UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
May 3, 1999
Date of Report (Date of earliest event reported)
AVADO BRANDS, INC.
(Exact name of registrant as specified in its charter)
Georgia Commission File No. 0-19542 59-2778983
- ------------------------ ------------------------------- -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
Hancock at Washington
Madison, Georgia 30650
- ------------------------ -------------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: (706) 342-4552
<PAGE>
ITEM 2. DISPOSITION OF ASSETS
On May 3, 1999, the Registrant completed the divestiture of its 279
franchised Applebee's Neighborhood Grill & Bar ("Applebee's") restaurants. Gross
consideration from the sales, based on arm's-length negotiations between the
parties, was $514.0 million resulting in an estimated pre-tax gain of $86.8
million ($53.8 million after-tax gain). At closing, the Registrant relinquished
its rights to develop Applebee's restaurants in the related markets. The
following table summarizes the completed divestiture transactions:
================ ================================== ============================
Closing Date Purchaser Restaurants
================ ================================== ============================
March 29, 1998 Applebee's International, Inc. 33 restaurants in Virginia
- ---------------- ---------------------------------- ----------------------------
June 15, 1998 TSSO, Inc. 1 restaurant in Illinois
- ---------------- ---------------------------------- ----------------------------
June 28, 1998 Quality Restaurant Concepts, LLC 26 restaurants in east
Tennessee and Mississippi
- ---------------- ---------------------------------- ----------------------------
June 28, 1998 Whit-Mart, Inc. 12 restaurants in South
Carolina
- ---------------- ---------------------------------- ----------------------------
August 3, 1998 Florida Apple, LLC 35 restaurants in Georgia
and Florida
- ---------------- ---------------------------------- ----------------------------
August 3, 1998 U.S. Restaurant Properties, Inc. 16 restaurants in Iowa and
and Darrel L. Rolph (two separate northwestern Illinois
agreements)
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 WHG Real Estate South, LLC and 9 restaurants in Wisconsin
Wisconsin Hospitality Group, LLC
WHG Real Estate East, LLC and 10 restaurants in Wisconsin
Wisconsin Hospitality Group, LLC
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 Woodland Group, Inc. 16 restaurants in Tennessee
and Kentucky
- ---------------- ---------------------------------- ----------------------------
August 24, 1998 Bloomin' Apple, LLC 4 restaurants in Illinois
and Wisconsin
- ---------------- ---------------------------------- ----------------------------
Sept. 14, 1998 Apple J, L.P. 29 restaurants in South
Carolina, North Carolina
and Georgia
- ---------------- ---------------------------------- ----------------------------
Oct. 26, 1998 The Delta Bluff, LLC 13 restaurants in Tennessee
and Mississippi
- ---------------- ---------------------------------- ----------------------------
Nov. 17, 1998 AppleIllinois Corp. 25 restaurants in Illinois
- ---------------- ---------------------------------- ----------------------------
Dec. 7, 1998 WHG Real Estate North, LLC and 4 restaurants in Wisconsin
Wisconsin Hospitality Group, LLC
- ---------------- ---------------------------------- ----------------------------
Feb. 18, 1999 Neighborhood Hospitality, Inc. 13 restaurants in West
Virginia, Kentucky and Ohio
- ---------------- ---------------------------------- ----------------------------
March 29, 1999 Whit-Mart, Inc. 8 restaurants in Kentucky
and Indiana
- ---------------- ---------------------------------- ----------------------------
May 3, 1999 Apple Capitol Group, LLC 25 restaurants in Washington
D.C., Pennsylvania, Delaware
Maryland and West Virginia
- ---------------- ---------------------------------- ----------------------------
Page 2
<PAGE>
ITEM 5. OTHER EVENTS
On May 17, 1999, the Registrant issued a Press Release regarding the
amendment of certain covenants pertaining to its 9.75% Senior Notes due 2006
attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma Financial Statements.
Basis of Presentation
The accompanying pro forma consolidated statement of earnings for the year
ended January 3, 1999 presents the results of Avado Brands, Inc. (the
"Company"), excluding the operations of its divested Applebee's restaurants, as
if such operations had been disposed of at the beginning of the period. The pro
forma consolidated balance sheet has been prepared assuming the divestitures
took place as of January 3, 1999.
The pro forma consolidated statement of earnings, balance sheet and notes
thereto should be read in conjunction with the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the year ended January
3, 1999.
The pro forma information is not necessarily indicative of the consolidated
results of operations or the consolidated financial position that would have
resulted had the Applebee's restaurant dispositions occurred as described above,
nor is it necessarily indicative of the results of operations of future periods
or future consolidated financial position.
Page 3
<PAGE>
<TABLE>
Avado Brands, Inc.
Pro Forma Consolidated Statement of Earnings
(Unaudited)
(In thousands, except per share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
Year Ended Year Ended
January 3, Pro Forma January 3,
1999 Adjustments 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Restaurant sales:
Canyon Cafe $ 48,187 - 48,187
Don Pablo's 270,399 - 270,399
Hops 106,329 - 106,329
McCormick & Schmick's 102,489 - 102,489
Applebee's 335,288 (335,288)(B) -
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant sales 862,692 (335,288) 527,404
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurant operating expenses:
Food and beverage 241,689 (93,803)(B) 147,886
Payroll and benefits 279,274 (119,189)(B) 160,085
Depreciation and amortization 17,014 - (B) 17,014
Other operating expenses 202,994 (79,457)(B) 123,537
- ------------------------------------------------------------------------------------------------------------------------------------
Total restaurant operating expenses 740,971 (292,449) 448,522
- ------------------------------------------------------------------------------------------------------------------------------------
General and administrative expenses 46,150 (13,641)(B) 32,509
Asset revaluation and other special charges 2,940 (778)(B) 2,162
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income 72,631 (28,420) 44,211
- ------------------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (25,313) 13,130 (C) (12,183)
Distributions on preferred securities (8,205) - (8,205)
Gain on disposal of assets 72,547 5,543 (D) 78,090
Income from investments carried at equity 1,025 - 1,025
Other, primarily goodwill amortization (5,641) 250 (B) (5,391)
- ------------------------------------------------------------------------------------------------------------------------------------
Total other income (expense) 34,413 18,923 53,336
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes and cumulative effect
of change in accounting principle 107,044 (9,497) 97,547
Income taxes 39,300 (3,000)(E) 36,300
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of change
in accounting principle 67,744 (6,497) 61,247
- ------------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
principle, net of tax benefit 1,461 - 1,461
- ------------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 66,283 (6,497) 59,786
====================================================================================================================================
Basic earnings per common share before cumulative
effect of change in accounting principle $ 1.85 1.67
Cumulative effect of change in accounting principle (0.04) (0.04)
- --------------------------------------------------------------------------------------------- -----------
Basic earnings per common share $ 1.81 1.63
============================================================================================= ===========
Diluted earnings per common share before cumulative
effect of change in accounting principle $ 1.65 1.50
Cumulative effect of change in accounting principle (0.03) (0.03)
- --------------------------------------------------------------------------------------------- -----------
Diluted earnings per common share $ 1.62 1.47
============================================================================================= ===========
Average number of common shares used in basic calculation 36,612 36,612
============================================================================================= ===========
Average number of common shares used in diluted calculation 44,395 44,395
============================================================================================= ===========
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
Page 4
<PAGE>
<TABLE>
Avado Brands, Inc
Pro Forma Consolidated Balance Sheet
(Unaudited)
(In thousands, except share data)
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Historical Pro Forma
January 3, Pro Forma January 3,
1999 Adjustments 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,216 - 7,216
Short-term investments 27 - 27
Accounts receivable 9,124 - 9,124
Inventories 8,599 (820)(A) 7,779
Prepaid expenses and other 3,205 (340)(A) 2,865
Assets held for sale 72,814 (68,320)(A) 4,494
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 100,985 (69,480) 31,505
Premises and equipment, net 367,587 - 367,587
Goodwill, net 138,005 - 138,005
Investments carried at equity 16,106 - 16,106
Other assets 47,914 (3,427)(A) 44,487
- ------------------------------------------------------------------------------------------------------------------------------------
$ 670,597 (72,907) 597,690
====================================================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 28,474 - 28,474
Accrued liabilities 42,053 5,866 (A) 47,919
Current installments of long-term debt 140,500 (84,316)(A) 56,184
Income taxes 28,091 2,106 (A) 30,197
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 239,118 (76,344) 162,774
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt 116,978 - 116,978
Deferred income taxes 8,200 - 8,200
Other long-term liabilities 8,177 - 8,177
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 372,473 (76,344) 296,129
- ------------------------------------------------------------------------------------------------------------------------------------
Company-obligated mandatorily redeemable preferred securities of
Avado Financing I, a subsidiary holding solely Avado Brands, Inc.
7% convertible subordinated debentures due March 1, 2027 115,000 - 115,000
Temporary equity, net 71,095 - 71,095
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 63,431 - 63,431
Retained earnings 162,411 3,437 (A) 165,848
Accumulated other comprehensive income 24 - 24
Treasury stock at cost; 8,910,174 shares in 1998 and 1,662,812
shares in 1997 (114,242) - (114,242)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 112,029 3,437 115,466
- ------------------------------------------------------------------------------------------------------------------------------------
$ 670,597 (72,907) 597,690
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
Avado Brands, Inc.
Notes to Pro Forma
Consolidated Financial Statements
Note A
Pursuant to 16 separate transactions, the Company has divested of its 279
franchised Applebee's Neighborhood Grill & Bar restaurants as of May 3, 1999.
Total gross consideration from the sales was $514.0 million resulting in an
estimated pre-tax gain of $86.8 million ($53.8 million after-tax gain). Thirteen
of the transactions were closed prior to January 3, 1999, and these transactions
were reflected in the Company's consolidated balance sheet for the period ended
January 3, 1999. As such, the pro forma adjustments in the accompanying pro
forma consolidated balance sheet reflect the pro forma effects of the remaining
three transactions which were closed subsequent to January 3, 1999.
The pro forma adjustment to long-term debt reflects the assumption that
sales proceeds from the transactions closed subsequent to January 3, 1999 would
have been used to reduce revolving credit obligations.
The pro forma adjustment to income tax liability reflects the taxes on the
gain on disposal of assets using a 38.0% effective rate.
The remaining pro forma adjustments to inventories, prepaid expenses and
other, assets held for sale and accrued liabilities reflect the sale of certain
assets and accruals for costs related to the three transactions closed
subsequent to January 3, 1999. The decrease in other assets primarily reflects
the sale of properties which had been initially leased to the buyers of certain
Applebee's markets.
Note B
The pro forma adjustments to revenues, restaurant operating expenses,
general and administrative expenses, special charges and other expenses
eliminate the activity of the 279 divested Applebee's restaurants including the
elimination of general and administrative expenses incurred at the Company's
Applebee's and Corporate headquarters directly related to the Applebee's brand.
Note C
The pro forma adjustment to interest expense reflects the changes resulting
from the assumed use of divestiture proceeds to reduce long-term debt related to
revolving credit agreements. In accordance with Securities and Exchange
Commission regulations, no adjustments were made to reflect pro forma interest
income which would have been earned on the proceeds received in excess of
revolving credit obligations of approximately $177.2 million.
Note D
The pro forma adjustment to gain on disposal of assets held for sale
reflects the estimated pre-tax gain related to the three divestiture
transactions completed subsequent to January 3, 1999.
Note E
The pro forma adjustment to income taxes reflects the blend of taxes on
operations provided at 34.0% and taxes on the gain on disposal of assets
provided at 38.0%.
Page 6
<PAGE>
(c) Exhibits.
2.1 Asset purchase agreement dated April 23, 1998, by and among Apple
South, Inc. and Whit-Mart, Inc.(1)
2.2 Asset purchase agreement dated May 1, 1998, by and among Apple South,
Inc. and T.S.S.O., Inc., and Lois Sedowicz.(1)
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.(1)
2.4 Asset purchase agreement dated June 19, 1998, by and among Apple South,
Inc. and U.S. Restaurant Properties Operating LP.(1)
2.5 Asset purchase agreement dated June 19, 1998, by and among Apple South,
Inc. and Darrel L. Rolph.(1)
2.6 Asset purchase agreement dated December 23, 1997 by and among Apple
South, Inc. and Applebee's International, Inc.(2)
2.7 Asset purchase agreement dated March 16, 1998 by and among Apple South,
Inc. and Quality Restaurant Concepts, LLC.(3)
2.8 Asset purchase agreement dated August 20, 1998 by an among Apple South,
Inc. and WHG Real Estate South, LLC and Wisconsin Hispitality Group, LLC.(4)
2.9 Asset purchase agreement dated August 20, 1998 by and among Apple
South, Inc. and WHG Real Estate East, LLC and Wisconsin Hospitality Group,
LLC.(4)
2.10 Asset purchase agreement dated April 6, 1998 by and among Apple South,
Inc. and Woodland Group, Inc.(4)
2.11 Asset purchase agreement dated May 15, 1998 by and among Apple South,
Inc. and Bloomin' Apple, LLC.(4)
2.12 Asset purchase agreement dated June 26, 1998 by and among Apple South,
Inc. and Apple J, L.P.(4)
2.13 Asset purchase agreement dated July 31, 1998, by and among Apple
South, Inc. and Delta Bluff, LLC.(5)
2.14 Asset purchase agreement dated September 15, 1998, by and among Apple
South, Inc. and WHG Real Estate North, LLC and Wisconsin Hospitality Group,
LLC.(6)
2.15 Asset purchase agreement dated June 29, 1998, by and among Apple
South, Inc. and AppleILLINOIS, LLC.
2.16 Asset purchase agreement dated September 30, 1998 by and among Apple
South, Inc. and Neighborhood Hospitality, Inc.
2.17 Asset purchase agreement dated February 9, 1999, by and among Avado
Brands, Inc. and Whit-Mart, Inc.
2.18 Asset purchase agreement dated November 25, 1998, by and among Avado
Brands, Inc. and Capitol Apple Group, LLC.
99.1 Press release dated May 17, 1999
_____________________________________________________________________
(1)Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 28, 1998.
(2)Incorporated by reference to the Registrant's 8-K filed on January 15,
1998.
(3)Incorporated by reference to the Registrants 10-K for the year ended
December 28, 1997.
(4)Incorporated by reference to the Registrant's 8-K filed on September 25,
1998.
(5)Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 27, 1998.
(6)Incorporated by reference to the Registrants 10-K for the year ended
January 3, 1999.
Page 7
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AVADO BRANDS, INC.
(Registrant)
Date: May 17, 1999 By: /s/ Louis J. Profumo
---------------------------------
Louis J. Profumo
Senior Vice President of Finance
and Chief Accounting Officer
Page 8
<PAGE>
EXHIBIT INDEX
2.1 Asset purchase agreement dated April 23, 1998, by and among Apple
South, Inc. and Whit-Mart, Inc.(1)
2.2 Asset purchase agreement dated May 1, 1998, by and among Apple South,
Inc. and T.S.S.O., Inc., and Lois Sedowicz.(1)
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.(1)
2.4 Asset purchase agreement dated June 19, 1998, by and among Apple South,
Inc. and U.S. Restaurant Properties Operating LP.(1)
2.5 Asset purchase agreement dated June 19, 1998, by and among Apple South,
Inc. and Darrel L. Rolph.(1)
2.6 Asset purchase agreement dated December 23, 1997 by and among Apple
South, Inc. and Applebee's International, Inc.(2)
2.7 Asset purchase agreement dated March 16, 1998 by and among Apple South,
Inc. and Quality Restaurant Concepts, LLC.(3)
2.8 Asset purchase agreement dated August 20, 1998 by an among Apple South,
Inc. and WHG Real Estate South, LLC and Wisconsin Hispitality Group, LLC.(4)
2.9 Asset purchase agreement dated August 20, 1998 by and among Apple
South, Inc. and WHG Real Estate East, LLC and Wisconsin Hospitality Group,
LLC.(4)
2.10 Asset purchase agreement dated April 6, 1998 by and among Apple South,
Inc. and Woodland Group, Inc.(4)
2.11 Asset purchase agreement dated May 15, 1998 by and among Apple South,
Inc. and Bloomin' Apple, LLC.(4)
2.12 Asset purchase agreement dated June 26, 1998 by and among Apple South,
Inc. and Apple J, L.P.(4)
2.13 Asset purchase agreement dated July 31, 1998, by and among Apple
South, Inc. and Delta Bluff, LLC.(5)
2.14 Asset purchase agreement dated September 15, 1998, by and among Apple
South, Inc. and WHG Real Estate North, LLC and Wisconsin Hospitality Group,
LLC.(6)
2.15 Asset purchase agreement dated June 29, 1998, by and among Apple
South, Inc. and AppleILLINOIS, LLC.
2.16 Asset purchase agreement dated September 30, 1998 by and among Apple
South, Inc. and Neighborhood Hospitality, Inc.
2.17 Asset purchase agreement dated February 9, 1999, by and among Avado
Brands, Inc. and Whit-Mart, Inc.
2.18 Asset purchase agreement dated November 25, 1998, by and among Avado
Brands, Inc. and Capitol Apple Group, LLC.
99.1 Press release dated May 17, 1999
_____________________________________________________________________
(1)Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 28, 1998.
(2)Incorporated by reference to the Registrant's 8-K filed on January 15,
1998.
(3)Incorporated by reference to the Registrants 10-K for the year ended
December 28, 1997.
(4)Incorporated by reference to the Registrant's 8-K filed on September 25,
1998.
(5)Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 27, 1998.
