FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities and Exchange Act of 1934
DATE OF REPORT (Date of earliest event Reported): June 3, 1996
T.J. CINNAMONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23026 22-3261564
(State of other jurisdictions (Commission file number) (IRS Employer
of incorporation) Identification No.)
135 Seaview Drive
Secaucus, NJ 07094-3618
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (201) 422-0910
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Item 5. Other Events.
On June 3, 1996, T.J. Cinnamons, Inc. (the "Company") entered into a
purchase agreement (the "Purchase Agreement") with T.J. Holding Company, Inc.
("Buyer"), a wholly owned subsidiary of Triarc Restaurant Group, pursuant to
which the Buyer will purchase certain intellectual property from the Company,
including the Company's tradename, trademarks, servicemarks, logos, signs,
distinctive recipes, secret formulas and technical information.
The Purchase Agreement further provides that Triarc Restaurant Group and
the Company will enter into a long term license agreement with the Company
granting the Company the right to distribute certain T.J. Cinnamons branded
products through specified retail grocery outlets and a management agreement for
the Buyer to manage the Company's existing franchise system.
The Purchase Agreement provides for a base purchase price of $3,540,000
payable over a period of 15 months and possible conditional payments of up to an
additional $5,500,000 over time dependent upon the amount of T.J. Cinnamons
product sales by Triarc Restaurant Group exceeding certain target levels and an
additional one-half percent of gross sales of full concept bakeries developed by
T.J. Holdings Company, Inc. in enclosed mall locations. The Company will apply a
substantial portion of the sales proceeds to discharge indebtedness. In
addition, certain members of the Company's management an affiliates thereof will
receive payments in consideration of covenants not to compete and restrictions
on the sale of Company Stock.
T.J. Cinnamons, Inc. has also reached an agreement in principle with Heinz
Bakery Products to terminate its trademark and technology license and
manufacturing agreement in consideration for repayment of certain indebtedness
to Heinz. The Company will focus it future business plans on the manufacturing
and distribution of fresh baked cinnamon roll and related products through
wholesale channels of distribution.
The foregoing summary of the Purchase Agreement is only a brief description
of the Purchase Agreement and is amplified and qualified in its entirety by the
detailed provisions of the Purchase Agreement which is filed as an exhibit
hereto and is incorporated herein.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Number Title
10.1 Purchase Agreement by and between T.J. Holdings Company,
Inc. and T.J. Cinnamons, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
T.J. CINNAMONS, INC.
(Registrant)
Date: June 18, 1996 By: /s/ Alan S. Gottlich
PURCHASE AGREEMENT
By and Between The Buyer
TJ HOLDING COMPANY, INC., A DELAWARE CORPORATION,
and The Seller
T.J. CINNAMONS, INC., A DELAWARE CORPORATION
JUNE 3, 1996
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TABLE OF CONTENTS
ARTICLE 1
SALE: PURCHASE PRICE: CLOSING .............................................3
Section 1.1 Sale and Delivery of the Intellectual Property ...........3
Section 1.2 Assignment of Supplier Agreements ........................3
Section 1.3 Purchase Price ...........................................3
Section 1.4 Base Purchase Price ......................................3
Section 1.5 Additional Payments ......................................4
Section 1.6 Royalty for New Bakeries .................................5
Section 1.7 Quarterly Reports ........................................5
Section 1.8 Additional Agreements ....................................6
Section 1.9 The Closing ..............................................6
Section 1.10 Liabilities of the Seller ...............................6
ARTICLE 2 .................................................................6
COVENANTS OF THE SELLER ...................................................6
Section 2.1 No Divided Distributions .................................6
Section 2.2 Payment of Seller's Liabilities ..........................7
Section 2.3 Heinz Agreement ..........................................7
ARTICLE 3 .................................................................7
REPRESENTATIONS OF THE SELLER .............................................7
Section 3.1 Organization and Authority ...............................7
Section 3.2 Authorization; No Conflicts ..............................7
Section 3.3 Ownership and Distinctiveness of Intellectual Property ...8
Section 3.4 Litigation ...............................................9
Section 3.5 No Other Ownership of the Intellectual Property ..........9
Section 3.6 Financial Statements .....................................9
Section 3.7 Franchises ...............................................10
Section 3.8 Regulatory Approvals .....................................10
Section 3.9 Trade Secrets ............................................10
Section 3.10 Adequacy of TJC System ..................................10
Section 3.11 Contracts and Commitments ...............................10
Section 3.12 Compliance with Laws ....................................11
Section 3.13 Disclosure ..............................................11
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ARTICLE 4 .................................................................11
REPRESENTATIONS OF THE BUYER ..............................................11
Section 4.1 Organization and Authority ...............................11
Section 4.2 Authorization ............................................11
Section 4.3 Disclosure ...............................................11
ARTICLE 5 .................................................................12
CONDITIONS TO THE OBLIGATIONS OF THE BUYER ................................12
Section 5.1 Truth of Representations and Warranties of the Seller;
Compliance with Covenants and Obligations ...............12
Section 5.2 Corporate Proceedings ...................................12
Section 5.3 Governmental Approvals ..................................12
Section 5.4 Third Party Consents ....................................12
Section 5.5 Bulk Sales Law Compliance ...............................12
Section 5.6 Adverse Proceedings .....................................13
Section 5.7 Supplier Agreement Termination and Estoppel Letters .....13
Section 5.8 Closing Deliveries ......................................13
Section 5.9 Closing Deliveries From Seller's Officers ...............14
Section 5.10 Completion of Exhibits ..................................14
ARTICLE 6 .................................................................14
CONDITIONS TO THE OBLIGATIONS OF THE SELLER ...............................14
Section 6.1 Truth of Representations and Warranties of the Buyer;
Compliance with Covenants and Obligations ................14
Section 6.2 Corporate Proceedings ....................................14
Section 6.3 Adverse Proceedings ......................................14
Section 6.4 Fairness Opinion .........................................14
Section 6.5 Closing Deliveries .......................................15
ARTICLE 7 .................................................................15
INDEMNIFICATION ...........................................................15
Section 7.1 Indemnification for Misrepresentations ..................15
Section 7.2 Survival of Representations .............................15
Section 7.3 Seller's Indemnity for Intellectual Property ............16
Section 7.4 Seller's Indemnity for Seller's Business Operations .....16
Section 7.5 Buyer's Indemnity for Buyer's Business Operations .......16
Section 7.6 Franchisee General Release Forms ........................17
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Section 7.7 Claims by Franchisees Against Buyer and Seller for Actions
Prior to and After the Closing ..........................17
Section 7.8 Buyer's Right of Offset .................................17
Section 7.9 Notice for Claims of Indemnification ....................18
Section 7.10 Defense by Indemnifying Party ...........................18
ARTICLE 8
GENERAL PROVISIONS ........................................................19
Section 8.1 Termination ..............................................19
Section 8.2 Effect of Termination ....................................19
Section 8.3 Broker's and Financial Advisers ..........................19
Section 8.4 Notices ..................................................20
Section 8.5 Successors and Assigns ...................................20
Section 8.6 Amendments ...............................................21
Section 8.7 Waivers ..................................................21
Section 8.8 Expenses .................................................21
Section 8.9 Severability .............................................21
Section 8.10 Specific Performance ....................................21
Section 8.11 Governing Law ...........................................21
Section 8.12 Counterparts ............................................22
Section 8.13 No Third Party Beneficiaries ............................22
Section 8.14 Entire Agreement ........................................22
EXHIBITS
Exhibit A: Intellectual Property
Exhibit B: License Agreement
Exhibit C: Management Agreement
Exhibit D: Form of Consulting Agreement for Charles Loccsiano
Exhibit E: Form of Consulting Agreement for Alan Gottlich
Exhibit F: Assignment of Supplier Agreements
Exhibit G: First Note, and Guarantee
Exhibit H: Second Note, and Guarantee
Exhibit I: Bill of Sale and Assignment of Intellectual Property
Exhibit J: Form of Legal Opinion of Counsel to the Seller
Exhibit K: Form of Legal Opinion of Counsel to the Buyer
Exhibit L: Form of Certificate of the Secretary of T.J. Cinnamon's Inc.
