UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended June 28, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ______ to ______
Commission File Number: 0-19542
APPLE SOUTH, INC.
(Exact name of registrant as specified in its charter)
Georgia 59-2778983
- --------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Hancock at Washington, Madison, GA 30650
- ----------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
706-342-4552
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
As of August 11, 1998, there were 36,372,018 shares of common stock of the
Registrant outstanding.
<PAGE>
APPLE SOUTH, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 28, 1998
INDEX
Part I - Financial Information Page
Item 1 - Consolidated Financial Statements:
Consolidated Statements of Earnings.........................3
Consolidated Balance Sheets.................................4
Consolidated Statements of Shareholders' Equity.............5
Consolidated Statements of Cash Flows.......................6
Notes to Consolidated Financial Statements..................7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations..............11
Item 3 - Quantitative and Qualitative Disclosures About
Market Risk................................................15
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders........16
Item 5 - Other Information..........................................16
Item 6 - Exhibits and Reports on Form 8-K...........................17
Signature ...........................................................18
Page 2
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)
<CAPTION>
Quarter Ended Six Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Applebee's $ 110,624 115,890 236,387 227,674
Don Pablo's 66,416 48,456 125,679 88,858
Hops 25,560 13,494 48,887 18,223
McCormick & Schmick's 25,361 19,708 46,703 27,032
Canyon Cafes 11,882 - 23,863 -
Other - 5,341 - 12,555
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 239,843 202,889 481,519 374,342
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 67,380 56,406 134,697 104,253
Payroll and benefits 77,327 60,540 155,975 112,878
Depreciation and amortization 4,184 7,785 8,388 14,630
Other operating expenses 55,899 44,599 112,357 84,157
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 204,790 169,330 411,417 315,918
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 12,281 9,779 25,196 18,393
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 22,772 23,780 44,906 40,031
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense, net (7,214) (4,703) (14,353) (8,579)
Distributions on preferred securities (2,013) (2,013) (4,025) (2,388)
Gain (loss) on disposal of assets held for sale (2,303) - 46,697 -
Income from investments carried at equity 84 - 787 -
Other, primarily goodwill amortization (1,901) (1,140) (3,223) (1,797)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) (13,347) (7,856) 25,883 (12,764)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative
effect of change in accounting principle 9,425 15,924 70,789 27,267
Income taxes 3,100 5,700 25,925 9,775
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of
change in accounting principle 6,325 10,224 44,864 17,492
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle, net of tax benefit - - 1,461 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 6,325 10,224 43,403 17,492
====================================================================================================================================
Basic earnings per common share:
Basic earnings before cumulative effect of
change in accounting principle $ 0.17 0.27 1.18 0.45
Cumulative effect of change in accounting principle - - (0.04) -
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per common share $ 0.17 0.27 1.14 0.45
====================================================================================================================================
Diluted earnings per common share:
Diluted earnings before cumulative effect of
change in accounting principle $ 0.17 0.25 1.03 0.44
Cumulative effect of change in accounting principle - - (0.03) -
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted earnings per common share $ 0.17 0.25 1.00 0.44
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
June 28, December 28,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S>
Assets <C> <C>
Current assets:
Cash and cash equivalents $ 3,706 2,503
Proceeds due from sale of assets 69,748 -
Short-term investments 27 37
Accounts receivable 14,684 8,983
Inventories 10,116 10,732
Prepaid expenses and other 8,224 9,047
Assets held for sale 252,020 331,104
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 358,525 362,406
Premises and equipment, net 314,033 283,839
Goodwill, net 139,069 138,403
Other assets 41,271 19,641
- ------------------------------------------------------------------------------------------------------------------------------------
$ 852,898 804,289
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 30,343 24,819
Accrued liabilities 49,180 40,266
Current installments of long-term debt 19 206
Income taxes 16,043 -
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 95,585 65,291
Long-term debt 385,450 381,843
Deferred income taxes 16,700 14,231
Other long-term liabilities 6,782 7,142
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 504,517 468,507
- ------------------------------------------------------------------------------------------------------------------------------------
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 -
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 1998 and 1997 405 405
Additional paid-in capital 141,842 145,269
Retained earnings 140,462 97,905
Treasury stock at cost; 3,636,535 shares in 1998 and 1,662,812
shares in 1997 (52,728) (22,797)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 229,981 220,782
- ------------------------------------------------------------------------------------------------------------------------------------
$ 852,898 804,289
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Statements of Shareholders' Equity
(Unaudited)
(In thousands, except per share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Additional Total
Common Stock Paid-in Retained Treasury Shareholders'
Shares Amount Capital Earnings Stock Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1997 40,479 $405 $145,269 $97,905 ($22,797) $220,782
Net earnings - - - 37,078 - 37,078
Purchase of common stock - - - - (113) (113)
Common stock issued to ESOP and ESPP - - 36 - 206 242
Exercise of options - - (2) - 12 10
Foreign currency translation adjustment - - - 148 - 148
Cash dividends ($0.01 per share) - - - (405) - (405)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at March 29, 1998 40,479 405 145,303 134,726 (22,692) 257,742
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings - - - 6,325 - 6,325
Purchase of common stock - - - - (30,318) (30,318)
Common stock issued to ESOP and ESPP - - - - 81 81
Exercise of options - - (61) - 201 140
Foreign currency translation adjustment - - - (83) - (83)
Equity forward contract pending settlement - - (3,400) - - (3,400)
Cash dividends ($0.0125 per share) - - - (506) - (506)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at June 28, 1998 40,479 $405 $141,842 $140,462 ($52,728) $229,981
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>
Apple South, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
<CAPTION>
Six Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
June 28, June 29,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 43,403 17,492
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 12,051 16,909
Deferred income taxes 2,469 1,800
Gain on sale of assets (46,697) -
(Increase) in assets:
Accounts receivable (5,703) (2,820)
Inventories (995) (994)
Prepaid expenses and other (4,124) (1,011)
Increase (decrease) in liabilities:
Accounts payable 5,524 (4,425)
Accrued liabilities (98) (5,464)
Income taxes 16,043 (120)
Other long-term liabilities 954 185
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 22,827 21,552
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (74,078) (73,186)
Acquisition of businesses, net of cash acquired (2,325) (106,240)
Proceeds from sale of premises and equipment 101,420 3,219
Decrease in short-term investments 10 15
Additions to franchise costs - (479)
Additions to other assets (20,074) (2,233)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities 4,953 (178,904)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net proceeds from revolving credit agreements 4,765 69,500
Proceeds from issuance of preferred securities, net of issue costs - 111,261
Proceeds from issuance of long-term debt - 510
Principal payments on long-term debt - (468)
Proceeds from issuance of common stock - 1,161
Dividends declared and paid (911) (718)
Purchase of treasury stock (30,431) (22,995)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (26,577) 158,251
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,203 899
Cash and cash equivalents at the beginning of the period 2,503 3,923
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period $ 3,706 4,822
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 6
<PAGE>
APPLE SOUTH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 28, 1998
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X promulgated by the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for annual financial statement
reporting purposes. However, there has been no material change in the
information disclosed in the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 28, 1997,
except as disclosed herein. In the opinion of management, all adjustments,
consisting only of normal recurring accruals, considered necessary for a fair
presentation have been included. Operating results for the six-month period
ended June 28, 1998 are not necessarily indicative of the results that may be
expected for the year ending January 3, 1999.
NOTE 2 - ASSET DIVESTITURES
As previously disclosed, in December 1997 the Company finalized its decision to
sell its franchised Applebee's Neighborhood Grill & Bar ("Applebee's")
restaurants. In the second quarter of 1998, the Company completed three
transactions for the sale of 39 Applebee's restaurants. Total proceeds from
these sales were $71.5 million. A portion of the proceeds were received
subsequent to June 28, 1998 and are thus classified as "Proceeds due from sale
of assets" in the accompanying consolidated balance sheet. Also in the second
quarter, the Company completed the sale of a 75% interest in its Harrigans
division (see Note 4). Total gains from these second quarter transactions were
$30.0 million. These gains were more than offset by charges of $32.3 million,
primarily related to expected losses on certain Applebee's sales contracts
signed during the second quarter, resulting in a reported net loss of $2.3
million. As of June 28, 1998, the Company had sold 72 of its 279 Applebee's
restaurants for total consideration of $166.2 million and a pre-tax gain of
$78.0 million ($48.4 million gain after tax effect).
The remaining premises and equipment, franchise costs and goodwill related to
the Applebee's division are included in "Assets held for sale". Depreciation and
amortization on these long-lived assets were suspended in December 1997, when
management finalized the decision to dispose of the division.
NOTE 3 - CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
At the beginning of fiscal 1998, the Company adopted AICPA Statement of Position
98-5, "Reporting the Cost of Start-Up Activities." This statement requires
entities to expense the costs of start-up activities as incurred. As a result of
the adoption of this change in accounting policy, from expensing preopening
costs in the first full month of a restaurant's operations to expensing them as
incurred, the Company recorded a cumulative effect charge from the change in
accounting principle of $2.2 million ($1.5 million net of tax benefit) during
the first quarter of 1998.
Page 7
<PAGE>
NOTE 4 - EQUITY INVESTMENTS
In January 1998, the Company acquired a 20% interest in Belgo Group PLC
("Belgo"), a public restaurant company based in the United Kingdom that owned
and operated two Belgo restaurants in London, for $6.1 million. In June 1998,
Belgo completed the acquisition of three additional restaurants (Daphne's, The
Collection, and Pasha). In connection with these acquisitions, the Company
invested an additional $3.4 million to maintain its 20% equity interest. The
investment in Belgo is accounted for under the equity method of accounting.
Accordingly, the Company's interest in Belgo's net earnings is included in
"Income from investments carried at equity" in the accompanying consolidated
statement of earnings. The Company's investment is included in "Other assets" in
the accompanying consolidated balance sheet. The investment is translated into
U.S. dollars at the period-end exchange rate, while net earnings are translated
at the average exchange rate during the period. The resulting translation
adjustments are recorded as a component of shareholders' equity and
comprehensive income (Note 9).
In April 1998, the Company sold its Harrigans division, retaining a 25% equity
interest in the ongoing business. The Company received $3.0 million in cash plus
a $4.0 million note and additionally retained ownership of the real estate for
two Harrigans locations which are being leased to the new entity. The
transaction resulted in a $0.7 million gain with an additional $4.0 million
gain, related to the note, being deferred. The investment in Harrigans is
accounted for using the equity method of accounting with net earnings included
in "Income from investments carried at equity". The Company's 25% equity
interest is included in "Other assets" in the accompanying consolidated balance
sheet.
NOTE 5 - SHAREHOLDERS' EQUITY
Cash dividends declared and paid in the quarter ended June 28, 1998 totaled
$506,000, or $0.0125 per share. On August 5, 1998, the Company declared a cash
dividend of $0.0125 per share, payable on August 31, 1998, to shareholders of
record on August 14, 1998.
In January 1998, the Company's Board of Directors approved the purchase of up to
two million additional shares of Apple South common stock. As of June 28, 1998,
the Company had completed this repurchase program. On June 18, 1998, the Company
announced the approval by its Board of Directors of an additional repurchase
program for the lesser of $125.0 million or 8.3 million shares. The Company also
announced that it would consider the use of forward equity purchases or similar
agreements to facilitate its repurchase program. To allow for the implementation
of the additional program, the Company obtained consent from the holders of its
9.75% Senior Notes due 2006 to amend certain covenants and events of default
provisions contained in the indenture dated May 1, 1996 relating to the notes.
Bond holder consent was finalized on July 1, 1998 and the Company paid $4.2
million to the consenting holders.
At quarter end, the Company had not purchased any shares pursuant to the 8.3
million share approval. To facilitate the repurchase program, however, the
Company initiated an equity forward purchase arrangement with a third party.
Pursuant to this arrangement, the third party purchased 250,000 shares of Apple
South common stock prior to June 28, 1998 at an average price of $13.60 (or a
total acquisition cost of $3.4 million). Under the terms of the arrangement, the
Company has the option to (i) acquire the shares at the third party's average
acquisition cost or (ii) instruct the third party to sell the stock and settle
in cash any appreciation or depreciation in the market value of the stock. The
acquisition price paid by the third party of $3.4 million has been reflected as
"Equity forward contract pending settlement" in the consolidated balance sheet.
Page 8
<PAGE>
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
For the six-month periods ended June 28, 1998 and June 29, 1997, the following
supplements the consolidated statements of cash flows (amounts in thousands):
1998 1997
- --------------------------------------------------------------------------------
Interest paid $ 14,580 9,976
- --------------------------------------------------------------------------------
Distributions paid on preferred securities $ 4,025 1,807
- --------------------------------------------------------------------------------
Income taxes paid $ 6,660 7,310
- --------------------------------------------------------------------------------
Business acquisitions, net of cash acquired:
Fair value of assets acquired, other than cash $ 1,314 47,166
Liabilities assumed - (22,379)
Merger consideration payable - (1,891)
Stock issued - (16,335)
Purchase price in excess of the net assets acquired 1,011 99,679
- --------------------------------------------------------------------------------
Net cash used for acquisitions $ 2,325 106,240
================================================================================
The 1998 business acquisition reflects the buy-out of a joint venture partner in
the Hops division. As discussed in Note 2, in 1998 the Company sold 72
Applebee's restaurants (a portion of the related proceeds were not received as
of June 28, 1998 and, as such, these transaction had no effect on consolidated
cash flows for the six months ended June 28, 1998). The accompanying
consolidated balance sheet reflects changes in asset and liability accounts
related to the divestiture of these restaurants as follows: decrease in assets
held for sale of $76.2 million, decreases in assets not classified as held for
sale of $6.2 million and increases in accrued liabilities of $5.7 million.
NOTE 7 - INCOME TAXES
The effective tax rate for the first six months of 1998 was 36.6% reflecting the
blend of taxes on operations estimated at 34.0% and taxes on the gain on sale of
assets estimated at 38.0%. The Company's effective tax rate on operations for
fiscal 1998 is expected to be 34.0% compared to the prior year effective rate of
32.4%.
NOTE 8 - CONTINGENCIES
During 1997, two lawsuits were filed by persons seeking to represent a class of
shareholders of the Company who purchased shares of the Company's common stock
between May 26, 1995 and September 24, 1996. Each plaintiff named the Company
and certain of its officers and directors as defendants. The complaints alleged
acts of fraudulent misrepresentation by the defendants which induced the
plaintiffs to purchase the Company's common stock and alleged illegal insider
trading by certain of the defendants, each of which allegedly resulted in losses
to the plaintiffs and similarly situated shareholders of the Company. The
complaints each sought damages and other relief. During 1998, one of these suits
was dismissed. Although the ultimate outcome of the remaining lawsuit cannot be
determined at this time, the Company believes that the allegations therein are
without merit and intends to vigorously defend itself.
Page 9
<PAGE>
NOTE 9 - COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income". SFAS 130, which is effective for the Company's fiscal 1998, establishes
standards for reporting and display of comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. Total comprehensive income for the six months ended June 28,
1998 of $43.5 million included net earnings as reported in the accompanying
consolidated statement of earnings plus the $0.1 million after-tax effect of
foreign currency translation adjustments. Comprehensive income for the six
months ended June 29, 1997 was equal to net earnings as reported.
Page 10
<PAGE>
Item 2.
APPLE SOUTH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Second Quarter and Six Months ended June 28, 1998
Consolidated Overview
Consolidated restaurant sales for the second quarter and six months ended June
28, 1998 increased 18% and 29%, respectively, over the comparable periods of
1997. Sales increases of 58% and 83%, for the same respective periods in the
Company's core brands, which include Don Pablo's, Hops, McCormick & Schmick's
and Canyon Cafes, were offset by declining revenues associated with the
Company's divestitures of its Applebee's and Harrigans divisions. Sales
attributable to the brands acquired in 1997 as well as subsequent unit growth
and increases in average unit volumes in these brands and unit growth in Don
Pablo's generated gains in core brand sales.
Net earnings for the second quarter were $6.3 million compared to $10.2 million
for the second quarter of 1997. Earnings for the second quarter included a $2.3
million net loss on the disposal of assets held for sale which was composed of a
$30.0 million gain on the sale of 39 Applebee's restaurants and a 75% interest
in the Harrigans division and a $32.3 million charge related primarily to losses
anticipated on certain Applebee's sales transactions which are expected to close
during the third quarter.
In January 1998, the Company acquired a 20% interest in Belgo Group PLC
("Belgo"), a public restaurant company based in the United Kingdom, for $6.1
million. In June 1998, Belgo completed the acquisition of three additional
restaurants (Daphne's, The Collection, and Pasha). In connection with these
acquisitions, the Company invested an additional $3.4 million to maintain its
20% equity interest. Also in the second quarter, the Company completed the sale
of its Harrigans division, retaining a 25% equity interest in the ongoing
business. The Company's pro rata share of net earnings of Belgo and Harrigans is
included in "Income from investments carried at equity" in the accompanying
consolidated statement of earnings.
The effective tax rate for the first six months of 1998 was 36.6% reflecting the
blend of taxes on operations estimated at 34.0% and taxes on the gain on sale of
assets estimated at 38.0%. The Company's effective tax rate on operations for
fiscal 1998 is expected to be 34.0% compared to the prior year effective rate of
32.4%.
Core Brands
The following table presents operating income for ongoing core brands. The table
presents the quarter and six-month periods ended June 28, 1998 compared to the
pro forma results for the quarter and six-month periods ended June 29, 1997
(assuming the 1997 acquisitions of Hops, McCormick & Schmick's and Canyon Cafes
occurred as of the beginning of 1997).
