AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of September 15, 1998, by and among
APPLE SOUTH, INC., a Georgia corporation ("Seller"), WHG REAL ESTATE NORTH, LLC,
a Wisconsin limited liability company ("Purchaser") and WISCONSIN HOSPITALITY
GROUP, LLC, a Wisconsin limited liability company ("Hospitality").
W I T N E S S E T H :
WHEREAS, Seller and Purchaser are parties to that certain Asset
Purchase Agreement dated as of July 24, 1998 (the "Original Agreement") pursuant
to which Seller agreed to sell to Purchaser certain Xxxxxxxx'x Neighborhood
Grill & Bar ("Applebee's") franchise restaurants and related property, and
Purchaser agreed to purchase such assets, all on the terms and subject to the
conditions set forth in the Original Agreement; and
WHEREAS, Hospitality will provide certain management services to
Purchaser after such sale and purchase, and in connection therewith, Hospitality
desires to make certain agreements with Seller as set forth herein; and
WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in its entirety as set forth herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and Rending to be legally bound, the parties hereby agree as
follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
have the meanings set forth below.
"Action" shall mean any action, suit, litigation, complaint, counterclaim,
claim, petition, mediation contest, or administrative proceeding whether at law,
in equity, in arbitration or otherwise, and whether conducted by or before any
Government or other Person.
"ADIs" shall mean Arbitron Rating Areas of Dominant Influence.
"ADI Personnel" shall have the meaning set forth in Section 4.4.
"Assets" shall mean all of Seller's rights and interests in, to, or under
the following:
(i) all tangible personal property of any kind located in the Restaurants
or on the Real Property, including, but not limited to, equipment, appliances,
machinery, tables, chairs, other furniture, bars, tableware, cookware, utensils,
furnishings, signage, leasehold improvements, fixtures, uniforms, supplies, food
and beverage inventory (including beer, liquor, and wine inventory), and
advertising and promotional materials; as set forth in Schedule 1.1(i).
(ii) $1,500 cash in each Restaurant;
(iii) all prepaid items relating exclusively to the Business;
(iv) all assignable Permits;
(v) all assignable rights under egress or implied warranties of
manufacturers, distributors, or retailers relating, to the Assets;
1
(vi) all of Seller's supplier lists, demographic, statistical, and other
information related exclusively to the Business,
(vii) the Contracts;
(viii) the Real Property; and
(ix) all records and files related to the Real Property such as purchase
agreements, deeds, construction documents, title reports, environmental and
engineering reports, appraisals, surveys, etc.
"Assets" shall not include cash in the Restaurants in excess of $1,500 per
Restaurant, bank accounts or any other property, tangible or intangible, real or
personal, not described above.
"Assumed Liabilities" shall mean (i) all obligations of Seller that accrue
after the Closing under the terms of the Contracts, (ii) all obligations of
Seller under the Contracts that accrue prior to the Closing but which are not
due for payment until after the Closing and which are taken into account in
computing the Purchase Price pursuant to Section 2.3, (iii) obligations arising
after the Closing under any Permits which are assigned to Purchaser, (iv) all
Property Taxes and all other obligations with respect to the Assets that accrue
prior to the Closing but which are not due for payment until after the Closing
and which are taken into account in computing the Purchase Price pursuant to
Section 2.3, (v) all Property Taxes and all other obligations with respect to
the Assets that accrue after the Closing, (vi) gift certificates issued by
Seller prior to Closing, (vii) accrued but unvested vacation of ADI Personnel
assumed pursuant to Section 6.3(c), and (viii) all obligations assumed by
Purchaser with respect to Seller's development sites under Section 4.7 not
otherwise assumed hereunder or covered by an increase in the purchase price
pursuant to Section 2.3. Assumed Liabilities shall not include any liability,
obligation payment, duty, or responsibility of any nature except as expressly
described above and specifically shall not include (i) liabilities or
obligations of Seller arising out of any breach by Seller of any of the
Contracts; (ii) except as provided in clauses (ii) or (iv) above, liabilities or
obligations of Seller under any of the Contracts or with respect to the Real
Property or other Assets that accrue in any such case prior to the Closing;
(iii) any liabilities or obligations of Seller under the Franchise Agreements;
(iv) any liability of Seller for product liability, personal injury, property
damage, or otherwise based on any tort claim or statutory liability (including
but not limited to any "dram shop" liability); (v) any federal, state, or local
tax liability of Seller except to the extent expressly assumed hereunder, (vi)
any contractual claim based on any lease, contract, or agreement other than the
Contracts; (vii) any liability, obligations or responsibility of Seller to
Seller's employees, agents, or independent contractors with respect to wages,
salaries, bonuses, or other compensation or benefits earned or accrued prior to
the Closing (except for accrued but unvested vacation assumed pursuant to
Section 6.3(c)); (viii) any liability or obligation of Seller arising out of the
negotiation, execution, or performance of this Agreement, including fees and
expenses of attorneys and accountants, except as otherwise expressly provided
herein, and (ix) any liability or obligation of the Seller which accrues in
connection with the litigation set forth on Schedule 3.10.
"Xxxx of Sale and Assignment Agreement" shall mean an instrument in
substantially the form of Exhibit A hereto pursuant to which the Assets (except
for the Real Property) will be transferred and assigned to Purchaser at the
Closing and pursuant to which Purchaser will assume the Assumed Liabilities.
"Business" shall mean the business of owning and operating the Restaurants
and developing and opening new Xxxxxxxx'x Neighborhood Grill & Bar restaurants
in the Territory, as conducted prior to the Closing by Seller pursuant to the
Franchise Agreements.
"Closing" shall have the meaning set forth in Section 2.6 hereof.
2
"Closing Date" shall mean the time and date that the Closing occurs.
"Code" shall mean the United States Internal Revenue Code of 1986, as
emended, and all regulations thereunder. Any reference herein to a specific
section or sections of the Code shall be deemed to include a reference to any
corresponding provision of future law.
"Consents" shall mean all consents, approvals, and estoppels of others
which are required to be obtained in order to effect the valid assignment,
transfer, and conveyance to Purchaser of the Material Contracts without
resulting in any default thereunder.
"Contracts" shall mean all contracts, agreements, and leases of equipment
or other personal property that relate exclusively to the Business; provided,
however, that the Franchise Agreements are not included within the meaning of
"Contracts."
"Deeds" shall mean special warranty deeds or limited warranty deeds to
convey good and marketable fee simple title to the Real Property, with the
warranty of title contained therein limited to the claims of Persons claiming
by, through or under Seller, but not otherwise
"Development Costs" shall mean all of Seller's out-of-pocket costs paid in
connection with the development and acquisition of the new restaurant sites in
the Territory set forth in Schedule 4.7 capitalized in accordance with generally
accepted accounting principles and Seller's historical practices including, but
not limited to legal fees, engineering fees, surveys, transfer taxes, title
policies, and the like; environmental investigation costs, the cost of permits,
approvals, variances, or rezoning; construction period insurance, and (ii)
Seller's internal costs capitalized in connection with such development efforts
in accordance with Seller's historic practices.
"Disclosure Memorandum" shall mean the set of numbered schedules
referencing Sections of this Agreement delivered by Seller and dated of even
date herewith, as supplemented by new or amended schedules delivered by Seller
prior to the Closing.
"DR Holdings Tracts" shall mean the two parcels of real property located at
0000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxx (Restaurant No. 1166) and 0000 Xxxx Xxxx,
Xxx Xxxxxx, Xxxxxxxxx ( Restaurant No. 1160) which are subject to leases, but
which Seller shall cause to be conveyed to Purchaser in fee simple at the
Closing.
"Effective Time" shall have the meaning set forth in Section 2.5 hereof.
"Employee Records" shall mean copies of Seller's employee records of those
current employees of Seller who are employed by Hospitality as of the Closing.
"Environmental Laws" shall mean all federal, state, municipal, and local
laws, statutes, ordinances, rules, regulations, conventions, and decrees
relating to the environment, including without limitation, those relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or Hazardous Materials or wastes
of every kind and nature into the environment (including without limitation
ambient air, surface water, ground water, soil and subsoil), or otherwise
relating to the manufacture, generation, processing, distribution, application,
use, treatment, storage, disposal, transport, or handing of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous substances or
wastes, and any and all laws, rules, regulations, codes, directives, orders,
decrees, judgments, injunctions, consent agreements, stipulations, provisions,
and conditions of Environmental Permits, licenses, injunctions, consent
agreements, simulations, certificates of authorization, and other operating
authorizations, entered, promulgated, or approved thereunder.
3
"Environmental Permits" shall mean all permits, licenses, certificates,
approvals, authorizations, regulatory plans or compliance schedules required by
applicable Environmental Laws, or issued by a Government pursuant to applicable
Environmental Laws, or entered into by agreement of the party to be bound,
relating to activities that affect the environment, including without
limitation, permits, licenses, certificates, approvals, authorizations,
regulatory plans and compliance schedules for air emissions, water discharges,
pesticide and herbicide or other agricultural chemical storage, use or
application, and Hazardous Material or Solid Waste generation, use, storage,
treatment and disposal.
"Forum" shall mean my federal, state, local, municipal, or foreign court,
governmental agency, administrative body or agency, tribunal; private
alternative dispute resolution system, or arbitration panel.
"Financing Commitment" shall have the meaning set forth in Section 6.4.
"Franchise Agreements" shall mean those development agreements, franchise
agreements, and other agreements between Seller and Franchisor relating
exclusively to the Territory.
"Franchisor" shall mean Xxxxxxxx'x International, Inc.
"Financial Statements" shall have the meaning set forth in Section 3.8.
"Government" shall mean any federal state, local, municipal or foreign
government or any department, commission, board, bureau, agency,
instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean all substances and materials designated as
hazardous or toxic as of the date hereof pursuant to any applicable
Environmental Law.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Knowledge of Seller" (or words of like effect) when used to qualify a
representation, warranty, or other statement shall mean the actual knowledge of
Seller's directors of operations for the Territory and all management of Seller
senior thereto after due inquiry of the Restaurant managers in the Territory;
provided that Seller shall have no knowledge of any condition or circumstance
which would cause Seller to modify its representations and warranties.
"Material Contracts" shall mean all Contracts that involve monetary
obligations of Seller of more than $12,000 per year and that are not cancelable
by Seller upon thirty days notice or less without penalty or liquidated damages,
a list of which are set forth on Schedule 1.1D.
"Minor Contracts" shall mean all Contracts that are not Material Contracts.
"Orders" shall mean all applicable orders, writs, judgments, decrees,
rulings, consent agreements, and awards of or by any Forum or entered by consent
of the party to be bound.
