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): May 9, 1996 (April 5, 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
The Mid America Transaction
On April 5, 1996, the Company acquired, pursuant to the
Leasehold and Asset Purchase and Sale Agreement with Mid America Restaurant
Group, Inc. ("Mid America"), all of the leasehold interests and operating assets
of Mid America formerly used by Mid America in connection with the operation of
six Blackeyed Pea Restaurants in the Kansas City metropolitan area. These
Blackeyed Pea restaurants were closed prior to the Company's acquisition of the
Mid America assets. The purchase price of the assets acquired was $3,000,000,
which was paid by the Company in cash. The purchase price of the assets was
determined by arm's length negotiations between the parties. The purchase price
was paid by the Company from capital reserves targeted for use for restaurant
development and acquisition. These reserves represent proceeds from the
Company's November 1995 initial public offering of its common stock.
The Company intends to remodel each of the restaurants so
acquired and to operate them as The Italian Oven restaurants. It is anticipated
that the remodeling will be completed and these new Company-owned restaurants
opened for business by August 1996.
The Western Pennsylvania Transaction
On April 29, 1996, the Company completed the acquisition of
the operating assets of four franchisees of the Company, Ovens of Cranberry,
Ltd., Ovens of Monroeville, Ltd., Ovens of Erie, Ltd. and Ovens of North Hills,
Ltd. ("Sellers"), which owned four The Italian Oven restaurants in the Western
Pennsylvania market. The acquisition was completed pursuant to the terms of an
asset acquisition agreement dated February 22, 1996 between the Company, the
Sellers and the Sellers' shareholders, Marc B. Robertshaw, William J. Rosa and
David S. Gallatin. The operating assets acquired consist of all furniture,
fixtures, equipment, operating licenses, leasehold improvements and leasehold
interests necessary to operate the restaurants.
The purchase price for the acquired assets was $2,714,500,
which was paid $1,627,900 in cash, $906,600 through the assumption of
indebtedness related to the purchase assets and $180,000 through the issuance of
36,000 shares of the Company's common stock (valued at the market price of $5.00
per share on the date of acquisition). The purchase price was determined by
arm's length negotiations among the parties. The cash portion of purchase price
was paid by the Company from capital reserves targeted for use for restaurant
development and acquisition. These reserves represent proceeds from the
Company's November 1995 initial public offering of its common stock.
The assets acquired by the Company were used by the Sellers for the
operation of each of their respective The Italian Oven restaurants. The Company
intends to continue to operate the assets for the same purposes.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of businesses acquired.
It is impracticable for the Company to file the financial
statements required for the acquisitions described under "The Western
Pennsylvania Transactions" in Item 2 of this Current Report on Form 8-K
concurrently with the filing of this Report. Such financial statements will be
filed with the Commission as soon as the same are available, but in no event
later than July 15, 1996.
(b) Pro forma financial information.
It is impracticable for the Company to file pro forma
financial statements taking into account the acquisitions described under "The
Western Pennsylvania Transactions" in Item 2 of this Current Report on Form 8-K
concurrently with the filing of this Report. Such pro forma financial statements
will be filed with the Commission at the time the financial statements for these
acquisitions are filed.
(c) Exhibits
10.1 Leasehold and Asset Purchase and Sale Agreement dated March 22, 1996 by
and between the Company and Mid America Restaurant Group, Inc.
10.2 First Amendment to Leasehold and Asset Purchase and Sale Agreement
dated March 29, 1996 by and among the Company, Mid America Restaurant
Group, Inc. and Mid America Restaurant Group of Kansas.
10.3 Agreement dated February 22, 1996, by and among the Company, Ovens of
Cranberry, Ltd., Ovens of Erie One, Ltd., Ovens of Monroeville, Ltd.,
Ovens of North Hills, Ltd., David S. Gallatin, Marc B. Robertshaw and
William J. Rosa.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned 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: May 9, 1996
EXHIBIT 10.1
LEASEHOLD AND ASSET
PURCHASE AND SALE AGREEMENT
THIS LEASEHOLD AND ASSET PURCHASE AND SALE AGREEMENT (this "Agreement")
is made as of March 4, 1996, by and between THE ITALIAN OVEN, INC., a
Pennsylvania corporation, or its assigns ("Purchaser") and MID AMERICA
RESTAURANT GROUP, INC., a Missouri corporation ("Seller").
RECITALS
THIS AGREEMENT is made on the basis of the following facts:
A. Pursuant to that certain Lease and Option to Purchase, dated April
12, 1991, between Seller, as Tenant, and Hawthorne Financial Group, Inc., as
Landlord, Seller is the holder of a leasehold interest in certain real property
(the "Independence Land"), as described in said lease. Seller is also the
beneficiary of that certain Purchase Option as contained in said lease and as
evidenced by that certain Real Estate Sale Contract, dated October 19, 1990,
wherein Seller is referred to as Buyer and Hawthorne Financial Group, Inc. is
referred to as Seller. Said lease and said Real Estate Sale Contract shall be
referred to collectively as the "Independence Lease"), a true and correct copy
of which is attached hereto as Exhibit A-1. Pursuant to the terms of the
Independence Lease, Seller has constructed upon the Independence Land a building
and other ancillary improvements (collectively, the "Independence
Improvements"). The Independence Land and the Independence Improvements shall be
referred to collectively as the "Independence Property." The Independence
Property has been furnished with certain furniture, fixtures, equipment and
other personal property, as described in the Inventory attached hereto as
Exhibit A-2 (the "Independence Personal Property"). Public notice of the
Independence Lease is made by that certain Memorandum of Lease, dated July 5,
1991, recorded in the real property records of Jackson County, Missouri, on July
24, 1991, in Book I2146 at Page 1380.
B. Pursuant to that certain Benjamin Plaza Lease, dated December 18,
1991, as amended by that certain First Lease Amendment, dated April 1, 1994 (the
"Benjamin Lease"), between Seller, as Tenant, and Real Properties Holding, Inc.,
as Landlord, Seller has a leasehold interest in certain real property (the
"Benjamin Land"), as described in the Benjamin Lease. A true and complete copy
of the Benjamin Lease is attached hereto as Exhibit B-1. Pursuant to the terms
of the Benjamin Lease, Seller has constructed upon the Benjamin Land a building
and other ancillary improvements (collectively, the "Benjamin Improvements").The
Benjamin Plaza Land and the Benjamin Improvements shall be referred to
collectively as the "Benjamin Property." The Benjamin Property has been
furnished with certain furniture, fixtures, equipment and other personal
property, as described in the Inventory attached hereto as Exhibit B-2 (the
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"Benjamin Personal Property"). Public notice of the Benjamin Lease is made by
that certain Memorandum of Lease, dated February 21, 1992, recorded in the real
property records of Jackson County, Missouri, on March 25, 1992, in Book 2225 at
Page 480.
C. Pursuant to that certain Ground Lease, dated January 23, 1991,
between Seller, as Tenant, and Q95 Associates, L.P., as Landlord, Seller has a
leasehold interest in certain real property (the "Overland Land"), as described
in said lease. Said lease is supplemented by (i) that certain Agreement, dated
January 23, 1991, between Seller and Steinmart, Inc, and (ii) that certain side
letter regarding common area maintenance, dated ___________, and (iii) those
certain Assignment of Lease, Consent to Assignment and Verification and Sublease
Agreement, each dated March 21, 1991. Said lease and said agreement and side
letter shall be referred to collectively as the "Overland Lease." A true and
complete copy of the Overland Lease is attached hereto as Exhibit C-1. Pursuant
to the terms of the Overland Lease, Seller has constructed upon the Overland
Land a building and other ancillary improvements (collectively, the "Overland
Improvements"). The Overland Land and the Overland Improvements shall be
referred to collectively as the "Overland Property." The Overland Property has
been furnished with certain furniture, fixtures, equipment and other personal
property, as described in the Inventory attached hereto as Exhibit C-2 (the
"Overland Personal Property"). Public notice of the Overland Lease is made by
that certain Memorandum of Lease, dated January 23, 1991, recorded in the real
property records of Johnson County, Kansas, on March 14, 1991, in Volume 3315 at
Page 755.
D. Pursuant to that certain Standard Form Ground Lease Agreement, dated
June 28, 1993 (the "Shawnee Lease"), between Seller, as Tenant, and Quivira
Limited Partners, L.P., as Landlord, Seller has a leasehold interest in certain
real property (the "Shawnee Land"), as described in the Shawnee Lease. A true
and complete copy of the Shawnee Lease is attached hereto as Exhibit D-1.
Pursuant to the terms of the Shawnee Lease, Seller has constructed upon the
Shawnee Land a building and other ancillary improvements (collectively, the
"Shawnee Improvements"). The Shawnee Land and the Shawnee Improvements shall be
referred to collectively as the "Shawnee Property." The Shawnee Property has
been furnished with certain furniture, fixtures, equipment and other personal
property, as described in the Inventory attached hereto as Exhibit D-2 (the
"Shawnee Personal Property"). Public notice of the Shawnee Lease is made by that
certain Memorandum of Lease, dated March 4, 1994, recorded in the real property
records of Johnson County, Kansas, on March 7, 1994, in Volume 4264 at Page 489,
under Reception No. 2367289.
E. Pursuant to that certain Shopping Center Build-To-Suit Lease, dated
June ___, 1989, as amended by that certain First Amendment to Shopping Center
Lease, dated July 26, 1989 (collectively, the "Creekwood Lease"), between
Seller, as Tenant, and North Oak Retail Partnership, as Landlord, Seller has a
leasehold interest in certain real property (the "Creekwood Land"), as described
in the Creekwood Lease. A true and complete copy of the Creekwood Lease is
attached hereto as Exhibit E-1. Pursuant to the terms of the Creekwood Lease,
Seller has constructed upon the Creekwood Land a building and other ancillary
improvements (collectively,
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the "Creekwood Improvements"). The Creekwood Land and the Creekwood Improvements
shall be referred to collectively as the "Creekwood Property." The Creekwood
Property has been furnished with certain furniture, fixtures, equipment and
other personal property, as described in the Inventory attached hereto as
Exhibit E-2 (the "Creekwood Personal Property"). Public notice of the Creekwood
Lease is made by that certain Memorandum of Lease, dated __________________,
recorded in the real property records of Clay County, Missouri, on
___________________, in Book ______ at Page _____.
F. Pursuant to that certain Ground Lease, dated March 2, 1992, as
amended by that certain First Amendment to Lease, dated May 4, 1992
(collectively, the "St. Joseph Lease"), between Seller, as Tenant, and Owl
Associates, as Landlord, Seller has a leasehold interest in certain real
property (the "St. Joseph Land"), as described in the St. Joseph Lease. A true
and complete copy of the St. Joseph Lease is attached hereto as Exhibit F-1.
Pursuant to the terms of the St. Joseph Lease, Seller has constructed upon the
St. Joseph Land a building and other ancillary improvements (collectively, the
"St. Joseph Improvements"). The St. Joseph Land and the St. Joseph Improvements
shall be referred to collectively herein as the "St. Joseph Property." The St.
Joseph Property has been furnished with certain furniture, fixtures, equipment
and other personal property, as described in the Inventory attached hereto as
Exhibit F-2 (the "St. Joseph Personal Property"). Public notice of the St.
Joseph Lease is made by that certain Memorandum of Lease, dated May 4, 1992,
recorded in the real property records of Buchanan County, Missouri, on May 21,
1992, at Book 1860 at Page 617.
G. Subject to the terms and conditions hereinafter set forth, Seller
desires to sell and Purchaser desires to purchase the Assets (as defined below)
and related rights of Seller.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing facts, the mutual and
dependent promises set forth herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Seller and
Purchaser agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement, the following words and terms shall
have the meanings set forth below:
1.1 "Assets" - collectively, the Leases and the Personal Property.
1.2 "Closing" - as defined in Section 7.1.
1.3 "Closing Date" - as defined in Section 7.1.
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1.4 "Condition(s)" - as defined in Section 3.1.
1.5 "Contingency Period" - as defined in subsection 3.1(a).
1.6 "Deposit" - as defined in subsection 2.2(a).
1.7 "Escrow Agent" - as defined in subsection 2.2(a).
1.8 "Estoppel" - as defined in subsection 3.1(d).
1.9 "Execution Date" - the latest date of execution of this Agreement
by both Purchaser and Seller.
1.10 "Improvements" - any existing improvements, structures, parking
facilities or fixtures placed, constructed, installed or located on or as part
of the Properties, and all plants, trees, and other appurtenances located upon,
over or under the Properties.
1.11 "Leases" - collectively, the Independence Lease, the Benjamin
Lease, the Overland Lease, the Shawnee Lease, the Creekwood Lease and the St.
Joseph Lease (any of which may be referred to individually as a "Lease").
1.12 "Personal Property" - collectively, the Independence Personal
Property, the Benjamin Personal Property, the Overland Personal Property, the
Shawnee Personal Property, the Creekwood Personal Property and the St. Joseph
Personal Property.
1.13 "Properties" - collectively, the Independence Property, the
Benjamin Property, the Overland Property, the Shawnee Property, the Creekwood
Property and the St. Joseph Property (or any of which may be referred to
individually as a "Property").
1.14 "Purchase Price" - as defined in Section 2.2.
ARTICLE II
Purchase and Sale of the Assets
2.1 Purchase. For the consideration hereinafter set forth, but subject
and pursuant to the terms, provisions, covenants and conditions contained
herein, Seller shall sell and convey all, but not less than all, the Assets to
Purchaser and Purchaser shall purchase the Assets from Seller.
