Exhibit 10(c)
STOCK PURCHASE AGREEMENT
BY AND AMONG
CASA OLE' RESTAURANTS, INC.
a Texas corporation,
MONTEREY'S ACQUISITION CORP.
a Delaware corporation
and
THE SHAREHOLDERS OF THE COMPANY
LISTED ON ANNEX "A" HERETO
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE................................. 1
1.1 Purchase of Stock...................................... 1
1.2 Purchase Price Adjustment and Estimated Closing Price
Adjustment............................................. 1
1.3 Post-Closing Price Adjustment.......................... 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND SELLERS........................................ 3
(A) Representations and Warranties of the Company and
Sellers................................................. 3
2.1 Authorization........................................... 3
2.2 Organization, Existence and Good Standing of the
Company................................................. 3
2.3 Capital Stock of the Company ........................... 4
2.4 Subsidiaries ............................................ 4
2.5 Financial Statements..................................... 4
2.6 No Brokers............................................... 5
2.7 Permits................................................... 5
2.8 Tax Matters............................................... 5
2.9 Assets and Properties .................................... 6
2.10 Real Property Leases; Options ............................ 7
2.11 Environmental Laws and Regulations........................ 7
2.12 Contracts ................................................ 8
2.13 No Violations ............................................ 9
2.14 Consents.................................................. 9
2.15 Litigation and Related Matters............................ 9
2.16 Compliance with Laws...................................... 9
2.17 Intellectual Property Rights.............................. 9
2.18 Employee Benefit Plans.................................... 10
2.19 Employees; Employee Relations............................. 11
2.20 Insurance................................................. 12
2.21 Interests in Customers, Suppliers,Etc..................... 13
2.22 Business Relations........................................ 13
2.23 Officers and Directors.................................... 13
2.24 Bank Accounts and Powers of Attorney...................... 13
2.25 Absence of Certain Changes or Events...................... 13
2.26 Disclosure................................................ 14
(B) Representations and Warranties of Sellers................. 14
2.27 Authority; Ownership...................................... 14
2.28 Preemptive Rights......................................... 14
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF BUYER.............. 15
3.1 Organization and Authorization............................ 15
3.2 No Violations............................................. 15
3.3 Consents.................................................. 15
3.4 Investment Intent......................................... 15
3.5 Available funds........................................... 15
3.6 Broker.................................................... 15
ARTICLE IV. COVENANTS OF THE PARTIES............................. 16
4.1 Course of Conduct by the Company........................... 16
4.2 Approvals and Consents..................................... 18
4.3 Investigations............................................. 18
4.4 Environmental Inspection................................... 18
4.5 Records Pertaining to the Company.......................... 18
4.6 Tax Elections.............................................. 19
4.7 No Solicitation............................................ 19
4.8 Terms of Employment Retention.............................. 19
4.9 Certain Protective Provisions.............................. 20
4.10 Termination of Consulting Agreements....................... 20
ARTICLE V. CONDITIONS TO OBLIGATIONS OF BUYER.................... 20
5.1 Representations and Warranties............................. 20
5.2 Covenants of Sellers and Company........................... 20
5.3 Absence of Litigation...................................... 20
5.4 Consents and Approvals..................................... 20
5.5 Certificates............................................... 21
5.6 Termination of Consulting Agreements....................... 21
5.7 Accounting Services Agreement.............................. 21
5.8 Opinion of Counsel......................................... 21
5.9 No Material Adverse Effect ................................ 22
5.10 No Transfers to Affiliates................................. 22
5.11 Compliance with Section 4.1................................ 22
5.12 Stock Certificates......................................... 22
5.13 Resignations and Releases of Directors and Officers........ 22
ARTICLE VI. CONDITIONS TO OBLIGATIONS OF SELLERS.................. 22
6.1 Representations and Warranties............................. 22
6.2 Covenants of Buyer......................................... 23
6.3 Absence of Litigation...................................... 23
6.4 Consents and Approvals..................................... 23
6.5 Certificates............................................... 23
6.6 Opinion of Counsel......................................... 23
6.7 Loan Agreements............................................ 23
6.8 Transfer of Funds.......................................... 24
ARTICLE VII. CLOSING............................................... 24
7.1 Closing.................................................... 24
7.2 Delivery of the Shares..................................... 24
7.3 Cash Payment to Sellers.................................... 24
ARTICLE VIII. TERMINATION PRIOR TO CLOSING.......................... 24
8.1 Termination................................................ 24
ARTICLE IX. INDEMNIFICATION...................................... 25
9.1 Buyer's Losses............................................ 25
9.2 Seller Losses............................................. 26
9.3 Notice of Loss............................................ 26
9.4 Right to Defend........................................... 26
9.5 Limitations of Indemnification............................ 27
9.6 Cooperation............................................... 27
ARTICLE X. MISCELLANEOUS........................................ 28
10.1 Entire Agreement.......................................... 28
10.2 Successors and Assigns.................................... 28
10.3 Counterparts.............................................. 28
10.4 Headings.................................................. 28
10.5 Construction.............................................. 28
10.6 Modification and Waiver................................... 28
10.7 Schedules, Etc............................................ 28
10.8 Notices................................................... 28
10.9 Governing Law............................................. 29
10.10 Survival of Covenants, Agreements, Representations
and Warranties......................................... 30
10.11 Expenses............................................. 30
10.12 Third Party Beneficiaries............................ 30
10.13 Number and Gender of Words........................... 30
10.14 Further Assurances................................... 30
10.15 Brokers and Agents................................... 30
ARTICLE XI. SELLERS' REPRESENTATIVE.............................. 31
11.1 Appointment and Acceptance................................ 31
11.2 Authorization............................................. 31
11.3 Certain Limitations....................................... 32
11.4 Actions................................................... 32
11.5 Effectiveness............................................. 32
11.6 Indemnification........................................... 32
11.7 Survival of Authorizations................................ 32
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of the 1st day of July, 1997 by and among CASA OLE'
RESTAURANTS, INC., a Texas corporation ("Buyer"), MONTEREY'S
ACQUISITION CORP., a Delaware corporation (the "Company"), and the
shareholders of the Company listed on Annex "A" hereto (each a
"Seller" and collectively, "Sellers").
W I T N E S S E T H:
WHEREAS, Sellers own all of the issued and outstanding shares
of capital stock of the Company; and
WHEREAS, Sellers desire to sell and convey to Buyer, and Buyer
desires to purchase from Sellers, all of the outstanding capital
stock of the Company;
NOW, THEREFORE, for and in consideration of the premises and
of the mutual representations, warranties, covenants and agreements
contained herein, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and upon
the terms and subject to the conditions hereinafter set forth, the
parties do hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE
1.1 Purchase of Stock. On the Closing Date (as defined
below), Buyer agrees to purchase from Sellers, and each Seller
agrees to sell to Buyer, all of the issued and outstanding shares
of common stock, no par value, of the Company (the "Company
Shares") owned by them for a total consideration of (i) $4,000,000
in cash, (ii) Buyer's assumption and refinancing of the Company's
senior debt and mandatory prepayment of subordinated debt to BHC
Acquisition Corp. as creditor ("Creditor") as set forth on
Schedule 1.1 hereto and (iii) the Estimated Closing Price
Adjustment (as defined in Section 1.2) (the "Total Consideration")
(subject to adjustment pursuant to Section 1.2).
1.2 Purchase Price Adjustment and Estimated Closing Price
Adjustment. The Total Consideration shall be increased or
decreased, as the case may be, by the sum of (i) the amount, if
any, by which the Company's outstanding indebtedness to the lenders
set forth on Schedule 1.1 hereto is less than or exceeds $7,006,000
as reflected on the Closing Date Balance Sheet (as defined below);
and (ii) the amount, if any, by which the Company's working capital
deficit is less than or exceeds $750,000 as reflected in the
Closing Date Balance Sheet plus (a) management fees payable or paid
during 1997 to River Associates, LLC through the Closing Date and
(b) all expenditures and accruals directly related to the opening
of the Baytown, Texas store in accordance with the Baytown Budget,
as hereafter defined (the construction budget with respect to such
store being set forth on Schedule 1.2 hereto (the "Baytown
Budget")) (the amount calculated pursuant to this Section 1.2, the
"Post-Closing Price Adjustment"). Sellers will prepare and deliver
to Buyer no later than five days prior to Closing an estimated
closing price adjustment (the "Estimated Closing Price Adjustment")
together with Sellers' work sheets and explanation relating to such
Estimated Closing Price Adjustment. Sellers will consider any
concerns expressed by Buyer with respect to the Estimated Closing
Price Adjustment and will value any adjustments thereto as both
parties may agree to be appropriate.
1.3 Post-Closing Price Adjustment.
(a) Within thirty (30) days following the Closing (as
defined below), the Sellers shall prepare a balance sheet of the
Company at the close of business on the Closing Date (the "Closing
Date Balance Sheet"). The Closing Date Balance Sheet shall be
prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP"). Seller shall promptly
deliver a copy of the Closing Date Balance Sheet to Buyer.
(b) Following completion of the Closing Date Balance
Sheet in accordance with Section 1.3(a) above, Sellers shall
determine the Post-Closing Price Adjustment which will indicate any
difference between the Estimated Closing Price Adjustment and the
Post-Closing Price Adjustment (the "Closing Price Difference").
Sellers shall submit the Post-Closing Price Adjustment to Buyer, at
the same time as delivery of the Closing Date Balance Sheet and if
Buyer does not object to the amount of the Post-Closing Price
Adjustment within twenty (20) days of receipt thereof, Sellers
shall pay to Buyer, or Buyer shall pay to Sellers as the case may
be, not later than thirty (30) days following receipt of the Post-Closing
Price Adjustment, an amount in cash equal to the Closing
Price Difference.
(c) If Buyer objects to the Post-Closing Price
Adjustment, it shall notify Seller within twenty (20) days
following receipt thereof, setting forth in specific detail the
bases for its objection and its proposal for any adjustments to the
Post-Closing Price Adjustment. Buyer and Sellers shall use their
best efforts to reach agreement as to any such proposed adjustment
or that no such adjustment is necessary. If agreement is reached
as to all proposed further adjustments, the parties shall make such
adjustments and the Post-Closing Price Adjustment shall be based
thereon. If Buyer and Sellers are unable to reach agreement within
thirty (30) days, then an accountant with a Big Six Accounting Firm
not used by Buyer or Sellers or such other accounting firm as
agreed upon by Buyer and Sellers (the "Third Party Accountant")
shall be engaged to review the proposed adjustments as to which
agreement has not been reached and shall make a determination as to
the resolution of the proposed adjustments to cause the Post-Closing Price
Adjustment to have been properly prepared in
accordance with the provisions of this Agreement. All resolutions
shall represent either agreement with the position taken by Buyer
or Sellers or a compromise of such positions. The determination of
the Third Party Accountant shall be final, conclusive and binding
upon Buyer and Sellers. Thereafter, Sellers shall pay to Buyer, or
Buyer shall pay to Sellers, as the case may be, not later than ten
(10) days following a determination of adjustments by the Third
Party Accountant, an amount in cash equal to the Closing Price
Difference, as determined by the Third Party Accountant. Buyer and
Sellers shall share equally the costs of the Third Party Accountant
hereunder.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
(A) Representations and Warranties of the Company and
Sellers. The Company and each Seller except JCB Venture
Partnership III, ▇. ▇. ▇▇▇▇▇▇▇▇ Company, ▇▇▇▇▇ ▇▇▇▇▇▇, and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇ Group") severally and not jointly represent
and warrant to Buyer as follows:
2.1 Authorization. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its
terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, (ii) the remedy of specific
performance and injunctive relief are subject to certain equitable
defenses and to the discretion of the court before which any
proceedings may be brought and (iii) rights to indemnification
hereunder may be limited under applicable securities laws (the
items described in clauses (i) through (iii) hereof, the "Equitable
Exceptions"). The Company has full corporate power, capacity and
authority to execute this Agreement and all other agreements and
documents contemplated hereby.
