and
(ii) A certificate of the Secretary or an Assistant Secretary of
Hospitality, dated as of the Closing Date, certifying in such detail as Seller
may request (i) that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors of Hospitality authorizing the execution,
delivery and performance of this Agreement, and that all such resolutions are
still in full force and effect and are all the resolutions adopted in connection
with the transactions contemplated by this Agreement, and (ii) as to the
incumbency and specimen signature of each officer of Hospitality's executing
this Agreement, and any certificate or instrument furnished pursuant hereto or
to be furnished in connection herewith as of the Closing Date, and a
certification by another officer of Hospitality as to the incumbency and
signature of the officer signing such certificate.
2.5 Transfer of Operations. Purchaser 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 expressly provided in this Agreement, all profits, losses,
liabilities, claims, or 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 Purchaser. 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
Purchaser thereafter.
2.6 Closing. The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of Godfrey & Kahn, S.C., 780
North Water Street, Milwaukee, Wisconsin, at 10:00 a.m. on August 24, 1998, or
on such other date and time as may be mutually agreed upon by the parties
hereto.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the various Assets as set forth on Exhibit E hereof. The allocation
contained in Exhibit E shall be subject to adjustments mutually agreed upon by
Purchaser and Seller at closing to reflect adjustments to the Purchase Price.
Each party hereby agrees that it will not take a position on any income tax
return, before any governmental agency charged with the collection of any income
tax, or in any judicial proceeding that is inconsistent with the terms of this
Section 2.7.
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2.8 Further Assurances. From time to time after the Closing at Purchaser's
request and expense, Seller shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
2.9 Post-Closing Adjustments. As soon as possible after the Closing (but
not later than the first anniversary thereof), the parties shall reconcile the
actual amount of prorations that were estimated at Closing as well as the
accrued but unvested vacation time of Seller's employees assumed by Purchaser
hereunder that has actually vested with the estimated amounts thereof. To the
extent that the actual amounts differ from the amounts estimated on Exhibit B
(Adjustment to Purchase Price) or prorations or adjustments other than those
reflected on Exhibit B are discovered after the Closing, the parties agree to
remit the correct amount of such items to the appropriate party within 15 days
after the same are determined. If Purchaser shall elect to acquire any
Development Site after the Closing, then Purchaser shall pay to Seller the
Development Costs therefor within 15 days after such election.
2.10 Delivery of Purchase Price. If the Purchase Price is not delivered by
wire transfer of immediately available funds to an account designated by Seller
or is not be received by Seller in such designated account no later than 4:00
p.m. Eastern Time on the Closing Date, then such failure of Seller to receive
such funds shall constitute a breach of and default under this Agreement by
Purchaser. If such a breach and default by Purchaser hereunder occurs then the
following shall apply:
(a) If the Purchase Price is delivered by wire transfer of immediately
available funds to the account designated by Seller and is received by Seller in
such designated account after 4:00 p.m. Eastern Time on the Closing Date but
before 4:00 p.m. Eastern Time on the day immediately following the Closing Date,
then Seller's remedies for such breach and default shall be the obligation of
Purchaser to pay to Seller the amount of $9,447 (the "Liquidated Damages"). The
Liquidated Damages shall be delivered by wire transfer of immediately available
funds to the account designated by Seller and shall be received by Seller in
such designated account before 4:00 p.m. Eastern Time on the day immediately
following the Closing Date. The parties hereto hereby accknowledge and agree
that the Liquidated Damages (i) are reasonable, (ii) are the result of the good
faith effort by the parties to estimate the actual harm caused by the breach and
default by Purchaser specified in this Section, and (iii) have been determined
by the parties because of the difficulty of determining and proving actual
damages for such breach and default after it occurs.
(b) If either the Purchase Price or the Liquidated Damages is not delivered
by wire transfer of immediately available funds to the account designated by
Seller or is not received by Seller in such designated account no later than
4:00 p.m. Eastern Time on the day immediately following the Closing Date, then
Seller's remedies for such breach and default shall be (i) the immediate
recission of the Closing, including without limitation the immediate
reconveyance of the Assets by Purchaser to Seller, and (ii) any other remedies
to which Seller shall be entitled under law or equity.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
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time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, 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 any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents 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 Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms. When the Bill of Sale, Assignment
Agreement and the Deeds have been executed and delivered in accordance with this
Agreement, they will constitute the legal, valid, and binding obligation of
Seller, enforceable in accordance with their terms.
3.5 Assets. (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements and with the historic practices of the Seller.
(c) There are no assets or property of any nature which are not being
transferred to Purchaser hereunder that have been customarily used exclusively
in the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property is in good operating
condition consistent with its age, subject to normal wear and tear and has been
maintained in accordance with standard practices.
(e) The inventory on hand: (i) is sufficient for the operation of the
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Business in the ordinary course based on current levels of Operation; (ii) has
been purchased in the ordinary course of business consistent in quality and
quantity with past practices of the Business; and (iii) is substantially useable
and saleable.
3.6 Contracts and Leases. (a) Each Material Contract and Lease is a valid
and subsisting agreement, without any default of Seller thereunder, and to the
knowledge of Seller, without any default on the part of any other party thereto.
To the knowledge of Seller, no event or occurrence has transpired which with the
passage of time or giving of notice or both will constitute a default under any
Material Contract or Lease. A true and correct list of each Material Contract
and Lease and every amendment thereto or other agreement or document relating
thereto is set forth as Schedule 3.6 to this Agreement. True and correct copies
of the Material Contracts and Leases (and any amendments thereto) have been
provided to Purchaser. At the time of Closing, Seller shall have made all
payments and performed all obligations due through the Closing Date under each
Contract and Lease, except to the extent that any payment due is set forth on
Exhibit B and deducted in calculating the Purchase Price pursuant to Section
2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property.
(a) Schedule 3.7(a) sets forth with respect to each Restaurant, its
location, whether it is located on Owned Real Property or is on a site subject
to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller, or the owner of the DR Holdings Tracts, has obtained all
authorizations and rights-of-way which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the site of each Restaurant, all of
which are assignable and shall be assigned to Purchaser at the Closing.
(d) Neither Seller nor the holder of the DR Holdings Tracts has received
any notice that any Government having the power of eminent domain over any
parcel of Real Property has commenced or intends to exercise the power of
eminent domain or a similar power with respect to any part of the Real Property.
(e) The Real Property and the present uses thereof comply with all laws and
regulations (including zoning laws and ordinances) of all Governments having
jurisdiction over the Real Property and all recorded covenants or restrictions,
and Seller has received no notice from any Government alleging that the Real
Property or any improvements erected or situated thereon, or the uses conducted
thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
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adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, or to the knowledge of Seller received by any owner of any
of the Real Property subject to a Lease, requiring or calling attention to the
need for any work, repair, construction, alteration, or installation on or in
connection with the Real Property which has not been complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
compliance with all applicable Environmental Laws and Environmental Permits held
by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Property to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller relating to any alleged past or
ongoing violation of any Environmental Laws or Environmental Permits with
respect to the Real Property, nor to Seller's knowledge is Seller subject to any
liability for any such past or ongoing violation, nor is Seller subject to any
liability for any such past or ongoing violation caused by Seller. Matters
referenced above of which Seller has knowledge are referenced on Schedule
3.7(g).
3.8 Financial Statements. Schedule 3.8 contains for each Restaurant
unaudited statements of operations as of the end of the 1997 fiscal year and for
each fiscal month ended thereafter through March 29, 1998 for which such
statements are available (the "Financial Statements"). The Financial Statements
have been prepared in accordance with Seller's historical practices and fairly
present the operations of the Restaurants for the periods presented and as of
their respective dates.
3.9 Taxes. All Property Taxes relating to the Assets have been fully paid
for 1997 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 other tax
returns and reports of whatever kind pertaining to the Assets and required to be
filed by Seller up to the Closing Date and such returns and reports properly
reflect or will properly reflect the tax liability of the Seller. Seller has
paid (or will timely pay) all taxes of whatever kind, including any interest,
penalties, governmental charges, duties, fees, and fines imposed by all
governmental entities or taxing authorities and withholding amounts, which are
due and payable prior to the Closing Date or for which assessments relating to
any period prior to the Closing Date have been received or levied. There are no
audits, suits, actions, claims, investigations, inquiries, or proceedings
pending or, to Seller's 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. The Seller has not requested any extension of time within which to
file returns in respect of any taxes. No tax deficiencies have been proposed or
assessed against Seller. For purposes hereof, "tax" or "taxes" means all
federal, state, county, local, foreign and other taxes or assessments including,
without limitation, income, estimated income, business, occupation, franchise,
property (real and personal), sales, employment, gross receipts, use, transfer,
ad valorem, profits, license, capital, payroll, employee withholding,
unemployment, excise, goods and services, severance, stamp and including
interest, penalties and additions in connection therewith for which the Seller
is or may be liable.
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3.10 Litigation. Except as set forth on Schedule 3.10, there is no Action
or Order pending or, to the knowledge of Seller, threatened against or affecting
Seller that pertains to the Restaurants or Business, or any of the Assets before
any court or by or before any Forum. The Seller is not subject to any order,
writ, judgment, injunction or decree of any governmental authority or
instrumentality or any court which would limit or restrict the Seller's right to
enter into and carry out this Agreement or the documents or agreements to be
entered into in connection herewith or to consummate the transactions
contemplated hereby or which would otherwise adversely affect the Business or
the Assets.
3.11 Permits. Seller has all Permits as are necessary to operate the
Restaurants and such Permits as set forth on Schedule 3.11 are and will be as of
the Closing current and effective. Seller has fulfilled and performed all of its
obligations with respect to such Permits, and to the knowledge of the Seller no
event has occurred which allows, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any other impairment
of the rights of the holder of any such Permits.
3.12 Compliance with Health and Safety Laws. To the knowledge of Seller,
Seller is in compliance with all laws, governmental standards, rules and
regulations applicable to Seller or to any of the Assets including, but not
limited to, the Americans with Disabilities Act and similar state laws,
occupational health and safety laws, and environmental laws.
3.13 Employment Contracts, Etc. Seller is not is a party to any written
employment agreements related to the employees at the Restaurants, (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits.
(a) Schedule 3.15 hereto contains a true and complete list of all the
following agreements or plans of Seller which are presently in effect and which
pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Sellers maintains or to which Seller has
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any outstanding, present, or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and has never contributed or been
obligated to contribute to a multiemployer plan as defined in section 3(37)(A)
of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in this Agreement or in any certificate furnished to
Purchaser pursuant to this Agreement or in the Disclosure Memorandum is or will
be when furnished both complete and accurate in all material respects; and all
documents furnished to Purchaser pursuant to this Agreement which are documents
described in this Agreement or in the Disclosure Memorandum are true and correct
copies of the documents which they purport to represent.
3.17 Conduct of Business. Since the end of fiscal year 1997, Seller has
conducted the operations of the Business in the ordinary course of business and
substantially in accordance with past practice, and has not taken any action
that, if taken after the date hereof, would violate Section 4.5.
3.18 Insurance. The Seller maintains policies of fire and casualty,
liability and other forms of insurances and bonds in such amounts, with such
deductibles, and against such risks and losses as are reasonable for the
Business and the Assets. Each such insurance policy and bond is in full force
and effect and Seller has not received notice and is not otherwise aware of any
cancellation or threat of cancellation of such insurance or bond.
3.19 Undisclosed Commitments or Liabilities. There are no commitments or
liabilities or obligations relating to the Business, whether accrued, absolute,
contingent or otherwise including, but not limited to, guarantees by Seller of
the liabilities of third parties for which specific and adequate provisions have
not been made on the Financial Statements, except those incurred in or as a
result of the ordinary course of business since the end of fiscal year 1997
(none of which ordinary course obligations have had or will have a material
adverse effect on the Assets or the Business).
ARTICLE IV - COVENANTS OF SELLER
4.1 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 Leases
and Material Contracts, where the failure to do so would have a material adverse
affect on the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to cooperate in assisting Purchaser with the assumption,
transfer, or reissuance of any and all Permits required for the operation of the
Restaurants, including without limitation making available ADI Personnel
required therefor.
4.3 Liabilities of Seller. All liabilities of Seller related to the Assets
which are not Assumed Liabilities will be promptly paid by Seller as they come
due.
4.4 Agreements Respecting Employees of Seller.
(a) Prior to the Effective Time without the prior written approval of
Purchaser and Hospitality, Seller shall not transfer or reassign to operations
outside the Business any employee exclusively involved in the operation or
supervision of the Restaurants ("ADI Personnel") At the Effective Time, Seller
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shall terminate the employment of all ADI Personnel. For a period of twelve
months following the Closing, neither Seller nor Hospitality shall hire any
person who was an employee of Purchaser within the previous three months. For a
period of eighteen months following the Closing, neither Seller nor Hospitality
shall solicit for employment any person who is an employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller, Purchaser, and Hospitality shall cooperate in the transition of
coverage of ADI Personnel from Seller's health, medical, life insurance and
other welfare plans to plans maintained by Hospitality.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
of the Franchise Agreements, using commercially reasonable efforts in keeping
with Seller's historical practices to preserve and maintain the services of its
employees and its relationships with suppliers and customers, (ii) pay all bills
and debts incurred by it related to the Business promptly as they become due,
and (iii) consult in advance with Purchaser on all decisions outside the
ordinary course of business relating to the Assets or the Restaurants.
(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices and in good
operating condition consistent with their age;
(ii) 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;
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations; and
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change in any material manner the ownership of the Assets; or directly
or indirectly, solicit or entertain any offer from or negotiate with or in any
manner engage, discuss, accept or consider any proposal from any other person
relating to the acquisition of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan which will be paid within
six weeks after the end of the month in which the Closing occurs;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts pursuant to Section 4.7 in the ordinary course of business)
any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into any Material Contract except in the ordinary course of
business;
(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
Lease, amend or otherwise modify any of its material terms or waive any breach
of any of its material terms or provisions or take any other action in
connection with any Material Contract or Lease that would materially impair the
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interests or rights of Seller to be transferred to Purchaser hereunder.
(vii) Cancel or terminate or permit to be canceled or terminated its
current insurance (or reinsurance) policies or permit any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, or lapsed policies are in full force
and effect.
4.6 Access to Information. Seller shall afford Purchaser and Hospitality,
their 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 Purchaser and Hospitality
such additional financial and operating data and other information as Seller may
possess and as Purchaser or Hospitality may reasonably request, subject to
Purchaser's and Hospitality's obligations regarding the confidentiality of such
information as set forth in Section 6.2 hereof; provided, however, that such
access shall be arranged in advance by Purchaser or by Hospitality with Seller
and will be scheduled in a manner and with a frequency calculated to cause the
minimum disruption of the business of Seller.
4.7 Development Efforts. Seller shall use commercially reasonable efforts
to maintain the current results of its development activities for the
Development Sites set forth on Schedule 4.7 for the benefit of Purchaser until
Purchaser's election pursuant to Section 6.5 hereto.
4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information with respect to any event which has materially adversely affected
the Assets or the operations of the Restaurants.
(b) 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 for
such month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
actions, charges, orders or other directives affecting the Business or 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) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
(e) Promptly after discovery, information in respect of any representation
or warranty made by Seller in this Agreement which was when made, or has
subsequently become, untrue.
(f) Promptly after receipt, any and all notices from Landlords under the
Leases.
4.9 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Seller will use commercially reasonable efforts to cause
the conditions set forth in Article VII to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby, including
obtaining the Consents. The parties acknowledge that no consents will be sought
with respect to any Minor Contract even if the failure to so obtain a consent to
assignment may result in a default or termination thereunder. Seller will use
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commercially reasonable efforts to obtain required consents of landlords to the
assignment of the Leases and shall bear any expenses associated with obtaining
such consents; however, Seller shall not be required to make any payment to a
landlord (other than reimbursement of expenses), guarantee any Lease or remain
liable for the payment thereof following the Closing, or agree to any
concessions or amendment to other leases or arrangements with such landlord in
order to obtain such consents.
4.10 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
Material Contracts entered into by Seller ("Subsequent Contracts") a provision
permitting the assignment of any such Subsequent Contract to Purchaser and
providing that upon such assignment, Purchaser shall succeed to all of Seller's
rights, title, and interests thereunder subject to the Purchaser'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.
4.11 Transition Services.
(a) For a period of three months after the Closing, if and to the extent
requested in writing by Purchaser, Seller agrees to provide to Purchaser and/or
Hospitality the services related to the Restaurants specified in Schedule 4.11
hereto (the "Services"). The Services shall be provided promptly and shall be
provided in the same manner and with the same or similar personnel as Seller
previously utilized.
(b) Purchaser or Hospitality will each pay for the Services which they
respectively receive 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 agreed to in
advance 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 Purchaser or Hospitality, Seller shall offer to specifically
designated personnel a bonus incentive to remain for the three month period. The
amount of such bonus shall be at the discretion of Purchaser. Such bonus, if
accepted by the employee, shall be paid by Purchaser at the end of the
three-month period, or for such shorter period as Purchaser may determine.
Nothwithstanding anything else in this Section 4.11, if Seller no longer has the
personnel to provide the services, Seller may outsource the Services to a third
party so long as the Services provided are in substantially the manner which
Seller would have provided if Seller did have such personnel and so long as the
cost of the Services invoiced to Purchaser and/or Hospitality do not exceed the
amount that the Services would have cost if Seller did have such personnel.
4.12 Delivery of Real Estate Documents. Seller has previously provided to
Purchaser legal descriptions of the Owned Real Property and copies of all
surveys, title policies, and environmental reports pertaining to the Owned Real
Property in Seller's possession.
4.13 Risk of Loss. Seller shall give Purchaser notice of the occurrence of
damage or destruction of or the commencement of condemnation proceedings
affecting the Real Property. If any portion of the Real Property is condemned or
is damaged or destroyed by fire or other casualty prior to the Closing,
Purchaser shall have the option to (i) eliminate that tract from the Agreement
and receive a deduction in the purchase price based on that portion of the
purpose price allocated to such tract, or (ii) proceed to Closing and receive
the insurance or condemnation proceeds associated therewith. Purchaser's
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election shall be made within 20 days following receipt of Seller's notice.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Hospitality hereby represent and warrant to Sellers as
follows:
5.1 Organization, Corporate Power, Authorization. Each of Purchaser and
Hospitality is a limited liability company duly organized, validly existing, and
in good standing under the laws of the State of Wisconsin and in each other
jurisdiction in which it is lawfully required to qualify to conduct business.
Each of Purchaser and Hospitality has the corporate power and authority to
execute and deliver this Agreement and the Bill of Sale and Assignment
Agreement, and to consummate the transactions contemplated hereby. All corporate
action on the part of Purchaser necessary for the authorization, execution, and
delivery of this Agreement and the Bill of Sale and Assignment Agreement, and
performance of all obligations of Purchaser thereunder has been duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement and the
Bill of Sale and Assignment Agreement by Purchaser and Hospitality do not and
the consummation by Purchaser and Hospitality of the transactions contemplated
hereby and thereby will not violate any provision of their respective articles
of organization or operating agreement.
5.3 Validity. This Agreement has been duly executed and delivered by
Purchaser and Hospitality, and constitutes the legal, valid, and binding
obligation of Purchaser and Hospitality, enforceable against Purchaser and
Hospitality in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Purchaser, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
5.4 Litigation Relating to the Agreement. Neither Purchaser nor Hospitality
is a party to, or subject to any judgment, decree, or order entered in any
lawsuit or proceeding brought by any governmental agency or instrumentality or
other party seeking to prevent the execution of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE VI - COVENANTS OF PURCHASER
6.1 Purchaser Performance. After the Closing Date, Purchaser shall promptly
pay as they become due and otherwise perform all obligations of Seller under the
Assumed Liabilities and otherwise perform and fulfill all other obligations with
respect to the Assets pertaining to the period after the Closing Date.
6.2 Confidentiality. In connection with the negotiation of this Agreement,
Seller may disclose Confidential Information, as defined below, to Purchaser
and/or Hospitality. Purchaser and Hospitality agree that if the transactions
contemplated herein are not consummated, eahc of Purchaser and Hospitality will
return to Seller all documents and other written information furnished to it.
Purchaser and Hospitality further agree to maintain the confidentiality of any
and all Confidential Information of Seller and not disclose any Confidential
Information to any Person other than such Person to whom Confidential
Information must be disclosed to effect the transactions and who are bound by
appropriate non-disclosure agreement or obligations. Purchaser and Hospitality
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller. The foregoing obligations shall not apply to (i) any
information which was known by Purchaser prior to its disclosure by Seller or
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Hospitality; (ii) any information which was in the public domain prior to the
disclosure thereof; (iii) any information which comes into the public domain
through no fault of Purchaser; (iv) any information which is disclosed to
Purchaser or Hospitality by a third party, other than an affiliate, having the
legal right to make such disclosure; or (iv) any information which is required
to be disclosed by Order of any Forum. For purposes of this Section,
"Confidential Information" shall mean any and all technical, business, and other
information which is (a) possessed or hereafter acquired by Seller and disclosed
to Purchaser or Hospitality and (b) derives economic value, actual or potential,
from not being generally known to Persons other than Seller, including, without
limitation, technical or nontechnical data, compositions, devices, methods,
techniques, drawings, inventions, processes, financial data, financial plans,
product plans, lists of actual or potential customers or suppliers, information
regarding the business plans and operations of Seller, and the existence of
discussions and negotiations between the parties hereto relating to the terms
hereof. The restrictions of this Section shall expire three years from the date
hereof with respect to any confidential business information that does not
constitute a trade secret under applicable law. Purchaser and Hospitality agree
to execute a confidentiality agreement with respect to all information received
in connection with due diligence.
6.3 Seller Employees.
(a) Hospitality shall offer employment to all ADI Personnel upon terms and
conditions substantially equivalent to those provided by Seller; however,
Hospitality shall not be required to provide stock options or any stock purchase
rights. For a period of twelve months following the Closing, neither Purchaser
nor Hospitality shall hire any person who was an employee of Seller or any
subsidiary of Seller within the previous three months (other than ADI
Personnel), and for a period of eighteen months following the Closing, neither
Purchaser nor Hospitality shall solicit for employment any person who is an
employee of Seller or any subsidiary of Seller.
(b) Hospitality shall maintain employee records transferred to Hospitality
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Hospitality's normal
business hours. Hospitality shall maintain the confidentiality of such records
and limit access thereto in a manner consistent with Hospitality's treatment of
its employee records.
(c) Hopsitality agrees, with respect to ADI Personnel hired by Hospitality,
to provide compensation and benefits to such ADI Personnel substantially
equivalent to current levels, excluding stock options and the stock purchase
program, and agrees (i) to give such employees credit under Hospitality's
benefits plans, programs, and arrangements, including credit for accrued but
unvested vacation which has been charged to Seller under Section 2.3, for such
employees' period of service with Seller, provided that such credit shall only
be taken into account under any tax-qualified plan maintained by Hospitality 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; (ii) to provide coverage to such
employees who are eligible under Hospitality'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 deductibles,
out of pocket expenses, and similar amounts paid by individuals and their
beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, each of Purchaser and Hospitality shall use commercially
reasonable efforts to cause the conditions set forth in Article VII to be
satisfied and to facilitate and cause the consummation of the transactions
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contemplated hereby. Specifically, but not by way of limitation, (i) Purchaser
will use commercially reasonable efforts to obtain a commitment letter for
financing the transactions contemplated hereby on substantially the terms set
forth in Exhibit F (the "Financing Commitment"), (ii) Purchaser and Hospitality
will promptly provide Franchisor with all information required by Franchisor to
determine whether Hospitality will be approved by as a developer with respect to
the Territory and whether Purchaser will be approved as a franchisee with
respect to the Territory, (iii) Purchaser and Hospitality will actively pursue
an agreement with Franchisor as to the principal terms of franchise and
development agreements with respect to the Territory, and (iv) Purchaser will
file all documents required to obtain approval of the transactions contemplated
hereby under the HSR Act within 15 days of the date hereof.
6.5 Development Sites. There are no Development Sites, and notwithstanding
anything else herein, references in this Agreement to Development Sites and
Development Costs shall take into account that there are no Development Sites.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser has procurred
obtained and reviewed (i) current surveys and title insurance commitments with
respect to the Owned Real Property ("Owner's Title Commitments") pursuant to
which the Title Company will agree to issue at Closing owner's policies of title
insurance ("Owner's Title Policies") on American Land Title Association standard
Form B-1990, without exceptions except as shown in the Owner's Title
Commitments, to be issued by Chicago Title Insurance Company ("Title Company")
in an amount in the case of each parcel equal to the purchase price allocated to
such parcel of the Owned Real Property pursuant to Section 2.7, and (ii) current
surveys and title insurance commitments with respect to the Real Property
subject to a Lease (collectively, the "Leased Real Property") (the "Lessee Title
Commitments", and collectively with the Owner's Title Commitments, the "Title
Commitments") pursuant to which the Title Company will agree to issue at Closing
lessee's policies of title insurance ("Lessee's Title Policies") on American
Land Title Association standard form of leasehold owner's policy to insure
leasehold estates, showing no exceptions except as shown in the Lessee Title
Commitments. The Owner's Title Policies shall insure the Purchaser that, upon
consummation of the purchase and sale herein contemplated, Purchaser will be
vested with good, fee simple, marketable, and insurable title to the Owned Real
Property, subject only to the Permitted Encumbrances or arising out of acts of
the insured. The Lessee's Title Policies shall insure the Purchaser that, upon
consummation of the transactions herein contemplated, Purchaser will be vested
with a good, valid, marketable and insurable leasehold estate in and to the
Leased Real Property, subject only to the Permitted Encumbrances. Purchaser has
furnished to Seller a written statement of reasonable objections to exceptions,
including any encumbrances or Surveys, which, in Purchaser's reasonable
judgment, would materially interfere with or impair Purchaser's use of the Real
Property for the operation of Applebee's restaurants or which would result in a
material decrease in the value of the Real Property ("Material Objections").
Seller shall have until the Termination Date to satisfy such Material Objections
(but with no obligation to do so) in all material respects, and if Seller fails
to satisfy all Material Objections in all material respects on or prior to the
Termination Date, then Purchaser's sole right and remedy shall be to either (i)
waive the objections and elect to close, or (ii) terminate this Agreement by
giving written notice of such termination to Seller. The parties acknowledge
that some of the Leased Real Property may be located in shopping centers, and as
such, unless the leased premises are a free standing building located on a
separate pad with its own legal description ("Free Standing Premises") the
Lessee Title Commitments for such Leased Real Property will contain encumbrances
for the entire shopping centers. Purchaser may not object to title encumbrances
for such Leased Real Property that do not affect the premises leased under the
Leases, which such encumbrances shall be deemed to be Permitted Encumbrances.
(b) Property Inspection.
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(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property and its compliance with laws;
provided, however, that (i) any activities by or on behalf of Purchaser,
including, without limitation, the entry by Purchaser or Purchaser's Designees
onto the Real Property, or the other activities of Purchaser or Purchaser's
Designees with respect to the Real Property (hereinafter called "Purchaser's
Activities") shall not damage the Real Property in any material manner
whatsoever or disturb or interfere with the rights of any lessor of Leased Real
Property; (ii) in the event the Real Property is altered or disturbed in any
manner in connection with any Purchaser's Activities, Purchaser shall
immediately return the Real Property to the condition existing prior to
Purchaser's Activities; (iii) Purchaser shall in no event without Seller's prior
written consent disclose the results of any of its investigations, examinations,
tests, or inspections to any party (including any Government unless required by
law) other than to its lenders, attorneys, consultants, and investors; and (iv)
Purchaser shall indemnify, defend, and hold Seller harmless from and against any
and all claims, liabilities, damages, losses, costs, and expenses of any kind or
nature whatsoever (including, without limitation, attorneys' fees, and expenses
and court costs) suffered, incurred or sustained by Seller as a result of, by
reason of, or in connection with any Purchaser's Activities. Notwithstanding any
provision of this Agreement to the contrary, Purchaser shall not have the right
to undertake any environmental studies or testing beyond the scope of a standard
"Phase I" evaluation without the prior written consent of Seller and, if
applicable, the lessor of any Leased Real Property.