(6)Incorporated by reference to the Registrants 10-K for the year ended
January 3, 1999.
9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of June 29, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and AppleILLINOIS, LLC, an
Illinois limited liability company ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADI's" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials;
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v) all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii) copies of Seller's employee records of those current employees of
Seller who are employed by Purchaser as of the Closing (subject to execution of
a release by each affected employee allowing for the disclosure of such files);
(viii) the Contracts and Leases;
1
<PAGE>
(ix) the Owned Real Property; and
(x) all records and files related to the Real Property and Development
Sites (which Purchaser elects to pursue under Section 6.5 and pays Seller the
Development Costs thereof) such as rent calculations, landlord correspondence,
purchase agreements, deeds, construction documents, title reports, environmental
and engineering reports, appraisals, surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, or any other property, tangible or intangible, real
or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c), and (viii) all
obligations with respect to Seller's development of the Development Restaurants
and Development Sites (which Purchaser elects to pursue under Section 6.5) 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, with respect to which Seller shall be and remain solely
responsible for, and specifically shall not include (i) liabilities or
obligations of Seller arising out of any breach by Seller of any of the
Contracts or Leases; (ii) except as provided in clauses (ii) or (iv) above,
liabilities or obligations of Seller under any of the Contracts or Leases or
with respect to the Owned Real Property or other Assets that accrue in any such
case prior to the Closing; (iii) any liabilities or obligations of Seller under
the Franchise Agreements; (iv) any liability of Seller for product liability,
personal injury, property damage, or otherwise based on any tort claim or
statutory liability (including but not limited to any "dram shop" liability);
(v) any federal, state, or local tax liability of Seller except to the extent
expressly assumed hereunder, (vi) any contractual claim based on any lease,
contract, or agreement other than the Contracts and Leases; (vii) any liability,
obligation, or responsibility of Seller to Seller's employees, agents, or
independent contractors with respect to wages, salaries, bonuses, or other
compensation or benefits earned or accrued prior to the Closing (except for
accrued but unvested vacation assumed pursuant to Section 6.3(c)); and (viii)
any liability or obligation of Seller arising out of the negotiation, execution,
or performance of this Agreement, including fees and expenses of attorneys and
accountants, except as otherwise expressly provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
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<PAGE>
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds, limited warranty deeds or other
appropriate instruments to convey good and marketable fee simple title to the
Owned Real Property to Purchaser or Purchaser's designee, with the warranty of
title contained therein limited to the claims of Persons claiming by, through or
under Seller (or in the case of the DR Holdings Tracts, the owner thereof), but
not otherwise.
"Development Costs" shall mean (i) all of Seller's out-of-pocket costs paid
in connection with the identification and development of the Development
Restaurants and Development Sites in each case which are capitalized in
accordance with generally accepted accounting principles and Seller's historical
practices including, but not limited to, the purchase price paid for real
estate; acquisition and closing costs, such as legal fees, engineering fees,
surveys, transfer taxes, title policies, and the like; costs of obtaining
leases, such as legal fees, surveys, title policies, and the like; environmental
investigation costs; the cost of permits, approvals, variances, or rezonings;
land development costs; construction costs; the cost of equipment and other
personal property acquired for the restaurants; pre-opening expenses; and
construction period insurance; and (ii) Seller's internal costs capitalized in
connection with such identification and development efforts in accordance with
Seller's historic practices.
"Development Restaurants" shall have the meaning set forth in Section 4.7.
"Development Sites" shall have the meaning set forth in Section 4.7.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"DR Holdings Tracts" shall mean four (4) parcels of real property located
in Bloomingdale, Streamwood, Hodgkins and Crystal Lake, Illinois, all of which
are subject to leases, but which Seller shall cause to be conveyed to Purchaser
in fee simple at the Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil, and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
3
<PAGE>
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, stipulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"Excluded Restaurants" shall mean those Restaurants 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.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Applebee's International, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal, state, local, municipal, or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Sellers' vice president of operations for the Territory and all management of
Seller senior thereto.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B and any leases subsequently entered into and pertaining to
Development Restaurants.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less, a list of which are set forth on
Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located or which is being held for a Development
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Restaurant (all of which tracts and parcels are described in Schedule 1.1C), and
all buildings, fixtures, signs, parking facilities, and other improvements
located thereon and appurtenances thereto. For the purposes of this Agreement,
"Owned Real Property" will include the DR Holdings Tracts.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from any Government which
relate exclusively to the Business, the Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean (i) such easements, restrictions,
covenants, and other such encumbrances which are shown as exceptions on the
Title Commitments and any other encumbrances of record as of the effective date
of the Title Commitments, (ii) ordinances (municipal and zoning), (iii) survey
matters, and (iv) such easements, restrictions, covenants, and other
encumbrances which become matters of public record after the effective date of
the Title Commitments and before the Closing, in each such case, to the extent
that such encumbrances could not reasonably be expected to materially interfere
with or impair Purchaser's use of the Real Property for Applebee's Neighborhood
Grill & Bar Restaurants or other reasonable commercial use or that are waived,
or deemed to be waived, by Purchaser pursuant to Section 7.1(a). Permitted
Encumbrances shall include in the case of both Real Property and personal
property all liens for taxes not yet due and payable. In the case of Assets
pertaining to the Development Restaurants, 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.
"Purchase Price Adjustment Schedule" shall have the meaning set forth in
Section 2.3.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the twenty three (23) Applebee's Neighborhood
Grill & Bar restaurants operated by Seller at the locations set forth on
Schedule 1.1A and any additional Development Restaurants completed prior to
Closing.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean August 31, 1998.
"Territory" shall mean those ADI's consisting of certain counties in the
State of Illinois as more particularly set forth on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 4.12(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.12(a).
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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 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 $30,665,000 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 that pertain to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to Seller's cost of
those Assets consisting of food, beverage (including beer, wine, and liquor),
new uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date, not to
exceed $15,000 per Restaurant; (v) the amount of Seller's Development Costs for
the Round Lake, Illinois Development Restaurant (provided, however, that
Purchaser shall not reimburse Seller for such Development Costs which exceed
$1,975,000 in the aggregate or for "pre-opening" Development Costs for such
location in excess of $75,000.00); (vi) if the Purchaser elects to pursue the
Development Sites under Section 6.5 and such sites are still available at such
time, the amount of the Development Costs for each such site; and (vii) the
purchase price for any assets Purchaser elects to purchase from Seller in
accordance with Section 4.13.
(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 Purchaser 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.
The foregoing adjustments shall be calculated by the parties and set forth
on a Purchase Price adjustment schedule (the "Purchase Price Adjustment
Schedule") which shall be signed by both parties at Closing. The Purchase Price
shall be paid by Purchaser on the Closing Date by wire transfer of immediately
available funds to an account designated by Seller. As soon as possible after
the Closing (but not later than the first anniversary thereof), the parties
shall reconcile the actual amount of prorations that were estimated at Closing
as well as 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
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than those reflected on the Purchase Price Adjustment Schedule are discovered
after the Closing, the parties agree to remit the correct amount of such items
to the appropriate party as and when same are determined.
2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date;
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit B hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller or in the case of the DR Holdings
Tracts by the owner thereof;
(vii) A Cross-Receipt, duly executed by Seller; and
(viii) Any other documents that Purchaser may reasonably request (including
estoppel letters from the landlords under the Leases in such form that Purchaser
or its lender may reasonably request) at least three days prior to the Closing
in order to effectuate the transactions contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request that all
representations and warranties of Purchaser in this Agreement are true in all
material respects as of the Closing Date;
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(A) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Bill of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (B) as to the incumbency and specimen signature of each officer
of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the Purchase Price;
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(iv) The Bill of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Ronald L. Panter & Associates, 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. In the event of a casualty which Seller has not been able
to repair or remedy prior to the Effective Time, Seller shall remit to Purchaser
at Closing the amount of the insurance proceeds related thereto less the amount
Seller spent prior to the Effective Time in repairing or remediating the
casualty, and proceeds from Seller's business interruption insurance (if Seller
has such coverage and if any is payable) shall be equitably shared by Seller and
Purchaser based on the extent to which the proceeds were paid based on
interruption to the affected Restaurant before and after the Effective Date,
respectively.
2.6 Closing. The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of a title company selected by
Purchaser located in Chicago, Illinois, at 10:00 a.m. on August 4, 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 Excluded Restaurants. (a) If prior to Closing (i) Seller is unable to
obtain a required Consent to the assignment of a Lease, (ii) Seller fails to
cure a Material Objection or any Owned Real Property becomes subject (after the
date of the applicable Title Commitment) to an encumbrance other than a
Permitted Encumbrance which Seller fails to cure, or (iii) Purchaser fails to
obtain a permit, license or other Government approval required for the operation
of a Restaurant by Purchaser after the Effective Time (despite Purchaser's best
efforts to obtain same) and Purchaser reasonably believes that it will not be
able to obtain such a permit, license or approval within two months of the
Closing Date, Purchaser may designate at Closing the affected Restaurant as an
Excluded Restaurant; provided, however, that notwithstanding anything herein to
the contrary, no more than two (2) Restaurants may be designated as Excluded
Restaurants.
(b) If any Restaurants are designated as Excluded Restaurants in accordance
with Section 2.8(a), then the Lease or the Owned Real Property and all other
Assets relating exclusively to such Excluded Restaurants shall not be
transferred to Purchaser hereunder, Assumed Liabilities pertaining to such
Excluded Restaurants shall not be assumed by Purchaser hereunder, and the
Purchase Price shall be reduced by the amounts allocated to such Excluded
Restaurants and attendant Assets on Exhibit D.
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
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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.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, the execution,
delivery and performance of this Agreement will not violate or result in a
breach of any term of Seller's Articles of Incorporation or Bylaws, result in a
breach of any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents executed in connection herewith, and the
consummation of the transactions contemplated hereby and thereby do not require
any filing with, notice to or consent, waiver or approval of any third party,
including but not limited to, any Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Seller, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
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3.5 Assets. (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements.
(c) There are no assets or property of any nature which is not being
transferred to Purchaser hereunder that has been customarily used exclusively in
the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property having a fair market
value of $10,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
3.6 Contracts and Leases. (a) Each Material Contract and Lease is a valid
and subsisting agreement, without any material default of Seller thereunder, and
to the knowledge of Seller, without any default on the part of any other party
thereto. To the knowledge of Seller, no event or occurrence has transpired which
with the passage of time or giving of notice or both will constitute a default
under any Material Contract or Lease. A true and correct list of each Material
Contract and Lease and every amendment thereto or other agreement or document
relating thereto is set forth as Schedule 3.6(a) to this Agreement. True and
correct copies of the Material Contracts and Leases (and any amendments thereto)
have been provided to Purchaser. At the time of Closing, Seller shall have made
all payments and performed all obligations due through the Closing Date under
each Contract and Lease, except to the extent that any payment due is set forth
on the Purchase Price Adjustment Schedule and deducted in calculating the
Purchase Price pursuant to Section 2.3.
(b) A true and correct list of contracts to which the Seller is a party
with respect to the operation of the Business as well as other territories
(which contracts, therefore, are not within the definition of "Contracts" herein
and are not being assigned to Purchaser hereunder), is set forth as Schedule
3.6(b) to this Agreement.
(c) 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.
(d) 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.
(e) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property. (a) Schedule 3.7(a) sets forth with respect to each
Restaurant, its location, whether it is located on Owned Real Property or is on
a site subject to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller, or the owner of the DR Holdings Tracts, has obtained all
authorizations and rights-of-way which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the site of each Restaurant, all of
which are assignable and shall be assigned to Purchaser at the Closing.
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(d) Neither Seller nor the owner of the DR Holdings Tracts has received any
notice that any Government having the power of eminent domain over any parcel of
Real Property has commenced or intends to exercise the power of eminent domain
or a similar power with respect to any part of the Real Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all material laws and regulations (including zoning laws and
ordinances) of each Government having jurisdiction over the Real Property, and
neither Seller nor the owner of the DR Holdings Tracts has received any notice
from any Government alleging that the Real Property or any improvements erected
or situated thereon, or the uses conducted thereon or therein, violate any
regulations of any Government having jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, the owner of the DR Holdings Tracts, or to the knowledge of
Seller received by any owner of any of the Real Property subject to a Lease,
requiring or calling attention to the need for any work, repair, construction,
alteration, or installation on or in connection with the Real Property which has
not been complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
material compliance with all applicable Environmental Laws and Environmental
Permits held by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Property to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller or the owner of the DR Holdings
Tracts relating to any alleged past or ongoing violation of any Environmental
Laws or Environmental Permits with respect to the Real Property, nor to Seller's
knowledge is Seller or the owner of the DR Holdings Tracts subject to any
liability for any such past or ongoing violation. Matters referenced above of
which Seller has knowledge 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
the three 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 or the owner of the DR Holdings Tracts has also timely
filed (or will timely file) all other tax returns and reports of whatever kind
pertaining to the Assets and required to be filed by Seller or the owner of the
DR Holdings Tracts up to the Closing Date. Seller or the owner of the DR
Holdings Tracts has paid (or will timely pay) all taxes of whatever kind,
including any interest, penalties, governmental charges, duties, fees, and fines
imposed by all governmental entities or taxing authorities, which are due and
payable prior to the Closing Date or for which assessments relating to any
period prior to the Closing Date have been received, the nonpayment of which
would result in lien on any of the Assets. There are no audits, suits, actions,
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claims, investigations, inquiries, or proceedings pending or, to Seller's
knowledge, threatened against Seller or the owner of the DR Holdings Tracts with
respect to taxes, interest, penalties, governmental charges, duties, or fines,
nor are any such matters under discussion with any governmental authority, nor
have any claims for additional taxes, interest, penalties, charges, fines, fees,
or duties been received by assessed against Seller or the owner of the DR
Holdings Tracts 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 or the owner of the DR Holdings Tracts that pertains to the
Restaurants, or any of the Assets before any court or by or before any Forum.
3.11 Permits. Seller has all material Permits as are necessary to operate
the Restaurants, a list of which is attached hereto as Schedule 3.11. Seller has
fulfilled and performed all of its material obligations with respect to such
Permits and, to the knowledge of Seller, no event has occurred which allows, nor
after notice or lapse of time or both would allow, revocation or termination
thereof or would result in any other impairment of the rights of the holder of
any such Permits.
3.12 Health and Safety Requirements. To the knowledge of Seller, Seller and
the owner of the DR Holdings Tracts are in compliance with all laws,
governmental standards, rules and regulations applicable to them or to any of
the Assets in respect to the Americans with Disabilities Act and similar state
laws, occupational health and safety laws, and environmental laws.
3.13 Employment Contracts, Etc. Seller is not is a party to any written
employment agreements related to the employees at the Restaurants (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits. (a) Schedule 3.15 hereto contains a true and
complete list of all the following agreements or plans of Seller which are
presently in effect and which pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option, incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal, which Sellers maintains or to which Seller has
any outstanding, present, or future obligation to contribute to or make payments
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under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and/or has never contributed or
been obligated to contribute to a multiemployer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in any certificate furnished to Purchaser pursuant
to this Agreement or in the Disclosure Memorandum is or will be when furnished
both complete and accurate in all material respects; and all documents furnished
to Purchaser pursuant to this Agreement which are documents described in this
Agreement or in the Disclosure Memorandum are true and correct copies of the
documents which they purport to represent.
ARTICLE IV - COVENANTS OF SELLER
4.1 Performance of Real Property Leases and Contracts. Seller shall,
through the Closing Date, continue to faithfully and diligently perform each and
every continuing obligation of Seller, if any, under each of the Leases and
Contracts, where the failure to do so would have a material adverse affect on
the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to assist Purchaser with the assumption, transfer, or
reissuance of any and all Permits required for the operation of the Restaurants.
4.3 Liabilities of Seller. All liabilities of Seller related to the
Business or the Assets that are not Assumed Liabilities will be promptly paid by
Seller as they come due.
4.4 Agreements Respecting Employees of Seller. (a) Prior to the Effective
Time without the prior written approval of Purchaser, Seller shall not transfer
or reassign to operations outside the Business any employee exclusively involved
in the operation or supervision of the Restaurants ("ADI Personnel"), except
that the parties acknowledge that Seller shall reassign Mario Cernadas on or
prior to the Closing Date and such individual shall not be deemed to be part of
ADI Personnel for purposes of this Agreement. Purchaser acknowledges that if
Seller's restaurant located in Wheaton, Illinois is closed on or prior to the
Closing Date, persons employed at such location prior to its closing may be
reassigned by Seller to certain of the Restaurants, in which case they will be
deemed to be "ADI Personnel." At the Effective Time, Seller shall terminate the
employment of all ADI Personnel. For a period of twelve months following the
Closing, Seller shall not solicit for employment any person who is a salaried
employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance, and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
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.
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(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices;
(ii) continue to purchase and maintain inventories for each Restaurant in
such quantities and quality as necessary to operate the Restaurants in
accordance with Seller's historical practice; and
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations.
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change (or in the case of the DR Holdings Tracts, allow any change) in
any material manner the ownership of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan providing for payment of
bonuses upon the Closing;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts of Development Restaurants in the ordinary course of
business) any of the Assets or allow the DR Holdings Tracts to be mortgaged or
subjected to lien;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into, terminate, or modify any Material Contract; or
(vi) cancel or terminate or consent to or accept any cancellation or
termination of any Lease, amend or otherwise modify any of its material terms or
waive any breach of any of its material terms or provisions or take any other
action in connection with any Lease that would materially impair the interests
or rights of Seller to be transferred to Purchaser hereunder.