Exhibit M: Form of Certificate of the President of T.J. Cinnamon's Inc.
Exhibit N: Form of Certificate of the Assistant Secretary of TJ Holding
Company Inc.
Exhibit O: Form of Certificate of the President of TJ Holding Company Inc.
Exhibit P: Form of Escrow Agreement
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PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement" or "Purchase Agreement") is
entered into as of the 3rd day of June, 1996, by and between TJ Holding Company,
Inc., a Delaware Corporation (the "Buyer"), a wholly owned subsidiary of Arby's
Inc., a Delaware Corporation, ("Arby's") and T.J. Cinnamons, Inc., a Delaware
Corporation, (the "Seller") with respect to the acquisition and sale of the
intellectual property developed and owned by the Seller and certain related
assets of the Seller. The Buyer and Seller are collectively referred to in this
Agreement as the "Parties" or individually as a "Party".
RECITALS OF FACT
A. The Seller is the owner of a unique system of developing and operating
food service units offering gourmet cinnamon rolls and other bakery items and
beverages ("TJC System"). The distinguishing features of the TJC System include
the name "T.J. Cinnamon's" and other related trade names, trademarks, service
marks, logos, signs, and emblems (the "Proprietary Marks"); distinctive recipes
and secret formulas for baking gourmet cinnamon rolls and other bakery products
(the "Secret Recipes"); secret and proprietary plans relating to the
preparation, baking, and merchandising of gourmet cinnamon rolls utilizing the
Secret Recipes, including instructional materials, operating manuals, and
training courses for preparing gourmet cinnamon rolls and other bakery items,
and any and all copyrights claimed in connection with such materials ("Technical
Information"); specially designed fixtures, equipment, containers, and other
items used in preparing, serving, and dispensing the gourmet cinnamon rolls and
other bakery items; distinctive production and delivery systems; and,
distinctive exterior and interior designs, decor, color schemes, and
furnishings. The Secret Recipes and Technical Information are all confidential
trade secrets of the Seller and are collectively referred to herein as the
"Proprietary Information". The Proprietary Marks and the Proprietary Information
are collectively referred to in this Agreement as the "Intellectual Property". A
list of the Intellectual Property is attached hereto as Exhibit A.
B. The gourmet cinnamon rolls and all other baking products prepared using
the Proprietary Information are referred to in this Agreement as "TJC Products".
The TJC Products and all other products sold under the Proprietary Marks,
including such modified or substituted marks that Buyer may utilize with respect
to the sale of TJC Products, are referred to as the "TJC Branded Products".
C. The Seller owns and operates, and franchises others ("TJC Franchisees")
pursuant to franchise agreements ("TJC Franchise Agreements") to operate, retail
locations ("TJC Bakeries") identified by one or more of the Proprietary Marks
(and using the Proprietary Information) that prepare and sell all or a variety
of TJC Products, and other bakery products
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and beverages. The Seller has also licensed others ("Retail Licensees") to use
the Proprietary Information to prepare and sell a limited variety of TJC
Products at or from certain retail locations other than TJC Bakeries ("TJC
Retail Locations"), which are identified by one or more of the Proprietary
Marks, and licenses other third parties ("Wholesale Licensees") to prepare and
sell on a wholesale basis certain selected TJC Products for resale through
retail food stores. (These licenses are referred to herein as "Wholesale
Licenses.") The TJC Franchisees, Retail Licensees, and Wholesale Licensees are
referred to in the aggregate as "TJC Licensees" and agreements with TJC
Licensees are referred to collectively as "TJC License Agreements" (which
includes TJC Franchise Agreements).
D. Arby's owns, operates, and franchises single and multi-brand restaurants
under the names Arby's, ZuZu, P.T. Noodles, and Arby's Roast Town, which
collectively sell breakfast, lunch, dinner, and snack food products using unique
systems ("Arby's Systems"), and which, along with other restaurants using
concepts which Arby's, the Buyer, or their successors or assigns may develop in
the future, including full-concept TJC Bakeries offering the complete line of
Required TJC Products and required Permitted TJC Products (as defined in the
License Agreement) and operating in a manner consistent with the definition of a
TJC Bakery under the License Agreement, but not including any full-concept TJC
Bakeries operating in enclosed shopping malls, are collectively referred to
herein as "Arby's Restaurants". Arby's and the Buyer wish to offer, and to
license franchisees of Arby's and the Buyer and Buyer's affiliates to offer the
TJC Branded Products, improvements to the TJC Products, other bakery items and
beverages in Arby's Restaurants.
E. The Seller desires to sell the Intellectual Property and the
accompanying goodwill to the Buyer, and the Buyer is willing to license to the
Seller, or license to Arby's to license to the Seller, such of the Intellectual
Property as is necessary for the operation of the existing TJC Bakeries, and,
with certain limitations, the sale of TJC Products by TJC Licensees in
accordance with the terms of this Agreement and the license agreement attached
hereto as Exhibit B (the "License Agreement").
F. The Seller desires to assign certain of its supplier agreements, and the
Buyer is willing to assume certain supplier agreements.
G. The Seller desires to obtain the assistance and expertise of the Buyer
in performing the Buyer's obligations and enforcing the Buyer's rights under the
TJC License Agreements. The Seller also desires to obtain the assistance of the
Buyer in operating and franchising other operating food service units pursuant
to the terms of the Management Agreement. The Buyer is willing to undertake such
management responsibilities pursuant to a management agreement in the form
attached hereto as Exhibit C (the "Management Agreement").
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H. This Agreement, the License Agreement, the Management Agreement, and
such other agreements as are contemplated by this Agreement, the License
Agreement, and the Management Agreement, are collectively referred to herein as
the "Agreements."
I. The Buyer desires to obtain agreements from certain principals of the
Seller, not to engage in competitive activities, and to obtain agreements from
certain stockholders of Seller regarding the transfer or assignment of ownership
interests in Seller. Such covenants and agreements are specified in the
agreements (the "Non-competition Agreement" and "Stock Sale Restriction
Agreement") attached hereto as Exhibits D and E.
With reference to the above stated Recitals of Fact and in consideration of
the mutual covenants and conditions contained in the Agreements, the Parties
hereby agree as follows:
ARTICLE I
SALE: PURCHASE PRICE; CLOSING
Section 1.1 Sale and Delivery of the Intellectual Property. Subject to and
upon the terms and conditions of the Agreements, on the Closing Date (as defined
in Section 1.8), the Seller shall sell, transfer, convey, assign, and deliver to
the Buyer, and the Buyer shall purchase from the Seller, free and clear of all
liens, all of Seller's rights, title, and interest in, under, and to the
Intellectual Property and all goodwill relating to or associated therewith.