(B) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities; or (ii) Closing.
(C) Purchaser acknowledges that Seller may deliver to Purchaser certain
documents and information in possession of Seller or Seller's agents with regard
to the Real Property (hereinafter called the "Due Diligence Materials"). The Due
Diligence Materials will be provided to Purchaser without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchaser
for Purchaser's informational purposes. Until Closing, Purchaser and Purchaser's
Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchaser's and Hospitality's Conditions to Closing. The obligations of
Purchaser and Hospitality hereunder are subject to satisfaction of each of the
following conditions at or before Closing, the occurrence of which may, at the
option of Purchaser and Hospitality, be waived:
(a) Subject to the matters disclosed in the Disclosure Memorandum as
supplemented by Seller from time to time, all representations and warranties of
Seller in this Agreement shall be true in all material respects on and as of the
Closing.
(b) Any supplement to the Disclosure Memorandum delivered by Seller shall
not reflect in Purchaser's reasonable judgment any material adverse change in
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the Assets or the Business.
(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 have obtained and delivered to Purchaser all Consents
necessary to transfer and assign the Assets (except for Minor Contracts) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant in the Territory. Hospitality and Franchisor
shall have entered into development agreements with respect to each ADI in the
Territory.
(f) Purchaser and Hospitality shall have obtained, either from Seller or
directly from the issuing authority, all permits, licenses, including liquor
licenses and beer permits, and approvals of all governmental and
quasi-governmental authorities necessary for the operation of the Restaurants in
accordance with franchise requirements; provided, however, that if Purchaser is
unable to obtain from local municipal or county authorities a permit necessary
for such operation of the Restaurants, and Purchaser 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 Purchaser a duly executed liquor license management agreement or
agreements with form and substance reasonably acceptable to Purchaser and
Seller.
(g) 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 Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit F upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 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 Purchaser and Hospitality in this
Agreement shall be true on and as of the Closing, and Purchaser and Hospitality
shall have delivered to Seller a certificate to such effect dated as of the
Closing Date.
(b) Purchaser and Hospitality shall have performed and complied in all
material respects with Purchaser's and Hopsitality's obligations under this
Agreement which are to be performed or complied with by Purchaser or Hospitality
prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(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 Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
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ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims.
(a) Seller shall indemnify and hold harmless Purchaser and Hospitality, and
their respective successors and assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser and Hospitality that result from, relate to, or arise
out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
or Hospitality by Seller pursuant hereto; or
(D) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Seller's
dealings, agreement, or arrangement with such Person.
(ii) Any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs, and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing including all such expenses reasonably incurred in
mitigating any damages resulting to Purchaser or Hospitality from any matter set
forth in subsection (i) above.
(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to Section 8.1(a)(i)(C) (and Section
8.1(a)(ii) to the extent the items covered thereby relate back to Section
8.1(a)(i)(C)) until the aggregate liability of Seller thereunder exceeds
$159,163 and then only to the extent that the aggregate liability of Seller
thereunder exceeds such amount; provided, however, that liabilities arising with
respect to Sections 3.1 through 3.4 and Sections 3.5(a), 3.5(d), 3.7(g), and 3.9
hereof shall not be subject to the foregoing threshold and any liabilities
arising with respect to such matters shall not be taken into account in
computing aggregate liabilities for the purpose of applying such threshold
amount to liabilities arising under other Sections subject thereto, provided,
however, that Seller shall have no liability for indemnification or otherwise
with respect to Section 8.1(a)(i)(C) to the extent it relates to Section 3.5(d)
(and Section 8.1(a)(ii) to the extent the items covered thereby relate back to
Section 8.1(a)(i)(C)'s applicability to Section 3.5(d)) until the aggregate
liability of Seller thereunder relating to a particular Restaurant exceeds
$5,000 for such Restaurant and then only to the extent that the aggregate
liability of Seller thereunder exceeds such amount. In no event shall the
aggregate liability of Seller under Section 8.1(a)(i)(C) (and Section 8.1(a)(ii)
to the extent the items covered thereby relate back to Section 8.1(a)(i)(C))
exceed $3,008,000; provided, however, that liabilities arising with respect to
Sections 3.1 through 3.4 and Sections 3.5(a), 3.5(d), and 3.9 hereof shall not
be subject to the foregoing cap and any liabilities arising with respect to such
matters shall not be taken into account in computing aggregate liabilities for
the purpose of applying such cap to liabilities arising under other sections
subject thereto.
(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any tax benefit to Purchaser and Hospitality from the matter
giving rise to the claim for indemnification hereunder and net of any insurance
proceeds received by Purchaser or Hospitality with respect to the matter out of
which such liability arose.
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(d) The representations and warranties of Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate delivered by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(i) the representations and warranties contained in Section 3.5(d) shall be
of no further force and effect after 60 days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1 through
3.4 and Sections 3.5(a), 3.7(g) and 3.9 shall survive until the expiration of
any applicable statues of limitation provided by law; and
(iii) all other representations and warranties of Seller shall be of no
further force and effect after 18 months from the date of the Closing.
Anything to the contrary notwithstanding, the Survival Period shall be
extended automatically to include any time period necessary to resolve a written
claim for indemnification which was made in reasonable detail before expiration
of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
(e) Except for claims under Sections 4.1, 4.3, 4.4, 4.5, 4.11, and 4.13
which shall survive the Closing, Purchaser and Hospitality may not assert any
claim against Seller for breach of any covenant contained in Article IV and all
such claims shall be deemed to be waived as a result of the Closing.
(f) Purchaser and Hospitality shall provide written notice to Seller of any
claim for indemnification under this Article as soon as practicable; provided,
however, that failure to provide such notice on a timely basis shall not bar
Purchaser's or Hospitality's ability to assert any such claim except to the
extent that Seller is actually prejudiced thereby. Purchaser and Hospitality
shall make commercially reasonable efforts to mitigate any damages, expenses,
etc. resulting from any matter giving rise to liability of Seller under this
Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
or Hospitality under Section 8.1, relating to a third party claim or demand,
Purchaser and Hospitality shall provide Seller with prompt written notice
thereof in accordance with Section 10.4 and Seller may defend, in good faith and
at its expense, by legal counsel chosen by it and reasonably acceptable to
Purchaser and Hospitality any such claim or demand, and Purchaser and
Hospitality, at their expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser and Hospitality shall not settle or
compromise such third party claim. In any event, Purchaser and Hospitality shall
cooperate in the settlement or compromise of, or defense against, any such
asserted claim. Notwithstanding the foregoing, Seller shall obtain the consent
of Purchaser and Hospitality, which consent shall not be unreasonably withheld,
prior to settling any such third party claim. In the event, the Seller shall
notify the Purchaser and Hospitality that it disputes any claim made by the
Purchaser or Hospitality and/or it shall fail to defend such claim actively and
in good faith, then the Purchaser and Hospitality shall have the right to
conduct a defense against such claim and shall have the right to settle and
compromise such claim without the consent of the Seller. Once the amount of such
claim is liquidated and the claim is finally determined, the Purchaser and
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Hospitality shall be entitled to pursue each and every remedy available to it at
law or in equity (through the procedure specified in Section 8.5) to enforce the
indemnification provisions of this Article VIII and, in the event it is
determined, or the Seller agrees, that it is obligated to indemnify the
Purchaser and Hospitality for such claim, the Seller agrees to pay all costs,
expenses and fees, including all reasonable attorneys' fees, which may be
incurred by Purchaser in attempting to enforce indemnification under this
Article VIII.
8.3 Seller Claims. Purchaser and Hospitality shall indemnify and hold
harmless Seller against, and in respect of, any and all damages, claims, losses,
liabilities, and expenses, including without limitation, legal, accounting and
other expenses, which may arise out of: (i) any breach or violation by Purchaser
or Hospitality of any covenant set forth herein or any failure to fulfill any
obligation set forth herein, including, but not limited to, the obligation to
satisfy the Assumed Liabilities; (ii) any breach of any of the representations
or warranties made in this Agreement by Purchaser or Hospitality; or (iii) any
claim by any Person for any brokerage or finder's fee or commission in respect
of the transactions contemplated hereby as a result of Purchaser's or
Hospitality's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII 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.
8.5 Settlement of Disputes.
(a) Arbitration. All disputes with respect to any claim for indemnification
under this Article VIII and all other disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the following
procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("AAA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
(iii) The arbitration hearing shall be held in Milwaukee, Wisconsin (in the
case of arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser or Hopsitality) or in a location mutually
agreeable to Seller, Purchaser, and Hospitality; or if Purchaser, Hospitality,
and Seller are unable to agree then at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Wisconsin (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, and judgment on such award may be entered by either party in a court of
competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
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the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination.
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller, Purchaser, and
Hospitality;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if (i) Purchaser shall not have obtained and provided a
copy of a Financing Commitment to Seller by the Termination Date, (ii) Purchaser
shall not been approved hereof as a franchisee with respect to the Territory by
Franchisor by the Termination Date or has not reached agreement with Franchisor
as to the material terms of franchise agreements with respect to the Territory
by the Termination Date, (iii) Hospitality shall not have reached agreement with
Franchisor as to a development schedule and other material terms of development
agreements with respect to the Territory by the Termination Date;
(iv) By either Seller, Purchaser, or Hospitality, at its sole election, at
any time after the Termination Date, if the Closing shall not have occurred on
or prior to such date;
(v) By Purchaser, if Seller makes any amendment or modification of, or
addition or supplement to, the Disclosure Memorandum the subject of which has,
had or could reasonably be expected to have a material adverse effect upon the
financial condition, properties, liabilities, business, results or operations of
the Business; or
(v) By Purchaser, pursuant to Section 2.10 hereof.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller, Purchaser, or Hospitality, as the
case may be, shall have willingly failed to fulfill its obligations hereunder,
the other party shall, subject to Section 8.5, be entitled to pursue, exercise,
and enforce any and all remedies, rights, powers, and privileges available to it
at law or in equity.
(c) If this Agreement is terminated pursuant to this Section 9.1, subject
to Section 9.1(b) and subject to Section 9.1(a)(v) and the liabilities specified
in Section 2.10, all further obligations of the parties under or pursuant to
this Agreement shall terminate without further liability of either party to the
other, provided that, Section 6.2, Article VIII, and Article X hereof shall
survive the termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
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and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) The parties shall split equally the costs of all filing fees required
under the HSR Act.
(c) Purchaser shall pay the costs of obtaining title insurance with respect
to the Real Property. Seller shall pay the costs of all transfer, intangible,
recording, and documentary taxes, stamps, and fees with respect to the transfer
of the Owned Real Property and the Leases. Purchaser shall pay the cost of all
surveys, and all environmental investigations, studies, and reports, and all
other costs of any investigation of the Assets, the Restaurants, or the Business
by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
If to Seller, to: With a required copy to:
Apple South, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Attention: Louis J. (Dusty) Profumo Attention: Larry D. Ledbetter, Esq.
Fax: 706-343-2434 Fax: 404-815-6555
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If to Purchaser: With a required copy to:
WHG Real Estate South, LLC Godfrey & Kahn, S.C.
c/o Wisconsin Hospitality Group, LLC 780 N. Water Street
2500 North Mayfair Road, Suite G-117 Milwaukee, WI 53202
Wauwatosa, Wisconsin 53226 Attention: Kelley Falkner
Attention: Mark Dillon Fax: (414) 273-5198
Fax: (414) 369-0705
If to Hospitality: With a required copy to:
Wisconsin Hospitality Group, LLC Godfrey & Kahn, S.C.
2500 North Mayfair Road, Suite G-117 780 N. Water Street
Wauwatosa, Wisconsin 53226 Milwaukee, WI 53202
Attention: Mark Dillon Attention: Kelley Falkner
Fax: (404) 369-0705 Fax: (414) 273-5198
If to Guarantor: With a required copy to:
Wisconsin Hospitality Group, LLC Godfrey & Kahn, S.C.
2500 North Mayfair Road, Suite G-117 780 N. Water Street
Wauwatosa, Wisconsin 53226 Milwaukee, WI 53202
Attention: Mark Dillon Attention: Kelley Falkner
Fax: (414) 369-0705 Fax: (414) 273-5198
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U. S. Mail properly addressed with adequate postage affixed.
10.5 WISCONSIN LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Purchaser, Hospitality, 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,
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.
10.10 Disclaimer of Warranties. OTHER THAN TO THE EXTENT OF ANY EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT AND IN THE
CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i), SELLER DOES NOT, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, AND SELLER SHALL NOT, BY THE EXECUTION
AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION
WITH THE CLOSING, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE ASSETS, AND ALL SUCH
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WARRANTIES ARE HEREBY DISCLAIMED. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, SHALL
ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INSPECTIONS AND INVESTIGATIONS EXCEPT TO THE EXTENT OF SELLER'S REPRESENTATIONS
AND WARRANTIES MADE HEREIN. SELLER SHALL SELL AND CONVEY TO PURCHASER, AND
PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS", AND WITH ALL FAULTS,
EXCEPT TO THE EXTENT OF SELLER'S REPRESENTATIONS AND WARRANTIES MADE HEREIN, AND
THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR
AFFECTING THE ASSETS BY SELLER, SELLER MAKES, AND SHALL MAKE, NO EXPRESS OR
IMPLIED WARRANTY OF SUITABILITY OR FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE,
OR AS TO THE MERCHANTABILITY, ENVIRONMENTAL CONDITION, TITLE, VALUE, QUALITY,
QUANTITY, CONDITION OR SALABILITY OF ANY OF THE ASSETS, OR AS TO THE PRESENCE ON
OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS MATERIAL EXCEPT TO THE EXTENT OF
SELLER'S REPRESENTATIONS AND WARRANTIES HEREIN. THE TERMS AND CONDITIONS OF THIS
SECTION 10.11 SHALL SURVIVE THE CONSUMMATION OF THE PURCHASE AND SALE OF THE
ASSETS ON THE CLOSING DATE WITHOUT REGARD TO ANY GENERAL LIMITATIONS UPON
SURVIVAL SET FORTH IN THIS AGREEMENT. THE LIMITATIONS SET FORTH IN THIS SECTION
SHALL IN NO WAY LIMIT ANY WARRANTY FROM ANY THIRD PARTY.
10.11 Time. Time is and shall be of the essence of this Agreement.
10.12 Guarantee. Mark Dillon agrees to guarantee the performance and
obligations of Purchaser with respect to this agreement; provided that such
guarantee shall terminate after the Closing Date, and Seller has relied upon
such guarantee in entering into this Agreement.
[Signatures Located on Following Pages]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SELLER:
APPLE SOUTH, INC.
By:
PURCHASER:
WHG REAL ESTATE SOUTH, LLC
By:
By:
HOSPITALITY:
WISCONSIN HOSPITALITY GROUP, LLC
By:
GUARANTOR:
MARK DILLON
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1(i) Tangible Personal Property located in the Restaurants
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.11 Permits
3.15 Seller Plans
4.7 Development Sites
4.11 Transition Services
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Adjustment to Purchase Price
C Opinion of Seller's Counsel
D Opinion of Purchaser's and Hospitality's Counsel
E Allocation of Purchase Price
F Lender's Commitment Letter
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of August 20, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller"), WHG REAL ESTATE EAST, LLC,
a Wisconsin limited liability company ("Purchaser"), and WISCONSIN HOSPITALITY
GROUP, LLC, a Wiscosin limited liability company ("Hospitality"),
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
WHEREAS, Hospitality will provide certain management services to Purchaser
after such sale and purchase, and in connection therewith, Hospitality desires
to make certain agreements with Seller as set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADIs" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials; as set forth in Schedule 1.1(i).
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v)all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi)all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii) the Contracts and Leases;
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(viii) the Owned Real Property; and
(ix)all records and files related to the Real Property such as rent
calculations, landlord correspondence, purchase agreements, deeds, construction
documents, title reports, environmental and engineering reports, appraisals,
surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, or any other property, tangible or intangible, real
or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c), and (viii) all
obligations assumed by Purchaser with respect to Seller's development sites
under Section 4.7 not otherwise assumed hereunder or covered by an increase in
the purchase price pursuant to Section 2.3. Assumed Liabilities shall not
include any liability, obligation, payment, duty, or responsibility of any
nature except as expressly described above and specifically shall not include
(i) liabilities or obligations of Seller arising out of any breach by Seller of
any of the Contracts or Leases; (ii) except as provided in clauses (ii) or (iv)
above, liabilities or obligations of Seller under any of the Contracts or Leases
or with respect to the Owned Real Property or other Assets that accrue in any
such case prior to the Closing; (iii) any liabilities or obligations of Seller
under the Franchise Agreements; (iv) any liability of Seller for product
liability, personal injury, property damage, or otherwise based on any tort
claim or statutory liability (including but not limited to any "dram shop"
liability); (v) any federal, state, or local tax liability of Seller except to
the extent expressly assumed hereunder, (vi) any contractual claim based on any
lease, contract, or agreement other than the Contracts and Leases; (vii) any
liability, obligation, or responsibility of Seller to Seller's employees,
agents, or independent contractors with respect to wages, salaries, bonuses, or
other compensation or benefits earned or accrued prior to the Closing (except
for accrued but unvested vacation assumed pursuant to Section 6.3(c)); (viii)
any liability or obligation of Seller arising out of the negotiation, execution,
or performance of this Agreement, including fees and expenses of attorneys and
accountants, except as otherwise expressly provided herein, (ix) any liability
or obligation of the Seller which accrues in connection with the litigation set
forth on Schedule 3.10.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
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"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds or limited warranty deeds to
convey good and marketable fee simple title to the Owned Real Property, with the
warranty of title contained therein limited to the claims of Persons claiming
by, through or under Seller, but not otherwise. "Development Costs" shall mean
(i) all of Seller's out-of-pocket costs paid in connection with the development
and acquisition of the new restaurant sites in the Territory set forth in
Schedule 4.7 capitalized in accordance with generally accepted accounting
principles and Seller's historical practices including, but not limited to, the
purchase price paid for real estate; acquisition and closing costs, such as
legal fees, engineering fees, surveys, transfer taxes, title policies, and the
like; environmental investigation costs; the cost of permits, approvals,
variances, or rezonings; construction period insurance; and (ii) Seller's
internal costs capitalized in connection with such development efforts in
accordance with Seller's historic practices.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"DR Holdings Tracts" shall mean the three parcels of real property located
at 5100 76th Street, Greendale, Wisconsin, 900 Hansen Road, Ashwaubenon,
Wisconsin and 660 S. Whitney Road, Madison, Wisconsin which are subject to
leases, but which Seller shall cause to be conveyed to Purchaser in fee simple
at the Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Employee Records" shall mean copies of Seller's employee records of those
current employees of Seller who are employed by Purchaser as of the Closing;
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
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applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal. "Forum" shall mean any federal, state, local, municipal,
or foreign court, governmental agency, administrative body or agency, tribunal,
private alternative dispute resolution system, or arbitration panel.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Applebee's International, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Seller's directors of operations for the Territory and all management of Seller
senior thereto after due inquiry of the Restaurant managers in the Territory;
provided that Seller shall have no knowledge of any condition or circumstance
which would cause Seller to modify its representations and warranties.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B and any leases subsequently entered into and pertaining to new
restaurants being developed pursuant to Section 4.7.
"Liquidated Damages" shall have the meaning set forth in Section 2.10
hereof.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less without penalty or liquidated damages,
a list of which are set forth on Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Note" shall have the meaning set forth in Section 2.3. "Orders" shall mean
all applicable orders, writs, judgments, decrees, rulings, consent agreements,
and awards of or by any Forum or entered by consent of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located (all of which tracts and parcels are
described in Schedule 1.1C) or which is being held for development pursuant to
Section 4.7 and which Purchaser elects to acquire pursuant to Section 6.5 and
all buildings, fixtures, signs, parking facilities, and other improvements
located thereon and appurtenances thereto. For the purposes of this Agreement,
"Owned Real Property" will include the DR Holdings Tracts.
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"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from governmental and
regulatory authorities which relate exclusively to the Business, the
Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, in the case of all Real Property, (i)
such easements, restrictions, covenants, and other such encumbrances which are
shown as exceptions on the Title Commitments and any other encumbrances of
record as of the effective date of the Title Commitments, (ii) ordinances
(municipal and zoning), (iii) survey matters, and (iv) such easements,
restrictions, covenants, and other encumbrances which become matters of public
record after the effective date of the Title Commitments and before the Closing,
in each such case, to the extent that such encumbrances could not reasonably be
expected to materially interfere with or impair Purchaser's use of the Real
Property for Applebee's Neighborhood Grill & Bar Restaurants or that are waived,
or deemed to be waived, by Purchaser pursuant to Section 7.1(a). Permitted
Encumbrances shall include in the case of both Real Property and personal
property all liens for taxes not yet due and payable. Notwithstanding the
foregoing, Permitted Encumbrances shall not include (i) any judgments for money
against Seller relating to the Real Property nor (ii) any judgments for money
relating to the owned Real Property, which becomes matters of public record or
are known to the Seller prior to the Closing.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the 19 Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean August 24, 1998.
"Territory" shall mean portions of the ADIs consisting of Milwaukee,
Wisconsin, Greenbay/Appleton, Wisconsin and/or Madison, Wisconsin, as set forth
on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 7.1(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 7.1(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
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forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due. Seller covenants and agrees to pay and
discharge all liabilities and obligations of the Seller and/or the Business
which are not specifically assumed by the Purchaser hereunder.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $17,650,466 million as adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases that pertain to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to Seller's cost of
those Assets consisting of food, beverage (including beer, wine, and liquor),
new uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date provided
that the cost of such inventory shall not exceed $15,000 per restaurant; and (v)
if the Purchaser elects to acquire the development sites for new restaurants set
forth in Schedule 4.7 (the "Development Sites"), the amount of Seller's
Development Costs.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the cost of unused vacation accrued but
unvested as of the Closing Date by ADI Personnel hired by Hospitality the cost
of which is being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
(d) Notwithstanding the foregoing, the parties agree that with respect to
Property Taxes, such Property Taxes shall be prorated between Seller and
Purchaser in accordance with the amount of Property Taxes due for the same
period in 1997, as set forth in the taxes bills received by Seller from the
relevant governmental authorities. The parties agree to make any adjustments
necessary to ensure that the Property Taxes have been allocated in accordance
with clauses (a)(i) and (b)(i) above as soon as practicable upon receipt of
bills received from the relevant governmental authorities, for Property Taxes
due with respect to the Assets for 1998.
The foregoing adjustments shall be calculated by the parties and set forth
on Exhibit B which shall be signed by both parties at Closing. The Purchase
Price shall be paid by Purchaser on the Closing Date by (i) delivery at the
Closing of a promissory note duly executed by Purchaser in the form attached
hereto as Exhibit G (the "Note") and (ii) wire transfer of immediately available
funds in an amount equal to the remainder of the Purchase Price to an account
designated by Seller and shall be received by Seller in such designated account
no later than 4:00 p.m. Eastern Time on the Closing Date.
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2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date as though
made on and as of the Closing Date and that Seller shall have performed in all
respects the covenants of the Seller contained in this Agreement required to be
performed on or prior to the Closing.
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit C hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller or in the case of the three DR
Holdings Tracts by the owner thereof;
(vii) Transfer returns for Wisconsin real estate transfers;
(viii) A non-foreign Status Affidavit duly executed by Seller;
(ix) An Owner's Affidavit duly executed by Seller;
(x) A Gap Affidavit duly executed by Seller;
(xi) A Cross-Receipt acknowledging receipt of the Purchase Price duly
executed by Seller; and
(xii) Any other documents that Purchaser may reasonably request at least
three days prior to the Closing in order to effectuate the transactions
contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof;
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(i) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Bill of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (ii) as to the incumbency and specimen signature of each officer
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of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the cash portion of the Purchase Price;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Godfrey & Kahn, S.C., counsel to Purchaser, in
substantially the form of Exhibit D hereto;
(vi) A Cross-Receipt acknowledging receipt of the Assets duly executed by
Purchaser;
(vii) Any other documents that Seller may reasonably request at least three
days prior to the Closing; and
(viii) The Note.
(c) At the Closing, Seller shall deliver to Hospitality the Employee
Records, subject to execution of a release by each affected employee allowing
for the disclosure of such files.
(d) At the Closing, Hospitality shall deliver to Seller:
(i) A certificate executed by Hopsitality, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof; and
(ii) A certificate of the Secretary or an Assistant Secretary of
Hospitality, dated as of the Closing Date, certifying in such detail as Seller
may request (i) that attached thereto is a true and complete copy of resolutions
adopted by the Board of Directors of Hospitality authorizing the execution,
delivery and performance of this Agreement, and that all such resolutions are
still in full force and effect and are all the resolutions adopted in connection
with the transactions contemplated by this Agreement, and (ii) as to the
incumbency and specimen signature of each officer of Hospitality's executing
this Agreement, and any certificate or instrument furnished pursuant hereto or
to be furnished in connection herewith as of the Closing Date, and a
certification by another officer of Hospitality as to the incumbency and
signature of the officer signing such certificate.
2.5 Transfer of Operations. Purchaser 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 expressly provided in this Agreement, all profits, losses,
liabilities, claims, or 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 Purchaser. 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
Purchaser thereafter.
2.6 Closing. The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of Godfrey & Kahn, S.C., 780
North Water Street, Milwaukee, Wisconsin, at 10:00 a.m. on August 24, 1998, or
on such other date and time as may be mutually agreed upon by the parties
hereto.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the various Assets as set forth on Exhibit E hereof. The allocation
contained in Exhibit E shall be subject to adjustments mutually agreed upon by
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Purchaser and Seller at closing to reflect adjustments to the Purchase Price.
Each party hereby agrees that it will not take a position on any income tax
return, before any governmental agency charged with the collection of any income
tax, or in any judicial proceeding that is inconsistent with the terms of this
Section 2.7.
2.8 Further Assurances. From time to time after the Closing at Purchaser's
request and expense, Seller shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
2.9 Post-Closing Adjustments. As soon as possible after the Closing (but
not later than the first anniversary thereof), the parties shall reconcile the
actual amount of prorations that were estimated at Closing as well as the
accrued but unvested vacation time of Seller's employees assumed by Purchaser
hereunder that has actually vested with the estimated amounts thereof. To the
extent that the actual amounts differ from the amounts estimated on Exhibit B
(Adjustment to Purchase Price) or prorations or adjustments other than those
reflected on Exhibit B are discovered after the Closing, the parties agree to
remit the correct amount of such items to the appropriate party within 15 days
after the same are determined. If Purchaser shall elect to acquire any
Development Site after the Closing, then Purchaser shall pay to Seller the
Development Costs therefor within 15 days after such election.
