SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported):August 19, 1996 (July 29, 1996)
The Italian Oven, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Pennsylvania
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(State or Other Jurisdiction of Incorporation)
0-27182 25-1624305
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(Commission File Number) (I.R.S. Employer Identification No.)
Eleven Lloyd Ave., Latrobe, PA 15650
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(Address of Principal Executive Offices) (Zip Code)
(412) 537-5380
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(Registrant's Telephone Number, Including Area Code)
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Item 2. Acquisition or Disposition of Assets
Effective July 29, 1996, in order to obtain cash for immediate operating needs,
the Company sold the operating assets of the Company's Erie and Cranberry,
Pennsylvania restaurants. These restaurants had been acquired by the Company in
April 1996. The assets were sold pursuant to an Asset Purchase Agreement dated
as of August 1, 1996 (the "Asset Purchase Agreement") to Armstrong Restaurants,
L.P. ("Armstrong"), a limited partnership affiliated with (i) a current
franchisee of the Company, The Armstrong Group of Companies, (ii) a stockholder
of the Company, Armstrong Holdings, Inc., and (iii) two of the Company's
directors, Kirby Campbell and Dru Sedwick.
Under the terms of the Asset Purchase Agreement, Armstrong purchased these
restaurant assets for aggregate consideration of $970,000, consisting of
$800,000 in cash and the relinquishment of $170,000 in prepaid franchise fees
under Armstrong's northeastern Ohio franchise development agreement. The selling
price was determined on the basis of arm's length negotiations between the
parties. The transaction was approved by the Board of Directors at a special
meeting at which Mr. Sedwick was not present and at which Mr. Campbell abstained
from voting due to his interest in the transaction.
The Erie and Cranberry, Pennsylvania restaurants will be operated by Armstrong
as franchised restaurants. To assist the Company in improving its cash position,
the Asset Purchase Agreement required Armstrong to prepay at closing $300,000 in
franchise royalties for these restaurants.
Under the terms of the Asset Purchase Agreement, Armstrong also agreed to waive
its development rights to northeastern Ohio, preserving only a five year right
of first refusal to match the terms of any development proposed by any other
persons in that territory and certain other areas in western Pennsylvania.
Should Armstrong elect to develop a restaurant in any of the locations included
in the right of first refusal, the Company must grant a credit or reduction of
$10,000 toward the franchise fees payable as to each restaurant which Armstrong
agrees to develop, such credit or reduction not to exceed $40,000 in the
aggregate.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired. None
(b) Pro forma financial information. None
(c) Exhibits.
10.1 Asset Purchase Agreement dated as August 1, 1996 by and between the Company
and Armstrong Restaurants, L.P.
<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.
THE ITALIAN OVEN, INC.
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(Registrant)
By /s/ Gary L. Steib
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Gary L. Steib, Chief Financial Officer
Dated: August 19, 1996
Exhibit 10.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into as of the 1st
day of August, 1996, by and between ARMSTRONG RESTAURANTS, L.P., a Delaware
limited partnership (the "Buyer") and THE ITALIAN OVEN INC., a Pennsylvania
corporation (the "Seller").
WHEREAS, the Seller operates The Italian Oven Restaurant located at
20001 U.S. Route 19, Cranberry Township, Pennsylvania 16046 (the "Cranberry
Township Restaurant") and The Italian Oven Restaurant located at 2709 West 12th
Street, Erie, Pennsylvania 16505 (the "Erie Restaurant"). The Cranberry Township
Restaurant and the Erie Restaurant shall collectively be referred to herein as
the "Restaurants"; and
WHEREAS, the Buyer and the Seller are parties to a Letter Agreement
dated July 22, 1996 (the "Letter") pursuant to which, among other things,
various assets relating to the Restaurants were conveyed to the Buyer and the
Buyer made a down payment to the Seller, and
WHEREAS, the Buyer wishes to purchase and acquire, and the Seller
wishes to sell and transfer, all of the assets of and relating to the operation
of the Restaurants and to definitively document the transactions effected or
contemplated by the Letter.