2.2 Organization, Existence and Good Standing of the Company.
The Company is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation
with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. The Company is duly qualified or licensed as a foreign
corporation and in good standing in each jurisdiction in which the
character or location of the property owned, leased or operated by
it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to be so duly
qualified or licensed would not have a material adverse effect on
the business, operations, properties, assets or condition
(financial or otherwise), or results of operations of the Company
taken as a whole (a "Material Adverse Effect"). Set forth on
Schedule 2.2 is a list of the jurisdictions in which the Company is
qualified or licensed to do business as a foreign corporation. Set
forth in Schedule 2.2 is a listing to the Company's knowledge of
all names of all predecessor companies for the past five (5) years
of the Company, including the names of any entities from whom the
Company previously acquired material assets. In addition, set
forth on Schedule 2.2 is a complete list of all the names under
which the Company does or has done business. Except as disclosed
in Schedule 2.2, the Company has not been a subsidiary or division
of another corporation or a part of an acquisition which was later
rescinded. Except as set forth on Schedule 2.2 the minute books of
the Company, as heretofore made available to Buyer, are correct and
complete in all material respects.
2.3 Capital Stock of the Company.
The Company's authorized capital stock consists of one
million five hundred thousand (1,500,000) shares of Common
Stock, no par value, of which one million one hundred forty-nine
thousand three hundred twenty-one (1,149,321) shares
shares are issued and outstanding and one million one hundred
fifty-six thousand three hundred twenty-one (1,156,321) will
be issued and outstanding on the Closing Date. All of the
Company Shares have been validly issued and are fully paid and
nonassessable and no holder thereof is entitled to any
preemptive rights (except as described in Schedule 2.3 and any
statutory preemptive rights, which Sellers hereby waive).
There are no outstanding conversion or exchange rights,
subscriptions, options, warrants or other arrangements or
commitments obligating the Company to issue any shares of
capital stock or other securities or to purchase, redeem or
otherwise acquire any shares of capital stock or other
securities, or to pay any dividend or make any distribution in
respect thereof, except as set forth on Schedule 2.3.
2.4 Subsidiaries. Except as set forth on Schedule 2.4, the
Company does not presently own, of record or beneficially, or
control directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any
corporation, association or business entity nor is the Company,
directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
2.5 Financial Statements.
(a) The Company has previously furnished to Buyer the
audited balance sheet of the Company as of December 29, 1996 and
the related statements of operations, shareholders' equity and cash
flows for the three (3) fiscal years then ended, each as audited by
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Company, certified public accountants, together
with the Company's unaudited balance sheets, management's
statements of operations and shareholders' equity for the five-month
period ended May 25, 1997 (collectively, the "Financial
Statements"). The Financial Statements present fairly the
financial position and results of operations of the Company as of
the indicated dates and for the indicated periods and have been
prepared in accordance with GAAP except as set forth in the notes
thereto or on Schedule 2.5 except that the interim statements are
subject to year end adjustments and do not contain notes. The
Company has previously permitted Buyer full access to papers
pertaining to the Financial Statements, including those work papers
in the possession of or prepared by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Company.
(b) Except to the extent (and not in excess of the
amounts) reflected in the December 29, 1996 balance sheet included
in the Financial Statements or as disclosed on Schedule 2.5, the
Company has no liabilities or obligations (including, without
limitation, Taxes (as defined in Section 2.8) payable and deferred
Taxes and interest accrued since December 29, 1996) required to be
reflected in the Financial Statements (or the notes thereto) in
accordance with GAAP other than current liabilities incurred in the
ordinary course of business, consistent with past practice,
subsequent to December 29, 1996.
2.6 No Brokers. Sellers and the Company have engaged or
consulted with no broker or finder other than any for whom Sellers
will be solely responsible for or fees or expenses in connection
with the transactions contemplated by this Agreement.
2.7 Permits. To the best of the Sellers' knowledge the
Company holds all licenses (including all licenses pertaining to
the sale of alcoholic beverages), franchises, permits and other
governmental authorizations necessary to operate its properties and
carry on its business as now being conducted, the absence of any of
which would have a Material Adverse Effect (the "Material
Permits"). An accurate list and summary description is set forth
on Schedule 2.7 hereto of all such Material Permits. The Material
Permits are valid, and the Company has not received any notice that
any governmental authority intends to cancel, terminate or not
renew any such Material Permit. The Company has conducted and is
conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in all applicable
licenses, franchises, permits, orders, approvals, variances, rules
and regulations and is not in violation of any of the foregoing
except where such noncompliance or violation would not have a
Material Adverse Effect. Except as specifically provided on
Schedule 2.7, the transactions contemplated by this Agreement will
not result in a default under or a breach or violation of, or
adversely affect the rights and benefits afforded to the Company
by, any such Material Permits. Except as set forth on
Schedule 2.7, within the twelve months preceding the date of this
Agreement, the Company has not received any written notice or
request from any fire marshal, board of fire underwriters or other
Agency (as defined in Section 2.15 hereof) requiring work to be
undertaken with respect to the assets or properties of the Company.
2.8 Tax Matters.
(a) The Company has filed all income tax returns
required to be filed by the Company and all returns of other Taxes
(as defined below) required to be filed by the Company and has paid
or provided for all Taxes shown to be due on such returns and all
such returns are accurate and correct in all material respects.
Except as set forth on Schedule 2.8, (i) no action or proceeding
for the assessment or collection of any Taxes is pending against
the Company; (ii) no deficiency, assessment or other formal claim
for any Taxes has been asserted or made against the Company that
has not been fully paid or finally settled; and (iii) no issue has
been formally raised in writing or, to the best of Seller's
knowledge, orally, by any taxing authority in connection with an
audit or examination of any return of Taxes. No federal, state or
foreign income tax returns of the Company have been examined, and
there are no outstanding agreements or waivers extending the
applicable statutory periods of limitation for such Taxes for any
period. All Taxes that the Company has been required to collect or
withhold have been duly withheld or collected and, to the extent
required, have been paid to the proper taxing authority. No Taxes
will be assessed on or after the Closing Date against the Company
for any tax period ending on or prior to the Closing Date other
than for Taxes accrued in the Financial Statements or disclosed on
Schedule 2.8. For purposes of this Agreement, "Taxes" shall mean
all taxes, charges, fees, levies or other assessments including,
without limitation, income, excise, property, withholding, sales
and franchise taxes, imposed by the United States, or any state,
county, local or foreign government or subdivision or agency
thereof, and including any interest, penalties or additions
attributable thereto.
(b) The Company is not a party to any Tax allocation or
sharing agreement.
(c) The Company has substantial authority for the
treatment of, or has disclosed (in accordance with
Section 6662(d)(2)(B)(ii) of the Code) on its Federal income
returns, all positions taken therein that could give rise to a
substantial understatement of Federal income tax within the meaning
of Section 6662(d) of the Code.
(d) The Company has not been a member of an affiliated
group filing a consolidated federal income tax return and does not
have any liability for Taxes for any Person other than the Company
(i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign law), (ii) as a
transferee or successor, (iii) by contract or (iv) otherwise.
(e) The Company's Tax basis in its assets for purposes
of determining its future amortization, depreciation and other
federal income Tax deductions is accurately reflected in all
material respects on the Company's Tax books and records.
2.9 Assets and Properties.
(a) Real Property. Schedule 2.9 contains a list of all
real properties owned by the Company (the "Real Property"). Except
as set forth on Schedule 2.9, the company has good and marketable
fee simple title to all Real Property and none of the Real Property
is subject to any Lien, except as set forth on Schedule 2.9.
(b) Personal Property. Except as set forth on
Schedule 2.9, and except for inventory and supplies disposed of or
consumed, and accounts receivable collected or written off, and
cash utilized, all in the ordinary course of business consistent
with past practice, the Company owns all of its inventory,
equipment and other personal property (both tangible and
intangible) reflected on the latest balance sheet included in the
Financial Statements or acquired since December 29, 1996, free and
clear of any Liens, except for statutory Liens for current taxes,
assessments or governmental charges or levies on property not yet
due and payable.
(c) Condition of Properties. Except as shown on
Schedule 2.9, the Real Property and all improvements thereto and
the leasehold estates which are the subject of the Real Property
Leases (as defined in Section 2.10) and the tangible personal
property owned or leased by the Company are in good operating
condition and repair, ordinary wear and tear excepted.
(d) Compliance. The current use, operation and
occupancy of the Real Property, the improvements thereto and the
leasehold estates which are the subject of the Real Property Leases
do not violate any zoning, building, health, flood control, fire or
other law, ordinance, order or regulation or any restrictive
covenant, except where such violations, individually or in the
aggregate, would not have a Material Adverse Effect. No written
notice of any such violation has been received from any
governmental authority.
2.10 Real Property Leases; Options. Schedule 2.10 sets forth
a list (i) all leases and subleases under which the Company is
lessor or lessee or sublessor or sublessee of any real property,
together with all amendments, supplements, nondisturbance
agreements, brokerage and commission agreements and other
agreements pertaining thereto ("Real Property Leases"); (ii) all
material options held by the Company or contractual obligations on
the part of the Company to purchase or acquire any interest in real
property; and (iii) all options granted by the Company or
contractual obligations on the part of the Company to sell or
dispose of any material interest in real property. Copies of all
Real Property Leases and such options and contractual obligations
have been delivered to Buyer. The Company has not assigned any
Real Property Leases or any such options or obligations. Except as
shown on Schedule 2.10 there are no liens on the interest of the
Company in the Real Property Leases, subject only to (i) Liens for
taxes and assessments not yet due and payable and (ii) those
matters set forth on Schedule 2.10. The Real Property Leases and
options and contractual obligations listed on Schedule 2.10 are in
full force and effect and constitute binding obligations of the
Company and to the Sellers and Company's best knowledge the other
parties thereto, and (x) there are no defaults by the Company
thereunder and (y) no event has occurred that with notice, lapse of
time or both would constitute a default by the Company or, to the
best knowledge of the Company and Sellers, by any other party
thereto.