"Permits" shall mean all rights of Seller under any liquor, alcoholic
beverage, beer and wine licenses, other licenses of every kind, certificates of
occupancy, and permits, or approvals of any nature, from governmental and
regulatory authorities which relate exclusively to the Business, the
Restaurants, or the Real Property.
"Permitted Encumbrances" shall mean, in the case of all Real Property, (i)
such easements, restrictions, covenants, and other such encumbrances which are
shown as exceptions on the Title Commitments and any other encumbrances of
record as of the effective date of the Title Commitments, (ii) ordinances
(municipal and zoning), (iii) survey matters, and (iv) such easements,
4
restrictions, covenants, and other encumbrances which become matters of public
record after the effective date of the Title Commitments and before the Closing,
in each such case, to the extent that such encumbrances could not reasonably be
expected to materially interfere with or impair Purchaser's use of the Real
Property for Xxxxxxxx'x Neighborhood Grill & Bar Restaurants or that are waived,
or deemed to be waived, by Purchaser pursuant to Section 7.1(a). Permitted
Encumbrances shall include in the case of both Real Property and personal
property all liens for taxes not yet due and payable. Notwithstanding the
foregoing, Permitted Encumbrances shall not include (i) any judgments for money
against Seller relating to the Real Property nor (ii) any judgments for money
relating to the Real Property, which becomes matters of public record or are
known to the Seller prior to the Closing
"Person" shall include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization, a government, and any other legal entity.
"Property Taxes" shall mean all ad valorem, real property, and personal
property taxes, all general and special private and public assessments, all
other property taxes, and all similar obligations pertaining to the Assets.
"Real Property" shall mean those tracts, and parcels of land owned by
Seller on which a Restaurant is located (all of which tracts and parcels are
described in Schedule 1.1C) and all buildings, fixtures, signs, parking
facilities, and other improvements located thereon and appurtenances thereto.
For purposes of this Agreement, "Real Property" will include the DR Holdings
Tracts.
"Restaurants" shall mean the 4 Xxxxxxxx'x Neighborhood Grill & Bar
restaurants operated by Seller at the locations set forth on Schedule 1.1A.
"Schedules" shall mean the numbered sections of the Disclosure Memorandum.
"Seller Plans" shall have the meaning set forth on Schedule 3.15.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste treatment
plant, water supply treatment plant, or air pollution control facility, and
other discarded material, including solid, liquid, semisolid, or contained
gaseous material resulting from industrial, commercial, mining, and agricultural
operations, and from community activities.
"Termination Date" shall mean October 8, 1998.
"Territory" shall mean those ADIs consisting of Lacrosse-Eau Claire,
Wisconsin and Wausau-Rhinelander, Wisconsin, as more particularly set forth on
Schedule 1.1E.
"Title Commitments" shall have the meaning set forth in Section 7.1(a).
"Title Policies" shall mean the Owner's Title Policies as defined in
Section 7.1(a).
ARTICLE II - PURCHASE AND SALE
2.1 Purchase and Sale. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing Seller shall sell, transfer, and assign
to Purchaser all of Seller's right, title, and interest in and to the Assets
free and clear of any mortgage, security interest, lien, charge, claim, or other
encumbrance of any nature except the Permitted Encumbrances, and Purchaser shall
purchase the Assets from Seller for the Purchase Price set forth in Section 2.3.
2.2 Assumption of Liabilities. As of the Effective Time, Purchaser shall
assume all of the Assumed Liabilities. Except for the Assumed Liabilities,
Purchaser does not hereby assume or agree to assume or pay any obligations,
liabilities, indebtedness, duties, responsibilities, or commitments of Seller or
5
any other Person, of any nature whatsoever, whether known or unknown, absolute
or contingent, due or to become due. Seller covenants and agrees to pay and
discharge all liabilities and obligations of the Seller and/or the Business
which are not specifically assumed by the Purchaser hereunder.
2.3 Purchase Price. The purchase price for the Assets (the "Purchase
Price") shall be $7,800,000 as adjusted as follows:
(a) The amount of the purchase price shall be increased by (i) all Property
Taxes accruing with respect to the Assets after the Closing that have been paid
by Seller prior to Closing; (ii) all amounts paid by Seller under the Contracts
that pertain to periods after the Closing; (iii) any other prepaid expenses
pertaining to the Business (such as telephone expenses, advertising expenses,
utility charges, and the like) to the extent that the same will benefit
Purchaser after the Closing; (iv) an amount equal to Seller's cost of those
Assets consisting of food, beverage (including beer, wine, and liquor), new
uniforms, paper, and supplies inventory as determined by the parties' joint
inventory at the close of business on the day prior to the Closing Date provided
that the cost of such inventory shall not exceed $15,000 per restaurant; and (v)
if the Purchaser elects to acquire the development sites for new restaurants set
forth in Schedule 4.7 (the "Development Sites"), the amount of Seller's
Development Costs.
(b) The amount of the purchase price shall be decreased by (i) all Property
Taxes accruing with respect to the Assets prior to the Closing that are due and
payable after the Closing and that have not been paid as of the Closing, (ii)
all amounts payable under the Contracts that pertain to periods before the
Closing but are due and payable after the Closing and that have not been paid as
of the Closing, and (iii) the cost of unused vacation accrued but unvested as of
the Closing Date by ADI Personnel hired by Hospitality the cost of which is
being assumed by Purchaser pursuant to Section 6.3(c).
(c) The amount of the purchase price shall be further adjusted to reflect
any expense paid by one party which the other party has agreed to pay or share
pursuant to Section 10.1 or otherwise pursuant to this Agreement.
(d) Notwithstanding the foregoing, the parties agree that with respect to
Property Taxes, such Property Taxes shall be prorated between Seller and
Purchaser in accordance with the amount of Property Taxes due for the same
period in 1997, as set forth in the taxes bills received by Seller from the
relevant governmental authorities. The parties agree to make any adjustments
necessary to ensure that the Property Taxes have been allocated in accordance
with clauses (a)(i) and (b)(i) above as soon as practicable upon receipt of
bills received from the relevant government authorities, for Property Taxes due
with respect to the Assets for 1998.
The foregoing adjustments shall be calculated by the parties and set forth
on Exhibit B which shall be signed by both parties at Closing. The Purchase
Price shall be paid by Purchaser on the Closing Date by wire transfer of
immediately available funds to an account designated by Seller.
2.4 Deliveries at the Closing.
(a) At the Closing, Seller shall deliver to Purchaser the following:
(i) A certificate executed by Seller, dated as of the Closing Date,
certifying in such detail as Purchaser may reasonably request that subject to
the matters disclosed in the Disclosure Memorandum, as it may be supplemented by
Seller from time to time, all representations and warranties of Seller in this
Agreement are true in all material respects as of the Closing Date as though
made on and as of the Closing Date and that Seller shall have performed in all
respects the covenants of the Seller contained in this Agreement required to be
performed on or prior to the Closing;
(ii) A certificate of the Secretary or an Assistant Secretary of Seller,
6
dated as of the Closing Date, certifying in such detail as Purchaser may
reasonably request (A) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of Seller authorizing the
execution, delivery, and performance of this Agreement, the Xxxx of Sale and
Assignment Agreement, and the Deeds, and that all such resolutions are still in
full force and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement, and (B) as to the incumbency and
specimen signature of each officer of Seller executing this Agreement, the Xxxx
of Sale and Assignment Agreement, the Deeds, and any certificate or instrument
furnished pursuant hereto, and a certification by another officer of Seller as
to the incumbency and signature of the officer signing such certificate;
(iii) The opinion of Xxxxxxxxxx Xxxxxxxx LLP, counsel to Seller, in
substantially the form of Exhibit C hereto;
(iv) The Xxxx of Sale and Assignment Agreement, duly executed by Seller;
(v) The Consents;
(vi) The Deeds, duly executed by Seller or in the case of the two DR
Holdings Tracts by the owner thereof;
(vii) Transfer returns for Wisconsin real estate transfers;
(viii) A non-foreign Status Affidavit duly executed by Seller;
(ix) An Owner's Affidavit duly executed bar Seller;
(x) A Gap Affidavit duly executed by Seller;
(xi) A Cross-Receipt acknowledging receipt of the Purchase Price duly
executed by Seller; and
(xii) Any other documents that Purchaser may reasonably request at least
three days prior to the Closing in order to effectuate the transactions
contemplated hereby.
(b) At the Closing Purchaser shall deliver to Seller the following:
(i) A certificate executed by Purchaser, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof,
(ii) A certificate of the Secretary or an Assistant Secretary of Purchaser,
dated as of the Closing Date, certifying in such detail as Seller may request
(i) that attached thereto is a true and complete copy of resolutions adopted by
the Board of Directors of Purchaser authorizing the execution, delivery and
performance of this Agreement and the Xxxx of Sale and Assignment Agreement, and
that all such resolutions are still in full force and effect and are all the
resolutions adopted in connection with the transactions contemplated by this
Agreement, and (ii) as to the incumbency and specimen signature of each officer
of Purchaser executing this Agreement, and any certificate or instrument
furnished pursuant hereto or to be furnished in connection herewith as of the
Closing Date, and a certification by another officer of Purchaser as to the
incumbency and signature of the officer signing such certificate;
(iii) The funds constituting the Purchase Price;
(iv) The Xxxx of Sale and Assignment Agreement, duly executed by Purchaser;
(v) The opinion of Xxxxxxx & Xxxx, S.C., counsel to Purchaser,
substantially the form of Exhibit D hereto;
(vi) A Cross-Receipt acknowledging receipt of the Assets duly executed by
Purchaser; and
7
(vii) Any other documents that Seller may reasonably request at least three
days prior to the Closing.
(c) At the Closing, Seller shall deliver to Hospitality the Employee
Records, subject to execution of a release by each affected employee allowing
for the disclosure of such files.
(d) At the Closing, Hospitality shall deliver to Seller:
(i) A certificate executed by Hospitality, dated as of the Closing Date,
certifying in such detail as Seller may reasonably request to the fulfillment of
the conditions specified in Sections 7.3(a) and (b) hereof; and
(ii) A certificate of the Secretary or an Assistant Secretary of
Hospitality, dated as of the Closing Date, certifying in such detail as Seller
may request, (a) that attached hereto is a true and complete copy of resolutions
adopted by the Board of Directors of Hospitality authorizing the execution,
delivery and performance of this Agreement, and that all such resolutions are
still in full force and affect and are all the resolutions adopted in connection
with the transactions contemplated by this Agreement, and (b) as to the
incumbency and specimen signature of each officer of Hospitality executing this
Agreement, and any certificate or instrument furnished pursuant hereto or to be
furnished in connection herewith as of the Closing Date, and a certificate by
another officer of Hospitality as to the incumbency and signature of the officer
signing such certificate.