4.6 Access to Information. Seller will cooperate with Purchaser in
notifying the Illinois Department of Revenue of the sale contemplated herein.
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. Schedule 4.7(a) lists the restaurants which are or
will be developed by Seller (the "Development Restaurants"), and Schedule 4.7(b)
lists the sites which Seller has identified for potential development (the
"Development Sites"). Seller shall use commercially reasonable efforts to
continue up to the Closing the development of the Development Restaurant in
accordance with the timetable and budget set forth on such Schedule, and
maintain the current results of its development activities for the Development
Sites, for the benefit of Purchaser, until Purchaser's election pursuant to
Section 6.5; provided, however, that Purchaser acknowledges that Seller does not
own or have any contractual rights to acquire or lease the Development Sites.
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4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information 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 four weeks after the end
of each calendar month, the statement of operations of each Restaurant for the
most recently ended fiscal month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
Actions, Orders, or other directives affecting the Business or any Restaurant
that, if adversely determined, could materially adversely affect the Assets, the
operations, business, prospects or condition (financial or otherwise) of the
Restaurant or the ability of Seller to perform its obligations hereunder;
(d) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
4.9 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, and if required by the
landlord as a condition to giving its Consent, Seller will remain liable under
the Lease through the expiration of the current term; 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 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 forty-five (45) 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 if Seller no longer has the personnel to provide such Services,
Seller may outsource such Services to a third party.
(b) Purchaser will pay for the Services on a monthly basis, after receipt
of an invoice from Seller, at Seller's direct personnel cost incurred in
connection with providing the requested Service or Seller's out-of-pocket cost
(if such 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.
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(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 and shall be paid by Purchaser. Such bonus, if
accepted by the employee, shall be paid by Purchaser at the end of the
three-month period, or for such shorter period as Purchaser may determine.
4.12 Delivery of Real Estate Documents. (a) Seller shall provide Purchaser,
promptly upon receipt, (i) current surveys and title insurance commitments with
respect to the Owned Real Property ("Owner's Title Commitments") pursuant to
which the Title Company will agree to issue at Closing to 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, with
such endorsements or extended coverage as is reasonably requested by Purchaser,
and Seller shall reasonably cooperate with Purchaser to obtain such coverage,
and without exceptions except as shown in the Owner's Title Commitments, to be
issued by Commonwealth Land & Title Company ("Title Company") in an amount in
the case of each parcel equal to the purchase price allocated to such parcel of
the Owned Real Property pursuant to Section 2.7, and (ii) current surveys
(collectively with the surveys of the Owned Real Property, the "Surveys") and
title insurance commitments with respect to the Real Property subject to a Lease
(collectively, the "Leased Real Property") (the "Lessee Title Commitments", and
collectively with the Owner's Title Commitments, the "Title Commitments")
pursuant to which the Title Company will agree to issue at Closing lessee's
policies of title insurance ("Lessee's Title Policies") on American Land Title
Association standard form of leasehold owner's policy to insure leasehold
estates, showing no exceptions except as shown in the Lessee Title Commitments.
The Owner's Title Policies shall insure the Purchaser that, upon consummation of
the purchase and sale herein contemplated, Purchaser will be vested with good,
fee simple, marketable, and insurable title to the Owned Real Property, subject
only to the Permitted Encumbrances or arising out of acts of the insured. The
Lessee's Title Policies shall insure the Purchaser that, upon consummation of
the transactions herein contemplated, Purchaser will be vested with a good,
valid, marketable and insurable leasehold estate in and to the Leased Real
Property, subject only to the Permitted Encumbrances. The Surveys shall be
certified as being prepared in accordance with the Minimum Detail Requirements
for ALTA/ACSM Land Title Surveys jointly established and adopted by ALTA and
ACSM in 1992 showing no survey exceptions other than the Permitted Encumbrances.
Notwithstanding anything to the contrary contained herein, while Lessee Title
Commitments will be delivered for all Leased Real Property, no surveys will be
delivered and no Lessee's Title Policies will be issued for Leases unless such
Leases are for Free Standing Premises (as defined in Section 7.1).
(b) Within five business days of the date hereof Seller shall provide to
Purchaser copies of all environmental reports pertaining to the Owned Real
Property in Seller's possession.
4.13 Restaurant Closing. Seller shall close and de-identify its Applebee's
restaurant in Wheaton, Illinois, at or prior to Closing. From the date hereof
until thirty (30) days after the Closing Date, Purchaser shall have the option
to purchase any signage, equipment or assets which Seller desires to sell from
such location at its fair market value, as determined by mutual agreement of the
parties or by an appraiser mutually selected by Seller and Purchaser, by
notifying Seller of its desire to purchase within three business days after
Seller notifies Purchaser of its intention to sell such assets.
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
liability company duly organized, validly existing, and in good standing under
the laws of the State of Illinois 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 articles of organization or operating 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,
financial data, financial plans, product plans, lists of actual or potential
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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 (and, if Seller has not yet reassigned all persons employed by Seller
at its Wheaton, Illinois location to other Restaurants such that such persons
are deemed to be "ADI Personnel" under Section 4.4, such employees as well) 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. Notwithstanding the foregoing sentence, Seller and Purchaser
acknowledge that Purchaser's offer of employment shall be made only on an
at-will basis, and such employees are not intended to be and shall not be deemed
to be third-party beneficiaries of this Agreement. For a period of twelve months
following the Closing, Purchaser shall not solicit for employment any person who
is a salaried employee of Seller or any subsidiary of Seller.
(b) Purchaser shall maintain employee records transferred to Purchaser
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchaser's normal
business hours. Purchaser shall maintain the confidentiality of such records and
limit access thereto in a manner consistent with Purchaser's treatment of its
employee records.
(c) Purchaser agrees with respect to ADI Personnel hired by Purchaser: (i)
to give such employees credit under Purchaser's benefits plans, programs, and
arrangements (including credit for accrued but unvested vacation which has been
charged to Seller under Section 2.3) for such employees' period of service with
Seller, provided that such credit shall only be taken into account under any
tax-qualified plan maintained by Purchaser for purposes of determining such
employees' eligibility for participation and eligibility to satisfy any hours of
service requirement in order to receive an allocation of an employer
contribution; (ii) to provide coverage to such employees who are eligible under
Purchaser's health, medical, life insurance, and other welfare plans (A) without
the need to undergo a physical examination or otherwise provide evidence of
insurability; (B) any pre-existing condition or similar limitations or
exclusions will be applied by taking into account the period of coverage under
Seller's plan; (C) by applying and giving credit for amounts paid for the plan
year in which the Closing Date occurs as deductibles, out of pocket expenses,
and similar amounts paid by individuals and their beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Purchaser shall use commercially reasonable efforts to
cause the conditions set forth in Article VII to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby.
Specifically, but not by way of limitation, Purchaser will (i) use commercially
reasonable efforts to obtain a commitment letter for financing the transactions
contemplated hereby on substantially the terms set forth in Exhibit E (the
"Financing Commitment") and to obtain financing on such terms, (ii) promptly
provide Franchisor with all information which Franchisor and Purchaser agree is
necessary to determine whether Purchaser will be approved as a franchisee with
respect to the Territory, (iii) actively pursue an agreement with Franchisor as
to the principal terms of franchise and development agreements with respect to
the Territory, and (iv) file all documents required to obtain approval of the
transactions contemplated hereby under the HSR Act within 15 days of the date
hereof.
6.5 Development Sites. Purchaser shall notify Seller no later than thirty
(30) days after the date hereof of its election (if any) to pursue the
acquisition or lease of the Development Sites. If Purchaser so elects and the
particular Development Sites are still available, (i) Seller will reasonably
cooperate with Purchaser's efforts to acquire or lease the Development Site(s)
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both before and after Closing (at no expense to Seller), (ii) Seller's records
and files related to each such Development Sites shall be deemed to be part of
the "Assets" to be assigned to Purchaser at Closing, and (iii) Purchaser shall
pay Seller for the Development Costs associated with such Developments Sites at
Closing under Section 2.3(a)(vi).
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have 30
days following receipt of the last to be received of the Surveys and Title
Commitments referred to in Section 4.12 (the "Title Inspection Period") to
review same and furnish Seller a written statement of reasonable objections to
exceptions which, in Purchaser's reasonable judgment, would materially interfere
with or impair Purchaser's use of the Real Property for the operation of
Applebee's restaurants or other reasonable commercial use ("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 appearing on a Survey, 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. Purchaser may not object
to title encumbrances for such Leased Real Property that do not affect the
premises leased under the Leases, which such encumbrances shall be deemed to be
Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchaser, including, without limitation, the
entry by Purchaser or Purchaser's Designees onto the Real Property, or the other
activities of Purchaser or Purchaser's Designees with respect to the Real
Property (hereinafter called "Purchaser's Activities") shall not damage the Real
Property in any manner whatsoever or disturb or interfere with the rights of any
lessor of Leased Real Property; (ii) in the event the Real Property is altered
or disturbed in any manner in connection with any Purchaser's Activities,
Purchaser shall immediately return the Real Property to the condition existing
prior to Purchaser's Activities; (iii) Purchaser shall in no event without
Seller's prior written consent disclose the results of any of its
investigations, examinations, tests, or inspections to any party (including any
Government unless required by law) other than to its lenders, attorneys,
consultants, and investors; and (iv) Purchaser shall indemnify, defend, and hold
Seller harmless from and against any and all claims, liabilities, damages,
losses, costs, and expenses of any kind or nature whatsoever (including, without
limitation, attorneys' fees, and expenses and court costs) suffered, incurred or
sustained by Seller as a result of, by reason of, or in connection with any
Purchaser's Activities. Notwithstanding any provision of this Agreement to the
contrary, Purchaser shall not have the right to undertake any environmental
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.
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(B) Purchaser shall have until the date which is thirty days after the date
of this Agreement (hereinafter called the "Due Diligence Date"), to perform such
investigations, examinations, tests and inspections as Purchaser shall deem
necessary or desirable to determine whether the Real Property is suitable and
satisfactory to Purchaser and can be used for Applebee's franchise restaurants.
In the event Purchaser shall determine that the Real Property is not reasonably
suitable and satisfactory to Purchaser, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller on or before the Due
Diligence Date. If Purchaser does not terminate this Agreement in accordance
with this Section 7.1(b) on or before the Due Diligence Date, Purchaser shall
have no further right to terminate this Agreement pursuant to this Section
7.1(b).
(C) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
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 or Purchaser may terminate this Agreement by giving written notice of
such termination to Seller:
(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;
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provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser reasonably believes that it will be able to obtain such a permit
within two months of the Closing Date, Closing of the transactions contemplated
hereunder will not be delayed if Seller delivers to Purchaser a duly executed
liquor license management agreement or agreements.
(g) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit E upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 Seller's Conditions to Closing. The obligations of Seller hereunder are
subject to satisfaction of each of the following conditions at or before
Closing, the occurrence of which may, at the option of Seller, be waived:
(a) All representations and warranties of Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser shall have performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complied with by Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(e) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims.
(a) Seller shall indemnify and hold harmless Purchaser, its successors and
assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser that result from, relate to, or arise out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
by Seller pursuant hereto; or
(D) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Seller's
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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
$250,000 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 $5,000,000.
(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 3.7(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, (i) to the extent that Seller
intentionally and actively concealed a breach of a representation or warranty,
the underlying representation or warranty shall survive until the expiration of
any applicable statutes of limitations provided by law, and (ii) 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.
(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
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prejudiced thereby. Purchaser shall make commercially reasonable efforts to
mitigate any damages, expenses, etc. resulting from any matter giving rise to
liability of Seller under this Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
under Section 8.1, relating to a third party claim or demand, Purchaser shall
provide Seller with prompt written notice thereof in accordance with Section
10.4 and Seller may defend, in good faith and at its expense, by legal counsel
chosen by it and reasonably acceptable to Purchaser any such claim or demand,
and Purchaser, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser shall not settle or compromise such
third party claim. In any event Purchaser shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
8.3 Seller Claims. Purchaser shall indemnify and hold harmless Seller
against, and in respect of, any and all damages, claims, losses, liabilities,
and expenses, including without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation by Purchaser of
any covenant set forth herein or any failure to fulfill any obligation set forth
herein, including, but not limited to, the obligation to satisfy the Assumed
Liabilities; (ii) any breach of any of the representations or warranties made in
this Agreement by Purchaser; or (iii) any claim by any Person for any brokerage
or finder's fee or commission in respect of the transactions contemplated hereby
as a result of Purchaser's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII shall be the sole and exclusive rights and remedies that either
party may seek for any misrepresentation, breach of warranty, or failure to
fulfill any covenant or agreement under this Agreement, except that either party
may seek specific performance or injunctive relief.
8.5 Settlement of Disputes.
(a) Arbitration. All disputes with respect to any claim for indemnification
under this Article VIII and all other disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the following
procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(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 Chicago, Illinois 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,
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shall deal with the question of costs of the arbitration and all related
matters, shall not award punitive damages, and judgment on such award may be
entered by either party in a court of competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination.
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1 or 7.2;
(iii) By Seller if Purchaser shall not (i) have obtained and provided a
copy of the Financing Commitment to Seller within 15 days from the date hereof,
(ii) been approved hereof as a franchisee with respect to the Territory by
Franchisor within 45 days of the date hereof, (iii) reached agreement with
Franchisor as to a development schedule and other material terms of franchise
and development agreements with respect to the Territory within 45 days from the
date hereof; or
(iv) By either Seller or Purchaser, at its sole election, at any time after
the Termination Date, if the Closing shall not have occurred on or prior to such
date.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller or Purchaser, as the case may be,
shall have willingly failed to fulfill its obligations hereunder, the other
party shall, subject to Section 8.5, be entitled to pursue, exercise, and
enforce any and all remedies, rights, powers, and privileges available to it at
law or in equity.
(c) Section 6.2, Article VIII, and Article X hereof shall survive the
termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
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 and Seller shall equally share the costs of obtaining the
Surveys, Title Commitments, Owner's Title Policies and Lessee's Title Policies
with respect to the Real Property and all transfer, intangible, recording, and
documentary taxes, stamps, and fees with respect to the transfer of the Owned
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Real Property and the Leases; provided, however, that if the Closing does not
occur, Purchaser shall have no obligation for such expenses. Purchaser shall pay
the cost of all other surveys, environmental investigations, studies, and
reports, and all other costs of any investigation of the Assets, the
Restaurants, or the Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents, subject to
Section 4.9.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
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If to Seller, to: With a required copy to:
Apple South, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Atention: 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:
AppleIllinois, LLC Gessler, Hughes & Socol, Ltd.
211 West Chicago, Suite 10 Three First National Plaza
Hinsdale, Illinois 60521 70 West Madison Street, Suite 2200
Attention: Tim Brugh Chicago, Illinois 60602-4205
Fax: 630-323-8910 Attention: Mark S. Dym
Fax: 312-580-1994
and
Ronald L. Panter & Associates
Three First National Plaza
70 West Madison Street, Suite 610
Chicago, Illinois 60602
Attention: Ronald Panter
Fax: 312-621-0821
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 ILLINOIS LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS
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
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as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, EXCEPT TO
THE EXTENT OF SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN,
SHALL ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT TO THE EXTENT OF SELLER'S
EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, SELLER SHALL SELL AND
CONVEY TO PURCHASER, AND PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS",
AND WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE ASSETS BY SELLER OR ANY THIRD
PARTY. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT TO THE EXTENT OF
SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, SELLER MAKES,
AND SHALL MAKE, NO EXPRESS OR IMPLIED WARRANTY OF SUITABILITY OR FITNESS OF ANY
OF THE ASSETS FOR ANY PURPOSE, OR AS TO THE MERCHANTABILITY, ENVIRONMENTAL
CONDITION, TITLE, VALUE, QUALITY, QUANTITY, CONDITION OR SALABILITY OF ANY OF
THE ASSETS, OR AS TO THE PRESENCE ON OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS
MATERIAL. THE TERMS AND CONDITIONS OF THIS SECTION 10.11 SHALL SURVIVE THE
CONSUMMATION OF THE PURCHASE AND SALE OF THE ASSETS ON THE CLOSING DATE WITHOUT
REGARD TO ANY GENERAL LIMITATIONS UPON SURVIVAL SET FORTH IN THIS AGREEMENT.
10.12 Time. Time is and shall be of the essence of this Agreement.
10.13 Guarantee. Timothy Brugh 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.
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:
AppleILLINOIS, LLC.