Section 1.2 Assignment of Supplier Agreements. The Seller has entered into
agreements with certain manufacturers and distributors of TJC Products and
ingredients used in TJC Products (the "Suppliers"), each of which is identified
in Schedule 1.2 (the "Supplier Agreements"). At the Closing, for the
consideration provided herein, the Seller shall assign to the Buyer and the
Buyer shall assume from the Seller the Supplier Agreements with William Foods,
Inc., Multifoods Specialty Distributors, Inc., Ryckoff-Sexton Corporation,
Nevarro Pecan Co., Inc., McCormick & Company, Incorporated, and Coca Cola
Fountain, pursuant to the delivery of a general assignment ("Assignment of
Suppliers Agreements") substantially in the form of Exhibit F. However, the
Buyer is not assuming any amounts payable to any Suppliers as of the Closing
Date, but rather is only assuming the obligations of the Supplier Agreements
after the Closing Date.
Section 1.3 Purchase Price. The aggregate purchase price for the Supplier
Agreements and the Intellectual Property and the accompanying goodwill, to be
acquired by the Buyer (the "Purchase Price") shall be Three Million Five Hundred
Forty Thousand Dollars ($3,540,000) ("Base Purchase Price") and further payments
(the "Additional Payments") by the Buyer, described below in Section 1.5. The
Purchase Price shall be paid as provided in Sections 1.4 and 1.5 below and shall
be allocated for Federal tax purposes among the assets as provided on Schedule
1.3 attached hereto.
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Section 1.4 Base Purchase Price. The Base Purchase Price shall be paid to
the Seller as follows:
(a) Cash upon execution of this Agreement in the amount of Twenty-Five
Thousand Dollars ($25,000);
(b) Cash at the Closing in the amount of One Million Seven Hundred
Sixty-Five Thousand Dollars ($1,765,000), less the amount paid to Heinz as
provided in Section 1 .4(c) (the "Closing Date Payment");
(c) Payment to Pro Bakers, Ltd. d/b/a Heinz Bakery Products ("Heinz")
of cash in the amount of not less that Four Hundred Thousand Dollars ($400,000),
and not more than Seven Hundred Ninety Thousand Dollars ($790,000) at the
Closing (the "Heinz Payment"), with the precise amount to be specified by Seller
not less than thirty (30) days prior to Closing.
(d) Delivery at the Closing of a promissory note ("First Note")
substantially in the form attached hereto as Exhibit G in the principal amount
of One Million Seven Hundred Fifty Thousand Dollars ($1,750,000) less the amount
of the Second Note as provided in Section 1.4(e), bearing an annual interest
rate on the outstanding principal amount at the rate equal to the prime rate as
published in the Wall Street Journal on the fifth (5th) day of business prior to
the Closing Date, plus one percent (1 %) (the "Interest Rate"), amortized from
the Closing Date to the date which is fifteen (15) consecutive months after the
Closing Date, payable in fifteen (15) equal monthly installments of principal
and interest; and
(e) Delivery at the Closing of a promissory note (" Second Note")
substantially in the form attached hereto as Exhibit H in a principal amount to
be specified by the Seller not less than thirty (30) days prior to Closing, but
in any event not more than One Million Seven Hundred Fifty Thousand Dollars
($1,750,000), bearing an annual interest rate at the Interest Rate, amortized
from the Closing Date to the date which is twenty-four (24) consecutive months
after the Closing Date, payable in twenty-four (24) equal monthly installments
of principal and interest.
Section 1.5 Additional Payments. The Additional Payments shall be computed
and paid as follows:
(a) The Buyer will pay to the Seller an amount (the "Arby's Royalty")
equal to the sum of (i) two percent (2%) of the Gross Sales (as defined in
Section 1.5(b)) of the TJC Branded Products sold in or from Arby's Restaurants
during the Initial Period (as defined below) and (ii) one percent (1 %) of the
Gross Sales of the TJC Branded Products sold in or from Arby's Restaurants
during the thirty-six (36) month period commencing on the day immediately
succeeding the last day of the Initial Period. For purposes of this Agreement,
the "Initial Period" shall be a period commencing on the later to occur of (i)
the first day of the twenty-fifth
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(25th) month following the Closing Date or (ii) the first day of the calendar
quarter (January 1, April 1, July 1, and October 1) immediately following the
date as of which the Gross Sales of the TJC Branded Products sold in or from
Arby's Restaurants for the immediately preceding four (4) calendar quarters
exceeds Twenty Six Million and Three Hundred Thousand Dollars ($26,300,000), and
terminating on the last day of the forty-eight (48th) month following the
Initial Period. If, in any calendar quarter, Buyer's, Arby's, or any successor's
Gross Sales of TJC Branded Products from sources other than Arby's Restaurants
exceeds Gross Sales of TJC Branded Products from Arby's Restaurants by a ratio
greater than 2:1, the Arby's Royalties shall be measured by the Gross Sales from
all sources selling TJC Branded Products (including Arby's Restaurants), rather
than just from Arby's Restaurants for each calendar quarter thereafter.
(b) For purposes of this Agreement, the term "Gross Sales" shall mean
all revenue actually received by Arby's Restaurants from the sale of TJC Branded
Products (pro rated if any period falls within a time period less than a full
calendar year), but shall not include (i) any sales taxes or other taxes
collected during such period from customers and paid directly to the appropriate
tax authorities, (ii) the retail value of employee purchases made during such
period, or, (iii) the coupon value of products distributed during such period
with promotional coupons with respect to TJC Branded Products.
(c) The Additional Payments shall be calculated at the end of each
calendar quarter following the commencement of the Initial Period, and paid with
respect to the Gross Sales of the calendar quarter on or before the last day of
the following calendar quarter, accompanied by such reports as the Seller may
reasonably request.
(d) Notwithstanding anything herein to the contrary, total payments
constituting Additional Payments from the Buyer to Seller shall not exceed Five
Million Five Hundred Thousand Dollars ($5,500,000) in the aggregate.
Section 1.6 Royalty for New Bakeries. In addition to the Arby's Royalty,
the Buyer shall also pay to the Seller an amount equal to one-half of one
percent (1/2 %) of the Gross Sales of TJC Branded Products sold during the New
Bakeries Period (as defined below) in or from new full concept bakeries modeled
on or after the TJC System established by Arby's after the Closing in enclosed
shopping malls ("Arby's Bakeries"). For purposes of this Agreement, the "New
Bakeries Period" shall commence on the Closing Date and shall terminate on the
last day of the two hundred and fortieth (240) month period following the
Closing Date. The amounts paid pursuant to this Section 1.6 are not subject to
the maximum amount provided in Section l.5(d).
Section 1.7 Quarterly Reports. The Buyer shall provide to Seller quarterly
reports concerning the Gross Sales of TJC Branded products sold in or from
Arby's Restaurants and from Arby's Bakeries, within thirty (30) days following
the end of each quarter. Each report shall contain a statement from the Buyer's
accounting firm or chief accounting officer, or his/her
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designee, attesting to the accuracy of the report. The Seller shall have the
right, upon reasonable notice, and at the Seller's sole cost and expense, to
audit the records of the Buyer that the Buyer utilized in preparing the
quarterly reports. The Buyer shall provide the Seller, on an annual basis, with
the Buyer's Uniform Franchise Offering Circular or such other material which
provides a list of Arby's Restaurants.
Section 1.8 Additional Agreements. At the Closing, the Buyer, and the
principals and stockholders of Seller designated in the License Agreement, shall
enter into the Non-competition Agreements and Stock Sale Restriction Agreements,
providing for the payment by the Buyer of the aggregate amount of Six Hundred
Thousand Dollars ($600,000) over two (2) years, in the amounts specified in, and
subject to the other terms and conditions as further provided in, the
Non-competition Agreements and Stock Sale Restriction Agreements.