2.11 Environmental Laws and Regulations.
(a) (i) Except as disclosed on the environmental
reports made available to or procured by Buyer, to the Sellers and
Company's best knowledge during the occupancy and operation of the
"Subject Property" (as defined below) by the Company and, prior to
its occupancy and operation, the operations of the Subject
Property, and any use, storage, treatment, disposal or
transportation of "Hazardous Substances" (as defined below) that
has occurred in or on the Subject Property prior to the date of
this Agreement have been in compliance with "Environmental
Requirements" (as defined below); (ii) to the Sellers and Company's
best knowledge during the occupancy and operation of the Subject
Property by the Company and, prior to its occupancy or operation,
no release, leak, discharge spill, disposal or emission of
Hazardous Substances has occurred in, on or under the Subject
Property in a quantity or manner that violates or requires further
investigation or remediation under Environmental Requirements;
(iii) to the Sellers and Company's best knowledge the Subject
Property is free of Hazardous Substances as of the date of this
Agreement, except for the presence of small quantities of Hazardous
Substances utilized by the Company or other tenants of the Subject
Property in the ordinary course of their business; (iv) there is no
pending or to the Sellers and Company's best knowledge threatened
litigation or administrative investigation or proceeding concerning
the Subject Property involving Hazardous Substances or
Environmental Requirements; (v) to the best knowledge of the
Company and Sellers, there are no above-ground or underground
storage tank systems located at the Subject Property; (vi) except
as set forth on Schedule 2.11, the Company has never owned,
operated, or leased any real property other than the Subject
Property; and (vii) to the Sellers and Company's best knowledge the
Company's transportation to or disposal at any off-site location of
any Hazardous Substances from property now or formerly owned,
operated or leased by the Company at the time of the Company's
ownership, operation or lease thereof was conducted in substantial
compliance with applicable Environmental Requirements, except where
a failure to comply would not have a Material Adverse Effect.
(b) Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Environmental Requirements" means all laws, statutes,
rules, regulations, ordinances, guidance documents, judgments,
decrees, orders, agreements and other restrictions and
requirements (in effect on the Closing Date) of any
governmental authority, including, without limitation,
federal, state and local authorities, relating to the
regulation or protection of human health and safety, natural
resources, conservation, the environment, or the storage,
treatment, disposal, transportation, handling or other
management of industrial or solid waste, hazardous waste,
hazardous or toxic substances or chemicals, or pollutants.
"Hazardous Substance" means (i) any "hazardous substance"
as defined in S101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, in effect
on the Closing Date (42 U.S.C. SS 9601 et seq.) ("CERCLA") or
any regulations promulgated thereunder, or the Occupational
Safety and Health Act of 1970, in effect on the Closing Date
(29 U.S.C. S 651 et seq.), or any regulations promulgated
thereunder; (ii) petroleum and petroleum by-products; or (iii)
any additional substances or materials that have been or are
currently classified or considered to be pollutants, hazardous
or toxic under Environmental Requirements.
"Subject Property" means the properties listed on
Schedules 2.9, 2.10 and 2.11.
2.12 Contracts.
(a) Set forth on Schedule 2.12(a) is a list of all
material contracts, agreements, arrangements and commitments
(whether oral or written) to which the Company is a party or by
which its assets or business are bound including, without
limitation, contracts, agreements, arrangements or commitments (the
following, "Contracts") that relate to (i) the sale, lease or other
disposition by the Company of all or any substantial part of its
business or assets (other than in the ordinary course of business)
or the maintenance thereof, (ii) the purchase or lease by the
Company of a substantial amount of assets (other than in the
ordinary course of business), (iii) the supply by the Company of
any customer's requirements for any item or the purchase by the
Company of its requirements for any item or of a vendor's output of
any item, (iv) lending or advancing funds by the Company, (v)
borrowing of funds or guaranteeing the borrowing of funds by any
other person, whether under an indenture, note, loan agreement or
otherwise, (vi) any transaction or matter with any affiliate of the
Company, (vii) noncompetition, (viii) licenses and grants to or
from the Company relating to any intangible property listed on
Schedule 2.17, (ix) the acquisition by the Company of any operating
business or the capital stock of any person since December 29,
1996, or (x) any other matter that is material to the business,
assets or operations of the Company, taken as a whole.
(b) Except as set forth on Schedule 2.12(b), each
Contract is in full force and effect on the date hereof, the
Company is not in default under any Contract, the Company has not
given or received notice of any default under any Contract, and, to
the knowledge of the Company and Sellers, no other party to any
Contract is in default thereunder.
2.13 No Violations. The execution, delivery and performance
of this Agreement and the other agreements and documents
contemplated hereby by the Company and the Sellers and the
consummation of the transactions contemplated hereby will not (i)
violate any provision of any Charter Document, (ii) violate any
statute, rule, regulation, order or decree of any public body or
authority by which the Company or the Sellers or its or their
respective properties or assets are bound, or (iii) except as set
forth on Schedule 2.13, result in a violation or breach of, or
constitute a default under, or result in the creation of any
encumbrance upon, or create any rights of termination, cancellation
or acceleration in any person with respect to any Contract or any
Material Permit of the Company or any other agreement, contract,
indenture, mortgage or instrument to which the Company is a party
or by which any of its properties or assets is bound.
2.14 Consents. Except as set forth on Schedule 2.14, no
consent, approval or other authorization of any governmental
authority or under any Contract or other agreement or commitment to
which the Company or Sellers are parties or by which its or their
respective assets are bound is required as a result of or in
connection with the execution or delivery of this Agreement and the
other agreements and documents to be executed by the Company and
Sellers or the consummation by the Company and Sellers of the
transactions contemplated hereby.
2.15 Litigation and Related Matters. Set forth on
Schedule 2.15 is a list of all actions, suits (excluding
garnishments of employee wages), proceedings, investigations or
grievances pending against the Company or, to the best knowledge of
the Company and Sellers, threatened against the Company, the
business or any property or rights of the Company, at law or in
equity, before or by any arbitration board or panel, court or
federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign ("Agencies"). None of the actions, suits, proceedings or
investigations listed on Schedule 2.15 either (i) results in or
would, if adversely determined, have a Material Adverse Effect or
(ii) affects or would, if adversely determined, affect the right or
ability of the Company to carry on its business substantially as
now conducted. The Company is not subject to any continuing court
or Agency order, writ, injunction or decree applicable specifically
to its business, operations or assets or its employees, nor in
default with respect to any order, writ, injunction or decree of
any court or Agency with respect to its assets, business,
operations or employees.
2.16 Compliance with Laws. The Company is in compliance with
all applicable laws, regulations, orders, judgments and decrees,
except where the failure to so comply would not have a Material
Adverse Effect.
2.17 Intellectual Property Rights. Schedule 2.17 lists the
domestic and foreign trade names, trademarks, service marks,
trademark registrations and applications, service ▇▇▇▇
registrations and applications, patents, patent applications,
patent licenses, software licenses and copyright registrations and
applications owned by the Company or used thereby in the operation
of its business (collectively, the "Intellectual Property"), which
Schedule indicates (i) the term and exclusivity of its rights with
respect to the Intellectual Property and (ii) whether each item of
Intellectual Property is owned or licensed by the Company, and if
licensed, the licensor and the license fees therefor. Unless
otherwise indicated on Schedule 2.17, the Company has the right to
use and license the Intellectual Property, and the consummation of
the transactions contemplated hereby will not result in the loss or
material impairment of any rights of the Company in the
Intellectual Property. Each item constituting part of the
Intellectual Property has been, to the extent indicated on
Schedule 2.17, registered with, filed in or issued by, as the case
may be, the United States Patent and Trademark Office or such other
government entity, domestic or foreign, as is indicated on
Schedule 2.17; all such registrations, filings and issuances remain
in full force and effect; and all fees and other charges with
respect thereto are current. Except as stated on Schedule 2.17,
there are no pending proceedings or adverse claims made in writing
or, to the best knowledge of the Company and Sellers, threatened
against the Company with respect to the Intellectual Property;
there has been no litigation commenced or threatened in writing
since May 7, 1994 with respect to the Intellectual Property or the
rights of the Company therein; and the Company and Sellers have no
knowledge that (i) the Intellectual Property or the use thereof by
the Company conflicts with any trade names, trademarks, service
marks, trademark or service ▇▇▇▇ registrations or applications,
patents, patent applications, patent licenses or copyright
registrations or applications of others ("Third Party Intellectual
Property"), in a way that could have a Material Adverse Effect or
(ii) such Third Party Intellectual Property or its use by others or
any other conduct of a third party conflicts with or infringes upon
the Intellectual Property or its use by the Company in a way that
could have a Material Adverse Effect.
2.18 Employee Benefit Plans. Each employee benefit plan within
the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained or
contributed to by the Company or any of its Group Members (as
defined below) (collectively, the "Plans") is listed on
Schedule 2.18, is in substantial compliance with applicable law and
has been administered and operated in all material respects in
accordance with its terms. Each Plan that is intended to be
"qualified" within the meaning of Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue
Service (the "IRS") and no event has occurred and no condition
exists that could be reasonably expected to result in the
revocation of any such determination. No event that constitutes a
"reportable event" (within the meaning of Section 4043(b) of ERISA)
for which the 30-day notice requirement has not been waived by the
Pension Benefit Guaranty Corporation (the "PBGC") has occurred with
respect to any Plan. No Plan is subject to Title IV of ERISA, and
neither the Company nor any Group Member has made any contributions
to or participated in any "multiple employer plan" (within the
meaning of the Code or ERISA) or "multi-employer plan" (as defined
in Section 4001(a)(3) of ERISA). Full payment has been made of all
amounts that the Company was required under the terms of the Plans
to have paid as contributions to such Plans on or prior to the date
hereof (excluding any amounts not yet due) and all amounts properly
accrued to date as liabilities of the Company that have not been
paid have been properly recorded on the Financial Statements, and
no Plan that is subject to Part 3 of Subtitle B of Title 1 of ERISA
has incurred any "accumulated funding deficiency" (within the
meaning of Section 302 of ERISA or Section 412 of the Code),
whether or not waived. Neither the Company nor, to the knowledge
of the Company and Sellers, any other "disqualified person" or
"party in interest" (within the meaning of Section 4975(e)(2) of
the Code and Section 3(14) of ERISA, respectively) has engaged in
any transactions in connection with any Plan that could be expected
to result in the imposition of a material penalty pursuant to
Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA
or a tax pursuant to Section 4975(a) of the Code. No material
claim, action, proceeding, or litigation has been made, commenced
or, to the knowledge of the Company and Sellers, threatened with
respect to any Plan (other than for benefits payable in the
ordinary course and PBGC insurance premiums). No Plan or related
trust owns any securities in violation of Section 407 of ERISA. To
the best knowledge of Sellers, neither the Company nor any Group
Member has incurred any liability or taken any action, or has any
knowledge of any action or event, that could cause it to incur any
liability (i) under Section 412 of the Code or Title IV of ERISA
with respect to any "single employer plan" (within the meaning of
Section 4001(a)(15) of ERISA), (ii) on account of a partial or
complete withdrawal (within the meaning of Section 4205 and 4203 of
ERISA, respectively) with respect to any "multi-employer plan"
(within the meaning of Section 3(37) of ERISA), (iii) on account of
unpaid contributions to any such multi-employer plan, or (iv) to
provide health benefits or other non-pension benefits to retired or
former employees, except as specifically required by
Section 4980B(f) of the Code. Except as set forth on
Schedule 2.18, neither the execution and delivery of this Agreement
by the Company or the consummation of the transactions contemplated
hereby will (i) entitle any current or former employee of the
Company to severance pay, unemployment compensation or any similar
payment, (ii) accelerate the time of payment or vesting, or
increase the amount of, any compensation due to any such employee
or former employee, or (iii) directly or indirectly result in any
payment made or to be made to or on behalf of any person to
constitute a "parachute payment" (within the meaning of
Section 280G of the Code). For purposes of this Agreement, "Group
Member" shall mean any member of any "affiliated service group" as
defined in Section 414(m) of the Code that includes the Company,
any member of any "controlled group of corporations" as defined in
Section 414(b) of the Code that includes the Company or any member
of any group of "trades or businesses under common control" as
defined by Section 414(c) of the Code that includes the Company.