2.2 Purchase Price. The total purchase price (the "Purchase Price") for
the Property shall be Three Million and No/100's Dollars ($3,000,000.00). The
Purchase Price shall be payable as follows:
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(a) Deposit. On the Execution Date, Purchaser shall deposit
the sum of Two Hundred Thousand and No/100 Dollars ($200,000.00) in certified
funds into an escrow account for the benefit of Purchaser and Seller with
National Title, Inc. ("Escrow Agent"), 1700 Lincoln Street, Suite 1900, Denver,
Colorado 80203. Such sum shall be deposited by Escrow Agent into an interest
bearing account which is satisfactory to Purchaser and Seller; such sum, and all
interest earned thereon shall be referred to herein as the "Deposit." The
Deposit shall be paid to Seller or refunded to Purchaser in accordance with the
terms and provisions of this Agreement.
(b) Cash. The balance of the Purchase Price, subject to
prorations and adjustments in accordance with Article VIII and against which the
Deposit shall be applied, shall be paid at Closing in cash, by certified or
cashier's check, wire transfer, or other immediately available funds.
2.3 Allocation. Subject to the prorations and adjustments in accordance
with Article VIII, the Purchase Price shall be allocated based upon the relative
fair market value of the Improvements and the Personal Property.
ARTICLE III
Conditions Precedent
3.1 Conditions. The obligations of Purchaser and Seller pursuant to
this Contract (except for Purchaser's indemnity obligations pursuant to Section
3.3, which shall survive in any event) are expressly contingent upon the
following conditions precedent (collectively, the "Conditions" or singularly a
"Condition") being satisfied or waived by Purchaser and Seller, in the manner
set forth below, on or before the dates set forth below for each such Condition:
(a) Creekwood Lease Rent Reduction. Purchaser shall have until
5:00 p.m. on March 25, 1996 (the "Contingency Period"), to negotiate with the
landlord under the Creekwood Lease to reduce the Minimum Rent thereunder to
$100,000.00 per year.
(b) Secretary's Certificate. On or before expiration of the
Contingency Period, Seller shall have furnished Purchaser with a certificate
dated after the Execution Date, signed by the Secretary or Assistant Secretary
of Seller, certifying as to:
(i) Resolutions of the Board of Directors and
Shareholders of Seller approving this Agreement and authorizing the consummation
of the transaction contemplated hereby;
(ii) copies of its organizational documents,
including its Articles of Incorporation and By-laws as in effect on the
Execution Date certified by the Missouri Secretary of State; and
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(iii) the names of the officer of officers authorized
to sign this Agreement and the other agreements contemplated hereby and to act
on behalf of Seller in connection herewith and the true signatures of such
officer or officers.
(c) Sales Certificate. On or before expiration of the
Contingency Period, Seller shall have furnished Purchaser with a certificate
dated after the Execution Date, signed by the President of Seller, certifying as
to the gross sales from the Properties for at least the past 12 months.
(d) Estoppels. On or before expiration of the Contingency
Period, Seller shall have obtained from each and every landlord (or lessor or
owner, as the case may be) and furnished to Purchaser an Estoppel Certificate
relating to their respective Lease (an "Estoppel") stating that, as of the date
of such Estoppel (a) the copy of the subject Lease which is attached to such
Estoppel is a full and complete copy of such Lease and all amendments thereto;
(b) the subject Lease is in full force and effect; (c) the rent and other
charges payable from Seller are current and have not been paid more than 30 days
in advance; (d) Seller is not in default of its obligations under the Lease and,
to the best of such landlord's knowledge, no event has occurred which, upon the
giving of notice and/or the passage of time, will result in an event of default
by Seller under the subject Lease; and (e) the commencement and termination
dates of the term of the subject Lease and available options to extend the term,
if any.
(e) Actual or Threatened Actions. As of the Closing Date,
there shall not be any actual or threatened action or proceeding against Seller
by or before any court or other governmental body or agency which shall seek to
restrain, prohibit, or invalidate the transactions contemplated by this
Agreement or which might affect the right of the Purchaser to own, operate,
lease or control the Assets after the Closing Date.
(f) Board Approval. On or before the tenth day following the
Execution Date, Purchaser's Board of Directors shall have approved the purchase
of the Assets in accordance with the terms hereof.
(g) Accuracy of Representations and Warranties. The
representations and warranties of Purchaser and Seller (as set forth in Article
IV) shall be true and correct in all material respects on and as of the Closing
Date.
(h) Franchisor Approval. On or before the expiration of the
Contingency Period, Seller shall have obtained written approval from Black-eyed
Pea, Inc. (successor to Prufrock Restaurants, Inc.) for the transaction
contemplated in this Agreement and a waiver of their first right refusal with
respect to the purchase of the Assets.
(i) Landlord Consent. On or before the expiration of the
Contingency Period, Seller shall have obtained the written consent of each and
every landlord (or lessor or owner, as the case may be) to the assignment of
their respective Lease and to any other part of the transaction contemplated by
<PAGE>
this Agreement requiring such landlord's consent. The form of such written
consent shall be reasonably satisfactory to Purchaser and Seller.
(j) Lender Approval. On or before the expiration of the
Contingency Period, Seller shall have obtained the written consent and release
agreement of and from each and every lender with a lien or encumbrance upon or
against any of the Assets. The terms and form of such agreements shall be
reasonably satisfactory to Seller and (to the extent such consent adds
additional obligations to Purchaser) Purchaser.
3.2 Termination. If, on or before the expiration of the stated time
period for any Condition, Purchaser or Seller gives written notice to the other
stating that such Condition has not been satisfied or waived, then such party
may, at its election, treat this Agreement as terminated (except for the
obligations of Purchaser pursuant to Section 3.3, which shall survive in any
event), in which event Escrow Agent shall promptly pay the Deposit to Purchaser,
and both parties shall be relieved from any further liability hereunder (except
for the obligations of Purchaser pursuant to Section 3.3, which shall survive in
any event). If neither party exercises the termination right set forth in this
Section 3.2 by the dates set forth for each Condition, then such Conditions
shall be deemed satisfied or waived by the parties. Notwithstanding any
provision of this Agreement which may indicate to the contrary, termination of
this Agreement pursuant to this Section 3.2 shall be the sole remedy by the
parties for the failure of any or all of the Conditions. The parties shall use
reasonable efforts and diligence in their efforts to satisfy the Conditions;
provided, however, that the parties shall be under no obligation to pay any
person or entity in order to obtain any document in satisfaction of any
Condition.
3.3 Purchaser's Access and Indemnity. After normal business hours and
reasonable notice to Seller, Seller shall permit access to the Properties (to
the extent permitted by the Leases) by Purchaser and the persons so designated
by Purchaser and shall afford them the opportunity to inspect and perform any
tests upon the Properties (to the extent permitted by the Leases) that Purchaser
deems necessary or appropriate. Purchaser shall, in good faith, conduct all such
inspections, investigations and tests in a manner that will not unreasonably
interfere with the operation of Seller's business or occupancy of the Properties
and Purchaser shall promptly return the Properties to their condition prior to
the time of any entry. Purchaser shall indemnify, pay, defend and hold harmless
Seller from all claims and liabilities for personal injury or physical property
damage, or mechanics' or materialmen's liens, which may be asserted against
Seller as a result of any entry by Purchaser.
3.4 Condition of the Assets. Purchaser acknowledges that Purchaser is
purchasing the Assets solely in reliance on Purchaser's own investigation, and
that no representations or warranties of any kind, either express or implied,
have been made by Seller or Seller's agents, except for those specifically set
forth in Article IV. Purchaser acknowledges that the Assets are being sold AS
IS, WHERE IS, without any warranty of quality, condition or usefulness,
including, without limitation, any WARRANTY OF MERCHANTABILITY or any WARRANTY
<PAGE>
OF FITNESS FOR THE PARTICULAR PURPOSE of Purchaser. The provisions of this
Section 3.4 will survive Closing.
ARTICLE IV
Representations and Warranties
4.1 Representations and Warranties of Seller. Seller represents and
warrants to Purchaser as follows:
(a) Organization; Power, Good Standing. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Missouri. Seller has all requisite corporate power and authority
to own, operate and lease its properties, to carry on the business as now being
conducted and to enter into this Agreement and perform its obligations
hereunder. Seller is duly qualified to do business as a foreign corporation in
Kansas.
(b) Authority Relative to Agreement. The execution, delivery
and performance of this Agreement by Seller has been fully and effectively
authorized by all necessary corporate action of Seller. This Agreement has been
duly executed by Seller and is a valid, legally binding and enforceable
obligation of Seller.
(c) Effect of Agreement. To the best of Seller's knowledge,
the execution, delivery and performance of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not (i) require the
consent, approval or authorization of any person, corporation, partnership,
joint venture or other business association or public authority; (ii) violate,
with or without the giving of notice or the passage of time, or both, any
provisions of law or statute or any rule, regulation, order, award, judgment or
decree of any court or governmental authority applicable to the Seller; or (iii)
conflict with or 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 (except as contemplated by this Agreement)
pursuant to any corporate charter, bylaw, indenture, mortgage, deed of trust,
lease, contract, agreement or other instrument, or any order, judgment, award,
decree, statute, ordinance, regulation or any other restriction of any kind or
character, to which Seller is a party, or by which Seller or any of the Assets
may be bound.
(d) Tax Matters. Seller has duly filed with the appropriate
United States, state and local governmental agencies, and with the appropriate
foreign countries and political subdivision thereof, all tax returns and reports
required to be filed; such returns and reports are accurate and complete; and
Seller has paid in full or made adequate provisions 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.
(e) Title to Assets.
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(i) Seller has good and marketable title to all of
the Leases and Properties, free and clear of all claims and encumbrances arising
by, through or under Seller, other than (A) any liens for taxes not yet due and
payable or being contested in good faith by appropriate proceedings, and (B)
such imperfections of title, easements, liens, pledges, charges and
encumbrances, if any, as do not materially detract from the value or interfere
with the present use of any of the Assets; and
(ii) All of the Leases are in force and are valid and
binding in accordance with their terms and there is not under any of the Leases,
on the part of Seller, any existing default, event of default or event which
with notice or lapse of time, or both, would constitute a default (and in
respect of which such Seller has not taken adequate steps to prevent such a
default or event of default from occurring).
(f) Litigation. There are no material claims, actions, suits,
proceedings or investigations pending or threatened against Seller relating to
or arising out of or in connection with the Assets at law or in equity or in
admiralty, or before or by any federal, state, municipal or governmental or
nongovernmental department, commission, board, bureau, agency or
instrumentality, United States or foreign, nor does Seller know of any facts
which would provide a basis for any such claim, action, suit proceeding or
investigation.
4.2 Representations and Warranties of Purchaser. Purchaser represents
and warrants to Seller as follows:
(a) Organization; Good Standing; Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania and has all requisite corporate power and
authority to own, lease and operate its properties, to carry on its business and
to enter into this Agreement and the Assignment and Assumption of Leases and
perform its obligations hereunder and thereunder. As of the Closing, Purchaser
shall have applied for authority to do business as a foreign corporation and is
in good standing in Kansas and Missouri.
(b) Authority Relative to Agreement. By the closing Date, the
execution, delivery and performance of this Agreement, the Assignment and
Assumption of Leases and the transactions contemplated hereby and thereby by the
Purchaser will have been duly and effectively authorized and ratified by all
necessary corporate action of the Purchaser. This Agreement, the Assignment and
Assumption of Leases have been duly executed by the Purchaser and are valid,
legally binding and enforceable obligations of the Purchaser.
(c) Effect of Agreement. The execution, delivery and
performance of this Agreement, the Assignment and Assumption of Leases, and the
consummation of the transactions contemplated hereby and thereby does not (i)
require the consent, approval or authorization of any person, corporation,
partnership, joint venture or other business association or other public
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authority; (ii) violate, with or without the giving of notice or the passage of
time, or both, any provisions of law applicable to the Purchaser; or (iii)
conflict with or result in a breach or termination of any provisions of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any of the properties or assets of the Purchaser pursuant to
any indenture, corporate charter, bylaw, agreement, mortgage, deed of trust,
lease, contract, 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 Purchaser is a party, or by which the Purchaser or any
of its assets or properties may be bound.
4.3 Nature and Survival; Indemnification.
(a) Events of Default. A breach of any representation or
warranty by Seller or Purchaser as the case may be, or breach as a result of the
failure of Seller or the Purchaser as the case may be, 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 subsections 4.3(c) and
(d) as the case may be.
(b) Survival of Representations, Etc. All representations,
warranties, covenants and agreements made by Seller and Purchaser in this
Agreement, and the remedies of the Purchaser and Seller with respect thereto,
shall survive the Closing hereunder for the following periods:
(i) with respect to the representations and
warranties of Seller contained in this Agreement, any claim arising thereunder
must be brought by the Purchaser within a period of 12 months following the
Closing Date; and
(ii) with respect to the representations and
warranties of the Purchaser contained in this Agreement, any claim arising
thereunder must be brought by a Seller within a period of 12 months following
the Closing Date.
(c) Indemnification to the Purchaser. Subject to the
limitations set forth in subsection 4.3(b), Seller agrees to indemnify and hold
Purchaser harmless against and in respect of:
(i) all obligations and liabilities of Seller,
whether accrued, absolute, fixed contingent or otherwise, other than any assumed
liabilities;
(ii) any loss, liability or damage suffered or
incurred by Purchaser because of a breach of any obligation of Seller incurred
under this Agreement, or because any representation or warranty by Seller
contained in this Agreement, shall be false in any material respect as of the
Closing Date; and
<PAGE>
(iii) all reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Purchaser in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of the matters
indemnified against it in this subsection 4.3(c).