2.10 Delivery of Purchase Price. If the Purchase Price is not delivered by
wire transfer of immediately available funds to an account designated by Seller
or is not be received by Seller in such designated account no later than 4:00
p.m. Eastern Time on the Closing Date, then such failure of Seller to receive
such funds shall constitute a breach of and default under this Agreement by
Purchaser. If such a breach and default by Purchaser hereunder occurs then the
following shall apply:
(a) If the Purchase Price is delivered by wire transfer of immediately
available funds to the account designated by Seller and is received by Seller in
such designated account after 4:00 p.m. Eastern Time on the Closing Date but
before 4:00 p.m. Eastern Time on the day immediately following the Closing Date,
then Seller's remedies for such breach and default shall be the obligation of
Purchaser to pay to Seller the amount of $10,364 (the "Liquidated Damages"). The
Liquidated Damages shall be delivered by wire transfer of immediately available
funds to the account designated by Seller and shall be received by Seller in
such designated account before 4:00 p.m. Eastern Time on the day immediately
following the Closing Date. The parties hereto hereby accknowledge and agree
that the Liquidated Damages (i) are reasonable, (ii) are the result of the good
faith effort by the parties to estimate the actual harm caused by the breach and
default by Purchaser specified in this Section, and (iii) have been determined
by the parties because of the difficulty of determining and proving actual
damages for such breach and default after it occurs.
(b) If either the Purchase Price or the Liquidated Damages is not delivered
by wire transfer of immediately available funds to the account designated by
Seller or is not received by Seller in such designated account no later than
4:00 p.m. Eastern Time on the day immediately following the Closing Date, then
Seller's remedies for such breach and default shall be (i) the immediate
recission of the Closing, including without limitation the immediate
reconveyance of the Assets by Purchaser to Seller, and (ii) any other remedies
to which Seller shall be entitled under law or equity.
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ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller. 3.3 Non-Contravention. Subject to obtaining the
consents to assignment of the Leases and Material Contracts set forth on
Schedule 3.3, 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 any agreement or other instrument to which
Seller is a party (except for defaults under Minor Contracts where the consent
of the other party or parties to such contract to the assignment thereof will
not be obtained) or violate any law or any order, rule, or regulation applicable
to Seller of any Forum having jurisdiction over Seller; and will not result in
the creation or imposition of any lien, charge, or encumbrance of any nature
whatsoever upon any of the Assets. Except as set forth on Schedule 3.3 and
except for consents required under Minor Contracts, the execution, delivery and
performance of this Agreement and the other documents 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 Forum other than any
filing required under the HSR Act and the expiration of any applicable waiting
period thereunder. Schedule 3.3 identifies separately each notice, consent,
waiver, or approval by reference to each Lease and to each Material Contract to
which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms. When the Bill of Sale, Assignment
Agreement and the Deeds have been executed and delivered in accordance with this
Agreement, they will constitute the legal, valid, and binding obligation of
Seller, enforceable in accordance with their terms.
3.5 Assets. (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements and with the historic practices of the Seller.
(c) There are no assets or property of any nature which are not being
transferred to Purchaser hereunder that have been customarily used exclusively
in the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property is in good operating
condition consistent with its age, subject to normal wear and tear and has been
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maintained in accordance with standard practices.
(e) The inventory on hand: (i) is sufficient for the operation of the
Business in the ordinary course based on current levels of Operation; (ii) has
been purchased in the ordinary course of business consistent in quality and
quantity with past practices of the Business; and (iii) is substantially useable
and saleable. 3.6 Contracts and Leases.
(a) Each Material Contract and Lease is a valid and subsisting agreement,
without any default of Seller thereunder, and to the knowledge of Seller,
without any default on the part of any other party thereto. To the knowledge of
Seller, no event or occurrence has transpired which with the passage of time or
giving of notice or both will constitute a default under any Material Contract
or Lease. A true and correct list of each Material Contract and Lease and every
amendment thereto or other agreement or document relating thereto is set forth
as Schedule 3.6 to this Agreement. True and correct copies of the Material
Contracts and Leases (and any amendments thereto) have been provided to
Purchaser. At the time of Closing, Seller shall have made all payments and
performed all obligations due through the Closing Date under each Contract and
Lease, except to the extent that any payment due is set forth on Exhibit B and
deducted in calculating the Purchase Price pursuant to Section 2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property.
(a) Schedule 3.7(a) sets forth with respect to each Restaurant, its
location, whether it is located on Owned Real Property or is on a site subject
to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller, or the owner of the DR Holdings Tracts, has obtained all
authorizations and rights-of-way which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the site of each Restaurant, all of
which are assignable and shall be assigned to Purchaser at the Closing.
(d) Neither Seller nor the holder of the DR Holdings Tracts has received
any notice that any Government having the power of eminent domain over any
parcel of Real Property has commenced or intends to exercise the power of
eminent domain or a similar power with respect to any part of the Real Property.
(e) The Real Property and the present uses thereof comply with all laws and
regulations (including zoning laws and ordinances) of all Governments having
jurisdiction over the Real Property and all recorded covenants or restrictions,
and Seller has received no notice from any Government alleging that the Real
Property or any improvements erected or situated thereon, or the uses conducted
thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
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(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, or to the knowledge of Seller received by any owner of any
of the Real Property subject to a Lease, requiring or calling attention to the
need for any work, repair, construction, alteration, or installation on or in
connection with the Real Property which has not been complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
compliance with all applicable Environmental Laws and Environmental Permits held
by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Property to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller relating to any alleged past or
ongoing violation of any Environmental Laws or Environmental Permits with
respect to the Real Property, nor to Seller's knowledge is Seller subject to any
liability for any such past or ongoing violation, nor is Seller subject to any
liability for any such past or ongoing violation caused by Seller. Matters
referenced above of which Seller has knowledge are referenced on Schedule
3.7(g).
3.8 Financial Statements. Schedule 3.8 contains for each Restaurant
unaudited statements of operations as of the end of the 1997 fiscal year and for
each fiscal month ended thereafter through March 29, 1998 for which such
statements are available (the "Financial Statements"). The Financial Statements
have been prepared in accordance with Seller's historical practices and fairly
present the operations of the Restaurants for the periods presented and as of
their respective dates.
3.9 Taxes. All Property Taxes relating to the Assets have been fully paid
for 1997 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 other tax
returns and reports of whatever kind pertaining to the Assets and required to be
filed by Seller up to the Closing Date and such returns and reports properly
reflect or will properly reflect the tax liability of the Seller. Seller has
paid (or will timely pay) all taxes of whatever kind, including any interest,
penalties, governmental charges, duties, fees, and fines imposed by all
governmental entities or taxing authorities and withholding amounts, which are
due and payable prior to the Closing Date or for which assessments relating to
any period prior to the Closing Date have been received or levied. There are no
audits, suits, actions, claims, investigations, inquiries, or proceedings
pending or, to Seller's 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. The Seller has not requested any extension of time within which to
file returns in respect of any taxes. No tax deficiencies have been proposed or
assessed against Seller. For purposes hereof, "tax" or "taxes" means all
federal, state, county, local, foreign and other taxes or assessments including,
without limitation, income, estimated income, business, occupation, franchise,
property (real and personal), sales, employment, gross receipts, use, transfer,
ad valorem, profits, license, capital, payroll, employee withholding,
unemployment, excise, goods and services, severance, stamp and including
interest, penalties and additions in connection therewith for which the Seller
is or may be liable.
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3.10 Litigation. Except as set forth on Schedule 3.10, there is no Action
or Order pending or, to the knowledge of Seller, threatened against or affecting
Seller that pertains to the Restaurants or Business, or any of the Assets before
any court or by or before any Forum. The Seller is not subject to any order,
writ, judgment, injunction or decree of any governmental authority or
instrumentality or any court which would limit or restrict the Seller's right to
enter into and carry out this Agreement or the documents or agreements to be
entered into in connection herewith or to consummate the transactions
contemplated hereby or which would otherwise adversely affect the Business or
the Assets.
3.11 Permits. Seller has all Permits as are necessary to operate the
Restaurants and such Permits as set forth on Schedule 3.11 are and will be as of
the Closing current and effective. Seller has fulfilled and performed all of its
obligations with respect to such Permits, and to the knowledge of the Seller no
event has occurred which allows, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any other impairment
of the rights of the holder of any such Permits.
3.12 Compliance with Health and Safety Laws. To the knowledge of Seller,
Seller is in compliance with all laws, governmental standards, rules and
regulations applicable to Seller or to any of the Assets including, but not
limited to, the Americans with Disabilities Act and similar state laws,
occupational health and safety laws, and environmental laws.
3.13 Employment Contracts, Etc. Seller is not is a party to any written
employment agreements related to the employees at the Restaurants, (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits.
(a) Schedule 3.15 hereto contains a true and complete list of all the
following agreements or plans of Seller which are presently in effect and which
pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Sellers maintains or to which Seller has
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any outstanding, present, or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and has never contributed or been
obligated to contribute to a multiemployer plan as defined in section 3(37)(A)
of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in this Agreement or in any certificate furnished to
Purchaser pursuant to this Agreement or in the Disclosure Memorandum is or will
be when furnished both complete and accurate in all material respects; and all
documents furnished to Purchaser pursuant to this Agreement which are documents
described in this Agreement or in the Disclosure Memorandum are true and correct
copies of the documents which they purport to represent.
3.17 Conduct of Business. Since the end of fiscal year 1997, Seller has
conducted the operations of the Business in the ordinary course of business and
substantially in accordance with past practice, and has not taken any action
that, if taken after the date hereof, would violate Section 4.5. 3.18 Insurance.
The Seller maintains policies of fire and casualty, liability and other forms of
insurances and bonds in such amounts, with such deductibles, and against such
risks and losses as are reasonable for the Business and the Assets. Each such
insurance policy and bond is in full force and effect and Seller has not
received notice and is not otherwise aware of any cancellation or threat of
cancellation of such insurance or bond.
3.19 Undisclosed Commitments or Liabilities. There are no commitments or
liabilities or obligations relating to the Business, whether accrued, absolute,
contingent or otherwise including, but not limited to, guarantees by Seller of
the liabilities of third parties for which specific and adequate provisions have
not been made on the Financial Statements, except those incurred in or as a
result of the ordinary course of business since the end of fiscal year 1997
(none of which ordinary course obligations have had or will have a material
adverse effect on the Assets or the Business).
ARTICLE IV - COVENANTS OF SELLER
4.1 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 Leases
and Material Contracts, where the failure to do so would have a material adverse
affect on the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to cooperate in assisting Purchaser with the assumption,
transfer, or reissuance of any and all Permits required for the operation of the
Restaurants, including without limitation making available ADI Personnel
required therefor.
4.3 Liabilities of Seller. All liabilities of Seller related to the Assets
which are not Assumed Liabilities will be promptly paid by Seller as they come
due.
4.4 Agreements Respecting Employees of Seller.
(a) Prior to the Effective Time without the prior written approval of
Purchaser and Hospitality, Seller shall not transfer or reassign to operations
outside the Business any employee exclusively involved in the operation or
supervision of the Restaurants ("ADI Personnel") At the Effective Time, Seller
shall terminate the employment of all ADI Personnel. For a period of twelve
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months following the Closing, neither Seller nor Hospitality shall hire any
person who was an employee of Purchaser within the previous three months. For a
period of eighteen months following the Closing, neither Seller nor Hospitality
shall solicit for employment any person who is an employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller, Purchaser, and Hospitality shall cooperate in the transition of
coverage of ADI Personnel from Seller's health, medical, life insurance and
other welfare plans to plans maintained by Hospitality.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
of the Franchise Agreements, using commercially reasonable efforts in keeping
with Seller's historical practices to preserve and maintain the services of its
employees and its relationships with suppliers and customers, (ii) pay all bills
and debts incurred by it related to the Business promptly as they become due,
and (iii) consult in advance with Purchaser on all decisions outside the
ordinary course of business relating to the Assets or the Restaurants.
(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices and in good
operating condition consistent with their age;
(ii) 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;
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations; and
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change in any material manner the ownership of the Assets; or directly
or indirectly, solicit or entertain any offer from or negotiate with or in any
manner engage, discuss, accept or consider any proposal from any other person
relating to the acquisition of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan which will be paid within
six weeks after the end of the month in which the Closing occurs;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts pursuant to Section 4.7 in the ordinary course of business)
any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into any Material Contract except in the ordinary course of
business;
(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
Lease, amend or otherwise modify any of its material terms or waive any breach
of any of its material terms or provisions or take any other action in
connection with any Material Contract or Lease that would materially impair the
interests or rights of Seller to be transferred to Purchaser hereunder.
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(vii) Cancel or terminate or permit to be canceled or terminated its
current insurance (or reinsurance) policies or permit any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, or lapsed policies are in full force
and effect.
4.6 Access to Information. Seller shall afford Purchaser and Hospitality,
their 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 Purchaser and Hospitality
such additional financial and operating data and other information as Seller may
possess and as Purchaser or Hospitality may reasonably request, subject to
Purchaser's and Hospitality's obligations regarding the confidentiality of such
information as set forth in Section 6.2 hereof; provided, however, that such
access shall be arranged in advance by Purchaser or by Hospitality with Seller
and will be scheduled in a manner and with a frequency calculated to cause the
minimum disruption of the business of Seller.
4.7 Development Efforts. Seller shall use commercially reasonable efforts
to maintain the current results of its development activities for the
Development Sites set forth on Schedule 4.7 for the benefit of Purchaser until
Purchaser's election pursuant to Section 6.5 hereto.
4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information with respect to any event which has materially adversely affected
the Assets or the operations of the Restaurants.
(b) 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 for
such month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
actions, charges, orders or other directives affecting the Business or 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) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
(e) Promptly after discovery, information in respect of any representation
or warranty made by Seller in this Agreement which was when made, or has
subsequently become, untrue.
(f) Promptly after receipt, any and all notices from Landlords under the
Leases.
4.9 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Seller will use commercially reasonable efforts to cause
the conditions set forth in Article VII to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby, including
obtaining the Consents. The parties acknowledge that no consents will be sought
with respect to any Minor Contract even if the failure to so obtain a consent to
assignment may result in a default or termination thereunder. Seller will use
commercially reasonable efforts to obtain required consents of landlords to the
assignment of the Leases and shall bear any expenses associated with obtaining
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such consents; however, Seller shall not be required to make any payment to a
landlord (other than reimbursement of expenses), guarantee any Lease or remain
liable for the payment thereof following the Closing, or agree to any
concessions or amendment to other leases or arrangements with such landlord in
order to obtain such consents.
4.10 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
Material Contracts entered into by Seller ("Subsequent Contracts") a provision
permitting the assignment of any such Subsequent Contract to Purchaser and
providing that upon such assignment, Purchaser shall succeed to all of Seller's
rights, title, and interests thereunder subject to the Purchaser'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.
4.11 Transition Services.
(a) For a period of three months after the Closing, if and to the extent
requested in writing by Purchaser, Seller agrees to provide to Purchaser and/or
Hospitality the services related to the Restaurants specified in Schedule 4.11
hereto (the "Services"). The Services shall be provided promptly and shall be
provided in the same manner and with the same or similar personnel as Seller
previously utilized.
(b) Purchaser or Hospitality will each pay for the Services which they
respectively receive 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 agreed to in
advance 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 Purchaser or Hospitality, Seller shall offer to specifically
designated personnel a bonus incentive to remain for the three month period. The
amount of such bonus shall be at the discretion of Purchaser. Such bonus, if
accepted by the employee, shall be paid by Purchaser at the end of the
three-month period, or for such shorter period as Purchaser may determine.
Nothwithstanding anything else in this Section 4.11, if Seller no longer has the
personnel to provide the services, Seller may outsource the Services to a third
party so long as the Services provided are in substantially the manner which
Seller would have provided if Seller did have such personnel and so long as the
cost of the Services invoiced to Purchaser and/or Hospitality do not exceed the
amount that the Services would have cost if Seller did have such personnel.
4.12 Delivery of Real Estate Documents. Seller has previously provided to
Purchaser legal descriptions of the Owned Real Property and copies of all
surveys, title policies, and environmental reports pertaining to the Owned Real
Property in Seller's possession.
4.13 Risk of Loss. Seller shall give Purchaser notice of the occurrence of
damage or destruction of or the commencement of condemnation proceedings
affecting the Real Property. If any portion of the Real Property is condemned or
is damaged or destroyed by fire or other casualty prior to the Closing,
Purchaser shall have the option to (i) eliminate that tract from the Agreement
and receive a deduction in the purchase price based on that portion of the
purpose price allocated to such tract, or (ii) proceed to Closing and receive
the insurance or condemnation proceeds associated therewith. Purchaser's
election shall be made within 20 days following receipt of Seller's notice.
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ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Hospitality hereby represent and warrant to Sellers as
follows:
5.1 Organization, Corporate Power, Authorization. Each of Purchaser and
Hospitality is a limited liability company duly organized, validly existing, and
in good standing under the laws of the State of Wisconsin and in each other
jurisdiction in which it is lawfully required to qualify to conduct business.
Each of Purchaser and Hospitality has the corporate power and authority to
execute and deliver this Agreement and the Bill of Sale and Assignment
Agreement, and to consummate the transactions contemplated hereby. All corporate
action on the part of Purchaser necessary for the authorization, execution, and
delivery of this Agreement and the Bill of Sale and Assignment Agreement, and
performance of all obligations of Purchaser thereunder has been duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement and the
Bill of Sale and Assignment Agreement by Purchaser and Hospitality do not and
the consummation by Purchaser and Hospitality of the transactions contemplated
hereby and thereby will not violate any provision of their respective articles
of organization or operating agreement.
5.3 Validity. This Agreement has been duly executed and delivered by
Purchaser and Hospitality, and constitutes the legal, valid, and binding
obligation of Purchaser and Hospitality, enforceable against Purchaser and
Hospitality in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Purchaser, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
5.4 Litigation Relating to the Agreement. Neither Purchaser nor Hospitality
is a party to, or subject to any judgment, decree, or order entered in any
lawsuit or proceeding brought by any governmental agency or instrumentality or
other party seeking to prevent the execution of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE VI - COVENANTS OF PURCHASER
6.1 Purchaser Performance. After the Closing Date, Purchaser shall promptly
pay as they become due and otherwise perform all obligations of Seller under the
Assumed Liabilities and otherwise perform and fulfill all other obligations with
respect to the Assets pertaining to the period after the Closing Date.
6.2 Confidentiality. In connection with the negotiation of this Agreement,
Seller may disclose Confidential Information, as defined below, to Purchaser
and/or Hospitality. Purchaser and Hospitality agree that if the transactions
contemplated herein are not consummated, eahc of Purchaser and Hospitality will
return to Seller all documents and other written information furnished to it.
Purchaser and Hospitality further agree to maintain the confidentiality of any
and all Confidential Information of Seller and not disclose any Confidential
Information to any Person other than such Person to whom Confidential
Information must be disclosed to effect the transactions and who are bound by
appropriate non-disclosure agreement or obligations. Purchaser and Hospitality
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller. The foregoing obligations shall not apply to (i) any
information which was known by Purchaser prior to its disclosure by Seller or
Hospitality; (ii) any information which was in the public domain prior to the
disclosure thereof; (iii) any information which comes into the public domain
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through no fault of Purchaser; (iv) any information which is disclosed to
Purchaser or Hospitality by a third party, other than an affiliate, having the
legal right to make such disclosure; or (iv) any information which is required
to be disclosed by Order of any Forum. For purposes of this Section,
"Confidential Information" shall mean any and all technical, business, and other
information which is (a) possessed or hereafter acquired by Seller and disclosed
to Purchaser or Hospitality and (b) derives economic value, actual or potential,
from not being generally known to Persons other than Seller, including, without
limitation, technical or nontechnical data, compositions, devices, methods,
techniques, drawings, inventions, processes, financial data, financial plans,
product plans, lists of actual or potential customers or suppliers, information
regarding the business plans and operations of Seller, and the existence of
discussions and negotiations between the parties hereto relating to the terms
hereof. The restrictions of this Section shall expire three years from the date
hereof with respect to any confidential business information that does not
constitute a trade secret under applicable law. Purchaser and Hospitality agree
to execute a confidentiality agreement with respect to all information received
in connection with due diligence.
6.3 Seller Employees.
(a) Hospitality shall offer employment to all ADI Personnel upon terms and
conditions substantially equivalent to those provided by Seller; however,
Hospitality shall not be required to provide stock options or any stock purchase
rights. For a period of twelve months following the Closing, neither Purchaser
nor Hospitality shall hire any person who was an employee of Seller or any
subsidiary of Seller within the previous three months (other than ADI
Personnel), and for a period of eighteen months following the Closing, neither
Purchaser nor Hospitality shall solicit for employment any person who is an
employee of Seller or any subsidiary of Seller.
(b) Hospitality shall maintain employee records transferred to Hospitality
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Hospitality's normal
business hours. Hospitality shall maintain the confidentiality of such records
and limit access thereto in a manner consistent with Hospitality's treatment of
its employee records.
(c) Hopsitality agrees, with respect to ADI Personnel hired by Hospitality,
to provide compensation and benefits to such ADI Personnel substantially
equivalent to current levels, excluding stock options and the stock purchase
program, and agrees (i) to give such employees credit under Hospitality's
benefits plans, programs, and arrangements, including credit for accrued but
unvested vacation which has been charged to Seller under Section 2.3, for such
employees' period of service with Seller, provided that such credit shall only
be taken into account under any tax-qualified plan maintained by Hospitality 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; (ii) to provide coverage to such
employees who are eligible under Hospitality'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 deductibles,
out of pocket expenses, and similar amounts paid by individuals and their
beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, each of Purchaser and Hospitality shall use commercially
reasonable efforts to cause the conditions set forth in Article VII to be
satisfied and to facilitate and cause the consummation of the transactions
contemplated hereby. Specifically, but not by way of limitation, (i) Purchaser
will use commercially reasonable efforts to obtain a commitment letter for
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financing the transactions contemplated hereby on substantially the terms set
forth in Exhibit F (the "Financing Commitment"), (ii) Purchaser and Hospitality
will promptly provide Franchisor with all information required by Franchisor to
determine whether Hospitality will be approved by as a developer with respect to
the Territory and whether Purchaser will be approved as a franchisee with
respect to the Territory, (iii) Purchaser and Hospitality will actively pursue
an agreement with Franchisor as to the principal terms of franchise and
development agreements with respect to the Territory, and (iv) Purchaser will
file all documents required to obtain approval of the transactions contemplated
hereby under the HSR Act within 15 days of the date hereof.
6.5 Development Sites. There are no Development Sites, and notwithstanding
anything else herein, references in this Agreement to Development Sites and
Development Costs shall take into account that there are no Development Sites.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser has procurred
obtained and reviewed (i) current surveys and title insurance commitments with
respect to the Owned Real Property ("Owner's Title Commitments") pursuant to
which the Title Company will agree to issue at Closing owner's policies of title
insurance ("Owner's Title Policies") on American Land Title Association standard
Form B-1990, without exceptions except as shown in the Owner's Title
Commitments, to be issued by Chicago Title Insurance Company ("Title Company")
in an amount in the case of each parcel equal to the purchase price allocated to
such parcel of the Owned Real Property pursuant to Section 2.7, and (ii) current
surveys and title insurance commitments with respect to the Real Property
subject to a Lease (collectively, the "Leased Real Property") (the "Lessee Title
Commitments", and collectively with the Owner's Title Commitments, the "Title
Commitments") pursuant to which the Title Company will agree to issue at Closing
lessee's policies of title insurance ("Lessee's Title Policies") on American
Land Title Association standard form of leasehold owner's policy to insure
leasehold estates, showing no exceptions except as shown in the Lessee Title
Commitments. The Owner's Title Policies shall insure the Purchaser that, upon
consummation of the purchase and sale herein contemplated, Purchaser will be
vested with good, fee simple, marketable, and insurable title to the Owned Real
Property, subject only to the Permitted Encumbrances or arising out of acts of
the insured. The Lessee's Title Policies shall insure the Purchaser that, upon
consummation of the transactions herein contemplated, Purchaser will be vested
with a good, valid, marketable and insurable leasehold estate in and to the
Leased Real Property, subject only to the Permitted Encumbrances. Purchaser has
furnished to Seller a written statement of reasonable objections to exceptions,
including any encumbrances or Surveys, which, in Purchaser's reasonable
judgment, would materially interfere with or impair Purchaser's use of the Real
Property for the operation of Applebee's restaurants or which would result in a
material decrease in the value of the Real Property ("Material Objections").
Seller shall have until the Termination Date to satisfy such Material Objections
(but with no obligation to do so) in all material respects, and if Seller fails
to satisfy all Material Objections in all material respects on or prior to the
Termination Date, then Purchaser's sole right and remedy shall be to either (i)
waive the objections and elect to close, or (ii) terminate this Agreement by
giving written notice of such termination to Seller. The parties acknowledge
that some of the Leased Real Property may be located in shopping centers, and as
such, unless the leased premises are a free standing building located on a
separate pad with its own legal description ("Free Standing Premises") the
Lessee Title Commitments for such Leased Real Property will contain encumbrances
for the entire shopping centers. Purchaser may not object to title encumbrances
for such Leased Real Property that do not affect the premises leased under the
Leases, which such encumbrances shall be deemed to be Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
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Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property and its compliance with laws;
provided, however, that (i) any activities by or on behalf of Purchaser,
including, without limitation, the entry by Purchaser or Purchaser's Designees
onto the Real Property, or the other activities of Purchaser or Purchaser's
Designees with respect to the Real Property (hereinafter called "Purchaser's
Activities") shall not damage the Real Property in any material manner
whatsoever or disturb or interfere with the rights of any lessor of Leased Real
Property; (ii) in the event the Real Property is altered or disturbed in any
manner in connection with any Purchaser's Activities, Purchaser shall
immediately return the Real Property to the condition existing prior to
Purchaser's Activities; (iii) Purchaser shall in no event without Seller's prior
written consent disclose the results of any of its investigations, examinations,
tests, or inspections to any party (including any Government unless required by
law) other than to its lenders, attorneys, consultants, and investors; and (iv)
Purchaser shall indemnify, defend, and hold Seller harmless from and against any
and all claims, liabilities, damages, losses, costs, and expenses of any kind or
nature whatsoever (including, without limitation, attorneys' fees, and expenses
and court costs) suffered, incurred or sustained by Seller as a result of, by
reason of, or in connection with any Purchaser's Activities. Notwithstanding any
provision of this Agreement to the contrary, Purchaser shall not have the right
to undertake any environmental studies or testing beyond the scope of a standard
"Phase I" evaluation without the prior written consent of Seller and, if
applicable, the lessor of any Leased Real Property.
(B) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities; or (ii) Closing.
(C) Purchaser acknowledges that Seller may deliver to Purchaser certain
documents and information in possession of Seller or Seller's agents with regard
to the Real Property (hereinafter called the "Due Diligence Materials"). The Due
Diligence Materials will be provided to Purchaser without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchaser
for Purchaser's informational purposes. Until Closing, Purchaser and Purchaser's
Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchaser's and Hospitality's Conditions to Closing. The obligations of
Purchaser and Hospitality hereunder are subject to satisfaction of each of the
following conditions at or before Closing, the occurrence of which may, at the
option of Purchaser and Hospitality, be waived:
(a) Subject to the matters disclosed in the Disclosure Memorandum as
supplemented by Seller from time to time, all representations and warranties of
Seller in this Agreement shall be true in all material respects on and as of the
Closing.
(b) Any supplement to the Disclosure Memorandum delivered by Seller shall
not reflect in Purchaser's reasonable judgment any material adverse change in
the Assets or the Business.
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(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 have obtained and delivered to Purchaser all Consents
necessary to transfer and assign the Assets (except for Minor Contracts) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant in the Territory. Hospitality and Franchisor
shall have entered into development agreements with respect to each ADI in the
Territory.