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
agree as follows:
I. PURCHASE AND SALE OF ASSETS
1.1 Sale of Assets. On the terms and subject to the conditions of this
Agreement, the Buyer shall purchase and acquire from the Seller, and the Seller
shall sell, convey, assign, transfer and deliver to the Buyer, free and clear of
any and all liens, taxes, charges, encumbrances and claims of any kind
whatsoever, all of Seller's right, title and interest in and to all of its
assets of every kind and description, wherever located, belonging to the Seller
and used or to be used in connection with the Restaurants and the operation
thereof, including, but not limited to, (i) its rights under the Lease Agreement
dated August, 1994, by and between PALT Partners/Cranberry, a Pennsylvania
limited partnership, as the Landlord and Ovens of Cranberry, Ltd., a
Pennsylvania corporation, as the Tenant and subsequently assigned to the Seller
by that certain Assignment and Assumption Agreement dated February 22, 1996, by
and among Ovens of Cranberry, Ltd., Ovens of Erie One, Ltd., Ovens of
Monroeville, Ltd. and Ovens of North Hills, Ltd. (the "Cranberry Township
Lease"), (ii) the Lease Agreement dated as of June 17, 1996, by and between
Timothy and Kathleen Boetger, as the Landlord and the Seller, as the Tenant (the
"Erie Lease"), and (iii) the equipment, cash, fixtures, machinery, food
inventory, furniture, goodwill, contract rights, rights under warranties,
operating licenses and other tangible assets used in connection with the
Restaurants. The assets to be sold, conveyed, assigned, transferred and
delivered to the Buyer by the Seller hereunder are hereinafter referred to as
the "Assets". The Buyer and Seller acknowledge that on July 22, 1996, the Seller
executed and delivered to the Buyer two (2) Bills of Sale dated July 23, 1996,
and the Seller hereby confirms the validity and effectiveness of such Bills of
Sale as of the close of business on July 22, 1996.
1.2 Assumption of Liabilities. Buyer shall not assume any liabilities
of Seller. Under no circumstances is Buyer agreeing hereunder to assume any
contract pertaining to the Restaurants, except for the Cranberry Township Lease
and the Erie Lease identified in Section 1.1 hereof. The Seller shall be
responsible for satisfying, and shall promptly pay from the Down Payment, as
hereinafter defined, all liabilities and obligations with respect to the
Restaurants prior to the Closing Date, including, but not limited to, rent, real
estate taxes and accrued but unpaid employee benefits.
1.3 Instruments of Conveyance and Transfer. Upon the Seller's
acceptance of that certain Binding Letter of Intent dated July 22, 1996, by and
between the Buyer and the Seller (the "Letter"), a copy of which is attached
hereto as Exhibit "A", and the making of Buyer's Down Payment, as defined in
Section 2.1(a) hereof, the Seller delivered to the Buyer bills of sale,
endorsements, assignments, Franchise Agreements, Oven Leases and other good and
sufficient instruments of conveyance and assignment, reasonably satisfactory in
form and substance to the Buyer and its counsel, that the Seller acknowledges
were effective to vest in the Buyer all of the Seller's right, title and
interest in and to the Assets. The Seller will take all additional steps as may
be necessary to put the Buyer in possession and control of the Assets; provided,
however, Seller has obtained the consent of the landlords of the Cranberry
Township Restaurant and the Erie Restaurant.
1.4 Liquor License. Buyer and Seller agree that Buyer shall be entitled
to the proceeds of the sale of Liquor License No. R-20284 held by Seller and
heretofore used as the Erie Restaurant, pursuant to the terms of a Side Letter
Agreement between Buyer and Seller.
II. CONSIDERATION FOR THE ASSETS
2.1 Purchase Price. As consideration for the Assets, the Buyer shall
pay the total of the following (the "Purchase Price"):
(a) Eight Hundred Thousand and 00/100 Dollars ($800,000.00) cash.