(d) Indemnification to the Sellers. Subject to the limitations
set forth in subsection 4.3(b), Purchaser agrees to indemnify and hold Seller
harmless against and in respect of:
(i) all obligations and liabilities assumed by
Purchaser pursuant to this Agreement;
(ii) any loss, liability or damage suffered or
incurred by Seller because of a breach of any obligation of Purchaser incurred
under this Agreement, or because any representation or warranty by Purchaser
contained in this Agreement, shall be false in any material respect as of the
Closing Date; and
(iii) all reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Seller in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of the matters
indemnified against it in this subsection 4.3(d).
(e) Representation, Cooperation and Settlement.
(i) The party claiming entitlement to indemnification
hereunder (the "Indemnified Party") agrees to give prompt written notice to the
other party (the "Indemnifying Party") of any claim against the Indemnified
Party which might give rise to a claim by the Indemnified Party against the
Indemnifying Party stating the nature and basis of the first-mentioned claim and
the amount thereof.
(ii) The Indemnified Party shall have full
responsibility and authority with respect to the disposition of any action, suit
or proceeding brought against it. In the event any action, suit or proceeding is
brought against the Indemnified Party with respect to which the Indemnifying
Party may have liability under the indemnity agreement contained in this Article
IV, however, the Indemnifying Party shall have the right, without prejudice to
the Indemnified Party's rights under this Agreement, at the Indemnifying Party's
sole expense, to be represented by counsel of its own choosing and with whom
counsel for the Indemnified Party shall confer in connection with the defense of
any such action, suit or proceeding. The Indemnified Party shall make available
to the Indemnifying Party and its counsel and accountants, all books and records
of the Indemnified Party relating to such action, suit or proceeding and the
parties agree to render to each other such assistance as may reasonably be
requested in order to insure the proper and adequate defense of any such action,
suit or proceeding.
<PAGE>
ARTICLE V
Seller's Undertakings Pending Closing
5.1 Operation of the Property. Until the earlier of the Closing or the
termination of this Agreement, Seller shall not permit any transfer or
encumbrance of any of Seller's right, title or interest in and to any of the
Assets.
5.2 Advise Purchaser. Until the earlier of the Closing or the
termination of this Agreement, Seller shall notify Purchaser promptly upon
learning or receiving notice, whichever first occurs, of any event, transaction,
or occurrence prior to Closing which would or might materially affect the
Assets, or any part thereof, or any other agreement with respect to the
Properties.
ARTICLE VI
Casualty and Condemnation
If (a) any of the Properties or any part thereof shall be damaged by
casualty prior to Closing, or (b) all or any part of the Properties shall be the
subject of any action to acquire, or shall previously have been acquired, by
authority of any governmental agency in the exercise of its power of eminent
domain or by private purchase in lieu thereof, then, in either such case,
Purchaser may elect, at its sole option, either to (i) terminate this Agreement
and recover its Deposit, in which case both Seller and Purchaser shall be
released from further responsibility hereunder (except for the obligations of
Purchaser pursuant to Section 3.3, which shall survive in any event), or (ii)
waive its right to terminate this Agreement, in which case Seller shall pay to
Purchaser all insurance or condemnation proceeds received or assigned to
Purchaser at Closing, and/or all of Seller's right to receive the proceeds, if
any, payable as a result of such casualty damage or condemnation action or
proceeding, and acceptance of any proceeds and settlement of any claims shall be
subject to Purchaser's prior written approval.
ARTICLE VII
Closing
7.1 Time of Closing. The closing of the purchase of the Assets (the
"Closing") shall take place on April 1, 1996, but in no event prior to Seller's
satisfaction or waiver of the Conditions ("Closing Date"), at 10:00 a.m. in the
offices of Seller's counsel in Denver, Colorado, unless Purchaser or Seller
terminates this Agreement pursuant to Section 3.2 or Article VI.
7.2 Deliveries. At the Closing the following shall occur:
(a) Payment of Purchase Price. Purchaser shall pay to Seller
the Purchase Price as provided in Section 2.2, subject to the adjustments
described in Article VIII.
<PAGE>
(b) Conveyance by Seller. Seller shall deliver to Purchaser:
(i) at least two counterparts of a duly executed and
acknowledged Assignment and Assumption of Leases, in the form of Exhibit G;
(ii) a duly executed and acknowledged Bill of Sale
for the Personal Property, in the form of Exhibit H; and
(iii) any and all conveyances, assignments and all
other instruments and documents as may be reasonably necessary in order to
complete the transaction herein provided and to carry out the intent and
purposes of this Agreement.
(c) Assumption by Purchaser. Purchaser shall deliver to Seller
at least two counterparts of a duly executed and acknowledged Assignment and
Assumption of Leases, in the form of Exhibit G.
(d) Possession. Possession of the Properties shall be
delivered to Purchaser.
ARTICLE VIII
Prorations and Closing Expenses; Post-Closing Transactions
8.1 Closing Adjustments. The cash due at Closing pursuant to subsection
2.2(b) shall be subject to adjustment as of the Closing Date in accordance with
the following provisions. For the purposes of prorations to the Closing,
Purchaser shall be deemed to own the Assets on the Closing Date.
(a) Lease Base/Minimum Rent. The monthly installments of base
or minimum rent paid pursuant to the Leases for the month in which the Closing
occurs shall be prorated to the Closing, and Purchaser shall pay Seller for the
period from the Closing Date through the last day of the month in which the
Closing occurs. On or before the first day of the month in which the Closing
occurs, Seller shall pay all monthly installments of base or minimum rent which
are due under the Leases up to and including the first day of the month in which
the Closing occurs.
(b) Percentage Rent. Percentage Rent which may become due and
payable pursuant to the Leases after the Closing shall be paid by Purchaser; no
proration or adjustment shall be made to the Purchase Price to account for
Percentage Rent.
(c) Real Property Taxes.
(i) Real property taxes for 1996 which are payable
pursuant to the Leases (other than the Creekwood Lease) shall be prorated to the
Closing, and Purchaser shall receive a credit against the Purchase Price for the
period from January 1, 1996 through the day before the
<PAGE>
Closing Date. Such proration shall be based upon all real property taxes paid by
Seller pursuant to the Leases (other than the Creekwood Lease) for 1995, and
shall include both city and county real property taxes on land and improvements.
Such proration shall be deemed a final settlement between the parties. Prior to
Closing, Seller shall pay all such real property taxes due pursuant to the
Leases (other than the Creekwood Lease) for 1995.
(ii) The monthly real property tax installment under
the Creekwood Lease for the month in which the Closing occurs shall be prorated
to the Closing, and Purchaser shall pay Seller for the period from the Closing
Date through the last day of the month in which the Closing occurs. Such
proration shall be deemed a final settlement between the parties. Seller shall
pay all monthly real property tax installments under the Creekwood Lease which
are due up to and including the first day of the month in which the Closing
occurs.
(d) Personal Property Taxes. Personal property taxes for 1996
which are payable with respect to the personal property on the Properties shall
be prorated to the Closing, and Purchaser shall receive a credit against the
Purchase Price for the period from January 1, 1996 through the day before the
Closing Date. Such proration shall be based upon all personal property taxes
paid by Seller with respect to the personal property on the Properties for 1995.
Such proration shall be deemed a final settlement between the parties.
Prior to Closing, Seller shall pay all such personal property taxes for 1995.
(e) Common Area Expenses. The monthly installment for common
area maintenance expense, operating expense and/or similar charges under the
Leases for the month in which the Closing occurs shall be prorated to the
Closing, and Purchaser shall pay Seller for the period from the Closing Date
through the last day of the month in which the Closing occurs. Such proration
shall be deemed a final settlement between the parties. Seller shall pay all
monthly installments for common area maintenance expense, operating expense
and/or similar charges under the Leases which are due up to and including the
first day of the month in which the Closing occurs.
(f) Closing Costs. Seller shall pay the cost of recording any
instruments required to discharge any liens or encumbrances against the Assets
and Seller's customary closing costs. Purchaser shall pay for recording any and
all conveyance documents, the state documentary fee and any and all sales, use
or transfer taxes attributable to this transaction and Purchaser's other
customary closing costs.
8.2 Settlement Sheet. At the Closing, Seller and Purchaser shall
execute a Closing settlement sheet to reflect the credits, prorations, and
adjustments contemplated by this Agreement.
8.3 Control of Settlements and Disputes. From and after the Closing
Date, the Purchaser shall have complete control over the payment, settlement or
other disposition of, or any dispute involving, any assumed liability and the
Purchaser shall have the right to conduct and
<PAGE>
control all negotiations and proceedings with respect thereto. Seller will
notify the Purchaser promptly of any claim made with respect to any assumed
liability and will not, except with the prior written consent of the Purchaser,
voluntarily made any payment of, or settle or offer to settle, or consent to any
compromise with respect to, any such claim. Seller will, at the expense of the
Purchaser, cooperate with the Purchaser in any reasonable manner requested by
the Purchaser in connection with any negotiations or proceedings involving any
such obligations or liabilities.
8.4 Further Assurances. From time to time after the Closing Date, upon
the request of the Purchaser, Seller will make available to the Purchaser any
records, documents and data retained by Seller relating to the Assets.
ARTICLE IX
Remedies
9.1 Breach by Seller. Time is of the essence of Seller's obligations
hereunder. If Seller fails to comply with any of its obligations hereunder which
are required to be performed at or prior to the Closing, Purchaser, at
Purchaser's option, shall be entitled, as its sole remedy (a) to terminate this
Agreement and obtain the prompt refund of the Deposit, whereupon both parties
shall be discharged from all duties and performance hereunder, or (b) in the
alternative, Purchaser shall be entitled to an action in specific performance.
In no event shall Purchaser be entitled to recovery of damages, except as
provided in subsection 4.3(a).
9.2 Breach by Purchaser. Time is of the essence of Purchaser's
obligations hereunder. If Purchaser fails to complete the acquisition as herein
provided by reason of any default by Purchaser, Seller, as its sole and
exclusive remedy, shall be entitled to terminate this Agreement and retain the
Deposit as liquidated damages. The parties hereby agree that the amount of the
Deposit is a fair and reasonable estimate of the total detriment that Seller
would suffer in the event of Purchaser's default and failure to duly complete
the acquisition hereunder.
ARTICLE X
General Provisions
10.1 Brokers. Purchaser represents and warrants to Seller that
Purchaser's sole contact with Seller has been made without the assistance of any
broker or other third party, other than Cohen-Esrey Real Estate Services, Inc.
Purchaser shall save and hold Purchaser free, clear and harmless from any claim,
cost or expense, including reasonable attorneys' fees, for or in connection with
any claims for commissions or compensation claimed or asserted in connection
with the transaction contemplated herein.
<PAGE>
10.2 Further Assurances. Purchaser and Seller shall execute and deliver
such documents, writings and further assurances as may be necessary or desirable
to carry out the intent and purpose of this Agreement.
10.3 Entire Agreement. No change or modification of this Agreement
shall be valid unless the same is in writing and signed by both parties hereto.
No waiver of any of the provisions of this Agreement shall be valid unless in
writing and signed by the party against whom it is sought to be enforced. This
Agreement, including the exhibits hereto, contains the entire agreement between
the parties relating to the purchase and sale of the Assets.
10.4 Survival. All of the parties' covenants and agreements hereunder,
to the extent not fully performed or discharged by or through the Closing, shall
be deemed not merged into any instrument delivered at Closing and shall remain
fully enforceable thereafter.
10.5 Dates. If any date set forth in this Agreement for the delivery of
any document or the happening of any event (such as, for example, the expiration
of the Contingency Period or the Closing Date) should, under the terms hereof,
fall on a weekend or holiday, then such date shall be automatically extended to
the next succeeding weekday that is not a holiday.
10.6 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State in which the subject Assets are located.
10.7 Notices. Any notice required or permitted to be sent pursuant to
this Agreement shall be in writing and shall be deemed received when (a)
personally delivered, or (b) three (3) days after having been deposited in a
U.S. Postal Service depository and sent by registered or certified mail, return
receipt requested, with all required postage prepaid, or (c) on the next
business day following deposit with Fed Ex or other nationally recognized
over-night courier, and, in any such event, addressed:
If to Seller: Mid-America Restaurant Group, Inc.
2851 South Parker Road, Suite 1080
Aurora, Colorado 80014
Attention: Timothy J. Schmidt
with a copy to: Matthew D. Gordon, Esq.
Sheldon, Tessler & Gordon, P.C.
4582 South Ulster Street Parkway,
Suite 902
Denver, Colorado 80237
If to Purchaser: The Italian Oven, Inc.
Eleven Lloyd Avenue
Latrobe, Pennsylvania 15650-1761
<PAGE>
with a copy to: Jeffrey W. Letwin, Esq.
Doepkin Keevican & Weiss, P.C.
3700 USX Tower
600 Grant Street
Pittsburgh, Pennsylvania 15219
Any address fixed pursuant to the foregoing may be changed by the addressee by
notice given pursuant to this Section 10.7.
10.8 Headings. The section headings which appear in some of the
sections of this Agreement are for purposes of convenience and reference and are
not in any sense to be construed as modifying the sections in which they appear.
10.9 Assignment. Purchaser shall not assign this Agreement or any
portion or right hereof or hereunder. Any attempted assignment of this Agreement
shall be void.
10.10 Successors and Assigns. Subject to Section 10.9, this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and assigns.
10.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.12 Recording. Neither party shall record this Agreement or any
memorandum of this Agreement in any public records.
10.13 Exhibits. All exhibits referred to in this Agreement and which
are attached hereto are deemed incorporated into this Agreement by reference.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement which
shall be effective as of the Execution Date.