(f) Purchaser and Hospitality shall have obtained, either from Seller or
directly from the issuing authority, all permits, licenses, including liquor
licenses and beer permits, and approvals of all governmental and
quasi-governmental authorities necessary for the operation of the Restaurants in
accordance with franchise requirements; provided, however, that if Purchaser is
unable to obtain from local municipal or county authorities a permit necessary
for such operation of the Restaurants, and Purchaser 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 Purchaser a duly executed liquor license management agreement or
agreements with form and substance reasonably acceptable to Purchaser and
Seller.
(g) 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 Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit F upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 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 Purchaser and Hospitality in this
Agreement shall be true on and as of the Closing, and Purchaser and Hospitality
shall have delivered to Seller a certificate to such effect dated as of the
Closing Date.
(b) Purchaser and Hospitality shall have performed and complied in all
material respects with Purchaser's and Hopsitality's obligations under this
Agreement which are to be performed or complied with by Purchaser or Hospitality
prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(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 Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
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ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims.
(a) Seller shall indemnify and hold harmless Purchaser and Hospitality, and
their respective successors and assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser and Hospitality that result from, relate to, or arise
out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
or Hospitality by Seller pursuant hereto; or
(D) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Seller's
dealings, agreement, or arrangement with such Person.
(ii) Any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs, and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing including all such expenses reasonably incurred in
mitigating any damages resulting to Purchaser or Hospitality from any matter set
forth in subsection (i) above.
(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to Section 8.1(a)(i)(C) (and Section
8.1(a)(ii) to the extent the items covered thereby relate back to Section
8.1(a)(i)(C)) until the aggregate liability of Seller thereunder exceeds
$176,837 and then only to the extent that the aggregate liability of Seller
thereunder exceeds such amount; provided, however, that liabilities arising with
respect to Sections 3.1 through 3.4 and Sections 3.5(a), 3.5(d), 3.7(g), and 3.9
hereof shall not be subject to the foregoing threshold and any liabilities
arising with respect to such matters shall not be taken into account in
computing aggregate liabilities for the purpose of applying such threshold
amount to liabilities arising under other Sections subject thereto, provided,
however, that Seller shall have no liability for indemnification or otherwise
with respect to Section 8.1(a)(i)(C) to the extent it relates to Section 3.5(d)
(and Section 8.1(a)(ii) to the extent the items covered thereby relate back to
Section 8.1(a)(i)(C)'s applicability to Section 3.5(d)) until the aggregate
liability of Seller thereunder relating to a particular Restaurant exceeds
$5,000 for such Restaurant and then only to the extent that the aggregate
liability of Seller thereunder exceeds such amount. In no event shall the
aggregate liability of Seller under Section 8.1(a)(i)(C) (and Section 8.1(a)(ii)
to the extent the items covered thereby relate back to Section 8.1(a)(i)(C))
exceed $3,342,000; provided, however, that liabilities arising with respect to
Sections 3.1 through 3.4 and Sections 3.5(a), 3.5(d), and 3.9 hereof shall not
be subject to the foregoing cap and any liabilities arising with respect to such
matters shall not be taken into account in computing aggregate liabilities for
the purpose of applying such cap to liabilities arising under other sections
subject thereto.
(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any tax benefit to Purchaser and Hospitality from the matter
giving rise to the claim for indemnification hereunder and net of any insurance
proceeds received by Purchaser or Hospitality with respect to the matter out of
which such liability arose.
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(d) The representations and warranties of Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate delivered by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(i) the representations and warranties contained in Section 3.5(d) shall be
of no further force and effect after 60 days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1 through
3.4 and Sections 3.5(a), 3.7(g) and 3.9 shall survive until the expiration of
any applicable statues of limitation provided by law; and
(iii) all other representations and warranties of Seller shall be of no
further force and effect after 18 months from the date of the Closing.
Anything to the contrary notwithstanding, the Survival Period shall be
extended automatically to include any time period necessary to resolve a written
claim for indemnification which was made in reasonable detail before expiration
of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
(e) Except for claims under Sections 4.1, 4.3, 4.4, 4.5, 4.11, and 4.13
which shall survive the Closing, Purchaser and Hospitality may not assert any
claim against Seller for breach of any covenant contained in Article IV and all
such claims shall be deemed to be waived as a result of the Closing.
(f) Purchaser and Hospitality shall provide written notice to Seller of any
claim for indemnification under this Article as soon as practicable; provided,
however, that failure to provide such notice on a timely basis shall not bar
Purchaser's or Hospitality's ability to assert any such claim except to the
extent that Seller is actually prejudiced thereby. Purchaser and Hospitality
shall make commercially reasonable efforts to mitigate any damages, expenses,
etc. resulting from any matter giving rise to liability of Seller under this
Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
or Hospitality under Section 8.1, relating to a third party claim or demand,
Purchaser and Hospitality shall provide Seller with prompt written notice
thereof in accordance with Section 10.4 and Seller may defend, in good faith and
at its expense, by legal counsel chosen by it and reasonably acceptable to
Purchaser and Hospitality any such claim or demand, and Purchaser and
Hospitality, at their expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser and Hospitality shall not settle or
compromise such third party claim. In any event, Purchaser and Hospitality shall
cooperate in the settlement or compromise of, or defense against, any such
asserted claim. Notwithstanding the foregoing, Seller shall obtain the consent
of Purchaser and Hospitality, which consent shall not be unreasonably withheld,
prior to settling any such third party claim. In the event, the Seller shall
notify the Purchaser and Hospitality that it disputes any claim made by the
Purchaser or Hospitality and/or it shall fail to defend such claim actively and
in good faith, then the Purchaser and Hospitality shall have the right to
conduct a defense against such claim and shall have the right to settle and
compromise such claim without the consent of the Seller. Once the amount of such
claim is liquidated and the claim is finally determined, the Purchaser and
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Hospitality shall be entitled to pursue each and every remedy available to it at
law or in equity (through the procedure specified in Section 8.5) to enforce the
indemnification provisions of this Article VIII and, in the event it is
determined, or the Seller agrees, that it is obligated to indemnify the
Purchaser and Hospitality for such claim, the Seller agrees to pay all costs,
expenses and fees, including all reasonable attorneys' fees, which may be
incurred by Purchaser in attempting to enforce indemnification under this
Article VIII.
8.3 Seller Claims. Purchaser and Hospitality shall indemnify and hold
harmless Seller against, and in respect of, any and all damages, claims, losses,
liabilities, and expenses, including without limitation, legal, accounting and
other expenses, which may arise out of: (i) any breach or violation by Purchaser
or Hospitality of any covenant set forth herein or any failure to fulfill any
obligation set forth herein, including, but not limited to, the obligation to
satisfy the Assumed Liabilities; (ii) any breach of any of the representations
or warranties made in this Agreement by Purchaser or Hospitality; or (iii) any
claim by any Person for any brokerage or finder's fee or commission in respect
of the transactions contemplated hereby as a result of Purchaser's or
Hospitality's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII 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.
8.5 Settlement of Disputes.
(a) Arbitration. All disputes with respect to any claim for indemnification
under this Article VIII and all other disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the following
procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("AAA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
(iii) The arbitration hearing shall be held in Milwaukee, Wisconsin (in the
case of arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser or Hopsitality) or in a location mutually
agreeable to Seller, Purchaser, and Hospitality; or if Purchaser, Hospitality,
and Seller are unable to agree then at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Wisconsin (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, and judgment on such award may be entered by either party in a court of
competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
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the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination.
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller, Purchaser, and
Hospitality;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if (i) Purchaser shall not have obtained and provided a
copy of a Financing Commitment to Seller by the Termination Date, (ii) Purchaser
shall not been approved hereof as a franchisee with respect to the Territory by
Franchisor by the Termination Date or has not reached agreement with Franchisor
as to the material terms of franchise agreements with respect to the Territory
by the Termination Date, (iii) Hospitality shall not have reached agreement with
Franchisor as to a development schedule and other material terms of development
agreements with respect to the Territory by the Termination Date;
(iv) By either Seller, Purchaser, or Hospitality, at its sole election, at
any time after the Termination Date, if the Closing shall not have occurred on
or prior to such date;
(v) By Purchaser, if Seller makes any amendment or modification of, or
addition or supplement to, the Disclosure Memorandum the subject of which has,
had or could reasonably be expected to have a material adverse effect upon the
financial condition, properties, liabilities, business, results or operations of
the Business; or
(v) By Purchaser, pursuant to Section 2.10 hereof.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller, Purchaser, or Hospitality, as the
case may be, shall have willingly failed to fulfill its obligations hereunder,
the other party shall, subject to Section 8.5, be entitled to pursue, exercise,
and enforce any and all remedies, rights, powers, and privileges available to it
at law or in equity.
(c) If this Agreement is terminated pursuant to this Section 9.1, subject
to Section 9.1(b) and subject to Section 9.1(a)(v) and the liabilities specified
in Section 2.10, all further obligations of the parties under or pursuant to
this Agreement shall terminate without further liability of either party to the
other, provided that, Section 6.2, Article VIII, and Article X hereof shall
survive the termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
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and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) The parties shall split equally the costs of all filing fees required
under the HSR Act.
(c) Purchaser shall pay the costs of obtaining title insurance with respect
to the Real Property. Seller shall pay the costs of all transfer, intangible,
recording, and documentary taxes, stamps, and fees with respect to the transfer
of the Owned Real Property and the Leases. Purchaser shall pay the cost of all
surveys, and all environmental investigations, studies, and reports, and all
other costs of any investigation of the Assets, the Restaurants, or the Business
by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
If to Seller, to: With a required copy to:
Apple South, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Attention: Louis J. (Dusty) Profumo Attention: Larry D. Ledbetter, Esq.
Fax: 706-343-2434 Fax: 404-815-6555
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If to Purchaser: With a required copy to:
WHG Real Estate East, LLC Godfrey & Kahn, S.C.
c/o Wisconsin Hospitality Group, LLC 780 N. Water Street
2500 North Mayfair Road, Suite G-117 Milwaukee, WI 53202
Wauwatosa, Wisconsin 53226 Attention: Kelley Falkner
Attention: Mark Dillon Fax: (414) 273-5198
Fax: (414) 369-0705
If to Hospitality: With a required copy to:
Wisconsin Hospitality Group, LLC Godfrey & Kahn, S.C.
2500 North Mayfair Road, Suite G-117 780 N. Water Street
Wauwatosa, Wisconsin 53226 Milwaukee, WI 53202
Attention: Mark Dillon Attention: Kelley Falkner
Fax: (404) 369-0705 Fax: (414) 273-5198
If to Guarantor: With a required copy to:
Wisconsin Hospitality Group, LLC Godfrey & Kahn, S.C.
2500 North Mayfair Road, Suite G-117 780 N. Water Street
Wauwatosa, Wisconsin 53226 Milwaukee, WI 53202
Attention: Mark Dillon Attention: Kelley Falkner
Fax: (414) 369-0705 Fax: (414) 273-5198
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U. S. Mail properly addressed with adequate postage affixed.
10.5 WISCONSIN LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Purchaser, Hospitality, 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,
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.
10.10 Disclaimer of Warranties. OTHER THAN TO THE EXTENT OF ANY EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT AND IN THE
CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i), SELLER DOES NOT, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, AND SELLER SHALL NOT, BY THE EXECUTION
AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION
WITH THE CLOSING, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE ASSETS, AND ALL SUCH
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WARRANTIES ARE HEREBY DISCLAIMED. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, SHALL
ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INSPECTIONS AND INVESTIGATIONS EXCEPT TO THE EXTENT OF SELLER'S REPRESENTATIONS
AND WARRANTIES MADE HEREIN. SELLER SHALL SELL AND CONVEY TO PURCHASER, AND
PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS", AND WITH ALL FAULTS,
EXCEPT TO THE EXTENT OF SELLER'S REPRESENTATIONS AND WARRANTIES MADE HEREIN, AND
THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR
AFFECTING THE ASSETS BY SELLER, SELLER MAKES, AND SHALL MAKE, NO EXPRESS OR
IMPLIED WARRANTY OF SUITABILITY OR FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE,
OR AS TO THE MERCHANTABILITY, ENVIRONMENTAL CONDITION, TITLE, VALUE, QUALITY,
QUANTITY, CONDITION OR SALABILITY OF ANY OF THE ASSETS, OR AS TO THE PRESENCE ON
OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS MATERIAL EXCEPT TO THE EXTENT OF
SELLER'S REPRESENTATIONS AND WARRANTIES HEREIN. THE TERMS AND CONDITIONS OF THIS
SECTION 10.11 SHALL SURVIVE THE CONSUMMATION OF THE PURCHASE AND SALE OF THE
ASSETS ON THE CLOSING DATE WITHOUT REGARD TO ANY GENERAL LIMITATIONS UPON
SURVIVAL SET FORTH IN THIS AGREEMENT. THE LIMITATIONS SET FORTH IN THIS SECTION
SHALL IN NO WAY LIMIT ANY WARRANTY FROM ANY THIRD PARTY.
10.11 Time. Time is and shall be of the essence of this Agreement.
10.12 Guarantee. Mark Dillon agrees to guarantee the performance and
obligations of Purchaser with respect to this agreement; provided that such
guarantee shall terminate after the Closing Date, and Seller has relied upon
such guarantee in entering into this Agreement.
[Signatures Located on Following Pages]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SELLER:
APPLE SOUTH, INC.
By:
PURCHASER:
WHG REAL ESTATE EAST, LLC
By:
By:
HOSPITALITY:
WISCONSIN HOSPITALITY GROUP, LLC
By:
GUARANTOR:
MARK DILLON
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1(i) Tangible Personal Property located in the Restaurants
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.11 Permits
3.15 Seller Plans
4.7 Development Sites
4.11 Transition Services
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Adjustment to Purchase Price
C Opinion of Seller's Counsel
D Opinion of Purchaser's and Hospitality's Counsel
E Allocation of Purchase Price
F Lender's Commitment Letter
G Note
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of April 6, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and WOODLAND GROUP, INC., an
Indiana corporation ("Purchaser"),
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions . For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADI's" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property and trade fixtures of any kind located
in the Restaurants or on the Real Property, including, but not limited to,
equipment, appliances, machinery, tables, chairs, other furniture, bars,
tableware, cookware, utensils, furnishings, signage, leasehold improvements,
fixtures, uniforms, supplies, food and beverage inventory (including beer,
liquor, and wine inventory), and advertising and promotional materials;
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business; (iv) all
assignable Permits;
(v) all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii) copies of Seller's employee records of those current employees of
Seller who are employed by Purchaser as of the Closing (subject to execution of
a release by each affected employee allowing for the disclosure of such files);
(viii) the Contracts and Leases;
(ix) the Owned Real Property (including the right, title, and interest of
DR Holdings, Inc. in the Madison Property which Seller shall cause to be
conveyed to Purchaser at Closing); and
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(x) All records and files related to the foregoing, such as rent
calculations, landlord correspondence, purchase agreements, deeds, construction
documents, title reports, environmental and engineering reports, appraisals,
surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, or any other property, tangible or intangible, real
or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c), and (viii) all
obligations with respect to Seller's development activities under Section 4.7
not otherwise assumed hereunder or covered by an increase in the purchase price
pursuant to Section 2.3. Assumed Liabilities shall not include any liability,
obligation, payment, duty, or responsibility of any nature except as expressly
described above and specifically shall not include (i) liabilities or
obligations of Seller arising out of any breach by Seller of any of the
Contracts or Leases; (ii) except as provided in clauses (ii) or (iv) above,
liabilities or obligations of Seller (or DR Holdings, Inc., in the case of the
Madison Property) under any of the Contracts or Leases or with respect to the
Owned Real Property or other Assets that accrue in any such case prior to the
Closing; (iii) any liabilities or obligations of Seller under the Franchise
Agreements; (iv) any liability of Seller or DR Holdings, Inc. for product
liability, personal injury, property damage, or otherwise based on any tort
claim or statutory liability (including but not limited to any "dram shop"
liability); (v) any federal, state, or local tax liability of Seller or DR
Holdings, Inc. except to the extent expressly assumed hereunder, (vi) any
contractual claim based on any lease, contract, or agreement other than the
Contracts and Leases; (vii) any liability, obligation, or responsibility of
Seller to Seller's employees, agents, or independent contractors with respect to
wages, salaries, bonuses, deferred compensation or any other compensation or
benefits earned or accrued prior to the Closing (except for accrued but unvested
vacation assumed pursuant to Section 6.3(c)); and (viii) any liability or
obligation of Seller arising out of the negotiation, execution, or performance
of this Agreement, including fees and expenses of attorneys and accountants,
except as otherwise expressly provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Brentwood Unit" shall have the meaning set forth in Section 4.13.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
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section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds, limited warranty deeds or other
appropriate instruments to convey good and marketable fee simple title to the
Owned Real Property, with the warranty of title contained therein limited to the
claims of Persons claiming by, through or under Seller (or in the case of the
Madison Property, DR Holdings, Inc.), but not otherwise.
"Development Costs" shall mean (i) all of Seller's out-of-pocket costs paid
in connection with the development of the restaurants listed on Schedule 4.7 and
capitalized in accordance with generally accepted accounting principles and
Seller's historical practices including, but not limited to, the purchase price
paid for real estate; acquisition and closing costs, such as legal fees,
engineering fees, surveys, transfer taxes, title policies, and the like; costs
of obtaining leases, such as legal fees, surveys, title policies, and the like;
environmental investigation costs; the cost of permits, approvals, variances, or
rezonings; land development costs; construction costs; the cost of equipment and
other personal property acquired for the restaurants; pre-opening expenses; and
construction period insurance; and (ii) Seller's internal costs capitalized in
connection with such development efforts in accordance with Seller's historic
practices. Seller's capitalized internal costs and pre-opening expenses shall
not exceed $150,000 in the aggregate. Total Development Costs, including
capitalized internal costs and pre-opening expenses, shall not exceed
$2,025,000.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
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limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"Forum" shall mean any federal, state, local, municipal, or foreign court,
governmental agency, administrative body or agency, tribunal, private
alternative dispute resolution system, or arbitration panel.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Applebee's International, Inc. "Financial
Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Sellers' vice president of operations for the Territory and all management of
Seller senior thereto.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B and any leases subsequently entered into and pertaining to new
restaurants being developed pursuant to Section 4.7.
"Madison Property" means the parcel of land located at 1557 North Gallatin
Pike, Madison, Tennessee and the building, fixtures, signs, parking facilities,
and other improvements located thereon which constitute the premises for the
Madison, Tennessee, Restaurant.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $6,000 per year and that are not cancelable
by Seller upon thirty days notice or less.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is now located and the tract (Lebanon, Tennessee)
acquired for development pursuant to Section 4.7 (all of which tracts and
parcels are described in Schedule 1.1C) and all buildings, fixtures, signs,
parking facilities, and other improvements located thereon. Owned Real Property
will include for all purposes of this Agreement unless expressly stated
otherwise, the Madison Property, which is held by DR Holdings, Inc., of record
but which is beneficially owned by Seller.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
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beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from governmental and
regulatory authorities which relate exclusively to the Business, the
Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, in the case of all Real Property, (i)
such easements, restrictions, covenants, and other such encumbrances which are
shown as exceptions on the Title Commitments any other encumbrances of record as
of the effective date of the Title Commitments, (ii) ordinances (municipal and
zoning), (iii) survey matters, and (iv) to the extent that such encumbrances are
waived by Purchaser, such easements, restrictions, covenants, and other
encumbrances which become matters of public record after the effective date of
the Title Commitments and before the Closing. Each of the matters covered by
items (i) and (iii) are subject to Purchaser's objection under Section 7.1,
which if duly given will preclude the matters objected to from becoming
Permitted Encumbrances until resolved. Permitted Encumbrances shall include in
the case of both Real Property and personal property all liens for taxes not yet
due and payable.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the 14 Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A and
the additional Applebee's restaurant in Lebanon, Tennessee, to be completed
prior to Closing pursuant to Section 4.7.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean June 30, 1998.
"Territory" shall mean the Nashville, Tennessee ADI and the Bowling Green,
Kentucky, ADI, consisting in each case of the counties listed on Schedule 1.1D.
"Title Commitments" shall have the meaning set forth in Section 7.1(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 7.1(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale . Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
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2.2 Assumption of Liabilities . As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due.
2.3 Purchase Price . The purchase price for the Assets (the "Purchase
Price") shall be $16 million as adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases with respect to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to Seller's cost of
those Assets consisting of food, beverage (including beer, wine, and liquor),
new uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date; and (v)
the amount of Seller's Development Costs.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, (iii) any other expenses pertaining to the Business
(such as telephone expenses, advertising expenses, utility charges and the like)
to the extent that the same are to be paid by Purchaser, and (iv) the estimated
cost of vacation accrued but unvested as of the Closing Date for ADI Personnel
hired by Purchaser, the cost of which is being assumed by Seller pursuant to
Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
(d) Twelve months following the Closing, the parties shall reconcile the
accrued but unvested vacation of ADI Personnel that vests and is given by
Purchaser with the estimated cost thereof deducted from the Purchase Price
pursuant to Section 2.3(b). If the cost was overestimated, Purchaser shall pay
the difference to Seller and if underestimated Seller shall pay the difference
to Purchaser.
The foregoing adjustments shall be calculated by the parties and set forth
on Exhibit D which shall be signed by both parties at Closing. The Purchase
Price shall be paid by Purchaser on the Closing Date by wire transfer of
immediately available funds to an account designated by Seller.
2.4 Deliveries at the Closing . (a) At the Closing, Seller shall deliver to
Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date;
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
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Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit B hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller (or in the case of the Madison
Property, by DR Holdings, Inc.);
(vii) A Cross-Receipt, duly executed by Seller; and
(viii) Any other documents that Purchaser may reasonably request at least
three days prior to the Closing in order to effectuate the transactions
contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof;
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(i) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Bill of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (ii) as to the incumbency and specimen signature of each officer
of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the Purchase Price;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Michael K. Banik, counsel to Purchaser, in substantially
the form of Exhibit C hereto;
(vi) A Cross-Receipt, duly executed by Purchaser; and
(vii) Any other documents that Seller may reasonably request at least three
days prior to the Closing.
2.5 Transfer of Operations . Purchaser 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 expressly provided in this Agreement, all profits, losses,
liabilities, claims, or 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 Purchaser. The risk
of loss or damage by fire, storm, flood, theft, or other casualty or cause shall
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be in all respects upon Seller prior to the Effective Time and upon the
Purchaser thereafter.
2.6 Closing . The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of Kilpatrick Stockton LLP,
Suite 2800, 1100 Peachtree Street, Atlanta, Georgia, at 10:00 a.m. on June 1,
1998, or on such other date and time as may be mutually agreed upon by the
parties hereto.
2.7 Allocation of Purchase Price . The Purchase Price shall be allocated
among the various Assets as set forth on Schedule 2.7 hereof. Each party hereby
agrees that it will not take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is inconsistent with the terms of this Section 2.7.
2.8 Further Assurances . From time to time after the Closing at Purchaser's
request and expense, Seller shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power3.1Organization,
Qualifications and Corporate Power . Seller is a corporation duly incorporated
and organized, validly existing, and in good standing under the laws of the
State of Georgia. Seller has the corporate power and authority to execute,
deliver, and perform this Agreement, the Bill of Sale and Assignment Agreement,
the Deeds, and all other agreements, documents, certificates, and other papers
contemplated to be delivered by Seller pursuant to this Agreement.
3.2 Authorization . The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention . Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, 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 any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller or the
Assets of any court or of any regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over Seller or the Assets, and
will not result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of the Assets. Except as set forth
on Schedule 3.3 and except for consents required under Minor Contracts, the
execution, delivery and performance of this Agreement and the other documents
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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 HSR Act
and the expiration of any applicable waiting period thereunder. Schedule 3.3
identifies separately each notice, consent, waiver, or approval by reference to
each Lease and to each Material Contract to which it is applicable.
3.4 Validity . This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Seller, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
3.5 Assets . (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements.
(c) There are no assets or property of any nature which is not being
transferred to Purchaser hereunder that has been customarily used exclusively in
the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property having a fair market
value of $2,500 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
3.6 Contracts and Leases
(a) Each Material Contract and Lease is a valid and subsisting agreement,
without any material default of Seller thereunder, and to the knowledge of
Seller, without any default on the part of any other party thereto. To the
knowledge of Seller, no event or occurrence has transpired which with the
passage of time or giving of notice or both will constitute a default under any
Material Contract or Lease. A true and correct list of each Material Contract
and Lease and every amendment thereto or other agreement or document relating
thereto is set forth as Schedule 3.6 to this Agreement. True and correct copies
of the Material Contracts and Leases (and any amendments thereto) have been
provided to Purchaser. At the time of Closing, Seller shall have made all
payments and performed all obligations due through the Closing Date under each
Contract and Lease, except to the extent that any payment due is set forth on
Exhibit D and deducted in calculating the Purchase Price pursuant to Section
2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
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3.7 Real Property
(a) Schedule 3.7(a) sets forth with respect to each Restaurant, its
location, whether it is located on Owned Real Property or is on a site subject
to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller (or in the case of the Madison Property, DR Holdings, Inc.) has
obtained all authorizations and rights-of-way which are necessary to ensure
vehicular and pedestrian ingress and egress to and from the site of each
Restaurant, all of which are assignable and shall be assigned to Purchaser at
the Closing.
(d) Neither Seller (nor in the case of the Madison Property, DR Holdings,
Inc.) has received any notice that any Government having the power of eminent
domain over any parcel of Real Property has commenced or intends to exercise the
power of eminent domain or a similar power with respect to any part of the Real
Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all laws and regulations (including zoning laws and ordinances) of
all Governments having jurisdiction over the Real Property, and neither Seller
nor DR Holdings, Inc. has received any notice from any Government alleging that
the Real Property or any improvements erected or situated thereon, or the uses
conducted thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller or DR Holdings, Inc., or to the knowledge of Seller received
by any owner of any of the Real Property subject to a Lease, requiring or
calling attention to the need for any work, repair, construction, alteration, or
installation on or in connection with the Real Property which has not been
complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
material compliance with all applicable Environmental Laws and Environmental
Permits held by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Property to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller or DR Holdings, Inc. relating to
any alleged past or ongoing violation of any Environmental Laws or Environmental
Permits with respect to the Real Property, nor to Seller's knowledge is Seller
or DR Holdings, Inc. subject to any liability for any such past or ongoing
violation. The foregoing representations and warranties are limited by the
matters set forth in the reports listed on Schedule 3.7(g).
3.8 Financial Statements . Schedule 3.8 contains for each Restaurant
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unaudited statements of operations as of the end of the 1997 fiscal year and for
each fiscal month ended thereafter through the date hereof for which such
statements are available, prepared in accordance with generally accepted
accounting principles, except for the absence of explanatory notes and except as
otherwise expressly described therein (the "Financial Statements"). The
Financial Statements have been prepared in accordance with Seller's historical
practices and fairly present the operations of the Restaurants for the periods
presented and as of their respective dates.
3.9 Taxes . All Property Taxes relating to the Assets have been fully paid
for 1997 and all prior tax years and there are no delinquent property tax liens
or assessments. Seller or DR Holdings, Inc. has also timely filed (or will
timely file) all other tax returns and reports of whatever kind pertaining to
the Assets and required to be filed by Seller or DR Holdings, Inc. up to the
Closing Date. Seller or DR Holdings, Inc. has paid (or will timely pay) all
taxes of whatever kind, including any interest, penalties, governmental charges,
duties, fees, and fines imposed by all governmental entities or taxing
authorities, which are due and payable 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 lien on any of the Assets. There are no
audits, suits, actions, claims, investigations, inquiries, or proceedings
pending or, to Seller's knowledge, threatened against Seller or DR Holdings,
Inc. 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 assessed against Seller or DR
Holdings, Inc. that in any such case affect the Assets.