Section 1.9 The Closing. The closing of the purchase and sale of the
Intellectual Property and the goodwill relating to or associated therewith and
the other agreements contemplated hereby (the "Closing") shall take place at the
offices of Rudnick, Wolfe, Epstien & Zeidman, located at 1401 New York Avenue,
N.W., Suite 900, Washington D.C. at 10:00 a.m., on August 30, 1996, or at such
other place, time, or date as may be mutually agreed upon in writing by the
Parties (the "Closing Date"), upon satisfaction of the conditions as set forth
in Articles 5 and 6. At the Closing, the Buyer will pay the Purchase Price by
wire transfer of immediately available funds to such account as the Seller may
reasonably direct by written notice delivered to the Buyer by the Seller at
least one (1) business day before the Closing Date. Simultaneously, the Seller
will assign and transfer to the Buyer good and valid title in and to the
Intellectual Property (free and clear of all liens) by delivery of a Bill of
Sale and Assignment of Intellectual Property duly executed by the Seller
substantially in the form of Exhibit I. At the Closing, there shall also be
delivered to the Seller and the Buyer the assignments, opinions, certificates,
and other contracts, documents, and instruments required to be delivered under
Articles 5 and 6.
Section 1.10 Liabilities of the Seller. The Buyer shall not assume any
liabilities of the Seller whatsoever as a part of the transactions completed by
this Agreement.
ARTICLE 2
COVENANTS OF THE SELLER
Section 2.1 No Divided Distributions. The Seller shall not declare or pay a
dividend on any class of stock for twelve (12) consecutive calendar months after
the Closing. For purposes of this Agreement, "Dividend Payment" shall mean
dividends (in cash or property) on, or other payments or distributions on
account of, or the setting apart of money for a sinking or other analogous fund
for, or the purchase, redemption, retirement, or other acquisition of, any
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shares of any class of stock of the Seller or of any warrants, options, or other
rights to acquire the same.
Section 2.2 Payment of Seller's Liabilities. Within fifteen (15) months
after the Closing, the Seller shall have paid all aggregate outstanding
liabilities existing as of the Closing Date (the "Closing Date Liabilities").
Compliance with this covenant shall be evidenced by delivery of a Certificate of
the President of the Seller to the Buyer in a form satisfactory to the Buyer,
not later than sixteen (16) months after the Closing. The Seller is expressly
permitted to incur new liabilities in the normal course of its business
operations after the Closing, provided all outstanding liabilities existing as
of the Closing Date are paid in full within fifteen (15) months after Closing.
To the extent that any Closing Date Liabilities exist on such date, and are not
released, the Buyer shall have the right to off-set such amount against the
Additional Payments due to the Seller; provided, however, that any creditor as
of the Closing Date that specifically releases Seller from all of its claims
shall not have to be paid pursuant to this Section.
Section 2.3 Heinz Agreement. The Seller shall terminate its Supplier
Agreement with Heinz (the "Heinz Agreement"). Both Parties acknowledge that the
Seller will assign its rights in, under, and to the Second Note to Heinz (the
"Heinz Assignment") on the Closing Date as part of the agreement between Heinz
and the Seller to terminate the Heinz Agreement.
ARTICLE 3
REPRESENTATIONS OF THE SELLER
The Seller represents and warrants to Arby's and the Buyer as follows:
Section 3.1 Organization and Authority. The Seller is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
Delaware, and has all requisite power and authority (corporate and other) to own
its properties, to carry on its business as now being conducted, to own and use
the Intellectual Property, to execute and deliver the Agreements, to perform its
obligations thereunder, and to consummate the transactions contemplated thereby.
Section 3.2 Authorization: No Conflicts. The execution and delivery by the
Seller of the Agreements and the performance by the Seller of its obligations
thereunder have been duly and validly authorized by all requisite corporate
action. Without limiting the generality of the foregoing at the Closing, the
shareholders and Board of Directors of the Seller have duly authorized the
transactions contemplated by the Agreements. This Agreement constitutes, and
each of the other Agreements when executed will constitute, the valid and
legally binding obligations of the Seller, enforceable against the Seller in
accordance with their respective terms. The execution, delivery, and performance
of the Agreements, and the consummation by the
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Seller of the transactions contemplated thereby, do not and will not, (a)
conflict with, violate or breach the provisions of any law, rule, or regulation
applicable to the Seller; (b) conflict with, violate, or breach a provision of
the Seller's Certificate of Incorporation or Bylaws; (c) conflict with, violate,
or breach any judgment, decree, order, or award of any court, arbitral tribunal,
administrative agency or commission or other governmental entity or regulatory
authority or agency; (d) constitute a fraudulent conveyance under any state law
or federal bankruptcy law; or (e) conflict with or result in the breach or
termination of any term or provision of any agreement or instrument to which the
Seller is a party or by which the Seller is or may be bound. Schedule 3.2
attached hereto sets forth a true, correct, and complete list of all consents
and approvals of third parties (including any governmental authorities) that are
required in connection with the execution, delivery, and consummation by the
Seller of the transactions contemplated by the Agreements.
Section 3.3 Ownership and Distinctiveness of Intellectual Property. The
Seller has an ownership interest in and/or uses the Intellectual Property in
connection with the conduct of the TJC System. No other intellectual or
intangible property is used or necessary in the conduct of the TJC System.
Except for the trademark applications which are still pending and identified on
Schedule 3.3, the Seller is the true, lawful, and sole owner of the Intellectual
Property; and, except as set forth in Schedule 3.3, the Seller has all exclusive
rights, title, and interest in and to the Intellectual Property, and will sell,
transfer, convey, and assign the Intellectual Property to Buyer, free and clear
of any pledges, liens, security interests, restrictions, prior assignments,
encumbrances, or claims of any kind or nature. Except as set forth in Schedule
3.3, (i) all registrations with and applications to governmental or regulatory
authorities in respect of such Intellectual Property are valid and in full force
and effect and are not subject to the payment of any taxes of any kind or
maintenance fees or the taking of any other actions by Seller to maintain their
validity or effectiveness; (ii) there are no restrictions on the direct or
indirect transfer of any contract, agreement, understanding, or any interest
therein, held by Seller in respect of such Intellectual Property; (iii) the
Seller has delivered to the Buyer prior to the execution of this Agreement
documentation with respect to any process, design, know-how, or trade secret
included in such Intellectual Property, which documentation is accurate in all
material respects and reasonably sufficient in detail and content to identify
and explain such process, design, know-how, or trade secret and to facilitate
its full and proper use without reliance on the special knowledge or memory of
any person; (iv) the Seller has taken reasonable security measures to protect
the secrecy, confidentiality, and value of its trade secrets in respect of the
TJC System; (v) the Seller is not, nor has it received any notice that it is, in
default (or with the giving of notice or lapse of time or both, would be in
default) under any contract, agreement, or understanding with respect to the
Intellectual Property; and, (vi) none of the Intellectual Property is being
infringed by any other person. The Seller has not received notice that it is
infringing upon any Intellectual Property of any other person or entity in
connection with the conduct of the TJC System, no claim is pending or has been
made to such effect (that has not been completely resolved), and the Seller is
not infringing upon any Intellectual Property rights of any other person or
entity in connection with the conduct of the TJC System. The
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delivery to the Buyer of the instruments of transfer of ownership contemplated
by the Agreements will exclusively vest all of the Seller's rights, title, and
interest in and to the Intellectual Property and the goodwill relating to or
associated with the Intellectual Property in the Buyer, free and clear of any
pledges, liens, security interests, restrictions, prior assignments,
encumbrances, and claims of any kind or nature except as contemplated by the
Agreements. The Seller represents and warrants the validity, distinctiveness,
and enforceability of the Proprietary Marks and the copyrights associated with
all written materials.