SELLER:
MID-AMERICA RESTAURANT GROUP, INC.,
a Missouri corporation
By: _______________________________
Timothy J. Schmidt, President
Date: _____________________________
PURCHASER:
THE ITALIAN OVEN, INC.,
a Pennsylvania corporation
By: _______________________________
Title: ____________________________
Date: _____________________________
EXHIBIT 10.2
FIRST AMENDMENT
TO
LEASEHOLD AND ASSET PURCHASE AND SALE AGREEMENT
THIS FIRST AMENDMENT TO LEASEHOLD AND ASSET PURCHASE AND SALE AGREEMENT
(this "First Amendment") is made and effective as of March 22, 1996, and is by
and among The Italian Oven, Inc., a Pennsylvania corporation ("Purchaser"), Mid
America Restaurant Group, Inc., a Missouri corporation ("Seller"), and Mid
America Restaurant Group of Kansas, a Kansas corporation ("Mid America of
Kansas").
RECITALS
This First Amendment is made on the basis of the following facts:
A. Purchaser and Seller entered into that certain Leasehold and Asset
Purchase and Sale Agreement, dated March 4, 1996 (the "Agreement").
B. Due to certain changed circumstances, Purchaser and Seller have
agreed to amend the Agreement all as more particularly set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
confessed and acknowledged, Purchaser, Seller and Mid America of Kansas agree as
follows:
1. The definition of "Independence Lease" as set forth in Recital A of
the Agreement is amended by adding as part of the Independence Lease that
certain Memorandum of Lease and Purchase Option, dated July 5, 1991, and
recorded in the real property records of Jackson County, Missouri, on July 24,
1991, in Book I2146 at Page 1380, under Reception No. I1053152. A copy of said
document is attached hereto as Exhibit A-1 and shall be considered to be part of
Exhibit A-1 of the Agreement for all purposes.
2. The definition of "Overland Lease" as set forth in Recital C of the
Agreement is amended by adding as part of the Overland Lease that certain
Estoppel Certificate, dated July 7, 1995, a copy of which is attached hereto as
Exhibit C-1 and shall be considered to be part of the Agreement for all
purposes.
3. The definition of "Shawnee Lease" as set forth in Recital D of the
Agreement is amended by adding as part of the Shawnee Lease that certain
Subordination, Non-Disturbance and
<PAGE>
Attornment Agreement, dated October 23, 1995, between Seller and Boatmen's First
National Bank of Kansas City, which was recorded in the Registry of Deeds of
Johnson County, Kansas, on November 14, 1995, in Book 4727, at Page 711, under
Reception No. 2543673. A copy of said document is attached hereto as Exhibit D-1
and shall be considered to be part of Exhibit D-1 of the Agreement for all
purposes.
4. The definition of "Creekwood Lease" as set forth in Recital E of the
Agreement is amended by the adding as part of the Creekwood Lease (a) that
certain Tenant Notice, dated December 15, 1995, from J.A. Peterson Enterprises,
Inc., and (b) that certain Tenant Estoppel Certificate, dated December 6, 1995.
Copies of both documents are attached hereto as Exhibit E-1 and shall be
considered part of Exhibit E-1 of the Agreement for all purposes.
5. The definition of "St. Joseph Lease" set forth in Recital F of the
Agreement is amended by adding as part of the St. Joseph Lease (a) that certain
Lease Amendment, dated March 2, 1992 (a copy of which was attached as part of
Exhibit F-1 to the Agreement), and (b) that certain Tenant Estoppel Certificate,
dated December 8, 1992, and (c) that certain Side Letter Agreement, dated
November 15, 1995, and (d) that certain Letter regarding address change, dated
February 26, 1996, and (e) that certain Memorandum of Lease, dated May 4, 1992,
which was recorded in the real property records of Buchanan County, Missouri, on
May 21, 1992, in Book 1860 at Page 617. Copies of the documents described in
clauses 5(b), (c), (d) and (e) are attached hereto as Exhibit F-1 and shall be
considered to be part of Exhibit F-1 of the Agreement for all purposes.
6. Subsection 3.1(a) is amended to provide that the Contingency Period
shall expire at 5:00 p.m. on March 29, 1996.
7. Subsection 4.1(e) and Exhibit H of the Agreement are amended to
reflect that the Personal Property may be subject to landlord liens by local
statute. Purchaser acknowledges the lien of the landlord under the Creekwood
Lease as set forth in Article XXV thereof.
8. Section 7.1 is amended by deletion therefrom of "April 1, 1996," and
the substitution therefor
of "April 5, 1996."
9. Notwithstanding the provisions of subsections 7.2(b)(i) and 7.2(c) a
separate Assignment and Assumption of Lease shall be used for the assignment and
assumption of the Overland Lease. The Form of that document is attached hereto
as Exhibit G-1. Pursuant to the terms of the Overland Lease, Mid America of
Kansas is the assignee of the Tenant's interest in the Overland Lease.
Accordingly, at Closing Mid America of Kansas shall execute the Assignment and
Assumption of Lease which is attached hereto as Exhibit G-1.
<PAGE>
10. On or before the Closing Date, Seller shall furnish to Purchaser a
certificate dated after the Execution Date, signed by the Secretary or Assistant
Secretary of Mid America of Kansas certifying as to:
(i) Resolutions of the Board of Directors and
Shareholders of Seller approving Paragraph 9 of this First Amendment and
authorizing the consummation of the transaction contemplated thereby;
(ii) copies of its organizational documents,
including its Articles of Incorporation and By-laws as in effect on the
Execution Date certified by the Kansas Secretary of State; and
(iii) the names of the officer of officers authorized
to sign this First Amendment and the other agreements contemplated hereby and to
act on behalf of Seller in connection herewith and the true signatures of such
officer or officers.
11. In the event of any inconsistencies between the terms and
provisions of this First Amendment and those of the Agreement, the terms and
provisions of this First Amendment shall control in all instances. Except as set
forth above, the parties ratify the Agreement and agree that the same is in full
force and affect. Capitalized terms not otherwise defined in this First
Amendment shall have the meanings attributed to such terms in the Agreement. All
Exhibits attached to this First Amendment are incorporated by the original
reference thereto.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment to be effective as of the date set forth above.
PURCHASER: THE ITALIAN OVEN, INC.,
a Pennsylvania corporation
By: _______________________________
Title: ____________________________
SELLER: MID AMERICA RESTAURANT GROUP, INC.,
a Missouri corporation
By: _______________________________
Timothy J. Schmidt, President
<PAGE>
AS TO PARAGRAPH 9 OF THIS FIRST AMENDMENT, MID AMERICA OF KANSAS AGREES AND
APPROVES:
MID AMERICA RESTAURANT GROUP OF KANSAS, INC.,
a Kansas corporation
By: _______________________________
Timothy J. Schmidt, President
EXHIBIT 10.3
AGREEMENT
THIS AGREEMENT is made and entered into this 22nd day of February,
1996, by and among Ovens of Cranberry, Ltd., a Pennsylvania corporation
("Cranberry"), Ovens of Erie One, Ltd., a Pennsylvania corporation ("Erie"),
Ovens of Monroeville, Ltd., a Pennsylvania corporation ("Monroeville"), Ovens of
North Hills, Ltd., a Pennsylvania corporation ("North Hills") (each, a "Seller"
and collectively, the "Sellers"); The Italian Oven, Inc., a Pennsylvania
corporation (the "Buyer"); and David S. Gallatin ("Gallatin"), Marc B.
Robertshaw ("Robertshaw") and William J. Rosa ("Rosa"), each individuals
resident in the Commonwealth of Pennsylvania (each, a "Stockholder" and
together, the "Stockholders").
W I T N E S S E T H:
WHEREAS, each of the Sellers is an owner/operator and franchisee of a
The Italian Oven restaurant franchise (a "Franchise"); and;
WHEREAS, (i) Cranberry operates a Franchise located at U.S. Route 19 at
Emeryville Drive, Mars, Pennsylvania 16046; (ii) Erie operates a Franchise
located at 2709 West 12th Street, Erie, Pennsylvania 16505; (iii) Monroeville
operates a Franchise located at 2644 Mosside Boulevard, Monroeville,
Pennsylvania 15146; and (iv) North Hills operates a Franchise located at 7219
McKnight Road, Pittsburgh, Pennsylvania 15237; and
WHEREAS, the Buyer is the franchisor of each Franchise owned by each of
the Sellers; and
WHEREAS, the Stockholders are the holders of all of the issued and
outstanding shares of each of the Sellers; and
WHEREAS, each of the Sellers desires to sell and the Buyer desires to
acquire certain of the assets, properties and business of the Sellers (the
business of each of the Sellers relating to the operation of each such Franchise
is hereinafter referred to as the "Business") effective as of the Closing Date
(as defined in Section 4.1).
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound hereby, do hereby agree as follows:
<PAGE>
I. SALE OF ASSETS AND RELATED TRANSACTIONS
1.1 Sale of Assets. Under the terms of this Agreement, on the Closing
Date, each Seller shall sell, convey, assign, transfer and deliver to the Buyer,
and the Buyer shall purchase and acquire from such Seller certain of such
Seller's assets and properties used in connection with the operation by such
Seller of the Franchise of such Seller (the "Purchased Stores") including,
without limitation, (i) leases for land and buildings set forth on Schedule
1.1(i) hereto (the "Leases"), (ii) leasehold improvements, furniture, fixtures
and equipment set forth on Schedule 1.1(ii) hereto (the "Fixed Assets"), (iii)
uncirculated gift certificates previously purchased by a Seller from the Buyer,
(iv), inventory located within the Purchased Stores, (v) supplies on hand at the
Purchased Stores (vi) rights, leases of personal property, contracts and other
instruments used in connection with the operation of the Business set forth on
Schedule 1.1(vi) hereto (the "Contracts") and (vii) certain licenses and
permits, including permits for Sunday Sales issued by the Pennsylvania Liquor
Control Board for the sale of liquor and malt or brewed beverages set forth on
Schedule 1.1(vii) hereto (the "Liquor Licenses"). The assets being sold,
conveyed or assigned to the Buyer by each Seller hereunder are sometimes
referred to as the "Purchased Assets". The Purchased Assets other than the Fixed
Assets are sometimes referred to as the "Nonfixed Assets".
1.2 Instruments of Conveyance and Transfer. On the Closing Date, each
Seller shall execute and deliver to Buyer a bill of sale in the form attached as
Exhibit 1.2. Simultaneously with such delivery, each Seller shall take all
additional steps as may be necessary to put Buyer in possession and operating
control of the Purchased Assets.
1.3 Release. on the Closing Date, each Seller and each Stockholder
shall execute the Mutual Release and Termination in the form attached as Exhibit
1.3 (the "Release").
1.4 Assignment of Contracts and Rights. Anything in this Agreement to
the contrary notwithstanding, this Agreement shall not constitute an agreement
to assign any claim, contract, license, lease, commitment, sales or purchase
order or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted transfer or assignment thereof, without the consent of
a third party thereto, would constitute a breach thereof or in any way adversely
affect the material rights of the Buyer or of any Seller thereunder. If such
consent is not obtained, or if an attempted transfer or assignment thereof would
be ineffective or would adversely affect the material rights of such Seller
thereunder so that the Buyer would not in fact receive all such rights, such
Seller will cooperate with the Buyer in any arrangement designed to provide for
the Buyer the benefits under any such claims, contracts, licenses, leases,
commitments, sales or purchase orders or any claim or right or any benefit
arising thereunder or resulting therefrom, including enforcement for the benefit
of the Buyer of any and all material rights of such Seller against a third party
thereto arising out of the breach or cancellation by such third party or
otherwise; and any transfer or assignment to the Buyer by such Seller of any
property or property rights or any contract or agreement which shall require the
consent or approval of any third party, shall be made subject to such consent or
approval being obtained.
<PAGE>
II. CONSIDERATION FOR TRANSFER OF THE ASSETS
2.1 Consideration to be Paid.
(a) Estimated Purchase Price. The estimated purchase price of the
Business ("Purchase Price") is Two Million Five Hundred Thirty Four Thousand,
Five Hundred Dollars ($2,534,500) plus the Market Value (as defined below) of
Twenty Five Thousand (25,000) shares of Buyer Stock (as defined below). The
estimated Purchase Price shall be paid and, to the extent necessary, adjusted
upward or downward, as set forth herein.
(b) Payment of Purchase Price. The Purchase Price shall be paid by
Buyer as follows:
(i) On the Closing Date, Buyer shall pay to the Sellers,
immediately available funds in an aggregate amount equal to the difference
between (i) Two Million Five Hundred Thirty Four Thousand Five Hundred Dollars
($2,534,500) minus (ii) the Retired Debt (as defined below) (the "Cash
Portion"). The Cash Portion shall be paid to the Sellers in such amounts and to
such accounts as shall be set forth in a Direction to Pay Proceeds in the form
of Exhibit 2.1(b)(i), signed by each Seller.
(ii) Buyer Stock. Buyer is paying a portion of the Purchase
Price by delivery on the Closing Date to Gallatin and Robertshaw of Twenty Five
Thousand (25,000) shares of the common stock of the Buyer (the "Buyer Stock").
In the event that the market value (the "Market Value") of the Buyer Stock
transferred is less than One Hundred Eighty Thousand Dollars ($180,000)
(calculated by multiplying the number of shares of Buyer Stock times the closing
sale price of the Buyer Stock on the Nasdaq National Market for the last
business day immediately prior to the Closing Date, as published in the Midwest
Edition of the Wall Street Journal), the number of shares of Buyer Stock
delivered shall be increased so that the Market Value thereof shall be equal to
$180,000. In the event that the Market Value of the Buyer Stock exceeds
$240,000, the number of shares of Buyer Stock delivered shall be decreased so
that the Market Value thereof shall be equal to $240,000. The Buyer Stock shall
be issued in the name of Gallatin or Robertshaw and for such number of shares as
shall be set forth in a Direction to Issue Stock in the form of Exhibit
2.1(b)(ii), signed by both Gallatin and Robertshaw.