(b) As of the close of business on July 22, 1996, the Buyer and the
Seller conducted a physical examination and valuation (the "Review") of the
inventory in the Restaurants (the "Inventory"). The Buyer shall pay by check or
cash the value of the Inventory agreed upon by the Buyer and the Seller, based
upon the Review (the "Value"); provided, however, that items of Inventory, if
any, which the Buyer reasonably and in good faith determines to be obsolete or
otherwise unusable in the ordinary course of business shall not be included
among the Assets hereunder and shall not be considered in determining the Value.
Any such obsolete or otherwise unusable items of Inventory which are excluded
from Assets hereunder shall remain the property of the Seller to be disposed of
for the account of the Seller as the Seller deem proper. The Value, as set forth
on Schedule 2.1 hereof, shall be added to the payment due to the Seller on the
Closing Date.
(c) The Buyer shall pay an additional amount for, and in an amount
equal. to, the amount of the cash on hand and the gift certificates in the
Restaurants as of the close of business on July 22, 1996. Such additional
amounts, as set forth on Schedule 2.1, shall be added to the payment due to the
Seller on the Closing Date.
(d) Prepayment of royalties in the amount of Three Hundred Thousand and
00/100 Dollars ($300,000.00). The prepayment of royalties will also be made in
cash. The Seller agrees to offset the prepayment of royalties against all
amounts owing by the Buyer to Seller under Buyer's Franchise Agreements
commencing in January of 1997 and continuing each month thereafter until the
entire balance of the prepayment is offset. The offset will apply to all
royalties payable in respect of all restaurants owned by Buyer at such time.
(e) Contingent Consideration. Upon the complete offset of the
prepayment of royalties described in Section 2.1 (d), the Buyer agrees to
forgive One Hundred and Seventy Thousand and 00/100 Dollars ($170,000.00) of a
refund of prepaid development fees owed by Seller to Buyer, as described in that
certain Development Agreement dated March 8, 1993 and that certain Extension
Agreement dated May 17, 1994 and waives all rights to the Exclusive Area as
defined in the Development Agreement, except as to the right of first refusal
set forth in Section 10.1 hereinbelow.
2.3 Payment of the Purchase Price.
(a) Following the execution of the Letter, the Buyer made a down
payment to the Seller in the amount of Five Hundred Thousand and 00/100 Dollars
($500,000.00) in cash (the "Down Payment"). In the event this transaction is
closed in accordance with the terms of this Agreement, the Down Payment shall be
applied to the Purchase Price and upon the failure of the transaction to close
under the terms of this Agreement, the Down Payment shall be refunded to the
Buyer and upon receipt thereof, the Buyer shall convey and assign to the Seller
the assets, leases and other property interests conveyed to it by the Seller. If
the Seller, without good cause, refuses to enter into, or close under the terms
of this Agreement, it shall reimburse the Buyer for all professional fees and
expenses incurred by the Buyer in connection with this transaction.
(b) At the Closing, the sum of (i) Four Hundred Thousand and 00/100
Dollars ($400,000. 00), (ii) the Value (as defined in Section 2.1 (b) hereof),
and (iii) cash on hand shall be paid to the Seller by certified check or wire
transfer as set forth on Schedule 2.1 hereof.
(c) On September 1, 1996, the sum of Two Hundred Thousand and 00/100
Dollars ($200,000.00) shall be paid to the Seller by certified check or wire
transfer.
2.3 Obligations Prior to the Closing Date.
(a) Operation of the Restaurants and the Assets until 12:01 a.m. on
July 22, 1996 shall be for the account of the Seller; and thereafter for the
account of the Buyer. The Buyer shall not assume and the Seller shall be
responsible for taxes, assessments, commitments, agreements, arrangements,
understandings, claims, debts, demands, obligations and liabilities accruing or
arising out of facts and circumstances occurring prior to July 23, 1996 in
connection with the Assets, the Restaurants or the operations thereof
III. CLOSING DATE
3.1 Closing Date. The closing (the "Closing") with respect to the
transactions provided for in this Agreement shall take place at 10:00 a.m. on
August 1, 1996, at the offices of the Buyer, One Armstrong Place, Butler,
Pennsylvania, or at such other place, date and time as the parties hereto may
mutually agree (the "Closing Date").