Page 11
<PAGE>
<TABLE>
Core Brands:
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Quarter Ended Six Months Ended
- --------------------------------------------------------------------------------------------------------------------------
Actual Pro forma Actual Pro forma
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restaurant sales:
Don Pablo's $ 66,416 48,456 125,679 88,858
Hops 25,560 13,494 48,887 26,063
McCormick & Schmick's 25,361 19,708 46,703 38,177
Canyon Cafes 11,882 8,488 23,863 15,480
- --------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 129,219 90,146 245,132 168,578
- --------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 35,990 24,901 68,568 46,981
Payroll and benefits 38,872 26,925 73,968 50,735
Depreciation and amortization 4,184 3,313 8,388 6,159
Other operating expenses 29,764 20,424 56,395 38,467
- --------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 108,810 75,563 207,319 142,342
- --------------------------------------------------------------------------------------------------------------------------
Income from restaurant operations 20,409 14,583 37,813 26,236
General and administrative expenses 8,903 7,086 17,864 13,236
==========================================================================================================================
Operating income $ 11,506 7,497 19,949 13,000
==========================================================================================================================
</TABLE>
Total core brand restaurant sales for the second quarter and six-month period
ending June 28, 1998 increased by 43% and 45%, respectively, over the pro forma
results of the comparable prior year periods while operating income increased by
53% for both the second quarter and year-to-date periods. The sales increase was
a result of a year-to-date increase in operating weeks of 47% in addition to
year-to-date increases in average weekly sales of 7% in both Hops and McCormick
& Schmick's and 4% in Canyon Cafes. Average weekly sales in Don Pablo's were 4%
negative. The gains in Hops, McCormick & Schmick's and Canyon Cafes were
predominately driven by customer counts associated with an increasing awareness
of these emerging brands and the positive result of new openings. An increase in
average weekly sales of 2% in Don Pablo's base restaurants (those open for a
full 12 months at the beginning of 1998), also associated with customer count
increases, was mitigated by lower average weekly sales in restaurants opened in
1997 and 1998. Seven weaker 1997 sites and management's decision to open 1998
restaurants for dinner only, combined to reduce overall average weekly sales for
all units. The strategic decision of dinner only openings (typically for the
first one to two weeks of operations, although extending for several additional
weeks in some units) has resulted in the desired effect of increasing both
customer and employee retention as new units establish themselves.
Restaurant operating expenses for the second quarter of 1998 were 84.2% of sales
compared to 83.8% for the comparable prior year period. The increase is
primarily attributable to an increase in the number of openings in the second
quarter of 1998 as compared to 1997, coupled with the Company's policy of
expensing preopening costs as incurred which was adopted at the beginning of
1998. General and administrative expenses, which include divisional and all
corporate overhead, decreased from 7.9% of sales to 6.9% primarily as a result
of leverage gained from absolute increases in size.
Page 12
<PAGE>
Asset Divestitures
As previously disclosed, in December 1997 the Company finalized its decision to
sell its franchised Applebee's Neighborhood Grill & Bar ("Applebee's")
restaurants. In the second quarter of 1998, the Company completed three
transactions for the sale of 39 Applebee's restaurants. Total proceeds from
these sales were $71.5 million. A portion of the proceeds were received
subsequent to June 28, 1998 and are thus classified as "Proceeds due from sale
of assets" in the accompanying consolidated balance sheet. Also in the second
quarter, the Company completed the sale of a 75% interest in its Harrigans
division (see Note 4). Total gains from these second quarter transactions were
$30.0 million. These gains were more than offset by charges of $32.3 million,
primarily related to expected losses on certain Applebee's sales contracts
signed during the second quarter, resulting in a reported net loss of $2.3
million. As of June 28, 1998, the Company had sold 72 of its 279 Applebee's
restaurants for total consideration of $166.2 million and a pre-tax gain of
$78.0 million ($48.4 million gain after tax effect).
The Company continues to expect net proceeds from the divestiture of its
Applebee's division, after selling expenses and income taxes, to approximate
$400 million. Subsequent to June 28, 1998, the Company completed the sale of 51
additional Applebee's restaurants for $86.7 million. As of August 11, 1998, the
Company has 8 definitive purchase contracts for 118 restaurants, and written
offers for the remaining 38 Applebee's locations.
Liquidity and Capital Resources
The principal uses of funds during the first six months of 1998 were capital
expenditures of $74.1 million, treasury stock purchases of $30.4 million
pursuant to a 2 million share repurchase program announced in January 1998 and
the $9.5 million investment in Belgo. Capital expenditures, which include
purchases of land for new restaurants, new restaurant construction, and
purchases of new and replacement furniture and equipment, are expected to
approximate $55 million to $60 million for the remainder of fiscal 1998 and $195
million to $210 million for fiscal 1999.
Capital requirements are expected to be funded with cash proceeds from the
divestiture of the Applebee's division, cash generated from operations and
remaining commitments of $14.9 million under a $30.0 million master equipment
lease. Additionally, at June 28, 1998 the Company had unsecured revolving bank
credit agreements aggregating $273.5 million of which $13.5 million was unused
and available. The $273.5 million aggregate amount includes $110.0 million in
revolving credit facilities executed in the second quarter to provide borrowing
capacity until additional proceeds from the Applebee's divestiture are received.
The Company anticipates reducing its revolving credit facilities as additional
sales proceeds are received and expects to complete a new $150.0 million
revolving credit facility by year end which will be used to fund future capital
requirements.
In the second quarter, Applebee's sales proceeds of $68.5 million were used to
reduce the obligation under a fully utilized $200.0 million credit facility.
Under the terms of the $200.0 million agreement, credit availability declines
commensurate with reductions in the outstanding obligation. The Company
anticipates that the remaining proceeds from the Applebee's divestiture will
continue to be used to reduce obligations related to revolving credit facilities
(under which $260.0 million was outstanding at June 28, 1998). Any remaining
proceeds from the divestiture will be used to fund new restaurant development.
Page 13
<PAGE>
On June 18, 1998, the Company announced the approval by its Board of Directors
of an additional repurchase program for the lesser of $125.0 million or 8.3
million shares. The Company also announced that it would consider the use of
forward equity purchases or similar agreements to facilitate its repurchase
program. To allow for the implementation of the additional program, the Company
obtained consent from the holders of its 9.75% Senior Notes due 2006 to amend
certain covenants and events of default provisions contained in the indenture
dated May 1, 1996, relating to the notes. Bond holder consent was finalized on
July 1, 1998 and the Company paid $4.2 million to the consenting holders. The
$4.2 million amount will be included in deferred loan costs in the consolidated
balance sheet and amortized over the remaining term of the indenture.
At quarter end, the Company had not purchased any shares pursuant to the 8.3
million share approval. To facilitate the repurchase program, however, the
Company initiated an equity forward purchase arrangement with a third party.
Pursuant to this arrangement, the third party purchased 250,000 shares of Apple
South common stock prior to June 28, 1998 at an average price of $13.60 (or a
total acquisition cost of $3.4 million). Under the terms of the arrangement, the
Company has the option to (i) acquire the shares at the third party's average
acquisition cost or (ii) instruct the third party to sell the stock and settle
in cash any appreciation or depreciation in the market value of the stock. The
acquisition price paid by the third party of $3.4 million has been reflected as
"Equity forward contract pending settlement" in the consolidated balance sheet.
Subsequent to June 28, 1998, the Company initiated two additional equity forward
purchase arrangements and through August 11, 1998, third parties had purchased a
total of 4.1 million shares pursuant to these arrangements.
Forward-Looking Information
Certain information contained in this Form 10-Q, particularly information
regarding the timing and sales price of the disposition of Applebee's
restaurants, future economic performance and finances, restaurant development
plans, capital requirements and objectives of management, is forward looking. In
some cases, information regarding certain important factors that could cause
actual results to differ materially from any such forward-looking statement
appear together with such statement. In addition, the following factors, in
addition to other possible factors not listed, could affect the Company's actual
results and cause such results to differ materially from those expressed in
forward-looking statements. These factors include competition within the casual
dining restaurant industry, which remains intense; changes in economic
conditions such as inflation or a recession; consumer perceptions of food
safety; weather conditions; changes in consumer tastes; labor and benefit costs;
legal claims; the continued ability of the Company to obtain suitable locations
and financing for new restaurant development; government monetary and fiscal
policies; laws and regulations; governmental initiatives such as minimum wage
rates and taxes; retention of Applebee's division employees while sales are
pending; the availability of qualified buyers for the Applebee's restaurants and
their ability to obtain required financing; and the satisfaction of closing
conditions for prospective transactions subject to outstanding contracts or
letters of intent. Other factors that may cause actual results to differ from
the forward-looking statements contained in this release and that may affect the
Company's prospects in general are described in Exhibit 99.1 to the Company's
Form 10-Q for the fiscal quarter ended June 29, 1997, and the Company's other
filings with the Securities and Exchange Commission.
Page 14
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New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income". SFAS 130, which is effective for the Company's fiscal 1998, establishes
standards for reporting and display of comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. Total comprehensive income for the six months ended June 28,
1998 of $43.5 million included net earnings as reported in the accompanying
consolidated statement of earnings plus the $0.1 million after-tax effect of
foreign currency translation adjustments. Comprehensive income for the six
months ended June 29, 1997 was equal to net earnings as reported.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Page 15
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Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on April 28, 1998, at which the
following proposals were voted upon by shareholders: (1) the election of seven
members of the Board of Directors, (2) a proposal to approve the Company's 1995
Stock Incentive Plan, as amended, (3) to consider and act upon a proposal to
approve the Company's Outside Director Deferred Stock Unit Plan, and (4)
ratification of the selection of KPMG Peat Marwick LLP as the Company's
independent auditors.
Each of the seven members of the Company's Board of Directors was elected to
serve a term of one year and until his or her successor is elected, and has
qualified by the following votes:
Affirmative Negative
------------------------------
Tom E. DuPree, Jr. 34,293,011 62,395
S. Kirk Kinsell 34,289,708 65,698
Erich J. Booth 34,297,593 57,813
Thomas R. Williams, Sr. 34,300,214 55,192
James W. Rowe 34,293,797 61,609
Ruth G. Shaw, Ph.D. 34,290,433 64,973
John L. Moorhead 34,290,094 65,312
The remaining proposals voted on at the April 28, 1998 Annual Meeting of
Shareholders were approved as follows:
Affirmative Negative Abstaining
--------------------------------------
1995 Stock Incentive Plan 21,920,666 12,375,967 58,773
Outside Director Deferred Stock Unit Plan 32,735,643 1,553,339 66,424
Appointment of KPMG Peat Marwick LLP 34,298,615 31,185 25,606
Item 5. Other Information
For the 1999 annual meeting of shareholders, the Company must be notified
not later than February 3, 1999 of any shareholder proposal that was not
submitted earlier for inclusion in the proxy materials, but is intended to be
presented for action at the meeting, or else proxies solicited by the Company
for that meeting may be voted on such proposal at the discretion of the person
or persons holding those proxies.
Page 16
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Item 6. Exhibits and Reports on Form 8-K
(a) 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.
4.1 Solicitation of Consents to Proposed Amendments to 9 3/4% Senior Notes
due 2006 of Apple South, Inc.
11.1 Computation of earnings per common share
27.1 Financial Data Schedule (EDGAR version only)
99.1 Safe Harbor Under the Private Securities Litigation Reform Act of
1995*
*Incorporated by reference to the corresponding exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, as amended by
a Form 10-Q/A filed on August 27, 1997
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated March 29, 1998, which
disclosed, pursuant to Item 2 of Form 8-K, the Company's completion of the sale
of 33 of its franchised Applebee's Neighborhood Grill & Bar restaurants.
Page 17
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Apple South, Inc.
(Registrant)
Date: August 11, 1998 By: /s/ Erich J. Booth
-------------------------
Erich J. Booth
Chief Financial Officer
and Treasurer
/s/ Philip L. Ammons
-------------------------
Philip L. Ammons
Chief Accounting Officer
Page 18
<PAGE>
EXHIBIT INDEX
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.
4.1 Solicitation of Consents to Proposed Amendments to 9 3/4% Senior Notes
due 2006 of Apple South, Inc.
11.1 Computation of earnings per common share
27.1 Financial Data Schedule (EDGAR version only)
99.1 Safe Harbor Under the Private Securities Litigation Reform Act of
1995*
*Incorporated by reference to the corresponding exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 29, 1997, as amended by
a Form 10-Q/A filed on August 27, 1997
Page 19
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of April 23, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and WHIT-MART, INC. a North
Carolina 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 of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, two laptops computers utilized in the Business, 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;
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(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)computer software and software licenses (subject to Seller's ability to
transfer and assign such software and licenses) and related manuals, in each
case used exclusively in connection with the operation of the Restaurants.
(vii) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(viii) 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);
(ix) the Contracts and Leases;
(x) the Owned Real Property (including any claims with respect to the
Summerville Condemnation if not settled prior to Closing); and
(xi) 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 by Purchaser 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
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accrued 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.
"Consents" shall mean (i) 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 and (ii) a waiver or expiration of
the right of first refusal for Store #207 in North Charleston, SC.
"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 to Purchaser or its designee, 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 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,
all as set forth on Schedule 4.7 and substantiated to the reasonable
satisfaction of Purchaser; and (ii) Seller's internal costs and internal
pre-opening expenses capitalized in connection with such development efforts in
accordance with Seller's historic practices. The costs and expenses described in
(ii) above plus external pre-opening expenses shall not exceed a total of
$120,000 for each of the two restaurants under development, and any such costs
in excess of such amount shall not be considered Development Costs.
"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.
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"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. "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, including the ground lease for the Applebee's restaurant being
developed pursuant to Section 4.7 in Murrell's Inlet, South Carolina.
"Lease Assignments" shall mean such instruments as shall be necessary to
transfer and assign all right, title, and interest of Seller in, to, and under
the Leases, each of which shall be substantially in the form of Exhibit B.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $6,000 per year and that are not cancelable
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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 (Hartsville, South
Carolina) 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 the
building to be developed pursuant to Section 4.7 in Murrell's Inlet, South
Carolina on property leased by Seller under a ground lease.
"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 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.
"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 ten Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A and
two additional Applebee's restaurants 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.
"Subsequent Contracts" shall have the meaning set forth in Section 4.10.
"Summerville Condemnation" shall mean the condemnation proceeding
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pertaining to a portion of the Owned Real Property on which the Summerville,
South Carolina, Restaurant is located as described in Schedule 3.7(d).
"Termination Date" shall mean July 15, 1998.
"Territory" shall mean a portion of the Florence, South Carolina ADI and
all of the Charleston, South Carolina ADI, in each case consisting of the
counties set forth 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.
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 $18,500,000 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 cover
periods 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; (v) the amount of
Seller's Development Costs, and (vi) if the Summerville Condemnation has not
been settled prior to Closing, reasonable attorneys' fees and other
out-of-pocket expenses incurred by Seller in connection with such matter.
(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) 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 Seller pursuant to Section 6.3(c), (iv) any proceeds
received by Seller prior to Closing with respect to the Summerville
Condemnation, net of Seller's reasonable attorneys' fees and other out-of-pocket
expenses incurred solely in connection with such matter; and (v) any adjustment
required by Section 7.1(b)D.
(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.
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The foregoing adjustments shall be calculated by the parties and set forth
on a 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.
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 C hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Lease Assignments, duly executed by Seller;
(vi) The Consents;
(vii) The Deeds, duly executed by Seller;
(viii) A Cross-Receipt, duly executed by Seller; and
(ix) 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;
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(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The Lease Assignments, duly executed by Purchaser;
(vi) The opinion of Ward & Smith, P.A., counsel to Purchaser, in
substantially the form of Exhibit D hereto;
(vii) A Cross-Receipt, duly executed by Purchaser; and
(viii) 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 June 8,
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, 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. The
costs and expenses attributable to the foregoing shall be shared equally by
Borrower and Seller. 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.
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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
court or of any regulatory body, administrative agency, or other governmental
instrumentality 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 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 $5,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
(e) Substantially all food inventories at the Effective Time will be
useable by Purchaser in the ordinary course of business.
(f) Schedule 3.5(f) sets forth a complete and accurate list of the Assets
constituting tangible personal property including the original basis therefor
and accumulated depreciation.
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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 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.
(e) Schedule 3.6(e) sets forth a list of agreements that relate to the
Business but that are not being assigned hereunder because they also cover other
restaurants of Seller not being sold hereunder.
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 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) Except as shown on Schedule 3.7(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 all Governments 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
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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 Sellers, 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 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 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
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 or Schedule 3.7(d),
there is no material Action or investigation pending or, to the knowledge of
Seller, threatened against or affecting Seller 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 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.
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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. Schedule 3.13 sets forth a list of ADI
Personnel as of the date shown on such schedule, along with their current
compensation rate and start date.
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 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 contributes 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.
(d) Seller has performed all obligations required of it, and is not in
default, under any Seller Plan.
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
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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
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") At the Effective Time, Seller shall terminate
the employment of all ADI Personnel. Seller shall pay all accrued and vested
vacation time for ADI Personnel along with their final paychecks. 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:
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(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 that Seller has adopted;
(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; or
(vii) settle the Summerville Condemnation.
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 complete the development of the two new Applebee's restaurants in Murrell's
Inlet and Hartsville, South Carolina listed on Schedule 4.7 substantially in
accordance with the timetable and budget set forth on such Schedule. The
Murrell's Inlet restaurant will be built on land held by Seller pursuant to a
ground lease. The Hartsville restaurant will be built on property held by Seller
in fee simple.
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, 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
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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; provided, however,
that Seller will assist Purchaser, to the extent reasonably requested by
Purchaser, in obtaining consents or transfers and assignments of the Minor
Contracts. 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 thirty (30) days advance written notice
of the Services requested. The Services shall be provided promptly as requested
and shall be provided in the same manner and with the same or similar personnel
as Seller previously utilized.
(b) 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.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
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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 North 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 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.