2.5 Transfer of Operations. Purchaser shall be entitled to immediate
possession of, and to exercise all rights arising under, the Assets from and
after the time that the Restaurants open for business on the Closing Date, and
operation of the Restaurants shall transfer at such time (the "Effective Time").
Except as expressly provided in this Agreement, all profits, losses,
liabilities, claims, or injures arising before the Effective Time shall be
solely to the benefit or the risk of Seller. All such occurrences after the
Effective Time shall be solely to the benefit or the risk of Purchaser. The risk
of loss or damage by fire, storm, flood, theft, or other casualty or cause shall
be in all respects upon Seller prior to the Effective Time and upon the
Purchaser thereafter.
2.6 Closing. The closing of the transactions described in this Article II
(the "Closing") shall take place at the offices of Xxxxxxx & Xxxx, S.C., 000
Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxx, at 10:00 a.m. on September 28, 1998,
or on such other date and time as may be mutually agreed upon by the parties
hereto.
2.7 Allocation of Purchase Price. The Purchase Price shall be allocated
among the various Assets as set forth on Exhibit E hereof. The allocation
contained in Exhibit E shall be subject to adjustments mutually agreed upon by
Purchaser and Seller at closing to reflect adjustments to the Purchase Price.
Each party hereby agrees that it will not take a position on any income tax
return, before any governmental agency charged with the collection of any income
tax, or in any judicial proceeding that is inconsistent with the terms of this
Section 2.7.
2.8 Further Assurances. From time to time after the Closing at Purchaser's
request and expense, Seller shall execute, acknowledge, and deliver to Purchaser
such other instruments of conveyance and transfer and shall take such other
actions and execute and deliver such other documents, certifications, and
further assurances as Purchaser may reasonably require to vest more effectively
in Purchaser, or to put Purchaser more fully in possession of, any of the
Assets, or to better enable Purchaser to complete, perform and discharge the
Assumed Liabilities. Each party hereto will cooperate with the other and execute
and deliver to the other party hereto such other instruments and documents and
take such other actions as may be reasonably requested from time to time by any
other party hereto as necessary to carry out, evidence, and confirm the intended
purpose of this Agreement.
8
2.9 Post-Closing Adjustments. As soon as possible after the Closing (but
not later than the first anniversary thereof), the parties shall reconcile the
actual amount of perorations that were estimated at Closing as well as the
accrued but unvested vacation time of Seller's employees assumed by Purchaser
hereunder that has actually vested with the estimated amounts thereof. To the
extent that the actual amounts differ from the amounts estimated on Exhibit B
(Adjustment to Purchase Price) or prorations or adjustments other than those
reflected on Exhibit B are discovered after the Closing, the parties agree to
remit the correct amount of such items to the appropriate party within 15 days
after the same are determined. If Purchaser shall elect to acquire any
Development Site after the Closing, then Purchaser shall pay to Seller the
Development Costs therefor within 15 days after such election.
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the limitations and exceptions set forth in the Disclosure
Memorandum dated of even date hereof as supplemented or amended from time to
time by Seller prior to the Closing Date, regardless of whether any Schedule
constituting a part of the Disclosure Memorandum is referenced in any specific
provision below, Seller hereby represents and warrants to Purchaser as follows:
3.1 Organization, Qualifications and Corporate Power. Seller is a
corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Georgia. Seller has the corporate power
and authority to execute, deliver, and perform this Agreement, the Xxxx of Sale
and Assignment Agreement, the Deeds, and all other agreements, documents,
certificates, and other papers contemplated to be delivered by Seller pursuant
to this Agreement.
3.2 Authorization. The execution, delivery, and performance by Seller of
this Agreement, the Xxxx of Sale and Assignment Agreement, the Deeds, and all
other agreements, documents, certificates, and other papers contemplated to be
delivered by Seller pursuant to this Agreement have been duly authorized by the
Board of Directors of Seller.
3.3 Non-Contravention. Subject to obtaining the consents to assignment of
the Material Contracts set forth on Schedule 3.3, the execution, delivery and
performance of this Agreement will not violate or result in a breach of any term
of Seller's Articles of Incorporation or Bylaws, result in a breach of any
agreement or other instrument to which Seller is a party (except for defaults
under Minor Contacts where the consent of the other party or parties to such
contract to the assignment thereof will not be obtained) or violate any law or
any order, rule, or regulation applicable to Seller of any Forum having
jurisdiction over Seller; and will not result in the creation or imposition of
any lien, charge, or encumbrance of any nature whatsoever upon any of the
Assets. Except as set forth on Schedule 3.3 and except for consents required
under Minor Contracts, the execution, delivery and performance of this Agreement
and the other documents executed in connection herewith, and the consummation of
the transactions contemplated hereby and thereby do not require any filing with,
notice to or consent, waiver or approval of any third party, including but not
limited to, any Forum other than any filing required under the HSR Act and the
expiration of any applicable waiting period thereunder. Schedule 3.3 identifies
separately each notice, consent, waiver, or approval by reference to each
Material Contract to which it is applicable.
3.4 Validity. This Agreement has been duly executed and delivered by the
Seller and constitutes the legal, valid, and binding obligation of Seller,
enforceable in accordance with its terms. When the Xxxx of Sale, Assignment
Agreement and the Deeds have been executed and delivered in accordance with this
Agreement, they will constitute the legal valid, and binding obligation of
Seller, enforceable in accordance with their terms.
3.5 Assets.
(a) Seller has good and valid title to all of the Assets constituting
9
personal property, free and clear of any and all mortgages, pledges, security
interests, liens, charges conditional sales agreements, and other encumbrances
except Permitted Encumbrances.
(b) The Assets located at each Restaurant constitute all tangible personal
property required on site to operate the Restaurant in accordance with the
Franchise Agreements and with the historic practices of the Seller.
(c) There are no assets or property of any nature which are not being
transferred to Purchaser hereunder that have been customarily used exclusively
in the operation or ownership of ache Restaurants other than Permits and
software licenses that are not assignable.
(d) Each Asset constituting tangible personal property is in good operating
condition consistent with its age, subject to normal wear and tear and has been
maintained in accordance with standard practices.
(e) The inventory on hand: (i) is sufficient for the operation of the
Business in the ordinary course based on current levels of Operation; (ii) has
been purchased in the ordinary course of business consistent in quality and
quantity with past practices of the Business, and (iii) is substantially useable
and salable.
3.6 Contracts.
(a) Each Material Contract is a valid and subsisting agreement, without any
default of Seller thereunder, and to the knowledge of Seller, without any
default on the part of my other party thereto. To the knowledge of Seller, no
event or occurrence has transpired which with the passage of time or giving of
notice or both will constitute a default under any Material Contract. A true and
correct list of each Material Contract and every amendment thereto or other
agreement or document relating thereto is set forth as Schedule 3.6 to this
Agreement. True and correct copies of the Material Contracts (and any amendments
thereto) have been provided to Purchaser. At the time of Closing, Seller shall
have made all payments and performed all obligations due through the Closing
Date under each Contract, except to the extent that any payment due is set forth
on Exhibit B and deducted in calculating the Purchase Price pursuant to Section
2.3.
(b) No Contract has been assigned by Seller or any interest granted therein
by Seller to any third party, or is subject to any mortgage, pledge,
hypothecation, security interest, lien, or other encumbrance or claim.
(c) The Contracts have been entered into in the ordinary course of Seller's
business and, to Seller's knowledge, contain commercially reasonable terms.
3.7 Real Property.
(a) Schedule 3.7(a) sets forth with respect to each Restaurant, its
location, and whether the improvements are owned or leased.
(b) The water, electric, gas, and sewer utility services, and storm
drainage facilities currently available to each parcel of Real Property are
adequate for the operation of the Restaurants as presently operated, and to
Seller's knowledge, there is no condition which will result in the termination
of the present access from each parcel of Real Property to such utility services
and other facilities.
(c) Seller, or the owner of the DR Holdings Tracts, has obtained all
authorizations and rights-of-way which are necessary to ensure vehicular and
pedestrian ingress and egress to and from the site of each Restaurant, all of
which are assignable and shall be assigned to Purchaser at the Closing.
(d) Neither Seller nor the holder of the DR Holdings Tracts has received
any notice that any Government having the power of eminent domain over any
10
parcel of Real Property has commenced or intends to exercise the power of
eminent domain or a similar power with respect to any part of the Real Property.
(e) The Real Property and the present uses thereof comply with all laws and
regulations (including zoning laws and ordinances) of all Governments having
jurisdiction over the Real Property and all recorded covenants or restrictions,
and Seller has received no notice from any Government alleging that the Real
Property or any improvements erected or situated thereon, or the uses conducted
thereon or therein, violate any regulations of any Government having
jurisdiction over the Real Property.
(f) To the knowledge of Seller, no work for municipal improvements has been
commenced on or in connection with any parcel of Real Property or any street
adjacent thereto and no such improvements are contemplated. No assessment for
public improvements has been made against the Real Property which remains
unpaid. No notice from any Government has been served upon the Real Property or
received by Seller, requiring or calling attention to the need for any work,
repair, construction, alteration, or installation on or in connection with the
Real Property which has not been complied with.
(g) Seller holds all Environmental Permits necessary for conducting the
Business and has conducted, and is presently conducting, the Business in
compliance with all applicable Environmental Laws and Environmental Permits held
by it, including, without limitation, all record keeping and filing
requirements. To the Seller's knowledge, all Hazardous Materials and Solid
Waste, on, in, or under Real Property have been properly removed and disposed
of, and to the Seller's knowledge no past or present disposal, discharge, spill,
or other release of, or treatment, transportation, or other handling of
Hazardous Materials or Solid Waste on, in, under, or off-site from any Real
Property will subject the Purchaser, or any subsequent owner, occupant, or
operator of the Real Properly to corrective or compliance action or any other
liability. There are no presently pending, or to Seller's knowledge, threatened
Actions or Orders against or involving Seller relating to any alleged past or
ongoing violation of any Environmental Laws or Environmental Permits with
respect to the Real Property, nor to Seller's knowledge is Seller subject to any
liability for any such past or ongoing violation, nor is Seller subject to any
liability for any such past or ongoing violation caused by Seller. Matters
referenced above of which Seller has knowledge are referenced on Schedule
3.7(g).
3.8 Financial Statements. Schedule 3.8 contains for each Restaurant
unaudited statements of operations as of the end of the 1997 fiscal year and for
the three fiscal months prior to the date hereof for which such statements are
available (the "Financial Statements"). The Financial Statements have been
prepared in accordance with Seller's historical practices and fairly present the
operations of the Restaurants for the periods presented and as of their
respective dates.