3.10 Litigation . Except as set forth on Schedule 3.10, there is no
material Action or investigation pending or, to the knowledge of Seller,
threatened against or affecting Seller or DR Holdings, Inc. that pertains to the
Restaurants, or any of the Assets before any court or by or before any
governmental body or arbitration board or tribunal.
3.11 Permits . Seller has all Permits as are necessary to operate the
Restaurants. Seller has fulfilled and performed all of its material obligations
with respect to such Permits and, to the knowledge of Seller, no event has
occurred which allows, nor after notice or lapse of time or both would allow,
revocation or termination thereof or would result in any other impairment of the
rights of the holder of any such Permits.
3.12 Health and Safety Requirements . To the knowledge of Seller, Seller
and DR Holdings, Inc. are in compliance with all laws, governmental standards,
rules and regulations applicable to them or to any of the Assets in respect to
the Americans with Disabilities Act and similar state laws, occupational health
and safety laws, and environmental laws.
3.13 Employment Contracts, Etc . Seller is not is a party to any written
employment agreements related to the employees at the Restaurants, (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters . Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
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thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits
(a) Schedule 3.15 hereto contains a true and complete list of all the
following agreements or plans of Seller which are presently in effect and which
pertain to any of the employees engaged exclusively in the Business:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Sellers maintains or to which Seller has
any outstanding, present, or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and/or has ever contributed or
been obligated to contribute to a multiemployer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents . All information
concerning Seller contained in any certificate furnished to Purchaser pursuant
to this Agreement or in the Disclosure Memorandum is or will be when furnished
both complete and accurate in all material respects; and all documents furnished
to Purchaser pursuant to this Agreement which are documents described in this
Agreement or in the Disclosure Memorandum are true and correct copies of the
documents which they purport to represent.
ARTICLE IV - COVENANTS OF SELLER
4.1 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 Leases
and Material Contracts, where the failure to do so would have a material adverse
affect on the operations of a Restaurant.
4.2 Transfer of Licenses and Permits . Seller shall use commercially
reasonable efforts to cooperate in assisting Purchaser with the assumption,
transfer, or reissuance of any and all Permits required for the operation of the
Restaurants.
4.3 Liabilities of Seller . All liabilities of Seller related to the Assets
are not Assumed Liabilities will be promptly paid by Seller as they come due.
4.4 Agreements Respecting Employees of Seller
(a) Prior to the Effective Time without the prior written approval of
Purchaser, Seller shall not transfer or reassign to operations outside the
Business any employee exclusively involved in the operation or supervision of
the Restaurants ("ADI Personnel") At the Effective Time, Seller shall terminate
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the employment of all ADI Personnel. For a period of eighteen months following
the Closing, Seller shall not solicit for employment any person who is an
employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business . (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
of the Franchise Agreements, using commercially reasonable efforts in keeping
with Seller's historical practices to preserve and maintain the services of its
employees and its relationships with suppliers and customers, (ii) pay all bills
and debts incurred by it related to the Business promptly as they become due,
and (iii) consult in advance with Purchaser on all decisions outside the
ordinary course of business relating to the Assets or the Restaurants.
(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices;
(ii) 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;
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations; and
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change (or in the case of the Madison Property, allow any change) in
any manner the ownership of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan described on Schedule 4.5,
which has been approved;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts pursuant to Section 4.7 in the ordinary course of business)
any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into any Material Contract;
(vi) cancel or terminate or consent to or accept any cancellation or
termination of any Material Contract or Lease, amend or otherwise modify any of
its material terms or waive any breach of any of its material terms or
provisions or take any other action in connection with any Material Contract or
Lease that would materially impair the interests or rights of Seller to be
transferred to Purchaser hereunder.
4.6 Access to Information . Seller shall afford Purchaser, 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 90 days following the Closing, during normal business
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hours, to the offices, properties, books, and records of Seller with respect to
the Assets and the Restaurants and shall furnish to Purchaser such additional
financial and operating data and other information as Seller may possess and as
Purchaser may reasonably request, subject to Purchaser's obligations regarding
the confidentiality of such information as set forth in Section 6.2 hereof;
provided, however, that such access shall be arranged in advance by Purchaser
with Seller and will be scheduled in a manner and with a frequency calculated to
cause the minimum disruption of the business of Seller.
4.7 Development Efforts . Seller shall use commercially reasonable efforts
to complete the development of the new Applebee's restaurant in Lebanon,
Tennessee listed on Schedule 4.7 substantially in accordance with the timetable
and budget set forth on such Schedule.
4.8 Reporting Requirements . Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information respect to any event which has materially adversely affected the
Assets or the operations of the Restaurants.
(b) As soon as available and in any event within fifteen business days
after the end of each fiscal month, the statement of operations of each
Restaurant for such month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
actions, charges, orders or other directives affecting the Business or 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) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
4.9 Cooperation . Insofar as such conditions are within its reasonable
control or influence, Seller will use commercially reasonable efforts to cause
the conditions set forth in Article VII to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby, including
obtaining the Consents. The parties acknowledge that no consents will be sought
with respect to any Minor Contract even if the failure to so obtain a consent to
assignment may result in a default or termination thereunder. Seller will use
commercially reasonable efforts to obtain required consents of landlords to the
assignment of the Leases and shall bear any expenses associated with obtaining
such consents; however, Seller shall not be required to make any payment to a
landlord (other than reimbursement of expenses), guarantee any Lease or remain
liable for the payment thereof following the Closing, or agree to any
concessions or amendment to other leases or arrangements with such landlord in
order to obtain such consents. Seller shall use commercially reasonable efforts
to obtain from owners of Real Property subject to Leases such estoppel
certificates as Purchaser may reasonable request.
4.10 Subsequent Contracts . From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
Material Contracts entered into by Seller ("Subsequent Contracts") a provision
permitting the assignment of any such Subsequent Contract to Purchaser and
providing that upon such assignment, Purchaser shall succeed to all of Seller's
rights, title, and interests thereunder subject to the Purchaser'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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4.11 Transition Services
(a) For a period of three months after the Closing, if and to the extent
requested in writing by Purchaser, Seller agrees to provide to Purchaser
restaurant accounting, POS system support, and other services related to the
Restaurants as mutually agreed upon between Seller and Purchaser (the
"Services"). Purchaser shall give Seller forty-five (45) 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) Purchaser 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 Purchaser, Seller shall offer to specifically designated personnel
a bonus incentive to remain for the three month period. The amount of such bonus
shall be at the discretion of Purchaser. Such bonus, if accepted by the
employee, shall be paid by Purchaser at the end of the three-month period, or
for such shorter period as Purchaser may determine.
4.12 Delivery of Real Estate Documents Within five business days of the
date hereof Seller shall provide to Purchaser legal descriptions of the Owned
Real Property and copies of all surveys, title policies, and environmental
reports pertaining to the Owned Real Property in Seller's possession.
4.13 Brentwood Restaurant The Applebee's restaurant located at 1656
Westgate Circle, Brentwood, Tennessee (the "Brentwood Unit") is not included in
the Assets being sold pursuant to this Agreement, and Purchaser is not acquiring
any interest in the assets associated with the Brentwood Unit. Neither Seller
nor any other party shall operate an Applebee's restaurant at the location of
the Brentwood Unit following the Closing. Purchaser shall have the option to
purchase the personal property in the Brentwood Unit at a mutually agreeable
price.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
5.1 Organization, Corporate Power, Authorization . Purchaser is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Indiana and in each other jurisdiction in which it is
lawfully required to qualify to conduct business. Purchaser has the corporate
power and authority to execute and deliver this Agreement and the Bill of Sale
and Assignment Agreement, and to consummate the transactions contemplated
hereby. All corporate action on the part of Purchaser necessary for the
authorization, execution, and delivery of this Agreement and the Bill of Sale
and Assignment Agreement, and performance of all obligations of Purchaser
thereunder has been duly taken.
5.2 Non-Contravention . The execution and delivery of this Agreement and
the Bill of Sale and Assignment Agreement by Purchaser do not and the
consummation by Purchaser of the transactions contemplated hereby and thereby
will not violate any provision of its articles of incorporation or bylaws.
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5.3 Validity . This Agreement has been duly executed and delivered by
Purchaser, and constitutes the legal, valid, and binding obligation of
Purchaser, enforceable against it in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws from time to time in effect
affecting the enforcement of creditors' rights. When the Bill of Sale and
Assignment Agreement has been executed and delivered in accordance with this
Agreement, it will constitute the legal, valid, and binding obligation of
Purchaser, enforceable in accordance with its terms, subject to general equity
principles and to applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws from time to time in effect affecting the enforcement of
creditors' rights.
5.4 Litigation Relating to the Agreement . Purchaser is not a party to, or
subject to any judgment, decree, or order entered in any lawsuit or proceeding
brought by any governmental agency or instrumentality or other party seeking to
prevent the execution of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE VI - COVENANTS OF PURCHASER
6.1 Purchaser Performance . After the Closing Date, Purchaser shall
promptly pay as they become due and otherwise perform all obligations of Seller
under the Assumed Liabilities and otherwise perform and fulfill all other
obligations with respect to the Assets pertaining to the period after the
Closing Date.
6.2 Confidentiality . In connection with the negotiation of this Agreement,
Seller may disclose Confidential Information, as defined below, to Purchaser.
Purchaser agrees that if the transactions contemplated herein are not
consummated, it will return to Seller all documents and other written
information furnished to it. Purchaser further agrees to maintain the
confidentiality of any and all Confidential Information of Seller and not
disclose any Confidential Information to any Person other than such Person to
whom Confidential Information must be disclosed to effect the transactions and
who are bound by appropriate non-disclosure agreement or obligations. Purchaser
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller. The foregoing obligations shall not apply to (i) any
information which was known by Purchaser prior to its disclosure by Seller; (ii)
any information which was in the public domain prior to the disclosure thereof;
(iii) any information which comes into the public domain through no fault of
Purchaser; (iv) any information which is disclosed to Purchaser by a third
party, other than an affiliate, having the legal right to make such disclosure;
or (iv) any information which is required to be disclosed by Order of any Forum.
For purposes of this Section, "Confidential Information" shall mean any and all
technical, business, and other information which is (a) possessed or hereafter
acquired by Seller and disclosed to Purchaser and (b) derives economic value,
actual or potential, from not being generally known to Persons other than
Seller, including, without limitation, technical or nontechnical data,
compositions, devices, methods, techniques, drawings, inventions, processes,
financial data, financial plans, product plans, lists of actual or potential
customers or suppliers, information regarding the business plans and operations
of Seller, and the existence of discussions and negotiations between the parties
hereto relating to the terms hereof. The restrictions of this Section shall
expire three years from the date hereof with respect to any confidential
business information that does not constitute a trade secret under applicable
law.
6.3 Seller Employees
(a) Purchaser shall offer employment to all ADI Personnel upon terms and
conditions substantially equivalent to those provided by Seller; however,
Purchaser shall not be required to provide stock options or any stock purchase
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rights. For a period of twelve months following the Closing, Purchaser shall not
hire any person who was an employee of Seller or any subsidiary of Seller within
the previous three months (other than ADI Personnel) and for a period of
eighteen months following the Closing, Purchaser shall not solicit for
employment any person who is an employee of Seller or any subsidiary of Seller.
(b) Purchaser shall maintain employee records transferred to Purchaser
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchaser's normal
business hours. Purchaser shall maintain the confidentiality of such records and
limit access thereto in a manner consistent with Purchaser's treatment of its
employee records.
(c) Purchaser agrees with respect to ADI Personnel hired by Purchaser: (i)
to give such employees credit under Purchaser's benefits plans, programs, and
arrangements, including credit for accrued but unvested vacation for such
employees' period of service with Seller, provided that such credit shall only
be taken into account under any tax-qualified plan maintained by Purchaser 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; (ii) to provide coverage to such
employees who are eligible under Purchaser'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 deductibles,
out of pocket expenses, and similar amounts paid by individuals and their
beneficiaries.
6.4 Cooperation . Insofar as such conditions are within its reasonable
control or influence, Purchaser shall use commercially reasonable efforts to
cause the conditions set forth in Article VII to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby.
Specifically, but not by way of limitation, Purchaser will (i) use commercially
reasonable efforts to obtain a signed commitment letter for financing for this
transaction on terms reasonably acceptable to Purchaser ("Financing Commitment")
within 15 days of the date hereof and to obtain financing on the terms set forth
therein, (ii) promptly provide Franchisor with all information required by
Franchisor to determine whether Purchaser will be approved as a franchisee with
respect to the Territory, (iii) actively pursue an agreement with Franchisor as
to the principal terms of franchise and development agreements with respect to
the Territory, and (iv) file all documents required to obtain approval of the
transactions contemplated hereby under the HSR Act within 15 days of the date
hereof.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection . (a) Purchaser shall have 45
days following receipt of the documents referred to in Section 4.12 (the "Title
Inspection Period") to obtain and review (i) current surveys and title insurance
commitments with respect to the Owned Real Property ("Owner's Title
Commitments") pursuant to which the Title Company will agree to issue at Closing
owner's policies of title insurance ("Owner's Title Policies") on American Land
Title Association standard Form B-1990, without exceptions except as shown in
the Owner's Title Commitments, to be issued by a reputable title insurance
company of Sellers' choice and reasonably acceptable to Purchaser ("Title
Company") in an amount in the case of each parcel equal to the purchase price
allocated to such parcel of the Owned Real Property pursuant to Section 2.7, and
(ii) current surveys and title insurance commitments with respect to the Real
Property subject to a Lease (collectively, the "Leased Real Property") (the
"Lessee Title Commitments", and collectively with the Owner's Title Commitments,
the "Title Commitments") pursuant to which the Title Company will agree to issue
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at Closing lessee's policies of title insurance ("Lessee's Title Policies") on
American Land Title Association standard form of leasehold owner's policy to
insure leasehold estates, showing no exceptions except as shown in the Lessee
Title Commitments. The Owner's Title Policies shall insure the Purchaser that,
upon consummation of the purchase and sale herein contemplated, Purchaser will
be vested with good, fee simple, marketable, and insurable title to the Owned
Real Property, subject only to the Permitted Encumbrances or arising out of acts
of the insured. The Lessee's Title Policies shall insure the Purchaser that,
upon consummation of the transactions herein contemplated, Purchaser will be
vested with a good, valid, marketable and insurable leasehold estate in and to
the Leased Real Property, subject only to the Permitted Encumbrances. Purchaser
shall have until the end of the Title Inspection Period in which to furnish
Seller a written statement of reasonable objections to exceptions ("Material
Objections"). Seller shall have until the Termination Date to satisfy such
Material Objections (but with no obligation to do so) in all material respects,
and if Seller fails to satisfy all Material Objections in all material respects
on or prior to the Termination Date, then Purchaser's sole right and remedy
shall be to either (i) waive the objections and elect to close, or (ii)
terminate this Agreement by giving written notice of such termination to Seller.
If Purchaser fails to furnish Seller a written statement of Material Objections
by the end of the Title Inspection Period with respect to any matter appearing
as an exception on a Title Commitment, such matter shall be deemed waived by
Purchaser and shall be a Permitted Encumbrance. The parties acknowledge that
some of the Leased Real Property may be located in shopping centers, and as
such, unless the leased premises are a free standing building located on a
separate pad with its own legal description ("Free Standing Premises") the
Lessee Title Commitments for such Leased Real Property will contain encumbrances
for entire shopping centers. Notwithstanding anything to the contrary contained
herein, while Lessee Title Commitments will be delivered for such Leased Real
Property, no surveys will be delivered and no Lessee's Title Policies will be
issued for Leases unless such Leases are for Free Standing Premises. Purchaser
may not object to title encumbrances for such Leased Real Property that do not
affect the premises leased under the Leases, which such encumbrances shall be
deemed to be Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchaser, including, without limitation, the
entry by Purchaser or Purchaser's Designees onto the Real Property, or the other
activities of Purchaser or Purchaser's Designees with respect to the Real
Property (hereinafter called "Purchaser's Activities") shall not damage the Real
Property in any manner whatsoever or disturb or interfere with the rights of any
lessor of Leased Real Property; (ii) in the event the Real Property is altered
or disturbed in any manner in connection with any Purchaser's Activities,
Purchaser shall immediately return the Real Property to the condition existing
prior to Purchaser's Activities; (iii) Purchaser shall in no event without
Seller's prior written consent disclose the results of any of its
investigations, examinations, tests, or inspections to any party (including any
Government unless required by law) other than to its lenders, attorneys,
consultants, and investors; and (iv) Purchaser shall indemnify, defend, and hold
Seller harmless from and against any and all claims, liabilities, damages,
losses, costs, and expenses of any kind or nature whatsoever (including, without
limitation, attorneys' fees, and expenses and court costs) suffered, incurred or
sustained by Seller as a result of, by reason of, or in connection with any
Purchaser's Activities. Notwithstanding any provision of this Agreement to the
contrary, Purchaser shall not have the right to undertake any environmental
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studies or testing beyond the scope of a standard "Phase I" evaluation without
the prior written consent of Seller and, if applicable, the lessor of any Leased
Real Property.
(B) Purchaser shall have until the date which is 45 days after the date of
this Agreement (hereinafter called the "Due Diligence Date"), to perform such
review, investigations, examinations, tests and inspections as Purchaser shall
deem necessary or desirable to determine whether the Real Property, the Leases,
Contracts, and Permits are suitable and satisfactory to Purchaser and can be
used for Applebee's franchise restaurants. In the event Purchaser shall
determine that such matters are not reasonably suitable and satisfactory to
Purchaser, Purchaser shall have the right to terminate this Agreement by giving
written notice to Seller on or before the Due Diligence Date If Purchaser does
not terminate this Agreement in accordance with this Section 7.1(b) on or before
the Due Diligence Date, Purchaser shall have no further right to terminate this
Agreement pursuant to this Section 7.1(b).
(C) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities; or (ii) Closing.
(D) Purchaser acknowledges that Seller may deliver to Purchaser certain
documents and information in possession of Seller or Seller's agents with regard
to the Real Property (hereinafter called the "Due Diligence Materials"). The Due
Diligence Materials will be provided to Purchaser without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchaser
for Purchaser's informational purposes. Until Closing, Purchaser and Purchaser's
Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchaser's Conditions to Closing . The obligations of Purchaser
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Purchaser, be
waived:
(a) Subject to the matters disclosed in the Disclosure Memorandum as
supplemented by Seller from time to time, all representations and warranties of
Seller in this Agreement shall be true in all material respects on and as of the
Closing.
(b) Any supplement to the Disclosure Memorandum delivered by Seller shall
not reflect in Purchaser's reasonable judgment any material adverse change in
the Assets or the Business.
(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 have obtained and delivered to Purchaser all consents
necessary to transfer and assign the Assets (except for Minor Contract) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant and development agreements with respect to each
ADI in the Territory. Such agreements shall grant Purchaser exclusive rights to
the development and operation of Applebee's restaurants in the Territory.
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(f) Purchaser 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 in accordance with franchise requirements;
provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser 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 Purchaser a duly executed
liquor license management agreement or agreements if allowed by law.
(g) 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 Purchaser.
(h) Purchaser shall have obtained the financing described on in the
Financing Commitment upon terms and conditions reasonably acceptable to
Purchaser or other financing reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
(k) Seller shall have completed and opened the new Applebee's restaurant
under development pursuant to Section 4.7.
(l) All Material Objections shall have been waived by Purchaser or resolved
to Purchaser's satisfaction.
7.3 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 Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser 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 Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(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 Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims
(a) Seller shall indemnify and hold harmless Purchaser, its successors and
assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser that result from, relate to, or arise out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
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(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
by Seller pursuant hereto;
(D) any liability to Purchaser resulting from the failure to obtain
consents from the other parties to Minor Contracts; or
(E) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Seller's
dealings, agreement, or arrangement with such Person.
(ii) Any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs, and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing including all such expenses reasonably incurred in
mitigating any damages resulting to Purchaser from any matter set forth in
subsection (i) above.
(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to Section 8.1(a)(i)(C) (and Section
8.1(a)(ii) to the extent the items covered thereby relate back to Section
8.1(a)(i)(C)) until the aggregate liability of Seller thereunder exceeds
$125,000 and then only to the extent that the aggregate liability of Seller
thereunder exceeds such amount; provided, however, that liabilities arising with
respect to Sections 3.1 through 3.4 hereof shall not be subject to the foregoing
threshold and any liabilities arising with respect to such matters shall not be
taken into account in computing aggregate liabilities for the purpose of
applying such threshold amount to liabilities arising under other Sections
subject thereto. In no event shall the aggregate liability of Seller under
Section 8.1(a)(i)(C) (and Section 8.1(a)(ii) to the extent the items covered
thereby relate back to Section 8.1(a)(i)(C)) exceed $3 million.
(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any tax benefit to Purchaser from the matter giving rise to the
claim for indemnification hereunder and net of any insurance proceeds received
by Purchaser with respect to the matter out of which such liability arose.
(d) The representations and warranties of Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate delivered by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(i) the representations and warranties contained in Section 3.5(d) shall be
of no further force and effect after 60 days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1, through
3.4 and Section 3.7(g) shall survive until the expiration of any applicable
statues of limitation provided by law; and
(iii) all other representations and warranties of Seller shall be of no
further force and effect after eighteen months from the date of the Closing.
Anything to the contrary notwithstanding, the Survival Period shall be
extended automatically to include any time period necessary to resolve a written
claim for indemnification which was made in reasonable detail before expiration
of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
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(e) Purchaser may not assert any claim against Seller for breach of any
covenant contained in Article IV (except for Sections 4.1, 4.3, 4.4, 4.5 and
4.11) and all such claims shall be deemed to be waived as a result of the
Closing. The other covenants contained in Article IV and liability therefor
shall survive the Closing.
(f) Purchaser shall provide written notice to Seller of any claim for
indemnification under this Article as soon as practicable; provided, however,
that failure to provide such notice on a timely basis shall not bar Purchaser's
ability to assert any such claim except to the extent that Seller is actually
prejudiced thereby. Purchaser shall make commercially reasonable efforts to
mitigate any damages, expenses, etc. resulting from any matter giving rise to
liability of Seller under this Article.
8.2 Defense of Third Party Claims . With respect to any claim by Purchaser
under Section 8.1, relating to a third party claim or demand, Purchaser shall
provide Seller with prompt written notice thereof in accordance with Section
10.4 and Seller may defend, in good faith and at its expense, by legal counsel
chosen by it and reasonably acceptable to Purchaser any such claim or demand,
and Purchaser, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser shall not settle or compromise such
third party claim. In any event Purchaser shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
8.3 Seller Claims . Purchaser shall indemnify and hold harmless Seller
against, and in respect of, any and all damages, claims, losses, liabilities,
and expenses, including without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation by Purchaser of
any covenant set forth herein or any failure to fulfill any obligation set forth
herein, including, but not limited to, the obligation to satisfy the Assumed
Liabilities; (ii) any breach of any of the representations or warranties made in
this Agreement by Purchaser; or (iii) any claim by any Person for any brokerage
or finder's fee or commission in respect of the transactions contemplated hereby
as a result of Purchaser's dealings, agreement, or arrangement with such Person.
Any claim pursuant to (ii) above must be asserted within eighteen months from
the date of Closing.
8.4 Exclusive Remedies . The rights and remedies of the parties under this
Article VIII 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.
8.5 Settlement of Disputes
(a) Arbitration. All disputes with respect to any claim for indemnification
under this Article VIII and all other disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the following
procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("AAA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
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(iii) The arbitration hearing shall be held in Indianapolis, Indiana (in
the case of arbitration initiated by Seller) or in Atlanta, Georgia (in the case
of arbitration initiated by Purchaser) at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Georgia (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, and judgment on such award may be entered by either party in a court of
competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if Purchaser shall not (i) have obtained and provided a
copy of a Financing Commitment to Seller within 15 days from the date hereof,
(ii) been approved hereof as a franchisee with respect to the Territory by
Franchisor within 45 days of the date hereof, (iii) reached agreement with
Franchisor as to a development schedule and other material terms of franchise
and development agreements with respect to the Territory within 45 days from the
date hereof; or
(iv) By either Seller or Purchaser, at its sole election, at any time after
the Termination Date, if the Closing shall not have occurred on or prior to such
date.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller or Purchaser, as the case may be,
shall have willingly failed to fulfill its obligations hereunder, the other
party shall, subject to Section 8.5, be entitled to pursue, exercise, and
enforce any and all remedies, rights, powers, and privileges available to it at
law or in equity.
(c) Section 6.2, Article VIII, and Article X hereof shall survive the
termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses . (a) Each party hereto shall pay its own legal, accounting,
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and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) Purchaser shall pay all filing fees required under the HSR Act.
(c) The parties shall split the costs of obtaining title insurance with
respect to the Real Property and all transfer, intangible, recording, and
documentary taxes, stamps, and fees with respect to the transfer of the Owned
Real Property and the Leases. Purchaser shall pay the cost of all surveys, and
all environmental investigations, studies, and reports, and all other costs of
any investigation of the Assets, the Restaurants, or the Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc . This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect . Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices . Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
If to Seller, to: With a required copy to:
Apple South, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Attention: Louis J. (Dusty) Profumo Attention: Larry D. Ledbetter, Esq.
Fax: 706-343-2434 Fax: 404-815-6555
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If to Purchaser: With a required copy to:
Woodland Group, Inc. Michael K. Banik
P.O. Box 1225 217 South Fourth Street
Elkhart, IN ###-##-#### Elkhart, Indiana
Attention: Walter J. Horin, Jr. Fax: 219-294-5424
Fax: 219-269-6555
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U. S. Mail properly addressed with adequate postage affixed.
10.5 GEORGIA LAW TO GOVERN . THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings . All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits . All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability . Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements . Purchaser 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, 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.
10.10 Construction . The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties . OTHER THAN TO THE EXTENT OF ANY EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT AND IN THE
CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i), SELLER DOES NOT, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, AND SELLER SHALL NOT, BY THE EXECUTION
AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION
WITH THE CLOSING, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE ASSETS, AND ALL SUCH
WARRANTIES ARE HEREBY DISCLAIMED. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, SHALL
ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INSPECTIONS AND INVESTIGATIONS. SELLER SHALL SELL AND CONVEY TO PURCHASER, AND
PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS", AND WITH ALL FAULTS, AND
THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR
AFFECTING THE ASSETS BY SELLER OR ANY THIRD PARTY. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SELLER MAKES, AND SHALL MAKE, NO EXPRESS OR IMPLIED
WARRANTY OF SUITABILITY OR FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE, OR AS
TO THE MERCHANTABILITY, ENVIRONMENTAL CONDITION, TITLE, VALUE, QUALITY,
QUANTITY, CONDITION OR SALABILITY OF ANY OF THE ASSETS, OR AS TO THE PRESENCE ON
OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS MATERIAL, OR THAT THE USE OR SALE OF
ANY OF THE ASSETS WILL NOT VIOLATE THE COPYRIGHT, TRADEMARK OR PATENT RIGHTS OF
ANY PERSON. THE TERMS AND CONDITIONS OF THIS SECTION 10.11 SHALL SURVIVE THE
CONSUMMATION OF THE PURCHASE AND SALE OF THE ASSETS ON THE CLOSING DATE WITHOUT
REGARD TO ANY GENERAL LIMITATIONS UPON SURVIVAL SET FORTH IN THIS AGREEMENT.