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,
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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 intends to offer employment to all ADI Personnel employed and
in good standing at the Effective Time 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 rights. For a period of eighteen
months following the Closing, unless otherwise permitted by Seller in writing,
Purchaser shall not solicit for employment any person who is an employee of
Seller or any subsidiary of Seller (other than ADI Personnel).
(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, to the
extent such plans are in effect (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. Seller and Purchaser acknowledge that the only employee
benefit plans to be offered by Purchaser to its employees, either at the
Effective Time or within twelve (12) months thereafter, are those listed on
Exhibit G.
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 reputable lender for
financing the transactions contemplated hereby on substantially the terms set
forth on Exhibit F (the "Financing Commitment") and to close such financing,
(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.
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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
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 (or with respect to any
matter arising after the date of the Title Commitment for the affected Real
Property, until the Closing has occurred) to 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
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 (or prior to the Closing in the case of a Material Objection
relating to any matter arising after the date of the relevant 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
Lessee's Title Policies may or may not 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) (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 and the other tangible Assets, 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
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and the other tangible Assets; 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 or other Assets are
altered or disturbed in any manner in connection with any Purchaser's
Activities, Purchaser shall immediately return the Real Property or other Assets
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 45 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
earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities; or (ii) Closing.
(D) On or before the Due Diligence Date, Purchaser shall deliver to Seller
a list setting forth all repairs or replacements of Assets that under reasonable
operating standards of a prudent operator would be required to be made within 60
days of the date of such list and the estimated cost of repair or replacement;
provided, however, that the cost of any remedial action must exceed $10,000 per
item in order for the item to be included on the list. The cost of repair or
replacement for the items set forth on the list shall constitute a Purchase
Price adjustment under Section 2.3 except to the extent any such item is
replaced or repaired by Seller to Purchaser's reasonable satisfaction prior to
Closing.
(E) 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
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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 Schedule
7.2(i) upon terms and conditions reasonably acceptable to Purchaser or other
financing reasonably acceptable to Purchaser.
(i) Seller shall have completed and opened the two Applebee's restaurants
under development pursuant to Section 4.7.
(j) Purchaser shall have been issued the Title Policies.
(k) 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.
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(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
$200,000 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 $5.0 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
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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 sixty 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 Sections 4.1, 4.3, 4.4, and 4.11 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.
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
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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 Wilmington, N.C. (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 30 days from the date hereof,
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(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,
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 the costs of obtaining title insurance with respect
to the Real Property. Purchaser shall also 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) Seller shall pay all transfer, intangible, recording, and documentary
taxes, stamps, and fees with respect to the transfer of the Owned Real Property
and the Leases.
(e) 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.
(f) 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.
(g) Seller shall pay the costs of obtaining any Consents.
(h) 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.
(i) Twelve months following the Closing, the parties shall reconcile the
accrued but unvested vacation time of Seller's employees assumed by Purchaser
hereunder that actually vested with the estimated amount thereof deducted from
the Purchase Price pursuant to Section 2.3. If such amount was overestimated
Purchaser shall pay the difference to Seller and if underestimated Seller shall
pay the difference to Purchaser.
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
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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:
Whit-Mart, Inc. Ward and Smith, P.A.
609 Pecan Lane 127 Racine Drive
Whiteville, North Carolina 28473 Wilmington, North Carolina 28403
Attention: Gary P. Whitman Attention: F.D. Nelms, Jr.
Fax: 910-642-3337 Fax: 910-392-2333
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
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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), AND, IN THE DEEDS AND IN THE
LEASE ASSIGNMENTS, 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:
WHIT-MART, INC.
By:
Name:
Title:
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Lease Assignment
C Opinion of Seller's Counsel
D Opinion of Purchaser's Counsel
E Allocation of Purchase Price
F Terms of Financing Commitment
G Purchaser Benefit Plans
Exhibits to this agreement are not filed pursuant to Item 601(b)(2) of SEC
Regulation S-K. By the filling of this Form 10-Q, the Registrant hereby agrees
to furnish supplementally a copy of any omitted schedule to the Commission upon
request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of May 1, 1998, by and among APPLE
SOUTH, INC., a Georgia corporation ("Seller") and T.S.S.O., INC., a Georgia
corporation ("TSSO") and LOIS SEDOWICZ ("Sedowicz") (TSSO and Sedowicz
collectively constituting the "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 Restaurant; and
WHEREAS, Seller desires to sell to Purchaser an Applebee's restaurant 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 Restaurant 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 the 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;
(ix) the 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 Restaurant 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, and (vii) accrued 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, liabilities or obligations of Seller under any of the Contracts or Leases
or with respect to the 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 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 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 Restaurant
and developing and opening new Applebee's Neighborhood Grill & Bar Restaurant 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.
"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 without
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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
Real Property, with the warranty of title contained therein limited to the
claims of Persons claiming by, through or under Seller, but not otherwise.
"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.
"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
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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.
"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 1.1C.
"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.
"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 Restaurant,
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 an Applebee's Neighborhood Grill & Bar Restaurant 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.
"Real Property" shall mean that tract and parcel of land owned by Seller on
which the Restaurant is located (all of which tract and parcel are described in
Schedule 1.1B), and all buildings, fixtures, signs, parking facilities, and
other improvements located thereon.
"Restaurant" shall mean the Applebee's Neighborhood Grill & Bar Restaurant
operated by Seller at the location 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
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gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean June 12, 1998.
"Territory" shall mean a portion of the Peoria/Bloomington, Illinois ADI,
as described on Schedule 1.1D
"Title Commitments" shall have the meaning set forth in Section 7.1(a).
"Title Policies" shall mean the 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.
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 $1,750,000 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
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; and (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.
(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 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 as of the Closing
Date by 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.
The foregoing adjustments shall be calculated by the parties and set forth
on Schedule 2.3 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:
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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;
(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, with the assignee to be designated
as Sedowicz;
(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 David Allen Kennedy, Esq., 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.
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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 Restaurant open for business on the Closing Date, and
operation of the Restaurant 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 June 12,
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 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 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
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any order, rule, or regulation applicable to Seller of any court or of any
regulatory body, administrative agency, or other governmental instrumentality
having jurisdiction over Seller; 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 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 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 the 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 Restaurant other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property having a fair market
value of $5,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
(e) The Assets consisting of uniforms, supplies, and advertisement and
promotional materials are in material compliance with all Franchise Agreements.
3.6 Contracts and Leases.
(a) Each Material Contract 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. A true
and correct list of each Material Contract 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 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, except to the extent that any payment due is set forth
on Schedule 2.3 and deducted in calculating the Purchase Price pursuant to
Section 2.3.
(b) No Contract has been assigned by Seller or any interest granted therein
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by Seller to any third party, or is subject to any mortgage, pledge,
hypothecation, security interest, lien, or other encumbrance or claim.
(c) 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 the Restaurant, its
location, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to the Real Property are adequate for
the operation of the Restaurant as presently operated, and to Seller's
knowledge, there is no condition which will result in the termination of the
present access from the Real Property to such utility services and other
facilities.
(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 the Restaurant, all of which are assignable and shall be assigned to
Purchaser at the Closing.
(d) Seller has received no notice that any governmental body having the
power of eminent domain over the Real Property has commenced or intends to
exercise the power of eminent domain or a similar power with respect to 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 all governmental bodies having jurisdiction over the Real
Property, and Seller has received no notice from any governmental body alleging
that the Real Property or any improvements erected or situated thereon, or the
uses conducted thereon or therein, violate any regulations of any governmental
body 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 the 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 county, township, or other governmental body has been served
upon the Real Property or received by Sellers, requiring or calling attention to
the need for any work, repair, construction, alteration, or installation on or
in connection with the Real Property which has not been complied with.
(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.
3.8 Financial Statements. Schedule 3.8 contains for the 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
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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 Restaurant 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
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, suit, investigation, or proceeding pending or, to the knowledge of
Seller, threatened against or affecting Seller that pertains to the Restaurant,
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 material Permits as are necessary to operate
the Restaurant. 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 is a party to any written
employment agreements related to the employees at the Restaurant, (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.
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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 contributes 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 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 Material Contracts, where the
failure to do so would have a material adverse affect on the operations of the
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
Restaurant.
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 Restaurant ("ADI Personnel") At the Effective Time, Seller shall terminate
all ADI Personnel. For a period of twelve months following the Closing, Seller
shall not hire any person who was an employee of Purchaser within the previous
three months. 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
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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 Restaurant as it is 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 Restaurant.
(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 the Restaurant in
such quantities and quality as necessary to operate the Restaurant in accordance
with Seller's historical practice;
(iii) continue to operate the Restaurant in accordance with all material
applicable local, state, and federal laws and regulations; and
(c) Further, with respect to the Restaurant, 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 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,
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 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 Restaurant 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.
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4.7 Intentionally Omitted.
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 Restaurant.
(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 the
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 the
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 Restaurant 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.
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. For a period of two weeks after the Closing,
Seller agrees to provide to Purchaser the services of personnel of Seller via
telephone to answer questions of Purchaser regarding the Business, provided that
all such personnel shall not devote more than an aggregrate of 20 hours per week
to such telephone calls and services directly related to such telephone calls.
4.12 Delivery of Real Estate Documents. Within five business days of the
date hereof Seller shall provide to Purchaser legal descriptions of the Real
Property and copies of all surveys, title policies, and environmental reports
pertaining to the 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. TSSO is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Georgia and in each other jurisdiction in which it is lawfully required
to qualify to conduct business. TSSO and Sedowicz have 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 corporate
action on the part of TSSO necessary for the authorization, execution, and
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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 TSSO do not and the consummation by
TSSO of the transactions contemplated hereby and thereby will not violate any
provision of its articles of incorporation or bylaws.
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.
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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
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 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 its
reasonably best efforts to obtain a signed commitment letter for financing in
substantially the form attached hereto as Exhibit D, (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 30
days following receipt of the documents referred to in Section 4.12 (the "Title
Inspection Period") to obtain and review current surveys and title insurance
commitments with respect to the Real Property ("Title Commitments") pursuant to
which the Title Company will agree to issue at Closing owner's policies of title
insurance ("Title Policies") on American Land Title Association standard Form
B-1990, without exceptions except as shown in the 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 Real Property
pursuant to Section 2.7. The 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 Real
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property, subject only to the Permitted Encumbrances or arising out of acts of
the insured. Purchaser shall have until the end of the Title Inspection Period
in which to 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 Restaurant ("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.
(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; (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.
(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 Restaurant.
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
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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 Contracts) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to the Restaurant and a development agreement with respect to 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 Restaurant 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 Restaurant, 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) Any applicable waiting period under the HSR Act shall have expired or a
notification of early termination of such waiting period shall have been
received by Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit D 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
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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) Any applicable waiting period under the HSR Act shall have expired or a
notification of early termination of such 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 $17,500
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
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Section 8.1(a)(ii) to the extent the items covered thereby relate back to
Section 8.1(a)(i)(C)) exceed $500,000.
(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 3.8(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,
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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;
(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 Atlanta, Georgia 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.
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(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 20 days from the date hereof,
(ii) been approved hereof as a franchisee with respect to the Territory by
Franchisor within 30 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 30 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 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 Real Property.
Purchaser shall also pay the cost of all surveys, and all environmental
investigations, studies, and reports, and all other costs of any investigation
of the Assets, the Restaurant, 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
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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:
Lois Sedowicz David Allen Kennedy, Esq.
T.S.S.O., Inc. 1864-B Independence Square
5555 Oakbrook Parkway Dunwoody, Georgia 30338
Suite 355 Fax: 770-396-5101
Norcross, Georgia 30093
Attention: Lois Sedowicz
Fax: 770-242-3072
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
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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.
10.13 Purchaser. Unless otherwise specified herein, every obligation, duty,
liability, representation, warranty, and covenant of Purchaser in this Agreement
shall be the joint and several obligation of TSSO and Sedowicz. Unless otherwise
specified herein, every benefit, obligation, duty, representation, warranty, and
covenant to and in favor of Purchaser in this Agreement shall be to both TSSO
and Sedowicz unless they otherwise agree between themselves and give notice of
such agreement to Seller.
[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:
T.S.S.O., INC.
By:
Name:
Title:
LOIS SEDOWICZ
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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 Loan Terms
Exhibits to this agreement are not filed pursuant to Item 601(b)(2) of SEC
Regulation S-K. By the filling of this Form 10-Q, the Registrant hereby agrees
to furnish supplementally a copy of any omitted schedule to the Commission upon
request.
25
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of May 4, 1998, by and among APPLE
SOUTH, INC., a Georgia corporation ("Seller"), FLORIDA APPLE NORTH, L.L.C., a
Florida limited liability company, FLORIDA APPLE SOUTH, L.L.C., a Florida
limited liability company, FLORIDA APPLE WEST, L.L.C., a Florida limited
liability company, and WIGEL PARTNERSHIP, a general partnership organized under
the laws of the State of New York (collectively, the "Purchasers" and
individually a "Purchaser"),
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar franchise restaurants ("Applebee's");and
WHEREAS, Seller desires to sell to Purchasers certain Applebee's and
related property, and Purchasers desire 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 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 will be employed by Purchasers as of the Closing (subject to
execution of a release by each affected employee allowing for the disclosure of
such files).
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(viii) the Contracts and Leases;
(ix) the Owned Real Property; and
(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, 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 Purchasers, (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 vacation of ADI
Personnel assumed pursuant to Section 6.3(c), and (viii) all Development Costs
with respect to Seller's development activities under Section 4.7. 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
liabilities assumed hereunder with respect to 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 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 Purchasers at
the Closing and pursuant to which Purchasers will assume the Assumed
Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's 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 Purchasers 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 and, except as otherwise expressly
provided herein, contracts relating to employee benefits 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 all of Seller's out-of-pocket costs paid in
connection with the development of the restaurant listed on Schedule 4.7 and
capitalized in accordance with generally accepted accounting principles
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; and construction period insurance. Seller's
internal costs and Seller's pre-opening expenses shall not constitute
Development Costs.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith.
"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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"Excluded Restaurants" shall mean those Restaurants designated as such in
accordance with Section 4.9(e), Section 7.1(a), or Section 7.1(b).
"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 or as of the Closing Date 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 district operators in the Territory (after a diligent review with the
general manager of each Restaurant of each matter herein subject to a knowledge
qualifier and after obtaining a completed and signed questionnaire from each
general manager relating to such matters in a form approved by Purchasers) 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.
"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 sixty days notice or less.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Note" shall mean a promissory note of Purchasers in the form of Exhibit E
attached hereto payable to Seller in the principal amount of $537,760 and
bearing interest at the rate of 2.5% per quarter simple interest. The Note shall
be payable in eight equal quarterly installments of $75,000 each, with each such
installment to be applied first to accrued interest and the remainder to
principal.
"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) or which is acquired by Seller prior to Closing for development
pursuant to Section 4.7, together with all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and all tenements,
hereditaments, easements, rights, ways, powers, privileges, immunities, and
opportunities belonging or in any way pertaining thereto.
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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 date of the Title Commitments and before the Closing, in each
case of items (i) through (iii) above solely to the extent that such
encumbrances would not unreasonably interfere with the marketability of such
Real Property for either restaurant or any commercial use (except as limited by
restrictions of record when Seller acquired the Real Property) or that are
waived, or deemed to be waived, by Purchasers pursuant to Section 7.1(a).
Permitted Encumbrances shall include in the case of both Real Property and
personal property all pending liens for taxes not yet due and payable. In the
case of Assets pertaining to Applebee's 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 34 Applebee's operated by Seller at the
locations set forth on Schedule 1.1A and any additional Applebee's 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 July 31, 1998.
"Territory" shall mean those ADI's consisting of (i) Ft. Myers-Naples,
Florida ADI (Glades, Charlotte, Lee, Hendry, and Collier Counties), (ii) West
Palm Beach - Ft. Pierce-Vero Beach, Florida ADI (Indian River, Okeechohee, St.
Lucie, Martin, and Palm Beach Counties), (iii) that portion of Tampa-St.
Petersburg ADI consisting of Sarasota County, Florida, and (iv) Jacksonville,
Florida ADI (Hamilton, Suwanee, Columbia, Baker, Union, Bradford, Putnam, Clay,
Duval, St. Johns, and Nassau Counties, Florida and Camden, Glynn, Brantley,
Charlton, Ware, and Clinch Counties, Georgia).
"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).
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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 Purchasers the Assets (divided among the Purchasers as they may direct Seller
in writing) free and clear of any mortgage, security interest, lien, charge,
claim, or other encumbrance of any nature except the Permitted Encumbrances, and
Purchasers 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, Purchasers shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchasers do 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 $65,006,760 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) with respect and relating to periods
after the Closing; and (iv) the amount of Seller's Development Costs for 5055 J.
Turner Butler Blvd., Jacksonville, Florida.
(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) the cost of unused vacation accrued as of the
Closing Date by ADI Personnel hired by Purchasers the cost of which is being
assumed by Purchasers pursuant to Section 6.3(c), and (iv) the amount of any
Purchase Price adjustment for any Excluded Restaurant and attendant Assets
pursuant to Section 2.8.
(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.
Schedule 2.3 sets forth the items expected to require an adjustment
pursuant to subparagraphs (a) and (b) above, whether each such adjustment is
expected to result in an increase or decrease in the Purchase Price, and the
estimated amount of each such adjustment. At the Closing the foregoing
adjustments shall be calculated by the parties and set forth on a schedule which
shall be signed by both parties. To the extent that Property Taxes or other
items are not known at the time of Closing, the parties shall estimate the
amounts in good faith and adjust the same at such time as such amounts are
finally known. The Purchase Price shall be paid by Purchasers on the Closing
Date by delivery of the Note duly executed by Purchasers and by wire transfer to
an account designated by Seller of immediately available funds in an amount
equal to the remainder of the Purchase Price.