3.9 Taxes. All Property Taxes relating to the Assets have been fully paid
for 1997 and ale prior tax years and there are no delinquent property tax liens
or assessments. Seller has also timely filed (or will timely file) all other tax
returns and reports of whatever kind pertaining to the Assets and required to be
filed by Seller up to the Closing Date and such returns and reports properly
reflect or will properly reflect the tax liability of the Seller. Seller has
paid (or will timely pay) all taxes of whatever kind, including any interest,
penalties, governmental charges, duties, fees, and fines imposed by all
governmental entities or taxing authorities and withholding amounts, which are
due and payable prior to the Closing Date or for which assessments relating to
any period prior to the Closing Date have been received or levied. There are no
audits, suits, actions claims, investigation, inquiries, or proceedings pending
or, to Seller's knowledge, threatened against Seller with respect to taxes,
interest, penalties, governmental charges, duties, or fines, nor are any such
matters under discussion with any governmental authority, nor have any claims
for additional taxes, interest, penalties, charges, fees, fees, or duties been
received by or assessed against Seller that in any such case affect the Assets.
11
The Seller has not requested any extension of time within which to file returns
in respect of any taxes. No tax deficiencies have been proposed or assessed
against Seller. For purposes hereof, "tax" or "taxes' means all federal, state,
county, local, foreign and other taxes or assessments including, without
limitation, income, estimated income, business, occupation, franchise, property
(real and personal), sales employment, gross receipts, use, transfer, ad
valorem, profits, license, capital, payroll, employee withholding, unemployment,
excise, goods and services, severance, stamp and including interest, penalties
and additions in connection therewith for which the Seller is or may be liable.
3.10 Litigation. Except as set forth on Schedule 3.10, there is no Action
or Order pending or, to the knowledge of Seller, threatened against or affecting
Seller that pertains to the Restaurants or Business, or any of the Assets before
any court or by or before any Forum. The Seller is not subject to any order,
writ, judgment, injunction or decree of any governmental authority or
instrumentality or any court which would limit or restrict the Seller's right to
enter into and carry out this Agreement or the documents or agreements to be
entered into in connection herewith or to consummate the transactions
contemplated hereby or which would otherwise adversely affect the Business or
the Assets.
3.11 Permits. Seller has all Permits as are necessary to operate the
Restaurants and such Permits as set forth on Schedule 3.11 are and will be as of
the Closing current and effective. Seller has fulfilled and performed all of its
obligations with respect to such Permits, and to the knowledge of the Seller no
event has occurred which allows, nor after notice or lapse of time or both would
allow, revocation or termination thereof or would result in any other impairment
of the rights of the holder of any such Permits.
3.12 Compliance with Health and Safety Laws. To the knowledge of Seller,
Seller is in compliance with all laws, governmental standards, rules and
regulations applicable to Seller or to any of the Assets including, but not
limited to, the Americans with Disabilities Act and similar state laws,
occupational health and safety laws, and environmental laws.
3.13 Employment Contracts, Etc. Seller is not a party to any written
employment agreements, related to the employees at the Restaurants, (or any oral
agreements providing for employment other than employment "at will") or any
deferred compensation agreements.
3.14 Labor Matters. Seller is not and never has been a party to any
collective bargaining or other labor agreement affecting the Business. To the
knowledge of Seller, there is no pending or threatened labor dispute, strike,
work stoppage, union representation, election, negotiation of collective
bargaining agreement, or similar labor matter affecting the Business. Seller is
not involved in any controversy with any group of its employees or any
organization representing any employees involved in the Business, and to the
knowledge of Seller, Seller is in compliance with all applicable federal and
state laws and regulations concede, the employer/employee relationship,
including but not limited to wage/hour laws, laws prohibiting discrimination,
and labor laws. Seller is in compliance with all of its agreements relating to
the employment of its employees, including, without limitation, provision
thereof relating to wages, bonuses, hours of work and the payment of Social
Security taxes, and Seller is not liable for any unpaid wages, bonuses, or
commissions or any tax, penalty, assessment, or forfeiture for failure to comply
with any of the foregoing.
3.15 Employee Benefits.
(a) Schedule 3.15 hereto contains a true and complete list of all the
following agreements or plans of Seller which are presently in effect and which
pertain to any of the ADI Personnel:
(i) "employee welfare benefit plans" and "employee pension benefit plans,"
as defined in Section 3(1) and 3(2), respectively, of the Employee Retirement
12
Income Security Act of 1914, as amended ("ERISA");
(ii) any other pension, profit sharing, retirement, deferred compensation,
stock purchase, stock option incentive, bonus, vacation, severance, disability,
health, hospitalization, medical, life insurance, vision, dental, prescription
drug, supplemental unemployment, layoff, automobile, apprenticeship and
training, day care, scholarship, group legal benefits, fringe benefits, or other
employee benefit plan, program, policy, or arrangement, whether written or
unwritten, formal or informal which Seller maintains or to which Seller has any
outstanding, present or future obligation to contribute to or make payments
under, whether voluntary, contingent, or otherwise (the plans, programs,
policies, or arrangements described in clauses (i) or (ii) are herein
collectively referred to as the "Seller Plans").
(b) Seller does not presently contribute and has never contributed or been
obligated to contribute to a multiemployer plan as defined in section 3(37)(A)
of ERISA.
(c) No Seller Plan is subject to Title IV of ERISA.
3.16 Accuracy of Schedules, Certificates and Documents. All information
concerning Seller contained in this Agreement or in any certificate furnished to
Purchaser pursuant to this Agreement or in the Disclosure Memorandum is or will
be when furnished both complete and accurate in all material respects, and all
documents furnished to Purchaser pursuant to this Agreement which are documents
described in this Agreement or in the Disclosure Memorandum are true and correct
copies of the documents which they purport to represent.
3.17 Conduct of Business. Since the end of fiscal year 1997, Seller has
conducted the operations of the Business in the ordinary course of business and
substantially in accordance with past practice, and has not taken any action
that, if taken after the date hereof, would violate Section 4.5.
3.18 Insurance. The Seller maintains policies of fire and casualty,
liability and other forms of insurances and bonds in such amounts, with such
deductibles, and against such risks and losses as are reasonable for the
Business and the Assets. Each such insurance policy and bond is in full force
and effect and Seller has not received notice and is not otherwise aware of any
cancellation or threat of cancellation of such insurance or bond.
3.19 Undisclosed Commitments or Liabilities. There are no commitments or
liabilities or obligations relating to the Business, whether accrued, absolute,
contingent or otherwise including, but not limited to, guarantees by Seller of
the liabilities of third parties for which specific and adequate provisions have
not been made on the Financial Statements, except those incurred in or as a
result of the ordinary course of business since the end of fiscal year 1997
(none of which ordinary course obligations have had or will have a material
adverse effect on the Assets or the Business).
ARTICLE IV - COVENANTS OF SELLER
4.1 Performance of Real Property Leases and Assumed Contracts. Seller
shall, through the Closing Date, continue to faithfully and diligently perform
each and every continuing obligation of Seller, if any, under each of the
Material Contracts, where the failure to do so would have a material adverse
affect on the operations of a Restaurant.
4.2 Transfer of Licenses and Permits. Seller shall use commercially
reasonable efforts to cooperate in assisting Purchaser with the assumption,
transfer, or reissuance of any and all Permits required for the operation of the
Restaurants, including without limitation making available ADI Personnel
required therefor.
4.3 Liabilities of Seller. All liabilities of Seller related to the Assets
which are not Assumed Liabilities will be promptly paid by Seller as they come
due.
13
4.4 Agreements Respecting Employees of Seller.
(a) Prior to the Effective Time without the prior written approval of
Purchaser and Hospitality, Seller shall not transfer or reassign to operations
outside the Business any employee exclusively involved in the operation or
supervision of the Restaurants ("ADI Personnel") At the Effective Time, Seller
shall terminate the employment of all ADI Personnel. For a period of twelve
months following the Closing, Seller shall not hire any person who was an
employee of Purchaser or Hospitality within the previous three months. For a
period of eighteen months following the Closing, Seller shall not solicit for
employment any person who is an employee of Purchaser or Hospitality.
(b) Seller shall be solely responsible for any severance amounts due or
granted by Seller to any ADI Personnel.
(c) Seller, Purchaser and Hospitality shall cooperate in the transition of
coverage of ADI Personnel from Seller's health, medical, life insurance and
other welfare plans to plans maintained by Hospitality.
4.5 Conduct of Business.
(a) From the date hereof until Closing, Seller shall (i) operate the
Restaurants as they are currently being operated and in the ordinary course of
business and in compliance with all terms and conditions of the Franchise
Agreements, using commercially reasonable efforts in keeping with Seller's
historical practices to preserve and maintain the services of its employees and
its relationships with suppliers and customers, (ii) pay all bills and debts
incurred by it related to the Business promptly as their become due, and (iii)
consult in advance with Purchaser on all decisions outside the ordinary course
of business relating to the Assets or the Restaurants.
(b) In particular, and without limiting the foregoing, with respect to the
Business, Seller shall:
(i) maintain the Assets consistent with past practices and in good
operating condition consistent with their age;
(ii) continue to purchase and maintain inventories for each Restaurant in
such quantities and quality as necessary to operate the Restaurants in
accordance with Seller's historical practice,
(iii) continue to operate the Restaurants in accordance with all material
applicable local, state and federal laws and regulations, and
(c) Further, with respect to the Restaurants, Seller shall not, without the
express prior written approval of Purchaser:
(i) change in any material manner the ownership of the Assets; or directly
or indirectly, solicit or entertain any offer from or negotiate with or in any
manner engage, discuss, accept or consider any proposal from any other person
relating to the acquisition of the Assets;
(ii) increase the rate of compensation to ADI Personnel beyond the usual
and customary annual merit increases or bonuses under established compensation
plans, except for payments under the stay-bonus plan which will be paid within
six weeks after the end of the month in which the Closing occurs;
(iii) mortgage, pledge, or subject to lien (except in connection with
development efforts pursuant to Section 4.7 in the ordinary course of business)
any of the Assets;
(iv) sell or otherwise dispose of any Asset except in the ordinary course
of business,
(v) enter into any Material Contract except in the ordinary course of
business;
14
(vi) other than in the ordinary course of business, cancel or terminate or
consent to or accept any cancellation or termination of any Material Contract,
amend or otherwise modify any of its material terms or waive any breach of any
of its material terms or provisions or take any over action in correction with
any Material Contract that would materially impair the interests or rights of
Seller to be transferred to Purchaser hereunder.
(vii) Cancel or terminate or permit to be canceled or terminated its
current insurance (or reinsurance) policies or permit any of the coverage
thereunder to lapse, unless simultaneously with such termination, cancellation
or lapse, replacement policies providing coverage equal to or greater than the
coverage under the canceled, terminated, or lapsed policies are in full force
and effect.