Section 3.4 Litigation. The Seller has not received any written notice of
and is not aware of any infringement by any third party of any of the
Intellectual Property. Except as set forth on Schedule 3.4 attached hereto, none
of the Intellectual Property is subject to, any litigation, suit, claim, action,
investigation, dispute, proceeding, or controversy before any court,
administrative agency, or other governmental authority, or arbitrator relating
to or affecting the ownership or use of the Intellectual Property by the Seller.
The Seller is not aware of any facts or circumstances that could reasonably be
interpreted to give rise to any such litigation, suit, claim, action,
investigation, dispute, proceeding, or controversy. The Seller is not in
violation of or in default with respect to any judgment, order, writ,
injunction, decree, or rule of any court, administrative agency, governmental
authority, or arbitrator, or any regulation of any administrative agency or
governmental authority which would adversely effect the Intellectual Property
being conveyed pursuant to this Agreement. Schedule 3.4 identifies and contains
a brief description of any unsatisfied judgment, order, decree, stipulation, or
injunction against the Seller relating to the Intellectual Property and any
claim, dispute, complaint, action, suit, proceeding, hearing, or investigation
of, or in, any court, governmental entity, or before any arbitrator, to which
the Seller is a party or is threatened to be made a party. None of the claims,
disputes, complaints, actions, suits, proceedings, hearings, and investigations
set forth in Schedule 3.4 could have a material adverse affect on the
Intellectual Property or the ownership of the Intellectual Property by the
Seller.
Section 3.5 No Other Ownership of the Intellectual Property. Except as
disclosed in Schedule 3.5, there are no other owners of an interest in the
Intellectual Property, and there are no persons or entities with rights or
options, vested or non-vested, to acquire any interest in any of the
Intellectual Property.
Section 3.6 Financial Statements. Attached as Schedule 3.6 are complete
copies of the Seller's financial statements (balance sheets, statements of
operation, and statements of cash flow; collectively the "Financial Statements")
audited as of and for the fiscal year ended December 31, 1995. The Financial
Statements fairly present the financial condition of the Seller as of the date
indicated, the results of operations, and the sales of TJC Products for the
respective period specified and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. Since the date of
the Financial Statements, there has not been any material adverse change or any
event or development which, individually or together with other such events or
developments, could reasonably be expected to result in
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a material adverse change, in the business condition (financial or otherwise),
results of operations, sales of TJC Products, or the prospects of the TJC
System.
Section 3.7 Franchises. Attached as Schedule 3.7 is a complete list of all
of the locations of TJC Bakeries, and the Seller has delivered to the Buyer, on
or prior to the date hereof, a copy of the forms of the Franchise Agreements
currently in effect as of the date hereof with respect to each of the TJC
Bakeries (excluding the TJC Bakery owned and operated by the Seller) and all
amendments thereto with respect to each. Other than as provided in the TJC
Franchise Agreements, there are no outstanding commitments, promises,
agreements, or understandings, either written or verbal, which have been made
with respect to the Intellectual Property to any of the TJC Franchisees.
Section 3.8 Regulatory Approvals. AD consents, approvals, authorizations,
and other requirements prescribed by any law, rule, or regulation which must be
obtained or satisfied by the Seller, which are necessary for the execution and
delivery of the Agreements by the Seller and the documents to be executed and
delivered by the Seller in connection with the Agreements, are set forth on
Schedule 3.8 attached hereto, and have been, or will be obtained and satisfied
prior to the Closing. The Seller is not required to submit any notice, report,
or other filing with or to any governmental entity in connection with the
execution, delivery, or performance of the Agreements by the Seller.
Section 3.9 Trade Secrets. The Secret Recipes and Technical Information
constitute trade secrets as that term is defined under the laws of the State of
New Jersey.
Section 3.10 Adequacy of TJC System. The TJC System is sufficient to permit
the Buyer to produce TJC Products of a quality currently customarily produced
and sold in TJC Bakeries.
Section 3.11 Contracts and Commitments. All contractual commitments,
whether written or oral, with respect to the Intellectual Property or the TJC
System, not disclosed in Section 3.7, have been disclosed to the Buyer on
Schedule 3.11 attached hereto, including the agreements for which the Seller is
required to provide Estoppel Letters under Section 5.7 below, and a copy of each
such contract or commitment has been provided to the Buyer. The Seller has not
breached, or received any claim or threat, oral or written, that it has
materially breached, any of the terms and conditions of the Supplier Agreements,
or any other agreements, contracts, or commitments used in connection with the
TJC System other than the Franchise Agreements. Except as provided on Schedule
3.11, the Seller has not breached, received any written claim or threat that it
has breached, or received any material oral claim or threat that it has
materially breached, any of the terms or conditions of the Franchise Agreements.
The Seller is not aware of any breach of any of the terms and conditions of the
Supplier Agreements, Franchise Agreements, or any other agreements, contracts,
or commitments used in connection with the TJC System by any party to such
agreements, contracts, or commitments. Each
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agreement, contract, or commitment listed or identified, or required to be
listed or identified in Schedule 3.11, is in full force and effect, and is a
legal, binding, and enforceable obligation of the parties thereto, subject to no
set-off against the Seller.
Section 3.12 Compliance with Laws. The Seller is not, nor has it at any
time within the last five (5) years been, nor has it received any notice that it
is or has at any time within the last five (5) years been, in violation of or in
default under, in any material respect, any law or order applicable to the
Seller, the TJC Products, or the TJC System.
Section 3.13 Disclosure. No representation or warranty by the Seller in
this Agreement or in any exhibit, list, statement, document, or information set
forth in or attached to any schedule delivered or to be delivered pursuant to
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit any material fact necessary in order to make the
statements contained in the Agreements not misleading. The Seller has disclosed
to the Buyer all material facts pertaining to the transactions contemplated by
the Agreements.
ARTICLE 4
REPRESENTATIONS OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
Section 4.1 Organization and Authority. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the state
Delaware, and has all requisite power and authority (corporate and other) to own
its properties, and has full power to execute and deliver the Agreements and to
consummate the transactions contemplated thereby.
Section 4.2 Authorization. The execution and delivery of the Agreements by
the Buyer have been duly authorized by all requisite corporate action. Without
limiting the generality of the foregoing, the Board of Directors of the Buyer
has duly authorized the transactions contemplated by the Agreements. This
Agreement constitutes, and each of the other Agreements when executed will
constitute, the valid and legally binding obligations of the Buyer, enforceable
against the Buyer in accordance with their respective terms. The execution,
delivery, and performance of the Agreements, and the consummation by the Buyer
of the transactions contemplated thereby, will not, (a) violate the provisions
of any law, rule, or regulation applicable to the Buyer; (b) violate a provision
of the Buyer's Certificate of Incorporation or Bylaws; (c) violate any judgment,
decree, order, or award of any court, arbitral tribunal, administrative agency,
or commission or other governmental entity or regulatory authority or agency; or
(d) conflict with or result in the breach or termination of any term or
provision of any agreement or instrument to which the Buyer is a party or by
which the Buyer is or may be bound.