By:
Name:
Title:
GUARANTOR:
Timothy Brugh
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Avado Brands, Inc. agrees to supplementally furnish to the Commission a
copy of any omitted exhibit or schedule to this Agreement upon the request of
the Commission. The following is a list briefly identifying the contents of all
omitted exhibits and schedules:
EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Opinion of Seller's Counsel
C Opinion of Purchaser's Counsel
D Allocation of Purchase Price
E Financing Terms
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Leases and
Material Contracts
3.6(a) List of Material Contract and Leases and
amendments thereto
3.6(b) Multi-Territory Agreements
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.11 Permits
3.15 Seller Plans
4.7(a) Development Restaurants
4.7(b) Development Sites
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
29
ASSET PURCHASE AGREEMENT
[WEST VIRGINIA MARKET]
THIS ASSET PURCHASE AGREEMENT, dated as of September 30, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller") and NEIGHBORHOOD
HOSPITALITY, INC., a Kentucky 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, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials;
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v) all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vi) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(vii) copies of Seller's employee records of those current employees of
Seller who are employed by Purchaser as of the Closing (subject to execution of
a release by each affected employee allowing for the disclosure of such files);
(viii) the Contracts and Leases;
(ix) the Owned Real Property; and
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(x) all records and files related to the Real Property and Development
Sites (which Purchaser elects to pursue under Section 6.5 and pays Seller the
Development Costs thereof) such as rent calculations, landlord correspondence,
purchase agreements, deeds, construction documents, title reports, environmental
and engineering reports, appraisals, surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts, or any other property, tangible or intangible, real
or personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts and Leases, (ii) all
obligations of Seller under the Contracts and Leases that accrue prior to the
Closing but which are not due for payment until after the Closing and which are
taken into account in computing the Purchase Price pursuant to Section 2.3,
(iii) obligations arising after the Closing under any Permits which are assigned
to Purchaser, (iv) all Property Taxes and all other obligations with respect to
the Assets that accrue prior to the Closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c), and (viii) all
obligations with respect to Seller's development activities of the Development
Restaurants and Development Sites (which Purchaser elects to pursue under
Section 6.5) not otherwise assumed hereunder or covered by an increase in the
purchase price pursuant to Section 2.3. Assumed Liabilities shall not include
any liability, obligation, payment, duty, or responsibility of any nature except
as expressly described above and specifically shall not include (i) liabilities
or obligations of Seller arising out of any breach by Seller of any of the
Contracts or Leases; (ii) except as provided in clauses (ii) or (iv) above,
liabilities or obligations of Seller under any of the Contracts or Leases or
with respect to the Owned Real Property or other Assets that accrue in any such
case prior to the Closing; (iii) any liabilities or obligations of Seller under
the Franchise Agreements; (iv) any liability of Seller for product liability,
personal injury, property damage, or otherwise based on any tort claim or
statutory liability (including but not limited to any "dram shop" liability);
(v) any federal, state, or local tax liability of Seller except to the extent
expressly assumed hereunder, (vi) any contractual claim based on any lease,
contract, or agreement other than the Contracts and Leases; (vii) any liability,
obligation, or responsibility of Seller to Seller's employees, agents, or
independent contractors with respect to wages, salaries, bonuses, or other
compensation or benefits earned or accrued prior to the Closing (except for
accrued but unvested vacation assumed pursuant to Section 6.3(c)); and (viii)
any liability or obligation of Seller arising out of the negotiation, execution,
or performance of this Agreement, including fees and expenses of attorneys and
accountants, except as otherwise expressly provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property 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
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
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section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds, limited warranty deeds or other
appropriate instruments to convey good and marketable fee simple title to the
Owned Real Property, with the warranty of title contained therein limited to the
claims of Persons claiming by, through or under Seller, but not otherwise.
"Development Costs" shall mean all of Seller's costs paid in connection
with the identification and development of the Development Sites which are
listed on Schedule 4.7.
"Development Restaurants" shall mean the Restaurants designated as such on
Schedule 1.1A.
"Development Sites" shall have the meaning set forth in Section 4.7.
"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.
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"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.
"Lease Assignments" shall mean an instrument pursuant to which the Leases
will be transferred and assigned to Purchaser at Closing and pursuant to which
Purchaser will assume the Assumed Liabilities related thereto.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less, a list of which are set forth on
Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located or which is being held for Development
Restaurants (all of which tracts and parcels are described in Schedule 1.1C ),
and all buildings, fixtures, signs, parking facilities, and other improvements
located thereon and appurtenances thereto.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from any Government which
relate exclusively to the Business, the Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, (i) such easements, restrictions,
covenants, and other such encumbrances which are shown as exceptions on the
Title Commitments and any other encumbrances of record as of the effective date
of the Title Commitments, (ii) ordinances (municipal and zoning), (iii) survey
matters, and (iv) such easements, restrictions, covenants, and other
encumbrances which become matters of public record after the effective date of
the Title Commitments and before the Closing, in each such case, to the extent
that such encumbrances could not reasonably be expected to materially interfere
with or impair Purchaser's use of the Real Property for Applebee's Neighborhood
Grill & Bar Restaurants or that are waived, or deemed to be waived, by Purchaser
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pursuant to Section 7.1(a). Permitted Encumbrances shall include in the case of
both Real Property and personal property all liens for taxes not yet due and
payable. In the case of Assets pertaining to Development Restaurants, 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.
"Purchase Price Adjustment Schedule" shall have the meaning set forth in
Section 2.3.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the thirteen (13) Applebee's Neighborhood Grill &
Bar restaurants operated by Seller at the locations set forth on Schedule 1.1A,
including the Development Restaurants.
"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 December 31, 1998.
"Territory" shall mean those ADI's set forth on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 4.12(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.12(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $24,100,000 adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
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by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases that pertain to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to Seller's cost of
those Assets consisting of food, beverage (including beer, wine, and liquor),
new uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date; and (v)
the Development Costs for each Development Restaurant and, if the Purchaser
elects under Section 6.5 to pursue the acquisition or lease of the Development
Sites and such sites are still available at such time, the amount of Seller's
Development Costs for each such Development Site.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the estimated cost of vacation accrued
but unvested as of the Closing Date by ADI Personnel hired by Purchaser the cost
of which is being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
The foregoing adjustments shall be calculated by the parties and set forth
on a Purchase Price adjustment schedule (the "Purchase Price Adjustment
Schedule") which shall be signed by both parties at Closing. The Purchase Price
shall be paid by Purchaser on the Closing Date by wire transfer of immediately
available funds to an account designated by Seller. As soon as possible after
the Closing (but not later than the first anniversary thereof), the parties
shall reconcile the actual amount of prorations that were estimated at Closing
as well as 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;
(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;
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(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 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 Lease Assignments, duly executed by Purchaser;
(vi) The opinion of James D. Asher, 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, 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 December
14, 1998, or on such other date and time as may be mutually agreed upon by the
parties hereto.
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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
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof, as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, the execution,
delivery and performance of this Agreement will not violate or result in a
breach of any term of Seller's Articles of Incorporation or Bylaws, result in a
breach of any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents executed in connection herewith, and the
consummation of the transactions contemplated hereby and thereby do not require
any filing with, notice to or consent, waiver or approval of any third party,
including but not limited to, any Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
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
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and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Seller, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
3.5 Assets. (a) Seller has good and valid title to all of the Assets
constituting personal property, free and clear of any and all mortgages,
pledges, security interests, liens, charges, conditional sales agreements, and
other encumbrances except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements.
(c) There are no assets or property of any nature which is not being
transferred to Purchaser hereunder that has been customarily used exclusively in
the operation or ownership of the Restaurants other than Permits and software
licenses that are not assignable.
(d) Each Asset constituting tangible personal property having a fair market
value of $10,000 or more is in good operating condition consistent with its age,
subject to normal wear and tear.
3.6 Contracts and Leases. (a) Each Material Contract and Lease is a valid
and subsisting agreement, without any material default of Seller thereunder, and
to the knowledge of Seller, without any default on the part of any other party
thereto. To the knowledge of Seller, no event or occurrence has transpired which
with the passage of time or giving of notice or both will constitute a default
under any Material Contract or Lease. A true and correct list of each Material
Contract and Lease and every amendment thereto or other agreement or document
relating thereto is set forth as Schedule 3.6 to this Agreement. True and
correct copies of the Material Contracts and Leases (and any amendments thereto)
have been provided to Purchaser. At the time of Closing, Seller shall have made
all payments and performed all obligations due through the Closing Date under
each Contract and Lease, except to the extent that any payment due is set forth
on the Purchase Price Adjustment Schedule and deducted in calculating the
Purchase Price pursuant to Section 2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property. (a) Schedule 3.7(a) sets forth with respect to each
Restaurant, its location, whether it is located on Owned Real Property or is on
a site subject to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller has obtained all authorizations and rights-of-way which are
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necessary to ensure vehicular and pedestrian ingress and egress to and from the
site of each Restaurant, all of which are assignable and shall be assigned to
Purchaser at the Closing.
(d) Seller has received no notice that any Government having the power of
eminent domain over any parcel of Real Property has commenced or intends to
exercise the power of eminent domain or a similar power with respect to any part
of the Real Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all material laws and regulations (including zoning laws and
ordinances) of each Government having jurisdiction over the Real Property, and
Seller has received no notice from any Government alleging that the Real
Property or any improvements erected or situated thereon, or the uses conducted
thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, or to the knowledge of Seller received by any owner of any
of the Real Property subject to a Lease, requiring or calling attention to the
need for any work, repair, construction, alteration, or installation on or in
connection with the Real Property which has not been complied with.
(g) Except as set forth on Schedule 3.7(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. Except as set forth on
Schedule 3.7(g), 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. Except as set forth on Schedule 3.7(g), 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 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 (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
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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 and occupational health and safety laws.
3.13 Employment Contracts, Etc. Seller is not is a party to any written
employment agreements related to the employees at the Restaurants (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits. (a) Schedule 3.15 hereto contains a true and
complete list of all the following agreements or plans of Seller which are
presently in effect and which pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock pur chase, 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").
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(b) Seller does not presently contribute and/or has never contributed or
been obligated to contribute to a multiemployer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in any certificate furnished to Purchaser pursuant
to this Agreement or in the Disclosure Memorandum is or will be when furnished
both complete and accurate in all material respects; and all documents furnished
to Purchaser pursuant to this Agreement which are documents described in this
Agreement or in the Disclosure Memorandum are true and correct copies of the
documents which they purport to represent.
ARTICLE IV - COVENANTS OF SELLER
4.1 Performance of Real Property Leases and Contracts. Seller shall,
through the Closing Date, continue to faithfully and diligently perform each and
every continuing obligation of Seller, if any, under each of the Leases and
Contracts, where the failure to do so would have a material adverse effect on
the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to assist Purchaser with the assumption, transfer, or
reissuance of any and all Permits required for the operation of the Restaurants.
4.3 Liabilities of Seller. All liabilities of Seller related to the
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"). At the Effective Time, Seller shall terminate
the employment of all ADI Personnel. For a period of twelve months following the
Closing, Seller shall not solicit for employment any person who is a salaried
employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance, and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
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
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accordance with Seller's historical practice; and
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations;
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser.
(i) change in any material manner the ownership of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan providing for payment of
bonuses upon the Closing;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts of Development Restaurants 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, terminate, or modify any Material Contract except in the
ordinary course of business; or
(vi) cancel or terminate or consent to or accept any cancellation or
termination of any Lease, amend or otherwise modify any of its material terms or
waive any breach of any of its material terms or provisions or take any other
action in connection with any Lease that would materially impair the interests
or rights of Seller to be transferred to Purchaser hereunder.
4.6 Access to Information. Seller shall afford Purchaser, its counsel,
financial advisors, auditors, lenders, lenders' counsel and other authorized
representatives reasonable access for any purpose consistent with this Agreement
from the date hereof until the Closing, during normal business hours, to the
offices, properties, books, and records of Seller with respect to the Assets and
the Restaurants and shall furnish to Purchaser such additional financial and
operating data and other information as Seller may possess and as Purchaser may
reasonably request, subject to Purchaser's obligations regarding the
confidentiality of such information as set forth in Section 6.2 hereof;
provided, however, that such access shall be arranged in advance by Purchaser
with Seller and will be scheduled in a manner and with a frequency calculated to
cause the minimum disruption of the business of Seller.
4.7 Development Efforts. Schedule 4.7 lists the restaurant sites which
Seller has identified for potential development (the "Development Sites ").
Seller shall use commercially reasonable efforts to maintain through Closing the
current results of its development activities for the Development Sites, for the
benefit of Purchaser, until Purchaser's election pursuant to Schedule 6.5
hereto; provided, however, that Purchaser acknowledges that Seller does not own
or have any contractual right to acquire the Development Sites.
4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information with respect to any event which has materially adversely affected
the Assets or the operations of the Restaurants.
(b) As soon as available and in any event within four weeks after the end
of each calendar month, the statement of operations of each Restaurant for such
fiscal month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
Actions, Orders, or other directives affecting the Business or any Restaurant
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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 forty-five (45) 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 if Seller no longer has the personnel to provide such Services,
Seller may outsource such services to a third party.
(b) Purchaser will pay for the Services on a monthly basis, after receipt
of an invoice from Seller, at Seller's direct personnel cost incurred in
connection with providing the requested Service or Seller's out-of-pocket cost
(if such 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 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. (a) Seller shall provide Purchaser,
promptly upon receipt, (i) current surveys and title insurance commitments with
respect to the Owned Real Property ("Owner's Title Commitments") pursuant to
which the Title Company will agree to issue at Closing to Purchaser and its
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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 an
amount in the case of each parcel equal to the purchase price allocated to such
parcel of the Owned Real Property pursuant to Section 2.7, and (ii) current
surveys (collectively with the surveys of the Owned Real Property, the
"Surveys") and title insurance commitments with respect to the Real Property
subject to a Lease (collectively, the "Leased Real Property") (the "Lessee Title
Commitments", and collectively with the Owner's Title Commitments, the "Title
Commitments") pursuant to which the Title Company will agree to issue at Closing
lessee's policies of title insurance ("Lessee's Title Policies") on American
Land Title Association standard form of leasehold owner's policy to insure
leasehold estates, showing no exceptions except as shown in the Lessee Title
Commitments. The Owner's Title Policies shall insure the Purchaser that, upon
consummation of the purchase and sale herein contemplated, Purchaser will be
vested with good, fee simple, marketable, and insurable title to the Owned Real
Property, subject only to the Permitted Encumbrances or arising out of acts of
the insured. The Lessee's Title Policies shall insure the Purchaser that, upon
consummation of the transactions herein contemplated, Purchaser will be vested
with a good, valid, marketable and insurable leasehold estate in and to the
Leased Real Property, subject only to the Permitted Encumbrances.
Notwithstanding anything to the contrary contained herein, while Lessee Title
Commitments will be delivered for all Leased Real Property, no surveys will be
delivered and no Lessee's Title Policies will be issued for Leases unless such
Leases are for Free Standing Premises (as defined in Section 7.1).
(b) No later than five business days after the date hereof, Seller shall
provide to Purchaser copies of all environmental reports pertaining to the Owned
Real Property in Seller's possession.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization, Corporate Power, Authorization. Purchaser is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Kentucky 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
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who are bound by appropriate non-disclosure agreements or obligations. Purchaser
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller, except that Purchaser may use such Confidential Information
in connection with the ordinary course of operation of the Restaurants after
Closing. The foregoing obligations shall not apply to (i) any information which
was known by Purchaser prior to its disclosure by Seller; (ii) any information
which was in the public domain prior to the disclosure thereof; (iii) any
information which comes into the public domain through no fault of Purchaser;
(iv) any information which is disclosed to Purchaser by a third party, other
than an affiliate, having the legal right to make such disclosure; or (iv) any
information which is required to be disclosed by Order of any Forum. For
purposes of this Section, "Confidential Information" shall mean any and all
technical, business, and other information which is (a) possessed or hereafter
acquired by Seller and disclosed to Purchaser and (b) derives economic value,
actual or potential, from not being generally known to Persons other than
Seller, including, without limitation, technical or nontechnical data,
compositions, devices, methods, techniques, drawings, inventions, processes,
financial data, financial plans, product plans, lists of actual or potential
customers or suppliers, information regarding the business plans and operations
of Seller, and the existence of discussions and negotiations between the parties
hereto relating to the terms hereof. The restrictions of this Section shall
expire three years from the date hereof with respect to any confidential
business information that does not constitute a trade secret under applicable
law.
6.3 Seller Employees. (a) Purchaser shall offer employment to 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 solicit for employment any person who is a salaried employee
of Seller or any subsidiary of Seller.
(b) Purchaser shall maintain employee records transferred to Purchaser
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchaser's normal
business hours. Purchaser shall maintain the confidentiality of such records and
limit access thereto in a manner consistent with Purchaser's treatment of its
employee records.
(c) Purchaser agrees with respect to ADI Personnel hired by Purchaser: (i)
to give such employees credit under Purchaser's benefits plans, programs, and
arrangements (including credit for accrued but unvested vacation which has been
charged to Seller under Section 2.3) for such employees' period of service with
Seller, provided that such credit shall only be taken into account under any
tax-qualified plan maintained by Purchaser for purposes of determining such
employees' eligibility for participation and eligibility to satisfy any hours of
service requirement in order to receive an allocation of an employer
contribution; (ii) to provide coverage to such employees who are eligible under
Purchaser's health, medical, life insurance, and other welfare plans (A) without
the need to undergo a physical examination or otherwise provide evidence of
insurability; (B) any pre-existing condition or similar limitations or
exclusions will be applied by taking into account the period of coverage under
Seller's plan; (C) by applying and giving credit for amounts paid for the plan
year in which the Closing Date occurs as deductibles, out of pocket expenses,
and similar amounts paid by individuals and their beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Purchaser shall use commercially reasonable efforts to
cause the conditions set forth in Article VII to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby.
Specifically, but not by way of limitation, Purchaser will (i) use commercially
reasonable efforts to obtain a commitment letter for financing the transactions
contemplated hereby on substantially the terms set forth in Exhibit E (the
"Financing Commitment") and to obtain financing on such terms, (ii) promptly
provide Franchisor with all information required by Franchisor to determine
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whether Purchaser will be approved as a franchisee with respect to the
Territory, (iii) actively pursue an agreement with Franchisor as to the
principal terms of franchise and development agreements with respect to the
Territory, and (iv) file all documents required to obtain approval of the
transactions contemplated hereby under the HSR Act within 15 days of the date
hereof.