2.19 Employees; Employee Relations.
(a) Schedule 2.19 sets forth (i) the name, hire date and
current annual salary (or rate of pay) and other compensation
(including, without limitation, normal bonus, profit-sharing and
other compensation) now payable by the Company to each salaried
employee, (ii) any increase to become effective after the date of
this Agreement in the total compensation or rate of total
compensation payable by the Company to each such person, (iii) any
increase to become payable after the date of this Agreement by the
Company to employees other than those specified in clause (i) of
this Section 2.19(a), (iv) all presently outstanding loans and
advances (other than routine travel advances to be repaid or
formally accounted for within sixty (60) days) made by the Company
to, or made to the Company by, any director, officer or employee,
(v) all other material and/or extraordinary transactions between
the Company and any director, officer or employee thereof since
December 29, 1996, and (vi) all accrued but unpaid vacation pay
owing to any employee that is not accrued in the Financial
Statements.
(b) Except as disclosed on Schedule 2.19, the Company is
not a party to, or bound by, the terms of any collective bargaining
agreement, and the Company has not experienced any material labor
difficulties during the last five (5) years. Except as set forth
on Schedule 2.19, there are no labor disputes existing, or to the
best knowledge of the Company and Sellers, threatened involving, by
way of example, strikes, work stoppages, slowdowns, picketing, or
any other interference with work or production, or any other
concerted action by employees. No charges or proceedings before
the National Labor Relations Board, or similar agency, exist, or to
the best knowledge of the Company and Sellers, are threatened.
(c) The Company and Sellers have no knowledge of any
facts that would indicate that the employees of the Company will
not continue in the employ thereof following the Closing on a basis
similar to that existing on the date of this Agreement. Except as
disclosed on Schedule 2.19, the Company is not a party to any
employment contract with any individual or employee, either express
or implied. No legal proceedings, formal written charges, formal
written complaints or similar actions which could have a Material
Adverse Effect exist under any federal, state or local laws
affecting the employment relationship including, but not limited
to: (i) anti-discrimination statutes such as Title VII of the Civil
Rights Act of 1964, as amended (or similar state or local laws
prohibiting discrimination because of race, sex, religion, national
origin, age and the like); (ii) the Fair Labor Standards Act or
other federal, state or local laws regulating hours of work, wages,
overtime and other working conditions; (iii) requirements imposed
by federal, state or local governmental contracts such as those
imposed by Executive Order 11246; (iv) state laws with respect to
tortious employment conduct, such as slander, harassment, false
light, invasion of privacy, negligent hiring or retention,
intentional infliction of emotional distress, assault and battery,
or loss of consortium; or (v) the Occupational Safety and Health
Act, as amended, as well as any similar state laws, or other
regulations respecting safety in the workplace; and to the best
knowledge of the Company and Sellers, no proceedings, charges, or
complaints are threatened under any such laws or regulations and no
facts or circumstances exist that would give rise to any such
proceedings, charges, complaints, or claims, whether valid or not
which could have a Material Adverse Effect. Except as shown
Schedule 2.19(c) on The Company is not subject to any settlement or
consent decree with any present or former employee, employee
representative or any government or Agency relating to claims of
discrimination or other claims in respect to employment practices
and policies; and no government or Agency has issued a judgment,
order, decree or finding with respect to the labor and employment
practices (including practices relating to discrimination) of the
Company. Since December 29, 1996, the Company has not incurred any
liability or obligation under the Worker Adjustment and Retraining
Notification Act or similar state laws; and the Company has not
laid off more than ten percent (10%) of its employees at any single
site of employment in any ninety (90) day period since December 29,
1996.
(d) To the best of the Company's knowledge, the Company
is in compliance in all material respects with the provisions of
the Americans with Disabilities Act.
2.20 Insurance. Schedule 2.20 contains an accurate list of
the policies and contracts (including insurer, named insured, type
of coverage, limits of insurance, required deductibles or co-payments,
annual premiums and expiration date) for fire, casualty,
liability, worker's compensation and other forms of insurance
maintained by, or for the benefit of, the Company. All such
policies are in full force and effect and shall remain in full
force and effect through the Closing Date and are adequate for the
business engaged in by the Company. Neither the Company nor
Sellers have received any notice of cancellation or non-renewal or
of significant premium increases with respect to any such policy.
Except as disclosed on Schedule 2.20, no pending claims made by or
on behalf of the Company under such policies have been denied or
are being defended against third parties under a reservation of
rights by an insurer thereof. All premiums due prior to the date
hereof for periods prior to the date hereof with respect to such
policies have been timely paid.
2.21 Interests in Customers, Suppliers, Etc. Except as set
forth on Schedule 2.21, no shareholder, officer, director or
affiliate of the Company possesses, directly or indirectly, any
financial interest in, or is a director, officer, employee or
affiliate of, any corporation, firm, association or business
organization that is a supplier, customer, lessor, lessee or
competitor of the Company. Ownership of securities of a
corporation whose securities are registered under the Securities
Exchange Act of 1934 not in excess of five percent (5%) of any
class of such securities shall not be deemed to be a financial
interest for purposes of this Section 2.21.
2.22 Business Relations. Except as set forth on
Schedule 2.22, to the best knowledge of the Company and Sellers, no
supplier of the Company has or will cease to do business therewith
after the consummation of the transactions contemplated hereby,
which cessation would have a Material Adverse Effect. Except as
set forth on Schedule 2.22, since December 29, 1996, the Company
has not experienced any difficulties in obtaining any inventory
items necessary to the operation of its business, and, to the best
knowledge of the Company and Sellers, no such shortage of supply of
inventory items is threatened or pending. The Company is not
required to provide any bonding or other financial security
arrangements in any material amount in connection with any
transactions with any of its suppliers.
2.23 Officers and Directors. Set forth on Schedule 2.23 is a
list of the current officers and directors of the Company.
2.24 Bank Accounts and Powers of Attorney. Schedule 2.24 sets
forth each bank, savings institution and other financial
institution with which the Company has an account or safe deposit
box and the names of all persons authorized to draw thereon or to
have access thereto. Each person holding a power of attorney or
similar grant of authority on behalf of the Company is identified
on Schedule 2.24. Except as disclosed on such Schedule, the
Company has not given any revocable or irrevocable powers of
attorney to any person, firm, corporation or organization relating
to its business for any purpose whatsoever.
2.25 Absence of Certain Changes or Events. Except as set
forth on Schedule 2.25 or as otherwise contemplated by this
Agreement, since December 29, 1996, there has not been any (a)
damage, destruction or casualty loss to the physical properties of
the Company (whether or not covered by insurance), in excess of
$10,000 for each restaurant location, (b) event or circumstance
that has had or could reasonably be expected to have a Material
Adverse Effect, (c) entry into any transaction, commitment or
agreement (including, without limitation, any borrowing) material
to the Company, except transactions, commitments or agreements in
the ordinary course of business consistent with past practice, (d)
declaration, setting aside or payment of any dividend or other
distribution in cash, stock or property with respect to the capital
stock or other securities of the Company, any repurchase,
redemption or other acquisition by the Company of any capital stock
or other securities, or any agreement, arrangement or commitment by
the Company to do so, (e) increase that is material in the
compensation payable or to become payable by the Company to its
directors, officers, employees or agents or any increase in the
rate or terms of any bonus, pension or other employee benefit plan,
payment or arrangement made to, for or with any such directors,
officers, employees or agents, except as set forth on
Schedule 2.25, (f) sale, transfer or other disposition of, or the
creation of any Lien upon, any part of the assets of the Company,
tangible or intangible, except for sales of inventory and use of
supplies and collections of accounts receivables in the ordinary
course of business consistent with past practice, or any
cancellation or forgiveness of any debts or claims by the Company,
(g) loss of its material suppliers which cannot be readily replaced
upon substantially the same terms and conditions, or any loss of
business or increase in the cost of inventory items or change in
the terms offered to customers, which would have a Material Adverse
Effect, or (h) except for expenditure pursuant to the Baytown
Budget and budgeted capital expenditure disclosed to Buyer, capital
expenditure (including any capital leases) or commitment therefor
by the Company in excess of $50,000.
2.26 Disclosure. All written agreements, lists, schedules,
instruments, exhibits, documents, certificates, reports, statement
and other writings furnished to Buyer pursuant hereto or in
connection with this Agreement or the transactions contemplated
hereby are and will be complete and accurate in all material
respects. No representation or warranty by Sellers and the Company
contained in this Agreement, in the schedules attached hereto or in
any certificate furnished or to be furnished by Sellers or the
Company to Buyer in connection herewith or pursuant hereto contains
or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make any
statement contained herein or therein not misleading.
(B) Representations and Warranties of Sellers. Each Seller,
including each member of the Bradford Group, severally and not
jointly represents and warrants as more specifically set forth
hereafter that the representations and warranties in this
Article II(B) as they apply to it, him or her are true and correct
as of the date of this Agreement and at the time of the Closing.
2.27 Authority; Ownership. Each Seller has the full legal
right, power and authority to enter into this Agreement. Each
Seller owns beneficially (subject to any community property
interest of Seller's spouse) and of record the Company Shares set
forth opposite such Seller's name on Annex "A", and, except as set
forth on Schedule 2.27 hereof, such Company Shares owned by Seller
are owned free and clear of all Liens other than standard state and
federal securities laws private offering restrictions. This
Agreement has been duly executed and delivered by Seller and
constitutes the valid and binding obligation of Seller, enforceable
in accordance with its terms, except that (i) such enforcement may
be subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, (ii) the
remedies of specific performance and injunctive relief are subject
to certain equitable defenses and to the discretion of the court
before which any proceedings may be brought and (iii) rights to
indemnification hereunder may be limited under applicable
securities laws (the items described in clauses (i) through (iii)
hereof, the "Equitable Exceptions"). Seller acknowledges that any
shareholder agreement to which he, she or it is a party relating to
the Company Shares will no longer be effective at or following the
Closing.
2.28 Preemptive Rights. Seller does not have, or hereby
waives, any preemptive or other right to acquire Company Shares
that such Seller has or may have had.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 Organization and Authorization. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Texas with all requisite corporate power and
authority to own, lease and operate its properties and to carry on
its business as now being conducted. Buyer has all requisite
corporate power, capacity and authority to execute and deliver this
Agreement and all other agreements and documents contemplated
hereby. The execution and delivery of this Agreement and such
other agreements and documents by Buyer and the consummation by
Buyer of the transactions contemplated hereby have been duly
authorized by Buyer and no other corporate action on the part of
Buyer is necessary to authorize the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
Buyer and constitutes the valid and binding obligation of Buyer,
enforceable in accordance with its terms, subject to the Equitable
Exceptions.