10.12 Time . Time is and shall be of the essence of this Agreement.
[Signatures Located on Following Pages]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SELLER:
APPLE SOUTH, INC.
By:
Name:
Title:
PURCHASER:
WOODLAND GROUP, INC.
By:
Name:
Title:
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Opinion of Seller's Counsel
C Opinion of Purchaser's Counsel
D Adjustments to Purchase Price
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Description of Leases
1.1C Legal Description of Owned Real Property
1.1D Territory
2.7 Allocation of Purchase Price
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) Environmental Matters
3.8 Financial Statements
3.10 Litigation
3.15 Seller Plans
4.5 Stay-Plan Bonus
4.7 Timetable and Budget for Lebanon,
Tennessee Development Site
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of May 15, 1998, by and between
APPLE SOUTH, INC., a Georgia corporation ("Seller") and BLOOMIN' APPLE LLC, a
South Carolina limited liability company ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADI's" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials;
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v)all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi)all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii)copies of Seller's employee records of those current employees of
Seller who are employed by Purchaser as of the Closing (subject to execution of
a release by each affected employee allowing for the disclosure of such files);
(viii) the Contracts and Leases;
(ix) the Owned Real Property; and
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(x)all records and files related to the Real Property and Development Site
(which Purchaser elects to pursue under Section 6.5 and pays Seller for the
Development Costs thereof) such as rent calculations, landlord correspondence,
purchase agreements, deeds, construction documents, title reports, environmental
and engineering reports, appraisals, surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, or any other property, tangible or intangible, real
or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c), and (viii) all
obligations with respect to Seller's development activities under Section 4.7
not otherwise assumed hereunder or covered by an increase in the purchase price
pursuant to Section 2.3. Assumed Liabilities shall not include any liability,
obligation, payment, duty, or responsibility of any nature except as expressly
described above and specifically shall not include (i) liabilities or
obligations of Seller arising out of any breach by Seller of any of the
Contracts or Leases; (ii) except as provided in clauses (ii) or (iv) above,
liabilities or obligations of Seller under any of the Contracts or Leases or
with respect to the Owned Real Property or other Assets that accrue in any such
case prior to the Closing; (iii) any liabilities or obligations of Seller under
the Franchise Agreements; (iv) any liability of Seller for product liability,
personal injury, property damage, or otherwise based on any tort claim or
statutory liability (including but not limited to any "dram shop" liability);
(v) any federal, state, or local tax liability of Seller except to the extent
expressly assumed hereunder, (vi) any contractual claim based on any lease,
contract, or agreement other than the Contracts and Leases; (vii) any liability,
obligation, or responsibility of Seller to Seller's employees, agents, or
independent contractors with respect to wages, salaries, bonuses, or other
compensation or benefits earned or accrued prior to the Closing (except for
accrued but unvested vacation assumed pursuant to Section 6.3(c)); and (viii)
any liability or obligation of Seller arising out of the negotiation, execution,
or performance of this Agreement, including fees and expenses of attorneys and
accountants, except as otherwise expressly provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
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"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds, limited warranty deeds or other
appropriate instruments to convey good and marketable fee simple title to the
Owned Real Property, with the warranty of title contained therein limited to the
claims of Persons claiming by, through or under Seller, but not otherwise.
"Development Costs" shall mean (i) all of Seller's out-of-pocket costs paid
in connection with the identification and development of the restaurants and
restaurant sites listed on Schedule 4.7 and capitalized in accordance with
generally accepted accounting principles and Seller's historical practices
including, but not limited to, the purchase price paid for real estate;
acquisition and closing costs, such as legal fees, engineering fees, surveys,
transfer taxes, title policies, and the like; costs of obtaining leases, such as
legal fees, surveys, title policies, and the like; environmental investigation
costs; the cost of permits, approvals, variances, or rezonings; land development
costs; construction costs; the cost of equipment and other personal property
acquired for the restaurants; pre-opening expenses; and construction period
insurance; and (ii) Seller's internal costs capitalized in connection with such
identification and development efforts in accordance with Seller's historic
practices.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
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"Forum" shall mean any federal, state, local, municipal, or foreign court,
governmental agency, administrative body or agency, tribunal, private
alternative dispute resolution system, or arbitration panel.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Applebee's International, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Sellers' vice president of operations for the Territory and all management of
Seller senior thereto.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B and any leases subsequently entered into and pertaining to new
restaurants being developed pursuant to Section 4.7.
"LLC Act" shall mean the South Carolina Limited Liability Company Act.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less, a list of which are set forth on
Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located or which is being held for development
pursuant to Section 4.7 (all of which tracts and parcels are described in
Schedule 1.1C), and all buildings, fixtures, signs, parking facilities, and
other improvements located thereon and appurtenances thereto.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from governmental and
regulatory authorities which relate exclusively to the Business, the
Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, in the case of all Real Property, (i)
such easements, restrictions, covenants, and other such encumbrances which are
shown as exceptions on the Title Commitments and any other encumbrances of
record as of the effective date of the Title Commitments, (ii) ordinances
(municipal and zoning), (iii) survey matters, and (iv) such easements,
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restrictions, covenants, and other encumbrances which become matters of public
record after the effective date of the Title Commitments and before the Closing,
in each such case, to the extent that such encumbrances could not reasonably be
expected to materially interfere with or impair Purchaser's use of the Real
Property for Applebee's Neighborhood Grill & Bar Restaurants or that are waived,
or deemed to be waived, by Purchaser pursuant to Section 7.1(a). Permitted
Encumbrances shall include in the case of both Real Property and personal
property all liens for taxes not yet due and payable. In the case of Assets
pertaining to Applebee's restaurants under development pursuant to Section 4.7,
Permitted Encumbrances shall include all mechanic's, materialman's, and other
liens relating to Assumed Liabilities.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the four Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A and
any additional Applebee's restaurants completed prior to Closing pursuant to
Section 4.7.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean August 14, 1998.
"Territory" shall mean the Rockford, Illinois, ADI, as more particularly
set forth on Schedule 1.1E. "Title Commitments" shall have the meaning set forth
in Section 4.12(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.12(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due.
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2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $8,000,000.00 as adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases that pertain to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to Seller's cost of
those Assets consisting of food, beverage (including beer, wine, and liquor),
new uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date; and (v)
if the Purchaser elects to pursue the acquisition of the development site for a
new restaurant set forth in Schedule 4.7 (the "Development Site") under Section
6.5 and such site is still available at such time, the amount of Seller's
Development Costs related to the Development Site.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the cost of vacation accrued but unvested
as of the Closing Date by ADI Personnel hired by Purchaser the cost of which is
being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
The foregoing adjustments shall be calculated by the parties and set forth
on Exhibit B which shall be signed by both parties at Closing. The Purchase
Price shall be paid by Purchaser on the Closing Date by wire transfer of
immediately available funds to an account designated by Seller. As soon as
possible after the Closing (but not later than the first anniversary thereof),
the parties shall reconcile the actual amount of prorations that were estimated
at Closing as well as accrued but unvested vacation time of Seller's employees
assumed by Purchaser hereunder that has actually vested with the estimated
amounts thereof. To the extent that the actual amounts differ from the amounts
estimated on Exhibit B or prorations or adjustments other than those reflected
on Exhibit B are discovered after the Closing, the parties agree to remit the
correct amount of such items to the appropriate party as and when same are
determined.
2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date;
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
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furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit C hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller;
(vii) A Cross-Receipt, duly executed by Seller; and
(viii) Any other documents that Purchaser may reasonably request at least
three days prior to the Closing in order to effectuate the transactions
contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof;
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(i) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Bill of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (ii) as to the incumbency and specimen signature of each officer
of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the Purchase Price;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Degenhart Law Firm, counsel to Purchaser, in
substantially the form of Exhibit D hereto;
(vi) A Cross-Receipt, duly executed by Purchaser; and
(vii) Any other documents that Seller may reasonably request at least three
days prior to the Closing.
2.5 Transfer of Operations. Purchaser 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 expressly provided in this Agreement, all profits, losses,
liabilities, claims, or 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 Purchaser. 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
Purchaser thereafter.
2.6 Closing. The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of Kilpatrick Stockton LLP,
Suite 2800, 1100 Peachtree Street, Atlanta, Georgia, at 10:00 a.m. on July 31,
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1998, or on such other date and time as may be mutually agreed upon by the
parties hereto.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the various Assets as set forth on Exhibit E hereof. Each party hereby
agrees that it will not take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is inconsistent with the terms of this Section 2.7.
2.8 Further Assurances. From time to time after the Closing at Purchaser's
request and expense, Seller shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, 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 any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents 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 Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
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3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Seller, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
3.5 Assets. (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements.
(c) There are no assets or property of any nature which is not being
transferred to Purchaser hereunder that has been customarily used exclusively in
the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property having a fair market
value of $10,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
3.6 Contracts and Leases. (a) Each Material Contract and Lease is a valid
and subsisting agreement, without any material default of Seller thereunder, and
to the knowledge of Seller, without any default on the part of any other party
thereto. To the knowledge of Seller, no event or occurrence has transpired which
with the passage of time or giving of notice or both will constitute a default
under any Material Contract or Lease. A true and correct list of each Material
Contract and Lease and every amendment thereto or other agreement or document
relating thereto is set forth as Schedule 3.6 to this Agreement. True and
correct copies of the Material Contracts and Leases (and any amendments thereto)
have been provided to Purchaser. At the time of Closing, Seller shall have made
all payments and performed all obligations due through the Closing Date under
each Contract and Lease, except to the extent that any payment due is set forth
on Exhibit B and deducted in calculating the Purchase Price pursuant to Section
2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property. (a) Schedule 3.7(a) sets forth with respect to each
Restaurant, its location, whether it is located on Owned Real Property or is on
a site subject to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
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of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller has obtained all authorizations and rights-of-way which are
necessary to ensure vehicular and pedestrian ingress and egress to and from the
site of each Restaurant, all of which are assignable and shall be assigned to
Purchaser at the Closing.
(d) Seller has received no notice that any Government having the power of
eminent domain over any parcel of Real Property has commenced or intends to
exercise the power of eminent domain or a similar power with respect to any part
of the Real Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all material laws and regulations (including zoning laws and
ordinances) of each Government having jurisdiction over the Real Property, and
Seller has received no notice from any Government alleging that the Real
Property or any improvements erected or situated thereon, or the uses conducted
thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, or to the knowledge of Seller received by any owner of any
of the Real Property subject to a Lease, requiring or calling attention to the
need for any work, repair, construction, alteration, or installation on or in
connection with the Real Property which has not been complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
material compliance with all applicable Environmental Laws and Environmental
Permits held by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Property to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller relating to any alleged past or
ongoing violation of any Environmental Laws or Environmental Permits with
respect to the Real Property, nor to Seller's knowledge is Seller subject to any
liability for any such past or ongoing violation. Matters referenced above of
which Seller has knowledge are set forth on Schedule 3.7(g).
3.8 Financial Statements. Schedule 3.8 contains for each Restaurant
unaudited statements of operations as of the end of the 1997 fiscal year and for
each fiscal month ended thereafter through the date hereof for which such
statements are available, prepared in accordance with generally accepted
accounting principles, except for the absence of explanatory notes and except as
otherwise expressly described therein (the "Financial Statements"). The
Financial Statements have been prepared in accordance with Seller's historical
practices and fairly present the operations of the Restaurants for the periods
presented and as of their respective dates.
3.9 Taxes. All Property Taxes relating to the Assets have been fully paid
for 1997 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 other tax
returns and reports of whatever kind pertaining to the Assets and required to be
filed by Seller up to the Closing Date. Seller has paid (or will timely pay) all
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taxes of whatever kind, including any interest, penalties, governmental charges,
duties, fees, and fines imposed by all governmental entities or taxing
authorities, which are due and payable 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 lien on any of the Assets. There are no
audits, suits, actions, claims, investigations, inquiries, or proceedings
pending or, to Seller's 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 assessed against Seller that in any such case affect the
Assets.
3.10 Litigation. Except as set forth on Schedule 3.10, there is no material
Action or Order pending or, to the knowledge of Seller, threatened against or
affecting Seller that pertains to the Restaurants, or any of the Assets before
any Forum.
3.11 Permits. Seller has all material Permits as are necessary to operate
the Restaurants. Seller has fulfilled and performed all of its material
obligations with respect to such Permits and, to the knowledge of Seller, no
event has occurred which allows, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any other impairment
of the rights of the holder of any such Permits.
3.12 Health and Safety Requirements. To the knowledge of Seller, Seller is
in compliance with all laws, governmental standards, rules and regulations
applicable to Seller or to any of the Assets in respect to the Americans with
Disabilities Act and similar state laws, occupational health and safety laws,
and environmental laws.
3.13 Employment Contracts, Etc. Seller is not a party to any written
employment agreements related to the employees at the Restaurants, (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits. (a) Schedule 3.15 hereto contains a true and
complete list of all the following agreements or plans of Seller which are
presently in effect and which pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
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drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Sellers maintains or to which Seller has
any outstanding, present, or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and/or has never contributed or
been obligated to contribute to a multiemployer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in any certificate furnished to Purchaser pursuant
to this Agreement or in the Disclosure Memorandum is or will be when furnished
both complete and accurate in all material respects; and all documents furnished
to Purchaser pursuant to this Agreement which are documents described in this
Agreement or in the Disclosure Memorandum are true and correct copies of the
documents which they purport to represent.
ARTICLE IV - COVENANTS OF SELLER
4.1 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 Leases
and Material Contracts, where the failure to do so would have a material adverse
effect on the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to assist Purchaser with the assumption, transfer, or
reissuance of any and all Permits required for the operation of the Restaurants.
4.3 Liabilities of Seller. All liabilities of Seller related to the Assets
that are not Assumed Liabilities will be promptly paid by Seller as they come
due.
4.4 Agreements Respecting Employees of Seller. (a) Prior to the Effective
Time without the prior written approval of Purchaser, Seller shall not transfer
or reassign to operations outside the Business any employee exclusively involved
in the operation or supervision of the Restaurants, except that the parties
acknowledge that Mario Cernadas and Jon Sanborn will be reassigned on or about
the Closing Date and shall not be considered to be ADI Personnel for purposes of
this Agreement ("ADI Personnel"). At the Effective Time, Seller shall terminate
the employment of all ADI Personnel. For a period of eighteen months following
the Closing, Seller shall not solicit for employment any person who is an
employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
of the Franchise Agreements, using commercially reasonable efforts in keeping
with Seller's historical practices to preserve and maintain the services of its
employees and its relationships with suppliers and customers, (ii) pay all bills
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and debts incurred by it related to the Business promptly as they become due,
and (iii) consult in advance with Purchaser on all decisions outside the
ordinary course of business relating to the Assets or the Restaurants.
(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices;
(ii) 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
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations.
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change in any material manner the ownership of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan described on Schedule 4.5,
which has been approved;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts pursuant to Section 4.7 in the ordinary course of business)
any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into any Material Contract except in the ordinary course of
business;
(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
Lease, amend or otherwise modify any of its material terms or waive any breach
of any of its material terms or provisions or take any other action in
connection with any Material Contract or Lease that would materially impair the
interests or rights of Seller to be transferred to Purchaser hereunder.
4.6 Access to Information. Seller shall afford Purchaser, 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 Purchaser such additional financial and
operating data and other information as Seller may possess and as Purchaser may
reasonably request, subject to Purchaser's obligations regarding the
confidentiality of such information as set forth in Section 6.2 hereof;
provided, however, that such access shall be arranged in advance by Purchaser
with Seller and will be scheduled in a manner and with a frequency calculated to
cause the minimum disruption of the business of Seller.
4.7 Development Efforts. Seller shall use commercially reasonable efforts
to maintain the current results of its development activities for the
Development Site, for the benefit of Purchaser, until Purchaser's election
pursuant to Section 6.5 hereto; provided, however, that Purchaser acknowledges
that Seller does not own or have any contractual right to acquire the
Development Site.
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4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information with respect to any event which has materially adversely affected
the Assets or the operations of the Restaurants.
(b) As soon as available and in any event within fifteen business days
after the end of each fiscal month, the statement of operations of each
Restaurant for such month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
Actions, Orders or other directives affecting the Business or 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) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
4.9 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Seller will use commercially reasonable efforts to cause
the conditions set forth in Article VII to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby, including
obtaining the Consents. The parties acknowledge that no consents will be sought
with respect to any Minor Contract even if the failure to so obtain a consent to
assignment may result in a default or termination thereunder. Seller will use
commercially reasonable efforts to obtain required consents of landlords to the
assignment of the Leases and shall bear any expenses associated with obtaining
such consents; however, Seller shall not be required to make any payment to a
landlord (other than reimbursement of expenses), guarantee any Lease or remain
liable for the payment thereof following the Closing, or agree to any
concessions or amendment to other leases or arrangements with such landlord in
order to obtain such consents.
4.10 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
Material Contracts entered into by Seller ("Subsequent Contracts") a provision
permitting the assignment of any such Subsequent Contract to Purchaser and
providing that upon such assignment, Purchaser shall succeed to all of Seller's
rights, title, and interests thereunder subject to the Purchaser'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.
4.11 Transition Services. (a) For a period of three months after the
Closing, if and to the extent requested in writing by Purchaser, Seller agrees
to provide to Purchaser restaurant accounting, POS system support, and other
services related to the Restaurants as mutually agreed upon between Seller and
Purchaser (the "Services"). Purchaser shall give Seller forty-five (45) days
advance written notice of the Services requested, whereupon Seller and Purchaser
shall use their best reasonable efforts to mutually agree upon the charges
therefore. 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) Purchaser will pay for the Services on a monthly basis, after receipt
of an invoice from Seller.
(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 Purchaser, Seller shall offer to specifically designated personnel
a bonus incentive to remain for the three-month period. The amount of such bonus
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shall be at the discretion of Purchaser. Such bonus, if accepted by the
employee, shall be paid by Purchaser at the end of the three-month period, or
for such shorter period as Purchaser may determine.
4.12 Delivery of Real Estate Documents. (a) Seller shall provide Purchaser,
promptly upon receipt, (i) current surveys and title insurance commitments with
respect to the Owned Real Property ("Owner's Title Commitments") pursuant to
which the Title Company will agree to issue at Closing to Purchase and its
lender (if requested by Purchaser) owner's policies of title insurance ("Owner's
Title Policies") on American Land Title Association standard Form B-1990,
without exceptions except as shown in the Owner's Title Commitments, to be
issued by Commonwealth Land & Title Insurance Company ("Title Company") in and
amount in the case of each parcel equal to the purchase price allocated to such
parcel of the Owned Real Property pursuant to Section 2.7, and (ii) current
surveys (collectively with the surveys of the Owned Real Property, the
"Surveys") and title insurance commitments with respect to the Real Property
subject to a Lease (collectively, the "Leased Real Property") (the "Lessee Title
Commitments", and collectively with the Owner's Title Commitments, the "Title
Commitments") pursuant to which the Title Company will agree to issue at Closing
lessee's policies of title insurance ("Lessee's Title Policies") on American
Land Title Association standard form of leasehold owner's policy to insure
leasehold estates, showing no exceptions except as shown in the Lessee Title
Commitments. The Owner's Title Policies shall insure the Purchaser that, upon
consummation of the purchase and sale herein contemplated, Purchaser will be
vested with good, fee simple, marketable, and insurable title to the Owned Real
Property, subject only to the Permitted Encumbrances or arising out of acts of
the insured. The Lessee's Title Policies shall insure the Purchaser that, upon
consummation of the transactions herein contemplated, Purchaser will be vested
with a good, valid, marketable and insurable leasehold estate in and to the
Leased Real Property, subject only to the Permitted Encumbrances.
Notwithstanding anything to the contrary contained herein, while Lessee Title
Commitments will be delivered for all Leased Real Property, no surveys will be
delivered and no Lessee's Title Policies will be issued for Leases unless such
Leases are for Free Standing Premises (as defined in Section 7.1).
(b) No later than five business days after the date hereof, Seller shall
provide to Purchaser copies of all environmental reports pertaining to the Owned
Real Property in Seller's possession.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Sellers as follows:
5.1 Organization, Corporate Power, Authorization. Purchaser is a limited
liability company duly organized, validly existing, and in good standing under
the laws of the State of South Carolina and in each other jurisdiction in which
it is lawfully required to qualify to conduct business. Purchaser has the
corporate power and authority to execute and deliver this Agreement and the Bill
of Sale and Assignment Agreement, and to consummate the transactions
contemplated hereby. All action on the part of Purchaser under its articles of
organization and operating agreement and under the LLC Act necessary for the
authorization, execution, and delivery of this Agreement and the Bill of Sale
and Assignment Agreement, and performance of all obligations of Purchaser
thereunder has been duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement and the
Bill of Sale and Assignment Agreement by Purchaser do not and the consummation
by Purchaser of the transactions contemplated hereby and thereby will not
violate any provision of its articles of organization or operating agreement or
the LLC Act.
5.3 Validity. This Agreement has been duly executed and delivered by
Purchaser, and constitutes the legal, valid, and binding obligation of
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Purchaser, enforceable against it in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws from time to time in effect
affecting the enforcement of creditors' rights. When the Bill of Sale and
Assignment Agreement has been executed and delivered in accordance with this
Agreement, it will constitute the legal, valid, and binding obligation of
Purchaser, enforceable in accordance with its terms, subject to general equity
principles and to applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws from time to time in effect affecting the enforcement of
creditors' rights.
5.4 Litigation Relating to the Agreement. Purchaser is not a party to, or
subject to any judgment, decree, or order entered in any lawsuit or proceeding
brought by any governmental agency or instrumentality or other party seeking to
prevent the execution of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE VI - COVENANTS OF PURCHASER
6.1 Purchaser Performance. After the Closing Date, Purchaser shall promptly
pay as they become due and otherwise perform all obligations of Seller under the
Assumed Liabilities and otherwise perform and fulfill all other obligations with
respect to the Assets pertaining to the period after the Closing Date.
6.2 Confidentiality. In connection with the negotiation of this Agreement,
Seller may disclose Confidential Information, as defined below, to Purchaser.
Purchaser agrees that if the transactions contemplated herein are not
consummated, it will return to Seller all documents and other written
information furnished to it. Purchaser further agrees to maintain the
confidentiality of any and all Confidential Information of Seller and not
disclose any Confidential Information to any Person other than such Person to
whom Confidential Information must be disclosed to effect the transactions and
who are bound by appropriate non-disclosure agreements or obligations. Purchaser
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller. The foregoing obligations shall not apply to (i) any
information which was known by Purchaser prior to its disclosure by Seller; (ii)
any information which was in the public domain prior to the disclosure thereof;
(iii) any information which comes into the public domain through no fault of
Purchaser; (iv) any information which is disclosed to Purchaser by a third
party, other than an affiliate, having the legal right to make such disclosure;
or (iv) any information which is required to be disclosed by Order of any Forum.
For purposes of this Section, "Confidential Information" shall mean any and all
technical, business, and other information which is (a) possessed or hereafter
acquired by Seller and disclosed to Purchaser and (b) derives economic value,
actual or potential, from not being generally known to Persons other than
Seller, including, without limitation, technical or nontechnical data,
compositions, devices, methods, techniques, drawings, inventions, processes,
financial data, financial plans, product plans, lists of actual or potential
customers or suppliers, information regarding the business plans and operations
of Seller, and the existence of discussions and negotiations between the parties
hereto relating to the terms hereof. The restrictions of this Section shall
expire three years from the date hereof with respect to any confidential
business information that does not constitute a trade secret under applicable
law.
6.3 Seller Employees. (a) Purchaser shall offer employment to all ADI
Personnel upon terms and conditions substantially equivalent to those provided
by Seller (including compensation and benefits not below those in place
immediately prior to the Closing); however, Purchaser shall not be required to
provide options or any other purchase rights regarding equity interests in
Purchaser. For a period of eighteen months following the Closing, Purchaser
shall not solicit for employment any person who is an employee of Seller or any
subsidiary of Seller.
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(b) Purchaser shall maintain employee records transferred to Purchaser
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchaser's normal
business hours. Purchaser shall maintain the confidentiality of such records and
limit access thereto in a manner consistent with Purchaser's treatment of its
employee records.
(c) Purchaser agrees with respect to ADI Personnel hired by Purchaser: (i)
to give such employees credit under Purchaser's benefits plans, programs, and
arrangements, including credit for accrued but unvested vacation which has been
charged to Seller under Section 2.3, for such employees' period of service with
Seller, provided that such credit shall only be taken into account under any
tax-qualified plan maintained by Purchaser 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; (ii) to provide coverage to such employees who are eligible under
Purchaser'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 deductibles, out of pocket expenses,
and similar amounts paid by individuals and their beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Purchaser shall use commercially reasonable efforts to
cause the conditions set forth in Article VII to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby.
Specifically, but not by way of limitation, Purchaser will (i) use commercially
reasonable efforts to obtain a commitment letter from a lender for financing on
substantially the terms set forth on Exhibit F (the "Financing Commitment") and
to obtain financing on such terms, (ii) promptly provide Franchisor with all
information required by Franchisor to determine whether Purchaser will be
approved as a franchisee with respect to the Territory, (iii) actively pursue an
agreement with Franchisor as to the principal terms of franchise and development
agreements with respect to the Territory, and (iv) file all documents required
to obtain approval of the transactions contemplated hereby under the HSR Act
within 15 days of the date hereof.
6.5 Development Site. Purchaser shall notify Seller no later than thirty
(30) days after the date hereof of its election (if any) to purchase the
acquisition of the Development Site. If Purchaser so elects and the Development
Site is still then available, (i) Seller will reasonably cooperate with
Purchaser's efforts to acquire the Development Site both before and after
Closing (at no expense to Seller), (ii) Seller's records and files related to
each such Development Site shall be deemed to be part of the "Assets" to be
assigned to Purchaser at Closing, and (iii) Purchaser shall pay Seller for the
Development Costs associated with the Development Site at Closing under Section
2.3(a)(v).
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have 30
days following receipt of the documents referred to in Section 4.12 (the "Title
Inspection Period") to review same and furnish Seller a written statement of
reasonable objections to exceptions which, in Purchaser's reasonable judgment,
would materially interfere with or impair Purchaser's use of the Real Property
for the operation of Applebee's restaurants ("Material Objections"). Seller
shall have until the Termination Date to satisfy such Material Objections (but
with no obligation to do so) in all material respects, and if Seller fails to
satisfy all Material Objections in all material respects on or prior to the
Termination Date, then Purchaser's sole right and remedy shall be to either (i)
waive the objections and elect to close, or (ii) terminate this Agreement by
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giving written notice of such termination to Seller. If Purchaser fails to
furnish Seller a written statement of Material Objections by the end of the
Title Inspection Period with respect to any matter appearing as an exception on
a Title Commitment, such matter shall be deemed waived by Purchaser and shall be
a Permitted Encumbrance. The parties acknowledge that some of the Leased Real
Property may be located in shopping centers, and as such, unless the leased
premises are a free standing building located on a separate pad with its own
legal description ("Free Standing Premises") the Lessee Title Commitments for
such Leased Real Property will contain encumbrances for entire shopping centers.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchaser, including, without limitation, the
entry by Purchaser or Purchaser's Designees onto the Real Property, or the other
activities of Purchaser or Purchaser's Designees with respect to the Real
Property (hereinafter called "Purchaser's Activities") shall not damage the Real
Property in any manner whatsoever or disturb or interfere with the rights of any
lessor of Leased Real Property; (ii) in the event the Real Property is altered
or disturbed in any manner in connection with any Purchaser's Activities,
Purchaser shall immediately return the Real Property to the condition existing
prior to Purchaser's Activities; (iii) Purchaser shall in no event without
Seller's prior written consent disclose the results of any of its
investigations, examinations, tests, or inspections to any party (including any
Government unless required by law) other than to its lenders, attorneys,
consultants, and investors; and (iv) Purchaser shall indemnify, defend, and hold
Seller harmless from and against any and all claims, liabilities, damages,
losses, costs, and expenses of any kind or nature whatsoever (including, without
limitation, attorneys' fees, and expenses and court costs) suffered, incurred or
sustained by Seller as a result of, by reason of, or in connection with any
Purchaser's Activities. Notwithstanding any provision of this Agreement to the
contrary, Purchaser shall not have the right to undertake any environmental
studies or testing beyond the scope of a standard "Phase I" evaluation without
the prior written consent of Seller and, if applicable, the lessor of any Leased
Real Property.