IV. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Buyer as follows:
4.1 Organization, Power, Good Standing. The Seller is a corporation
duly organized and validly existing under the laws of the Commonwealth of
Pennsylvania, and has all requisite corporate power and authority to own,
operate and lease its properties, to carry on its business as now being
conducted and to enter into this Agreement and to perform its obligations
hereunder.
4.2 Authorization. The execution, delivery and performance of this
Agreement by the Seller has been duly and effectively authorized by all
necessary corporate action of the Seller. This Agreement has been duly executed
by the Seller and it is the legal, valid and binding obligation of the Seller,
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy, reorganization, moratorium or the exercise of judicial discretion.
4.3 Effect of Agreement. The execution, delivery and performance of
this Agreement by the Seller and the consummation of the transactions
contemplated hereby do not and will not (i) require the consent, approval or
authorization of any person, corporation, partnership, joint venture or other
business association, except for the landlords identified in Section 1.1 hereof
and PNC Bank, formerly Marine Bank, of Erie, Pennsylvania, (ii) violate any
provisions of law applicable to the Seller or the Assets, or (iii) conflict with
or (with or without the giving of notice and/or the passage of time) result in a
breach or termination of any provision of, or constitute a default under, or
result in the creation of any lien, charge or encumbrance upon any of the Assets
pursuant to any agreement or other instrument, or any order, judgment, award,
decree, statute, ordinance, regulation or any other restriction of any kind or
character, to which the Seller is a party, or by which the Seller or any of the
Assets may be bound.
4.4 Undisclosed Liabilities. Except as and to the extent disclosed in
the Financial Statements or the listing of payables and sales reports previously
delivered to the Buyer and relating to the Restaurants (the "Payable Schedule"),
the Seller has no liabilities or obligations of any kind relating to the
Restaurants, whether accrued, absolute, contingent or otherwise, whether or not
such liabilities or obligations would have been required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles. The Seller does not know and has no reasonable grounds to know of
any basis for assertion against the Seller of any claim or liability of any
nature in any amount relating to the Restaurants which is not listed in the
Payable Schedule or disclosed in the Financial Statements.
4.5 Absence of Certain Changes or Events. The Seller has operated both
the Cranberry Township Restaurant and the Erie Restaurant since April 22, 1996,
only in the ordinary course and there has not been any adverse change in or
development adversely affecting the business, assets, properties, financial
position, results of operations or prospects of the Restaurants (including,
without limitation, any fire or other casualty loss to any of the Assets) nor is
the Seller aware of any such adverse change or development which may occur in
the future.
4.6 Tax Matters. The Seller has duly filed the appropriate federal,
state and local governmental agencies tax returns and reports required to be
filed; such tax returns and reports are accurate and complete; and the Seller
has paid in full or made adequate provision for all taxes, interest, penalties,
assessments or deficiencies shown to be due on such tax returns and reports or
claimed to be due by any taxing authority or otherwise due and owing. Seller has
made all withholdings of tax required to be made under all applicable federal,
state and local tax regulations and such withholdings have either been paid to
the respective governmental agencies or set aside in accounts for such purpose
or accrued, reserved and entered upon the books of the Seller. The Seller is not
a party to any pending action or proceeding, nor is any action or proceeding
threatened, by any governmental authority for assessment or collection of taxes
and no claim for assessment or collection of taxes has been asserted against the
Seller.
4.7 Title to Assets; Absence of Liens and Encumbrances. The Seller has
good title to all of the Assets, free and clear of all easements, liens,
pledges, charges, claims and encumbrances.
4.8 Litigation. There are no claims, actions, suits, investigations or
proceedings pending or threatened against or affecting the Seller at law or in
equity, on, before or by any federal, state, municipal or other governmental or
non-governmental department, commission, board, bureau, agency or
instrumentality, United States or foreign, nor does the Seller know of any facts
which would provide a basis for any such claim, action, suit, investigation or
proceeding, except as identified on Schedule 4. 8 attached hereto and made a
part hereof.