3.2 No Violations. The execution and delivery of this
Agreement and the other agreements and documents contemplated
hereby by Buyer and the consummation of the transactions
contemplated hereby will not (a) violate any provision of the
Articles of Incorporation or Bylaws of Buyer, (b) violate any
statute, rule, regulation, order or decree of any public body or
authority by which Buyer or its properties or assets are bound, or
(c) result in a violation or breach of, or constitute a default
under or result in the creation of any encumbrance upon, or create
any rights of termination, cancellation or acceleration in any
person with respect to any agreement, contract, indenture, mortgage
or instrument to which Buyer is a party or any of its properties or
assets is bound.
3.3 Consents. Except as set forth on Schedule 3.3, no
consent, approval or other authorization of any governmental
authority or third party is required as a result of or in
connection with the execution and delivery of this Agreement and
the other agreements and documents to be executed by Buyer or the
consummation by Buyer of the transactions contemplated hereby.
3.4 Investment Intent. Buyer is purchasing the shares of the
Company with investment intent and not with a view to distribution.
3.5 Available funds. Buyer has secured commitments for funds
necessary to consummate the transactions pursuant to this Agreement
3.6 Broker. Other than Wyndcrest Partners, Ltd., whose fees
and expenses will be paid by the Buyer, Buyer has not engaged or
consulted with any broker or finder in connection with the
transaction contemplated by this Agreement.
ARTICLE IV.
COVENANTS OF THE PARTIES
4.1 Course of Conduct by the Company. Except as set forth on
Schedule 4.1, from April 29, 1997 through and until the Closing
Date, except as approved in writing by Buyer or as otherwise
permitted or contemplated by this Agreement, the Company's business
shall be conducted only in the ordinary course of business
consistent with past practice, and Sellers shall cause the Company
to comply with the following covenants:
(a) Capital Expenditures. Except for expenditures
pursuant to the Baytown Budget and budgeted capital expenditures
disclosed to Buyer, the Company shall not make any capital
expenditures or commitments therefor (other than with respect to
the items set forth on the Baytown Budget) which, when combined
with capital expenditures or commitments therefor after May 1, 1997
would exceed $50,000.
(b) Certificate of Incorporation; Bylaws. The Company
shall not make any change in its Certificate of Incorporation or
Bylaws.
(c) Stock Issuance: Redemptions: Reorganizations. The
Company shall not (i) issue, grant or dispose of, or make any
agreement, arrangement or commitment obligating the Company to
issue, grant or dispose of any capital shares or other securities
of the Company, (ii) redeem or acquire, or make any agreement,
arrangement or commitment obligating the Company to redeem or
acquire, any shares of capital stock or other securities of the
Company, or (iii) authorize or effect or make any agreement,
arrangement or commitment obligating the Company to effect, any
reorganization, recapitalization or split-up of such capital stock
of the Company.
(d) Employee Matters. The Company shall not (i) except
for increases in the ordinary course or in compensation of
employees required under any collective bargaining agreement listed
on Schedule 2.19, make any increase that is material in the
compensation payable or to become payable to any of the officers,
employees, or agents of the Company, or (ii) make, amend or enter
into any employment contract or any bonus, incentive, stock option,
profit sharing, pension, retirement, stock purchase,
hospitalization, medical reimbursement, insurance, severance
benefit or other similar plan or arrangement or make any voluntary
contribution to any such plan or arrangement.
(e) Insurance Coverage. The Company shall maintain, or
have maintained on its behalf, insurance coverage for the benefit
of the Company on the same basis as, or on a substantially
equivalent basis to, the current insurance coverage described on
Schedule 2.20.
(f) Business Organization. The Company shall use
commercially reasonable efforts to preserve intact its business
organization and to keep available the services of its present
officers and employees as a group.
(g) Maintenance of Property. The Company shall maintain
its Real Property and all improvements thereto, equipment and other
tangible personal property in its present operating condition and
repair, ordinary wear and tear excepted. The Company will fully
perform and pay for all maintenance, painting, repairs, alterations
and other work required to be performed by the Company as lessee
under the Real Property Leases listed on Schedule 2.10.
(h) Relations with Suppliers, Etc. The Company will use
commercially reasonable efforts to preserve its relationships with
its material suppliers and others having material business dealings
with it. The Company promptly shall notify Buyer if the Company is
informed by any of its material suppliers that such supplier will
or may cease to do business with the Company either prior to or
following the Closing.
(i) Incurrence of Debt. The Company will not
voluntarily incur or assume, whether directly or by way of guaranty
or otherwise, any material obligation or liability, except
obligations and liabilities incurred in the ordinary course of
business, consistent with past practice and as set forth in the
Baytown Budget.
(j) Liens. The Company will not mortgage, pledge,
encumber, create or allow any Liens not existing on the date hereof
upon any of its properties or assets, tangible or intangible,
except Liens created in the ordinary course of business, consistent
with past practice.
(k) Disposition of Assets. The Company will not sell,
transfer or otherwise dispose of any of its tangible or intangible
property or assets, except for inventory and supplies sold,
disposed of or consumed and accounts receivable collected or
written off in the ordinary course of business, consistent with
past practice or items of equipment scheduled for replacement which
shall not exceed in value $10,000 for any single item. The Company
will not cancel or forgive any debts or claims except or in the
ordinary course of business, consistent with past practice.
(l) Agreements, Leases and Licenses. The Company will
not amend, terminate before the end of its term, or allow to lapse
any material agreement, lease, license or permit to which it is a
party or of which it is the holder.
(m) Accounting Practices. The Company will not make any
material changes in its accounting methods, principles or
practices, except as required by GAAP.
(n) Changes in Business Practice. The Company will not
take any action, the purpose or effect of which is to shift income
from post-closing periods to the pre-closing period or to defer
expenses from the pre-closing period to post-closing periods, which
action is not in the ordinary course of business, consistent with
past practice.
(o) Transactions with Affiliates. Except for management
fees payable to River Associates, LLC, the Company will not enter
into any agreement, arrangement or transaction with, or make any
payment, distribution, loan or advance to, any affiliate of the
Company or any officer, director or shareholder of the Company,
except for salaries, travel advances and other payments consistent
with past practices or as otherwise specifically permitted by this
Agreement.
(p) Material Transactions. The Company will not enter
into any other agreement, course of action or transaction material
to it, except in the ordinary course of business, consistent with
past practice.
4.2 Approvals and Consents. The Company and Sellers shall
use their respective reasonable best efforts (i) to cause all
conditions to the obligations of Buyer under this Agreement over
which they are able to exercise influence or control to be
satisfied prior to the Closing Date and (ii) to obtain promptly and
to comply with all requisite statutory, regulatory or court
approvals, third party releases and consents, and other
requirements necessary for the valid and legal consummation of the
transactions contemplated hereby.
4.3 Investigations. The Company shall provide Buyer and its
representatives and agents such access to the books and records of
the Company and furnish to Buyer such financial and operating data
and other information with respect to the businesses and property
of the Company as it may reasonably request from time to time, and
permit Buyer and its representatives and agents to make such
inspections of the Company's real and personal properties as they
may reasonably request all during normal business hours and with
prior notice, Sellers shall promptly arrange for Buyer and its
representatives and agents to meet with such directors, officers,
employees and agents of the Company as requested.
4.4 Environmental Inspection. Following the date of this
Agreement, the Company, at its own cost and expense, shall provide
to Buyer access to all records and information concerning all
Hazardous Substances, used, stored, generated, treated or disposed
of by the Company, all environmental or safety studies conducted by
or on behalf of the Company and all reports, correspondence or
filings to governmental agencies with jurisdiction over
Environmental Requirements concerning the compliance of the Subject
Property or the operation of the Subject Property with
Environmental Requirements, all policies and procedures manuals or
guidelines utilized by the Company to comply with Environmental
Requirements, and any other information reasonably requested by
Buyer pertaining to environmental, health and safety issues (the
"Environmental Information"). The Company agrees that Buyer shall
at its expense have the right to inspect the Environmental
Information and the Subject Property, including the performance of
an environmental site assessment and audit, and, at the discretion
of Buyer, with prior notice to the Company, perform subsurface or
other invasive investigations, including air monitoring, at the
Subject Property. The Company understands and agrees that Buyer
and its agents and representatives, with prior notice to the
Company, may find it appropriate to contact governmental agencies
in connection with their analysis of the Environmental Information
or as a result of its other investigations of the Subject Property.
4.5 Records Pertaining to the Company.
(a) Turnover of Records. At the Closing, Sellers will
deliver or cause to be delivered to the Company any records (i) in
the possession of Sellers, (ii) applicable primarily to the
Company, and (iii) of which the Company does not already have
copies.
(b) Retention of Records. Each of Buyer and Sellers
shall, for a period of four (4) years after the Closing Date,
neither dispose of nor destroy any of the business records or files
that pertain in part to the Company without first offering to turn
over possession of copies thereof to the other party at the other
party's expense, by written notice to the other party, at least
thirty (30) days prior to the proposed date of such disposition or
destruction.
(c) Access to Records. Sellers shall allow the Company
and its representatives access to all business records and files of
Sellers that pertain in part to the Company, during normal working
hours at the principal place of business of Sellers, or at any
location where such records are stored, and the Company shall have
the right, at its own expense, to make copies of any such records
and files.
(d) Assistance with Records. From and after the Closing
Date, Sellers shall make available to Buyer, upon written request,
(i) personnel of Sellers to assist Buyer in locating and obtaining
records and files maintained by Sellers, and (ii) any of the
personnel of Sellers, whose assistance or participation is
reasonably required by Buyer in anticipation of, or preparation
for, any existing or future third party actions, Tax or other
matters in which the Company or any of its past, present or future
affiliates is involved and which relate to the business of the
Company, and Buyer and the Company shall reimburse Sellers for all
costs and expenses thereafter.
(e) Auditors' Work Papers. Sellers shall use their
respective best efforts (including, without limitation, furnishing
any certificates reasonably requested, and complying with other
reasonable requests as a prerequisite to availability) to cause
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and Company, and any other independent accounting
firm that has reviewed or prepared a report on any financial
statements of the Company to make available to Buyer for inspection
and copying, at Buyer's expense and upon its written request
therefor, such accounting firm's work papers with respect to any
such financial statements and shall take all such actions as
required by any such accounting firm in connection with such
request.
4.6 Tax Elections. No new elections with respect to Taxes or
any changes in current elections with respect to Taxes affecting
the Company shall be made after the date of this Agreement without
the prior written consent of Buyer, which shall not be unreasonably
withheld.