(B) Purchaser shall have until the date which is thirty days after the date
of this Agreement (hereinafter called the "Due Diligence Date"), to perform such
investigations, examinations, tests and inspections as Purchaser shall deem
necessary or desirable to determine whether the Real Property is suitable and
satisfactory to Purchaser and can be used for Applebee's franchise restaurants.
In the event Purchaser shall determine that the Real Property is not reasonably
suitable and satisfactory to Purchaser, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller on or before the Due
Diligence Date If Purchaser does not terminate this Agreement in accordance with
this Section 7.1(b) on or before the Due Diligence Date, Purchaser shall have no
further right to terminate this Agreement pursuant to this Section 7.1(b).
(C) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
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earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities; or (ii) Closing.
(D) Purchaser acknowledges that Seller may deliver to Purchaser certain
documents and information in possession of Seller or Seller's agents with regard
to the Real Property (hereinafter called the "Due Diligence Materials"). The Due
Diligence Materials will be provided to Purchaser without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchaser
for Purchaser's informational purposes. Until Closing, Purchaser and Purchaser's
Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchaser's Conditions to Closing. The obligations of Purchaser
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Purchaser, be
waived:
(a) Subject to the matters disclosed in the Disclosure Memorandum as
supplemented by Seller from time to time, all representations and warranties of
Seller in this Agreement shall be true in all material respects on and as of the
Closing.
(b) Any supplement to the Disclosure Memorandum delivered by Seller shall
not reflect in Purchaser's reasonable judgment any material adverse change in
the Assets or the Business.
(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 have obtained and delivered to Purchaser all consents
necessary to transfer and assign the Assets (except for Minor Contracts) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant and development agreements with respect to each
ADI in the Territory.
(f) Purchaser 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 in accordance with franchise requirements;
provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser 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 Purchaser a duly executed
liquor license management agreement or agreements.
(g) 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 Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit F upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 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:
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(a) All representations and warranties of Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser 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 Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(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 Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims.
(a) Seller shall indemnify and hold harmless Purchaser, its successors and
assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser that result from, relate to, or arise out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
by Seller pursuant hereto; or
(D) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Seller's
dealings, agreement, or arrangement with such Person.
(ii) Any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs, and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing including all such expenses reasonably incurred in
mitigating any damages resulting to Purchaser from any matter set forth in
subsection (i) above.
(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to Section 8.1(a)(i)(C) (and Section
8.1(a)(ii) to the extent the items covered thereby relate back to Section
8.1(a)(i)(C)) until the aggregate liability of Seller thereunder exceeds $80,000
and then only to the extent that the aggregate liability of Seller thereunder
exceeds such amount; provided, however, that liabilities arising with respect to
Sections 3.1 through 3.4 hereof shall not be subject to the foregoing threshold
and any liabilities arising with respect to such matters shall not be taken into
account in computing aggregate liabilities for the purpose of applying such
threshold amount to liabilities arising under other Sections subject thereto. In
no event shall the aggregate liability of Seller under Section 8.1(a)(i)(C) (and
Section 8.1(a)(ii) to the extent the items covered thereby relate back to
Section 8.1(a)(i)(C)) exceed $8,000,000.
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(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any tax benefit to Purchaser from the matter giving rise to the
claim for indemnification hereunder and net of any insurance proceeds received
by Purchaser with respect to the matter out of which such liability arose.
(d) The representations and warranties of Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate delivered by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(i) the representations and warranties contained in Section 3.5(d) shall be
of no further force and effect after thirty days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1, through
3.4 and Section 3.7(g) shall survive until the expiration of any applicable
statues of limitation provided by law; and
(iii) all other representations and warranties of Seller shall be of no
further force and effect after one year from the date of the Closing.
Anything to the contrary notwithstanding, the Survival Period shall be
extended automatically to include any time period necessary to resolve a written
claim for indemnification which was made in reasonable detail before expiration
of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
(e) Purchaser may not assert any claim against Seller for breach of any
covenant contained in Article IV (except for Sections 4.1, 4.3, 4.4, and 4.11)
and all such claims shall be deemed to be waived as a result of the Closing. The
other covenants contained in Article IV and liability therefor shall survive the
Closing.
(f) Purchaser shall provide written notice to Seller of any claim for
indemnification under this Article as soon as practicable; provided, however,
that failure to provide such notice on a timely basis shall not bar Purchaser's
ability to assert any such claim except to the extent that Seller is actually
prejudiced thereby. Purchaser shall make commercially reasonable efforts to
mitigate any damages, expenses, etc. resulting from any matter giving rise to
liability of Seller under this Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
under Section 8.1, relating to a third party claim or demand, Purchaser shall
provide Seller with prompt written notice thereof in accordance with Section
10.4 and Seller may defend, in good faith and at its expense, by legal counsel
chosen by it and reasonably acceptable to Purchaser any such claim or demand,
and Purchaser, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser shall not settle or compromise such
third party claim. In any event Purchaser shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
8.3 Seller Claims. Purchaser shall indemnify and hold harmless Seller
against, and in respect of, any and all damages, claims, losses, liabilities,
and expenses, including without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation by Purchaser of
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any covenant set forth herein or any failure to fulfill any obligation set forth
herein, including, but not limited to, the obligation to satisfy the Assumed
Liabilities; (ii) any breach of any of the representations or warranties made in
this Agreement by Purchaser; or (iii) any claim by any Person for any brokerage
or finder's fee or commission in respect of the transactions contemplated hereby
as a result of Purchaser's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII 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.
8.5 Settlement of Disputes. (a) Arbitration. All disputes with respect to
any claim for indemnification under this Article VIII and all other disputes and
controversies of every kind and nature between the parties hereto arising out of
or in connection with this Agreement shall be submitted to arbitration pursuant
to the following procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("AAA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
(iii) The arbitration hearing shall be held in South Carolina (in the case
of arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser) at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Georgia (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, and judgment on such award may be entered by either party in a court of
competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination. (a) This Agreement may be terminated as follows:
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(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if Purchaser shall not (i) have obtained and provided a
copy of a Financing Commitment to Seller within fifteen (15) days from the date
hereof, (ii) been approved hereof as a franchisee with respect to the Territory
by Franchisor within forty five (45) days of the date hereof, (iii) reached
agreement with Franchisor as to a development schedule and other material terms
of franchise and development agreements with respect to the Territory within
forty five (45) days from the date hereof; or
(iv) By either Seller or Purchaser, at its sole election, at any time after
the Termination Date, if the Closing shall not have occurred on or prior to such
date.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller or Purchaser, as the case may be,
shall have willingly failed to fulfill its obligations hereunder, the other
party shall, subject to Section 8.5, be entitled to pursue, exercise, and
enforce any and all remedies, rights, powers, and privileges available to it at
law or in equity.
(c) Section 6.2, Article VIII, and Article X hereof shall survive the
termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) Purchaser shall pay all filing fees required under the HSR Act.
(c) Purchaser shall pay (or reimburse Seller for) the costs of obtaining
the Title Commitments, Owner's Title Policies and Lessee's Title Policies with
respect to the Real Property and all transfer, intangible, recording, and
documentary taxes, stamps, and fees with respect to the transfer of the Owned
Real Property and the Leases. Purchaser shall also pay the cost of the Surveys
and all other surveys, and all environmental investigations, studies, and
reports, and all other costs of any investigation of the Assets, the
Restaurants, or the Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents subject to Section
4.9.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
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except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
If to Seller, to: With a required copy to:
Apple South, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Attention: Louis J. (Dusty) Profumo Attention: Larry D. Ledbetter, Esq.
Fax: 706-343-2434 Fax: 404-815-6555
If to Purchaser: With a required copy to:
Bloomin' Apple LLC Degenhart Law Firm
837 Detyens Rd. 2805 Millwood Avenue
Mt. Pleasant, South Carolina 29464 Columbia, South Carolina 29205
Attention: Kevin Allardice Attention: Paul Degenhart
Fax: (803) 971-0268 Fax: (803) 771-4886
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U. S. Mail properly addressed with adequate postage affixed.
10.5 GEORGIA LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Seller will prepare and, subject to Purchaser's
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review and approval, release all press announcements relating to this Agreement
and the transactions contemplated herein as Seller may find necessary. Except to
the extent required by law, Purchaser shall refrain from issuing any press
release, publicity statement, or other public notice relating to this Agreement
or the transactions contemplated hereby without Seller's prior written approval.
10.10 Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties. OTHER THAN TO THE EXTENT OF ANY EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT OR IN THE
CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i), SELLER DOES NOT, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, AND SELLER SHALL NOT, BY THE EXECUTION
AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION
WITH THE CLOSING, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE ASSETS, AND ALL SUCH
WARRANTIES ARE HEREBY DISCLAIMED. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, SHALL
ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INSPECTIONS AND INVESTIGATIONS. SELLER SHALL SELL AND CONVEY TO PURCHASER, AND
PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS", AND WITH ALL FAULTS, AND
THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR
AFFECTING THE ASSETS BY SELLER OR ANY THIRD PARTY. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, SELLER MAKES, AND SHALL MAKE, NO EXPRESS OR IMPLIED
WARRANTY OF SUITABILITY OR FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE, OR AS
TO THE MERCHANTABILITY, ENVIRONMENTAL CONDITION, TITLE, VALUE, QUALITY,
QUANTITY, CONDITION OR SALABILITY OF ANY OF THE ASSETS, OR AS TO THE PRESENCE ON
OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS MATERIAL, OR THAT THE USE OR SALE OF
ANY OF THE ASSETS WILL NOT VIOLATE THE COPYRIGHT, TRADEMARK OR PATENT RIGHTS OF
ANY PERSON. THE TERMS AND CONDITIONS OF THIS SECTION 10.11 SHALL SURVIVE THE
CONSUMMATION OF THE PURCHASE AND SALE OF THE ASSETS ON THE CLOSING DATE WITHOUT
REGARD TO ANY GENERAL LIMITATIONS UPON SURVIVAL SET FORTH IN THIS AGREEMENT.
10.12 Time. Time is and shall be of the essence of this Agreement.
10.13 Guarantee. Kevin Allardice and Andrew Robertson agree to jointly and
severally guarantee the performance and obligations of Purchaser hereunder;
provided that such guarantee shall terminate immediately after the Closing, and
Seller has relied upon such guarantee in entering into this Agreement.
10.14 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same instrument.
[Signatures Located on Following Pages]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLER:
APPLE SOUTH, INC.
By:
Name:
Title:
PURCHASER:
BLOOMIN' APPLE LLC
By:
Name:
Title:
By:
Name:
Title:
GUARANTORS:
Kevin P. Allardice
Andrew C. Robertson
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Adjustment to Purchase Price
C Opinion of Seller's Counsel
D Opinion of Purchaser's Counsel
E Allocation of Purchase Price
F Financing Terms
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.15 Seller Plans
4.5 Stay-Plan Bonus
4.7 Development Properties
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of June 26th, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and APPLE J, L.P., a
Delaware limited partnership ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADI's" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials;
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v)all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi)all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii)copies of Seller's employee records of those current employees of
Seller who are employed by Purchaser as of the Closing (subject to execution of
a release by each affected employee allowing for the disclosure of such files);
(viii) the Contracts and Leases;
(ix) the Owned Real Property; and
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(x)all records and files related to the Real Property such as rent
calculations, landlord correspondence, purchase agreements, deeds, construction
documents, title reports, environmental and engineering reports, appraisals,
surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, notes and accounts receivable, or any other property,
tangible or intangible, real or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, and (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c). Assumed
Liabilities shall not include any liability, obligation, payment, duty, or
responsibility of any nature except as expressly described above and
specifically shall not include (i) liabilities or obligations of Seller arising
out of any breach by Seller of any of the Contracts or Leases; (ii) except as
provided in clauses (ii) or (iv) above, accounts payable and liabilities or
obligations of Seller under any of the Contracts or Leases or with respect to
the Owned Real Property or other Assets that accrue in any such case prior to
the Closing; (iii) any liabilities or obligations of Seller under the Franchise
Agreements; (iv) any liability of Seller for product liability, personal injury,
property damage, or otherwise based on any tort claim or statutory liability
(including but not limited to any "dram shop" liability); (v) any federal,
state, or local tax liability of Seller except to the extent expressly assumed
hereunder, (vi) any contractual claim based on any lease, contract, or agreement
other than the Contracts and Leases; (vii) any liability, obligation, or
responsibility of Seller to Seller's employees, agents, or independent
contractors with respect to wages, salaries, bonuses, or other compensation or
benefits earned or accrued prior to the Closing including, without limitation,
Seller's obligations under its pay-to-stay bonus plan and any severance
obligations arising due to the termination of Seller's employees at Closing
(except for accrued but unvested vacation assumed pursuant to Section 6.3(c));
and (viii) any liability or obligation of Seller arising out of the negotiation,
execution, or performance of this Agreement, including fees and expenses of
attorneys and accountants, except as otherwise expressly provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
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corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds, limited warranty deeds or other
appropriate instruments to convey good and marketable fee simple title to the
Owned Real Property, with the warranty of title contained therein limited to the
claims of Persons claiming by, through or under Seller (or in the case of the DR
Holdings Tracts, the owner thereof), but not otherwise.
"Default" shall mean an event of default as defined in any contract or
other agreement or instrument , or any event which, with the passage of time or
giving of notice or both , would constitute an event of default or other breach
under such document or instrument.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"DR Holdings Tracts" shall mean two parcels of real property located in
Greenville, South Carolina (#170) and Beaufort, South Carolina (#164) of which
are subject to leases, but which Seller shall cause to be conveyed to Purchaser
in fee simple at the Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"Excluded Restaurants" shall mean any Restaurant designated as such under
Section 2.8(a).
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"Forum" shall mean any federal, state, local, municipal, or foreign court,
governmental agency, administrative body or agency, tribunal, private
alternative dispute resolution system, or arbitration panel.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Applebee's International, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Sellers' vice president of operations for the Territory and all management of
Seller senior thereto.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less, a list of which are set forth on
Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located (all of which tracts and parcels are
described in Schedule 1.1C) and all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and appurtenances thereto.
For the purposes of this Agreement, "Owned Real Property" will include the DR
Holdings Tracts.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from any Government which
relate exclusively to the Business, the Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean (i) such easements, restrictions,
covenants, and other such encumbrances which are shown as exceptions on the
Title Commitments and any other encumbrances of record as of the effective date
of the Title Commitments, (ii) ordinances (municipal and zoning), (iii) survey
matters, and (iv) such easements, restrictions, covenants, and other
encumbrances which become matters of public record after the effective date of
the Title Commitments and before the Closing, in each such case, to the extent
that such encumbrances could not reasonably be expected to materially interfere
with or impair Purchaser's use of the Real Property for Applebee's Neighborhood
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Grill & Bar Restaurants or that are waived, or deemed to be waived, by Purchaser
pursuant to Section 7.1(a). Permitted Encumbrances shall include in the case of
both Real Property and personal property all liens for taxes not yet due and
payable.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Purchase Price Adjustment Schedule" shall have the meaning set forth in
Section 2.3.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the 29 Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean August 26, 1998.
"Territory" shall mean those ADI's set forth on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 4.11(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.11(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $60,000,000 adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases that pertain to periods after the Closing; (iii) any other prepaid
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expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; and (iv) an amount equal to Seller's cost
of those Assets consisting of food and beverage (including beer, wine, and
liquor) inventory as determined by the parties' joint inventory at the close of
business on the day prior to the Closing Date.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the estimated cost of vacation accrued
but unvested as of the Closing Date by ADI Personnel hired by Purchaser the cost
of which is being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
The foregoing adjustments shall be calculated by the parties and set forth
on a Purchase Price adjustment schedule (the "Purchase Price Adjustment
Schedule") which shall be signed by both parties at Closing. The Purchase Price
shall be paid by Purchaser on the Closing Date by wire transfer of immediately
available funds to an account designated by Seller. As soon as possible after
the Closing (but not later than the first anniversary thereof), the parties
shall reconcile the actual amount of prorations that were estimated at Closing
as well as accrued but unvested vacation time of Seller's employees assumed by
Purchaser hereunder that has actually vested with the estimated amounts thereof.
To the extent that the actual amounts differ from the amounts estimated on the
Purchase Price Adjustment Schedule or prorations or adjustments other than those
reflected on the Purchase Price Adjustment Schedule are discovered after the
Closing, the parties agree to remit the correct amount of such items to the
appropriate party as and when same are determined.
2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date;
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit B hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller or in the case of the DR Holdings
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Tracts by the owner thereof;
(vii) A Cross-Receipt, duly executed by Seller; and
(viii) Any other documents that Purchaser may reasonably request at least
three days prior to the Closing in order to effectuate the transactions
contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request that all
representations and warranties of Purchaser in this Agreement are true in all
material respects as of the Closing Date;
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(A) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Bill of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (B) as to the incumbency and specimen signature of each officer
of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the Purchase Price;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Glast, Phillips & Murray, P.C., counsel to Purchaser, in
substantially the form of Exhibit C hereto;
(vi) A Cross-Receipt, duly executed by Purchaser;
(vii) A certificate stating that Purchaser is not required to obtain
approval of the transactions contemplated herein under the HSR Act; and
(viii) Any other documents that Seller may reasonably request at least
three days prior to the Closing.
2.5 Transfer of Operations. (a) Purchaser 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 otherwise provided herein. Except as expressly provided in this
Agreement, all profits, losses, liabilities, claims, or 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 Purchaser. 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 Purchaser thereafter.
(b) In the event of a casualty to a Restaurant which Seller has not been
able to repair or remedy prior to the Effective Time and the affected Restaurant
is open for business on the Closing Date, the Assets related to the affected
Restaurant shall be sold to the Purchaser as contemplated herein at the Closing,
and Seller shall remain obligated and continue to repair the Restaurant with
diligence after the Effective Time to at least as good of a condition as the
Restaurant was in immediately prior to the casualty.
(c) In the event of a casualty to a Restaurant which Seller has not been
able to repair or remedy prior to the Effective Time and the affected Restaurant
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is not able to be opened for business on the Closing Date due to such casualty
(but the Restaurant is not eligible for designation as an Excluded Restaurant
under Section 2.8(a)(ii)), then Seller shall remain obligated and continue to
repair the Restaurant with diligence after the Effective Time, to at least as
good of a condition as the Restaurant was in immediately prior to the casualty,
the Real Property and all other Assets relating exclusively to the affected
Restaurant shall not be transferred to Purchaser hereunder at Closing, Assumed
Liabilities pertaining to the affected Restaurant shall not be assumed by
Purchaser hereunder, and the Purchase Price shall be reduced by the amount
allocated to the affected Restaurant and attendant Assets on Schedule 2.5.
Within three business days following completion of the repairs, the Real
Property and all other Assets relating exclusively to the affected Restaurant
shall be transferred to Purchaser hereunder, Assumed Liabilities pertaining to
the affected Restaurant shall be assumed by Purchaser hereunder, and Purchaser
shall pay Seller the Purchase Price allocated to the affected Restaurant and
attendant Assets on Schedule 2.5.
2.6 Closing. The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of Kilpatrick Stockton LLP,
Suite 2800, 1100 Peachtree Street, Atlanta, Georgia, at 10:00 a.m. on August 14,
1998, or on such other date and time as may be mutually agreed upon by the
parties hereto.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the various Assets as set forth on Exhibit D hereof, which Exhibit shall
be prepared by the parties and attached hereto at Closing. Each party hereby
agrees that it will not take a position on any income tax return, before any
governmental agency charged with the collection of any income tax, or in any
judicial proceeding that is inconsistent with the terms of this Section 2.7.
2.8 Excluded Restaurants. (a) If prior to Closing (i) Seller fails to cure
one or more Material Objections, Purchaser may designate at Closing each
adversely affected Restaurant as an Excluded Restaurant; provided, however, that
notwithstanding anything herein to the contrary, no more than three (3)
Restaurants may be designated as an Excluded Restaurant under this Section
2.8(a)(i), or (ii) a Restaurant suffers a total casualty which Seller is not
required to repair or remedy pursuant to the Franchise Agreements (and Purchaser
is not required to repair or remedy pursuant to its franchise and development
agreements with Franchisor), Purchaser or Seller may designate at Closing each
adversely affected Restaurant as an Excluded Restaurant
(b) If a Restaurant is designated as an Excluded Restaurant in accordance
with Section 2.8(a), then the Real Property and all other Assets relating
exclusively to such Excluded Restaurant shall not be transferred to Purchaser
hereunder, Assumed Liabilities pertaining to such Excluded Restaurant shall not
be assumed by Purchaser hereunder, and the Purchase Price shall be reduced by
the amounts allocated to such Excluded Restaurant and attendant Assets on
Schedule 2.5.
(c) If, within thirty (30) days after the Closing Date, Seller cures all
Material Objections with respect to a Restaurant which has been designated by
Purchaser as an Excluded Restaurant under Section 2.8(a)(i), within three
business days following satisfaction of such Material Objections, the Real
Property and all other Assets relating exclusively to the affected Restaurant
shall be transferred to Purchaser hereunder, Assumed Liabilities pertaining to
the affected Restaurant shall be assumed by Purchaser hereunder, and Purchaser
shall pay Seller the Purchase Price allocated to the subject Restaurant and
attendant Assets on Schedule 2.5.
2.9 Further Assurances. From time to time after the Closing at Purchaser's
request and expense, Seller shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
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Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement. The Seller is now, and will be at Closing, duly qualified
and/or licensed to transact business and in good standing as a foreign
corporation in each state in which the character of the property owned or leased
by the Seller and the nature of the business conducted by it require such
qualification and/or licensing.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by all
required corporate action by Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, 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 any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents 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 Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Seller, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
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3.5 Assets. (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements.
(c) There are no assets or property of any nature which is not being
transferred to Purchaser hereunder that has been customarily used exclusively in
the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property having a fair market
value of $3,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
(e) The inventories of Seller on hand and included in the physical count to
be conducted by Seller and Purchaser on the Closing Date consist only of salable
goods and materials used by Seller in the ordinary course of its business, none
of which is obsolete, spoiled or otherwise unusable.
3.6 Contracts and Leases. (a) Each Material Contract and Lease is a valid
and subsisting agreement, without any material default of Seller thereunder, and
to the knowledge of Seller, without any Default on the part of any other party
thereto. To the knowledge of Seller, no event or occurrence has transpired which
with the passage of time or giving of notice or both will constitute a Default
under any Material Contract or Lease. A true and correct list of each Material
Contract and Lease and every amendment thereto or other agreement or document
relating thereto is set forth as Schedule 3.6 to this Agreement. True and
correct copies of the Material Contracts and Leases (and any amendments thereto)
have been provided to Purchaser. At the time of Closing, Seller shall have made
all payments and performed all obligations due through the Closing Date under
each Contract and Lease, except to the extent that any payment due is set forth
on the Purchase Price Adjustment Schedule and deducted in calculating the
Purchase Price pursuant to Section 2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property. (a) Schedule 3.7(a) sets forth with respect to each
Restaurant, its location, whether it is located on Owned Real Property or is on
a site subject to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller, or the owner of the DR Holdings Tracts, has obtained all
authorizations and rights-of-way which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the site of each Restaurant, all of
which are assignable and shall be assigned to Purchaser at the Closing.
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(d) Neither Seller nor the owner of the DR Holdings Tracts has received any
notice that any Government having the power of eminent domain over any parcel of
Real Property has commenced or intends to exercise the power of eminent domain
or a similar power with respect to any part of the Real Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all material laws and regulations (including zoning laws and
ordinances) of each Government having jurisdiction over the Real Property, and
neither Seller nor the owner of the DR Holdings Tracts has received any notice
from any Government alleging that the Real Property or any improvements erected
or situated thereon, or the uses conducted thereon or therein, violate any
regulations of any Government having jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, the owner of the DR Holdings Tracts, or to the knowledge of
Seller received by any owner of any of the Real Property subject to a Lease,
requiring or calling attention to the need for any work, repair, construction,
alteration, or installation on or in connection with the Real Property which has
not been complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
material compliance with all applicable Environmental Laws and Environmental
Permits held by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Property to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller or the owner of the DR Holdings
Tracts relating to any alleged past or ongoing violation of any Environmental
Laws or Environmental Permits with respect to the Real Property, nor to Seller's
knowledge is Seller or the owner of the DR Holdings Tracts subject to any
liability for any such past or ongoing violation. Matters referenced above of
which Seller has knowledge, if any, are referenced on Schedule 3.7(g).
3.8 Financial Statements. Schedule 3.8 contains for each Restaurant
unaudited statements of operations as of the end of the 1997 fiscal year and
Seller has previously delivered to Purchaser unaudited statements of operations
as of all fiscal months thereafter for which such statements are available (the
"Financial Statements"). The Financial Statements have been prepared in
accordance with Seller's historical practices and fairly present the operations
of the Restaurants for the periods presented and as of their respective dates.
3.9 Taxes. All Property Taxes relating to the Assets have been fully paid
for 1997 and all prior tax years and there are no delinquent property tax liens
or assessments. Seller or the owner of the DR Holdings Tracts has also timely
filed (or will timely file) all other tax returns and reports of whatever kind
pertaining to the Assets and required to be filed by Seller or the owner of the
DR Holdings Tracts up to the Closing Date, including all sales and use taxes
arising out of the operations of the Restaurants. Seller or the owner of the DR
Holdings Tracts has paid (or will timely pay) all taxes of whatever kind,
including any interest, penalties, governmental charges, duties, fees, and fines
imposed by all governmental entities or taxing authorities, which are due and
payable 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 lien on any of the Assets. In addition, except as set forth on
Schedule 3.9, (i) no audit of any material federal, state or local U.S. return
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of the Seller is currently in progress, nor has the Seller been notified that
such an audit is contemplated by any taxing authority, (ii) the Seller has not
extended any statute of limitations with respect to the period for assessment of
any federal, state or local U.S. tax, and (iii) the Seller does not contemplate
the filing of an amendment to any return, which amendment would have a material
adverse effect on the Seller.
3.10 Litigation. Except as set forth on Schedule 3.10, there is no material
Action or Order pending or, to the knowledge of Seller, threatened against or
affecting Seller or the owner of the DR Holdings Tracts that pertains to the
Restaurants, or any of the Assets before any court or by or before any Forum.