(iii) Retired Debt. In addition to payment of the Cash Portion
as described above, Buyer shall repay on the Closing Date all outstanding
balances of principal and accrued interest of each of the Sellers due and owing
by each of such Sellers to PNC Bank, National Association under and pursuant to
those certain loan agreements described on Schedule 2.1(b)(iii) (the "Retired
Debt").
(c) Assumed Liabilities. The Buyer shall, contemporaneously with the
execution hereof, deliver an undertaking to become effective on the Closing Date
in the form of Exhibit 2.1(c) (the "Assumption Agreement") whereby the Buyer
assumes and agrees to pay, perform and discharge all obligations of the Sellers
under the Leases and Contracts arising after the Closing
<PAGE>
Date. All liabilities and obligations so assumed by the Buyer are hereinafter
sometimes collectively referred to as the "Assumed Liabilities". In connection
with the assumption of any Leases, the right to the return of any security
deposits previously paid by any Seller shall be retained by such Seller. Buyer
shall, if required by a Landlord in connection with the assumption of any Lease,
negotiate with the respective Landlord as to the need for and the amount of any
substitute security deposits.
(d) Investment Letters. It is understood by the parties hereto that the
shares of Buyer Stock issuable to Gallatin and Robertshaw hereunder will not be
registered under the Securities Act of 1933, as amended (the "Securities Act")
and are being issued to Gallatin and Robertshaw pursuant to a private placement
offering exempt from such registration pursuant to Section 4(2) of the
Securities Act. In connection therewith, Buyer shall have received from both
Gallatin and Robertshaw an investment letter ("Investment Letter") in the form
attached as Exhibit 2.1(d), containing agreements recognizing restrictions
appropriate under Rule 144 promulgated under the Securities Act on the transfer
of the Buyer Stock received by them pursuant to this Agreement and permitting a
legend to be affixed to the certificates representing such shares of Buyer Stock
summarizing or identifying such restrictions.
2.2 Purchase Price Adjustments.
(a) Inventory and Gift Certificate Payment. Each Seller shall, at the
close of business on the date immediately preceding the Closing Date, conduct a
physical inventory of all usable food inventory located at each Purchased Store
and a count of all uncirculated gift certificates redeemable at any The Italian
Oven store and previously purchased from Buyer and held for sale to customers of
the Seller (the "Gift Certificates"). On the Closing Date, prior to the
commencement of business on such date, Buyer shall confirm the accuracy of
Seller's physical inventory conducted on the preceding date, and shall confirm
the dollar value of the Gift Certificates thereto. Buyer shall calculate the
value of such inventory and Gift Certificates (based on the cost thereof as
indicated by receipts therefor or, if no such receipts are available, based on
the reasonable estimate of Buyer) and shall, within ten (10) days, remit an
amount equal to the value of such inventory and Gift Certificates to the
respective Seller.
(b) Resolution of Final Inventory Disputes. During the 15-days
immediately following the Sellers' receipt of the payment in respect of
inventory and Gift Certificates, the Sellers shall be entitled to review the
Buyer's working papers relating to the valuation of Sellers' physical inventory.
Such inventory calculation shall become final and binding upon the parties on
the 15th day following such delivery of payment unless a Seller gives written
notice to the Buyer of its disagreement with such inventory calculation (a
"Notice of Disagreement") prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature and dollar amount of any disagreement so
asserted and the calculations and assumptions forming the basis for the
disagreement. During the 15 days immediately following the delivery of any
Notice of Disagreement, the objecting Seller and the Buyer shall seek in good
faith to resolve in writing any differences which they may have with respect to
the matters specified in the Notice of
<PAGE>
Disagreement. During such period, such Seller and the Buyer shall each have
access to the other's working papers prepared in connection with the other's
preparation of the physical inventory or Notice of Disagreement. If any matters
which were properly included in the Notice of Disagreement remain unresolved at
the end of such 15 day period, they shall be submitted by the parties for review
and resolution by an independent accounting firm of recognized standing (the
"Accounting Firm") selected jointly by the independent auditors of such Seller
and the independent auditors of the Buyer. The determination of the Accounting
Firm shall be final and binding upon the parties. The fees and expenses of the
Accounting Firm shall be shared equally by the Buyer and such Seller.
(c) Proration Items. The Sellers and the Buyer shall prorate between
them, as of the Closing Date, (i) all real estate taxes, sewer and water rentals
and utility charges applicable to the real property and improvements subject to
the Leases and Contracts and (ii) all rentals, fees, assessments and other
charges with respect to the Leases and Contracts, including any percentage rents
which shall be prorated based on any Seller's actual sales and the Buyer's
actual sales during the relevant period. To the extent the prorations can be
calculated prior to the Closing Date, they are set forth in Schedule 2.2(c) and
will be settled in connection with the payment of the estimated Purchase Price.
To the extent the prorations cannot be calculated prior to the Closing Date,
each party agrees to pay to the other the appropriate amount promptly after such
determination.
2.3 Liabilities not Assumed. The Buyer shall assume only the Assumed
Liabilities. Without limiting the generality of the foregoing sentence, the
Buyer shall not assume, and each Seller shall retain and be responsible for, the
following liabilities and obligations incurred by such Seller as its interests
shall appear:
(a) any obligation or liability of a Seller to distribute to the
shareholders of such Seller or otherwise apply all or any part of the
consideration received hereunder;
(b) any obligation or liability of such Seller for taxes of any kind
for all periods ending on or before the Closing Date;
(c) any obligation or liability of such Seller arising out of existing
litigation or any obligation of such Seller arising out of, or relating to, a
condition or event existing or occurring prior to the Closing Date;
(d) any obligation or liability of such Seller arising from its failure
to perform any of its agreements contained herein or incurred by such Seller in
connection with the consummation of the transactions contemplated hereby;
(e) any obligation or liability of such Seller based upon acts or
omissions of such Seller occurring after the Closing Date;
<PAGE>
(f) subject to Section 3.1(c) and 12.3 hereof, any expenses of a
Seller, including taxes, incurred in connection with the sale contemplated by
this Agreement;
(g) any liability or obligation of a Seller pursuant to Article XII
hereof;
(h) any brokerage or finder's fee payable by a Seller in connection
with the transactions contemplated hereby;
(i) any liability or obligation of any Seller to the Stockholders
arising out of any action by such
Seller in connection with the transaction contemplated hereby;
(j) any liability or obligation of any Seller relating to product
liability claims as to products distributed or sold by such Seller prior to the
Closing Date;
(k) any liability or obligation of any Seller relating to employee
claims including, without limitation, workers' compensation claims arising out
of or in connection with events or conditions occurring or existing prior to the
Closing Date;
(l) any liability or obligation of any Seller under any employee
benefit plan; and
(m) any liability or obligation of any Seller arising out of or
resulting from its non-compliance with any territorial, federal, state or local
laws, rules, regulations, orders or administrative or judicial determinations
relating to the environment, zoning, land use, pollution, sanitation or to the
health and safety standards applicable to its employees, including, without
limitation, the environmental laws.
2.4 Allocation of Consideration. The Buyer and each Seller shall
allocate the Purchase Price to broad categories constituting components of the
Purchased Assets in accordance with an estimated allocation set forth on
Schedule 2.4. The parties shall, within a reasonable time following the Closing
Date, prepare a final version of Schedule 2.4 based on the actual Closing Date
consideration. The Buyer and each Seller shall report the purchase and sale of
the Purchased Assets in accordance with the agreed upon allocation among such
broad categories for all tax purposes, including the filing of the forms
prescribed under Section 1060 of the Internal Revenue Code and the Treasury
Regulations promulgated thereunder, but such allocations shall not restrain
reporting for other, non-tax purposes.
2.5 Assignment to Stockholders. Each Seller and each Stockholder agree
that, notwithstanding that the Business and the Purchased Assets being purchased
by the Buyer are owned by such Sellers, payment of the Buyer Stock portion of
the Purchase Price to certain of the Stockholders (instead of to the Sellers) in
accordance with this Agreement shall be adequate consideration for the transfer
by each Seller of such Seller's right, title and interest in the Purchased
Assets. This Agreement shall have the effect of an assignment by each Seller to
<PAGE>
the Stockholders receiving Buyer Stock of such Seller's right to such Buyer
Stock and the Buyer shall have no further liability to any Seller or to Rosa in
respect thereof.
III. TAXES
3.1 Taxes.
(a) Each Seller shall file all tax returns, shall pay and shall be
entitled to any credit or refunds of all taxes attributable to the Business
payable with respect to any taxable year or period ending on or before the
Closing Date.
(b) Buyer and each Seller will permit the other, at reasonable times
and upon reasonable notice, to have access to, and to copy and use, any records
or information which may be relevant in connection with the preparation of any
tax returns, any audit or other examination by any taxing authority, or any
judicial or administrative proceedings relating to liability for any taxes
relating to the Business. The party requesting assistance hereunder shall
reimburse the other party for reasonable expenses incurred in providing such
assistance. Any information obtained pursuant to this Section 3.1(b) shall be
held in strict confidence and shall be used solely in connection with the reason
for which it was required.
(c) The Buyer and each Seller shall cooperate in preparing, executing
and filing use and sales tax returns relating to, and the Buyer and each Seller
shall share equally and pay when due, any and all sales, real estate, transfer
or use taxes due with regard to the purchase and sale of the Purchased Assets.
Such tax returns shall be prepared in a manner that is consistent with the
allocation of the Purchase Price contemplated by Section 2.1.
IV. CLOSING
4.1 Closing. The closing with respect to the transactions provided for
in this Agreement (the "Closing") shall take place on a Monday within five (5)
business days of the date on which the Buyer has received the approval of the
Pennsylvania Liquor Control Board to the transfer to the Buyer from each Seller,
as its interests appear, of the last of the three (3) Liquor Licenses (the
"Closing Date") at the offices of Doepken Keevican & Weiss Professional
Corporation, 37th Floor, USX Tower, Pittsburgh, Pennsylvania 15219 at 10:00
o'clock a.m., or at such other place or on such other date as the parties hereto
may mutually agree.
V. REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each Seller hereby represents and warrants to the Buyer as follows:
5.1 Organization; Power; Good Standing. Each Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. Each Seller has all requisite corporate power and
authority to own, operate and lease its properties, to
<PAGE>
carry on the Business as now being conducted and to enter into this Agreement
and perform its obligations hereunder. Each Seller is duly qualified to do
business as a foreign corporation and is in good standing in each of the
jurisdictions listed in Disclosure Exhibit 5.1 hereto and no Seller has failed
to qualify in any other jurisdiction in which the property operated by such
Seller or the nature of the Business makes such qualification necessary, except
where such failure to qualify would not have a material adverse effect on the
condition or business prospects of the Buyer.
5.2 Authority Relative to Agreement. The execution, delivery and
performance of this Agreement by each Seller has been duly and effectively
authorized by all necessary corporate action of such Seller. This Agreement has
been duly executed by each Seller and is a valid, legally binding and
enforceable obligation of such Seller.
5.3 Effect of Agreement. Except as set forth in Disclosure Exhibit 5.3
hereto, the execution, delivery and performance of this Agreement by each Seller
and the consummation of the transactions contemplated hereby will not (i)
require the consent, approval or authorization of any person, corporation,
partnership, joint venture or other business association or public authority
(other than the directors of such Seller); (ii) violate, with or without the
giving of notice or the passage of time, or both, any provisions of law or
statute or any rule, regulation, order, award, judgment or decree of any court
or governmental authority applicable to the Seller; or (iii) conflict with or
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 Purchased Assets (except as contemplated by this Agreement) pursuant to any
corporate charter, bylaw, indenture, mortgage, deed of trust, lease, contract,
agreement or other instrument, or any order, judgment, award, decree, statute,
ordinance, regulation or any other restriction of any kind or character, to
which such Seller is a party, or by which such Seller or any of the Purchased
Assets may be bound.
5.4 Financial Statements and Estimated Statement. The financial
information related to the Business prepared by each Seller previously delivered
to the Buyer] or [in the form attached as Disclosure Exhibit 5.4] (the
"Financial Statements"), was prepared in accordance with the books and records
of such Seller and, to the best of such Seller's knowledge, is true and correct
in all material respects, after giving effect to the assumptions made in
preparation thereof. The Financial Statements have been prepared in conformity
with generally accepted accounting principles and fairly present the financial
position and results of operations of the Business and may be relied upon as
such.