4.9 Employee Matters. There are no controversies pending or threatened
between the Seller and any of its employees employed at the Restaurants and the
Seller has not taken or failed to take any action which would provide a
reasonable basis for any such controversy. The Seller has complied with all laws
relating the employment of labor, including any provisions relating to wages,
hours, collective bargaining and the payment of social security and similar
taxes, and is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing. There are no organizational efforts
presently being made or threatened by or on behalf of any labor union with
respect to the employees of the Seller at the Restaurants. To the best of
Seller's knowledge, there are not present employees of the Restaurants who will
not be available for employment by the Buyer on substantially the same terms and
conditions as they are presently employed by the Seller. The Seller has
previously provided a list of the names and current annual salary rates of the
employees in the Restaurants; such individuals are highly qualified for the
positions occupied, are competent to perform the duties required by such
positions and are in good standing with the Seller.
4.10 Trade Names. The Seller has the full and exclusive right to use
the trade name, trademark or service mark "The Italian Oven" and "The Italian
Oven Restaurant" now used by it, and no such use infringes upon the lawful
rights of any other person or entity. The Seller has no reason to believe that
there are claims of third parties to use such name or a similar name in the area
and has no reason to believe that there exists any basis for any such claim. The
Seller has received no notice of, and has no reason to believe that there are
any basis for, any conflict with the asserted rights of others in any
trademarks, trade names, service marks, copyrights or franchising rights. The
Seller does not use any patents, formulae, processes, know-how, trade secrets,
copyrights, designations, or any other trade names, publication names,
trademarks or service marks other than in accordance with its corporate policy.
No director, officer, employee, stockholder, agent or representative of the
Seller has any interest whatsoever in any such prohibited trademarks, trade
names and service marks.
4.11 Permits and Licenses. The Seller has all of the material permits,
licenses, authorizations, consents, orders, concessions and the like required
for the continuous operation of the Restaurants specifically including, but not
limited in kind or scope to, building permits, signage permits, site use
approval, zoning certificates, certificates of occupancy, certificates of public
convenience, environmental and land use permits, driveway, curb cut, approach
road and access road approvals, water, server and utility certificates and any
necessary approvals from state or local health, safety and transportation or
other governmental boards or authorities (all such approvals, permits, license
authorizations, consents, orders, concessions, and the like being referred to
herein after the "Licenses"). True and complete copies of the Licenses have been
delivered to the Buyer or have been made available to the Buyer for inspection.
All the Licenses have been validly and finally acquired by the Seller and are in
full force and effect. No violations are being, or have been, recorded against
such Licenses, nor has any citation, notice or warning been issued with respect
to any License, nor has any investigation, hearing or warning been held or given
or threatened to be held or given with respect to any License. The Seller has
not received any actual notice or other information that any appropriate
authority intends to cancel, terminate or suspend, or to conduct any
investigation or proceeding with respect to, any of such Licenses or that any
valid grounds exist for any cancellation, termination or suspension or any
Licenses. No consent, approval, order, notice or other authorization of any
Federal, state, county or local governmental agency or department is required to
be obtained by or on behalf of the Seller as a prerequisite for, or consequence
of, the sale of the Assets to the Buyer; and no such consent, approval, order,
notice, or other authorization is required to allow Buyer to operate the
Restaurants after the Closing in the same manner that the Restaurants were
operated prior to the Closing.
4.12 Assets; Inventory.
(a) The Assets are in good repair and operating condition so that the
Buyer can operate the Restaurants as Italian Oven Restaurants serving, in a
customarily timely manner, the quality and quantity of food and beverages that
are customary at other such restaurants. There are no actions pending or
threatened by any federal, state or local regulatory agency with respect to the
compliance of the Assets with applicable ordinances or regulations. The Seller
shall deliver to the Buyer prior to Closing copies of all of the warranties on
any Assets in the Restaurant.
(b) The Inventory is in good and marketable condition or otherwise
usable for the purpose for which it was procured and is not excessive in kind or
amount in light of the business of the Seller.