3.11 Permits. Seller has all material Permits as are necessary to operate
the Restaurants. Seller has fulfilled and performed all of its material
obligations with respect to such Permits and, to the knowledge of Seller, no
event has occurred which allows, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any other impairment
of the rights of the holder of any such Permits.
3.12 Health and Safety Requirements. To the knowledge of Seller, Seller and
the owner of the DR Holdings Tracts are in compliance with all laws,
governmental standards, rules and regulations applicable to them or to any of
the Assets in respect to the Americans with Disabilities Act and similar state
laws, occupational health and safety laws, and environmental laws.
3.13 Employment Contracts, Etc. Seller is not is a party to any written
employment agreements related to the employees at the Restaurants (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits. (a) Schedule 3.15 hereto contains a true and
complete list of all the following agreements or plans of Seller which are
presently in effect and which pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Seller maintains or to which Seller has any
outstanding, present, or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
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collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and/or has never contributed or
been obligated to contribute to a multiemployer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
(d) No Seller Plan has been terminated nor has any accumulated funding
deficiency (as defined in Code Section 412(a)) been incurred, nor has any waiver
from the Internal Revenue Service been received or requested.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in any certificate furnished to Purchaser pursuant
to this Agreement or in the Disclosure Memorandum is or will be when furnished
both complete and accurate in all material respects; and all documents furnished
to Purchaser pursuant to this Agreement which are documents described in this
Agreement or in the Disclosure Memorandum are true and correct copies of the
documents which they purport to represent.
3.17 Employees. Schedule 3.17 sets forth a list of the employees of the
Seller constituting ADI Personnel from and including each assistant manager up
through Vice President of Operations for the Territory, stating with respect to
each the name, date of hire and rate of compensation. Except as described in
Schedule 3.17 or Schedule 3.10, to the knowledge of Seller, there are no claims
or disputes pending with any employee constituting ADI Personnel regarding
workers' compensation, unemployment benefits, discrimination (including
discrimination based on any disability), or compensation.
ARTICLE IV - COVENANTS OF SELLER
4.1 Performance of Real Property Leases and 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 Leases and
Contracts, where the failure to do so would have a material adverse affect on
the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to assist Purchaser with the assumption, transfer, or
reissuance of any and all Permits required for the operation of the Restaurants.
4.3 Liabilities of Seller. All liabilities of Seller related to the
Business or the Assets that are not Assumed Liabilities will be promptly paid by
Seller as they come due.
4.4 Agreements Respecting Employees of Seller. (a) Prior to the Effective
Time without the prior written approval of Purchaser, Seller shall not transfer
or reassign to operations outside the Business any employee exclusively involved
in the operation or supervision of the Restaurants ("ADI Personnel"), except
that Purchaser acknowledges that Pat Mullett will be reassigned by Seller on or
prior to the Closing Date and will not be considered to be part of ADI Personnel
hereunder. At the Effective Time, Seller shall terminate the employment of all
ADI Personnel. For a period of twelve months following the Closing, Seller shall
not solicit for employment any person who is a salaried employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance, and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
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of the Franchise Agreements, using commercially reasonable efforts in keeping
with Seller's historical practices to preserve and maintain the services of its
employees and its relationships with suppliers and customers, (ii) pay all
bills, rents and debts incurred by it related to the Business promptly as they
become due, and (iii) consult in advance with Purchaser on all decisions outside
the ordinary course of business relating to the Assets or the Restaurants.
(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices;
(ii) 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
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations.
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change (or in the case of the DR Holdings Tracts, allow any change) in
any material manner the ownership of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan providing for payment of
bonuses upon the Closing, which Seller shall pay at Closing or within 60 days
thereafter;
(iii) mortgage, pledge, or subject to lien any of the Assets or allow the
DR Holdings Tracts to be mortgaged or subjected to lien;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into, terminate, or modify any Material Contract except in the
ordinary course of business;
(vi) cancel or terminate or consent to or accept any cancellation or
termination of any Lease, amend or otherwise modify any of its material terms or
waive any breach of any of its material terms or provisions or take any other
action in connection with any Lease that would materially impair the interests
or rights of Seller to be transferred to Purchaser hereunder.
4.6 Access to Information. Seller shall afford Purchaser, 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 Purchaser such additional financial and
operating data and other information as Seller may possess and as Purchaser may
reasonably request, subject to Purchaser's obligations regarding the
confidentiality of such information as set forth in Section 6.2 hereof;
provided, however, that such access shall be arranged in advance by Purchaser
with Seller and will be scheduled in a manner and with a frequency calculated to
cause the minimum disruption of the business of Seller.
4.7 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information respect to any event which has materially adversely affected the
Assets or the operations of the Restaurants.
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(b) As soon as available and in any event within four weeks after the end
of each calendar month, the statement of operations of each Restaurant for such
fiscal month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
Actions, Orders, or other directives affecting the Business or 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) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
4.8 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Seller will use commercially reasonable efforts to cause
the conditions set forth in Article VII to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby, including
obtaining the Consents. The parties acknowledge that no consents will be sought
with respect to any Minor Contract even if the failure to so obtain a consent to
assignment may result in a default or termination thereunder. Seller shall bear
any expenses associated with obtaining the Consents; however, Seller shall not
be required to make any payment to any party (other than reimbursement of
expenses), guarantee any Material Contract or Lease or remain liable for the
payment thereof following the Closing, or agree to any concessions or amendment
to other contracts, or arrangements with such party in order to obtain such
consents.
4.9 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
Material Contracts entered into by Seller in accordance with Section 4.5(c)(v)
("Subsequent Contracts") a provision permitting the assignment of any such
Subsequent Contract to Purchaser and providing that upon such assignment,
Purchaser shall succeed to all of Seller's rights, title, and interests
thereunder subject to the Purchaser'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.
4.10 Transition Services. (a) For a period of three months after the
Closing, if and to the extent requested in writing by Purchaser, Seller agrees
to provide to Purchaser restaurant accounting, POS system support, and other
services related to the Restaurants as mutually agreed upon between Seller and
Purchaser (the "Services"). Purchaser shall give Seller forty-five (45) days
advance written notice of the Services requested, and the parties will agree
upon the charges therefore prior to the Closing Date. The Services shall be
provided promptly as requested and shall be provided in substantially the same
manner and with the same or similar personnel as Seller previously utilized;
provided, however that if Seller no longer has the personnel to provide such
services, Seller may outsource such services to a third party.
(b) Purchaser will pay for the Services on a monthly basis, after receipt
of an invoice from Seller.
(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 Purchaser, Seller shall offer to specifically designated personnel
a bonus incentive to remain for the three month period. The amount of such bonus
shall be at the discretion of Purchaser. Such bonus, if accepted by the
employee, shall be paid by Purchaser at the end of the three-month period, or
for such shorter period as Purchaser may determine.
4.11 Delivery of Real Estate Documents. (a) Seller shall provide Purchaser,
promptly upon receipt (i) current surveys and title insurance commitments with
respect to the Owned Real Property ("Owner's Title Commitments") pursuant to
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which the Title Company will agree to issue at Closing to Purchaser and its
lender (if requested by Purchaser) owner's and mortgagee's policies of title
insurance ("Owner's Title Policies") on American Land Title Association standard
Form B-1990, without exceptions except as shown in the Owner's Title
Commitments, to be issued by Commonwealth Land & Title Insurance Company ("Title
Company") in an amount in the case of each parcel equal to the purchase price
allocated to such parcel of the Owned Real Property pursuant to Section 2.7, and
(ii) current surveys (collectively with the surveys of the Owned Real Property,
the "Surveys") and title insurance commitments with respect to the Real Property
subject to a Lease (collectively, the "Leased Real Property") (the "Lessee Title
Commitments", and collectively with the Owner's Title Commitments, the "Title
Commitments") pursuant to which the Title Company will agree to issue at Closing
lessee's policies of title insurance ("Lessee's Title Policies") on American
Land Title Association standard form of leasehold owner's policy to insure
leasehold estates, showing no exceptions except as shown in the Lessee Title
Commitments. The Owner's Title Policies shall insure the Purchaser that, upon
consummation of the purchase and sale herein contemplated, Purchaser will be
vested with good, fee simple, marketable, and insurable title to the Owned Real
Property, subject only to the Permitted Encumbrances or arising out of acts of
the insured. The Lessee's Title Policies shall insure the Purchaser that, upon
consummation of the transactions herein contemplated, Purchaser will be vested
with a good, valid, marketable and insurable leasehold estate in and to the
Leased Real Property, subject only to the Permitted Encumbrances.
Notwithstanding anything to the contrary contained herein, while Lessee Title
Commitments will be delivered for all Leased Real Property, no surveys will be
delivered and no Lessee's Title Policies will be issued for Leases unless such
Leases are for Free Standing Premises (as defined in Section 7.1).
(b) No later than five business days after the date hereof Seller shall
provide to Purchaser copies of all environmental reports pertaining to the Owned
Real Property in Seller's possession.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization, Corporate Power, Authorization. Purchaser is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware and in each other jurisdiction in which it is
lawfully required to qualify to conduct business. Purchaser has the power and
authority to execute and deliver this Agreement and the Bill of Sale and
Assignment Agreement, and to consummate the transactions contemplated hereby.
All action on the part of Purchaser necessary for the authorization, execution,
and delivery of this Agreement and the Bill of Sale and Assignment Agreement,
and performance of all obligations of Purchaser thereunder has been duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement and the
Bill of Sale and Assignment Agreement by Purchaser do not and the consummation
by Purchaser of the transactions contemplated hereby and thereby will not
violate any provision of its certificate of limited partnership, regulations or
limited partnership agreement.
5.3 Validity. This Agreement has been duly executed and delivered by
Purchaser, and constitutes the legal, valid, and binding obligation of
Purchaser, enforceable against it in accordance with its terms, subject to
general equity principles and to applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws from time to time in effect
affecting the enforcement of creditors' rights. When the Bill of Sale and
Assignment Agreement has been executed and delivered in accordance with this
Agreement, it will constitute the legal, valid, and binding obligation of
Purchaser, enforceable in accordance with its terms, subject to general equity
principles and to applicable bankruptcy, insolvency, reorganization, moratorium,
and similar laws from time to time in effect affecting the enforcement of
creditors' rights.
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5.4 Litigation Relating to the Agreement. Purchaser is not a party to, or
subject to any judgment, decree, or order entered in any lawsuit or proceeding
brought by any governmental agency or instrumentality or other party seeking to
prevent the execution of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE VI - COVENANTS OF PURCHASER
6.1 Purchaser Performance. After the Closing Date, Purchaser shall promptly
pay as they become due and otherwise perform all obligations of Seller under the
Assumed Liabilities and otherwise perform and fulfill all other obligations with
respect to the Assets pertaining to the period after the Closing Date.
6.2 Confidentiality. In connection with the negotiation of this Agreement,
Seller may disclose Confidential Information, as defined below, to Purchaser.
Purchaser agrees that if the transactions contemplated herein are not
consummated, it will return to Seller all documents and other written
information furnished to it. Purchaser further agrees to maintain the
confidentiality of any and all Confidential Information of Seller and not
disclose any Confidential Information to any Person other than such Person to
whom Confidential Information must be disclosed to effect the transactions and
who are bound by appropriate non-disclosure agreements or obligations. Purchaser
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller, except that Purchaser may use such Confidential Information
in connection with the ordinary course of operation of the Restaurants after
Closing. The foregoing obligations shall not apply to (i) any information which
was known by Purchaser prior to its disclosure by Seller; (ii) any information
which was in the public domain prior to the disclosure thereof; (iii) any
information which comes into the public domain through no fault of Purchaser;
(iv) any information which is disclosed to Purchaser by a third party, other
than an affiliate, having the legal right to make such disclosure; or (iv) any
information which is required to be disclosed by Order of any Forum. For
purposes of this Section, "Confidential Information" shall mean any and all
technical, business, and other information which is (a) possessed or hereafter
acquired by Seller and disclosed to Purchaser and (b) derives economic value,
actual or potential, from not being generally known to Persons other than
Seller, including, without limitation, technical or nontechnical data,
compositions, devices, methods, techniques, drawings, inventions, processes,
financial data, financial plans, product plans, lists of actual or potential
customers or suppliers, information regarding the business plans and operations
of Seller, and the existence of discussions and negotiations between the parties
hereto relating to the terms hereof. The restrictions of this Section shall
expire three years from the date hereof with respect to any confidential
business information that does not constitute a trade secret under applicable
law.
6.3 Seller Employees. (a) Purchaser shall offer employment to substantially
all ADI Personnel upon terms and conditions substantially similar to those
provided by Seller; however, Purchaser shall not be required to provide stock
options or any stock purchase rights. For a period of twelve months following
the Closing, Purchaser shall not solicit for employment any person who is a
salaried employee of Seller or any subsidiary of Seller.
(b) Purchaser shall maintain employee records transferred to Purchaser
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchaser's normal
business hours. Purchaser shall maintain the confidentiality of such records and
limit access thereto in a manner consistent with Purchaser's treatment of its
employee records.
(c) Purchaser agrees with respect to ADI Personnel hired by Purchaser: (i)
to give such employees credit under Purchaser's benefits plans, programs, and
arrangements (including credit for accrued but unvested vacation which has been
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charged to Seller under Section 2.3) for such employees' period of service with
Seller, provided that such credit shall only be taken into account under any
tax-qualified plan maintained by Purchaser 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; (ii) to provide coverage to such employees who are eligible under
Purchaser'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 deductibles, out of pocket expenses,
and similar amounts paid by individuals and their beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Purchaser shall use commercially reasonable efforts to
cause the conditions set forth in Article VII to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby.
Specifically, but not by way of limitation, Purchaser will (i) use commercially
reasonable efforts to obtain a commitment letter for financing the transactions
contemplated hereby on substantially the terms set forth in Exhibit E (the
"Financing Commitment") and to obtain financing on such terms, (ii) promptly
provide Franchisor with all information required by Franchisor to determine
whether Purchaser will be approved as a franchisee with respect to the
Territory, and (iii) actively pursue an agreement with Franchisor as to the
principal terms of franchise and development agreements with respect to the
Territory.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have
until fifteen (15) business days following receipt from Seller of all of the
Surveys and Title Commitments pursuant to Section 4.11 (the "Title Inspection
Period") to review same and furnish Seller a written statement of reasonable
objections to exceptions which, in Purchaser's reasonable judgment, would
materially interfere with or impair Purchaser's use of the Real Property for the
operation of Applebee's restaurants ("Material Objections"). Seller shall have
until the Termination Date to satisfy such Material Objections (but with no
obligation to do so) in all material respects, and if Seller fails to satisfy
all Material Objections in all material respects on or prior to the Termination
Date, then Purchaser's sole right and remedy shall be to either (i) waive the
objections and elect to close, (ii) terminate this Agreement by giving written
notice of such termination to Seller, or (iii) designate the affected Restaurant
as an Excluded Restaurant in accordance with Section 2.8. If Purchaser fails to
furnish Seller a written statement of Material Objections by the end of the
Title Inspection Period with respect to any matter appearing as an exception on
a Title Commitment, such matter along with all other encumbrances of record as
of the effective date of the Title Commitments not objected to by Purchaser
shall be deemed waived by Purchaser and shall be a Permitted Encumbrance. The
parties acknowledge that some of the Leased Real Property may be located in
shopping centers, and as such, unless the leased premises are a free standing
building located on a separate pad with its own legal description ("Free
Standing Premises") the Lessee Title Commitments for such Leased Real Property
will contain encumbrances for entire shopping centers. Purchaser may not object
to title encumbrances for such Leased Real Property that do not affect the
premises leased under the Leases, which such encumbrances shall be deemed to be
Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
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conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchaser, including, without limitation, the
entry by Purchaser or Purchaser's Designees onto the Real Property, or the other
activities of Purchaser or Purchaser's Designees with respect to the Real
Property (hereinafter called "Purchaser's Activities") shall not damage the Real
Property in any manner whatsoever or disturb or interfere with the rights of any
lessor of Leased Real Property; (ii) in the event the Real Property is altered
or disturbed in any manner in connection with any Purchaser's Activities,
Purchaser shall immediately return the Real Property to the condition existing
prior to Purchaser's Activities; (iii) Purchaser shall in no event without
Seller's prior written consent disclose the results of any of its
investigations, examinations, tests, or inspections to any party (including any
Government unless required by law) other than to its lenders, attorneys,
consultants, and investors; and (iv) Purchaser shall indemnify, defend, and hold
Seller harmless from and against any and all claims, liabilities, damages,
losses, costs, and expenses of any kind or nature whatsoever (including, without
limitation, attorneys' fees, and expenses and court costs) suffered, incurred or
sustained by Seller as a result of, by reason of, or in connection with any
Purchaser's Activities. Notwithstanding any provision of this Agreement to the
contrary, Purchaser shall not have the right to undertake any environmental
studies or testing beyond the scope of a standard "Phase I" evaluation without
the prior written consent of Seller and, if applicable, the lessor of any Leased
Real Property.
(B) Purchaser shall have until July 31, 1998 (hereinafter called the "Due
Diligence Date"), to perform such investigations, examinations, tests and
inspections as Purchaser shall deem necessary or desirable to determine whether
the Real Property is suitable and satisfactory to Purchaser and can be used for
Applebee's franchise restaurants. In the event Purchaser shall determine that
the Real Property is not reasonably suitable and satisfactory to Purchaser,
Purchaser shall have the right to terminate this Agreement by giving written
notice to Seller on or before the Due Diligence Date. If Purchaser does not
terminate this Agreement in accordance with this Section 7.1(b) on or before the
Due Diligence Date, Purchaser shall have no further right to terminate this
Agreement pursuant to this Section 7.1(b).
(C) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities; or (ii) Closing.
(D) Purchaser acknowledges that Seller may deliver to Purchaser certain
documents and information in possession of Seller or Seller's agents with regard
to the Real Property (hereinafter called the "Due Diligence Materials"). The Due
Diligence Materials will be provided to Purchaser without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchaser
for Purchaser's informational purposes. Until Closing, Purchaser and Purchaser's
Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchaser's Conditions to Closing. The obligations of Purchaser
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Purchaser, be
waived:
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(a) Subject to the matters disclosed in the Disclosure Memorandum as
supplemented by Seller from time to time, all representations and warranties of
Seller in this Agreement shall be true in all material respects on and as of the
Closing.
(b) Any supplement to the Disclosure Memorandum delivered by Seller shall
not reflect in Purchaser's reasonable judgment any material adverse change in
the Assets or the Business.
(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 have obtained and delivered to Purchaser all Consents
necessary to transfer and assign the Assets to Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant and development agreements with respect to each
ADI in the Territory.
(f) Purchaser 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 in accordance with franchise requirements;
provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser 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 Purchaser a duly executed
liquor license management agreement or agreements.
(g) Purchaser shall have obtained the financing described on Exhibit E upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(h) Purchaser shall have been issued the Title Policies.
(i) There shall be no Material Adverse Change in the financial condition of
the Restaurants. As used herein, the term "Material Adverse Change" shall mean a
decrease in sales of all Restaurants in the aggregate in an amount equal or more
than 10% during the period from the date hereof through the Closing Date
relative to the same period during 1997.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 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 Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser 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 Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(e) Purchaser shall have delivered the items required by Section 2.4(b).
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ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims. (a) Seller shall indemnify and hold harmless
Purchaser, its successors and assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser that result from, relate to, or arise out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
by Seller pursuant hereto; (D) any claim by any Person for any brokerage or
finder's fee or commission in respect of the transactions contemplated hereby as
a result of Seller's dealings, agreement, or arrangement with such Person; or
(E) any claim arising out of the operation of the Restaurants prior to the
Closing.
(ii) Any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs, and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing including all such expenses reasonably incurred in
mitigating any damages resulting to Purchaser from any matter set forth in
subsection (i) above.
(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to claims under Section 8.1(a)(i)(C)
(and Section 8.1(a)(ii) to the extent the items covered thereby relate back to
Section 8.1(a)(i)(C)) for any single Restaurant until the aggregate liability of
Seller thereunder exceeds $60,000.00 for the affected Restaurant (at which point
the Seller will be obligated to indemnify the Purchaser from and against all
such liabilities for the affected Restaurant relating to the first dollar);
provided, however, that liabilities arising with respect to Sections 3.1 through
3.4, 3.7(g) and 3.9 hereof shall not be subject to the foregoing threshold and
any liabilities arising with respect to such matters shall not be taken into
account in computing aggregate liabilities for the purpose of applying such
threshold amount to liabilities arising under other Sections subject thereto. In
no event shall the aggregate liability of Seller under Section 8.1(a)(i)(C) (and
Section 8.1(a)(ii) to the extent the items covered thereby relate back to
Section 8.1(a)(i)(C)) exceed $15,000,000.00.
(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any tax benefit to Purchaser from the matter giving rise to the
claim for indemnification hereunder and net of any insurance proceeds received
by Purchaser with respect to the matter out of which such liability arose.
(d) The representations and warranties of Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate delivered by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(i) the representations and warranties contained in Section 3.5(d) shall be
of no further force and effect after thirty days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1 through
3.4, Section 3.7(g) and 3.9 shall survive until the expiration of any applicable
statues of limitation provided by law; and
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(iii) all other representations and warranties of Seller shall be of no
further force and effect after eighteen months from the date of the Closing.
Anything to the contrary notwithstanding, the Survival Period shall be
extended automatically to include any time period necessary to resolve a written
claim for indemnification which was made in reasonable detail before expiration
of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
(e) Except for claims arising under Sections 4.1, 4.3, 4.4, and 4.10 which
shall survive the Closing, Purchaser may not assert any claim against Seller for
breach of any covenant contained in Article IV following the Closing.
(f) Purchaser shall provide written notice to Seller of any claim for
indemnification under this Article as soon as practicable; provided, however,
that failure to provide such notice on a timely basis shall not bar Purchaser's
ability to assert any such claim except to the extent that Seller is actually
prejudiced thereby. Purchaser shall make commercially reasonable efforts to
mitigate any damages, expenses, etc. resulting from any matter giving rise to
liability of Seller under this Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
under Section 8.1, relating to a third party claim or demand, Purchaser shall
provide Seller with prompt written notice thereof in accordance with Section
10.4 and Seller may defend, in good faith and at its expense, by legal counsel
chosen by it and reasonably acceptable to Purchaser any such claim or demand,
and Purchaser, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser shall not settle or compromise such
third party claim. In any event Purchaser shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
8.3 Seller Claims. Purchaser shall indemnify and hold harmless Seller
against, and in respect of, any and all damages, claims, losses, liabilities,
and expenses, including without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation by Purchaser of
any covenant set forth herein or any failure to fulfill any obligation set forth
herein, including, but not limited to, the obligation to satisfy the Assumed
Liabilities; (ii) any breach of any of the representations or warranties made in
this Agreement by Purchaser; or (iii) any claim by any Person for any brokerage
or finder's fee or commission in respect of the transactions contemplated hereby
as a result of Purchaser's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII 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.
8.5 Settlement of Disputes. (a) Arbitration. All disputes with respect to
any claim for indemnification under this Article VIII and all other disputes and
controversies of every kind and nature between the parties hereto arising out of
or in connection with this Agreement shall be submitted to arbitration pursuant
to the following procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
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(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("AAA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
(iii) The arbitration hearing shall be held in Dallas, Texas (in the case
of arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser) at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Georgia (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, shall not award punitive damages, and judgment on such award may be
entered by either party in a court of competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination. (a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if Purchaser shall not (i) have obtained and provided a
copy of the Financing Commitment to Seller within fifteen (15) days from the
date hereof, (ii) been approved hereof as a franchisee with respect to the
Territory by July 31, 1998 (iii) reached agreement with Franchisor as to a
development schedule and other material terms of franchise and development
agreements with respect to the Territory by July 31, 1998;
(iv) By either Seller or Purchaser, at its sole election, in the event of a
Material Adverse Change ( as defined in Section 7.2(i)); or
(v) By either Seller or Purchaser, at its sole election, at any time after
the Termination Date, if the Closing shall not have occurred on or prior to such
date.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(v) above because Seller or Purchaser, as the case may be, shall
have willingly failed to fulfill its obligations hereunder, the other party
shall, subject to Section 8.5, be entitled to pursue, exercise, and enforce any
and all remedies, rights, powers, and privileges available to it at law or in
equity.
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(c) Section 6.2, Article VIII, and Article X hereof shall survive the
termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) Purchaser shall pay all filing fees required under the HSR Act.
(c) The costs of obtaining the Title Commitments, Owner's Title Policies
and Lessee's Title Policies with respect to the Real Property and all transfer,
intangible, recording, and documentary taxes, stamps, and fees with respect to
the transfer of the Owned Real Property and the Leases shall be shared equally
by Seller and Purchaser. Purchaser shall pay the cost of the Surveys and all
other surveys, environmental investigations, studies, and reports, and all other
costs of any investigation of the Assets, the Restaurants, or the Business by
Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents subject to Section
4.9.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
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If to Seller, to: With a required copy to:
Apple South, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Attention: Louis J. (Dusty) Profumo Attention: Larry D. Ledbetter, Esq.
Fax: 706-343-2434 Fax: 404-815-6555
If to Purchaser: With a required copy to:
Apple J, L.P. Glast, Phillips & Murray
58 Judges Hill Drive 2200 One Galleria Tower
Norwell, Massachusetts 02061 Dallas, Texas 75240-6657
Attention: Bill Klepper Attention: Ronald L. Brown
Fax: (781) 544-2035 Fax: (972) 419-8329
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U. S. Mail properly addressed with adequate postage affixed.
10.5 GEORGIA LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Purchaser 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, 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.
10.10 Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, EXCEPT TO
THE EXTENT OF SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN,
SHALL ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT TO THE EXTENT OF SELLER'S
EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, SELLER SHALL SELL AND
CONVEY TO PURCHASER, AND PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS",
AND WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE ASSETS BY SELLER OR ANY THIRD
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PARTY. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT TO THE EXTENT OF
SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, SELLER MAKES,
AND SHALL MAKE, NO EXPRESS OR IMPLIED WARRANTY OF SUITABILITY OR FITNESS OF ANY
OF THE ASSETS FOR ANY PURPOSE, OR AS TO THE MERCHANTABILITY, ENVIRONMENTAL
CONDITION, TITLE, VALUE, QUALITY, QUANTITY, CONDITION OR SALABILITY OF ANY OF
THE ASSETS, OR AS TO THE PRESENCE ON OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS
MATERIAL. THE TERMS AND CONDITIONS OF THIS SECTION 10.11 SHALL SURVIVE THE
CONSUMMATION OF THE PURCHASE AND SALE OF THE ASSETS ON THE CLOSING DATE WITHOUT
REGARD TO ANY GENERAL LIMITATIONS UPON SURVIVAL SET FORTH IN THIS AGREEMENT.
10.12 Time. Time is and shall be of the essence of this Agreement.
10.13 Guarantee. Bill Klepper, Pat Williamson and Allan Huston agree to
jointly and severally guarantee the performance and obligations of Purchaser
hereunder; provided that such guarantee shall terminate immediately after the
Closing, and Seller has relied upon such guarantee in entering into this
Agreement
[Signatures Located on Following Pages]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SELLER:
APPLE SOUTH, INC.
By:
Name:
Title:
PURCHASER:
APPLE J, L.P.
By:
Name:
Title:
GUARANTORS:
Bill Klepper
Pat Williamson
Allan Huston
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Opinion of Seller's Counsel
C Opinion of Purchaser's Counsel
D Allocation of Purchase Price
E Financing Terms
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
2.5 Allocation
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.9 Taxes
3.10 Litigation
3.15 Seller Plans
3.17 Employees
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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