5.5 Absence of Certain Changes or Events. Since [date of Financial
Statements] (the "Record Date") except as otherwise disclosed in Disclosure
Exhibit 5.5(a) hereto, in conducting the Business, including but not limited to
use and operation of the Purchased Assets, no Seller has:
(a) incurred any obligation or liability (contingent or
otherwise) except (i) normal trade or business obligations incurred in the
ordinary course of business, the performance
<PAGE>
of which will not, individually or in the aggregate, have a material adverse
effect on the Purchased Assets and (ii) obligations under contracts, agreements
and leases described in Disclosure Exhibit 5.5(b) or Schedules 1.1(i) or 1.1(v)
hereto, the performance of which will not, individually or in the aggregate,
have a material adverse effect on the Purchased Assets;
(b) mortgaged, pledged or subjected to any lien, charge,
security interest or to any other encumbrance any of the Purchased Assets
(whether tangible or intangible);
(c) sold, assigned, transferred, conveyed, leased or otherwise
disposed of or agreed to sell, assign, transfer, convey, lease or otherwise
dispose of any of the Purchased Assets, except for fair consideration in the
ordinary course of business;
(d) waived or released any rights, whether or not in the
ordinary course of business;
(e) made or granted any general wage or salary increase or
entered into any employment contract with any employee engaged in connection
with the operation of the Business involving an annual basic rate of
compensation in excess of $30,000 or a period of employment of more than thirty
days;
(f) entered into any transaction, contract or commitment other
than in the ordinary course of business;
(g) made any capital expenditure or entered into any
commitment therefor which, individually, exceeds $30,000 other than those
disclosed to Buyer;
(h) suffered any material casualty loss or damage, whether or
not such loss or damage shall have been covered by insurance;
(i) introduced any material change with respect to the
operation of the Business, including its method of accounting.
5.6 Tax Matters. Each Seller has duly filed with the appropriate United
States, state and local governmental agencies, and with the appropriate foreign
countries and political subdivisions thereof, all tax returns and reports
required to be filed; such returns and reports are accurate and complete; and
each such Seller has paid in full or made adequate provisions 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. In connection with the operation of the Business, each Seller has
made all withholdings of tax required to be made under all applicable United
States, state and local tax regulations and such withholdings have either been
paid to the appropriate governmental agencies or set aside in accounts for such
purpose or accrued, reserved against and entered upon the books of such Seller.
<PAGE>
5.7 Title to Properties; Absence of Liens and Encumbrances; Leases.
(a) In connection with the operation of the Business, each
Seller has good and marketable title to all of the Purchased Assets, free and
clear of all claims and encumbrances, other than (i) as specifically disclosed
in the Financial Statements, (ii) any liens for taxes not yet due and payable or
being contested in good faith by appropriate proceedings and (iii) such
imperfections of title, easements, liens, pledges, charges and encumbrances, if
any, as do not materially detract from the value or interfere with the present
use of any of the Purchased Assets or otherwise materially impair the operations
of the Business;
(b) To the knowledge of each Seller, all of the Leases and the
Contracts are in force and are valid and binding in accordance with their terms
and there is not under any of the Leases or the Contracts, on the part of such
Seller, any existing default, event of default or event which with notice or
lapse of time, or both, would constitute a default (and in respect of which such
Seller has not taken adequate steps to prevent such a default or event of
default from occurring) other than the failure to obtain consent to an
assignment to the Buyer as expressly contemplated herein.
5.8 List of Properties, Contracts and Other Data. Disclosure Exhibit
5.8 hereto is a correct and complete list setting forth the following
information with respect to the Business:
(a) all of the Leases;
(b) all of the Purchased Assets requiring specific documents of
transfer in order to effectively transfer title thereto from any Seller to the
Buyer, together with a brief description of the documents required;
(c) all of the Contracts, except (i) contracts or commitments involving
the payment by or to any Seller of less than $10,000 with respect to any one
contract or commitment or $25,000 with respect to any related group of contracts
or commitments, (ii) contracts or commitments terminable by any Seller without
liability or expense on thirty days' notice or less, and (iii) contracts or
commitments for the purchase or sale of merchandise or services entered into in
the ordinary course of business, the performance of which by such Seller will
extend over a period of less than three months and which will not individually
or in the aggregate, have any material adverse effect on the financial condition
or results of operations of the Business (collectively, the "Listed Contracts");
and
(d) the names and current annual salary rates of all employees of each
Seller engaged in connection with the operation of the Business.
To the knowledge of each Seller, copies of all written Leases and
Listed Contracts, including all amendments thereto, referred to in such list
have been delivered to the Buyer.
<PAGE>
5.9 Litigation. To the best of Seller's knowledge, except as disclosed
in Exhibit 5.9 hereto, there are no material claims, actions, suits, proceedings
or investigations pending or threatened against any Seller relating to or
arising out of or in connection with the operation of the Business at law or in
equity or in admiralty, or before or by any federal, state, municipal or
governmental or nongovernmental department, commission, board, bureau, agency or
instrumentality, United States or foreign, nor does such Seller know of any
facts which would provide a basis for any such claim, action, suit, proceeding
or investigation.
5.10 Labor Controversies. To the best of each Seller's knowledge,
except as disclosed in Exhibit 5.10 hereto, there are no controversies pending
or threatened between such Seller and any of its employees engaged in connection
with the operation of the Business and such Seller has not taken or failed to
take any action which would provide a reasonable basis for any such controversy.
5.11 Purchased Assets. Each Seller will maintain and deliver to Buyer
on the Closing Date the Purchased Assets in such working order and condition as
the Purchased Assets were in as of date of this Agreement, normal wear and tear
excepted. Sale of the Purchased Assets hereunder is on an "as is where is" basis
and such Seller makes no representations or warranties, express or implied with
respect to the condition of the Purchased Assets. WITHOUT LIMITING THE
FOREGOING, EACH SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY
REGARDING MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
5.12 Licenses; Permits; Authorizations. Disclosure Exhibit 5.12 hereto
is a schedule of all approvals, authorizations, consents, licenses, orders and
permits (except for sales and use tax permits and franchise tax regulations) of
all governmental agencies, whether United States, state or local, or foreign
used by each Seller in connection with the operation of the Business (excluding
the approval of the Pennsylvania Liquor Control Board in connection with the
transfer of the Liquor Licenses).
5.13 Compliance with Applicable Law. The conduct of the Business by
each Seller does not violate or infringe any domestic or foreign laws, statutes,
ordinances or regulations or any right or trademark, trade name, know-how or
other proprietary right of third parties, the enforcement of which would
adversely and materially affect the Business or the value of the Purchased
Assets.
5.14 Pension and Employee Benefit Plans.
(a) As used herein, the terms described below shall be defined as
follows:
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
<PAGE>
"ERISA Affiliate" shall mean any (i) corporation which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Internal Revenue Code of 1986, as amended (the "Code")) as
a Seller; (ii) partnership or other trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with a Seller; and (iii) solely for purposes of liability under Section
412(c)(11) of the Code, the lien created under Section 412(n) of the Code and
for a tax imposed for failure to meet minimum funding standards under Section
4971 of the Code, member of the same affiliated service group (within the
meaning of Section 414(m) of the Code) as a Seller, any corporation described in
clause (i) above or any partnership, trade or business described in clause (ii)
above.
"Person" shall mean an individual, a corporation, a
partnership, an association, a trust or any other entity or organization,
including any federal, state, local or foreign governmental or regulatory agency
or authority.
"Plan" shall mean any employee benefit plan defined in Section
3(3) of ERISA (applicable to any of each Seller's employees engaged in
connection with the operation of the Business) in respect of which such Seller
or any ERISA Affiliate is, or within the immediately preceding six (6) years
was, an "employer" as defined in Section 3(5) of ERISA.
"Termination Event" shall mean (i) any reportable event
described in Section 4043 of ERISA or regulations promulgated thereunder
occurring with respect to a Defined Benefit Plan (applicable to any Seller's
employees engaged in connection with the operation of the Business) as defined
in Section 3(35) of ERISA ("Benefit Plan"), other than an event as to which the
requirement of notice has been waived by Pension Benefit Guaranty Corporation
("PBGC") regulations, (ii) the withdrawal of a Seller or any of its ERISA
Affiliates from a Benefit Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA or the cessation of
operations which results in the termination of employment of 20% of Benefit Plan
participants who are employees of such Seller or its ERISA Affiliates unless, in
any such case, the assets of any such Benefit Plan are at least equal to its
liability for vested accrued benefits thereunder, (iii) the occurrence of an
obligation arising under Section 4041 of ERISA of such Seller or its ERISA
Affiliates to provide affected parties with a written notice of an intent to
terminate a Benefit Plan in a distress termination described in Section 4041(c)
of ERISA, (iv) the PBGC's institution of proceedings to terminate a Benefit
Plan, or (v) any event or condition which constitutes grounds under Section 4042
of ERISA for the appointment of a trustee to administer a Benefit Plan and (vi)
the partial or complete withdrawal of such Seller or its ERISA Affiliates from a
multiemployer plan as defined in Section 4001(a)(3) of ERISA ("Multiemployer
Plan") unless such withdrawal can be accomplished without incurring any material
withdrawal liability to such Multiemployer Plan.
(b) No Seller maintains or contributes to any Plan applicable to any of
its employees engaged in connection with the operation of the Business other
than a Plan listed on Disclosure Exhibit 5.14 hereto. Each Plan which is
intended to be a qualified Plan has been determined by the Internal Revenue
Service to be qualified under Section 401(a) of the Code as currently in effect
<PAGE>
and each trust related to any such Plan has been determined to be exempt from
federal income tax under Section 501(a) of the Code. Except as otherwise
disclosed on Disclosure Exhibit 5.14 hereto, no Seller nor any of its ERISA
Affiliates maintains or contributes to any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA (applicable to any of such Seller's
employees engaged in connection with the operation of the Business) which
provides lifetime benefits to retirees. No Seller nor any ERISA Affiliate has
breached any responsibilities, obligations or duties imposed on it by ERISA or
regulations promulgated thereunder with respect to any Plan in any material
respect. No accumulated funding deficiency (as defined in Section 302(a)(2) of
ERISA and Section 412(a) of the Code) exists in respect to any Benefit Plan. No
Seller nor any of its ERISA Affiliates nor, to the best of their knowledge, any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt "prohibited transaction" described in Section 406 of ERISA or Section
4975 of the Code or (ii) has taken any action which would constitute or result
in a Termination Event with respect to any Plan. No Seller nor any of its ERISA
Affiliates has incurred any liability to the PBGC which remains outstanding
other than for the payment of premiums which have been paid when due. Schedule B
to the most recent annual report filed with the Internal Revenue Service with
respect to each Benefit Plan is complete and accurate in all material respects;
since the date of each such Schedule B, there has been no material adverse
change in the funding status or financial condition of the Benefit Plan relating
to such Schedule B. No Seller nor any of its ERISA Affiliates has failed to make
a required installment under subsection (m) of Section 412 of the Code or any
other payment required under Section 412 of the Code on or before the due date
for such installment or other payment. No Seller nor any of its ERISA Affiliates
is required to provide security to a Plan under Section 401(a)(29) of the Code
due to a Plan amendment that results in an increase in current liability for the
plan year.
5.15 Purchased Assets' Relationship to Business of the Seller. Except
as disclosed on Disclosure Exhibit 5.15 hereto, the Purchased Assets constitute
all of the material properties and assets used to conduct the business and
affairs of the Purchased Stores.
5.16 Books and Records. The books, records and work papers of each
Seller relating to the operation of the Business are complete and correct, have
been maintained in accordance with good business practices and accurately
reflect the basis for the Financial Statements referred to in Section 5.4
hereof.
5.17 Acknowledgment of Seller. Each Seller acknowledges and agrees
that, (a) other than the representations and warranties of the Buyer
specifically contained in this Agreement, there are no representations or
warranties of the Buyer either expressed or implied with respect to the Buyer,
and (b) each Seller shall have a right to indemnification solely as provided in
Article XII hereof and shall have no claim or right to indemnification with
respect to any information, documents and materials furnished by the Buyer or
any of its officers, directors, employees, agents or advisors, or otherwise
available to such Seller.
<PAGE>
5.18 Share Ownership. Set forth on Disclosure Exhibit 5.18 is a list of
each owner of each class of stock of each Seller, the number of such shares
owned and the percentage ownership of each. There are no options, warrants or
other rights outstanding to purchase any such shares.
VI. REPRESENTATIONS AND WARRANTIES OF THE BUYER
Buyer represents and warrants to each Seller and the Stockholders as
follows:
6.1 Organization; Good Standing; Power. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to own, lease and operate its properties, to carry on its business and to enter
into this Agreement and the Assumption Agreement and perform its obligations
hereunder and thereunder.
The Buyer is duly qualified to do business as a foreign
corporation and is in good standing in each of the jurisdictions in which the
property owned, leased or operated by it or the nature of the business conducted
by it hereunder makes such qualification necessary, except where such failure to
qualify would not have a material adverse effect on the condition or business
prospects of the Buyer.
6.2 Authority Relative to Agreement. The execution, delivery and
performance of this Agreement, the Release and the Assumption Agreement and the
transactions contemplated hereby and thereby by the Buyer have been duly and
effectively authorized and ratified by all necessary corporate action of the
Buyer. This Agreement, the Release and the Assumption Agreement have been duly
executed by the Buyer and are valid, legally binding and enforceable obligations
of the Buyer.
6.3 Effect of Agreement. The execution, delivery and performance of
this Agreement, the Release and the Assumption Agreement, and the consummation
of the transactions contemplated hereby and thereby does not (i) require the
consent, approval or authorization of any person, corporation, partnership,
joint venture or other business association or other public authority; (ii)
violate, with or without the giving of notice or the passage of time, or both,
any provisions of law applicable to the Buyer; or (iii) conflict with or 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
properties or assets of the Buyer pursuant to any indenture, corporate charter,
bylaw, agreement, indenture, mortgage, deed of trust, lease, contract, 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 a party, or by which the Buyer or any of its assets or properties may be
bound.
6.4 Acknowledgment of Buyer. The Buyer acknowledges and agrees that,
(a) other than the representations and warranties of each Seller specifically
contained in this Agreement, there are no representations or warranties of any
Seller either expressed or implied with respect
<PAGE>
to any Seller, the Business or the Purchased Assets, and (b) the Buyer shall
have a right to indemnification solely as provided in Article XII hereof and
shall have no claim or right to indemnification with respect to any information,
documents and materials furnished by such Seller or any of its officers,
directors, employees, agents or advisors, or otherwise available to the Buyer.