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Section 4.3 Disclosure. No representation or warranty by the Buyer in this
Agreement or in any exhibit, list, statement, document, or information set forth
in or attached to any schedule delivered or prepared by Buyer pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or
omits or will omit any material fact necessary in order to make the statements
contained in the Agreements not misleading.
ARTICLE 5
CONDITIONS TO THE OBLIGATIONS OF THE BUYER
The obligations of the Buyer hereunder are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by the Buyer in its sole discretion):
Section 5.1 Truth of Representations and Warranties of the Seller:
Compliance with Covenants and Obligations. Each of the representations and
warranties of the Seller in the Agreements shall be true and correct on and as
of the Closing Date as though such representations and warranties were made on
and as of such date, except for any changes consented to in writing by the
Buyer. The Seller shall have performed and complied with all terms, conditions,
covenants, obligations, agreements, and restrictions required by this Agreement
to be performed or complied with by the Seller prior to or at the Closing Date.
Nothing contained herein shall prevent the Seller prior to the Closing Date from
closing TJC Bakeries or terminating TJC Franchisees, provided that Schedule 3.7
is amended to reflect such action.
Section 5.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Seller to authorize or carry out the
Agreements and to sell, transfer, convey, assign, and deliver the Intellectual
Property shall have been taken.
Section 5.3 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions, and similar bodies, the consent, authorization, or
approval of which is necessary under any applicable law, rule, order, or
regulation for the consummation by the Seller of the transactions contemplated
by the Agreements shall have been received, and shall be in form and substance
reasonably satisfactory to the Buyer.
Section 5.4 Third Party Consents. All third party consents necessary under
any contract, agreement, or law for the consummation by the Seller of the
transactions contemplated by the Agreements shall have been received, and shall
be in form and substance reasonably satisfactory to the Buyer.
Section 5.5 Bulk Sales Law Compliance. The Seller shall have complied with
the bulk sales law of the State of New Jersey or obtained an opinion of counsel
satisfactory to the Buyer
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that the bulk sales law of the State of New Jersey does not apply to the
transactions contemplated by the Agreements.
Section 5.6 Adverse Proceedings. No action or proceeding by any third party
or any governmental entity shall have been instituted or threatened which seeks
to restrain, prohibit, enjoin, make illegal, or invalidate the transactions
contemplated by the Agreements or which might affect any right of the Buyer with
respect to the Intellectual Property or under the Agreements.
Section 5.7 Supplier Agreement Termination and Estoppel Letters. The Heinz
Agreement between the Seller and Heinz shall have been irrevocably terminated,
in writing, on such terms and conditions as are satisfactory to the Buyer. In
addition, the Seller shall have received from each Wholesale Licensee,
co-packer, distributor (other than as disclosed in Exhibit F), broker, and other
agents or parties to agreements identified on Schedule 3.11, a letter ("Estoppel
Letters") acknowledging there is no written or oral contract, agreement or
understanding of any kind which is binding or enforceable between them or which
would affect the Buyer, the TJC System, or the Intellectual Property in any way.
Section 5.8 Closing Deliveries from Seller. The Buyer shall have received
from the Seller at or prior to the Closing each of the following documents:
(a) the License Agreement executed by the Parties substantially in the
form of Exhibit B;
(b) the Management Agreement executed by the Parties substantially in
the form of Exhibit C;
(c) the Assignment of Supplier Agreements executed by the Seller
substantially in the form of Exhibit F and any consents so required shall have
been obtained;
(d) the Bill of Sale and Assignment of the Intellectual Property
executed by the Seller substantially in the form of Exhibit I;
(e) a signed opinion of counsel for the Seller substantially in the
form of Exhibit J;
(f) a signed Certificate of the Secretary of the Seller attesting to
the charter documents of the Seller and the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement in the form of
Exhibit L;
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(g) a signed Certificate of the President of the Seller verifying that
all of the representations and warranties are true and correct and that the
covenant of the Seller with respect to the Closing Date Liabilities has been
satisfied substantially in the form of Exhibit M;
(h) a termination of the Heinz Agreement in a form satisfactory to the
Buyer, including the Heinz Assignment;
(i) a copy of the Estoppel Letters from the Suppliers in a form
satisfactory to the Buyer; and,
(j) a copy of a tax clearance certificate issued to the Seller from
the Tax Assessment Department of the State of New Jersey.
Section 5.9 Closing Deliveries From Seller's Officers. The Buyer shall have
received from the officers of the Seller at or prior to the Closing, each of the
following documents:
(a) the executed Consulting Agreement entered into by and between the
Buyer and Charles Loccsiano substantially in the form of Exhibit D; and
(b) the executed Consulting Agreement entered into by and between the
Buyer and Alan Gottlich substantially in the form of Exhibit E.
Section 5.10 Completion of Exhibits. The parties acknowledge and agree
that, as of the date of this Agreement, certain exhibits and schedules to this
Agreement, and certain exhibits to be attached to other exhibits, will not be
completed or attached hereto. The parties shall prepare, finalize and attach all
required exhibits and schedules at least thirty (30) days prior to the Closing
Date.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller hereunder are subject to the fulfillment, at
or before the Closing, of each of the following conditions (all or any of which
may be waived in whole or in part by the Seller in its sole discretion):
Section 6.1 Truth of Representations and Warranties of the Buyer:
Compliance with Covenants and Obligations. The representations and warranties of
the Buyer in this Agreement shall be true on and as of the Closing Date as
though such representations and warranties were made on and as of such date. The
Buyer shall have performed and complied in all respects with all terms,
conditions, obligations, agreements, and restrictions required by this Agreement
to be performed or complied with by the Buyer prior to or at the Closing Date.
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Section 6.2 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out the
Agreements shall have been taken.
Section 6.3 Adverse Proceedings. No action or proceeding by any third party
shall have been instituted or threatened which seeks to restrain, prohibit, or
invalidate the transactions contemplated by the Agreements or which might affect
the rights of the Seller to transfer the Intellectual Property.
Section 6.4 Fairness Opinion. The Seller shall have received an opinion,
with respect to the fairness to the shareholders and creditors of the Seller of
the transactions contemplated by the Agreements.
Section 6.5 Closing Deliveries. The Seller shall have received from the
Buyer at or prior to the Closing each of the following documents:
(a) payment of the Closing Date Payment;
(b) evidence of payment of the Heinz Payment satisfactory to the
Seller;
(c) the Note executed by the Buyer;
(d) the Purchase Agreement executed by the Parties;
(e) the License Agreement executed by the Parties substantially in the
form of Exhibit B;
(f) the Management Agreement executed by the Parties substantially in
the form of Exhibit C;
(g) a signed opinion of counsel for the Buyer substantially in the
form of Exhibit K;
(h) a signed Certificate of the Assistant Secretary of the Buyer
attesting to the charter documents of the Buyer and the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement
substantially in the form of Exhibit M; and
(i) a signed Certificate of the President of the Buyer verifying that
all of the representations and warranties are true and correct, substantially in
the form of Exhibit N.
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ARTICLE 7
INDEMNIFICATION
Section 7.1 Indemnification for Misrepresentations. The Buyer and the
Seller each hereby indemnifies and holds the other harmless against all claims,
damages, losses, liabilities, costs, and expenses (including, without
limitation, settlement costs and any legal, accounting or other expenses for
investigating or defending any actions or threatened actions) reasonably
incurred by the Buyer or Seller in connection with any misrepresentation
contained in any statement, certificate, or schedule furnished by such Party
pursuant to the Agreements or in connection with the transactions contemplated
by the Agreements.