6.5 Development Sites. Purchaser shall notify Seller no later than thirty
(30) days after the date hereof of its election (if any) to pursue the
acquisition or lease of any or all of the Development Sites. If Purchaser so
elects and the particular Development sites are still available, (i) Seller will
reasonably cooperate with Purchaser's efforts to acquire or lease the
Development Site(s) both before and after Closing (at no expense to Seller),
(ii) Seller's records and files related to each such Development Site shall be
deemed to be part of the "Assets" to be assigned to Purchaser at Closing, and
(iii) Purchaser shall pay Seller for the Development Costs associated with such
Development Sites at Closing under Section 2.3(a)(v).
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have 30
days following receipt of the documents referred to in Section 4.12(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 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, such matter along with all other encumbrances of record as
of the effective date of the Title Commitments not objected to by Purchaser
shall be deemed waived by Purchaser and shall be a Permitted Encumbrance. The
parties acknowledge that some of the Leased Real Property may be located in
shopping centers, and as such, unless the leased premises are a free standing
building located on a separate pad with its own legal description ("Free
Standing Premises") the Lessee Title Commitments for such Leased Real Property
will contain encumbrances for entire shopping centers. Purchaser may not object
to title encumbrances for such Leased Real Property that do not affect the
premises leased under the Leases, which such encumbrances shall be deemed to be
Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchaser, including, without limitation, the
entry by Purchaser or Purchaser's Designees onto the Real Property, or the other
activities of Purchaser or Purchaser's Designees with respect to the Real
Property (hereinafter called "Purchaser's Activities") shall not damage the Real
Property in any manner whatsoever or disturb or interfere with the rights of any
lessor of Leased Real Property; (ii) in the event the Real Property is altered
or disturbed in any manner in connection with any Purchaser's Activities,
Purchaser shall immediately return the Real Property to the condition existing
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prior to Purchaser's Activities; (iii) Purchaser shall in no event without
Seller's prior written consent disclose the results of any of its
investigations, examinations, tests, or inspections to any party (including any
Government unless required by law) other than to its lenders, attorneys,
consultants, and investors; and (iv) Purchaser shall indemnify, defend, and hold
Seller harmless from and against any and all claims, liabilities, damages,
losses, costs, and expenses of any kind or nature whatsoever (including, without
limitation, attorneys' fees, and expenses and court costs) suffered, incurred or
sustained by Seller as a result of, by reason of, or in connection with any
Purchaser's Activities. Notwithstanding any provision of this Agreement to the
contrary, Purchaser shall not have the right to undertake any environmental
studies or testing beyond the scope of a standard "Phase I" evaluation without
the prior written consent of Seller and, if applicable, the lessor of any Leased
Real Property.
(B) Purchaser shall have until the date which is thirty days after the date
of this Agreement (hereinafter called the "Due Diligence Date"), to perform such
investigations, examinations, tests and inspections as Purchaser shall deem
necessary or desirable to determine whether the Real Property is suitable and
satisfactory to Purchaser and can be used for Applebee's franchise restaurants.
In the event Purchaser shall determine that the Real Property is not reasonably
suitable and satisfactory to Purchaser, Purchaser shall have the right to
terminate this Agreement by giving written notice to Seller on or before the Due
Diligence Date. If Purchaser does not terminate this Agreement in accordance
with this Section 7.1(b) on or before the Due Diligence Date, Purchaser shall
have no further right to terminate this Agreement pursuant to this Section
7.1(b).
(C) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall: (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less than $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
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
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complied with by Seller prior to or on the Closing Date.
(d) Seller shall have obtained and delivered to Purchaser all consents
necessary to transfer and assign the Assets (except for Minor Contracts) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant and development agreements with respect to each
ADI in the Territory.
(f) Purchaser shall have obtained, either from Seller or directly from the
issuing authority, all permits, licenses, including liquor licenses, and
approvals of all governmental and quasi-governmental authorities necessary for
the operation of the Restaurants in accordance with franchise requirements;
provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser reasonably believes that it will be able to obtain such a permit
within two months of the Closing Date, Closing of the transactions contemplated
hereunder will not be delayed if Seller delivers to Purchaser a duly executed
liquor license management agreement or agreements.
(g) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit E upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 Seller's Conditions to Closing. The obligations of Seller hereunder are
subject to satisfaction of each of the following conditions at or before
Closing, the occurrence of which may, at the option of Seller, be waived:
(a) All representations and warranties of Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser shall have performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complied with by Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(e) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims. (a) Seller shall indemnify and hold harmless P
urchaser, 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:
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(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
$241,000 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 $2,410,000.
(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 3.7(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.
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(e) Purchaser may not assert any claim against Seller for breach of any
covenant contained in Article IV (except for Sections 4.1, 4.3, 4.4, 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 VIII.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
under Section 8.1, relating to a third party claim or demand, Purchaser shall
provide Seller with prompt written notice thereof in accordance with Section
10.4 and Seller may defend, in good faith and at its expense, by legal counsel
chosen by it and reasonably acceptable to Purchaser any such claim or demand,
and Purchaser, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser shall not settle or compromise such
third party claim. In any event Purchaser shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
8.3 Seller Claims. Purchaser shall indemnify and hold harmless Seller
against, and in respect of, any and all damages, claims, losses, liabilities,
and expenses, including without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation by Purchaser of
any covenant set forth herein or any failure to fulfill any obligation set forth
herein, including, but not limited to, the obligation to satisfy the Assumed
Liabilities; (ii) any breach of any of the representations or warranties made in
this Agreement by Purchaser; or (iii) any claim by any Person for any brokerage
or finder's fee or commission in respect of the transactions contemplated hereby
as a result of Purchaser's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII shall be the sole and exclusive rights and remedies that either
party may seek for any misrepresentation, breach of warranty, or failure to
fulfill any covenant or agreement under this Agreement, except that either party
may seek specific performance or injunctive relief.
8.5 Settlement of Disputes. (a) Arbitration. All disputes with respect to
any claim for indemnification under this Article VIII and all other disputes and
controversies of every kind and nature between the parties hereto arising out of
or in connection with this Agreement shall be submitted to arbitration pursuant
to the following procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("AAA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
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(iii) The arbitration hearing shall be held in Lexington, Kentucky (in the
case of arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser) at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Georgia (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, shall not award punitive damages, and judgment on such award may be
entered by either party in a court of competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwith standing anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination.
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if Purchaser shall not (i) have obtained and provided a
copy of the Financing Commitment to Seller within fifteen (15) days from the
date hereof, (ii) been approved hereof as a franchisee with respect to the
Territory by 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
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carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) Purchaser shall pay all filing fees required under the HSR Act.
(c) Purchaser shall pay (or reimburse Seller for) the costs of obtaining
the Title Commitments, Owner's Title Policies and Lessee's Title Policies with
respect to the Real Property and all transfer, intangible, recording, and
documentary taxes, stamps, and fees with respect to the transfer of the Owned
Real Property and the Leases. Purchaser shall also pay the cost of the Surveys
and all other surveys, environmental investigations, studies, and reports, and
all other costs of any investigation of the Assets, the Restaurants, or the
Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents subject to Section
4.9.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
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:
Neighborhood Hospitality, Inc. James D. Asher
Highway 15 1832 South Box 679 203 Suite B Main Street
Hazard, Kentucky 41702 Whitesburg, Kentucky 41858
Attention: Marty Johnson, President Fax: (606) 633-3280
Fax: (606) 439-2169
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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 GEORGIA LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Purchaser and Seller will coordinate with each
other all press releases relating to the transactions contemplated by this
Agreement and, except to the extent required by law, refrain from issuing any
press release, publicity statement, or other public notice relating to this
Agreement or the transactions contemplated hereby without providing the other
party reasonable opportunity to review and comment thereon.
10.10 Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, EXCEPT TO
THE EXTENT OF SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN,
SHALL ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT TO THE EXTENT OF SELLER'S
EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, SELLER SHALL SELL AND
CONVEY TO PURCHASER, AND PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS",
AND WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE ASSETS BY SELLER OR ANY THIRD
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:
Louis J. Profumo, Senior Vice President--
Planning and Acquisitions
PURCHASER:
NEIGHBORHOOD HOSPITALITY, INC.
By:
Marty Johnson, President
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EXHIBIT TABLE OF CONTENTS
EXHIBIT TITLE
A Bill of Sale and Assignment Agreement
B Opinion of Seller's Counsel
C Opinion of Purchaser's Counsel
D Allocation of Purchase Price
E Financing Terms
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.15 Seller Plans
4.7 Development Sites
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of February 9, 1999, by and among
AVADO BRANDS, 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 Prope rty, including, but not limited to, equipment, appliances,
machinery, 1 laptop computer 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;
(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
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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; and
(xi) all records and files related to the Real Property such as 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, and (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c). Assumed
Liabilities shall not include any liability, obligation, payment, duty, or
responsibility of any nature except as expressly described above and
specifically shall not include (i) liabilities or obligations of Seller arising
out of any breach by Seller of any of the Contracts or Leases; (ii) except as
provided in clauses (ii) or (iv) above, liabilities or obligations of Seller
under any of the Contracts or Leases or with respect to the Owned Real Property
or other Assets that accrue in any such case prior to the Closing; (iii) any
liabilities or obligations of Seller under the Franchise Agreements; (iv) any
liability of Seller for product liability, personal injury, property damage, or
otherwise based on any tort claim or statutory liability (including but not
limited to any "dram shop" liability); (v) any federal, state, or local tax
liability of Seller except to the extent expressly assumed hereunder, (vi) any
contractual claim based on any lease, contract, or agreement other than the
Contracts and Leases; (vii) any liability, obligation, or responsibility of
Seller to Seller's employees, agents, or independent contractors with respect to
wages, salaries, bonuses, or other compensation or benefits earned or accrued
prior to the Closing (except for accrued but unvested vacation assumed pursuant
to Section 6.3(c)); and (viii) any liability or obligation of Seller arising out
of the negotiation, execution, or performance of this Agreement, including fees
and expenses of attorneys and accountants, except as otherwise expressly
provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Applebee's Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
"Closing Date" shall mean the time and date that the Closing occurs.
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"Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts and the Leases
without resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds, 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.
"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.
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"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.
"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
by Seller upon thirty days notice or less, a list of which are set forth on
Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located (all of which tracts and parcels are
described in Schedule 1.1C), and all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and appurtenances thereto.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from any Government which
relate exclusively to the Business, the Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, in the case of all Real Property, (i)
such easements, restrictions, covenants, and other such encumbrances which are
shown as exceptions on the Title Commitments and any other encumbrances of
record as of the effective date of the Title Commitments, (ii) ordinances
(municipal and zoning), (iii) survey matters, and (iv) such easements,
restrictions, covenants, and other encumbrances which become matters of public
record after the effective date of the Title Commitments and before the Closing,
in each such case, to the extent that such encumbrances could not reasonably be
expected to materially interfere with or impair Purchaser's use of the Real
Property for Applebee's Neighborhood Grill & Bar Restaurants or that are waived,
or deemed to be waived, by Purchaser pursuant to Section 7.1(a). Permitted
Encumbrances shall include in the case of both Real Property and personal
property all liens for taxes not yet due and payable.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
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organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Purchase Price Adjustment Schedule" shall have the meaning set forth in
Section 2.3.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the eight (8) 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.
"Subsequent Contracts" shall have the meaning set forth in Section 4.10.
"Termination Date" shall mean April 30, 1999.
"Territory" shall mean those ADI's set forth on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 4.12(a).
"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.12(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $11,700,000 (provided, however, that if the Closing occurs on
or prior to April 2, 1999, the Purchase Price shall be $11,500,000) adjusted as
follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases 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
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periods 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 and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the estimated cost of vacation accrued
but unvested as of the Closing Date by ADI Personnel hired by Purchaser the cost
of which is being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
The foregoing adjustments shall be calculated by the parties and set forth
on a Purchase Price adjustment schedule (the "Purchase Price Adjustment
Schedule") which shall be signed by both parties at Closing. The Purchase Price
shall be paid by Purchaser on the Closing Date by wire transfer of immediately
available funds to an account designated by Seller. As soon as possible after
the Closing (but not later than the first anniversary thereof), the parties
shall reconcile the actual amount of prorations that were estimated at Closing
as well as 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;
(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;
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(vii) The Deeds, duly executed by Seller;
(vii) 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
(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 Lease Assignments, duly executed by Purchaser;
(vi) The opinion of Ward and Smith, P.A., counsel to Purchaser, in form and
content mutually satisfactory to the parties;
(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 April 2,
1999, 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.
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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
Purchaser 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.
2.9 Lock-Up Fee. (a) For and in consideration of Seller entering into this
Agreement, Purchaser shall pay to Seller $200,000 in cash, $50,000 to be payable
no later than 5:00 p.m. Atlanta time on the date hereof and $150,000 to be
payable no later than 5:00 p.m. Atlanta time on the first business day following
Purchaser's receipt of the Financing Commitment, in each case by means of a wire
transfer of immediately available funds to an account designated by Seller, such
funds to be held by Seller as Seller's own sole and exclusive property and to
not constitute a deposit, down-payment, escrow, or any other contingent funds.
(b) In the event that the Closing occurs on or before April 30, 1999
pursuant to the terms of this Agreement, then the Purchase Price shall be
reduced by (i) the amount paid by Purchaser under subsection (a) hereof and (ii)
an amount equal to the interest on such amount at an annual rate of 4.5% for the
time period from the payment(s) by Purchaser to Seller called for in subsection
(a) hereof until the Closing Date.
(c) In the event that the Closing does not occur on or before April 30,
1999 pursuant to the terms of this Agreement because Seller was not willing or
not prepared to satisfy Sections 7.2(a), (b), (c), (d), and (j) of this
Agreement, then Seller shall pay to Purchaser (i) the amount paid by Purchaser
under subsection (a) hereof and (ii) an amount equal to the interest on such
amount at an annual rate of 4.5% for the time period from the payment(s) by
Purchaser to Seller called for in Subsection (a) hereof until the date of such
repayment by Seller to Purchaser, to be paid in cash no later than 5:00 p.m.
Atlanta time on the day immediately following the Termination Date, by means of
a wire transfer of immediately available funds to an account designated by
Purchaser.
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
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the Leases and Material Contracts set forth on Schedule 3.3, the execution,
delivery and performance of this Agreement will not violate or result in a
breach of any term of Seller's Articles of Incorporation or Bylaws, result in a
breach of any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents executed in connection herewith, and the
consummation of the transactions contemplated hereby and thereby do not require
any filing with, notice to or consent, waiver or approval of any third party,
including but not limited to, any Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Bill of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Seller, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
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 usable
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 therefore
and accumulated depreciation.
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)
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have been provided to Purchaser. At the time of Closing, Seller shall have made
all payments and performed all obligations due through the Closing Date under
each Contract and Lease, except to the extent that any payment due is set forth
on the Purchase Price Adjustment Schedule and deducted in calculating the
Purchase Price pursuant to Section 2.3.
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
(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 relate to
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) Seller has received no notice that any Government having the power of
eminent domain over any parcel of Real Property has commenced or intends to
exercise the power of eminent domain or a similar power with respect to any part
of the Real Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all material laws and regulations (including zoning laws and
ordinances) of each Government having jurisdiction over the Real Property, and
Seller has received no notice from any Government alleging that the Real
Property or any improvements erected or situated thereon, or the uses conducted
thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, or to the knowledge of Seller received by any owner of any
of the Real Property subject to a Lease, requiring or calling attention to the
need for any work, repair, construction, alteration, or installation on or in
connection with the Real Property which has not been complied with.
(g) Except as set forth on Schedule 3.7(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. Except as set forth on
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Schedule 3.7(g), 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. Except as set forth on Schedule 3.7(g), 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 each Restaurant
unaudited statements of operations as of the end of the 1998 fiscal year and for
each fiscal month ended thereafter through the date hereof for which such
statements are available (the "Financial Statements"). The Financial Statements
have been prepared in accordance with Seller's historical practices and fairly
present the operations of the Restaurants for the periods presented and as of
their respective dates.
3.9 Taxes. All Property Taxes relating to the Assets have been fully paid
for 1997 and all prior tax years and there are no delinquent property tax liens
or assessments. Seller has also timely filed (or will timely file) all other tax
returns and reports of whatever kind pertaining to the Assets and required to be
filed by Seller up to the Closing Date. 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 and occupational health and safety 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 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
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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 pur chase, 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 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
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 Contracts. Seller shall,
through the Closing Date, continue to faithfully and diligently perform each and
every continuing obligation of Seller, if any, under each of the Leases and
Contracts, where the failure to do so would have a material adverse affect on
the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to cooperate in assisting Purchaser with the assumption,
transfer, or reissuance of any and all Permits required for the operation of the
Restaurants.
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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"). 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 pay checks. For a period
of eighteen months following the Closing, Seller shall not solicit for
employment any person who is a salaried employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance, and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
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 so that the Assets are, at Closing, in operating
condition consistent with their age;
(ii) continue to purchase and maintain inventories for each Restaurant in
such quantities and quality as necessary to operate the Restaurants in
accordance with Seller's historical practice; and
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state, and federal laws and regulations.