4.13 Compliance With Laws. The conduct of the Seller in operating the
Restaurant business does not violate or infringe upon any federal, state or
local laws, statutes, ordinances or regulations or any right or patent,
trademark, trade name, copyright, know-how or other proprietary right of third
parties, the enforcement of which would materially adversely affect the business
of the Seller of the value of the Assets. To the best of Seller's knowledge,
there are no existing laws, regulations or decrees, nor are there any proposed
laws, regulations or decrees, which will adversely affect the ability of the
Buyer to operate the Restaurants after the Closing.
4.14 Other Information. None of the information and documents furnished
or to be furnished by the Seller to the Buyer or any of its representatives in
connection with the execution, delivery and closing of this Agreement is or will
be false or misleading or contains or will contain any untrue statement of a
material fact or omits to state any material fact required to be stated to make
the statements therein not misleading.
V. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
5.1 Organization, Power, Good Standing. The Buyer is a limited
partnership duly organized and validly existing under the laws of the State of
Delaware and duly qualified to transact business in the Commonwealth of
Pennsylvania, and has all requisite corporate power and authority to own,
operate and lease its properties, to carry on its business as now being
conducted and to enter into this Agreement and to perform its obligations
hereunder.
5.2 Authorization. The execution, delivery and performance of this
Agreement by the Buyer has been duly and effectively authorized by all necessary
corporate action by the General Partner of the Buyer. This Agreement has been
duly executed by the Buyer and it is the legal, valid and binding obligation of
the Buyer, enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, reorganization, moratorium or the exercise of judicial
discretion.
5.3 Effect of Agreement. The execution, delivery and performance of
this Agreement by the Buyer and the consummation of the transactions
contemplated hereby do not and will not (i) require the consent, approval or
authorization of any person, corporation, partnership, joint venture or other
business association, except for the General Partner of the Buyer, (ii) violate
any provisions of law applicable to the Buyer, or (iii) conflict with or (with
or without the giving of notice and/or the passage of time) result in a breach
or termination of any provision of, or constitute a default under, or result in
the creation of any lien, charge or encumbrance upon any of the Assets pursuant
to any agreement or other instrument, or any order, judgment, award, decree,
statute, ordinance, regulation or any other restriction of any kind or
character, to which the Buyer is party, or by which the Buyer may be bound.
VI. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER
The obligations of the Seller under this Agreement are subject to the
satisfaction on or prior to the Closing of each of the following conditions:
6.1 Accuracy of Representations and Warranties. The representations and
warranties of the Buyer herein contained shall be true and correct on and as of
the Closing, with the same force and effect as though made on and as of the
Closing.
6.2 Performance of Agreements. The Buyer shall have performed all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it on or prior
to the Closing.
VII. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject to the
satisfaction on or prior to the Closing of each of the following conditions:
7.1 Accuracy of Representations and Warranties. The representations and
warranties of the Seller herein contained shall be true and correct on and as of
the Closing, with the same force and effect as though made on and as of the
Closing.
7.2 Performance of Agreements. The Seller shall have performed all
obligations and agreements and complied with all covenants and conditions
contained in this Agreement to be performed or complied with by it on or prior
to the Closing.
7.3 Consents. As of the Closing, the Seller shall have obtained all
such consents, assignments and approvals required for the closing of the
transactions set forth herein and for the Buyer to enjoy after the Closing all
rights and benefits with respect to the Assets presently enjoyed by the Seller,
in form and substance reasonably satisfactory to the Buyer.
7.4 Instruments of Conveyance and Transfer. Prior to or at the Closing,
the Seller shall have delivered to the Buyer bills of sale, endorsements,
assignments and other good and sufficient instruments of conveyance and
assignment, reasonably satisfactory in form and substance to the Buyer and its
counsel, as shall be effective to vest in the Buyer all of the Seller's
respective right, title and interest in and to the Assets, free and clear,
except as set forth herein, of all liens, taxes, charges and encumbrances, and
the Seller shall have taken all other steps as maybe necessary to place the
Buyer in possession and control of the Assets and the Restaurants. The Seller
shall also deliver to the Buyer one (1) set of as-built drawings of the
Restaurants as approved by the Pennsylvania Department of Labor and Industry.