Section 7.2 Survival of Representations. All representations and warranties
made by the Parties herein or in any instrument or document furnished in
connection with the Agreements shall survive the Closing and any investigation
at any time made by, or on behalf of, the Parties to the Agreements. All such
representations and warranties shall expire on the third (3rd) anniversary of
the Closing Date.
Section 7.3 Seller's Indemnity for Intellectual Property. The Seller hereby
agrees to indemnify and hold the Buyer, its officers, directors, shareholders,
and affiliates (the "Buyer's Indemnitees") harmless from any and all claims,
damages, losses, liabilities, costs, and expenses (including, without
limitation, settlement costs and any legal, accounting, or other expenses for
investigating or defending any actions or threatened actions) reasonably
incurred by the Buyer's Indemnitees, in connection with any claims against the
validity, distinctiveness, and/or enforceability of the Intellectual Property.
With respect to claims against the use, validity, distinctiveness, and/or
enforceability of the Intellectual Property, as such Intellectual Property
existed in the United States and Canada as of Closing, the Seller agrees to pay
for the defense of any claims (including, without limitation, settlement costs
and any legal, accounting, or other expenses for investigating or defending any
actions or threatened actions), that the Buyer's use of the Intellectual
Property infringes upon the rights of others. The Buyer shall have the right to
control the defense of claims relating to or involving the Intellectual Property
(including selecting the attorney to represent the Buyer in such a dispute). The
Buyer agrees to consult with the Seller on the progress, strategy, and status of
any such suits and Buyer agrees it will not refuse to settle or settle such
action without the prior written consent of the Seller.
Section 7.4 Seller's Indemnity for Seller's Business Operations. The Seller
hereby agrees to indemnify and hold the Buyer's Indemnitees harmless from any
and all claims, damages, losses, liabilities, costs, and expenses (including,
without limitation, settlement costs and any legal, accounting, or other
expenses for investigating or defending any actions or threatened actions)
reasonably incurred by the Buyer's Indemnitees in connection with any claims
relating to the Supplier Agreements, the liabilities or obligations of the
Seller, and/or any liabilities or claims arising out of any act or omission by
the Seller in relation to the business operations of the Seller, either prior to
or after the Closing. With respect to claims involving
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the business operations of the Seller, the Seller shall have the right to
control the defense of such claims, the Seller shall pay for the defense of any
such claims, and the Seller shall indemnify and hold the Buyer's Indemnitees
harmless.
Section 7.5 Buyer's Indemnity for Buyer's Business Operations. The Buyer
hereby agrees to indemnify and hold the Seller, its officers, directors,
shareholders, and affiliates (the "Seller's Indemnitees") harmless from any and
all claims, damages, losses, liabilities, costs, and expenses (including,
without limitation, settlement costs and any legal, accounting, or other
expenses for investigating or defending any actions or threatened actions)
reasonably incurred by the Seller's Indemnitees, in connection with any
liabilities or claims arising out of any act or omission by the Buyer in
relation to the business operations of the Buyer arising either prior to or
after Closing. The business operations of the Buyer, however, shall not include
acts or omissions of the Buyer under the Management Agreement which occur at the
direction of the Seller, and which involve or relate to the business operations
of the Seller, which is addressed in Section 7.6 below. With respect to claims
involving the business operations of the Buyer, the Buyer shall have the right
to control the defense of such claims, the Buyer shall pay for the defense of
such claims, and the Buyer shall indemnify and hold the Seller's Indemnitees
harmless.
Section 7.6 Franchisee General Release Forms. At least twenty-five (25)
days prior to the Closing, the Seller shall send a letter to each TJC Franchisee
offering to release each TJC Franchisee from all royalties owed the Seller and
all royalties that would be owed to the Seller (and paid to the Buyer under the
Management Agreement) for six (6) months following the Closing, in exchange for
a general release ("Franchisee General Release") from all liabilities for all
past actions or omissions up to and including the Closing and for all potential
claims or causes of action relating to the transactions contemplated by the
Closing. The form of the Franchisee General Release and the content of any
communication concerning it shall be satisfactory to both Parties, and shall not
be sent to any TJC Franchisee until the form and content is approved by the
Buyer. Both the Buyer and Seller shall receive a copy of each letter sent, all
communications received in response to the Franchise General Release form, and
of each Franchisee General Release which is signed and returned by a TJC
Franchisee.
Section 7.7 Claims by Franchisees Against Buyer and Seller for Actions
Prior to and After the Closing. With respect to claims against both the Seller
and the Buyer by TJC Franchisees for acts or omissions which allegedly started
prior to the Closing and continued after the Closing, the Seller agrees to
indemnify the Buyer and hold the Buyer, its officers, directors, shareholders,
and affiliates, harmless from any and all claims, damages, losses, liabilities,
costs, and expenses (including, without limitation, settlement costs and any
legal, accounting, or other expenses for investigating or defending any actions
or threatened actions) reasonably incurred by the Buyer. The Seller and the
Buyer agree to each pay for fifty percent (50%) of the costs of the defense of
any such claims, (including, without limitation, settlement costs and any legal
accounting, or other expenses for investigating or defending any actions or
threatened actions),
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but the Buyer shall have the right to control the defense of such claims. The
Buyer agrees to consult with the Seller on the progress, strategy, and status of
any such suits and agrees it will not refuse to enter into settlement or enter
into settlement of any such action without the prior written consent of the
Seller.
Section 7.8 Buyer's Right of Offset. For any amount to which the Buyer
shall be entitled to indemnification pursuant to this Agreement prior to
settlement or judgment, the Buyer shall have the right to credit such amount
against the First Note and the Additional Payments provided for in Article I
equal to an amount of ten percent (10%) of the claim or Twenty Thousand Dollars
($20,000), whichever is less, per month, per claim, after the claim is settled
or a judgement is rendered then the Buyer's right of offset shall extend to the
full amount of the settlement or judgement, without limitation. The Buyer shall
also have the right to offset money it owes to Seller, pursuant to the terms of
the License Agreement or the Management Agreement, subject to the above monthly
and per claim limits until settlement of a claim or a judgement is rendered, as
provided above. All amounts that are offset as provided for in this Section 7.8
shall be deposited in an escrow account ("Escrow") maintained by Rudnick, Wolfe,
Epstien & Zeidman ("Escrow Agent"), in accordance with the terms and conditions
of the escrow agreement attached hereto as Exhibit P. The Escrow Agent shall
disburse the funds from the Escrow in accordance with the escrow agreement.
Section 7.9 Notice for Claims of Indemnification. Whenever any claim shall
arise for indemnification pursuant to this Article 7, the Party seeking
indemnification (the "Indemnified Party"), shall promptly notify the Party from
whom indemnification is sought (the "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third-party, the notice to the Indemnifying
Party shall specify, if known, the amount or an estimate of the amount of the
liability arising therefrom. The Indemnified Party shall not settle or
compromise any claim by a third party for which it is entitled to
indemnification without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld, unless suit shall have been instituted
against it and the Indemnifying Party shall not have taken control of such suit
after notification thereof.