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change in any material manner the ownership of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan providing for payment of
bonuses upon the Closing;
(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 except in the
ordinary course of business; or
(vi) other than in the ordinary course of business, cancel or terminate or
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consent to or accept any cancellation or termination of any Material Contract or
Lease, amend or otherwise modify any of its material terms or waive any breach
of any of its material terms or provisions or take any other action in
connection with any Material Contract or Lease that would materially impair the
interests or rights of Seller to be transferred to Purchaser hereunder.
4.6 Access to Information. Seller shall afford Purchaser, its counsel,
financial advisors, auditors, lenders, lenders' counsel and other authorized
representatives reasonable access for any purpose consistent with this Agreement
from the date hereof until the Closing, during normal business hours, to the
offices, properties, books, and records of Seller with respect to the Assets and
the Restaurants and shall furnish to Purchaser such additional financial and
operating data and other information as Seller may possess and as Purchaser may
reasonably request, subject to Purchaser's obligations regarding the
confidentiality of such information as set forth in Section 6.2 hereof;
provided, however, that such access shall be arranged in advance by Purchaser
with Seller and will be scheduled in a manner and with a frequency calculated to
cause the minimum disruption of the business of Seller.
4.7 [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 has materially adversely affected
the Assets or the operations of the Restaurants.
(b) As soon as available and in any event within four weeks after the end
of each calendar month, the statement of operations of each Restaurant for such
fiscal month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
Actions, Orders, or other directives affecting the Business or any Restaurant
that, if adversely determined, could materially adversely affect the Assets, the
operations, business, prospects or condition (financial or otherwise) of the
Restaurant or the ability of Seller to perform its obligations hereunder;
(d) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
4.9 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. 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
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rights, title, and interests thereunder subject to the Purchaser's assumption of
all of Seller's duties, powers, and obligations under such Subsequent Contract,
and (b) to ensure that no Subsequent Contract contains any provision which would
limit in any way the rights, title, and interests of Seller in the Assets.
4.11 Transition Services. (a) For a period of three months after the
Closing, if and to the extent requested in writing by Purchaser, Seller agrees
to provide to Purchaser restaurant accounting, POS system support, and other
services related to the Restaurants as mutually agreed upon between Seller and
Purchaser (the "Services"). Purchaser shall give Seller forty-five (45) days
advance written notice of the Services requested. The Services shall be provided
promptly as requested and shall be provided in substantially the same manner and
with the same or similar personnel as Seller previously utilized; provided,
however, that if Seller no longer has the personnel to provide such Services,
Seller may outsource such services to a third party.
(b) Purchaser will pay for the Services on a monthly basis, after receipt
of an invoice from Seller, at Seller's direct personnel cost incurred in
connection with providing the requested Service or Seller's out-of-pocket cost
(if such 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 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. (a) Within five business days of
the date hereof, Seller shall provide Purchaser (i) 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 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) surveys (collectively with the surveys of the Owned Real Property, the
"Surveys") and title insurance commitments with respect to the Real Property
subject to a Lease (collectively, the "Leased Real Property") (the " Lessee
Title Commitments", and collectively with the Owner's Title Commitments, the
"Title Commitments") pursuant to which the Title Company will agree to issue at
Closing lessee's policies of title insurance ("Lessee's Title Policies") on
American Land Title Association standard form of leasehold owner's policy to
insure leasehold estates, showing no exceptions except as shown in the Lessee
Title Commitments. The Owner's Title Policies shall insure the Purchaser that,
upon consummation of the purchase and sale herein contemplated, Purchaser will
be vested with good, fee simple, marketable, and insurable title to the Owned
Real Property, subject only to the Permitted Encumbrances or arising out of acts
of the insured. The Lessee's Title Policies shall insure the Purchaser that,
upon consummation of the transactions herein contemplated, Purchaser will be
vested with a good, valid, marketable and insurable leasehold estate in and to
the Leased Real Property, subject only to the Permitted Encumbrances.
Notwithstanding anything to the contrary contained herein, while Lessee Title
Commitments will be delivered for all Leased Real Property, no surveys will be
delivered and no Lessee's Title Policies will be issued for Leases unless such
Leases are for Free Standing Premises (as defined in Section 7.1).
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(b) No later than five business days after the date hereof, Seller shall
provide to Purchaser copies of all environmental reports pertaining to the Owned
Real Property in Seller's possession.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization, Corporate Power, Authorization. Purchaser is a
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 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
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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 intends to offer employment to all ADI
Personnel employed and in good standing at the Effective Date 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 a salaried 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 F.
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, signed
by both the lender and Purchaser, for financing the transactions contemplated
hereby on substantially the terms set forth in Exhibit E (the "Financing
Commitment") and to close such financing substantially on such terms, (ii)
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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(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 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 along with all other encumbrances of record as of the effective date
of the Title Commitments not objected to by Purchaser shall be deemed waived by
Purchaser and shall be a Permitted Encumbrance. The parties acknowledge that
some of the Leased Real Property may be located in shopping centers, and as
such, unless the leased premises are a free standing building located on a
separate pad with its own legal description ("Free Standing Premises") the
Lessee Title Commitments for such Leased Real Property will contain encumbrances
for entire shopping centers. Purchaser may not object to title encumbrances for
such Leased Real Property that do not affect the premises leased under the
Leases, which such encumbrances shall be deemed to be Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property 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 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
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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) 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 of the
Consents.
(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.
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(f) Purchaser shall have obtained, either from Seller or directly from the
issuing authority, all permits, licenses, including liquor licenses, and
approvals of all governmental and quasi-governmental authorities necessary for
the operation of the Restaurants in accordance with franchise requirements;
provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser reasonably believes that it will be able to obtain such a permit
within two months of the Closing Date, Closing of the transactions contemplated
hereunder will not be delayed if Seller delivers to Purchaser a duly executed
liquor license management agreement or agreements.
(g) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit E upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 Seller's Conditions to Closing. The obligations of Seller hereunder are
subject to satisfaction of each of the following conditions at or before
Closing, the occurrence of which may, at the option of Seller, be waived:
(a) All representations and warranties of Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser shall have performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complied with by Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(e) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims. (a) Seller shall indemnify and hold harmless
Purchaser, its successors and assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser that result from, relate to, or arise out of:
(A) any and all liabilities and obligations of Seller of any nature
whatsoever, except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
by Seller pursuant hereto; or
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(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
$125,000 and then only to the extent that the aggregate liability of Seller
thereunder exceeds such amount; provided, however, that liabilities arising with
respect to Sections 3.1 through 3.4 hereof shall not be subject to the foregoing
threshold and any liabilities arising with respect to such matters shall not be
taken into account in computing aggregate liabilities for the purpose of
applying such threshold amount to liabilities arising under other Sections
subject thereto. In no event shall the aggregate liability of Seller under
Section 8.1(a)(i)(C) (and Section 8.1(a)(ii) to the extent the items covered
thereby relate back to Section 8.1(a)(i)(C)) exceed $3,000,000.
(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 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
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prejudiced thereby. Purchaser shall make commercially reasonable efforts to
mitigate any damages, expenses, etc. resulting from any matter giving rise to
liability of Seller under this Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
under Section 8.1, relating to a third party claim or demand, Purchaser shall
provide Seller with prompt written notice thereof in accordance with Section
10.4 and Seller may defend, in good faith and at its expense, by legal counsel
chosen by it and reasonably acceptable to Purchaser any such claim or demand,
and Purchaser, at its expense, shall have the right to participate in the
defense of any such third party claim. So long as Seller is defending in good
faith any such third party claim, Purchaser shall not settle or compromise such
third party claim. In any event Purchaser shall cooperate in the settlement or
compromise of, or defense against, any such asserted claim.
8.3 Seller Claims. Purchaser shall indemnify and hold harmless Seller
against, and in respect of, any and all damages, claims, losses, liabilities,
and expenses, including without limitation, legal, accounting and other
expenses, which may arise out of: (i) any breach or violation by Purchaser of
any covenant set forth herein or any failure to fulfill any obligation set forth
herein, including, but not limited to, the obligation to satisfy the Assumed
Liabilities; (ii) any breach of any of the representations or warranties made in
this Agreement by Purchaser; or (iii) any claim by any Person for any brokerage
or finder's fee or commission in respect of the transactions contemplated hereby
as a result of Purchaser's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII shall be the sole and exclusive rights and remedies that either
party may seek for any misrepresentation, breach of warranty, or failure to
fulfill any covenant or agreement under this Agreement, except that either party
may seek specific performance or injunctive relief.
8.5 Settlement of Disputes. (a) Arbitration. All disputes with respect to
any claim for indemnification under this Article VIII and all other disputes and
controversies of every kind and nature between the parties hereto arising out of
or in connection with this Agreement shall be submitted to arbitration pursuant
to the following procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(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, North Carolina
(in the case of arbitration initiated by Seller) or in Atlanta, Georgia (in the
case of arbitration initiated by Purchaser) at a location designated by a
majority of the arbitrators. The Commercial Arbitration Rule of the AAA shall be
used and the substantive laws of the State of Georgia (excluding conflict of
laws provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
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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. Notwith standing anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination.
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if Purchaser shall not (i) have obtained and provided a
copy of the Financing Commitment to Seller within 30 days from the date hereof,
(ii) been approved hereof as a franchisee with respect to the Territory by
Franchisor within 45 days of the date hereof, (iii) reached agreement with
Franchisor as to a development schedule and other material terms of franchise
and development agreements with respect to the Territory within 45 days from the
date hereof; or
(iv) By either Seller or Purchaser, at its sole election, at any time after
the Termination Date, if the Closing shall not have occurred on or prior to such
date.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller or Purchaser, as the case may be,
shall have willingly failed to fulfill its obligations hereunder, the other
party shall, subject to Section 8.5, be entitled to pursue, exercise, and
enforce any and all remedies, rights, powers, and privileges available to it at
law or in equity.
(c) Section 6.2, Article VIII, and Article X hereof shall survive the
termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) Purchaser shall pay all filing fees required under the HSR Act.
(c) Purchaser shall pay (or reimburse Seller for) the costs of obtaining
the Title Commitments, Owner's Title Policies and Lessee's Title Policies with
respect to the Real Property. Seller shall pay all transfer, intangible,
recording, and documentary taxes, stamps, and fees with respect to the transfer
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of the Owned Real Property and the Leases. Purchaser shall also pay the cost of
the Surveys and all other surveys, environmental investigations, studies, and
reports, and all other costs of any investigation of the Assets, the
Restaurants, or the Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property.
(f) Seller shall pay the costs of obtaining any Consents subject to Section
4.9.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
If to Seller, to: With a required copy to:
Avado Brands, 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,
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demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U. S. Mail properly addressed with adequate postage affixed.
10.5 GEORGIA LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Purchaser and Seller will coordinate with each
other all press releases relating to the transactions contemplated by this
Agreement and, except to the extent required by law, refrain from issuing any
press release, publicity statement, or other public notice relating to this
Agreement or the transactions contemplated hereby without providing the other
party reasonable opportunity to review and comment thereon.
10.10 Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, EXCEPT TO
THE EXTENT OF SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN,
SHALL ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY
PURCHASER'S INSPECTIONS AND INVESTIGATIONS. EXCEPT TO THE EXTENT OF SELLER'S
EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, SELLER SHALL SELL AND
CONVEY TO PURCHASER, AND PURCHASER SHALL ACCEPT, THE ASSETS "AS IS", "WHERE IS",
AND WITH ALL FAULTS, AND THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR
REPRESENTATIONS, COLLATERAL TO OR AFFECTING THE ASSETS BY SELLER OR ANY THIRD
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:
AVADO BRANDS, INC.
By:
Louis J. Profumo, Senior Vice President for
Planning and Acquisitions
PURCHASER:
WHIT-MART, INC.
By:
Gary P. Whitman, President
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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 Allocation of Purchase Price
E Financing Terms
F Purchaser Benefit Plans
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Leases and
Material Contracts
3.5(f) Tangible Personal Property
3.6 List of Material Contract and Leases and
amendments thereto
3.6(e) Multi-Territory Agreements
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.13 Employees
3.15 Seller Plans
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of November 25, 1998, by and among
AVADO BRANDS, INC., a Georgia corporation ("Seller") and APPLE CAPITOL GROUP,
LLC, a Florida Limited Liability Company ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller owns and operates a number of Applebee's Neighborhood Grill
& Bar ("Applebee's") franchise restaurants; and
WHEREAS, Seller desires to sell to Purchaser certain Applebee's restaurants
and related property, and Purchaser desires to purchase such assets, all on the
terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below:
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding, whether at
law, in equity, in arbitration or otherwise, and whether conducted by or before
any Government or other Person.
"ADI's" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials;
(ii) all tangible personal property listed on Schedule 1.1G which is
located in restaurants which have been previously closed by Seller in Fairfax
and Manassas, Virginia;
(iii) $1,500 cash in each Restaurant;
(iv) all prepaid items relating exclusively to the Business;
(v) all assignable Permits;
(vi) all assignable rights under express or implied warranties of
manufacturers, distributors, or retailers relating to the Assets;
(vii) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business;
(viii) all financial operating statements, business records, records
relating to insurance claims, employment records (subject to execution of a
release by each affected employee allowing for the disclosure of such files) and
employment claims and other files in each case exclusively pertaining to the
operation and employees of the Business;
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(ix) the Contracts and Leases;
(x) the Owned Real Property;
(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.; and
(xii) all goodwill or other intangible assets not listed above related
exclusively to the Business.
A copy of Seller's asset depreciation schedule for the Business is attached
hereto as Schedule 1.1F. This Schedule is provided for informational purposes
only, and Seller makes no representations regarding this schedule, as the
parties acknowledge that certain assets may be shown on the Schedule which are
not located in the Restaurant (and are not being conveyed to Purchaser) and
other assets may be located in the Restaurants (and are being conveyed to
Purchaser).
"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 or are related to or in any way
attributable to any period prior to closing but which are not due for payment
until after the Closing and which are taken into account in computing the
Purchase Price pursuant to Section 2.3, (v) all Property Taxes and all other
obligations with respect to the Assets that accrue after the Closing, (vi) gift
certificates issued by Seller prior to Closing, and (vii) accrued but unvested
vacation of ADI Personnel assumed pursuant to Section 6.3(c). Assumed
Liabilities shall not include any liability, obligation, payment, duty, or
responsibility of any nature except as expressly described above and
specifically shall not include (i) liabilities or obligations of Seller arising
out of any breach by Seller of any of the Contracts or Leases; (ii) except as
provided in clauses (ii) or (iv) above, liabilities or obligations of Seller
under any of the Contracts or Leases or with respect to the Owned Real Property
or other Assets that accrue in any such case prior to the Closing; (iii) any
liabilities or obligations of Seller under the Franchise Agreements; (iv) any
liability of Seller for product liability, personal injury, property damage, or
otherwise based on any tort claim or statutory liability (including but not
limited to any "dram shop" liability); (v) any federal, state, or local tax
liability of Seller except to the extent expressly assumed hereunder, (vi) any
contractual claim based on any lease, contract, or agreement other than the
Contracts and Leases; (vii) any liability, obligation, or responsibility of
Seller to Seller's employees, agents, or independent contractors with respect to
wages, salaries, bonuses, or other compensation or benefits earned or accrued
prior to the Closing (except for accrued but unvested vacation assumed pursuant
to Section 6.3(c)); and (viii) any liability or obligation of Seller arising out
of the negotiation, execution, or performance of this Agreement, including fees
and expenses of attorneys and accountants, except as otherwise expressly
provided herein.
"Bill of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Owned Real Property) will be transferred and assigned to Purchaser at
the Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
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"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 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 ." All the Contracts of which Seller or Seller's Directors of
Operations for the Restaurants have knowledge are described on Schedule 1.1G.
"Deeds" shall mean special warranty deeds, limited warranty deeds or other
appropriate instruments to convey good and marketable fee simple title to the
Owned Real Property, with the warranty of title contained therein limited to the
claims of Persons claiming by, through or under Seller (or, in the case of the
DR Holdings Tracts, the owner thereof), but not otherwise.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"DR Holdings Tracts" shall mean 2 parcels of real property located in
Martinsburg, West Virginia and Woodbridge, Virginia which are subject to leases,
but which Seller shall cause to be conveyed to Purchaser in fee simple at the
Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Environmental Laws" shall mean (1) 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, (2) 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, and (3) all
principles of common law pertaining to the regulation and protection of the
environment and damages to natural resources.
"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,
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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 (1) all substances and materials designated
as hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law, (2) any petroleum, petroleum products (including, without
limitation, crude oil or any fraction thereof), natural gas, natural gas
liquids, liquefied natural gas or synthetic gas useable for fuel (or mixtures of
natural gas and such synthetic gas), oil and gas exploration or production
waste, polychlorinated biphenyls ("PCBs"), asbestos-containing materials,
mercury, and lead-based paints; and (3) any other chemicals, materials,
substances, or wastes, exposure to which is prohibited, limited, or regulated by
any governmental or regulatory authority.
"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. Seller shall be imputed to have "knowledge" of the
provisions of any written contract, license, deed, and agreement which arises
from or in connection with the Business prior to the Closing.
"Lease Assignments" shall mean instruments pursuant to which the Leases
will be transferred and assigned to Purchaser at the Closing and pursuant to
which Purchaser will assume the Assumed Liabilities thereunder.
"Leases" shall mean the leases of real property and improvements described
on Schedule 1.1B.
"Liabilities" shall mean each and every liability or obligation of the
Person who is specified (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due),
including, without limitation any liability for any tax or other governmental
assessments.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $5,000 per year and that are not cancelable
by Seller upon thirty days notice or less, a list of which are set forth on
Schedule 1.1D.