7.5 Due Diligence. Buyer shall have completed its due diligence review
with respect to the Restaurants and the Assets and be satisfied with the results
thereof
7.6 Licenses. All Licenses shall have been either effectively
transferred to Buyer, in the process of being transferred to Buyer, or Buyer
shall have obtained all Licenses necessary to operate the Restaurants.
7.7 Material Adverse Change. No event shall have occurred and no
condition shall exist which constitutes or, with the giving of notice or the
passage of time, or both, is likely to constitute or give rise to a material
adverse change with respect to the Assets or the Restaurants.
VIII. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION AND SETTLEMENT OF CLAIMS
8.1 Events of Default. The failure of any representation or warranty of
the Seller to be true and correct as of the date hereof or the failure of the
Seller to perform any of its covenants and obligations under this Agreement,
shall be considered a default hereunder giving rise to the indemnification set
forth in Section 8.3 hereof
8.2 Survival. The representations and warranties made by the Seller in
this Agreement or in connection with the transactions contemplated hereby shall
survive the Closing.
8.3 Indemnification of the Buyer. The Seller agrees to indemnify and
hold the Buyer harmless against and in respect of:
(a) all obligations and liabilities of the Seller, whether accrued,
absolute, fixed, contingent or otherwise, not expressly assumed by the Buyer
pursuant to this Agreement;
(b) any loss, liability or damage suffered or incurred by the Buyer,
directly or indirectly, (i) as a result of a breach of any duty or obligation of
the Seller expressed or implied in this Agreement, or (ii) as a result of any
representation or warranty by the Seller contained herein, or in any document
furnished or required to be furnished pursuant to this Agreement by the Seller
or any of its representatives to the Buyer being false or misleading as of the
date hereof or as of the Closing Date;
(c) any loss, liability or damage resulting to the Buyer by reason of
any claim, debt, liability or obligation or any alleged claim, debt, liability
or obligation of the Seller to any party, incurred prior to the Closing or
arising from any matter or thing occurring prior to the Closing or as a result
of the transactions contemplated hereby, including, but not limited to, claims
made by governmental authorities for taxes or otherwise, except for liabilities
expressly assumed pursuant to this Agreement;
(d) all reasonable costs and expenses (including reasonable attorneys'
fees) incurred by the Buyer in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters indemnified
against this Section 8.3.
8.4 Representation, Cooperation and Settlement.
(a) The Buyer agrees to give prompt written notice to the Seller of any
claim against the Buyer which might give rise to a claim by the Buyer against
the Seller based on the indemnity agreement contained in Section 8.3 hereof,
stating the nature and basis of the claim and amount thereof.
(b) The Buyer shall have full responsibility and authority with respect
to the disposition of any action, suit or proceeding brought against it;
provided, however, notwithstanding anything herein to the contrary, the Buyer
shall not settle any dispute for which the Seller has agreed to indemnify the
Buyer hereunder without the prior written consent of the Seller. The Seller may,
at its sole expense and liability, participate in any negotiations and assume
defense (through legal counsel acceptable to the Buyer) of any suit, proceeding
or other action with respect to the dispute which the Buyer had determined to
settle, provided that the Seller proceed in good faith, expeditiously and
diligently. The Seller must, however, agree in writing to indemnify the Buyer
for any amounts that ultimately become payable, together with any additional
interest, penalties or other losses or expenses, which arise because the Seller
contested the dispute which the Buyer had determined to settle. In the event of
action, suit or proceeding is brought against the Buyer with respect to which
the Seller may have liability under the indemnity agreement contained in Section
8.3, the Seller has the right, without prejudice to the Buyer's rights under
this Agreement, at the Seller's sole expense, to be represented by counsel of
its own choosing and with whom counsel for the Buyer shall confer in connection
with the defense of any such action, suit or proceeding. The Buyer shall make
available to the Seller and its counsel and accountants all books and records of
the Buyer relating to such action, suit or proceeding and the parties agree to
render to each other such assistance as may be reasonably requested in order to
insure the proper and adequate defense of any such action, suit or proceeding.