4.7 No Solicitation. Except with respect to Buyer and its
affiliates, after the date hereof and prior to the Closing Date,
Sellers shall not, and Sellers shall cause the Company and the
respective officers, directors, employees, agents and
representatives of Sellers and the Company (including, without
limitation, any investment banker, attorney or accountant retained
by any of them) not to (i) initiate or solicit, directly or
indirectly, any inquiries or the making of any proposal with
respect to a merger, consolidation, sale of shares of capital stock
or similar transaction involving, or any purchase of all or any
significant portion of the assets (other than in the ordinary
course of business) of, or any equity interest in, the Company (an
"Acquisition Transaction"), or (ii) engage in any negotiations
concerning, or provide to any other person any information or data
relating to the Company for the purposes of or have any discussions
with any person relating to, or otherwise cooperate in any way
with, or assist or participate in, facilitate or encourage any
effort or attempt by any other person to seek or effect, an
Acquisition Transaction. Sellers shall promptly advise Buyer of,
and communicate to Buyer the terms of, any such inquiry or proposal
the Company or Sellers may receive.
4.8 Terms of Employment Retention. Buyer shall cause the
Company to continue to employ on an at-will basis following the
Closing Date all or substantially all of the Company's current
employees at the same or substantially equivalent compensation
basis (including wages and benefits), in the same or substantially
equivalent job function or position. Buyer agrees to recognize the
original hire date recognized and determined by the Company for
each employee retained by the Company for the purposes of
determining and providing benefits to such employees, including the
use of such original hire dates recognized by the Company in
determining eligibility and the accrual dates related to time off
for paid vacation and other benefits affected by the date of hire.
4.9 Certain Protective Provisions. For a period of five (5)
years following the Closing, Buyer shall cause the Company to
retain in its Charter Documents provisions concerning the
indemnification and limitation of liability of officers and
directors no less favorable to the present and former officers and
directors of the Company than those existing in the Company's
Charter Documents on the Closing Date.
4.10 Termination of Consulting Agreements. Sellers shall
procure prior to Closing the termination of each management,
consulting and employment agreement described on Schedule 2.19.
ARTICLE V.
CONDITIONS TO OBLIGATIONS OF BUYER
The obligation of Buyer to purchase the Company Shares, and to
cause the other transactions contemplated hereby to occur at the
Closing, shall be subject to the satisfaction or written waivers by
Buyer of each of the following conditions at or prior to the
Closing:
5.1 Representations and Warranties. Each representation and
warranty of the Company and Sellers contained in this Agreement and
in any Schedule or other disclosure in writing from the Company or
Sellers shall be true and correct when made, and shall be true and
correct in all material respects on and as of the Closing Date with
the same effect as though such representation and warranty had been
made on and as of the Closing Date.
5.2 Covenants of Sellers and Company. All of the covenants
and agreements herein on the part of Sellers and the Company to be
complied with or performed on or before the Closing Date shall have
been fully complied with and performed.
5.3 Absence of Litigation. No inquiry, action, suit or
proceeding shall have been asserted, threatened or instituted
(i) in which it is sought to restrain or prohibit the carrying out
of the transactions contemplated by this Agreement or to challenge
the validity of such transactions or any part thereof, (ii) which
could, if adversely determined, result in any Material Adverse
Effect or (iii) as a result of which, in the reasonable judgment of
Buyer, Buyer would be deprived of the material benefits of the
ownership of the Company Shares.
5.4 Consents and Approvals. All material authorizations,
consents, approvals, waivers and releases, if any, necessary for
Sellers and the Company to consummate the transactions contemplated
hereby shall have been obtained and copies thereof shall be
delivered to Buyer.
5.5 Certificates. The Company and Sellers shall have
delivered to Buyer (i) certificates of the appropriate governmental
authorities, dated as of a date not more than twenty (20) days
prior to the Closing Date, attesting to the good standing of the
Company in the States of Delaware, Texas and Oklahoma; (ii) copies,
certified by the Secretary of State of Delaware as of a date not
more than twenty (20) days prior to the Closing Date, of the
Certificate of Incorporation and all amendments thereto of the
Company, and attesting to the existence of the Company; (iii) a
copy certified by the Secretary of the Company, dated the Closing
Date, of the Bylaws of the Company; and (iv) a certificate, dated
the Closing Date, of the Secretary of the Company relating to the
incumbency and corporate proceedings in connection with the
consummation of the transactions contemplated hereby.
5.6 Termination of Consulting Agreements. Sellers shall have
delivered to Buyer terminations of each management, consulting and
employment agreement described on Schedule 2.19.
5.7 Accounting Services Agreement. Buyer, the Company and
ShowBiz Pizza Time, Inc. shall have entered into an Accounting
Services Agreement with respect to certain accounting services to
be provided to the Company by ShowBiz Pizza Time, Inc.
5.8 Opinion of Counsel. Buyer shall have received an opinion
of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel to Sellers and the Company, dated the
Closing Date and in form and substance reasonably satisfactory to
Buyer, substantially to the effect that: (a) the Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware; (b) the
authorized capital stock of the Company consists of one million
five hundred thousand (1,500,000) shares of common stock, no par
value, of which one million one hundred fifty-six thousand three
hundred twenty-one (1,156,321) shares are issued and outstanding;
to counsel's knowledge (subject to compliance with applicable
federal and state securities laws), all of such shares are validly
issued, fully paid and nonassessable and were not issued in
violation of any preemptive rights of any shareholder of the
Company; such shares are owned of record as set forth in
Section 2.3; and such counsel has no knowledge of any outstanding
securities convertible into, exchangeable for or carrying the right
to acquire capital stock of the Company, or any subscriptions,
warrants, options, rights or other arrangements or commitments
obligating the Company to issue or dispose of any capital stock or
any ownership therein; (c) upon endorsement by Sellers of the
Company Shares and delivery of the certificates representing the
Company Shares in accordance with the terms of this Agreement,
Buyer will be vested with all rights of Sellers in and to the
Company Shares; (d) the execution and delivery of this Agreement
and all other agreements and documents contemplated hereby by the
Company and Sellers and the performance by the Company and Sellers
of their respective obligations under this Agreement and such other
agreements and documents do not constitute a violation of or a
default under its respective Certificate of Incorporation or Bylaws
(as applicable) or any agreements, arrangements, commitments,
orders, judgments or decrees to which it is a party or by which it
or its respective assets are bound of which such counsel has
knowledge; (e) the Company has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement
and the other agreements and documents contemplated hereby (to
which each is a party); the execution and delivery of this
Agreement and the other agreements and documents by the Company and
the performance by the Company of its obligations hereunder and
under the other agreements and documents have been duly authorized
by all requisite corporate action on the part of the Company. This
Agreement and each other agreement and document contemplated hereby
is a valid and binding obligation of the Company and each Seller,
respectively, enforceable against the Company and each Seller (to
the extent each is a party) in accordance with their respective
terms, subject to the Equitable Exceptions; (f) to such counsel's
knowledge, there are no actions, suits or proceedings pending or
threatened that are required by the terms of Section 2.15 to be
described in Schedule 2.15 that are not described therein, and no
consent, approval, authorization or other action by, or filing
with, any governmental authority, regulatory body or other person
is required to be obtained by the Company or any Seller in
connection with the execution, delivery or performance by them of
their respective obligations under this Agreement, except for such
as have been duly obtained or made.
5.9 No Material Adverse Effect. There shall not have been
any action, suit or event which as resulted in or could reasonably
be expected to result in a Material Adverse Effect. For purposes
hereof, any increase in working capital deficit will not be deemed
a Material Adverse Effect.
5.10 No Transfers to Affiliates. Except as otherwise
expressly contemplated by this Agreement, and the payment of
management fees to River Associates, LLC, the Company shall not
have distributed or transferred any of its assets or properties, or
made any payments, to or for the benefit of any of its affiliates.
5.11 Compliance with Section 4.1. The Company shall not have
entered into any agreement, commitment or transaction nor shall
have taken any other action that would not be in compliance with
each provision of Section 4.1.
5.12 Stock Certificates. Sellers shall have tendered
certificates representing the Company Shares, duly endorsed in
blank or accompanied by appropriate stock powers, in proper form
for transfer, with all transfer taxes paid.
5.13 Resignations and Releases of Directors and Officers.
Buyer shall have received the resignations of and releases
regarding any equity weighted arrangements, stock options or
related expenses from each of the directors and officers of the
Company, effective as of the Closing.
ARTICLE VI.
CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers to sell the Company Shares and to
cause the other transactions contemplated hereby to occur at the
Closing shall be subject to the satisfaction or written waiver by
Sellers of each of the following conditions at or prior to the
Closing:
6.1 Representations and Warranties. Each representation and
warranty of Buyer contained in this Agreement and in any
Schedule or other disclosure in writing from Buyer shall be true
and correct when made, and shall be true and correct in all
material respects on and as of the Closing Date with the same
effect as though such representation and warranty had been made on
and as of the Closing Date.
6.2 Covenants of Buyer. All of the covenants and agreements
herein on the part of Buyer to be complied with or performed on or
before the Closing Date shall have been fully complied with and
performed.
6.3 Absence of Litigation. No inquiry, action, suit or
proceeding shall have been asserted, threatened or instituted in
which it is sought to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the
validity of such transactions or any part thereof.
6.4 Consents and Approvals. All material authorizations,
consents, approvals, waivers and releases, if any, necessary for
Buyer to consummate the transactions contemplated hereby shall have
been obtained and copies thereof shall be delivered to Sellers.
6.5 Certificates. Buyer shall have delivered to Sellers (i)
certificates of the appropriate governmental authorities, dated as
of a date not more than twenty (20) days prior to the Closing Date,
attesting to the existence and good standing of Buyer in the State
of Texas; (ii) copies, certified by the Secretary of State of Texas
as of a date not more than twenty (20) days prior to the Closing
Date, of the Articles of Incorporation and all amendments thereto
of Buyer; (iii) a copy, certified by the Secretary of Buyer, dated
the Closing Date, of the bylaws of Buyer; and (iv) a certificate,
dated the Closing Date, of the Secretary of Buyer relating to the
incumbency and corporate proceedings in connection with the
consummation of the transactions contemplated hereby.
6.6 Opinion of Counsel. Sellers shall have received an
opinion of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A Professional Corporation),
counsel to Buyer, dated the Closing Date and in form and substance
reasonably satisfactory to Sellers, substantially to the effect
that: (a) Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas;
(b) the execution and delivery of this Agreement and all other
agreements and documents contemplated hereby by Buyer and the
performance by Buyer of its obligations under this Agreement and
such other agreements and documents does not constitute a violation
of or a default under its Articles of Incorporation or Bylaws or
any agreement, arrangement, commitment, order, judgment or decree
to which it is a party or by which its assets are bound of which
such counsel has knowledge; (c) Buyer has the corporate power and
authority to execute, deliver and perform its obligations under
this Agreement and the other agreements and documents by Buyer
contemplated hereby (to which it is a party) and the execution and
delivery of this Agreement and the other agreements and documents
by the Company and the performance by Buyer of its obligations
hereunder and under the other agreements and documents have been
duly authorized by all requisite action on the part of Buyer; and
(d) this Agreement and each other agreement and document
contemplated hereby is a valid and binding obligation of Buyer (to
which it is a party), enforceable against Buyer in accordance with
their respective terms, subject to the Equitable Exceptions.