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"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Owned Real Property" shall mean those tracts and parcels of land owned by
Seller on which a Restaurant is located (all of which tracts and parcels are
described in Schedule 1.1C) and all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and easements and
appurtenances thereto. For the purposes of this Agreement, "Owned Real Property"
will include the DR Holdings Tracts.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits or approvals of any nature, from any Government which
relate exclusively to the Business, the Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean (i) such easements, restrictions,
covenants, and other such encumbrances which are shown as exceptions on the
Title Commitments and any other encumbrances of record as of the effective date
of the Title Commitments, (ii) ordinances (municipal and zoning), (iii) survey
matters, and (iv) such easements, restrictions, covenants, and other
encumbrances which become matters of public record after the effective date of
the Title Commitments and before the Closing, in each such case, to the extent
that such encumbrances, individually or in the aggregate, 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 that have been taken into
account in computing the Purchase Price pursuant to Section 2.3.
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Purchase Price Adjustment Schedule" shall have the meaning set forth in
Section 2.3.
"Real Property" shall mean the land and improvements comprising the Owned
Real Property and all land and improvements subject to Leases.
"Restaurants" shall mean the 23 Applebee's Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean March 15, 1999.
"Territory" shall mean those ADI's set forth on Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 4.12(a).
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"Title Policies" shall mean the Owner's Title Policies and the Lessee's
Title Policies as defined in Section 4.12(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $43,750,000.00 adjusted as follows:
The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing or in anyway are
related to or attributable to any period after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
and Leases that pertain to periods after the Closing; (iii) any other prepaid
expenses pertaining to the Business (such as telephone expenses, advertising
expenses, utility charges, and the like) to the extent that the same will
benefit Purchaser after the Closing; (iv) an amount equal to 50% of Seller's
cost of those Assets consisting of food, beverage (including beer, wine, and
liquor), new uniforms, paper, and supplies inventory in each case to the extent
such assets are readily useable, merchantable, current under existing Franchisor
programs and are within prescribed shelf lives 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 or are related to
or in any way attributable to any period prior to Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts and Leases that pertain to periods
before the Closing but are due and payable after the Closing and that have not
been paid as of the Closing, and (iii) the estimated cost of vacation accrued
but unvested as of the Closing Date by ADI Personnel hired by Purchaser the cost
of which is being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
The foregoing adjustments shall be calculated by the parties and set forth
on a Purchase Price adjustment schedule (the "Purchase Price Adjustment
Schedule") which shall be signed by both parties at Closing. The Purchase Price
shall be paid by Purchaser on the Closing Date by wire transfer of immediately
available funds to an account designated by Seller. As soon as possible after
the Closing (but not later than the first anniversary thereof), the parties
shall reconcile the actual amount of prorations that were estimated at Closing
as well as accrued but unvested vacation time of Seller's employees assumed by
Purchaser hereunder that has actually vested with the estimated amounts thereof.
To the extent that the actual amounts differ from the amounts estimated on the
Purchase Price Adjustment Schedule or prorations or adjustments other than those
reflected on the Purchase Price Adjustment Schedule are discovered after the
Closing, the parties agree to remit the correct amount of such items to the
appropriate party as and when same are determined.
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2.4 Deliveries at the Closing. (a) At the Closing, Seller shall deliver to
Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true as of the Closing Date in all material respects (provided
that the materiality qualifier contained herein shall not apply in addition to a
materiality qualifier contained in any representation or warranty);
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Bill of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Bill
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Kilpatrick Stockton LLP, counsel to Seller, in
substantially the form of Exhibit B hereto;
(iv) The Bill of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller or in the case of the DR Holdings
Tracts by the owner thereof;
(vii) The Lease Assignments, duly executed by Seller;
(viii) A Cross-Receipt, duly executed by Seller;
(ix) Seller Affidavits;
(x) Well, tank, sewage treatment or other disclosure forms which Seller is
required under applicable law to deliver in connection with the transfer of the
Real Property;
(xi) Subordination, Nondisturbance and Attornment Agreements;
(xii) A list of all ADI Personnel at Closing; and
(xiii) 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 as of the
Closing Date in all material respects (provided that the materiality qualifier
contained herein shall not apply in addition to a materiality qualifier
contained in any representation or warranty);
(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
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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 Lease Assignments, duly executed by Purchaser;
(vi) The opinion of Krass Monroe, P.A., 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, 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 February
1, 1999, 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
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 request 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
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time by Seller prior to the Closing Date for changes between the date hereof and
the Closing Date, regardless of whether any Schedule constituting a part of the
Disclosure Memorandum is referenced in any specific provision below, Seller
hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Bill of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Bill of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Leases and Material Contracts set forth on Schedule 3.3, the execution,
delivery and performance of this Agreement will not violate or result in a
breach of any term of Seller's Articles of Incorporation or Bylaws, result in a
breach of any agreement or other instrument to which Seller is a party (except
for defaults under Minor Contracts where the consent of the other party or
parties to such contract to the assignment thereof will not be obtained) or
violate any law or any order, rule, or regulation applicable to Seller of any
Forum having jurisdiction over Seller; and will not result in the creation or
imposition of any lien, charge, or encumbrance of any nature whatsoever upon any
of the Assets. Except as set forth on Schedule 3.3 and except for consents
required under Minor Contracts, the execution, delivery and performance of this
Agreement and the other documents executed in connection herewith, and the
consummation of the transactions contemplated hereby and thereby do not require
any filing with, notice to or consent, waiver or approval of any third party,
including but not limited to, any Forum other than any filing required under the
HSR Act and the expiration of any applicable waiting period thereunder. Schedule
3.3 identifies separately each notice, consent, waiver, or approval by reference
to each Lease and to each Material Contract to which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms, 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 or required by the Franchise
Agreements other than Permits and software licenses that are not assignable.
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(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.
3.6 Contracts and Leases. (a) Each 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 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 Contracts and Leases (and any amendments thereto) have been provided to
Purchaser. At the time of Closing, Seller shall have made all payments and
performed all obligations due through the Closing Date under each Contract and
Lease, except to the extent that any payment due is set forth on the Purchase
Price Adjustment Schedule and deducted in calculating the Purchase Price
pursuant to Section 2.3 .
(b) No Contract or Lease has been assigned by Seller or any interest
granted therein by Seller to any third party, or is subject to any mortgage,
pledge, hypothecation, security interest, lien, or other encumbrance or claim.
(c) Seller's possession of property subject to the Leases has not been
disturbed, nor has any claim been asserted against Seller adverse to its rights
in such leasehold interests.
(d) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property. (a) Schedule 3.7(a) sets forth with respect to each
Restaurant, its location, whether it is located on Owned Real Property or is on
a site subject to a Lease, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller, or the owner of the DR Holdings Tracts, has obtained all
authorizations and rights-of-way which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the site of each Restaurant, all of
which are assignable and shall be assigned to Purchaser at the Closing.
(d) Neither Seller nor the owner of the DR Holdings Tracts has received any
notice that any Government having the power of eminent domain over any parcel of
Real Property has commenced or intends to exercise the power of eminent domain
or a similar power with respect to any part of the Real Property.
(e) The Real Property and the present uses thereof comply in all material
respects with all laws and regulations (including zoning laws and ordinances) of
each Government having jurisdiction over the Real Property, and neither Seller
nor the owner of the DR Holdings Tracts has received any notice from any
Government alleging that the Real Property or any improvements erected or
situated thereon, or the uses conducted thereon or therein, violate any
regulations of any Government having jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, the owner of the DR Holdings Tracts, or to the knowledge of
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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) Except as set forth on Schedule 3.7(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. Except as set forth on
Schedule 3.7(g), 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. Except as set forth on Schedule 3.7(g), there are no presently
pending, or to Seller's knowledge, threatened Actions or Orders against or
involving Seller or the owner of the DR Holdings Tracts relating to any alleged
past or ongoing violation of any Environmental Laws or Environmental Permits
with respect to the Real Property, nor to Seller's knowledge is Seller or the
owner of the DR Holdings Tracts subject to any liability for any such past or
ongoing violation.
3.8 Financial Statements. Schedule 3.8 contains for each Restaurant
unaudited statements of operations as of the end of the 1997 and 1996 fiscal
years and Seller has previously provided Purchaser with statements of operations
for each month during the current year ending prior to the date hereof for which
such statements are available, including an IRO Summary as of September 27, 1998
(the "Financial Statements"). The Financial Statements (including all notes and
schedules contained therein or annexed thereto) (i) are true, complete and
accurate, (ii) except as set forth on Schedule 3.8, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, (iii) have been prepared in accordance with the books and records of
Seller and (iv) fairly present, in accordance with generally accepted accounting
principles, except as set forth on Schedule 3.8, the results of operations of
Seller as of the dates and for the years and periods indicated. The financial
information contained in the financial statements described above is consistent
with the sales and other information reported to Franchisor under the Franchise
Agreements.
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 property tax liens or
assessments which are due that remain unpaid. Seller or the owner of the DR
Holdings Tracts has also timely filed (or will timely file) all other tax
returns and reports of whatever kind pertaining to the Assets and required to be
filed by Seller or the owner of the DR Holdings Tracts up to the Closing Date.
Seller or the owner of the DR Holdings Tracts has paid (or will timely pay) all
taxes of whatever kind, including any interest, penalties, governmental charges,
duties, fees, and fines imposed by all governmental entities or taxing
authorities, which are due and payable prior to the Closing Date or for which
assessments relating to any period prior to the Closing Date have been received,
the nonpayment of which would result in lien on any of the Assets. There are no
audits, suits, actions, claims, investigations, inquiries, or proceedings
pending or, to Seller's knowledge, threatened against Seller or the owner of the
DR Holdings Tracts with respect to taxes, interest, penalties, governmental
charges, duties, or fines, nor are any such matters under discussion with any
governmental authority, nor have any claims for additional taxes, interest,
penalties, charges, fines, fees, or duties been received by assessed against
Seller or the owner of the DR Holdings Tracts that in any such case affect the
Assets.
3.10 Litigation. Except as set forth on Schedule 3.10, there is no Action
or Order pending or, to the knowledge of Seller, threatened against or affecting
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Seller or the owner of the DR Holdings Tracts that pertains to the Restaurants,
or any of the Assets before any court or by or before any Forum.
3.11 Permits. Seller has all material Permits as are necessary to operate
the Restaurants. Seller has fulfilled and performed all of its material
obligations with respect to such Permits and, to the knowledge of Seller, no
event has occurred which allows, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any other impairment
of the rights of the holder of any such Permits.
3.12 Health and Safety Requirements. To the knowledge of Seller, Seller and
the owner of the DR Holdings Tracts are in compliance with all laws,
governmental standards, rules and regulations applicable to them or to any of
the Assets in respect to the Americans with Disabilities Act and similar state
laws and occupational health and safety laws.
3.13 Employment Contracts, Etc. Seller is not a party to any written
employment agreements related to the employees at the Restaurants (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concerning the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provisions
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits. (a) Schedule 3.15 hereto contains a true and
complete list of all the following agreements or plans of Seller which are
presently in effect and which pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock pur chase, 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 multiemployer plan as defined in section
3(37)(A) of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Liabilities. Except to the extent reflected on any Financial
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Statements, Seller does not have any other Liability related to the Business,
and at the Closing will not have any Liabilities related to the Business that
have arisen, except in the ordinary course of business, none of which newly
arisen Liabilities shall have an adverse affect upon the operation of the
Business. All of Seller's Liabilities related to the Business are current in
payment and not otherwise in payment arrears.
3.17 Undisclosed Liabilities. The Seller does not have any Liability
related to the Business (and there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against it giving rise to any such Liability), except for (i) Liabilities
reflected on the Financial Statements, (ii) Liabilities which have arisen after
the most recent Financial Statements in the ordinary course of business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law), and (iii) any Liability specifically noted on Schedule 3.17
attached hereto.
3.18 Legal Compliance. With respect to the Business, the Seller has
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state and local governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against Seller
with respect to the Business alleging any failure so to comply.
3.19 Insurance. Seller has maintained for the past three (3) years (prior
to the date hereof) and currently maintains with financially sound and reputable
insurers property, casualty, liability and workers compensation insurance
providing "Occurrence" based coverage (as opposed to "Claims Made" coverage)
against liabilities, casualties, risks and contingencies in such amounts as is
customary for others operating a business similar to that of Seller, and
attached hereto as Schedule 3.19 is a true, correct and complete copy of all
such policies of insurance with respect to the Business. All premiums with
respect to such policies of insurance have been paid or payment is current, and
Seller has not terminated or received notice of cancellation or termination of
any of such polices of insurance.
3.20 Absence of Certain Changes. Except as set forth on Schedule 3.20,
since December 31, 1997, there has not been: (i) any material adverse change in
the financial condition, assets, liabilities, business, prospects or operations
of the Business,(ii) any material loss, damage or destruction, whether covered
by insurance or not, affecting the Business or (iii) any other material adverse
event or condition not in the ordinary course of business of the Business.
3.21 Disclosure of Material Facts. No representation or warranty by Seller
contained in this Agreement and no statement contained in any Exhibit or
Schedule hereto or in any document executed or delivered by Seller and furnished
to Purchaser, or to be furnished to Purchaser pursuant to the provisions of this
Agreement, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements contained herein or therein not misleading.
3.22 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.
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ARTICLE IV - COVENANTS OF SELLER
4.1 Performance of Real Property Leases and Contracts. Seller shall,
through the Closing Date, continue to faithfully and diligently perform each and
every continuing obligation of Seller, if any, under each of the Leases and
Contracts, where the failure to do so would have a material adverse affect on
the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to assist Purchaser with the assumption, transfer, or
reissuance of any and all Permits required for the operation of the Restaurants.
4.3 Liabilities of Seller. All liabilities of Seller related to the
Business or the Assets that are not Assumed Liabilities will be promptly paid by
Seller as they come due.
4.4 Agreements Respecting Employees of Seller. (a) Prior to the Effective
Time without the prior written approval of Purchaser, Seller shall not transfer
or reassign to operations outside the Business any employee exclusively involved
in the operation or supervision of the Restaurants ("ADI Personnel"). For
purposes of this Agreement, the term "ADI Personnel" shall also include Vince
Wiley. At the Effective Time, Seller shall terminate the employment of all ADI
Personnel. For a period of twelve months following the Closing, Seller shall not
solicit for employment any person who is a salaried employee of Purchaser.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller and Purchaser shall cooperate in the transition of coverage of
ADI Personnel from Seller's health, medical, life insurance, and other welfare
plans to plans maintained by Purchaser.
4.5 Conduct of Business. (a) From the date hereof until Closing, Seller
shall (i) operate the Restaurants as they are currently being operated and in
the ordinary course of business and in compliance with all terms and conditions
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.
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior writt en approval of Purchaser:
(i) change (or in the case of the DR Holdings Tracts, allow any change) in
any material manner the ownership of the Assets;
(ii) increase the rate of compensation, directly or indirectly, 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;
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(iii) mortgage, pledge, or subject to lien any of the Assets or allow the
DR Holdings Tracts to be mortgaged or subjected to lien;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business;
(v) enter into, terminate, or modify any Material Contract except in the
ordinary course of business; or
(vi) cancel or terminate or consent to or accept any cancellation or
termination of any Lease, amend or otherwise modify any of its material terms or
waive any breach of any of its material terms or provisions or take any other
action in connection with any Lease that would materially impair the interests
or rights of Seller to be transferred to Purchaser hereunder.
4.6 Access to Information. Seller shall afford Purchaser, its counsel,
financial advisors, auditors, lenders, lenders' counsel and other authorized
representatives reasonable access for any purpose consistent with this Agreement
from the date hereof until the Closing, during normal business hours, to the
offices, properties, books, and records of Seller with respect to the Assets and
the Restaurants and shall furnish to Purchaser such additional financial and
operating data and other information as Seller may possess and as Purchaser may
reasonably request, subject to Purchaser's obligations regarding the
confidentiality of such information as set forth in Section 6.2 hereof;
provided, however, that such access shall be arranged in advance by Purchaser
with Seller and will be scheduled in a manner and with a frequency calculated to
cause the minimum disruption of the business of Seller.
4.7 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information respect to any event which has materially adversely affected the
Assets or the operations of the Restaurants.
(b) As soon as available and in any event within four weeks after the end
of each calendar month, the statement of operations of each Restaurant for such
fiscal month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
Actions, Orders, or other directives affecting the Business or any Restaurant
that, if adversely determined, could materially adversely affect the Assets, the
operations, business, prospects or condition (financial or otherwise) of the
Restaurant or the ability of Seller to perform its obligations hereunder;
(d) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
4.8 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Seller will use commercially reasonable efforts to cause
the conditions set forth in Article VII to be satisfied and to facilitate and
cause the consummation of the transactions contemplated hereby, including
obtaining the Consents. The parties acknowledge that no consents will be sought
with respect to any Minor Contract even if the failure to so obtain a consent to
assignment may result in a default or termination thereunder. Seller shall bear
any expenses associated with obtaining the Consents; however, Seller shall not
be required to make any payment to any party (other than reimbursement of
expenses), guarantee any Material Contract or Lease or remain liable for the
payment thereof following the Closing, or agree to any concessions or amendment
to other contracts, or arrangements with such party in order to obtain such
consents.
4.09 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
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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.