4.6 Access to Information. Seller shall afford Purchaser and Hospitality,
its counsel, financial advisors, auditors, lenders, lenders, counsel and other
authorized representatives reasonable access for any purpose consistent with
this Agreement from the date hereof until the Closing, during normal business
hours, to the offices, properties, books, and records of Seller with respect to
the Assets and the Restaurants and shall furnish to Purchaser and Hospitality
such additional financial and operating data and other information as Seller may
possess and as Purchaser or Hospitality may reasonably request, subject to
Purchaser's and Hospitality's obligations regarding the confidentiality of such
information as set forth in Section 6.2 hereof; provided, however, that such
access shall be arranged in advance by Purchaser or Hospitality with Seller and
will be scheduled in a manner and with a frequency calculated to cause the
minimum disruption of the business of Seller.
4.7 Development Efforts. Seller shall use commercially reasonable efforts
to maintain the current results of its development activities for the
Development Sites set forth on Schedule 4.7 for the benefit of Purchaser until
Purchaser's election pursuant to Section 6.5 hereto.
4.8 Reporting Requirements. Through the Closing Date, Seller shall furnish
to Purchaser:
(a) Promptly after the occurrence, or failure to occur, of any such event,
information with respect to any event which has materially adversely affected
the Assets or the operations of the Restaurants.
(b) As soon as available and in any event within 15 business days after the
end of each fiscal month, the statement of operations of each Restaurant for
such month in the Seller's regularly prepared format.
(c) Promptly after the commencement of each such matter, notice of all
actions, charges, orders or other directives affecting the Business or any
Restaurant that, if adversely determined, could materially adversely affect the
Assets, operations, business, prospects or condition (financial or otherwise) of
the Restaurants or the ability of Seller to perform its obligations hereunder.
(d) Such other information respecting the Assets or the operations,
business prospects, or condition (financial or otherwise) of the Restaurants as
the Purchaser may from time to time reasonably request.
(e) Promptly after discovery, information in respect of any representation
or warranty made by Seller in this Agreement which was when made, or has
subsequently become, untrue. 4.9 Cooperation. Insofar as such conditions are
within its reasonable control or influence, Seller will use commercially
reasonable efforts to cause the conditions set forth in Article VII to be
satisfied and to facilitate and cause the consummation of the transactions
contemplated hereby, including obtaining the Consents. The parties acknowledge
that no consents will be sought with respect to any Minor Contract even if the
failure to so obtain a consent to assignment may result in a default or
termination thereunder.
15
4.10 Subsequent Contracts. From the date of this Agreement to the Closing
Date, Seller shall use commercially reasonable efforts (a) to include in any
Material Contracts entered into by Seller ("Subsequent Contracts") a provision
permitting the assignment of any such Subsequent Contract to Purchaser and
provide that upon such assignment, Purchaser shall succeed to all of Seller's
rights, title, and interests thereunder subject to the Purchaser's assumption of
all of Seller's duties, powers, and obligations under such Subsequent Contract,
and (b) to ensure that no Subsequent Contract contains any provision which would
limit in any way the rights, title, and interests of Seller in the Assets.
4.11 Transition Services.
(a) For a period of three months after the Closing, if and to the extent
requested in writing by Purchaser, Seller agrees to provide to Purchaser and/or
Hospitality restaurant accounting, POS system support, and other services
related to the Restaurants as mutually agreed upon between Seller and Purchaser
(the "Services"). Purchaser shall give Seller 45 days advance written notice of
the Services requested. The Services shall be provided promptly as requested and
shall be provided in the same manner and with the same or similar personnel as
Seller previously utilized.
(b) Purchaser or Hospitality will pay for the Services which they
respectively receive on a monthly basis, after receipt of an invoice from
Seller, at Seller's direct personnel cost incurred in connection with providing
the requested Service, plus an amount of reasonable overhead agreed to in
advance not to exceed 85% of the base salaries of the personnel providing the
Services. Seller's invoice shall detail the personnel used, the amount of time
spent, and its calculation of the cost thereof. Direct personnel cost shall
include only base salary and benefits normally paid to Seller employees in such
capacities.
(c) Seller is not required to maintain the employment of any specific
personnel in connection with providing the Services, provided, however, that if
requested by Purchaser or Hospitality, Seller shall offer to specifically
designated personnel a bonus incentive to retrain for the three month period.
The amount of such bonus shall be at the discretion of Purchaser. Such bonus, if
accepted by the employee, shall be paid by Purchaser at the end of the
three-month period, or for such shorter period as Purchaser may determine.
4.12 Delivery of Real Estate Documents. (a) Seller has previously provided
to Purchaser legal descriptions of the Real Property and copies of all surveys,
title policies, and environmental reports pertaining to the Real Property in
Seller's possession. (b) Seller has previously provided to Purchaser current
surveys and title insurance commitments with respect to the Real Property
("Title Commitments") pursuant to which the Title Company will agree to issue at
Closing owner's policies of title insurance ("Title Policies") on American Land
Title Association standard Form B-1990, without exceptions except as shown in
the Title Commitments, to be issued by Chicago Title Insurance Company ("Title
Company") in an amount in the case of each parcel equal to the purchase price
allocated to such parcel of the Real Property pursuant to Section 2.7. The Title
Policies shall insure the Purchaser that, upon consummation of the purchase and
sale herein contemplated, Purchaser will be vested with good, fee simple,
marketable, and insurable title to the Real Property, subject only to the
Permitted Encumbrances or arising out of acts of the insured.
4.13 Risk of Loss. Seller shall give Purchaser notice of the occurrence of
damage or destruction of or the commencement of condemnation proceedings
affecting the Real Property. If any portion of the Real Property is condemned or
is damaged or destroyed by fire or other casualty prior to the Closing,
Purchaser shall have the option to (i) eliminate that tract from the Agreement
and receive a deduction in the purchase price based on that portion of the
purchase price allocated to such tract, or (ii) proceed to Closing and receive
the insurance or condemnation proceeds associated therewith. Purchaser's
election shall be made within 20 days following receipt of Seller's notice.
16
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser and Hospitality hereby represents and warrants to Sellers as
follows:
5.1 Organization, Corporate Power, Authorization. Each of Purchaser and
Hospitality is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Wisconsin and in each other
jurisdiction in which it is lawfully required to qualify to conduct business.
Each of Purchaser and Hospitality has the corporate power and authority to
execute and deliver this Agreement and the Xxxx of Sale and Assignment
Agreement, and to consummate the transactions contemplated hereby. All corporate
action on the part of Purchaser and Hospitality necessary for the authorization,
execution, and delivery of this Agreement and the Xxxx of Sale and Assignment
Agreement, and performance of their respective obligations thereunder have been
duly taken.
5.2 Non-Contravention. The execution and delivery of this Agreement and the
Xxxx of Sale and Assignment Agreement by Purchaser and Hospitality do not and
the consummation by Purchaser and Hospitality of the transactions contemplated
hereby and thereby will not violate any provision of their respective articles
of organization or operating agreement.
5.3 Validity. This Agreement has been duly executed and delivered by
Purchaser and Hospitality, and constitutes the legal, valid, and binding
obligation of Purchaser and Hospitality, enforceable against Purchaser and
Hospitality in accordance with its terms, subject to general equity principles
and to applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws from time to time in effect affecting the enforcement of creditors'
rights. When the Xxxx of Sale and Assignment Agreement has been executed and
delivered in accordance with this Agreement, it will constitute the legal,
valid, and binding obligation of Purchaser, enforceable in accordance with its
terms, subject to general equity principles and to applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in
effect affecting the enforcement of creditors' rights.
5.4 Litigation Relating to the Agreement. Neither Purchaser nor Hospitality
is a party to, or subject to any judgment, decree, or order entered in any
lawsuit or proceeding brought by any governmental agency or instrumentality or
other party seeking to prevent the execution of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE VI - COVENANTS OF PURCHASER
6.1 Purchaser Performance. After the Closing Date, Purchaser shall promptly
pay as they become due and otherwise perform all obligations of Seller under the
Assumed Liabilities and otherwise perform and fulfill all other obligations with
respect to the Assets pertaining to the period after the Closing Date.
6.2 Confidentiality. In connection with the negotiation of this Agreement,
Seller may disclose Confidential Information, as defined below, to Purchaser
and/or Hospitality. Purchaser and Hospitality agrees that if the transactions
contemplated herein are not consummated, each of Purchaser and Hospitality will
return to Seller all documents and other written information furnished to it.
Purchaser and Hospitality further agree to maintain the confidentiality of any
and all Confidential Information of Seller and not disclose any Confidential
Information to any Person other than such Person to whom Confidential
Information must be disclosed to effect the transactions and who are bound by
appropriate non-disclosure agreement or obligations. Purchaser and Hospitality
shall not use such Confidential Information for financial gain or in any manner
adverse to Seller. The foregoing obligations shall not apply to (i) any
information which was known by Purchaser or Hospitality prior to its disclosure
by Seller; (ii) any information which was in the public domain prior to the
disclosure thereof; (iii) any information which comes into the public domain
through no fault of Purchaser or Hospitality; (iv) any information which is
17
disclosed to Purchaser or Hospitality by a third party, other than an affiliate,
having the legal right to make such disclosure; or (iv) any information which is
required to be disclosed by Order of any Forum. For purposes of this Section,
"Confidential Information" shall mean any and all technical, business, and other
information which is (a) possessed or hereafter acquired by Seller and disclosed
to Purchaser or Hospitality and (b) derives economic value, actual or potential,
from not being generally known to Persons other than Seller, including, without
limitation, technical or nontechnical data, compositions, devices, methods,
techniques, drawings, inventions, processes, financial data, financial plans,
product plans, lists of actual or potential customers or suppliers, information
regarding the business plans and operations of Seller, and the existence of
discussions and negotiations between the parties hereto relating to the terms
hereof. The restrictions of this Section shall expire three years from the date
hereof with respect to any confidential business information that does not
constitute a trade secret under applicable law. Purchaser and Hospitality agree
to execute a confidentiality agreement with respect to all information received
in connection with due diligence.
6.3 Seller Employees.
(a) Hospitality shall offer employment to all ADI Personnel upon terms and
conditions substantially equivalent to those provided by Seller; however,
Hospitality shall not be required to provide stock options or any stock purchase
rights. For a period of twelve months following the Closing, neither Purchaser
nor Hospitality shall hire any person who was an employee of Seller or any
subsidiary of Seller within the previous three months (other than ADI
Personnel), and for a period of eighteen months following the Closing, neither
Purchaser nor Hospitality shall solicit for employment any person who is an
employee of Seller or any subsidiary of Seller.
(b) Hospitality shall maintain employee records transferred to Hospitality
hereunder for a period of not less than four years and during that period will
afford Seller reasonable access to such records during Hospitality's normal
business hours. Hospitality shall maintain the confidentiality of such records
and limit access thereto in a manner consistent with Hospitality's treatment of
its employee records.