6.7 Loan Agreements. Prior to or simultaneous with the
Closing, the lenders disclosed on Schedule 1.1 hereto shall have
consented to the transactions set forth in this Agreement and
released all pledges of Company stock and all guarantees in
connection with such loans, and Buyer shall have (i) retired the
Company's outstanding indebtedness with such lenders or (ii)
refinanced such indebtedness (provided that the subordinated
indebtedness shall be repaid), in each event such that there shall
be no continuing obligations of Sellers with respect to such
indebtedness of the Company.
6.8 Transfer of Funds. Buyer shall have delivered to Sellers
the amount specified in Section 7.3.
ARTICLE VII.
CLOSING
7.1 Closing. Unless this Agreement is first terminated as
provided in Section 8.1, and subject to the satisfaction or waiver
of all the conditions set forth in Articles V and VI, the closing
of the transactions contemplated hereby (the "Closing") shall take
place at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A Professional
Corporation), in Dallas, Texas, or such other place as is agreed to
by Buyer and Sellers, on July 2, 1997 or such other date as the
parties may agree upon in writing (the "Closing Date").
7.2 Delivery of the Shares. At the Closing, Sellers shall
deliver or cause to be delivered to Buyer the stock certificates
evidencing all of the Company Shares owned by them, duly endorsed
or accompanied by duly executed stock powers assigning the Company
Shares to Buyer and otherwise in good form for transfer.
7.3 Cash Payment to Sellers. At the Closing, Buyer shall
deliver, by wire transfer of immediately available funds to the
accounts designated by Sellers, to Sellers the Total Consideration
(as adjusted pursuant to Section 1.2).
ARTICLE VIII.
TERMINATION PRIOR TO CLOSING
8.1 Termination.
(a) This Agreement may be terminated and abandoned at any
time prior to the Closing:
(I) By the written mutual consent of Buyer
and Sellers;
(ii) By Buyer on the Closing Date if any of the
conditions set forth in Article V shall not have been fulfilled on
or prior to the Closing Date;
(iii) By Sellers on the Closing Date if any of
the conditions set forth in Article VI shall not have been
fulfilled on or prior to the Closing Date; and
(iv) By either Buyer or Sellers if the Closing
shall not have occurred on or before July 30, 1997; however, to the
extent satisfactory progress is being made towards closing, Sellers
will agree to one 30 day extension.
(b) Any termination pursuant to this Article VIII shall
be without prejudice to the terminating party's rights and remedies
under this Agreement by reason of any violation of this Agreement
occurring prior to such termination. In the event of a termination
pursuant to this Article VIII, each party shall bear its own costs
and expenses incurred with respect to the transactions contemplated
hereby.
ARTICLE IX.
INDEMNIFICATION
9.1 Buyer's Losses.
(a) Each Seller severally and not jointly agrees to
indemnify and hold harmless Buyer and its directors, officers,
employees, representatives, agents and attorneys from, against and
in respect of any and all Buyer's Losses (as defined below)
suffered, sustained, incurred or required to be paid by any of them
by reason of (i) any representation or warranty made by such Seller
in or pursuant to this Agreement (including, without limitation,
the representations and warranties contained in any certificate
delivered pursuant hereto) being untrue or incorrect in any
material respect, except in any instance and to the extent Buyer's
Losses result from the negligence or misconduct of Buyer; or (ii)
any failure by the Company (with respect to periods prior to the
Closing) or such Seller to observe or perform its or his or her
covenants and agreements set forth in this Agreement or in any
other agreement or document executed by it or him or her in
connection with the transactions contemplated hereby, except in any
instance and to the extent Buyer's Losses result from the
negligence or misconduct of Buyer.
(b) "Buyer's Losses" shall mean all damages (including,
without limitation, amounts paid in settlement with the Sellers'
consent, which consent may not be unreasonably withheld), losses,
obligations, liabilities, claims, deficiencies, costs and expenses
(including, without limitation, reasonable attorneys' fees),
penalties, fines, interest and monetary sanctions, including,
without limitation, reasonable attorneys' fees and costs incurred
to comply with injunctions and other court and Agency orders, and
other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce the
rights of Buyer or such other persons to indemnification hereunder.
"Buyer's Losses" shall be determined in good faith net of any tax
benefits resulting from any such Loss. "Buyer's Losses" shall
include lost profits from operations but not other consequential
damages to Buyer not due or payable to a third party.
9.2 Seller Losses.
(a) Buyer agrees to indemnify and hold harmless Sellers
and their respective directors, officers, managers, employees,
representatives, agents and attorneys from, against and in respect
of any and all Seller Losses (as defined below) suffered,
sustained, incurred or required to be paid by any of them by reason
of (i) any representation or warranty made by Buyer in or pursuant
to this Agreement (including, without limitation, the
representations and warranties contained in any certificate
delivered pursuant hereto) being untrue or incorrect in any
respect; or (ii) any failure by Buyer to observe or perform its
covenants and agreements set forth in this Agreement or any other
agreement or document executed by it in connection with the
transactions contemplated hereby, except in any instance and to the
extent Seller Losses result from the negligence or misconduct of a
Seller.
(b) "Seller Losses" shall mean all damages (including,
without limitation, amounts paid in settlement with the consent of
Buyer, which consent may not be reasonably withheld), losses,
obligations, liabilities, claims, deficiencies, costs and expenses
(including, without limitation, reasonable attorneys' fees),
penalties, fines, interest and monetary sanctions, including,
without limitation, reasonable attorneys' fees and costs incurred
to comply with injunctions and other court and Agency orders, and
other costs and expenses incident to any suit, action,
investigation, claim or proceeding or to establish or enforce the
rights of Sellers or such other persons to indemnification
hereunder. "Seller Losses" shall be determined in good faith net
of any tax benefits resulting from any such loss. "Seller's
Losses" shall not include consequential damages not due or payable
to a third party.
9.3 Notice of Loss. Except to the extent set forth in the
next sentence, a party to the Agreement will not have any liability
under the indemnity provisions of this Agreement with respect to a
particular matter unless a notice setting forth in reasonable
detail the breach or other matter which is asserted has been given
to the Indemnifying Party (as defined below) and, in addition, if
such matter arises out of a suit, action, investigation, proceeding
or claim, such notice is given promptly, but in any event within
thirty (30) days after the Indemnified Party (as defined below) is
given notice of the claim or the commencement of the suit, action,
investigation or proceeding. Notwithstanding the preceding
sentence, failure of the Indemnified Party to give notice hereunder
shall not release the Indemnifying Party from its obligations under
this Article IX, except to the extent the Indemnifying Party is
actually prejudiced by such failure to give notice, provided,
however, that failure to give notice will not serve to extend any
time period for making a claim. With respect to Buyer's Losses,
Sellers shall be the Indemnifying Party and Buyer and its
directors, officers, employees, representatives, agents and
attorneys shall be the Indemnified Party. With respect to Seller
Losses, Buyer shall be the Indemnifying Party and Sellers and their
respective directors, officers, managers, employees,
representatives, agents and attorneys shall be the Indemnified
Party.
9.4 Right to Defend. Upon receipt of notice of any suit,
action, investigation, claim or proceeding for which
indemnification might be claimed by an Indemnified Party, the
Indemnifying Party shall be entitled to defend, contest or
otherwise protect against any such suit, action, investigation,
claim or proceeding at its own cost and expense, and the
Indemnified Party must cooperate in any such defense or other
action. The Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in defense thereof by
counsel of its own choosing, but the Indemnifying Party shall be
entitled to control the defense unless the Indemnified Party has
relieved the Indemnifying Party from liability with respect to the
particular matter or the Indemnifying Party fails to assume defense
of the matter. In the event the Indemnifying Party shall fail to
defend, contest or otherwise protect in a timely manner against any
such suit, action, investigation, claim or proceeding, the
Indemnified Party shall have the right, but not the obligation,
thereafter to defend, contest or otherwise protect against the same
and make any compromise or settlement thereof and recover the
entire cost thereof from the Indemnifying Party including, without
limitation, reasonable attorneys' fees, disbursements and all
amounts paid as a result of such suit, action, investigation, claim
or proceeding or the compromise or settlement thereof, provided,
however, that the Indemnified Party must send a written notice to
the Indemnifying Party of any such proposed settlement or
compromise, which settlement or compromise the Indemnifying Party
may reject, in its reasonable judgment, within thirty (30) days of
receipt of such notice. Failure to reject such notice within such
thirty (30) day period shall be deemed an acceptance of such
settlement or compromise. The Indemnified Party shall have the
right to effect a settlement or compromise over the objection of
the Indemnifying Party; provided, that if (i) the Indemnifying
Party is contesting such claim in good faith or (ii) the
Indemnifying Party has assumed the defense from the Indemnified
Party, the Indemnified Party waives any right to indemnity
therefor. If the Indemnifying Party undertakes the defense of such
matters, the Indemnified Party shall not, so long as the
Indemnifying Party does not abandon the defense thereof, be
entitled to recover from the Indemnifying Party any legal or other
expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than the reasonable costs
of investigation undertaken by the Indemnified Party with the prior
written consent of the Indemnifying Party.
9.5 Limitations of Indemnification. The persons or entities
indemnified pursuant to this Article IX shall not assert any claim
for indemnification hereunder until such time as and solely to the
extent that the aggregate of all claims that such persons may have
against the Indemnifying Party shall exceed $100,000 with respect
to all claims. No Seller shall be obligated to indemnify and hold
harmless any Indemnified Party with respect to any claim for
indemnification hereunder exceeding the cash consideration received
by such Seller (excluding any amount received as Creditor)
described in Section 1.1 hereof; provided, however, that the
foregoing limitation shall not be applicable to any breach of the
representations and warranties contained in Sections 2.3 (Capital
Stock of the Company) and 2.27 (Authority; Ownership) hereof.
9.6 Cooperation. Each of Buyer, Sellers and the Company, and
each of their affiliates, successors and assigns, shall cooperate
with each other in the defense of any suit, action, investigation,
proceeding or claim by a third party and, during normal business
hours, shall afford each other access to their books and records
and employees relating to such suit, action, investigation,
proceeding or claim and shall furnish each other all such further
information that they have the right and power to furnish as may
reasonably be necessary to defend such suit, action, investigation,
proceeding or claim, including, without limitation, reports,
studies, correspondence and other documentation relating to
Environmental Protection Agency, Occupational Safety and Health
Administration and Equal Employment Opportunity Commission matters.
ARTICLE X.
MISCELLANEOUS
10.1 Entire Agreement. This Agreement (including the
exhibits and schedules hereto) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, between the parties hereto with respect to the subject
matter hereof, and no party shall be liable or bound to the other
in any manner by any representations or warranties not set forth
herein.
10.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted
assigns. Neither this Agreement nor any rights, interests, or
obligations hereunder may be assigned by any party hereto without
the prior written consent of all other parties hereto, and any
purported assignment in violation of this Section 10.2 shall be
null and void.
10.3 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed
to be an original and all of which shall constitute the same
instrument.
10.4 Headings. The headings of the articles and sections of
this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the
construction hereof.
10.5 Construction. As used in this Agreement, the words
"herein," "hereof" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular
article, section, paragraph or other subdivision.
10.6 Modification and Waiver. Any of the terms or conditions
of this Agreement may be waived in writing at any time by the party
which is entitled to the benefits thereof, and this Agreement may
be modified or amended by a written instrument executed by Buyer,
the Company and each Seller. No supplement, modification or
amendment of this Agreement shall be binding unless executed in
writing by all of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
10.7 Schedules, Etc. All Exhibits and Schedules annexed
hereto are expressly made a part of this Agreement as though fully
set forth herein.