2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchasers the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchasers may reasonably request that (A) subject
to the matters disclosed in the Disclosure Memorandum, all representations and
warranties of Seller in this Agreement are true in all material respects as of
the Closing Date, and (B) Seller has performed and complied in all material
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respects with all of its obligations under this Agreement which are to be
performed or complied with by the Seller prior to or on 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 Purchasers 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 (except with respect to any Excluded Restaurant);
(vi) The Deeds (except with respect to any Excluded Restaurant), duly
executed by Seller;
(vii) A Cross-Receipt, duly executed by Seller; and
(viii) Any other documents that Purchasers may reasonably request prior to
the Closing to effectuate the transactions contemplated hereby.
(b) At the Closing Purchasers shall deliver to Seller the following:
(i) A certificate executed by Purchasers, 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 a manager (or in the case of WIGEL Partnership, a
partner) of each 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 members of Purchasers authorizing the
execution, delivery and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Note 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 manager (or in the case of WIGEL Partnership, each
partner) of a 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 manager (or in the case
of WIGEL Partnership, another partner) of each 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
Purchasers;
(v) The opinion of Chopin, Miller & Yudenfreund, counsel to Purchasers, in
substantially the form of Exhibit C hereto;
(vi) A Cross-Receipt, duly executed by Purchasers;
(vii) The Note, duly executed by Purchasers; and
(viii) Any other documents that Seller may reasonably request prior to the
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Closing to effectuate the transactions contemplated hereby.
2.5 Transfer of Operations. Purchasers 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 Purchasers. 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
Purchasers 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 26,
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 Excluded Restaurants. If any Restaurants are designated as Excluded
Restaurants in accordance with Sections 4.9(e), 7.1(a) or 7.1(b), then the Lease
or the Owned Real Property and all other Assets relating exclusively to such
Excluded Restaurants shall not be transferred to Purchasers hereunder, Assumed
Liabilities pertaining to such Excluded Restaurants shall not be assumed by
Purchasers hereunder, and the Purchase Price shall be reduced by the amounts
allocated to such Excluded Restaurants and attendant Assets on Schedule 2.7.
2.9 Further Assurances. From time to time after the Closing at Purchasers'
request and expense, Seller shall execute, acknowledge, and deliver to
Purchasers 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 Purchasers may reasonably require to vest more effectively
in Purchasers, or to put Purchasers more fully in possession of, any of the
Assets, or to better enable Purchasers 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 and attached to and incorporated herein,
Seller hereby represents and warrants to Purchasers 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
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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
court or of any regulatory body, administrative agency, or other governmental
instrumentality 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 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 as of the date hereof constitute
all tangible personal property required on site to operate the Restaurant
generally and in accordance with the Franchise Agreements specifically.
(c) There are no assets or property of any nature which is not being
transferred to Purchasers 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 cost or a
fair market value of $2,000 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
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of the Material Contracts and Leases (and any amendments thereto) have been
provided to Purchasers. 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
Schedule 2.3 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's 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 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 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
Purchasers at the Closing.
(d) Except as shown on Schedule 3.7(d)/(f), Seller has received no notice
that any governmental body 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 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) Except as shown on Schedule 3.7(d)/(f), no work for municipal
improvements has been commenced on or in connection with any parcel of Real
Property or any street adjacent thereto and to the knowledge of Seller, 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 the Seller, or 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
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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 Purchasers, 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. The foregoing representations
exclude the matters disclosed in the environmental reports referenced in
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 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
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 which relate
to any period prior to the Closing Date, 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 or
assessed against Seller that in any such case affect the Assets.
3.10 Litigation. (a) Except as set forth on Schedule 3.10, there is no
material action, suit, investigation, or proceeding 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.
(b) Seller is not a party to, or subject to any Order entered in any Action
brought by any Government or Person seeking to prevent the execution of this
Agreement or the consummation of the transactions contemplated hereby.
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 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 except as shown on Schedule 3.12.
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.
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3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. 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 Government 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 laws 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 employees engaged 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, nor has it 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 Purchasers 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 Purchasers 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.
4.2 Transfer of Licenses and Permits. Seller shall use its reasonable best
efforts to assist Purchasers with the assumption, transfer, or reissuance of any
and all Permits.
4.3 Liabilities of Seller. All liabilities of Seller related to the Assets
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that do not constitute 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
Purchasers, Seller shall not transfer or reassign to operations outside the
Business (i) any employee exclusively involved in the operation or supervision
of the Restaurants or (ii) any of Seller's district operators for the Territory
(collectively, "ADI Personnel"). For a period of twelve months following the
Closing, Seller shall not employ any ADI Personnel (or former employee of Seller
who would have been an ADI Personnel but for a transfer by Seller or termination
of employment with Seller on or before April 1, 1998) or for a period of
eighteen months following the Closing solicit any such person for employment.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchasers 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 Purchasers.
4.5 Conduct of Business. From the date hereof until Closing:
(a) 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 its reasonable best 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 Purchasers 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) continue to conduct the advertising activities and efforts as set forth
on Schedule 4.5;
(ii) maintain the Assets consistent with past practices and in accordance
with the maintenance capital expenditure budget set forth on Schedule 4.5;
(iii) continue to conduct on a timely basis all Restaurant remodeling and
refurbishments as set forth on Schedule 4.5, which Schedule shows the remodel
and refurbishment activities for Seller with respect to the Territory as
budgeted by Seller;
(iv) 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;
(v) 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 Purchasers:
(i) change 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;
(iii) mortgage, pledge, or subject to lien (except in connection with
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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 described in Section 3.5(d)
except replacement of such Asset 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 Purchasers hereunder.
4.6 Access to Information. Seller shall afford Purchasers, 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 Purchasers such additional financial and
operating data and other information as Seller may possess and as Purchasers may
reasonably request, subject to Purchasers' 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 Purchasers
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 its reasonable best efforts to
continue up to the Closing the development of the new Applebee's listed on
Schedule 4.7 in accordance with the timetable and budget set forth on such
Schedule.
4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchasers:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information respect to any event which has materially affected, adversely or
otherwise, 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 could materially 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 Purchasers may from time to time reasonably request.
4.9 Cooperation. (a) Insofar as such conditions are within its reasonable
control or influence, Seller will use its reasonable best 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.
(b) 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.
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(c) Seller will use its reasonable best 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 or as
provided in subparagraph (d) below) or agree to any concessions or amendment to
other leases or arrangements with such landlord in order to obtain such
consents. If required in order to obtain a landlord's required consent to
assignment of a Lease, Seller shall agree to remain liable on the Lease (but not
on any extension obtained pursuant to Section 4.13). Seller shall not be
required to guarantee any Lease.
(d) If necessary to obtain a landlord's required consent to the assignment
of a Lease, Seller and Purchasers shall spend up to a total of $100,000 (such
cost to be paid one-half by Seller and one-half by Purchasers) for payment to
the landlord, to fund legal action to obtain the consent, or for other similar
purposes; provided that such expenditures shall not be required for more than
three Leases.
(e) If Seller is unable to obtain required consents to the assignment of
three or fewer Leases, then such Leases shall not be assigned hereunder and the
Restaurants located on the premises subject to such Leases shall constitute
Excluded Restaurants.
4.10 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use its reasonable best 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 Purchasers and
providing that upon such assignment, Purchasers shall succeed to all of Seller's
rights, title, and interests thereunder subject to the Purchasers' 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 or, prospectively,
the Purchasers 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 Purchasers, Seller agrees to provide to Purchasers
restaurant accounting, POS system support, and other services related to the
Restaurants as mutually agreed upon between Seller and Purchasers (the
"Services"). Purchasers shall give Seller thirty 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) Purchasers will pay for the Services on a monthly basis, after receipt
of an invoice from Seller. The price for the Services shall be mutually agreed
upon by the parties.
(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 Purchasers, 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 Purchasers. Such bonus, if accepted by the
employee, shall be paid by Purchasers at the end of the three-month period, or
for such shorter period as Purchasers may determine.
4.12 Delivery of Real Estate Documents. Within two days of the date hereof
Seller shall provide to Purchasers 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 Leases. Seller shall use its reasonable best efforts to obtain
extensions or options to extend so that each Lease (excluding the Leases for the
Boynton Beach and the Sarasota Restaurants) designated by Purchasers will have a
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remaining term after Closing (including any term for which a Purchaser shall
have the right to extend) of at least fifteen years on terms acceptable to
Purchasers; however, Seller shall not be required to make any payment to obtain
any such extension or agree to remain liable during any such extension period.
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchasers hereby represent and warrant to Sellers as follows:
5.1 Organization, Corporate Power, Authorization. Each Purchaser other than
WIGEL Partnership is a limited liability company duly organized, validly
existing, and in good standing under the laws of the State of Florida and in
each other jurisdiction in which it is lawfully required to qualify to conduct
business. WIGEL Partnership is a general partnership duly organized under the
laws of the State of New York. Each Purchaser has the power and authority to
execute and deliver this Agreement, the Note, and the Bill of Sale and
Assignment Agreement, and to consummate the transactions contemplated hereby.
All company or partnership action on the part of each Purchaser necessary for
the authorization, execution, and delivery of this Agreement, the Note, and the
Bill of Sale and Assignment Agreement, and performance of all obligations of
each Purchaser thereunder has been duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement, the
Note, and the Bill of Sale and Assignment Agreement by each Purchaser does not
and the consummation by each Purchaser of the transactions contemplated hereby
and thereby will not violate any provision of its articles of organization or
operating agreement or other organizational documents.
5.3 Validity. This Agreement has been duly executed and delivered by each
Purchaser, and constitutes the legal, valid, and binding obligation of each
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 each of Note and the Bill
of Sale and the Assignment Agreement has been executed and delivered in
accordance with this Agreement, it will constitute the legal, valid, and binding
obligation of each 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. No Purchaser is a party to, or
subject to any Order entered in any Action brought by any Government or other
Person 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, Purchasers 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 Purchasers.
Purchasers agree that if the transactions contemplated herein are not
consummated, they will return to Seller all documents and other written
information furnished to it. Purchasers 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. Purchasers
shall not use such Confidential Information for financial gain or in any manner
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adverse to Seller. The foregoing obligations shall not apply to (i) any
information which was known by Purchasers 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 Purchasers; (iv) any information which is disclosed to Purchasers 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 or legal process issued by any Forum. For purposes of this Section,
"Confidential Information" shall mean any and all technical, business, and other
information which (a) is possessed or hereafter acquired by Seller and disclosed
to Purchasers 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) Purchasers shall offer employment to all ADI Personnel upon terms and
conditions substantially equivalent to those provided by Seller; however,
Purchasers shall not be required to provide stock options or any stock purchase
rights. For a period of twelve months following the Closing, Purchasers shall
not employ any person who was an employee of Seller or any subsidiary of Seller
on or after April 1, 1998 (other than ADI Personnel), and for a period of
eighteen months following the Closing, Purchasers shall not solicit for
employment any such person.
(b) Purchasers shall maintain employee records transferred to Purchasers
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchasers' normal
business hours. Purchasers shall maintain the confidentiality of such records
and limit access thereto in a manner consistent with Purchasers' treatment of
its employee records.
(c) Purchasers agree with respect to ADI Personnel hired by Purchasers: (i)
to give such employees credit under Purchasers' benefits plans, programs, and
arrangements, including credit for accrued 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 Purchasers 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
Purchasers' 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 their reasonable
control or influence, Purchasers shall use their reasonable best 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, Purchasers will (i) use their
reasonable best efforts to obtain a commitment letter for financing the
transactions contemplated hereby on substantially the terms set forth in Exhibit
D (the "Financing Commitment") and to obtain financing on such terms, (ii)
promptly provide Franchisor with all information required by Franchisor to
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determine whether Purchasers will be approved as franchisees 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) if necessary, 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) Purchasers 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 Lawyers Title Insurance
Corporation ("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 Purchasers that, upon consummation of the purchase and sale herein
contemplated, a 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 Purchasers that, upon consummation of the transactions herein
contemplated, Purchasers 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. Purchasers shall have until the end of the Title
Inspection Period in which to furnish Seller a written statement of reasonable
objections to exceptions which, in Purchasers' reasonable judgment, would
unreasonably interfere with the marketability of the Real Property for
restaurant or any commercial use (except as limited by restrictions of record
when Seller acquired the Real Property) ("Material Objections"). Seller shall
have until the Termination Date to satisfy such Material Objections in all
material respects, but Seller shall have no obligation to do so. Seller shall,
however, be obligated to remove any liens that can be satisfied by the payment
of money or to bond over any liens that can be bonded over. If Seller fails to
satisfy all Material Objections in all material respects on or prior to the
Termination Date, then Purchasers' sole right and remedy shall be to (i) waive
the objections and elect to close, (ii) if no more than two Restaurant sites are
subject to unresolved Material Objections, designate one or both of such
Restaurants as Excluded Restaurants (provided that no more than two Restaurants
collectively under this subsection (a) and under subsection (b) below may be
designated as Excluded Restaurants), or (iii) if more than two Restaurant sites
are subject to unresolved Material Objections, terminate this Agreement by
giving written notice of such termination to Seller. If Purchasers fail 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 Purchasers 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
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Leases are for Free Standing Premises. Purchasers 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, Purchasers and
Purchasers' agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchasers' 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 Purchasers may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchasers, including, without limitation, the
entry by Purchasers or Purchasers' Designees onto the Real Property, or the
other activities of Purchasers or Purchasers' Designees with respect to the Real
Property (hereinafter called "Purchasers' 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 Purchasers' Activities,
Purchasers shall immediately return the Real Property to the condition existing
prior to Purchasers' Activities; (iii) Purchasers 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) Purchasers 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
Purchasers' Activities. Notwithstanding any provision of this Agreement to the
contrary, Purchasers 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) Purchasers shall have until the Closing Date to perform such
investigations, examinations, tests and inspections as Purchasers shall deem
necessary or desirable to determine whether the Real Property is subject to any
defect that would unreasonably interfere with its use as a restaurant ("Property
Defect"). In the event Purchasers shall reasonably determine that the Real
Property is subject to a Property Defect, Purchasers shall give written notice
to Seller on or before the 45th day following the date hereof (the "Due
Diligence Date") except for Property Defects that arise after the Due Diligence
Date, notice of which may be given through the Closing Date. If notice of a
Property Defect is not timely given, it shall be deemed waived by Purchasers.
Upon the receipt of such notice timely given, Seller shall have until the
Termination Date to cure any Property Defect (but with no obligation to do so)
in all material respects, and if Seller fails to do so, then Purchasers' sole
right and remedy shall be to (i) waive such Property Defect and elect to close,
(ii) if no more than two Restaurant sites are subject to unresolved Property
Defects, designate one or both of the Restaurants located on the site as
Excluded Restaurants (provided that no more than two Restaurants collectively
under this subsection (b) and subsection (a) above may be designated as Excluded
Restaurants), or (iii) if more than two Restaurant sites are subject to
unresolved Property Defects terminate this Agreement by giving written notice to
Seller.
(C) Prior to any entry by Purchasers or any of Purchasers' Designees onto
the Real Property, Purchasers shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchasers' Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
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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 Purchasers' 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
Purchasers' Activities; or (ii) Closing.
(D) Purchasers acknowledge that Seller may deliver to Purchasers 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 Purchasers without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchasers
for Purchasers' informational purposes. Until Closing, Purchasers and
Purchasers' Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchasers' Conditions to Closing. The obligations of Purchasers
hereunder are subject to satisfaction of each of the following conditions at or
before Closing, the occurrence of which may, at the option of Purchasers, be
waived:
(a) Subject to the matters disclosed in the Disclosure Memorandum, all
representations and warranties of Seller in this Agreement shall be true in all
material respects on and as of the Closing.
(b) 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.
(c) Seller shall have obtained and delivered to Purchasers all consents
necessary to transfer and assign the Assets (except for Minor Contracts and
those consents relating to Excluded Restaurants) to Purchasers.
(d) Purchasers 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.
(e) Purchasers 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 Purchasers are unable to obtain from local municipal
or county authorities a permit necessary for such operation of the Restaurants,
and Purchasers reasonably believe that they 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 Purchasers a duly executed
liquor license management agreement or agreements.
(f) If applicable, 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 Purchasers.
(g) Purchasers shall have obtained the financing described on Exhibit D
upon terms and conditions reasonably acceptable to Purchasers or other financing
reasonably acceptable to Purchasers.
(h) Purchasers shall have been issued the Title Policies.
(i) 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 Purchasers in this Agreement
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shall be true on and as of the Closing, and Purchasers shall have delivered to
Seller a certificate to such effect dated as of the Closing Date.
(b) Purchasers shall have performed and complied in all material respects
with all of their obligations under this Agreement which are to be performed or
complied with by Purchasers prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements, or
release the Seller of all its obligations thereunder, effective as of the
Closing.
(d) Seller shall have obtained all the Consents (except those relating to
Excluded Restaurants).
(e) If applicable, 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) Purchasers 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 Purchasers, their successors
and assigns, against, and in respect of:
(i) Any and all damages, claims, losses, liabilities, costs, and expenses
incurred or suffered by Purchasers 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) except as otherwise provided in Section 9.1, any misrepresentation or
breach of warranty by Seller contained in this Agreement, the Disclosure
Memorandum, or any certificate, furnished to Purchasers 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 Purchasers 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)) unless and until the aggregate liability of Seller thereunder
exceeds $500,000, whereupon Seller shall have liability for such indemnification
from the first dollar as if such threshold did not exist; provided, however,
that liabilities arising with respect to Sections 3.1 through 3.4, 3.5(a),
3.5(b), 3.5(c), 3.7(g), and 3.8 through 3.10 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
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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 Purchasers from the matter giving rise to the
claim for indemnification hereunder and net of any insurance proceeds received
by Purchasers 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 sixty days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1, through
3.4, 3.5(a), 3.5(b), and 3.5(c) and Section 3.7(g) and any obligations arising
pursuant to the Deeds 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 two years 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) The covenants contained in Section 4.1 through 4.4 and 4.11 and
liability therefor shall survive the Closing. After the Closing, Purchasers may
not assert any claim against Seller for breach of any covenant contained in any
other Section of Article IV and all such claims shall be deemed to be waived as
a result of the Closing.