(c) Hospitality agrees, with respect to ADI Personnel hired by Hospitality,
to provide compensation and benefits to such ADI Personnel substantially
equivalent to current levels, excluding stock options and the stock purchase
program, and agrees (i) to give such employees credit under Hospitality's
benefits plans, programs, and arrangements, include credit for accrued but
unvested vacation which has been charged to Seller under Section 2.3, for such
employees' period of service with Seller, provided that such credit shall only
be taken into account under any tax-qualified plan maintained by Hospitality for
purposes of determining such employees' eligibility for participation and
eligibility to satisfy any hours of service requirement in order to receive an
allocation of an employer contribution; (ii) to provide coverage to such
employees who are eligible under Hospitality's health, medical, life insurance,
and other welfare plans (A) without the need to undergo a physical examination
or otherwise provide evidence of insurability; (B) any pre-existing condition or
similar limitations or exclusions will be applied by taking into account the
period of coverage under Seller's plan; (C) by applying and giving credit for
amounts paid for the plan year in which the Closing Date occurs as deductibles,
out of pocket expenses, and similar amounts paid by individuals and their
beneficiaries.
6.4 Cooperation. Insofar as such conditions are within its reasonable
control or influence, each of Purchaser and Hospitality shall use commercially
reasonable efforts to cause the conditions set forth in Article VII to be
satisfied and to facilitate and cause the consummation of the transactions
contemplated hereby. Specifically, but not by way of limitation, (i) Purchaser
will use commercially reasonable efforts to obtain a commitment letter for
financing the transactions contemplated hereby (the "Financing Commitment") upon
terms and conditions substantially similar to the financing provided to WHG Real
18
Estate South, LLC ("South") and WHG Real Estate East, LLC ("East"), Purchaser's
affiliates, in connection with the consummation of the transactions contemplated
under those respective certain Asset Purchase Agreements dated as of May 11,
1998, as amended, by and among Seller, Hospitality and South or East, as
applicable (the "Affiliate Agreements"), (ii) Purchaser and Hospitality will
promptly provide Franchisor with all information required by Franchisor to
determine whether Hospitality will be approved as a developer with respect to
the Territory and whether Purchaser will be approved as a franchisee with
respect to the Territory, (iii) Purchaser and Hospitality will actively pursue
an agreement with Franchisor as to the principal terms of franchise and
development agreements with respect to the Territory, and (iv) Purchaser will
file all documents required to obtain approval of the transactions contemplated
hereby under the HSR Act within 15 days of the date hereof.
6.5 Development Sites. Purchaser shall notify Seller no later than
September 7, 1998 of its election (if any) to acquire any of the results of
Seller's development activities for the development Sites set forth on Schedule
4.7, and Purchaser's failure to provide such notice to Seller by such date shall
constitute a waiver by Seller of any rights to acquire any Development Sites.
ARTICLE VII - CONDITIONS PRECEDENT TO THE CLOSING
7.1 Title Examination and Property Inspection.
(a) Purchaser shall have until August 31, 1998 (the "The Inspection
Period") to review the Title Commitments. Purchaser shall have until the end of
the Title Inspection Period in which to furnish Seller a written statement of
reasonable objections to exceptions, including any encumbrances or Surveys,
which, in Purchaser reasonable judgment, would materially interfere with or
impair Purchaser's use of the Real Property for the operation of Applebee's
restaurants or which would result in a material decrease in the value of the
Real Property ("Material Objections"). Seller shall have until the Termination
Date to satisfy such Material Objections (but with no obligation to do so) in
all material respects, and if Seller fails to satisfy all Material Objections in
all material respects on or prior to the Termination Date, then Purchaser's sole
right and remedy shall be to either (i) waive the objections and elect to close,
or (ii) terminate this Agreement by giving written notice of such termination to
Seller. If Purchaser fails to furnish Seller a written statement of Material
Objections by the end of the Title Inspection Period with respect to any matter
appearing as an exception on a Title Commitment, such matter shall be deemed
waived by Purchaser and shall be a Permitted Encumbrance.
(b) Property Inspection.
(A) Between the date of this Agreement and the Closing Date, Purchaser and
Purchaser's agents, employees, contractors, representatives and other designees
(hereinafter collectively called "Purchaser's Designees") shall have the right
to enter the Real Property for the purposes of inspecting the Real Property,
conducting soil tests, conducting surveys, mechanical and structural engineering
studies, environmental studies, and conducting any other investigations,
examinations, tests, and inspections as Purchaser may reasonably require to
assess the condition of the Real Property and its compliance with laws;
provided, however, that (i) any activities by or on behalf of Purchaser,
including, without limitation, the entry by Purchaser or Purchaser's Designees
onto the Real Property, or the other activities of Purchaser or Purchaser's
Designees with respect to the Real Property (hereinafter called "Purchaser's
Activities") shall not damage the Real Property in any material manner
whatsoever; (ii) in the event the Real Property is altered or disturbed in any
manner in connection with any Purchaser's Activities, Purchaser shall
immediately return the Real Property to the condition existing prior to
Purchaser's Activities; (iii) Purchaser shall in no event without Seller's prior
written consent disclose the results of any of its investigations, examinations,
tests, or inspections to any party (including any Government unless required by
law other than to its lenders, attorneys, consultants, and investors; and (iv)
Purchaser shall indemnify, defend, and hold Seller harmless from and against any
19
and all clams, liabilities, damages, losses, costs, and expenses of any kind or
nature whatsoever (including, without limitation, attorneys' fees, and expenses
and court costs) suffered, incurred or sustained by Seller as a result of, by
reason of, or in connection with any Purchaser's Activities. Notwithstanding any
provision of this Agreement to the contrary, Purchaser shall not have the right
to undertake any environmental studies or tests beyond the scope of a standard
"Phase I" evaluation without the prior written consent of Seller and, if
applicable, the lessor of any Leased Real Property.
(B) Purchaser shall have until August 31, 1998 (hereinafter called the "Due
Diligence Date"), to perform such investigations, examinations, tests and
inspections as Purchaser shall deem necessary or desirable to determine whether
the Real Property and the Assets located thereon are suitable and satisfactory,
to Purchaser and can be used for Applebee's franchise restaurants. In the event
Purchaser shall determine that the Real Property and the Assets located thereon
are not reasonably suitable and satisfactory to Purchaser, Purchaser shall have
the right to terminate this Agreement by giving written notice to Seller on or
before the Due Diligence Date. If Purchaser does not terminate this Agreement in
accordance with this Section 7.1(b) on or before the Due Diligence Date,
Purchaser shall have no further right to terminate this Agreement pursuant to
this Section 7.1(b).
(C) Prior to any entry by Purchaser or any of Purchaser's Designees onto
the Real Property, Purchaser shall (i) procure a policy of commercial general
liability insurance, issued by an insurer reasonably satisfactory to Seller,
covering all Purchaser's Activities, with a single limit of liability (per
occurrence and aggregate) of not less the $1,000,000.00; and (ii) deliver to
Seller a Certificate of Insurance, evidencing that such insurance is in force
and effect, and evidencing that Seller has been named as an additional insured
thereunder with respect to any Purchaser's Activities. Such insurance shall be
written on an "occurrence" basis, and shall be maintained in force until the
earlier of (i) the termination of this Agreement and the conclusion of all
Purchaser's Activities, or (ii) Closing.
(D) Purchaser acknowledges that Seller may deliver to Purchaser certain
documents and information in possession of Seller or Seller's agents with regard
to the Real Property (hereinafter called the "Due Diligence Materials"). The Due
Diligence Materials will be provided to Purchaser without any representation or
warranty of any kind or nature whatsoever and are merely provided to Purchaser
for Purchaser's informational purposes. Until Closing, Purchaser and Purchaser's
Designees shall maintain all Due Diligence Materials as Confidential
Information.
7.2 Purchaser's and Hospitality's Conditions to Closing. The obligations of
Purchaser and Hospitality hereunder are subject to satisfaction of each of the
following conditions at or before Closing, the occurrence of which may, at the
option of Purchaser or Hospitality, be waived:
(a) Subject to the matters disclosed in the Disclosure Memorandum as
supplemented by Seller from time to time, all representations and warranties of
Seller in this Agreement shall be true in all material respects on and as of the
Closing.
(b) Any supplement to the Disclosure Memorandum delivered by Seller shall
not reflect in Purchaser's reasonable judgment any material adverse change in
the Assets or the Business.
(c) Seller shall have performed and complied in all material respects with
all of its obligations under this Agreement which are to be performed or
complied with by Seller prior to or on the Closing Date.
(d) Seller shall have obtained and delivered to Purchaser all Consents
necessary to transfer and assign the Assets (except for Minor Contracts) to
Purchaser.
20
(e) Purchaser and Franchisor shall have entered into a franchise agreement
with respect to each Restaurant in the Territory. Hospitality and Franchisor
shall have entered into development agreements with respect to each ADI in the
Territory.
(f) Purchaser and Hospitality shall have obtained, either from Seller or
directly from the issuing authority, all permits, licenses, including liquor
licenses and beer permits, and approvals of all governmental and
quasi-governmental authorities necessary for the operation of the Restaurants in
accordance with franchise requirements; provided, however, that if Purchaser is
unable to obtain from local municipal or county authorities a permit necessary
for such operation of the Restaurants, and Purchaser reasonably believes that it
will be able to obtain such a permit within two months of the Closing Date,
Closing of the transactions contemplated hereunder will not be delayed if Seller
delivers to Purchaser a duly executed liquor license management agreement or
agreements with form and substance reasonably acceptable to Purchaser and
Seller.
(g) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Purchaser.
(h) Purchaser shall have obtained financing upon terms and conditions
substantially similar to the financing provided to South and East, Purchaser's
affiliates, in connection with the consummation of the transactions contemplated
under the Affiliate Agreements, or other financing reasonably acceptable to
Purchaser.
(i) Purchaser shall have been issued the Title Policies.
(j) Seller shall have delivered the items required by Section 2.4(a).
7.3 Seller's Conditions to Closing. The obligations of Seller hereunder are
subject to satisfaction of each of the following conditions at or before
Closing, the occurrence of which may, at the option of Seller, be waived.
(a) All representations and warranties of Purchaser in this Agreement shall
be true on and as of the Closing and Purchaser and Hospitality shall have
delivered to Seller a certificate to such effect dated as of the Closing Date.
(b) Purchaser and Hospitality shall have performed and complied in all
material respects with Purchaser and Hospitality's obligations under this
Agreement which are to be performed or complied with by Purchaser or Hospitality
prior to or on the Closing Date.
(c) Franchisor shall have agreed to terminate the Franchise Agreements
effective as of the Closing.