10.8 Notices. All notices of communication required or
permitted hereunder shall be in writing and may be given by (a)
depositing the same in United States mail, addressed to the party
to be notified, postage prepaid and registered or certified with
return receipt request, (b) delivering the same in person to an
officer or agent of such party, (c) transmitting by facsimile the
same with electronic confirmation of receipt.
(i) If to Buyer, addressed to it at:
Casa Ole' Restaurants, Inc.
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Attn: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
with copies to:
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
or ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
(ii) If to the Sellers, addressed thereto
at the addresses set forth on Annex "A" hereto:
(iii) If to the Company, addressed to:
Monterey's Acquisition Corp.
c/o River Associates, LLC
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Attn: ▇▇. ▇▇▇ ▇. ▇▇▇▇▇▇
and marked "Personal and Confidential"
with copies to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
Attorneys at Law
Suite 1000
Volunteer Building
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Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: A. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
or to such other address or counsel as any party hereto shall
specify pursuant to this Section 10.8 from time to time.
10.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH LAWS OF THE STATE OF DELAWARE.
10.10 Survival of Covenants, Agreements, Representations
and Warranties.
(a) Covenants and Agreements. All covenants and
agreements made hereunder or pursuant hereto or in connection with
the transactions contemplated hereby shall survive the Closing and
shall continue in full force and effect thereafter according to
their terms without limit as to duration.
(b) Representations and Warranties. All representations
and warranties contained herein shall survive the Closing and shall
continue in full force and effect thereafter for a period of
eighteen (18) months following the Closing, except that (i) the
representations and warranties contained in Sections 2.8 (Tax and
Related Matters), 2.11 (Environmental Laws and Regulations) and
2.18 (Employee Benefit Plans) hereof shall survive until the
expiration of the applicable periods (including any extensions) of
the statutes of limitation to which such representations and
warranties relate, and (ii) the representations and warranties
contained in Sections 2.1 (Authorization), 2.3 (Capital Stock of
the Company) and 2.27 (Authority; Ownership) shall survive
indefinitely.
(c) Claims Made Prior to Expiration. Notwithstanding
the foregoing survival periods set forth in this Section 10.10, the
termination of a survival period shall not affect the rights of an
Indemnified Party in respect of any claim made by such party with
specificity, in good faith and in writing to the Indemnifying Party
in accordance with Sections 9.3 and 10.8 hereof prior to expiration
of the applicable survival period.
10.11 Expenses. Sellers, on the one hand, and Buyer, on
the other hand, shall be solely responsible for their respective
costs and expenses incurred in connection with the transactions
contemplated hereby.
10.12 Third Party Beneficiaries. Except as otherwise
specifically provided in Article IX, no individual or firm,
corporation, partnership or other entity shall be a third-party
beneficiary of the representations, warranties, covenants and
agreements made by any party hereto.
10.13 Number and Gender of Words. Whenever the singular
number is used, the same shall include the plural where
appropriate, and words of any gender shall include each other
gender where appropriate.
10.14 Further Assurances. From time to time after the
Closing, at the request of any other party but at the expense of
the requesting party, Buyer, the Company or Sellers, as the case
may be, will execute and deliver any such other instruments of
conveyance, assignment and transfer, and take such other action as
the other party may reasonably request in order to consummate or
evidence the transactions contemplated hereby.
10.15 Brokers and Agents. Each party agrees to indemnify
and hold harmless the other parties against all loss, cost, damages
or expense arising out of claims for fees or commissions of brokers
employed or alleged to have been employed by such indemnifying
party.
ARTICLE XI.
SELLERS' REPRESENTATIVE
11.1 Appointment and Acceptance. In order to facilitate the
consummation of the transactions contemplated by this Agreement and
the resolution of matters after the Closing between Buyer and the
Sellers, River II, L.P., acting through its general partner, River
Associates, LLC, and its successors (the "Sellers'
Representative"), acting as hereinafter provided, shall serve as
the attorney-in-fact and agent for each of the Sellers in his name,
place and ▇▇▇▇▇ in connection with the transactions contemplated by
this Agreement in accordance with the terms of this Agreement, such
appointment being coupled with an interest and irrevocable. By
executing and delivering this Agreement, the Sellers'
Representative hereby accepts its appointment and authorization as
the Sellers' Representative and as attorney-in-fact and agent on
behalf of such of the Sellers in accordance with the terms of this
Agreement.
11.2 Authorization. The Sellers' Representative has the
authority, without restriction:
(a) As to Deliveries. To: (i) prepare, finalize,
approve and authorize all exhibits, schedules and other attachments
to this Agreement and the other contracts, instruments and
documents delivered by or on behalf of the Sellers pursuant to this
Agreement (collectively, the "Transaction Documents"); (ii) deliver
to the Buyer on behalf of the Sellers, as provided in this
Agreement, the share certificates representing all of the
outstanding shares of stock of the Company, any transmittal letters
related thereto, and all other materials to be delivered in
connection therewith; (iii) execute, deliver and accept delivery
of, on each Seller's behalf, any and all agreements, instruments
and documents to be, or as, delivered by or on behalf of the
Sellers pursuant to this Agreement; and (iv) execute and deliver,
and to accept delivery of, on behalf of the Sellers, such
agreements, instruments and other documents as may be deemed by the
Sellers' Representative in its sole and absolute discretion to be
appropriate under the Transaction Documents;
(b) Notice and Determination. To bind the Sellers by
all notices received, by all agreements and determinations made,
and by all agreements, instruments and other documents executed and
delivered by the Sellers' Representative under the Transaction
Documents; and
(c) Disputes and Claims. To: (i) dispute or refrain
from disputing any claim made by Buyer under the Transaction
Documents; (ii) make a claim against Buyer arising under the
Transaction Documents; (iii) negotiate and compromise any dispute
which may arise under, and exercise or refrain from exercising
remedies available under the Transaction Documents and sign any
releases or other documents with respect to such dispute or remedy;
(iv) waive any condition contained in the Transaction Documents;
(v) prepare the Closing Date Balance Sheet, determine the
Post-Closing Price Adjustment and submit each to the buyer pursuant
to Section 1.3 of this Agreement, (vi) negotiate and settle with
Buyer regarding the Closing Date Balance Sheet and the Post-Closing
Adjustments; (vii) give any and all consents under the Transaction
Documents; (viii) give such instructions and to do such other
things and refrain from doing such other things as the Sellers'
Representative shall in its sole and absolute discretion deem
necessary or appropriate to carry out the provisions of the
Transaction Documents.
11.3 Certain Limitations. Notwithstanding the foregoing or
anything else in the Transaction Documents, the Sellers'
Representative shall not have any authority with respect to the
modification or amendment of this Agreement or to a breach by a
Seller of any representation, warranty or covenant set forth in
Article II(B) of this Agreement.
11.4 Actions. Each of the Sellers hereby expressly
acknowledges and agrees (a) that the Sellers' Representative is
authorized to act on his behalf notwithstanding any dispute or
disagreement between or among the Sellers and (b) that Buyer and
any other person shall be entitled to rely on any and all actions
taken by the Sellers' Representative under the Transaction
Documents without liability to, or obligation to inquire of, any of
the Sellers.
11.5 Effectiveness. The authority of the Sellers'
Representative hereunder shall continue and be effective until all
of the rights and/or obligations of the Sellers under the
Transaction Documents, or any dispute arising thereunder,
terminate.
11.6 Indemnification. By executing and delivering this
Agreement, each Seller hereby severally and not jointly agrees to
indemnify and hold the Sellers' Representative harmless for any and
all liability, loss, cost, damage or expense (including attorneys'
fees) incurred or suffered as a result of the performance of its
duties under the Transaction Documents or any document, instrument
or agreement related thereto, except such that arises from its
gross negligence or willful misconduct.
11.7 Survival of Authorizations. EACH SELLER (A) INTENDS FOR
THE AUTHORIZATIONS AND AGREEMENTS IN THIS AGREEMENT TO REMAIN IN
FORCE IF HE SUBSEQUENTLY BECOMES MENTALLY OR PHYSICALLY DISABLED OR
INCOMPETENT, (B) DOES HEREBY AUTHORIZE SUCH RECORDINGS AND FILINGS
OF THIS AGREEMENT AS ANY PERSON DEEMS APPROPRIATE AND (C) DOES
HEREBY DIRECT THAT NO FILING OF ANY ACCOUNTING OR POSTING OF A
SURETY BOND SHALL BE REQUIRED OF ANY PERSON SERVING AS THE SELLERS'
REPRESENTATIVE.
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first above written.
BUYER:
CASA OLE' RESTAURANTS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President and Chief
Financial Officer
THE COMPANY:
MONTEREY'S ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Secretary
RIVER II, L.P.
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
Title: President, River
Associates, LLC,
as General Partner
BHC ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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JCB VENTURE PARTNERSHIP III
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Partner
▇.▇. ▇▇▇▇▇▇▇▇ & CO., LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Partner
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/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, Trustee
Trustee for the ▇▇▇▇▇ ▇. ▇▇▇▇▇
Profit Sharing Plan
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LIST OF SCHEDULES
Set Forth in Disclosure Statement
Schedule 1.1 Outstanding Senior Debt and Subordinated Debt
Schedule 1.2 Baytown Budget
Schedule 2.2 Organization, Existence and Good Standing
Schedule 2.3 Capital Stock
Schedule 2.4 Subsidiaries
Schedule 2.5 Financial Statements
Schedule 2.6 Accounts Receivable
Schedule 2.7 Permits
Schedule 2.8 Tax Matters
Schedule 2.9 Real and Personal Property
Schedule 2.10 Real Property Leases
Schedule 2.11 Environmental Matters
Schedule 2.12 Contracts
Schedule 2.13 Violations
Schedule 2.14 Sellers' Consents
Schedule 2.15 Litigation
Schedule 2.17 Intellectual Property
Schedule 2.18 Employee Benefits
Schedule 2.19 Employee Matters
Schedule 2.20 Insurance
Schedule 2.21 Interest in Customers, Suppliers, Inc.
Schedule 2.22 Business Relations
Schedule 2.23 Officers and Directors
Schedule 2.24 Bank Accounts
Schedule 2.25 Absence of Certain Changes
Schedule 2.27 Ownership of Company Shares
Schedule 3.3 Buyer's Consents
Schedule 4.1 Course of Conduct by the Company
Schedule 10.15 Brokers and Agents
ANNEX "A"
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Number of Number of
Company Shares Company Shares
Name and Address Held Thereby on to be held at
of Shareholder June, 1997 the Closing Date
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River Associates, LLC 824,394 824,394
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BHC Acquisition Corp. 143,250 143,250
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 57,190 57,190
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
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JCB Venture Partnership III 42,892 42,892
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ & Co., LLC 7,150 7,150
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ 14,298 14,298
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 7,150 7,150
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ 18,408 18,408
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▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ Profit Sharing Trust
18,408 18,408
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▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 3,681 3,681
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ 10,000 14,500
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 2,500 5,000
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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