Section 7.10 Defense by Indemnifying Party. With respect to any claim
giving rise to indemnity resulting from or arising out of any claim or legal
proceeding by a person who is not a party to the Agreements, the Indemnifying
Party, at its sole cost and expense, may, upon written notice to the Indemnified
Party, assume the defense of any such claim or legal proceeding if it
acknowledges, to the Indemnified Party, in writing, its obligations to indemnify
the Indemnified Party with respect to all elements of such claim. The
Indemnified Party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense. If the
Indemnifying Party does not assume the defense of any such claim or litigation
resulting therefrom within thirty (30) days after the date such claim is made,
the Indemnified Party may defend against such claim or litigation, in such
manner as it may deem
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appropriate, including, but not limited to, settling such claim or litigation,
after giving notice of the same to the Indemnifying Party, on such terms as the
Indemnified Party may deem appropriate, and the Indemnifying Party shall be
entitled to participate in (but not control) the defense of such action, with
its counsel and at its own expense. If the Indemnifying Party thereafter seeks
to question the manner in which the Indemnified Party defended such third party
claim or the amount or nature of any such settlement, the Indemnifying Party
shall have the burden to prove by a preponderance of the evidence that the
Indemnified Party did not defend or settle such third party claim in a
reasonably prudent manner.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(a) at any time before the Closing, by mutual written agreement of the
Seller and Buyer;
(b) at any time before the Closing, by the Seller or Buyer, in the
event of a material breach by the non-terminating party if such non-terminating
party fails to cure such breach within thirty (30) business days following
notification thereof by the terminating party;
(c) upon notification to the non-terminating party by the terminating
party that the satisfaction of any condition to the terminating party's
obligations under this Agreement has become impossible to satisfy; or
(d) at any time after October 31, 1996, by the Seller or Buyer, upon
notification to the non-terminating party by the terminating party, if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party.
Section 8.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 8.1, this Agreement will immediately become null and void,
and there will be no liability or obligation on the part of the Seller or Buyer
(or any of their respective officers, directors, employees, agents,
representatives or affiliates), except as provided in the next succeeding
sentence and except that the provisions with respect to expenses in Section 8.8
will continue to apply following any such termination. Notwithstanding any other
provision in this Agreement to the contrary, upon termination of this Agreement
pursuant to Section 8.1 (b) or (c), each Party will remain liable to the other
Party for any breach of this Agreement by such Party existing at the time of
such termination, and each Party may seek such remedies, including
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damages and attorney fees, against the other, with respect to any such breach as
is provided in this Agreement or as may be otherwise available at law or in
equity.
Section 8.3 Broker's and Financial Advisers. The Seller has engaged Arthur
Andersen, LLP as a financial adviser in connection with the transactions
contemplated by the Agreements. All amounts due to Arthur Andersen, LLP are
solely the responsibility of the Seller and the Seller will hold the Buyer
harmless from any such claim for payment by Arthur Andersen, LLP. The Seller
represents and warrants that it has not engaged any other financial adviser,
broker, or finder, nor has Seller incurred any other liability for brokerage
fees, commissions, or finder's fees in connection with the transactions
contemplated by the Agreements. The Buyer represents and warrants that it has
not engaged any broker or finder or incurred any liability for brokerage fees,
commissions, or finder's fees in connection with the transactions contemplated
by the Agreements. Each Party agrees to indemnify and hold the other harmless
against any claims or liabilities asserted against them by any person acting or
claiming to act as a financial adviser, broker or finder on behalf of such
Party.
Section 8.4 Notices. Any notices or other communications required or
permitted by the Agreements shall be sufficiently given if delivered personally
or sent by telex, facsimile, overnight courier, registered or certified mail
postage prepaid, addressed as follows or to such other address of which the
Parties may have given notice:
To the Seller: T. J. Cinnamons, Inc.
Attn: Alan S. Gottlich, Chief Financial Officer
135 Seaview Drive
Secaucus, New Jersey 07094
Fax: (201) 422-0858
With copies to: Saul Feiger, Esq.
152-18 Union Turnpike
Kew Garden Hills, New York 11367
Fax: (718) 380-3092
To the Buyer: TJ Holding Company, Inc.
Attn: Jonathan P. May, Vice President
1000 Corporate Drive
Fort Lauderdale, Florida 33334
Fax: (954) 351-5619
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With copies to: Rudnick, Wolfe, Epstien & Zeidman
Attn: Mark A. Kirsch, Esq.
1401 New York Avenue, N.W.
Suite 900
Washington, D.C. 20005
Fax: (202) 879-5773
All notices or other communications shall be deemed received on the date
delivered if delivered personally, by facsimile, by telex, or by overnight
courier, or three (3) business days after being sent, if sent by registered or
certified mail.
Section 8.5 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of each of the Parties and their respective successors
and assigns. No assignment shall release a Party from any obligation or
liability under this Agreement.
Section 8.6 Amendments. The Parties, by the consent of their respective
Boards of Directors or officers authorized by such Boards, may amend or modify
this Agreement and the exhibits and schedules hereto, in such manner as may be
agreed upon, by a written instrument executed by each Party.
Section 8.7 Waivers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 8.8 Expenses. Each of the Parties shall bear its own costs and
expenses (including legal fees and expenses) incurred in connection with the
Agreements.
Section 8.9 Severability. If any of the provisions of the Agreements may be
construed in more than one way, one of which would render the provision illegal
or otherwise voidable or unenforceable, such provision shall have the meaning
which renders it valid and enforceable. The language of all of the provisions of
the Agreements shall be construed according to their fair meaning and not
strictly construed against either Party. If any court or other governmental
authority shall determine any provision of the Agreements unenforceable or void,
the Parties agree that the provision shall be amended so that it is enforceable
to the fullest extent permissible under the laws and public policies of the
jurisdiction in which enforcement is sought and affords the Parties the same
basic rights and obligations and has the same economic effect. If any of the
provisions of the Agreements are held invalid or unenforceable by any court or
other governmental authority or in any arbitration proceeding, such a finding
shall not invalidate the remainder of the Agreements.
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Section 8.10 Specific Performance. The Seller and Buyer each acknowledge
that they would be irreparably damaged if any of the provisions of the
Agreements are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, the Parties agree that either Party shall
be entitled to an injunction to prevent a breach or anticipatory breach of the
provisions of the Agreements and to specifically enforce the Agreements and the
terms and provisions of the Agreements in any action instituted in any court of
the United States or any state thereof or any foreign country having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
Section 8.11 Governing Law. Any dispute with respect to the entering into,
performance, or interpretation of this Agreement shall be governed by the laws
of the State of Florida, without regard to the Florida law of conflicts. The
Parties hereby agree that to the extent any disputes arise that cannot be
resolved directly between the Parties, the Parties shall file any necessary suit
only in the federal or state court having jurisdiction where the Buyer's
principal office is then located. The Parties irrevocably submit to the
jurisdiction of any such court and waive any objection they may have to either
the jurisdiction or venue of any such court.
Section 8.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 8.13 No Third Party Beneficiaries. Except as expressly provided to
the contrary herein, nothing in this Agreement is intended, nor shall be deemed,
to confer upon any person or entity, other than the Parties and their successors
and assigns, any rights or remedies under or by reason of this Agreement.
Section 8.14 Entire Agreement. This Agreement and all schedules and
exhibits and all agreements and instruments to be delivered by the Parties
pursuant to this Agreement, represent the entire understanding and agreement
between the Parties with respect to the subject matter hereof and supersede all
prior oral and written and all contemporaneous oral negotiations, commitments
and understandings between such Parties.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the Parties as
of and on the date first above written.
(Corporate Seal) SELLER: T.J. CINNAMONS, INC., a Delaware
corporation
Attest: By: /s/ Charles N. Loccisano
Secretary Title: President & CEO
(Corporate Seal) BUYER: TJ HOLDING COMPANY, INC., a
Delaware corporation
Attest: By: /s/ David L. Dorff
Secretary Title: Senior Vice President & CFO
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