(f) Purchasers 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 Purchasers'
ability to assert any such claim except to the extent that Seller is actually
prejudiced thereby. Purchasers shall use their reasonable best efforts to
mitigate any damages, expenses, etc. resulting from any matter giving rise to
liability of Seller under this Article.
8.2 Seller Claims. (a) Purchasers shall jointly and severally 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 Purchasers 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) except as otherwise provided
in Section 9.1, any breach of any of the representations or warranties made in
this Agreement by Purchasers; (iii) any claim by any Person or any brokerage or
finder's fee or commission in respect of the transactions contemplated hereby as
a result of Purchasers' dealings, agreement, or arrangement with such Person.
(b) The amount of any liability of Purchasers under this Section 8.2 shall
be computed net of any tax benefit to Seller from the matter giving rise to the
claim for indemnification hereunder and net of any insurance proceeds received
by Seller with respect to the matter out of which such liability arose.
8.3 Defense of Third Party Claims. With respect to any claim by Seller or
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Purchasers under Section 8.1 or 8.2, respectively, relating to a third party
claim or demand, the indemnitee shall provide the indemnitor with prompt written
notice thereof in accordance with Section 10.4 and the indemnitor shall defend,
in good faith and at its expense, by legal counsel chosen by it and reasonably
acceptable to the indemnitee any such claim or demand, and the indemnitee, at
its expense, shall have the right to participate in the defense of any such
third party claim. So long as the indemnitor is defending in good faith any such
third party claim, the indemnitee shall not settle or compromise such third
party claim. In any event the indemnitee shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
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 Orlando, Florida. The
Commercial Arbitration Rule of the AAA shall be used and the substantive laws of
the State of Florida (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, including the award of attorneys' fees to the prevailing party as
determined by majority decision of the arbitrators, 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.
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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 Purchasers;
(ii) By Purchasers pursuant to Section 7.1;
(iii) By Seller if Purchasers shall not have (i) obtained and provided a
copy of a Financing Commitment to Seller within 30 days from the date hereof,
(ii) been approved hereof as franchisees 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 Purchasers, at their 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 any 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) If any of the warranties made in this Agreement:
(i) will be or would be, at Closing (as if they had been given again at
Closing) not complied with or otherwise untrue or inaccurate in any material
respect (but was when given not so untrue or inaccurate), then the party in
receipt of that warranty (the "Warrantee") shall be entitled by notice in
writing to the party giving that warranty (the "Warrantor") to terminate this
Agreement, but shall not be entitled to any other rights or remedies, including
the right to claim damages, and failure to exercise this right shall constitute
a waiver of any other rights of the Warrantee arising out of any breach of such
warranty; or
(ii) was, when given, untrue or inaccurate in a material respect, then the
Warrantee shall be entitled by notice in writing to the Warrantor to terminate
this Agreement (in addition to and without prejudice to all other rights and
remedies available to it including the right to claim damages), and failure to
exercise this right shall not constitute a waiver of any other rights of the
Warrantee arising out of any breach of such warranty.
(d) 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) Purchasers shall pay all filing fees required under the HSR Act, if
applicable.
(c) Seller shall pay the costs of obtaining title insurance with respect to
the Real Property (provided that Florida properties are insured by a single
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policy for an aggregate value of no more than $35,000,000) and all transfer,
intangible, recording, and documentary taxes, stamps, and fees with respect to
the transfer of the Owned Real Property and the Leases. Purchasers 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 Purchasers.
(d) Purchasers 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 cost of performing the physical inventory at
Closing.
(g) Seller shall pay the costs of obtaining any Consents, except as
provided in Section 4.9(d).
(h) Following the Closing, Seller shall pay to Purchasers 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. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other party. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of Seller and Purchasers.
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 Purchasers: With a required copy to:
Florida Apple North, L.L.C. Chopin, Miller & Yudenfreund
551 Madison Avenue 440 Royal Palm Way
2nd Floor Suite 200
New York, New York 10022 Palm Beach, Florida 33480
Attention: Gregory Georgas Attention: L. Frank Chopin
Fax: 212-317-2900 Fax: 561-655-9508
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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 FLORIDA LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA
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 Purchasers'
review and approval, release all press announcements relating to this Agreement
and the transaction contemplated herein as Seller may find necessary. Except to
the extent required by law, Purchasers shall refrain from issuing any press
release, publicity statement, or other public notice relating to this Agreement
or the transaction 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 ANY
OTHER DOCUMENTS DELIVERED PURSUANT TO SECTION 2.4(a), SELLER DOES NOT, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, 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 PURCHASERS' INSPECTIONS AND INVESTIGATIONS EXCEPT TO THE EXTENT OF
REPRESENTATIONS AND WARRANTIES MADE BY SELLER HEREIN. SELLER SHALL SELL AND
CONVEY TO PURCHASERS, AND PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE
IS", AND WITH ALL FAULTS EXCEPT TO THE EXTENT OF REPRESENTATIONS AND WARRANTIES
MADE BY SELLER HEREIN, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE ASSETS BY SELLER. EXCEPT TO THE
EXTENT OF REPRESENTATIONS AND WARRANTIES MADE BY SELLER 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. THE
LIMITATIONS SET FORTH IN THIS SECTION SHALL IN NO WAY LIMIT ANY WARRANTY FROM
ANY THIRD PARTY.
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:
PURCHASERS:
FLORIDA APPLE NORTH, L.L.C.
By:
Name:
Title:
FLORIDA APPLE SOUTH, L.L.C.
By:
Name:
Title:
FLORIDA APPLE WEST, L.L.C.
By:
Name:
Title:
WIGEL PARTNERSHIP
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 Terms of Financing Commitment
E Form of Note
Exhibits to this agreement are not filed pursuant to Item 601(b)(2) of SEC
Regulation S-K. By the filling of this Form 10-Q, the Registrant hereby agrees
to furnish supplementally a copy of any omitted schedule to the Commission upon
request.
28
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of June 19, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and U. S. RESTAURANT
PROPERTIES OPERATING 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;
WHEREAS, on or about the date hereof, Seller entered into an agreement to
sell certain Applebee's restaurants and related property (excluding real
property) to Darrell L. Rolph or his permitted assign ("Rolph").
WHEREAS, Seller desires to sell to Purchaser the real property which Seller
owns and transfer to Purchaser certain leases on which such restaurants are
located, all on the terms and subject to the conditions set forth herein; and
WHEREAS, Purchaser desires to purchase such property and accept such
leases, on the terms and subject to the conditions set forth herein, and
simultaneously lease such properties to Rolph;
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.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all prepaid items relating exclusively to the Real Property;
(ii) all assignable Permits;
(iii) all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(iv) the Contracts;
(v) the Owned Real Property;
(vi) the Leases; and
(vii)all records and files related to the Real Property such as purchase
agreements, deeds, construction documents, title reports, environmental and
engineering reports, appraisals, surveys, etc.
"Assets" shall not include 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
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obligations of Seller under the Contracts that accrue prior to the Closing and
Leases 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 after the Closing. 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 clause (ii) 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 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); (iv) any
federal, state, or local tax liability of Seller except to the extent expressly
assumed hereunder, (v) any contractual claim based on any lease, contract, or
agreement other than the Contracts and Leases; (vi) 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; and (vii) 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 and Leases) 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
as conducted prior to the Closing by Seller.
"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.
"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 and agreements that relate exclusively
to the Real Property, a list of which are set forth on Schedule 1.1B-1.
"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.
"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
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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.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"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.
"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.
"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 1.1C.
"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 1.1B-2.
"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 (all of which tracts and parcels are described in Schedule 1.1A), and all
buildings, fixtures, signs, parking facilities, and other improvements located
thereon and appurtenances thereto.
"Permits" shall mean all rights of Seller under licenses of every kind,
certificates of occupancy, and permits or approvals of any nature, from
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governmental and regulatory authorities which relate exclusively to 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) matters
reflected on the surveys delivered in accordance with Section 4.9(a), 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 (or its lessee's) use of the Real Property for Applebee's
Neighborhood Grill & Bar Restaurants or other reasonable commercial use and that
do not represent a lien or encumbrance for money owing. Permitted Encumbrances
shall include 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 the Leases.
"Restaurants" shall mean the Applebee's Neighborhood Grill & Bar
restaurants operated by Seller on the Real Property.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"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.
"Title Commitments" shall have the meaning set forth in Section 4.9(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.9(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 $10,500,000.00 adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all amounts
paid by Seller under the Contracts that pertain to periods after the Closing;
and (ii) any other prepaid expenses pertaining to the Real Property to the
extent that the same will benefit Purchaser after the Closing.
(b) The amount of the purchase price shall be decreased by all amounts
payable under the Contracts 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.
(c) The Purchase Price shall be adjusted by prorating all Property Taxes as
of the Closing Date and Purchaser will assume all obligations to pay same.
(d) 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
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;
(vii) An Assignment and Assumption of the Leases, duly executed by Seller;
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(viii) A Cross-Receipt, duly executed by Seller; and
(ix) 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 the
General Partner of the 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) An Assignment and Assumption of the Leases, duly executed by Purchaser;
(vi) The opinion of Middleberg, Riddle & Gianna, counsel to Purchaser, in
substantially the form of Exhibit C hereto;
(vii) A Cross-Receipt, duly executed by Purchaser; and
(viii) 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 (the
"Effective Time"). Except as expressly provided in this Agreement, all
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,
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. 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
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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. In addition, Seller shall provide all documentation
(at no expense to Seller other than incidental copying charges), which Purchaser
may reasonably request, including providing management letters to Purchaser's
auditors, in order for Purchaser to satisfy its reporting requirements under
applicable securities laws.
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. 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
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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. 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.
3.6 Contracts. 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.
3.7 Real Property. (a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 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.
(f) 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
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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, if any, are referenced on Schedule 3.7(f).
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
the three (3) fiscal months most recently ended prior to 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
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 any of the Assets before any Forum.
3.11 Permits. Seller has all material Permits as are necessary to own or
lease, as applicable, the Real Property. 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 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 Contracts and Leases. 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 Contracts and Leases, where the
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failure to do so would have a material adverse effect on the Assets.
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 ownership or leasing by
Purchaser (as applicable) of the Real Property.
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 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, (ii) pay all bills and debts incurred by it
related to the Assets 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.
(b) In particular, and without limiting the foregoing, with respect to the
Assets, Seller shall (i) maintain the Assets consistent with past practices, and
(ii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations.
(c) Further, with respect to the Assets, Seller shall not, without the
express prior written approval of Purchaser, (i) change in any material manner
the ownership of the Assets, (ii) mortgage, pledge, or subject to lien any of
the Assets, (iii) sell or otherwise dispose of any Asset, (iv) enter into,
terminate, or modify any Material Contract except in the ordinary course of
business, or (v) 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.
4.5 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
shall furnish to Purchaser such 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.
4.6 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.
(b) Promptly after the commencement of each such matter, notice of all
Actions, Orders, or other directives affecting any Restaurant that, if adversely
determined, could materially adversely affect the Assets (financial or
otherwise) or the ability of Seller to perform its obligations hereunder;
(c) Such other information respecting the Assets as the Purchaser may from
time to time reasonably request.
4.7 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
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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, leases or arrangements with such party in order to obtain
such consents. In addition, Seller shall use its reasonable best efforts to
obtain estoppel certificates in favor of Purchaser from the landlords under the
Leases.
4.8 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.
4.9 Delivery of Real Estate Documents. (a) Seller shall provide Purchaser
(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 Purchaser 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 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 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 corporate
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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 certificate of limited partnership 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.
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,
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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 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.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have 15
days following receipt of the documents referred to in Section 4.9(a) (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 Owned
Real Property for the operation of Applebee's restaurants or other reasonable
commercial use ("Material Objections"). 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. Within ten (10) days after receipt of Purchaser's notice,
Seller shall provide Purchaser with a written statement of which Material
Objections Seller shall use its reasonable best efforts to satisfy prior to the
Termination Date, it being acknowledged that Seller is not obligated to attempt
to satisfy any Material Objections. If Seller's notice indicates that Seller
does not intend to satisfy all of the Material Objections, Purchaser shall have
five (5) days after receipt of Seller's notice to terminate this Agreement by
giving written notice of such termination to Seller; provided, however, that the
failure by Purchaser to so terminate within such five (5) day period shall
constitute a waiver by Purchaser of those Material Objections which Seller has
declined to attempt to satisfy. If Seller fails to satisfy all Material
Objections which it stated in its notice that it would use its reasonable best
efforts to satisfy 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 Lease 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,
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
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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 forty-five (45) 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
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 (taken as a whole or individually with respect to any tract of Real
Property).
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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 all the Consents.
(e) The Restaurants (excluding the Real Property) shall be acquired by
Rolph prior to or effective as of the Closing Date.
(f) Buyer shall have been issued the Title Policies subject only to the
Permitted Encumbrances.
(g) 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) Seller shall have obtained all the Consents.
(d) The Restaurants (excluding the Real Property) shall be acquired by
Rolph prior to or effective as of the Closing Date.
(e) 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 lien, charge or encumbrance on any of the Assets (except Owned Real
Property) other than the Permitted Encumbrances;
(C) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(D) 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
(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.
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(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to Section 8.1(a)(i)(D) (and Section
8.1(a)(ii) to the extent the items covered thereby relate back to Section
8.1(a)(i)(D)) until the aggregate liability of Seller thereunder exceeds
$105,000 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)(D) (and Section 8.1(a)(ii) to the extent the items covered
thereby relate back to Section 8.1(a)(i)(D)) exceed $1,050,000.
(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 Sections 3.1 through
3.4 and Section 3.7(f) shall survive until the expiration of any applicable
statues of limitation provided by law; and
(ii) 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 and 4.4(c)) 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 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
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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.
8.3 Defense of Third Party Claims. With respect to any claim by Purchaser
under Section 8.1 or by Seller under Section 8.2, in each case relating to a
third party claim or demand, the indemnified party shall provide the
indemnifying party with prompt written notice thereof in accordance with Section
10.4 and the indemnifying party may defend, in good faith and at its expense, by
legal counsel chosen by it and reasonably acceptable to the indemnified party
any such claim or demand, and the indemnified party, at its expense, shall have
the right to participate in the defense of any such third party claim. So long
as the indemnifying party is defending in good faith any such third party claim,
the indemnified party shall not settle or compromise such third party claim. In
any event the indemnified party shall cooperate in the settlement or compromise
of, or defense against, any such asserted claim.
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 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.
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(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; or
(iii) 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 and Seller shall share equally the costs of the Surveys,
Title Commitments, Title Policies and all transfer, intangible, recording, and
documentary taxes, stamps, and fees with respect to the transfer of the Real
Property. Purchaser shall pay the cost of all other environmental
investigations, studies, and reports, and all other costs of any investigation
of the Assets by Purchaser.
(c) 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.
(d) Seller shall pay the costs of obtaining any Consents subject to Section
4.8. 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
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reasonably acceptable to Seller 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:
_______________________ Middleberg, Riddle & Gianna
5310 Harvest Hill Road 1600 Allianz Financial Centre
Suite 270 2323 Bryan Street
Dallas, Texas 75230 Dallas, Texas 75201
Attention: Robert Stetson Attention: Richard S. Wilensky
Fax: (972) 490-9119 Fax: 214-220-3189
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.
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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
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.
[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:
U.S. RESTAURANT PROPERTIES OPERATING L.P.
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 Allocation of Purchase Price
Exhibits to this agreement are not filed pursuant to Item 601(b)(2) of SEC
Regulation S-K. By the filling of this Form 10-Q, the Registrant hereby agrees
to furnish supplementally a copy of any omitted schedule to the Commission upon
request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of June 19, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and DARREL L. ROLPH or his
Permitted Assigns ("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;
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property (excluding real property), and Purchaser desires to
purchase such assets, all on the terms and subject to the conditions set forth
herein; and
WHEREAS, on or about the date hereof, Seller has entered into an agreement
to sell the Owned Real Property (defined below) to U.S. Restaurant Properties
Operating L.P. ("USRP"), and Purchaser desires to lease such properties from
USRP;
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 mean all employees exclusively involved in the
operation or supervision of the Restaurants, including without limitation, those
persons listed on Schedule 3.13.
"Affiliate" means any Person that owns or controls more than a 10% interest
in Seller (a "Controlling Affiliate") or in which Seller or a Controlling
Affiliate owns or controls more than a 5% interest.
"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, ovens, refrigerators, display cases, shelves, tools, pans, lights,
menus, books, cabinets, racks, towels, ornaments, cash registers, tables,
chairs, other furniture, bars and bar equipment, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies,
food, paper and beverage inventory (including beer, liquor, and wine inventory),
and advertising and promotional materials; the Assets also include any of the
foregoing property currently held by Seller pursuant to equipment leases, all of
which leased equipment will be purchased by Seller prior to Closing at its sole
cost and expense pursuant to Section 4.16.