(d) Seller shall have obtained all the Consents.
(e) The waiting period under the HSR Act shall have expired or a
notification of early termination of the waiting period shall have been received
by Seller.
(f) Purchaser shall have delivered the items required by Section 2.4(b).
ARTICLE VII - INDEMNIFICATION
8.1 Purchaser Claims.
(a) Seller shall indemnify and hold harmless Purchaser and Hospitality, and
their respective successors and assigns, against, and in respect of:
(i) Any and all damages, losses, liabilities, costs, and expenses incurred
or suffered by Purchaser and Hospitality that result from, relate to, or arise
out of:
21
(A) any and all liabilities and obligations of Seller of any nature
whatsoever except for the Assumed Liabilities;
(B) any failure by Seller to carry out any covenant or agreement contained
in this Agreement;
(C) any misrepresentation or breach of warranty by Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate, furnished to Purchaser
or Hospitality by Seller pursuant hereto; or
(D) any claim by any Person for any brokerage or finder's fee or commission
in respect of the transactions contemplated hereby as a result of Seller's
dealings, agreement, or arrangement with such person.
(ii) Any and all actions, suits, claims, proceedings, investigations,
demands, assessments, audits, fines, judgments, costs, and other expenses
(including, without limitation, reasonable legal fees and expenses) incident to
any of the foregoing including all such expenses reasonably incurred in
mitigating any damages resulting to Purchaser or Hospitality from any matter set
forth in subsection (i) above.
(b) Notwithstanding the foregoing, Seller shall have no liability for
indemnification or otherwise with respect to Section 8.1(a)(i)(C) (and Section
8.1(a)(ii) to the extent the items covered thereby relate back to Section
8.1(a)(i)(C)) until the aggregate liability of Seller thereunder exceeds $78,000
and then only to the extent that the aggregate liability of Seller thereunder
exceeds such amount; provided, however, that liabilities arising with respect to
Sections 3.1 through 3.4 and Sections 3.5(a), 3.5(d), 3.7(g), and 3.9 hereof
shall not be subject to the foregoing threshold and any liabilities arising with
respect to such matters shall not be taken into account in computing aggregate
liabilities for the purpose of apply such threshold amount to liabilities
arising under other Sections subject thereto, provided, however, that Seller
shall have no liability for indemnification or otherwise with respect to Section
8.1(a)(i)(C) to the extent it relates to Section 3.5(d) (and Section 8.1(a)(ii)
to the extent the items covered thereby relate back to Section 8.l(a)(i)(C)'s
applicability to Section 3.5(d)) until the aggregate liability of Seller
thereunder relating to a particular Restaurant exceeds $5,000 for such
Restaurant and then only to the extent that the aggregate liability of Seller
thereunder exceeds such amount. In no event shall the aggregate liability of
Seller under Section 8.1(a)(i)(C) (and Section 8.1(a)(ii) to the extent the
items covered thereby relate back to Section 8.1(a)(i)(C)) exceed $1,560,000,
provided, however, that liabilities arising with respect to Sections 3.1 through
3.4 and Sections 3.5(a), 3.5(d), and 3.9 hereof shall not be subject to the
foregoing cap and any liabilities arising with respect to such matters shall not
be taken into account in computing aggregate liabilities for the purpose of
applying such cap to liabilities arising under other sections subject thereto.
(c) The amount of any liability of Seller under this Section 8.1 shall be
computed net of any tax benefit to Purchaser and Hospitality from the matter
giving rise to the claim for indemnification hereunder and net of any insurance
proceeds received by Purchaser or Hospitality with respect to the matter out of
which such liability arose.
(d) The representations and warranties of Seller contained in this
Agreement, the Disclosure Memorandum, or any certificate delivered by or on
behalf of Seller pursuant to this Agreement or in connection with the
transactions contemplated herein shall survive the consummation of the
transactions contemplated herein and shall continue in full force and effect for
the periods specified below ("Survival Period"):
(i) the representations and warranties contained in Section 3.5(d) shall be
of no further force and effect after 60 days from the date of the Closing;
(ii) the representations and warranties contained in Sections 3.1 through
3.4 and Sections 3.5(a), 3.7(g) and 3.9 shall survive until the expiration of
any applicable statues of limitation provided by law; and
22
(iii) all other representations and xxxxx of Seller shall be of no further
force and effect after 18 months from the date of the Closing.
Anything to the contrary notwithstanding, the Survival Period shall be
extended automatically to include any time period necessary to resolve a written
claim for indemnification which was made in reasonable detail before expiration
of the Survival Period but not resolved prior to its expiration, and any such
extension shall apply only as to the claims so asserted and not so resolved
within the Survival Period. Liability for any such item shall continue until
such claim shall have been finally settled, decided, or adjudicated.
(e) Except for claims under Sections 4.1, 4.3, 4.4, 4.5, 4.11, and 4.13
which shall survive the Closing, Purchaser and Hospitality may not assert any
claim against Seller for breach of any covenant contained in Article IV and all
such claims shall be deemed to be waived as a result of the Closing.
(f) Purchaser and Hospitality shall provide written notice to Seller of any
claim for indemnification under this Article as soon as practicable; provided,
however, that failure to provide such notice on a timely basis shall not bar
Purchaser's or Hospitality's ability to assert any such claim except to the
extent that Seller is actually prejudiced thereby. Purchaser and Hospitality
shall more commercially reasonable efforts to mitigate any damages, expenses,
etc. resulting from any matter giving rise to liability of Seller under this
Article.
(g) Notwithstanding any other provision of this Article VIII, the aggregate
principal amount of the obligation of Seller under this Article VIII shall not
exceed the gross proceeds actually received by the Seller in connection with
this Agreement and the transaction contemplated hereby.
8.2 Defense of Third Party Claims. With respect to any claim by Purchaser
or Hospitality under Section 8.1, relating to a third party claim or demand,
Purchaser or Hospitality shall provide Seller with prompt written notice thereof
in accordance with Section 10.4 and Seller may defend, in good faith and at its
expense by legal counsel chosen by it and reasonably acceptable to Purchaser and
Hospitality any such claim or demand, and Purchaser and Hospitality, at their
expense, shall have the right to participate in the defense of any such third
party claim. So long as Seller is defending in good faith any such third party
claim, Purchaser and Hospitality shall not settle or compromise such third party
claim. In any event, Purchaser and Hospitality shall cooperate in the settlement
or compromise of or defense against, any such asserted claim. Notwithstanding
the foregoing, Seller shall obtain the consent of Purchaser and Hospitality,
which consent shall not be unreasonably withheld, prior to setting any such
third party claim. In the event the Seller shall notify the Purchaser and
Hospitality that it disputes any claim made by the Purchaser or Hospitality
and/or it shall fail to defend such claim actively and in good faith, then the
Purchaser and Hospitality shall have the right to conduct a defense against such
claim and shall have the right to settle and compromise such claim without the
consent of the Seller. Once the amount of such claim is liquidated and the claim
is finally determined, the Purchaser and Hospitality shall be entitled to pursue
each and every remedy available to it at law or in equity (through the procedure
specified in Section 8.5) to enforce the indemnification provisions of this
Article VIII and, in the event it is determined, or the Seller agrees, that it
is obligated to indemnify the Purchaser and Hospitality for such claim, the
Seller agrees to pay all costs, expenses and fees, including all reasonable
attorneys' fees, which may be incurred by Purchaser or Hospitality in attempting
to enforce indemnification under this Article VIII.
8.3 Seller Claims. Purchaser and Hospitality shall indemnify and hold
harmless Seller against, and in respect of, any and all damages, claims, losses,
liabilities, and expenses, including without limitation, legal, accounting and
other expenses, which may arise out of: (i) any breach or violation by Purchaser
or Hospitality of any covenant set forth herein or any failure to fulfill any
obligation set forth herein, including, but not limited to, the obligation to
satisfy the Assumed Liabilities, (ii) any breach of any of the representations
23
or warranties made in this Agreement by Purchaser or Hospitality; or (iii) any
claim by any Person for any brokerage or finder's fee or commission in respect
of the transactions contemplated hereby as a result of Purchaser's or
Hospitality's dealings, agreement, or arrangement with such Person.
8.4 Exclusive Remedies. The rights and remedies of the parties under this
Article VIII shall be the sole and exclusive rights and remedies that either
party may seek for any misrepresentation, breach of warranty, or failure to
fulfill any covenant or agreement under this Agreement, except that either party
may seek specific performance or injunctive relief.
8.5 Settlement of Disputes.
(a) Arbitration. All disputes with respect to any claim for indemnification
under this Article VIII and all other disputes and controversies of every kind
and nature between the parties hereto arising out of or in connection with this
Agreement shall be submitted to arbitration pursuant to the following
procedures:
(i) After a dispute or controversy arises, either party may, in a written
notice delivered to the other party, demand such arbitration. Such notice shall
designate the name of the arbitrator appointed by such party demanding
arbitration, together with a statement of the matter in controversy;
(ii) Within 30 days after receipt of such demand, the other party shall, in
a written notice delivered to the other party, name such party's Arbitrator. If
such party fails to name an arbitrator, then the second arbitrator shall be
named by the American Arbitration Association ("ADA"). The two arbitrators so
selected shall name a third arbitrator within 30 days, or in lieu of such
agreement on a third arbitrator by the two arbitrators so appointed, the third
arbitrator shall be appointed by the AAA;
(iii) The arbitration hearing shall be held in Milwaukee, Wisconsin (in the
case of arbitration initiated by Seller) or in Atlanta, Georgia (in the case of
arbitration initiated by Purchaser or Hospitality) or in a location mutually
agreeable to Seller, Purchaser and Hospitality; or if Purchaser, Seller and
Hospitality are unable to agree then at a location designated by a majority of
the arbitrators. The Commercial Arbitration Rule of the AAA shall be used and
the substantive laws of the State of Wisconsin (excluding conflict of laws
provisions) shall apply;
(iv) An award rendered by a majority of the arbitrators appointed pursuant
to this Agreement shall be final and binding on all parties to the proceeding,
shall deal with the question of costs of the arbitration and all related
matters, and judgment on such award may be entered by either party in a court of
competent jurisdiction; and
(v) Except as set forth in subsection (b) below, the parties stipulate that
the provisions of this Section 8.5 shall be a complete defense to any suit,
action or proceeding instituted in any federal, state, or local court or before
any administrative tribunal with respect to any controversy or dispute arising
out of this Agreement. The arbitration provisions hereof shall, with respect to
such controversy or dispute, survive the termination or expiration of this
Agreement.
(b) Emergency Relief. Notwithstanding anything in this Section 8.5 to the
contrary, any party may seek from a court any provisional remedy that may be
necessary to protect any rights or property of such party pending the
establishment of the arbitral tribunal or its determination of the merits of the
controversy.