6.5 No Knowledge of Sellers' Breach. Neither Buyer nor any of its
officers, directors, shareholders, employees, agents or advisors has knowledge
of any breach of any representation or warranty by any Seller or of any other
condition or circumstance that would give rise to a claim by the Buyer
hereunder.
6.6 Transfer of Buyer Stock. The Buyer is transferring to Gallatin and
Robertshaw good title to the Buyer Stock, free and clear of all claims,
encumbrances, security interests and liens whatsoever.
VII. TRANSACTIONS PRIOR TO THE CLOSING DATE
7.1 Access to Information. Each Seller shall give to the Buyer, its
employees, agents, consultants and representatives reasonable access during
normal business hours throughout the period prior to the Closing Date, to the
Purchased Assets, books, contracts, commitments and records of such Seller for
such purposes as are appropriate; provided that the same does not unreasonably
interfere with such Seller's business and provided further that Buyer shall
notify such Seller prior to speaking with any employee of Seller, and Buyer
shall cooperate with Seller to minimize disruptions to Seller's operations. Each
Seller shall furnish to the Buyer during such period all such information
concerning the affairs of the Business as the Buyer or its representative may
reasonably request.
7.2 Conduct of the Business Pending the Closing Date. Each Seller
hereby agrees that prior to the Closing Date it will, with respect to the
Business:
(a) operate only in the usual, regular and ordinary manner
and, to the extent consistent with such operation, use its reasonable best
efforts to preserve its present business organization intact, keep available the
services of its present officers and employees and preserve its present
relationships with persons having business dealings with it;
(b) maintain all of the Purchased Assets in customary repair,
order and condition, reasonable wear and use excepted;
(c) maintain its books, accounts and records in the usual,
regular and ordinary manner, on a basis consistent with prior years; endeavor to
comply with all laws and contractual obligations; and perform all of its
obligations without default;
<PAGE>
(d) make or grant no general wage or salary increase or
increase in compensation payable or to become payable to any employee; pay or
provide for no bonus, stock option, stock purchase, profit sharing, deferred
compensation, pension, multi-employer pension, retirement or other similar
payment or arrangement except in the ordinary course of administering existing
plans referred to in Disclosure Exhibit 5.14 hereto; pay or provide for no
unfunded pensions, not covered by any pension plan, other than the unfunded
pensions, if any, referred to in Disclosure Exhibit 5.14 hereto and enter into
no employment or consulting agreement or sales agency with respect to the
performance of personal services which is not terminable without liability by
Seller on thirty days notice or less.
(e) (i) incur or become subject to, or agree to incur or
become subject to, no obligation or liability (contingent or otherwise), subject
to the exceptions enumerated in Section 5.5(a) hereof; (ii) discharge or satisfy
no lien or encumbrance and pay no obligation or liability (contingent or
otherwise), subject to the exceptions enumerated in Section 5.5(a) hereof; (iii)
mortgage, pledge or subject to lien, charge, security interest or any other
encumbrance none of the Purchased Assets; (iv) sell, assign, transfer, convey,
lease or otherwise dispose of, or agree to sell, assign, transfer, convey, lease
or otherwise dispose of, none of the Purchased Assets, except for fair
consideration in the ordinary course of business; (v) acquire or lease (other
than a renewal of an existing lease in the ordinary course of business), or
agree to acquire or lease (other than a renewal of an existing lease in the
ordinary course of business), no material assets or property; (vi) cancel or
compromise no debt or claim, except for adjustments or settlements made in the
ordinary course of business; (vii) waive or release no rights of material value;
(viii) transfer or grant no rights under any concessions, leases, licenses,
agreements, patents, inventions, trade names, trademarks, or with respect to any
know-how or intellectual property rights; (iv) modify, change or terminate no
existing license, lease, contract or other document referred to in Disclosure
Exhibit 5.8 hereto; (x) make no capital expenditures and enter into no
commitments therefor which individually or in the aggregate exceed $5,000; (xi)
enter into no collective bargaining agreement and, through negotiation or
otherwise, make no commitment or incur any liability to any labor organization;
and (xii) enter into no transaction and make or enter into no contract or
commitment which by reason of its size or otherwise is not in the ordinary
course of business;
(f) make no substantial renovation of property involving any
substantial obligation on the part of the Business; and
(g) make no change in its accounting procedures which
adversely affects the Business; and
Each Seller agrees that it will enter into no transaction and will use
its best efforts not to permit any event to occur which would result in any of
the Seller's Representations and Warranties contained in this Agreement not
being true and correct in all material respects at and as of the time
immediately after the occurrence of such transaction or event.
<PAGE>
7.3 Consents. Buyer agrees that it shall cooperate with each Seller to
obtain prior to the Closing Date all such consents, assignments, and approvals
as may be required in order to enable it to perform its obligations hereunder,
including, but not limited to, the consents of all Landlords to the assignment
of the Leases and all consents and approvals required to permit it to make the
transfers to the Buyer contemplated herein so that the Buyer may enjoy after the
Closing Date all rights and benefits presently enjoyed by each Seller in the
operation of the Business.
7.4 Schedules and Disclosure Exhibits. Buyer and each Seller and
Stockholder each acknowledge that as of the date of execution of this Agreement,
the Schedules and Disclosure Exhibits to be attached hereto and made a part
hereof will not be completed. Buyer, each Seller and each Stockholder agree that
they shall cooperate with each other prior to the Closing Date to enable Sellers
to prepare such Schedules and Disclosure Exhibits in a form satisfactory to
Buyer.
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF BOTH THE SELLER
AND THE BUYER
8.1 Execution of Assumption Agreement. The obligations of the Seller
and the Buyer under this Agreement are subject to the execution and delivery on
the date hereof of the Assumption Agreement, which shall not become effective
until the Closing Date.
8.2 Execution of Mutual Release. The obligations of the Seller and the
Buyer under this Agreement are subject to the execution and delivery on the
Closing Date of the Release.
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLERS
The obligations of each Seller under this Agreement are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
9.1 Accuracy of Representations and Warranties. The representations and
warranties of the Buyer herein contained shall be true and correct in all
material respects on and as of the Closing Date, with the same force and effect
as though made on and as of such date, except as affected by the transactions
contemplated hereby.
9.2 Performance of Agreements. The Buyer shall have performed in all
material respects all obligations and agreements and complied with all covenants
and conditions contained in this Agreement to be performed or complied with by
it at or prior to the Closing Date and shall have delivered the following:
(a) the Cash Portion of the Purchase Price in accordance with
Section 2.1(b)(i); and
(b) the Buyer Stock in accordance with Section 2.1(b)(ii).
<PAGE>
9.3 Repayment of Retired Debt. The Buyer shall have delivered evidence
satisfactory to each Seller and each Stockholder that all obligations
outstanding under the Retired Debt have been repaid in full and that all
personal guaranties of any Stockholder in connection therewith have been
terminated.
9.4 Resolutions of Board of Directors; Incumbency. The Seller shall
have received from the Buyer certified copies of the Resolutions of the Board of
Directors of the Buyer approving this Agreement and authorizing the consummation
of the transactions contemplated hereby and a certificate of the Secretary or
Assistant Secretary of the Buyer as to the officer or officers authorized to
sign this Agreement and the other agreements contemplated hereby and to act on
behalf of the Buyer in connection herewith and the true signatures of such
officer or officers.
9.5 Officer's Certificate. Buyer shall have furnished the Seller with
its certificate, dated as of the Closing Date, signed by the Buyer's President
and Secretary, to the effect that, to the best knowledge, information and belief
of such officer, the Buyer has fulfilled the conditions specified in Section 9.1
hereof.
X. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligations of the Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions:
10.1 Accuracy of Representations and Warranties. The representations
and warranties of each Seller herein contained shall be true and correct in all
material respects on and as of the Closing Date with the same force and effect
as though made on and as of such date, except as affected by transactions
contemplated hereby (including the updates contemplated by Section 10.4 hereof).
10.2 Performance of Agreements. Each Seller shall have performed in all
material respects all obligations and agreements and complied with all covenants
and conditions contained in this Agreement to be performed or complied with by
it at or prior to the Closing Date and shall have delivered the following:
(a) a Direction to Pay Proceeds executed by each Seller in
accordance with Section 2.1(b)(i);
(b) a Direction to Issue Stock executed by each Stockholder in
accordance with Section 2.1(b)(ii);
(c) a Bill of Sale in accordance with Section 1.2;
<PAGE>
(d) an Investment Letter executed by Gallatin and Robertshaw
in accordance with Section 2.1(d); and
(e) a limited Indemnification Agreement of the Refresh Group,
Inc. in favor of the Buyer in connection with the employees identified on
Schedule 11.2(b) in the form attached as Exhibit 10.2(e); and
(f) an Estoppel Certificate in the form attached as Exhibit
10.2(f) from each Landlord of each Lease.
10.3 Officers' Certificates. Each Seller shall have furnished the Buyer
with its certificate dated the Closing Date, signed by the President of such
Seller, to the effect that the Seller has fulfilled the conditions specified in
Sections 7.2, 7.3 and 10.1 hereof. Such certificate shall include a schedule
which shall contain an update of the information disclosed in the Disclosure
Exhibits hereto and a complete and correct list and description of the
information specified in Section 5.8 as of a date not more than three (3) days
prior to the Closing Date.
10.4 Secretary's Certificate. Each Seller shall have furnished the
Buyer with a certificate dated the Closing Date, signed by the Secretary or an
Assistant Secretary of such Seller, certifying as to:
(a) Resolutions of the Board of Directors and Shareholders of
each Seller approving this Agreement and authorizing the consummation of the
transaction contemplated hereby;
(b) copies of its organizational documents, including its
Articles of Incorporation and By-laws as in effect on the Closing Date certified
by the appropriate state official where such documents are filed in a state
office together with certificates from the appropriate state officials as to the
continued existence and good standing of the Borrower in each state where
organized or qualified to do business, each of which must be certified by such
state officials as of a date within 30 days prior to the Closing Date; and
(c) the names of the officer or officers authorized to sign
this Agreement and the other agreements contemplated hereby and to act on behalf
of such Seller in connection herewith and the true signatures of such officer or
officers.
10.5 Opinion of Counsel for the Seller. The Buyer shall have received
an opinion of counsel for the Sellers, dated the Closing Date, in form and
substance satisfactory to the Buyer and its counsel, and substantially in the
form of Exhibit 10.5 hereto.
10.6 Actual or Threatened Actions. There shall not be any actual or, in
the opinion of the Buyer, threatened action or proceeding by or before any court
or other governmental body or agency which shall seek to restrain, prohibit or
<PAGE>
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Buyer to own, operate or control the Purchase Assets after the
Closing Date.
10.7 Material Changes. Prior to the Closing Date there shall be no
material adverse change in any Seller's condition (financial or otherwise),
assets, liabilities, or business of the Business.
10.8 Consents. All required consents shall have been received by the
Buyer including, but not limited to, all consents and approvals required to
permit the Buyer to enjoy after the Closing Date all rights and benefits
presently enjoyed by the Business. Without in any way limiting the foregoing
sentence, all consents to the assignments of contracts, leases, agreements, etc.
identified on Disclosure Exhibit 5.8 (the "Assigned Contracts") necessary to
assign the Assigned Contracts and the consent of the Pennsylvania Liquor Control
Board to the transfer of the Liquor Licenses shall have been obtained.
10.9 Store Repairs. All of the repairs to the Purchased Stores
identified in the letter of Ralph J. Guarino to Gallatin dated February 1, 1996,
a copy of which is attached as Exhibit 10.9 hereto, shall have been made to the
reasonable satisfaction of the Buyer or other alternative arrangements for such
repairs shall have been made to the satisfaction of the Buyer.
10.10 Completion of Due Diligence. Buyer shall have completed to its
satisfaction a review of all aspects of the operation of the Business and an
analysis of all assets being purchased hereunder. Each Seller and each
Stockholder shall have provided all reasonable assistance, including all
requested documentation to enable Buyer and its counsel to complete such review.
10.11 Delivery of Schedules and Disclosure Exhibits. Each Seller and
each Stockholder shall have delivered to the Buyer each of the Schedules and
Disclosure Exhibits hereto satisfactory in form and substance to Buyer and its
counsel, in Buyer's sole and reasonable determination.
10.12 Miscellaneous Pre-Closing Conditions. Sellers shall have taken
all other steps deemed by Buyer to be necessary, in Buyer's sole and reasonable
determination, to vest in Buyer, all of the rights and all of the assets of
Sellers purported to be transferred to Buyer hereunder and necessary for the
operation of the Business, the parties hereto acknowledging that Buyer shall
have no obligation to consummate the transactions provided for herein unless
such conditions shall have been satisfied.
XI. COVENANTS OF THE PARTIES
11.1 Confidentiality. The Buyer acknowledges that the information it
possesses regarding the Sellers is confidential and that it shall not use or
disclose any such information except as reasonably necessary to consummate the
transactions contemplated herein; provided, however, that after the Closing
Date, the Buyer may use or disclose such information as it relates solely to the
Business.