(ii) all computer equipment, computer software and licenses of related
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software, data transmission devices, manuals and portable computers used by ADI
Personnel primarily in connection with the operation of the Restaurants;
(iii) $1,500 cash in each Restaurant;
(vi) all prepaid items relating exclusively to the Business;
(v) all assignable Permits;
(vi) all assignable rights under all express or implied warranties of
manufacturers, distributors, or retailers or other third parties or other claims
for damages or loss relating to the Assets;
(vii) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(viii) copies of Seller's employee records and related personnel files
related to 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);
(ix) the Contracts and Leases;
(x) all records and files related to the Leased Real Property such as rent
calculations, landlord correspondence, construction documents, title reports,
environmental and engineering reports, appraisals, surveys, etc; records of all
service and maintenance histories, if any, of the Assets; all records relating
to warranties, service agreements, or similar agreements pertaining to the
Assets; and copies of any other records and files that contain information
material to the Business or the Assets, in whatever media such records or files
are kept;
(xi) any written information in Seller's possession related to any pending
or proposed ordinance or regulation in any state, county, municipality, or other
governmental unit affecting the Business;
(xii) rights to existing Restaurant telephone numbers; and
(xiii) all of Seller's other rights and property interests of any nature
which are customarily and exclusively used in the operation of the Restaurants.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, the Owned Real Property, 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,, and (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) liabilities
or obligations of Seller with respect to the Owned Real Property; (iii) except
as provided in clauses (ii) or (iv) above, liabilities or obligations of Seller
under any of the Contracts or Leases or other Assets that accrue in any such
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case prior to the Closing or are attributable to the period prior to Closing,
including, without limitation, base rent, percentage rent, common area
maintenance or similar charges and any adjustments with respect to such items of
rent and other charges; (iv) any liabilities or obligations of Seller under the
Franchise Agreements; (v) 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);
(vi) any federal, state, or local tax liability of Seller except to the extent
expressly assumed hereunder, (vii) any contractual claim based on any lease,
contract, or agreement other than the Contracts and Leases; (viii) 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 (ix)
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 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.
"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 or penalty 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."
"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, presence, management, transport, or handling
of pollutants, contaminants, chemicals, or industrial, toxic, or hazardous
substances or wastes, and any and all laws, rules, regulations, codes,
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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 Restaurant" shall mean a Restaurant designated as such in
accordance with Section 2.8.
"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.
"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' directors of operations for the Territory and all management of Seller
senior thereto.
"Leased Real Property" shall mean those tracts and parcels of land leased
by Seller pursuant to the Leases and all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and appurtenances subject to
the Leases.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B. Schedule 1.1B shall include for each Lease all amounts due and
payable up to the Closing Date, including without limitation, base rent,
percentage rent common area maintenance and similar charges (such amounts shall
be estimated if not known).
"Material Contracts" shall mean all Contracts that involve (i) monetary
obligations of Seller of more than $5,000 per year, or (ii) a term greater than
twelve (12) months, and that are not cancelable by Seller upon thirty days
notice or less, a list of which are set forth on Schedule 1.1C.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
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"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 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 Leased Real Property.
"Permitted Assigns" shall mean an entity to be formed which will be
controlled by Darrel L. Rolph and David K. Rolph.
"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 Leased 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 Leased 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, the Leased Real Property and any other leased real property on
which the Restaurants are located.
"Remediation List" shall have the meaning set forth in Section 6.6.
"Restaurants" shall mean the 16 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.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including without limitation, all net income, gross income, gross receipts,
sales, excise and ad valorem, transfer, franchise, profits, license,
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withholding, payroll, employment, severance, stamp, occupation, property or
other taxes, customs, duties, fees, assessments or charges of any nature
whatsoever together with any interest, penalties, addition to tax, or additional
amounts imposed by any taxing authority, domestic or foreign.
"Termination Date" shall mean the earlier of (i) August 31, 1998 or (ii)
the date which is thirty (30) days after the Closing Date.
"Territory" shall mean those ADI's particularly set forth on Schedule 1.1D.
"Title Commitments" shall have the meaning set forth in Section 4.12.
"Title Policies" shall have the meaning set forth in Section 4.12.
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, assign and
deliver 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 Ten Million Dollars ($10,000,000.00) 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; and (iii) any other
prepaid expenses pertaining to the Business (such as telephone expenses,
advertising expenses (except as provided in Section 2.3(d)), utility charges,
and the like) to the extent that the same will benefit Purchaser after the
Closing.
(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 (including those amounts as set forth on Schedule
1.1B), (iii) the estimated cost of vacation accrued as but unvested of the
Closing Date with respect to ADI Personnel hired by Purchaser the cost of which
is being assumed by Purchaser pursuant to Section 6.3(c), and (iv) all amounts
on the Remediation List, unless repaired to Purchaser's reasonable satisfaction
prior to Closing.
(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 anything contained herein to the contrary, all rebates
of advertising payments made by Seller, including without limitation, amounts
paid to Franchisor's national marketing fund related to the Restaurants, shall
belong to Purchaser and there shall be no reduction of the Purchase Price
regarding any such amounts.
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(e) Not less than three days prior to the Closing, the parties hereto will
prepare a draft of a closing statement setting forth the adjustments to the
purchase price made pursuant to this Section 2.3.
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 in writing by Seller. On or about
February 15, 1999, 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 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 and will not
omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(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 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, 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) A Cross-Receipt, duly executed by Seller;
(vii) To the extent necessary pursuant to Section 7.2(f) below, a mutually
acceptable liquor license management agreement or agreements;
(viii) All operating manuals and other documents provided by Franchisor;
and
(ix) 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:
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(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 Hinkle, Eberhart & Elkouri, L.L.C., 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
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,
1998, or on such other date and time as may be mutually agreed upon by the
parties hereto. Purchaser may delay the Closing for up to three business days
following receipt of any amendment to the Disclosure Memorandum.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the various Assets as set forth on Exhibit D hereof. Each party hereby
agrees that it will not take a position on any income tax return or form, 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 or
Exhibit D.
2.8 Excluded Restaurant. (a) If prior to Closing Seller is unable to obtain
a required Consent to the assignment of a Lease, Purchaser may designate at
Closing the affected Restaurant as an Excluded Restaurant; provided, however,
that notwithstanding anything herein to the contrary, no more than one (1)
Restaurant may be designated as an Excluded Restaurant.
(b) If a Restaurant is designated as an Excluded Restaurant in accordance
with Section 2.8(a), then the Lease and all other Assets relating exclusively to
such Excluded Restaurant shall not be transferred to Purchaser hereunder,
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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 2.8.
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
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 and has all requisite authority
to own, lease and operate its properties and assets and to carry on its business
as it is now being conducted and is duly qualified or licensed as a foreign
corporation, in good standing to do business in Iowa. Seller has the corporate
power and authority to execute, deliver, and perform this Agreement, the Bill of
Sale and Assignment Agreement, 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, 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
necessary corporate actions or proceedings on the part of Seller, including
approval by the Board of Directors of Seller and no other corporate actions or
proceedings on the part of Seller are necessary under its Articles of
Incorporation or bylaws, by law, or otherwise to authorize the execution and
delivery by the Seller of this Agreement, the performance by Seller of its
obligations hereunder, and the consummation by Seller of the transactions
contemplated hereby.
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
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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. The documents delivered
by Seller at Closing will be sufficient to transfer to Purchaser all of Seller's
right, title and interest in and to the Assets.
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 constitute all tangible personal property required to
operate the Restaurant in accordance with the Franchise Agreements or necessary
to operate the Restaurants in accordance with Seller's historical practices,
except for assets which are not being conveyed hereunder which Seller has
historically used in the operation of the Restaurants and Seller's other
restaurants located outside the Territory.
(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 $1,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
(e) Substantially all inventories located at the Restaurants, including,
but not limited to, food, beverage, supplies, liquor, paper products and
uniforms, are saleable or usable in the ordinary course of business for their
intended use and exist in such quantity as necessary to operate the Restaurants
in accordance with Seller's historical practices and the terms of the Franchise
Agreements.
(f) The buildings, fixtures, parking facilities, trash facilities, fences
and other improvements, appurtenances and hereditaments at or on each Restaurant
are in good condition, commensurate with their age, with reasonable wear and
tear excepted, and in compliance in all material respects with all federal,
state and local laws, rules and regulations and leases and lease provisions.
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
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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.
(e) Seller is in compliance with its obligations under the Franchise
Agreements with respect to remodeling of the Restaurants.
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, Leased
Real Property or other leased Real Property, 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 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 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 after due inquiry received by
any owner of any of the Leased Real Property, requiring or calling attention to
the need for any work, repair, construction, alteration, or installation on or
in connection with the Real Property which has not been complied with.
(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. Seller has not taken or omitted to take any action relating to the
Real Property that would result in any liability to Seller or any subsequent
owner or lessee of the Real Property under any Environmental Law. 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
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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, 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 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
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 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. Schedule 3.13 hereto is a true and complete
list (i) of each person employed in connection with the operation of the
Restaurants, from and including each assistant manager and assistant kitchen
manager up through Vice President of Operations for the ADIs; and (ii) each
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other salaried employee whose duties are primarily related to Seller's
operations in the ADIs who could during the current fiscal year receive,
compensation (including all bonuses, perquisites and other items of value) in
excess of Thirty Thousand Dollars ($30,000). For each such person, Schedule 3.13
lists the full name, job title or duty, salary and bonus. Seller shall, as soon
as possible after the date hereof, provide Purchaser with ESOP and 401(K)
account balances for such employees.
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
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 multi employer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
(d) Seller has provided to Purchaser copies of all Seller Plans and with
respect to each of Seller's Plans to the extent applicable (i) true and complete
copies of all documents embodying or relating to each Seller Plan including
without limitation, the plan and trust or other funding arrangement relating
thereto, summary plan descriptions, employee handbooks or personnel manuals and
all amendments thereto (ii) the most recent annual report, if any, required by
ERISA and (iii) the most recent determination letter received from the Internal
Revenue Service.
3.16 Accuracy of Schedules, Certificates and Documents. All information
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 will not omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
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under which they were made, not misleading; 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. Seller has not made any statements to its employees which
are inconsistent with the provisions of Section 6.3 hereof.
3.18 Insurance. Schedule 3.18 is a true and complete list and brief
description of all property, fire, casualty, liability, life, worker's
compensation, and other forms of insurance of any kind owned or held by Seller
regarding the Assets or the Restaurants. All such policies (a) are in full force
and effect, (b) are valid and outstanding policies, (c) insure against the risks
of the kind customarily insured against and in the amounts customarily carried
by entities similarly situated, and (d) provide that they will remain in full
force and effect through the respective dates set forth in Schedule 3.18.
3.19 Affiliates. Seller has not been a party to, and there does not now
exist, any transaction affecting the Restaurants or the Assets (including
without limitation the purchase, sale or exchange of property or the rendering
of any service) with any Affiliate of Seller or any entity in which any of them
owns a beneficial interest.
ARTICLE IV - COVENANTS OF SELLER
4.1 Performance of Real Property Leases and Contracts; Lease Options.
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 effect on the operations of a Restaurant. Seller shall, through the
Closing Date, exercise any option becoming exercisable under a Lease to extend
the term of such Lease.
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"). The parties hereto recognize that Mario
Cernadas will be reassigned on or about the Closing Date and shall not be
considered to be ADI Personnel for purposes of this Agreement. However,
notwithstanding anything contained herein to the contrary, Purchaser may
contact, solicit or hire Mario Cernadas. 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 or hire 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 shall cooperate with Purchaser 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
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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; and (iii) continue to operate the
Restaurants in accordance with all material applicable local, state, and federal
laws and regulations;
(iv) continue to conduct the advertising activities and efforts as set
forth on Schedule 4.5A;
(v) continue to conduct on a timely basis all normal period Asset
maintenance;
(vi) continue to conduct on a timely basis all Restaurant remodeling and
refurbishing as set forth on Schedule 4.5B.
(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 providing for payment of
bonuses upon the Closing; (a copy of which is attached to Schedule 3.13).
(iii) mortgage, pledge, or subject to lien any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into, terminate, or modify any Material Contract or waive any
breach of any of its material terms or provisions or take any other action in
connection with any Material Contract that would materially impair the interests
or rights of Seller to be transferred to Purchaser hereunder 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.
(vii) establish or adopt any new "employee benefit plan" as defined in
Section 3(3) of ERISA.
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
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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 only a reasonable disruption of the business of Seller.
4.7 [Intentionally left blank.]
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 (i) has materially adversely
affected the Assets or the operations of the Restaurants, (ii) breached any of
Seller's representations, warranties contained in Articles III or IV hereof.
(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 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, leases or arrangements with such party 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 thirty (30) days advance
written notice of the Services requested. 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 the Seller no longer has the personnel to provide such Services,
Seller may outsource such Services to a third party.
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(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 or Seller's out-of-pocket cost
(if the Services are outsourced), plus an amount of reasonable overhead not to
exceed 85% of the base salaries of the personnel providing the Services or
overseeing such Services (if the Services are outsourced). 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 six (6) 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. As soon as possible, Seller shall
provide Purchaser copies of all surveys, title abstracts with respect to the
Leased Real Property updated through the date on which Seller acquired a
leasehold interest therein, and all environmental reports pertaining to the
Leased Real Property, and current ALTA surveys (the "Surveys") and title
insurance commitments with respect to the Leased Real Property (the "Title
Commitments") pursuant to which Commonwealth Land & Title Company (the "Title
Company") will agree to issue at Closing Lessee's policies of title insurance
("Title Policies") on American Land Title Association standard form of
Leaseholder owner's policy to insure leasehold estates, showing no exceptions
except as shown in the Lessee Title Commitments. The 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.
4.13 Employee Benefits. Seller agrees to indemnify and hold harmless
Purchaser from and against all losses, expenses and liabilities, arising under
Section 4980B of the Code arising from Seller's failure to comply with the
continuation requirements of Section 4980B of the Code and sections 601 through
608 of ERISA with respect to ADI Personnel for events occurring on or prior to
the date of Closing.
4.14 No Sale Negotiations. Seller and its representatives and agents shall
not solicit, entertain or undertake any negotiations, discussions or contact any
party other than Purchaser and its representatives with respect to the sale,
transfer or other disposition of any of the Assets (other than in the ordinary
course of Restaurant operations), the Restaurants, or any interest, legal,
equitable or beneficial, in any of the above.
4.15 Equipment Leases. Prior to or at the Closing, Seller shall purchase
all equipment and other tangible personal property customarily located in the
Restaurants or on the Real Property or used exclusively with respect to the
Business that is subject to any equipment or other personal property lease.
Title to all such property so acquired shall be transferred to Purchaser at
Closing free and clear of any lien, security interest, Claim or other
encumbrance.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization, Corporate Power, Authorization. Assuming Purchaser
assigns this Agreement to a Permitted Assign which is a corporation, the
Permitted Assign will be a corporation duly organized, validly existing, and in
good standing under the laws of its state of organization and in each other
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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
Purchaser has or its Permitted Assign will have the power and authority to
execute and deliver the Bill and 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 consummation by Purchaser's Permitted Assign (if
any) of the transactions contemplated hereby and thereby will not violate any
provision of its articles of organization or bylaws, as applicable.
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 Purchaser 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 or Purchaser's Permitted Assign, 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.
5.5 Ability. Purchaser has arranged for the financing of the Purchase
Price, and all material terms related thereto are finalized. Purchaser has
arranged for the leasing of the Owned Real Properties from USRP, and all
material terms related thereto are finalized.
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 subject
to Purchaser's right, in good faith, to contest the amount or validity of such
obligation, 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; provided, however, that this Agreement is intended only for the
benefit of the parties hereto and neither this Agreement, nor any of the rights,
interests, or obligations hereunder, is intended for the benefit of any other
Person.
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 its employees,
agents, attorneys, lenders and accountants in connection with the transactions
contemplated hereby and 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
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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 as to whom Purchaser has been furnished all employment records at
Closing, 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 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
within six (6) months of the Closing Date: (i) to give such employees credit
under Purchaser's benefits plans, programs, and arrangements (including credit
for accrued 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.
(d) Each of the ADI Personnel offered employment pursuant to Section 6.3(a)
shall be offered employment by Purchaser as an "at will" employee of Purchaser
to perform such duties as Purchaser may assign to such employee from time to
time. Each such employee shall be subject to the same rules and policies
applicable to Purchaser's current employees with respect to all employment
related matters including retention, disciplinary action, termination,
promotion, compensation, and except as otherwise provided in this Agreement,
benefits.
(e) The covenants of Purchaser contained in this Section are made solely to
Seller. Nothing contained in this Section gives or shall be construed as giving
any employee of Seller, including ADI Personnel, any right to be employed by
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Purchaser in any capacity, for any rate of compensation or for any period of
time. No employee of Seller, including ADI Personnel, shall be considered a
third party beneficiary of the covenants of Purchaser contained in this Section
and Purchaser shall have no liability to any employee on account of its breach
of any such covenant.
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) promptly provide
Franchisor with all information required by Franchisor to determine whether
Purchaser will be approved as a franchisee with respect to the Territory, (ii)
actively pursue an agreement with Franchisor as to the principal terms of
franchise and development agreements with respect to the Territory, and (iii)
file all documents required, if any, to obtain approval of the transactions
contemplated hereby under the HSR Act within 15 days of the date hereof.
6.5 Remediation List. Purchaser shall deliver to Seller a list setting
forth all remedial actions that would require repair and replacement within
sixty (60) days of the date thereof with respect to any of the Assets under
reasonable operating standards of a prudent operator and the estimated cost of
each such action (the "Remediation List"); provided, however, that each remedial
action with respect to any Restaurant must be in excess of $10,000 per item. The
aggregate amount set forth on the Remediation List shall be a Purchase Price
adjustment pursuant to Section 2.3 of this Agreement, unless repaired by Seller
to Purchaser's satisfaction prior to Closing. Purchaser shall use its best
efforts to deliver the Remediation List within one (1) month of the date of this
Agreement.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have
fifteen (15) days following receipt of the documents referred to in Section 4.12
(the "Title Inspection Period") in which to furnish Seller a written statement
of reasonable objections to exceptions which, in Purchaser's sole judgment,
would materially interfere with or impair Purchaser's use of the Leased Real
Property for the operation of Applebee's restaurants ("Material Objections").