ARTICLE IX - TERMINATION
9.1 Termination.
24
(a) This Agreement may be terminated as follows:
(i) At any time by the mutual consent of Seller, Purchaser and Hospitality;
(ii) By Purchaser pursuant to Section 7.1;
(iii) By Seller if (i) Purchaser shall not have obtained and provided a
copy of a Financing Commitment to Seller on or before September 18, 1998, (ii)
Purchaser shall not been approved hereof as a franchisee with respect to the
Territory by Franchisor on or before September 18, 1998 or has not reached
agreement with Franchisor as to the material terms of franchise agreements with
respect to the Territory on or before September 18, 1998, (iii) Hospitality
shall not have reached agreement with Franchisor as to a development schedule
and other material terms of franchise and development agreements with respect to
the Territory on or before September 18, 1998;
(iv) By either Seller, Purchaser or Hospitality, at its sole election, at
any time after the Termination Date, if the Closing shall not have occurred on
or prior to such date;
(v) By Purchaser, if Seller makes any amendment or modification of, or
addition or supplement to, the Disclosure Memorandum the subject of which has,
had or could reasonably be expected to have a material adverse effect upon the
financial condition, properties, liabilities, business, results or operations of
the Business.
(b) In the event of the termination of this Agreement pursuant to
subparagraph (a)(iv) above because Seller, Purchaser or Hospitality, as the case
may be, shall have willingly failed to fulfill its obligations hereunder, the
other party shall, subject to Section 8.5, be entitled to pursue, exercise, and
enforce any and all remedies, rights, powers, and privileges available to it at
law or in equity.
(c) If this Agreement is terminated pursuant to this Section 9.1, subject
to Section 9.1(b) above, all further obligations of the parties under or
pursuant to this Agreement shall terminate without further liability of either
party to the other, provided that, Section 6.2, Article VIII, and Article X
hereof shall survive the termination of this Agreement
ARTICLE X - MISCELLANEOUS
10.1 Expenses.
(a) Each party hereto shall pay its own legal, accounting, and similar
expenses incidental to the preparation of this Agreement, the carrying out of
the provisions of this Agreement, and the consummation of the transactions
contemplated hereby.
(b) Seller and Purchaser shall split equally the costs of all filing fees
required under the HSR Act.
(c) Purchaser shall pay the costs of obtaining title insurance with respect
to the Real Property. Seller shall pay the costs of all transfer, intangible,
recording, and documentary taxes, stamps, and fees with respect to the transfer
of the Real Property. Purchaser shall pay the cost of all surveys, and all
environmental investigations, studies, and reports, and all other costs of any
investigation of the Assets, the Restaurants, or the Business by Purchaser.
(d) Purchaser shall pay any costs associated with the transfer of any
Permits and the cost of obtaining liquor licenses or other Permits that are not
assignable.
(e) Seller and Purchaser shall split equally the cost of any sales taxes,
transfer taxes documentary stamp taxes, or other taxes imposed with respect to
the transfer of any Assets constituting personal property.
25
(f) Seller shall pay the costs of obtaining any Consents.
(g) Following the Closing, Seller shall pay to Purchaser on a monthly basis
as billed the amount of all gift certificates issued by Seller prior to the
Closing and redeemed thereafter.
10.2 Contents of Agreement; Parties in Interest; etc. This Agreement sets
forth the entire understanding of the parties hereto with respect to the
transactions contemplated hereby and constitutes a complete statement of the
terms of such transaction. This Agreement shall not be amended or modified
except by written instrument duly executed by each of the parties hereto. Any
and all previous agreements and understandings between the parties regarding the
subject matter hereof, whether written or oral, are superseded by this
Agreement. Neither party has been induced to enter into this Agreement in
reliance on, and has not relied upon, any statement, representation, or warranty
of the other party not set forth in this Agreement the Disclosure Memorandums or
any certificate delivered pursuant to this Agreement.
10.3 Assignment and Binding Effect. Purchaser may assign the right to
receive any of the Assets at Closing to any affiliate or other third party
reasonably acceptable to Seller and acceptable to Franchisor, provided that no
such assignment shall affect Purchaser's liability hereunder. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
assigns of Seller and Purchaser.
10.4 Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by telecopy or by
first class registered or certified United States Mail, with proper postage
prepaid, as follows:
If to Seller, to; With a required copy to:
Apple South, Inc. Xxxxxxxxxx Xxxxxxxx LLP
Xxxxxxx at Washington 0000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000 Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. (Dusty) Profumo Attention: Xxxxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000 Fax: (000) 000-0000
If to Purchaser: With a required copy to:
WHG Real Estate North, LLC Xxxxxxx & Xxxx, S.C.
0000 X. Xxxxxxx Xxxx 000 X. Xxxxx Xxxxxx
Xxxxx X-000 Xxxxxxxxx, Xxxxxxxxx 00000
Xxxxxxxxx, XX 00000 Attention: Xxxxxx Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
If to Hospitality: With a required copy to:
Wisconsin Hospitality Group, LLC Xxxxxxx & Xxxx, S.C.
0000 X. Xxxxxxx Xxxx 000 X. Xxxxx Xxxxxx
Xxxxx X-000 Xxxxxxxxx, Xxxxxxxxx 00000
Xxxxxxxxx, XX 00000 Attention: Xxxxxx Xxxxxxx
(000) 000-0000 Fax: (000) 000-0000
or to such other address or person as the addressee may have specified in a
notice duly given to the sender as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
been given as of the date actually delivered, or if mailed, four days after
deposit in the U.S. Mail properly addressed with adequate postage affixed.
10.5 WISCONSIN LAW TO GOVERN. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF WISCONSIN
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
26
10.6 Headings. All section headings contained in this Agreement are for
convenience of reference only, do not form a part of this Agreement, and shall
not affect in any way the meaning or interpretation of this Agreement.
10.7 Schedules and Exhibits. All Exhibits and Schedules referred to herein
are intended to be and hereby are specifically made a part of this Agreement.
10.8 Severability. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision any
other jurisdiction.
10.9 Public Announcements. Purchaser, Seller and Hospitality will
coordinate with each other all press releases relating to the transactions
contemplated by this Agreement and, except to the extent required by law,
refrain from issuing any press release, publicity statement, or other public
notice relating to this Agreement or the transactions contemplated hereby
without providing the other party reasonable opportunity to review and comment
thereon.
10.10 Disclaimer of Warranties. OTHER THAN TO THE EXTENT OF ANY EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT AND IN THE
CLOSING CERTIFICATE REQUIRED BY SECTION 2.4(8)(i), SELLER DOES NOT, BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, AND SELLER SHALL NOT, BY THE EXECUTION
AND DELIVERY OF ANY DOCUMENT OR INSTRUMENT EXECUTED AND DELIVERED IN CONNECTION
WITH THE CLOSING, MAKE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
ANY KIND OR NATURE WHATSOEVER, WITH RESPECT TO THE ASSETS, AND ALL SUCH
WARRANTIES ARE HEREBY DISCLAIMED. PURCHASER WILL CONDUCT SUCH INSPECTIONS AND
INVESTIGATIONS OF THE ASSETS (INCLUDING, BUT NOT LIMITED TO, THE PHYSICAL AND
ENVIRONMENTAL CONDITION THEREOF) AND RELY UPON SAME AND, UPON CLOSING, SHALL
ASSUME THE RISK THAT ADVERSE MATTERS MAY NOT HAVE BEEN REVEALED BY PURCHASER'S
INSPECTIONS AND INVESTIGATIONS EXCEPT TO THE EXTENT OF SELLER'S REPRESENTATIONS
AND WARRANTIES MADE HEREIN. SELLER SHALL SELL AND CONVEY TO PURCHASER, AND
PURCHASER SHALL ACCEPT, THE ASSETS "AS IS," "WHERE IS," AND WITH ALL FAULTS,
EXCEPT TO THE EXTENT OF SELLER'S REPRESENTATIONS AND WARRANTIES MADE HEREIN, AND
THERE ARE NO ORAL AGREEMENTS, WARRANTIES OR REPRESENTATIONS, COLLATERAL TO OR
AFFECTING THE ASSETS BY SELLER. SELLER MAKES, AND SHALL MAKE, NO EXPRESS OR
IMPLIED WARRANTY OF SUITABILITY OR FITNESS OF ANY OF THE ASSETS FOR ANY PURPOSE,
OR AS TO THE MERCHANTABILITY, ENVIRONMENTAL CONDITION, TITLE, VALUE, QUALITY,
QUANTITY, CONDITION OR SALABILITY OF ANY OF THE ASSETS, OR AS TO THE PRESENCE ON
OR ABSENCE FROM THE ASSETS OF ANY HAZARDOUS MATERIAL EXCEPT TO THE EXTENT OF
SELLER'S REPRESENTATIONS AND WARRANTIES HEREIN. THE TERMS AND CONDITIONS OF THIS
SECTION 10.10 SHALL SURVIVE THE CONSUMMATION OF THE PURCHASE AND SALE OF THE
ASSETS ON THE CLOSING DATE WITHOUT REGARD TO ANY GENERAL LIMITATIONS UPON
SURVIVAL SET FORTH IN THIS AGREEMENT. THE LIMITATIONS SET FORTH IN THIS SECTION
SHALL IN NO WAY LIMIT ANY WARRANTY FROM ANY THIRD PARTY.
10.11 Time. Time is and shall be of the essence of this Agreement.
27
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLER:
APPLE SOUTH, INC.
By:
Name:
Title:
PURCHASER:
WHG REAL ESTATE NORTH, LLC
By: Xxxx Xxxxxx, Manager
HOSPITALITY:
WISCONSIN HOSPITALITY GROUP, LLC
By: Xxxx Xxxxxx, President
28
DISCLOSURE MEMORANDUM
Table of Contents
Schedule Title
1.1(i) Tangible Personal Property located in the Restaurants
1.1A Restaurants by Address
1.1C Legal Description of Real Property
1.1D Material Contracts
1.1E Territory
3.3 Consents Required to Assign Material Contracts
3.6 List of Material Contracts and amendments thereto
3.7(a) Location and Ownership of Restaurants
3.7(g) List of Environmental Reports and Matters
3.8 Financial Statements
3.10 Litigation
3.11 Permits
3.15 Seller Plans
4.7 Development Sites
29
EXHIBIT TABLE OF CONTENTS
Exhibit Title
A Xxxx of Sale and Assignment Agreement
B Adjustment to Purchase Price
C Opinion of Seller's Counsel
D Opinion of Purchaser's Counsel
E Allocation of Purchase Price
Exhibits and schedules to this agreement are not filed pursuant to Item
601(b)(2) of SEC Regulation S-K. By the filing of this Form 10-K, the Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
30