<PAGE>
11.2 Employee Retention. Schedule 11.2(a) hereto contains accurate and
complete information as to the names and rates of compensation (whether in the
form of salaries, bonuses, commissions or other supplemental compensation now or
hereafter payable) of all employees of each Seller employed in the Business,
together with information as to any employment contracts with any such
employees, any arrangements involving the indebtedness of such employees to such
Seller and any arrangements involving the indebtedness of such Seller to such
employees in any amount. Schedule 11.2(b) hereto contains accurate and complete
information as to the names and rates of compensation (whether in the form of
salaries, bonuses, commissions or other supplemental compensation now or
hereafter payable) of all employees of The Refresh Group,Inc. ("RGI") employed
in the Business, together with information as to any employment contracts with
any such employees, any arrangements involving the indebtedness of such
employees to RGI and any arrangement involving the indebtedness of RGI to such
employees in any amount. Buyer shall offer employment as of the Closing Date to
the individuals employed by Sellers and RGI in the Business and listed on
Schedule 11.2(a) and Schedule 11.2(b) (the "Continuing Employees"). For purposes
of determining the level of employee benefits to be provided to any Continuing
Employee by the Buyer, Buyer shall provide credit to each Continuing Employee
for the time of service that each such Continuing Employee was employed by a
Seller or RGI, as the case may be. Under no condition shall Buyer be deemed to
have assumed, and each Seller does hereby agree to indemnify the Buyer for any
and all liabilities and obligations incurred prior to the Closing Date in
connection with the Continuing Employees, including without limitation
liabilities and obligations for all wages, salary, termination pay, severance
pay, sick pay and vacation pay, any wage and payroll tax, any unemployment
benefits, any pension plan or welfare plan benefits and any other benefits, to
which any such Continuing Employees are entitled by virtue of their employment
by a Seller prior to the Closing Date or the termination of their employment by
a Seller, on or prior to the Closing Date. The Buyer has no present intention
(subject to its discretion as to employee performance) to terminate the
employment of any Continuing Employee within the 60 days following the Closing
Date, and the Buyer assumes all obligations and liabilities, if any, under the
Worker Adjustment and Retaining Notification Act (the "WARN Act") and any
analogous state legislation relating to or arising out of this Agreement. The
Buyer also agrees to comply with the terms of the WARN Act and any analogous
state legislation following the Closing Date.
11.3 Rule 144 Sales. Buyer will from time to time at the request of
Gallatin or Robertshaw supply said requesting party with any information
necessary to enable such person to make routine sales of Buyer Stock as may be
permitted by, and in accordance with, the applicable provisions of Rule 144 as
in effect from time to time. As used herein, "Rule 144" shall mean Rule 144
promulgated under the Securities Act as in effect as of the date of this
Agreement, and as subsequently amended, and all substitutions and replacements
of said Rule. Buyer has complied and will continue to comply with all
requirements of the Securities Exchange Act of 1934, as amended ("Exchange Act")
and the rules and regulations of the SEC promulgated thereunder with respect to
the filing of annual, periodic and other reports on a timely basis. Upon the
written request of Gallatin or Robertshaw, Buyer shall furnish such person with
a written
<PAGE>
statement representing that it has complied with the reporting
requirements enumerated in Rule 144(c)(1).
XII. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
12.1 Events of Default. A breach of any representation or warranty by
any Seller or the Buyer, as the case may be, or breach as a result of the
failure of any Seller or the Buyer, as the case may be, 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 12.3 or 12.4,
as the case may be, hereof.
12.2 Survival of Representations, Etc. All representations, warranties,
covenants and agreements made by any Seller and the Buyer in this Agreement, and
the remedies of the Buyer and any Seller with respect thereto, shall survive the
Closing hereunder for the following periods:
(a) With respect to the representations and warranties of each
Seller contained in this Agreement, any claim arising thereunder must be brought
by the Buyer within a period of twelve months following the Closing Date.
(b) With respect to the representations and warranties of the
Buyer contained in this Agreement, any claim arising thereunder must be brought
by a Seller within a period of twelve months following the Closing Date.
(c) With respect to the covenants and agreements of each
Seller and the Buyer contained in this Agreement, any claim arising thereunder
must be brought within the period of the applicable statutes of limitation,
including any extensions thereof.
12.3 Indemnification to the Buyer. In addition to the indemnifications
described in Section 11.2, each Seller agrees to indemnify and hold the Buyer
harmless against and in respect of:
(a) all obligations and liabilities of such Seller, whether
accrued, absolute, fixed, contingent or otherwise, other than the Assumed
Liabilities;
(b) any loss, liability or damage suffered or incurred by the
Buyer because of a breach of any obligation of such Seller incurred under this
Agreement, or because any representation or warranty by such Seller contained in
this Agreement, shall be false in any material respect as of the Closing Date;
<PAGE>
(c) 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 it in this Section 12.3.
12.4 Indemnification to the Sellers. The Buyer agrees to indemnify and
hold each Seller harmless against and in respect of:
(a) all obligations and liabilities assumed by the Buyer
pursuant to this Agreement;
(b) any loss, liability or damage suffered or incurred by such
Seller because of a breach of any obligation of the Buyer incurred under this
Agreement, or because any representation or warranty by the Buyer contained in
this Agreement, shall be false in any material respect as of the Closing Date;
(c) all reasonable costs and expenses (including reasonable
attorneys' fees) incurred by such Seller in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against it in this Section 8.4.
12.5 Representation, Cooperation and Settlement.
(a) The party claiming entitlement to indemnification
hereunder (the "Indemnified Party") agrees to give prompt written notice to the
other party (the "Indemnifying Party") of any claim against the Indemnified
Party which might give rise to a claim by the Indemnified Party against the
Indemnifying Party stating the nature and basis of the first-mentioned claim and
the amount thereof.
(b) The Indemnified Party shall have full responsibility and
authority with respect to the disposition of any action, suit or proceeding
brought against it. In the event any action, suit or proceeding is brought
against the Indemnified Party with respect to which the Indemnifying Party may
have liability under the indemnity agreement contained in this Article XII,
however, the Indemnifying Party shall have the right, without prejudice to the
Indemnified Party's rights under this Agreement, at the Indemnifying Party's
sole expense, to be represented by counsel of its own choosing and with whom
counsel for the Indemnified Party shall confer in connection with the defense of
any such action, suit, or proceeding. The Indemnified Party shall make available
to the Indemnifying Party and its counsel and accountants, all books and records
of the Indemnified Party relating to such action, suit or proceeding and the
parties agree to render to each other such assistance as may reasonably be
requested in order to insure the proper and adequate defense of any such action,
suit or proceeding.
XIII. TRANSACTIONS SUBSEQUENT TO THE CLOSING DATE
<PAGE>
13.1 Control of Settlements and Disputes. From and after the Closing
Date, the Buyer shall have complete control over the payment, settlement or
other disposition of, or any dispute involving, any Assumed Liability and the
Buyer shall have the right to conduct and control all negotiations and
proceedings with respect thereto. Each Seller will notify the Buyer promptly of
any claim made with respect to any Assumed Liability and will not, except with
the prior written consent of the Buyer, voluntarily make any payment of, or
settle or offer to settle, or consent to any compromise with respect to, any
such claim. Such Seller will, at the expense of the Buyer, cooperate with the
Buyer in any reasonable manner requested by the Buyer in connection with any
negotiations or proceedings involving any such obligations or liabilities.
13.2 Further Assurances. From time to time after the Closing Date, upon
the request of the Buyer, each Seller will (a) make available to the Buyer any
records, documents and data retained by such Seller relating to the Purchased
Assets, and (b) execute, deliver and acknowledge all such further instruments of
transfer and conveyance as the Buyer may reasonably require to more effectively
transfer the Purchased Assets to the Buyer and to put the Buyer in possession of
any of the Purchased Assets.
13.3 Registration of Buyer Stock. In the event that Buyer, prior to the
third anniversary of the Closing Date, files a Registration Statement with the
SEC in connection with an underwritten offering to the public of Buyer's common
stock (which, in any event, will not occur prior to the one-year anniversary of
Buyer's initial public offering), Buyer will include all or part of the Buyer
Stock in the Registration Statement provided (i) the Stockholders requesting
that the Buyer Stock held by them be included in the Registration Statement,
bear the expenses of the underwriting discounts and commissions relating solely
to the Buyer Stock so registered, SEC and "blue sky" filing or similar fees and
transfer fees or taxes relating solely to such issued Buyer Stock and expenses
of counsel, independent accountants or other advisors, if any, retained by said
Stockholders or any of them in connection with such registration and sale, other
expenses related solely to the sale or distribution of such Buyer Stock and the
amount of the increase, if any, of Buyer's printing, legal and accounting
expenses attributable to the inclusion of the Buyer Stock in the registration,
(ii) the prospective underwriters or their representatives do not advise the
Buyer that a contemporaneous offering of such Buyer Stock to be so registered
would unreasonably interfere with the public offering by Buyer and (iii) the
Stockholders, the Buyer and the underwriters agree to certain customary
indemnification provisions. Buyer will notify all Stockholders of any such
offering prior to the registration thereof. Said notice shall allow the
Stockholders at least ten (10) days after it is given to elect to have any or
all of their Buyer Stock included in the Registration Statement, provided,
however, that Buyer shall not be obligated to register any of the Buyer Stock in
the event that less than 10,000 shares of Buyer Stock are requested, in the
aggregate, to be registered by the Stockholders hereunder.
XIV. MISCELLANEOUS
14.1 Brokerage. Each Seller represents and warrants to the Buyer that
such Seller has not incurred any obligations or liabilities, contingent or
otherwise, for brokerage or finders' fees
<PAGE>
or agents' commissions or other like payments in connection with this Agreement
or the transactions contemplated hereby. The Buyer represents and warrants to
such Seller that the Buyer has not incurred any obligations or liabilities,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other like payments in connection with this Agreement or the transactions
contemplated hereby. Each Seller and the Buyer each agree to indemnify and hold
the other harmless against and in respect of any such obligations or liabilities
based in any way on agreements, arrangements or understandings claimed to have
been made by it or them with any third party and not disclosed herein.
14.2 Waivers and Amendment.
(a) Each Seller or the Buyer may, by written notice to the
other, (i) extend the time for the performance of any of the obligations or
other actions of the other; (ii) waive any inaccuracies in the representations
or warranties of the other contained in this Agreement; (iii) waive compliance
with any of the covenants of the other contained in this Agreement; and (iv)
waive or modify performance of any of the obligations of the other.
(b) This Agreement may be amended, modified or supplemented
only by a written instrument executed by all the parties hereto. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or no behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained herein. 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.
14.3 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, the Buyer shall pay the fees and expenses of its
counsel, accountants, other experts and all other expenses incurred by it
incident to the negotiation, preparation and execution of this Agreement, and
each Seller shall pay any and all such fees and expenses incurred by it incident
to the negotiation, preparation and execution of this Agreement and the
performance by it of its obligations hereunder. Notwithstanding the generality
of the foregoing (i) Buyer shall assume and be liable for all costs attributable
solely to obtaining the consent of PNC Bank, National Association ("PNC") to the
assumption of that portion of the Assumed Debt owed by any Seller to PNC and the
release of any guarantor thereunder (including PNC's legal fees) and all costs
attributable solely to obtaining the consent of the LCB to the transfer of the
Liquor Licenses (including all transfer fees); and (ii) Sellers shall assume and
be liable for all costs and expenses attributable solely to obtaining the
consents of any Landlord or any other contracting party to the assignment of any
Lease or any Contract to the Buyer and the release of any guarantor thereunder
(including payment of any transfer or assignment fee and such Landlord or
contracting party's legal fees but excluding the cost of any new or substituted
security deposits, which shall be paid by Buyer.
<PAGE>
14.4 Notices. All notices, requests, demands and other communications
which are 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:
(a) If to the Seller or
Stockholder: David S. Gallatin
c/o Refresh America
P.O. Box 230
Greensburg, PA 15601
and
Marc B. Robertshaw
Laurel Vending, Inc.
116 N. Main Street
Greensburg, PA 15601
With a copy to: James J. Conte, Esq.
101 N. Main Street
Greensburg, PA 15601
If to the Buyer: The Italian Oven, Inc.
Eleven Lloyd Avenue
Latrobe, PA 15601
ATTN: President
With a copy to: Jeffrey W. Letwin, Esq.
Doepken Keevican & Weiss
37th Floor USX Tower
600 Grant Street
Pittsburgh, PA 15219
or to such other address as any party shall have specified by notice in writing
to the other.
14.5 Entire Agreement. This Agreement, the Schedules, the Exhibits and
the Disclosure Exhibits hereto constitute the entire agreement between the
parties with respect to the subject matter hereof.
14.6 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors, heirs
and permitted assigns; nothing in this Agreement, expressed or implied, is
intended to confer on any other person other than the parties
<PAGE>
hereto, or their successors, any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
14.7 Non-assignability. This Agreement and any rights pursuant hereto
shall not be assignable by Buyer or any Seller without the prior written consent
of the other, which consent shall not be unreasonably withheld.
14.8 Applicable Law. This Agreement and the legal relations between the
parties hereto shall be governed by and in accordance with the laws of the
Commonwealth of Pennsylvania.
14.9 Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
14.10 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.
14.11 Publicity. Neither Buyer nor any Seller shall not make any public
release of information regarding the matter contemplated herein, without the
prior written consent and approval of the other.
<PAGE>
IN WITNESS WHEREOF, the undersigned, intending to be legally bound
hereby, have duly executed and delivered this Agreement as of the date first
above written.
OVENS OF CRANBERRY, LTD.
By:
Title:__________________________________
OVENS OF ERIE ONE, LTD.
By:
Title:__________________________________
OVENS OF MONROEVILLE, LTD.
By:
Title:__________________________________
OVENS OF NORTH HILLS, LTD.
By:
Title:__________________________________
---------------------------------------
David S. Gallatin
---------------------------------------
Marc B. Robertshaw
---------------------------------------
William J. Rosa
THE ITALIAN OVEN, INC.
By:
Title:__________________________________