Seller shall have fifteen (15) days after the receipt of Purchaser's statement
of Material Objections to notify Purchaser which Material Objections it shall
use its reasonably best efforts to satisfy (but with no obligation to do so) in
all material respects. If Seller's notice indicates that Seller does not intend
to satisfy all of the Material Objections, Purchaser shall have five (5) days
after receipt of Seller's notice to terminate this Agreement by giving written
notice of termination to Seller; provided, however, that the failure of
Purchaser to so terminate within such five (5) day period shall constitute a
waiver by Purchaser of those Material Objections which Seller has declined to
attempt to satisfy. If Seller fails to satisfy all Material Objections (which it
stated in its notice that it would attempt to satisfy) in all material respects
or prior to the Termination Date, then Purchaser's sole right and remedy shall
be to either (i) waive the remaining 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 Title
Commitments for such Leased Real Property will contain encumbrances for entire
shopping centers. Notwithstanding anything to the contrary contained herein,
while Title Commitments will be delivered for such Leased Real Property, no
surveys will be delivered and no 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
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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 Leased Real Property for the purposes of inspecting the Leased 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 Leased 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 Leased Real
Property, or the other activities of Purchaser or Purchaser's Designees with
respect to the Leased Real Property (hereinafter called "Purchaser's
Activities") shall not damage the Leased Real Property in any manner whatsoever
or disturb or interfere with the rights of any lessor; (ii) in the event the
Leased Real Property is altered or disturbed in any manner in connection with
any Purchaser's Activities, Purchaser shall immediately return the Leased 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 the lessor
of any Leased Real Property.
(B) Purchaser shall have until the date which is the later of (i) thirty
days after the date of this Agreement or (ii) fifteen days following receipt of
the documents referred to in Section 4.12 (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 Assets are
suitable and satisfactory to Purchaser and can be used for Applebee's franchise
restaurants. In the event Purchaser shall determine that the Assets 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 Leased 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
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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 to reflect any event or occurrence
after the date hereof, 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 or
otherwise as reasonably indicated by Purchaser; 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 and mutually acceptable
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) The Owned Real Property and any leases of real property on which a
Restaurant is located (other than the Leases) shall be acquired by USRP, an
affiliated entity of USRP or by Purchaser, prior to or effective as of the
Closing Date.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
(k) 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.
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
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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) The Owned Real Property and any leases of real property on which a
Restaurant is located (other than the Leases) shall be acquired by USRP, an
affiliated entity of USRP or by Purchaser, prior to or effective as of the
Closing Date.
(e) Seller shall have obtained all the Consents.
(f) 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.
(g) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims. (a) Seller shall defend, indemnify and hold harmless
Purchaser and its officers, directors, agents, employees and Affiliates and
Purchaser's successors and assigns ("Purchaser Parties"), against, and in
respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser Parties 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 or liability related to noncompliance with any bulk sales
laws;
(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 Parties 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
$100,000 (at which point the Seller will be obligated to indemnify the Purchaser
Parties from and against all such liabilities relating back to the first
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dollar). 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 $2,500,000.
(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
(even if Purchaser knew or had reason to know of any misrepresentation or breach
of warranty at the time of Closing) and shall continue in full force and effect
for the periods specified below (the "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
statutes of limitation provided by law (if there is no applicable statute of
limitations, such representations and warranties shall survive indefinitely);
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.
(e) Except for claims arising under Sections 4.1, 4.3, 4.4 and 4.11 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) and all
such claims shall be deemed to be waived as a result of 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.
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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 (provided that such representations and warranties
shall be of no further force and effect after eighteen months after the Closing
Date); 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 Wichita, Kansas (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.
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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
Seller a copy of a commitment letter for the financing of the transactions
contemplated hereby 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 and Seller shall split equally all filing fees, if any,
required under the HSR Act.
(c) Purchaser and Seller shall split equally the costs of obtaining the
Title Commitments, the Surveys and Title Policies and all transfer, intangible,
recording, and documentary taxes, stamps, and fees with respect to the transfer
of the Leases. Purchaser shall pay the cost of 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.
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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. Hancock Kilpatrick Stockton LLP
at Washington Madison, Georgia 30650 1100 Peachtree Street, Suite 2800
Attention: Louis J. (Dusty) Profumo Atlanta, Georgia 30309
Fax: 706-343-2434 Attention: Larry D. Ledbetter, Esq.
Fax: 404-815-6555
If to purchaser: With a required copy to:
Darrel Rolph Hinkle, Eberhart & Elkouri, L.L.C.
1877 N. Rock Road Suite 2000, Epic Center
Wichita, Kansas 67206 301 North Main Street
Attention: Darrel L. Rolph Wichita, Kansas 67202
Fax: 316-681-2481 Attention: Winton M. Hinkle
Fax: 316-264-1518
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.
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.
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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,
AND IN THE CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i) 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, AND IN THE CLOSING CERTIFICATE REQUIRED BY SECTION
2.4(a)(i) 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,
EXCEPT TO THE EXTENT OF SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES
CONTAINED HEREIN, AND IN THE CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i)
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 AND IN THE CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(a)(i).
10.12 Purchaser's Right to Rely. NOTWITHSTANDING ANYTHING IN THE FOREGOING
TO THE CONTRARY, PURCHASER'S INSPECTIONS AND INVESTIGATIONS OF THE ASSETS SHALL
NOT IN ANY WAY OBVIATE OR HAVE ANY EFFECT ON SELLER'S REPRESENTATIONS,
WARRANTIES, AND COVENANTS MADE HEREIN. FURTHER, ANY DISCLOSURE BY SELLER OR
SELLER'S EMPLOYEES OR AGENTS, OTHER THAN A DISCLOSURE APPEARING ON THE
DISCLOSURE MEMORANDUM SHALL NOT IN ANY WAY OBVIATE OR HAVE ANY EFFECT ON
SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS MADE HEREIN.
10.13 Time. Time is and shall be of the essence of this Agreement.
10.14 Guarantee. Darrel L. Rolph and David K. Rolph each agrees to
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.
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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:
DARREL L. ROLPH
GUARANTORS:
Darrel L. Rolph
David K. Rolph
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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
Exhibits to this agreement are not filed pursuant to Item 601(b)(2) of SEC
Regulation S-K. By the filling of this Form 10-Q, the Registrant hereby agrees
to furnish supplementally a copy of any omitted schedule to the Commission upon
request.
30
Solicitation of Consents to Proposed Amendments to:
9 3/4% Senior Notes due 2006
of
Apple South, Inc.
Apple South, Inc., a Georgia corporation (the "Company"), is seeking your
consent (the "Consent") to the amendments (the "Proposed Amendments") of the
covenants contained in the indenture dated as of May 1, 1996 (the "Indenture")
governing its 9 3/4% Senior Notes due 2006 (the "Notes").
If the Requisite Consents (as defined herein) are received, the Company
will pay each Holder (as defined herein) who has given and has not revoked its
Consent as of the Expiration Date (as defined herein) with respect to any
portion of the Notes of such Holder $35 per $1,000 of principal amount (the
"Consent Price") of such portion of such Holder's Notes.
- --------------------------------------------------------------------------------
THE CONSENT SOLICITATION WILL EXPIRE ON THE EXPIRATION DATE. CONSENTS MAY BE
REVOKED AT ANY TIME PRIOR TO THE EXPIRATION DATE. THE CONSENT SOLICITATION AND
THE ACCOMPANYING CONSENT CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ
BEFORE ANY DECISION IS MADE WITH RESPECT TO THE CONSENT SOLICITATION.
- --------------------------------------------------------------------------------
General
The Company is seeking Consents from persons beneficially holding
("Holders") the Notes to the Proposed Amendments to the Indenture relating to
the Notes.
The Proposed Amendments
The execution and delivery of a Consent by a Holder will constitute the
consent of such Holder to the Proposed Amendments. The Proposed Amendments would
amend certain provisions contained in the Indenture. The Proposed Amendments are
contained in a first supplemental indenture (the "Supplemental Indenture") as
set forth on Annex A hereto. Below is a brief description of the Proposed
Amendments (unless otherwise defined herein, capitalized terms below have the
meanings ascribed to them in the Indenture):
Limitation on Restricted Payments. A new exception will be added to the
"Limitation on Restricted Payments" covenant that would allow the Company to
purchase, redeem, acquire, cancel or retire for value shares of the Company's
common stock for an aggregate amount not to exceed $100 million without
violating the "Limitation on Restricted Payments" covenant, provided that no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence of such action. Limitation on Guarantees by Restricted
Subsidiaries. A new covenant will be added that would require each Restricted
Subsidiary that guarantees any Indebtedness of the Company also to provide a
guarantee (a "Subsidiary Guaranty") of the Notes.
Limitation on Incurrence of Indebtedness. The "Limitation on Incurrence of
Indebtedness" covenant will be amended to permit Restricted Subsidiaries to
provide guarantees of (i) the Indebtedness of the Company under its Credit
Agreement and (ii) the Notes.
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Events of Default. The Events of Default provision will be amended to add
that an Event of Default will occur if any Subsidiary Guaranty ceases to be in
full force and effect or is declared null and void or any Restricted Subsidiary
denies that it has any further liability under any Subsidiary Guaranty.
The Proposed Amendments will be set forth in a Supplemental Indenture that
will be executed by the Company and the Trustee promptly after receipt of the
Requisite Consents.
The foregoing is qualified in its entirety by reference to the Indenture
and the form of Supplemental Indenture, copies of which can be obtained without
charge from the Trustee.
Principal Terms of the Consent Solicitation and Payment for Consents
The Consents of the Holders of not less than a majority of the outstanding
principal amount of the Notes is required to effect the Proposed Amendments (the
"Requisite Consents"). If the Requisite Consents are received, the Company will
pay each Holder of the Notes who has given and has not revoked its Consent as of
the Expiration Date with respect to any portion of the Notes of such Holder $35
per $1,000 principal amount of such portion of such Holder's Notes.
Record Date; Expiration Date; Revocation of Consents
This Solicitation of Consents (the "Consent Solicitation") is being
delivered to Holders of record of Notes on June 17, 1998 (the "Record Date").
The Consent Solicitation will expire at 5:00 PM, New York City time, on June 29,
1998 or at any later time and date to which the Consent Solicitation may be
extended from time to time by the Company (the "Expiration Date"). Consents may
be revoked at any time prior to the expiration date.
Procedures for Delivering Consents; Additional Information
For a Holder to validly consent, a properly completed and duly executed
Consent must be received by the SunTrust Bank, Atlanta, as Trustee (the
"Trustee"), at the address or facsimile number set forth below on or prior to
the Expiration Date.
Beneficial owners whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee must contact such entity
promptly if they desire to consent.
A signed copy of a facsimile of the Consent will be accepted. The Consent
should be sent by each Holder or his or her broker, dealer, commercial bank,
trust company or other nominee to the Trustee at the address or facsimile number
set forth below:
By Facsimile: By Hand, Mail or Overnight Confirm by Telephone:
(404) 240-2030 Courier: Philip DeMouey
SunTrust Bank, Atlanta (404) 240-1936
Attention: 3495 Piedmont Road
Philip DeMouey Building 10, Suite 810
Atlanta, Georgia 30305
Attention:
Philip DeMouey
Any requests for assistance with respect to completing the attached form or
for additional copies of the Consent Solicitation and Consent may be directed to
the Trustee at its telephone number or address set forth above. You may also
contact your broker, dealer, commercial bank or trust company or other nominee
for assistance concerning the Consent Solicitation.
Effectiveness of Proposed Amendments
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The Proposed Amendments with respect to the Indenture will become effective
upon execution by the Company and the Trustee of the Supplemental Indenture. It
is expected that the Supplemental Indenture will be executed as promptly as
practicable after receipt of the Requisite Consents. Upon execution, the First
Supplemental Indenture will be modified as provided in the Proposed Amendments.
Payment to Consenting Holders
If the Requisite Consents are received, the Company will pay, promptly
after the Expiration Date, to each Holder of the Notes who has given and has not
revoked its Consent as of the Expiration Date, with respect to any portion of
the Notes of such Holder, the Consent Price of such portion of such Holder's
Notes at the address of such Holder appearing in the records of the Company.
Important Tax Information
HOLDERS OF NOTES SHOULD CONSULT THEIR TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR
SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION.
Certain Tax Consequences to United States Holders
Payments made pursuant to the Consent Solicitation will be treated as fees
for consenting to the Proposed Amendments and will constitute ordinary income to
consenting recipient United States Holders. The modification of the Indentures
by the Proposed Amendments will not trigger a taxable sale or exchange of the
Notes for federal income tax purposes.
As used herein, the term "United States Holder" means an owner of any Notes
that is, for United States federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, or (iii) an estate or trust the income of which is subject
to United States federal income taxation regardless of its source.
Form W-9
Under federal income tax law, the Company may be required to withhold 31%
of the amount of any payment made to certain Holders pursuant to the Consent
Solicitation. In order to avoid such backup withholding, each consenting Holder
must provide such Holder's correct taxpayer identification number ("TIN") by
completing the Form W-9 enclosed herewith, or otherwise establish, in the manner
prescribed by applicable Treasury regulations, an exemption from backup
withholding. In general, the TIN of a Holder who is an individual is his or her
Social Security number. In addition, if a Holder required to supply a correct
TIN fails to do so, such Holder may also be subject to a penalty imposed by the
Internal Revenue Service. Certain Holders (including, among others, all
corporations) are exempt from these backup withholding requirements. For further
information regarding backup withholding and instructions for completing the
Form W-9 (including how to obtain a TIN if the Holder does not have one), the
Holder should consult the Form W-9 or the Holder's tax advisor.
Consequences of Failure to File Form W-9
The failure of a Holder to complete Form W-9 will not, by itself, cause the
Consent to be invalidly delivered but may require the Company to withhold 31% of
the amount of any payment made to such Holder pursuant to the Consent
Solicitation. Backup withholding is not an additional federal income tax.
Rather, the federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If backup withholding
results in an overpayment of taxes, a refund or credit may be obtained, provided
the required information is furnished to the Internal Revenue Service.
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NOTE: FAILURE TO COMPLETE AND RETURN THE FORM W-9 MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO THE HOLDER PURSUANT TO THE CONSENT
SOLICITATION. PLEASE REVIEW THE FORM W-9 FOR ADDITIONAL DETAILS.
Certain Tax Consequences to United States Alien Holders
Although it is not entirely clear that United States federal withholding
tax is applicable to payments made pursuant to the Consent Solicitation, such
tax will be withheld from such payments paid to a United States Alien Holder at
a 30% rate or such lower rate as may be specified by an applicable income tax
treaty. United States Alien Holders of Notes should consult their own tax
advisors regarding the availability of a refund of such withholding tax.
As used herein, the term "United States Alien Holder" means an owner of any
Notes that is, for United States federal income tax purposes, (i) a nonresident
alien individual, (ii) a foreign corporation, (iii) a nonresident alien
fiduciary of a foreign estate or trust or (iv) a foreign partnership one or more
of the members of which is, for United States federal income tax purposes, a
nonresident alien individual, a foreign corporation or a nonresident alien
fiduciary of a foreign estate or trust. If a United States Alien Holder of the
Notes is engaged in a trade or business in the United States, and if the receipt
of the Consent Price is effectively connected with such trade or business, such
Holder will generally be subject to regular United States income tax on the
Consent Price (and, if the Holder is a foreign corporation, a branch profit tax,
unless an applicable treaty provides otherwise). Such Holder, however, will not
be subject to the 30% withholding tax, provided that it furnishes to the Company
properly executed Internal Revenue Service Form 4224.
Miscellaneous
By executing the Consent and returning it to the Trustee as instructed
below, the undersigned hereby acknowledges receipt of this form of Consent
Solicitation and hereby consents to (i) the procedures set forth in the Consent
Solicitation as to the amendment of the Indenture, and (ii) the Proposed
Amendments, which shall be adopted by the Company with respect to the Indenture
promptly following receipt of the Requisite Consents, and which shall be deemed
to have been received by each Holder following such adoption in accordance with
the terms of the Notes. The undersigned, by consenting to the Proposed
Amendments as herein provided, hereby waives his or her right (and the right of
his or her transferees) to revoke such consent after the Expiration Date.
This solicitation is not being made to, nor will the Company accept
Consents from, Holders of Notes in any jurisdiction in which solicitation would
not be in compliance with the securities laws of such jurisdiction.
J.P. Morgan Securities Inc. ("JPMSI") will participate in the solicitation
of Consents. JPMSI has provided and is currently retained to provide certain
investment banking services to the Company for which it has received and is
entitled to receive usual and customary fees. In addition, JPMSI was the lead
manager for the offering of the Notes. JPMSI is, from time to time, a holder of
Notes and will tender its consent with respect to any Notes held by it on the
Record Date.
Available Information
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith file reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at Room
3190, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661 and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
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such material may be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, material filed by the Company can be inspected
at the offices of the National Association of Securities Dealers, Inc., 33
Whitehall Street, 10th Floor, New York, NY 10004. Such material also may be
accessed electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
APPLE SOUTH, INC.
The undersigned holder of record on June 17, 1998 of the 9 3/4% Senior
Notes due 2006 (the "Notes"), of Apple South, Inc. (the "Company"), hereby
Consents Does Not Consent
to the Proposed Amendments as defined in the Consent Solicitation dated June 18,
1998 of the Company. The undersigned acknowledges receipt of the Consent
Solicitation.
Unless otherwise specified by the undersigned, this form relates to the
total principal amount of Notes held by the undersigned on the date hereof, as
indicated below.
Notes Held:
Principal Amount Held:
Principal Amount as to Which Consent is Given:
If forms of Consent are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or other persons acting
in a fiduciary or representative capacity, such persons should so indicate when
signing.