4.10 Transition Services. (a) For a period of three months after the
Closing, if and to the extent requested in writing by Purchaser, Seller agrees
to provide to Purchaser restaurant accounting, POS system support, and other
services related to the Restaurants as mutually agreed upon between Seller and
Purchaser (the "Services"). Purchaser shall give Seller forty-five (45) days
advance written notice of the Services requested. The Services shall be provided
promptly as requested and shall be provided in substantially the same manner and
with the same or similar personnel as Seller previously utilized; provided,
however, that if Seller no longer has the personnel to provide such Services,
Seller may outsource such services to a third party.
(b) Purchaser will pay for the Services on a monthly basis, after receipt
of an invoice from Seller, at Seller's direct personnel cost incurred in
connection with providing the requested Service or Seller's out-of-pocket cost
(if such 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 three month period. The amount of such bonus
shall be at the discretion of Purchaser. Such bonus, if accepted by the
employee, shall be paid by Purchaser at the end of the three-month period, or
for such shorter period as Purchaser may determine.
4.11 Delivery of Real Estate Documents. (a) Seller shall provide Purchaser,
promptly upon receipt, (i) current surveys (prepared in accordance with
Purchaser's reasonable specifications) 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-1992,
without exceptions except as shown in the Owner's Title Commitments, to be
issued by Commonwealth Land & Title Insurance Company ("Title Company") in an
amount in the case of each parcel equal to the purchase price allocated to such
parcel of the Owned Real Property pursuant to Section 2.7, and (ii) current
surveys (prepared in accordance with Purchaser's reasonable specifications)
(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
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to the contrary contained herein, while Lessee Title Commitments will be
delivered for all Leased Real Property, no surveys will be delivered and no
Lessee's Title Policies will be issued for Leases unless such Leases are for
Free Standing Premises (as defined in Section 7.1).
(b) No later than five business days after the date hereof Seller shall
provide to Purchaser copies of all environmental reports pertaining to the Owned
Real Property in Seller's possession.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.1 Organization, Corporate Power, Authorization. Purchaser is a limited
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. Purchaser has the power and
authority to execute and deliver this Agreement, the Bill of Sale and Assignment
Agreement and the Lease Assignments, and to consummate the transactions
contemplated hereby. All action on the part of Purchaser necessary for the
authorization, execution, and delivery of this Agreement, the Bill of Sale and
Assignment Agreement and the Lease Assignments, and performance of all
obligations of Purchaser thereunder has been duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement, the
Bill of Sale and Assignment Agreement and the Lease Assignments by Purchaser do
not and the consummation by Purchaser of the transactions contemplated hereby
and thereby will not violate any provision of its articles of organization or
regulations.
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 and the Lease Assignments have been executed and delivered
in accordance with this Agreement, they will constitute the legal, valid, and
binding obligation of Purchaser, enforceable in accordance with their 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
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whom Confidential Information must be disclosed to effect the transactions and
who are bound by appropriate non-disclosure agreements or obligations. Purchaser
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller, except that Purchaser may use such Confidential Information
in connection with the ordinary course of operation of the Restaurants after
Closing. The foregoing obligations shall not apply to (i) any information which
was known by Purchaser prior to its disclosure by Seller; (ii) any information
which was in the public domain prior to the disclosure thereof; (iii) any
information which comes into the public domain through no fault of Purchaser;
(iv) any information which is disclosed to Purchaser by a third party, other
than an affiliate, having the legal right to make such disclosure; or (iv) any
information which is required to be disclosed by Order of any Forum. For
purposes of this Section, "Confidential Information" shall mean any and all
technical, business, and other information which is (a) possessed or hereafter
acquired by Seller and disclosed to Purchaser and (b) derives economic value,
actual or potential, from not being generally known to Persons other than
Seller, including, without limitation, technical or nontechnical data,
compositions, devices, methods, techniques, drawings, inventions, processes,
financial data, financial plans, product plans, lists of actual or potential
customers or suppliers, information regarding the business plans and operations
of Seller, and the existence of discussions and negotiations between the parties
hereto relating to the terms hereof. The restrictions of this Section shall
expire three years from the date hereof with respect to any confidential
business information that does not constitute a trade secret under applicable
law.
6.3 Seller Employees. (a) Purchaser shall offer employment to 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,
other than the ADI Personnel, Purchaser shall not solicit for employment any
person who is a salaried employee of Seller or any subsidiary of Seller.
(b) Purchaser shall maintain employee records transferred to Purchaser
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Purchaser's normal
business hours. Purchaser shall maintain the confidentiality of such records and
limit access thereto in a manner consistent with Purchaser's treatment of its
employee records.
(c) Purchaser agrees with respect to ADI Personnel hired by Purchaser: (i)
to give such employees credit under Purchaser's benefits plans, programs, and
arrangements (including credit for accrued but unvested vacation which has been
charged to Seller under Section 2.3) for such employees' period of service with
Seller, provided that such credit shall only be taken into account under any
tax-qualified plan maintained by Purchaser for purposes of determining such
employees' eligibility for participation and eligibility to satisfy any hours of
service requirement in order to receive an allocation of an employer
contribution; (ii) to provide coverage to such employees who are eligible under
Purchaser's health, medical, life insurance, and other welfare plans (A) without
the need to undergo a physical examination or otherwise provide evidence of
insurability; (B) any pre-existing condition or similar limitations or
exclusions will be applied by taking into account the period of coverage under
Seller's plan; (C) by applying and giving credit for amounts paid for the plan
year in which the Closing Date occurs as deductibles, out of pocket expenses,
and similar amounts paid by individuals and their beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, Purchaser shall use commercially reasonable efforts to
cause the conditions set forth in Article VII to be satisfied and to facilitate
and cause the consummation of the transactions contemplated hereby.
Specifically, but not by way of limitation, Purchaser will (i) use commercially
reasonable efforts to obtain a commitment letter for financing the transactions
contemplated hereby on terms reasonably satisfactory to Purchaser (the
"Financing Commitment") and to obtain financing on such terms, (ii) promptly
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provide Franchisor with all information required by Franchisor to determine
whether Purchaser will be approved as a franchisee with respect to the
Territory, (iii) actively pursue an agreement with Franchisor as to the
principal terms of franchise and development agreements with respect to the
Territory, and (iv) file all documents required to obtain approval of the
transactions contemplated hereby under the HSR Act within 15 days of the date
hereof.
6.5 Equipment Removal. Within 45 days after the Closing Date (or sooner if
required by the landlord), Purchaser shall, at its own expense, remove all of
the Assets listed on Schedule 1.1F from Seller's closed restaurant locations in
Fairfax and Manassas, Virginia. Purchaser shall be responsible for and shall
repair or replace any damage to Seller's properties caused by such removal.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection. (a) Purchaser shall have 45
days following the later of the date hereof or receipt of the documents referred
to in Section 4.11(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 Real Property for the operation of Applebee's
Neighborhood Grill and Bar restaurants ("Material Objections"). Seller shall use
commercially reasonable efforts to satisfy such Material Objections in all
material respects (other than making payments to third parties not otherwise
required or agreeing to concessions or amendments to contracts or arrangements),
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 along with all other
encumbrances of record as of the effective date of the Title Commitments not
objected to by Purchaser shall be deemed waived by Purchaser and shall be a
Permitted Encumbrance. The parties acknowledge that some of the Leased Real
Property may be located in shopping centers, and as such, unless the leased
premises are a free standing building located on a separate pad with its own
legal description ("Free Standing Premises") the Lessee Title Commitments for
such Leased Real Property will contain encumbrances for entire shopping centers.
Purchaser may not object to title encumbrances for such Leased Real Property
that do not affect the premises leased under the Leases, which such encumbrances
shall be deemed to be Permitted Encumbrances.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property; provided, however, that (i) any
activities by or on behalf of Purchaser, including, without limitation, the
entry by Purchaser or Purchaser's Designees onto the Real Property, or the other
activities of Purchaser or Purchaser's Designees with respect to the Real
Property (hereinafter called "Purchaser's Activities") shall not damage the Real
Property in any manner whatsoever or disturb or interfere with the rights of any
lessor of Leased Real Property; (ii) in the event the Real Property is altered
or disturbed in any manner in connection with any Purchaser's Activities,
Purchaser shall immediately return the Real Property to the condition existing
prior to Purchaser's Activities; (iii) Purchaser shall in no event without
Seller's prior written consent disclose the results of any of its
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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 sixty (60) 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
and to review information provided by Seller under Section 4.6. In the event
Purchaser shall determine that the Real Property is not reasonably suitable and
satisfactory to Purchaser or that the information received will materially
adversely affect the financial condition, assets, liabilities, business,
prospects or operations of the Business, 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, either individually or in the
aggregate, any material adverse change in the Assets or the Business.
(c) Seller shall have performed and complied in all material respects with
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all of its obligations under this Agreement which are to be performed or
complied with by Seller prior to or on the Closing Date.
(d) Seller shall have obtained and delivered to Purchaser all consents
necessary to transfer and assign the Assets (except for Minor Contracts) to
Purchaser.
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant and development agreements with respect to each
ADI in the Territory.
(f) Purchaser shall have obtained, either from Seller or directly from the
issuing authority, all permits, licenses, including liquor licenses, and
approvals of all governmental and quasi-governmental authorities necessary for
the operation of the Restaurants in accordance with franchise requirements;
provided, however, that if Purchaser is unable to obtain from local municipal or
county authorities a permit necessary for such operation of the Restaurants, and
Purchaser reasonably believes that it will be able to obtain such a permit
within two months of the Closing Date, Closing of the transactions contemplated
hereunder will not be delayed if Seller delivers to Purchaser a duly executed
liquor license management agreement or agreements.
(g) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Purchaser.
(h) Purchaser shall have obtained the financing described on Exhibit E upon
terms and conditions reasonably acceptable to Purchaser or other financing
reasonably acceptable to Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 Seller's Conditions to Closing. The obligations of Seller hereunder are
subject to satisfaction of each of the following conditions at or before
Closing, the occurrence of which may, at the option of Seller, be waived:
(a) All representations and warranties of Purchaser in this Agreement shall
be true on and as of the Closing, and Purchaser shall have delivered to Seller a
certificate to such effect dated as of the Closing Date.
(b) Purchaser shall have performed and complied in all material respects
with all of its obligations under this Agreement which are to be performed or
complied with by Purchaser prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(e) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VIII - INDEMNIFICATION
8.1 Purchaser Claims. (a) Seller shall indemnify and hold harmless
Purchaser, its successors and assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser that result from, relate to, or arise out of:
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(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
$300,000.00 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 $4,375,000.00; provided,
however, that liabilities arising with respect to Sections 3.1 through 3.4
hereof shall not be subject to the foregoing cap and any liabilities arising
with respect to such matters shall not be taken into account in computing
aggregate liabilities for the purpose of applying such threshold amount to
liabilities arising under other Sections subject thereto.
(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any 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 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 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
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of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
(e) Except for claims arising under Sections 4.1, 4.3, 4.4, and 4.10 which
shall survive the Closing, Purchaser may not assert any claim against Seller for
breach of any other covenant contained in Article IV after six months from the
date of 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 upon acceptance of its obligation to indemnify pursuant to
Section 8.1 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.
Purchaser's obligation to indemnify Seller for breaches of Purchaser
representations or warranties shall be subject to the same threshold and
limitation term as set forth in Section 8.1(b). Seller may not assert any claim
against Purchaser for claims pursuant to Article VI after one year from the date
of the Closing, except for claims under Section 6.1.
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
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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 Minnesota (in the case of
arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser) at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Georgia (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, shall not award punitive damages, and judgment on such award may be
entered by either party in a court of competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, either party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination. (a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller and Purchaser;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller or Purchaser if Purchaser shall not (i) have obtained and
provided a copy of the Financing Commitment to Seller within 30 days from the
date hereof, (ii) been approved hereof as a franchisee with respect to the
Territory by Franchisor within 45 days of the date hereof, (iii) reached
agreement with Franchisor as to a development schedule and other material terms
of franchise and development agreements with respect to the Territory within 45
days from the date hereof; or
(iv) By either Seller or Purchaser, at its sole election, at any time after
the Termination Date, if the Closing shall not have occurred on or prior to such
date.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller or Purchaser, as the case may be,
shall have willingly failed to fulfill its obligations hereunder, the other
party shall, subject to Section 8.5, be entitled to pursue, exercise, and
enforce any and all remedies, rights, powers, and privileges available to it at
law or in equity.
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(c) Section 6.2, Article VIII, and Article X hereof shall survive the
termination of this Agreement.
ARTICLE X - MISCELLANEOUS
10.1 Expenses. (a) Each party hereto shall pay its own legal, accounting,
and similar expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated hereby.
(b) Purchaser shall pay all filing fees required under the HSR Act.
(c) Purchaser and Seller shall split equally the costs of obtaining the
Surveys, Title Commitments, Owner's Title Policies and Lessee's Title Policies
with respect to the Real Property. Purchaser and Seller shall split equally all
recording fees with respect to the transfer of the Owned Real Property and the
Leases; provided that Seller shall pay for all transfer taxes with respect
thereto. Purchaser shall pay the cost of all other surveys, environmental
investigations, studies, and reports, and all other costs of any investigation
of the Assets, the Restaurants, or the Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) The parties shall split equally the cost of any sales taxes, transfer
taxes, documentary stamp taxes, or other taxes imposed with respect to the
transfer of any Assets constituting personal property; provided, that Seller
shall pay all such taxes in excess of $100,000.
(f) Seller shall pay the costs of obtaining any Consents subject to Section
4.9.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement, the Disclosure Memorandum,
or any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
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If to Seller, to: With a required copy to:
Avado Brands, Inc. Kilpatrick Stockton LLP
Hancock at Washington 1100 Peachtree Street, Suite 2800
Madison, Georgia 30650 Atlanta, Georgia 30309
Attention: Louis J. (Dusty) Profumo Attention: Larry D. Ledbetter, Esq.
Fax: 706-343-2434 Fax: 404-815-6555
If to Purchaser: With a required copy to:
Apple Capitol Group, LLC Krass Monroe, P.A.
2710 Oakbrook Lane Suite 100 Southpoint Office
Weston, Florida 33332 1650 West 82nd Street Center
Attention: Jason Kirschner Minneapolis, Minnesota 55431
Fax: 949-349-1636 Attention: John Berg
Fax: 612-885-5969
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, EXCEPT FOR MATTERS RELATING TO THE
INTERPRETATION OR ENFORCEMENT OF THE DEEDS, LEASE ASSIGNMENTS OR THIS AGREEMENT
RELATING TO REAL ESTATE MATTERS, WHICH SHALL BE GOVERNED BY THE LAWS OF THE
STATE IN WHICH THE AFFECTED REAL ESTATE IS LOCATED.
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 ju risdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
10.9 Public Announcements. Purchaser and Seller will coordinate with each
other all press releases relating to the transactions contemplated by this
Agreement and, except to the extent required by law, refrain from issuing any
press release, publicity statement, or other public notice relating to this
Agreement or the transactions contemplated hereby without providing the other
party reasonable opportunity to review and comment thereon.
10.10 Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event that any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto and no presumption or burden of
proof shall arise favoring or disfavoring any party hereto by virtue of the
authorship of any of the provisions of this Agreement.
10.11 Disclaimer of Warranties. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, EXCEPT TO
THE EXTENT OF SELLER'S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN,
SHALL ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY
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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.
10.13 Guarantee. Steve Raskin and Jason Kirschner jointly and severally
agree to guarantee the performance and obligations of Purchaser hereunder
(subject to all of the terms, conditions, rights and remedies contained herein);
provided that such guarantee shall terminate immediately after the Closing or
upon termination of this Agreement in accordance with its terms; provided that
the termination is not as a result of a breach or default by Purchaser; and
provided further that such guarantee shall continue notwithstanding termination
with respect to provisions which survive termination pursuant to Section 9.1(c).
The parties acknowledge that Seller has relied upon such guarantee in entering
into this Agreement.
[Signatures Located on Following Pages]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLER:
AVADO BRANDS, INC.
By:
Name:
Title:
PURCHASER:
APPLE CAPITOL GROUP, LLC
By:
Name:
Title:
GUARANTORS:
Jason Kirschner
Steve Raskin
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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
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DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1A Restaurants by Address
1.1B Leases
1.1C Legal Description of Owned Real Property
1.1D Material Contracts
1.1E Territory
1.1F Depreciation Schedule
1.1G Miscellaneous Personal Property
1.1H Contracts
3.3 Consents Required to Assign Leases and
Material Contracts
3.6 List of Material Contract and Leases and
amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) Environmental Matters
3.8 Financial Statements
3.10 Litigation
3.15 Seller Plans
3.17 Liabilities
3.19 Insurance
3.20 Changes
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 8-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
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Avado Brands Positions Capital Structure for the Future
Madison, Ga. (May 17, 1999) - Avado Brands, Inc., a rapidly growing,
multi-concept casual dining restaurant company, today announced that it has
begun soliciting consents from the holders of its 9.75% Senior Notes due 2006 to
the amendment of certain covenants pertaining to the Notes. The amendments are
being sought in connection with a proposed private placement to qualified
institutional buyers of $100 million of senior subordinated notes. The proposed
sale of the notes is expected to close contemporaneously with a new $125 million
bank revolving credit facility. The purpose of the proposed note offering and
the new bank facility is to refinance the Company's existing revolving credit
facilities and to provide for future working capital and other corporate
purposes. BancBoston Robertson Stephens Inc. will act as solicitation agent in
connection with the consent solicitation.
The Notes will not initially be registered under the Securities Act of 1933
and may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements of the Securities Act.