IX. CLOSING COSTS
9.1 Closing Costs. All taxes, rents and utility charges at the
Restaurants shall be prorated as of July 23, 1996, which proration shall be made
on the basis of a thirty (30) day month.
X. RIGHT OF FIRST REFUSAL
10.1 Grant of Right. The Seller hereby grants the Buyer a right of
first refusal for five (5) years from the Closing Date to develop restaurants in
the following geographic territories: Cleveland, Ohio; Erie, Pennsylvania;
Meadville, Pennsylvania; New Castle, Pennsylvania and Grove City, Pennsylvania.
If the Buyer elects to develop a restaurant at any of such locations (other than
in the Exclusive Area defined in the Development Agreement), the Buyer shall
receive a credit or reduction of Ten Thousand and 00/100 Dollars ($10, 000. 00)
toward the franchise fees payable as to each restaurant the Buyer agrees to
develop; however, such credit or reduction shall not exceed Forty Thousand and
00/100 Dollars ($40,000.00) in the aggregate.
XI. MISCELLANEOUS
11.1 Brokerage Fees; Expenses. The Buyer and the Seller each represent
and warrant to the other that it has not incurred any obligations or
liabilities, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other like payment in connection with this Agreement or the
transactions contemplated hereby.
11.2 Amendment; Waiver. This Agreement may be amended, modified or
supplemented only by a written instrument executed by all the parties hereto. No
action taken pursuant to this Agreement, including, without limitation to, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties or agreements contained therein. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
11.3 Notices. Any notice, request, demand or other communication which
is required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by registered
or certified mail, return receipt requested, postage prepaid, to the following,
or to such other address as any party shall have specified by notice in writing
to the other:
If to the Buyer: Armstrong Restaurants, L.P.
One Armstrong Place
Butler, PA 16001
Attention: Kirby J. Campbell
With copy to: Henry C. Cohen, Esquire
Daniel L. Wessels, Esquire
Cohen & Grigsby
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222
If to the Seller: The Italian Oven, Inc.
Eleven Lloyd Avenue
Latrobe, PA 15650
Attention: Chief Executive Officer
With copy to: Jeffrey W. Letwin, Esquire
Doepken, Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219
11.4 Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter and supersedes all
previous oral and written and all contemporaneous oral negotiations,
commitments, writings and understandings.
11.5 Binding Effect; Benefits; Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
heirs, successors and assigns; nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto, or their
respective heirs, successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
11.6 Non-Assignability. This Agreement and any rights pursuant hereto
shall not be assignable by any party hereto without the prior written consent of
the other party.
11.7 Section and Other Headings. The section and other headings
contained in the Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
11.9 Further Assurances. The parties each agree to execute and deliver
such other documents, certificates, agreements and writings and to take such
other actions as may be necessary or desirable in order to satisfy all
conditions to, and to consummate or implement expeditiously, the closing of the
transactions contemplated by this Agreement.
11.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
11.11 Cumulative Remedies. The rights and remedies of the parties
hereunder are cumulative and not exclusive of any rights or remedies which the
parties would otherwise have. No single or partial exercise of any such right or
remedy by a party, and no discontinuance of steps to enforce any such right or
remedy, shall preclude any further exercise thereof or of any other right or
remedy of such party.
11.12 Exhibits and Schedules. The Exhibits and Schedules attached
hereto are an integral part hereof and all references herein to this Agreement
shall include such Exhibits and Schedules.
11.13 Publicity. Neither party shall make any press release or other
public announcement regarding this Agreement or any transaction contemplated
hereby until the text of such release or announcement has been submitted to the
other party and the party has approved the same.
IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement as of the date first above written.
ATTEST: ARMSTRONG RESTAURANTS, L.P.
By: JAYCO, INC. its General Partner
By:________________________________ By:________________________________
Dru A. Sedwick, Secretary Jay L. Sedwick, President
ATTEST: THE ITALIAN OVEN, INC.
By:________________________________ By:________________________________
Jeffrey W. Letwin, Secretary Garvin Warden,
Chief Executive Officer