Name of Signer (Please Print):
Telephone No. of Signer:
Date:
--------------------------------
Signature
5
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EXHIBIT A
FORM OF SUBSIDIARY GUARANTY
SUBSIDIARY GUARANTY
This Subsidiary Guaranty (the "Guaranty") is made and entered into as of by
, a (the "Guarantor"), having its principal office at in favor of SunTrust Bank,
Atlanta, as Trustee (in such capacity, together with its successors and assigns,
the "Trustee") for the holders (the "Holders") of the Notes (as defined herein)
issued by Apple South, Inc. (the "Company") under the Indenture referred to
below.
W I T N E S S E T H
WHEREAS, the Company and SunTrust Bank, Atlanta, as Trustee, have entered
into that certain Indenture dated as of May 1, 1996 (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Company issued $125,000,000 in original aggregate principal amount
of 9 3/4% Senior Notes due 2006 (the "Notes"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings given to such terms in the
Indenture which shall be a part of this Guaranty as if fully set forth in this
place; and
WHEREAS, the Company agreed, pursuant to the terms of the Notes, not to
permit any Restricted Subsidiary, directly or indirectly, to Guarantee any
indebtedness of the Company which is pari passu with or subordinate in right of
payment to the Notes unless such Restricted Subsidiary simultaneously executes
and delivers a Subsidiary Guaranty of payment of the Notes by such Restricted
Subsidiary; and
WHEREAS, the Guarantor is a Restricted Subsidiary and intends to incur a
Guarantee of Indebtedness of the Company which is [pari passu with] [subordinate
in right of payment to] the Notes.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the Guarantor hereby
agrees with the Trustee for its benefit and for the ratable benefit of the
Holders of Notes as follows:
SECTION 1. Guarantee. The Guarantor hereby unconditionally and irrevocably
guarantees, to each Holder and the Trustee and their respective successors and
assigns (a) the full and punctual payment within applicable grace periods of
principal of, interest on and the redemption or repurchase prices with respect
to, the Notes when due, whether at maturity, by acceleration, by Offer to
Purchase or otherwise, and all other monetary obligations of the Company under
the Indenture and the Notes and (b) the full and punctual performance within
applicable grace periods of all other obligations of the Company under the
Indenture and the Notes (all the foregoing being hereinafter collectively called
the "Obligations"). The Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice or further assent from
the Guarantor and that the Guarantor will remain bound under this Guaranty
notwithstanding any extension or renewal of any Obligation.
The Guarantor consents that, at any time, and from time to time, either
with or without consideration, the whole or any part of any security now or
hereafter held for any Obligations may be exchanged, compromised or surrendered
by the Trustee or any of the Holders; the time or place of payment of any
Obligations or of any security thereof may be changed or extended, in whole or
in part, to a time certain or otherwise, and may be renewed or accelerated, in
whole or in part by the Trustee or any of the Holders; the Company may be
granted indulgences generally by the Trustee or any of the Holders; any of the
provisions of any Note or any other instrument evidencing any Obligations or any
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security therefor may be modified or waived by the Trustee or any of the
Holders; any party liable for the payment thereof (including but not being
limited to any co-guarantor) may be granted indulgences or released by the
Trustee or any of the Holders; neither the termination of existence, bankruptcy,
lack of authority nor disability of the Company or the Guarantor, shall affect
the continuing obligation of Guarantor, and that no claim need be asserted by
the Trustee or any of the Holders against the custodian, trustee or debtor in
bankruptcy or receiver of any bankrupt or insolvent guarantor; any deposit
balance to the credit of the Company or any other party liable for the payment
of the Obligations or liable upon any security therefor may be released, in
whole or in part, by the Trustee or any of the Holders at, before and/or after
the stated, extended or accelerated maturity of any Obligations; and the Trustee
or any of the Holders may release, discharge, compromise or enter into any
accord and satisfaction with respect to any collateral for the Obligations, or
the liability of the Company or Guarantor, or any liability of any other person
primarily or secondarily liable on any of the Obligations, all without notice to
or further assent by the Guarantor, who shall remain bound hereon,
notwithstanding any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence, release, discharge or accord and
satisfaction.
In the event of dissolution or insolvency (as defined by the Georgia
Uniform Commercial Code as in effect at the time) of the Company, or if a
petition in bankruptcy be filed by or against the Company, or if a receiver be
appointed for any part of the property or assets of the Company, the Guarantor
agrees to pay to the Trustee on behalf of the Holders upon demand the full
amount which would be payable hereunder by the Guarantor if all such Obligations
were then due and payable.
The Guarantor expressly waives: (a) notice of acceptance of this Guaranty
and of all extensions or renewals of credit or other financial accommodations to
the Company made by the Trustee or any of the Holders pursuant to the Indenture
or the Notes ; (b) presentment and demand for payment of any of the Obligations;
(c) protest and notice of dishonor or of default to the Guarantor or to any
other party with respect to any of the Obligations or with respect to any
security therefor; (d) any invalidity or disability in whole or in part at the
time of the acceptance of, at any time with respect to, any security for the
Obligations or with respect to any party primarily or secondarily liable for the
payment of the Obligations; (e) the fact that any security for the Obligations
may at any time, or from time to time, be in default or be inaccurately
estimated or may deteriorate in value for any cause whatsoever; (f) any
diligence in the creation or perfection of a security interest or collection or
protection of or realization upon the Obligations or any security therefor, any
liability hereunder, or in respect of any party primarily or secondarily liable
for the payment of the Obligations or any lack of commercial reasonableness in
dealing with any security for the Obligations; (g) any duty or obligation on the
part of the Trustee or any of the Holders to ascertain the extent or nature of
any security for the Obligations, or any insurance or other rights respecting
such security, or the liability of any party primarily or secondarily liable for
the Obligations, or to take any steps or action to safeguard, protect, handle,
obtain or convey information respecting, or otherwise follow in any manner, any
such security, insurance or other right; (h) any duty or obligation on the
Trustee or any of the Holders to proceed to collect the Obligations from, or to
commence an action against, the Company, any other guarantor, or any other
Person, or to resort to any security or to any balance of any deposit account or
credit on the books of the Holders in favor of the Company or any other Person,
despite any notice or request of the Guarantor to do so; (i) any rights of the
Guarantor pursuant to Official Code of Georgia Section 10-7-24 or any similar or
subsequent law; (j) all other notices to which the Guarantor might otherwise be
entitled; and (k) demand for payment under this Guaranty.
This is a guaranty of payment and not of collection. The liability of the
Guarantor on this Guaranty shall be continuing, direct and immediate and not
conditional or contingent upon either the pursuit of any remedies against the
Company or any other Person or foreclosure of any security interest or liens
2
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available to the Trustee or any of the Holders. The Trustee or any of the
Holders may accept any payment, plan for adjustment of debts, plan for
reorganization or liquidation, or plan of composition or extension proposed by,
or on behalf of, the Company or any other guarantor without in any way affecting
or discharging the liability of the Guarantor hereunder. If the Obligations are
partially paid, the Guarantor shall remain liable for any balance of such
Obligations. The Guaranty shall be revived and reinstated in the event any
payment received by the Trustee or any of the Holders on any Obligations is
required to be repaid or rescinded under present or future federal or state law
or regulation relating to bankruptcy, insolvency or other relief of debtors.
The Holders or the Trustee, acting on their behalf, may, without notice to
the Guarantor, sell, assign or transfer all or any of the Obligations, and in
such event each and every immediate and successive assignee, transferee, or
holder of all or any of the Obligations shall have the right to enforce this
Guaranty, by suit or otherwise, for the benefit of such assignee, transferee or
holder, as fully as if such assignee, transferee or holder were herein by name
specifically given such rights, powers and benefits, but the Trustee shall have
an unimpaired right, prior and superior to that of any such assignee, transferee
or holder, to enforce this Guaranty for the benefit of the Holders, as to so
much of the Obligations as has not been sold, assigned or transferred.
No delay or failure on the part of the Trustee or any of the Holders in the
exercise of any right or remedy shall operate as a waiver thereof, and no single
or partial exercise by the Trustee or any of the Holders of any right or remedy
shall preclude other or further exercise thereof or the exercise of any other
right or remedy.
For the purpose of this Guaranty, the Obligations shall include all debts,
liabilities and obligations of the Company to the Trustee or any of the Holders
of the Notes under the Indenture, notwithstanding any right or power of the
Company or anyone else to assert any claim or defense as to the invalidity or
unenforceability thereof, and no such claim or defense shall impair or affect
the obligations and liabilities of the Guarantor hereunder.
Any amount received by the Trustee or any of the Holders from whatever
source and applied by it toward the payment of the Obligations shall be applied
in such order of application as the Trustee may from time to time elect in
accordance with the applicable terms of the Indenture.
This Guaranty shall bind and inure to the benefit of the Trustee and the
Holders, and their respective successors and assigns, and likewise shall bind
the Guarantor and its successors and assigns. If more than one Person shall
execute this Guaranty, the term "Guarantor" shall mean, as used herein, all
parties executing this Guaranty and all such parties shall be liable jointly and
severally, one with the other and with the Company, for each of the
undertakings, agreements, obligations, covenants and liabilities provided for
herein with respect to the Guarantor. This Guaranty contains the entire
agreement and there is no understanding that any Person, other than the
Guarantor shall execute this or a similar Guaranty as a condition to its
effectiveness. Furthermore, no course of prior dealing between the parties, no
usage of trade, and no parol or extrinsic evidence shall be used to supplement
or modify any terms of this Guaranty; nor are there any conditions to the
complete effectiveness of this Guaranty.
This Guaranty shall be deemed accepted by the Trustee on behalf of the
Holders in the State of New York. The parties agree that this Guaranty shall be
deemed, made, delivered, performed and accepted by the Trustee on behalf of the
Holders in the State of New York and shall be governed by the laws of the State
of New York. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
3
<PAGE>
The Guarantor (a) submits to personal jurisdiction in the State of New
York, the courts thereof and the United States District Courts sitting therein,
for the enforcement of this Guaranty, (b) waives any and all personal rights
under the law of any jurisdiction to object on any basis (including, without
limitation, inconvenience of forum) to jurisdiction or venue within the State of
New York for the purpose of litigation to enforce this Guaranty, and (c) agrees
that service of process may be made upon the Guarantor by first class postage
prepaid mail, addressed to the Guarantor at the latest address of the Guarantor
known to the Trustee (or at such other address as the Guarantor may specify for
the purpose by written notice to such effect to the Trustee). Nothing herein
contained, however, shall prevent the Trustee or any Holder from bringing any
action or exercising any rights against any security and against the Guarantor
personally, and against any assets of the Guarantor, within any other state or
jurisdiction.
The Guarantor expressly waives, for the Trustee's and the Holders'
collective benefit and the benefit of the Company and any other guarantor, maker
or endorser of the Obligations, any and all claims or actions against the
Company, any other guarantor, maker or endorser of the Obligations and any and
all rights of recourse against any property or assets of the Company, any other
guarantor, maker or endorser of the Obligations (including without limitation,
any security for the Obligations) arising out of or related to any payment made
by the Guarantor under this Guaranty, including, without limitation, any claim
of the Guarantor for subrogation, reimbursement, exoneration, contribution or
indemnity that the Guarantor may have against the Company, any other guarantor,
maker or endorser of the Obligations, and any benefit of, and any other right to
participate in, any security for the Obligations or any guaranty of the
Obligations now or hereafter held by the Trustee or any Holders. The waiver
contained in this paragraph shall continue and survive until the termination of
this Guaranty and the full payment and satisfaction of the Obligations.
Notwithstanding any term of this Guaranty which is, or may be construed to
be, to the contrary, it is the mutual intent of the Guarantor, the Trustee and
the Holders that the Guarantor's maximum liability arising hereunder in respect
of the obligations shall not, in any event, exceed the maximum amount permitted
by applicable federal bankruptcy, state insolvency, or similar laws affecting
the enforcement of creditors' rights generally ("Applicable Law"). To that end,
but only to the extent that the obligations of the Guarantor hereunder, or any
portion thereof, would otherwise be subject to avoidance under Applicable Law if
the Guarantor is not deemed to have received valuable consideration, fair value
or reasonably equivalent value for the incurrence thereof, the Guarantor's
obligations hereunder shall be reduced to that amount which, after giving effect
thereto, would not render the Guarantor insolvent, or leave the Guarantor with
an unreasonably small capital to conduct its business, or cause the Guarantor to
have incurred debts (or intended to have incurred debts) beyond its ability to
pay such debts as they mature, at the time such obligations are deemed to have
been incurred under Applicable Law. As used herein, the terms "insolvent" and
"unreasonably small capital" shall likewise be determined in accordance with
Applicable Law. This section is intended solely to preserve the rights of the
Trustee and the Holders hereunder to the maximum extent permitted by Applicable
Law, and neither the Guarantor nor any other persons shall have any right or
claim under this paragraph that would not otherwise be available under
Applicable Law.
SECTION 2. Amendments, Waivers and Consents. The Guarantor and the Trustee
may amend or agree to waive any of the provisions of this Guaranty; provided
however, that without the consent of the Required Holders, no such amendment or
waiver shall be made which adversely affects the interests of the Holders in any
material respect. Any amendment or waiver of any provision of this Guaranty and
any consent to any departure by the Guarantor from any provision of this
Guaranty shall be effective only if made or duly given in compliance with all of
the terms and provisions of this Section 2 and neither the Trustee nor any
Holder shall be deemed, by any act, delay, indulgence, omission or otherwise to
have waived any right or remedy hereunder or to have acquiesced in any default
hereunder or in any breach of any of the terms and conditions hereof. Failure of
4
<PAGE>
the Trustee or any Holder to exercise, or delay in exercising, any right, power
or privilege hereunder shall not preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. A waiver by the Trustee
or any Holder of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy that the Trustee or such Holder would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
SECTION 3. Waivers. The Guarantor waives presentment and demand for payment
of any of the Obligations, protest and notice of dishonor or default with
respect to any of the Obligations, and all other notices to which the Guarantor
might otherwise be entitled, except as otherwise expressly provided herein.
SECTION 4. Successors and Assigns. This Guaranty and all obligations of the
Guarantor hereunder shall be binding upon the successors of the Guarantor, and
shall, together with the rights and remedies of the Trustee hereunder, inure to
the benefit of the Trustee and the Holders, and their respective successors and
assigns. The obligations of the Guarantor hereunder are not assignable and any
attempt to assign all or any portion of such obligations shall be null and void.
SECTION 5. Termination of Guaranty. This Guaranty shall be automatically
and unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the Company's
and each Restricted Subsidiary's Capital Stock in, or all or substantially all
the assets of, the Guarantor (which sale, exchange or transfer is not prohibited
by the Indenture) or (ii) the release or discharge of the Guarantee which
resulted in the creation of this Subsidiary Guaranty, except a discharge or
release by, or as a result of, payment under such Guarantee.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
under seal as of ____________________, 19__.
[NAME OF GUARANTOR]
By:
Title:
Attest:
Title:
5
<TABLE>
Exhibit 11.1
Computation of Earnings Per Common Share
(In thousands, except per share data)
<CAPTION>
Quarter Ended Six Months Ended
- ------------------------------------------------------------------------------------------------------------------------------------
June 28, June 29, June 28, June 29,
1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average number of common shares used in basic calculation 37,513 38,325 38,167 38,566
Net additional shares issuable pursuant to employee stock
option plans at period-end market price 80 109 34 138
Shares issuable on assumed conversion of convertible
preferred securities 7,774 7,774 7,774 4,357
====================================================================================================================================
Average number of common shares used in diluted calculation 45,367 46,208 45,975 43,061
====================================================================================================================================
Earnings before cumulative effect of change in accounting principle $ 6,325 10,224 44,864 17,492
Cumulative effect of change in accounting principle, net of tax benefit - - 1,461 -
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings 6,325 10,224 43,403 17,492
Distribution savings on assumed conversion of convertible
preferred securities, net of income taxes 1,328 1,288 2,656 1,528
====================================================================================================================================
Net earnings for computation of diluted earnings per common share $ 7,653 11,512 46,059 19,020
====================================================================================================================================
Basic earnings before cumulative effect of change in accounting principle $ 0.17 0.27 1.18 0.45
Cumulative effect of change in accounting principle - - (0.04) -
====================================================================================================================================
Basic earnings per common share $ 0.17 0.27 1.14 0.45
====================================================================================================================================
Diluted earnings before cumulative effect of change in accounting principle $ 0.17 0.25 1.03 0.44
Cumulative effect of change in accounting principle - - (0.03) -
====================================================================================================================================
Diluted earnings per common share $ 0.17 0.25 1.00 0.44
====================================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM
10-Q FOR THE PERIOD ENDING JUNE 28, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS).
</LEGEND>
<CIK> 0000849101
<NAME> Apple South, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Jan-03-1999
<PERIOD-START> Dec-29-1997
<PERIOD-END> Jun-28-1998
<CASH> 3,706
<SECURITIES> 27
<RECEIVABLES> 14,684
<ALLOWANCES> 0
<INVENTORY> 10,116
<CURRENT-ASSETS> 358,525
<PP&E> 314,033
<DEPRECIATION> 0
<TOTAL-ASSETS> 852,898
<CURRENT-LIABILITIES> 95,585
<BONDS> 385,450
115,000
0
<COMMON> 405
<OTHER-SE> 229,576
<TOTAL-LIABILITY-AND-EQUITY> 852,898
<SALES> 481,519
<TOTAL-REVENUES> 481,519
<CGS> 134,697
<TOTAL-COSTS> 411,417
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,353
<INCOME-PRETAX> 70,789
<INCOME-TAX> 25,925
<INCOME-CONTINUING> 44,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,461
<NET-INCOME> 43,403
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
