Asset Purchase Agreement - OS Pacific Inc. and Roy's-Newport Beach LLC
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
OS PACIFIC, INC.
AND
ROY'S - NEWPORT BEACH, L.L.C.
DATED SEPTEMBER ____, 2002
<PAGE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE OF THE RESTAURANT..........................................1
1.1 Purchased Assets.............................................1
1.2 Purchase Price...............................................2
1.3 Adjustments to Purchase Price ...............................2
1.4 Allocation of Purchase Price.................................3
2. TRANSFER OF ASSETS .................................................3
2.1 Definition of Purchased Assets...............................3
2.2 Prorations...................................................4
2.3 Excluded Assets..............................................4
3. LIABILITIES.........................................................5
3.1 Liabilities Not to be Assumed................................5
3.2 Liabilities to be Assumed....................................6
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER........................6
4.1 General......................................................7
4.2 Authority....................................................7
4.3 No Violation.................................................7
4.4 Financial Statements.........................................7
4.5 Tax Matters..................................................8
4.6 Inventory....................................................8
4.7 Absence of Certain Changes...................................8
4.8 Absence of Undisclosed Liabilities...........................9
4.9 No Litigation................................................9
4.10 Compliance With Laws and Orders..............................9
4.11 Title to and Condition of Properties.........................9
4.12 Insurance...................................................10
4.13 Contracts and Commitments...................................10
4.14 Labor Matters...............................................11
4.15 Employee Benefit Plans......................................12
4.16 Employment Compensation.....................................12
4.17 Intellectual Property.......................................13
4.18 Major Suppliers.............................................13
4.19 Assets Necessary to Business................................13
4.20 No Brokers or Finders.......................................13
4.21 Disclosure..................................................13
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.................14
5.1 Corporate....................................................14
5.2 Authority....................................................14
5.3 No Brokers or Finders........................................14
5.4 Disclosure...................................................14
5.5 Buyer's Cooperation..........................................14
5.6 Other Action.................................................14
I
<PAGE>
6. EMPLOYEES - EMPLOYEE BENEFITS........................................15
6.1 Affected Employees.............................................15
6.2 Retained Responsibilities......................................15
6.3 Payroll Tax....................................................15
6.4 Termination Benefits...........................................15
6.5 WARN Act Obligations...........................................15
7. OTHER MATTERS........................................................15
7.1 Pre-Closing Revenue and Expenses...............................15
7.2 Post-Closing Revenue and Expenses..............................15
7.3 Noncompetition.................................................15
7.4 Confidentiality................................................16
7.5 Non-Solicitation...............................................16
7.6 Reasonableness of Restrictions; Reformation; Enforcement.......16
7.7 Specific Performance...........................................17
8. FURTHER COVENANTS OF THE SELLER......................................17
8.1 Access to Information and Records..............................17
8.2 Conduct of Business Pending the Closing........................17
8.3 Consents.......................................................18
8.4 Other Action...................................................18
8.5 Disclosure.....................................................18
8.6 Amendment to Real Property Lease...............................19
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..........................19
9.1 Representations and Warranties True on the
Closing Date.................................................19
9.2 Compliance With Agreement......................................19
9.3 Absence of Litigation..........................................19
9.4 Consents and Approvals.........................................19
9.5 Estoppel Certificates..........................................19
9.6 Transfer of Alcoholic Beverage License.........................19
9.7 Delivery of Closing Documents..................................19
9.8 Simultaneous Closing...........................................19
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS.........................19
10.1 Representations and Warranties True on the
Closing Date.................................................20
10.2 Compliance With Agreement......................................20
10.3 Absence of Litigation..........................................20
10.4 Transfer of Alcoholic Beverage License.........................20
11 INDEMNIFICATION......................................................20
11.1 By the Seller .................................................20
11.2 By Buyer.......................................................20
11.3 Indemnification of Third-Party Claims..........................21
11.4 Payment........................................................21
11.5 No Waiver......................................................22
11.6 Survival of Indemnification....................................22
12. CLOSING..............................................................22
12.1 Closing Date...................................................22
II
<PAGE>
12.2 Place of Closing...............................................22
12.3 Documents to be Delivered by the Seller........................22
12.4 Documents to be Delivered by Buyer.............................23
13. TERMINATION..........................................................23
13.1 Right of Termination Without Breach............................23
13.2 Termination for Breach.........................................24
14. MISCELLANEOUS........................................................24
14.1 Disclosure Schedules...........................................24
14.2 Further Assurance..............................................24
14.3 Disclosures and Announcements..................................24
14.4 Assignment; Parties in Interest................................25
14.5 Law Governing Agreement........................................25
14.6 Amendment and Modification.....................................25
14.7 Notice.........................................................25
14.8 Expenses.......................................................26
14.9 Entire Agreement...............................................27
14.10 Counterparts...................................................27
14.11 Headings.......................................................27
III
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated this
_____ day of September 2002, and entered into by and among OS PACIFIC, INC., a
Florida corporation ("Buyer"), ROY'S - NEWPORT BEACH, L.L.C., an Arizona limited
liability company (the "Seller"), JAMES E. MARSH, an individual resident of the
state of Arizona ("Marsh") and W. RANDALL SCHOCH, an individual resident of the
state of Arizona ("Schoch").
RECITALS
A. Marsh and Schoch are the principal members of Seller.
B. Seller is an Arizona limited liability company governed by and
operating under that certain Operating Agreement of Roy's - Newport Beach,
L.L.C., dated September 30, 1998 ("Operating Agreement").
C. The Seller is engaged in the business of owning and operating an
upscale restaurant known as "Roy's" and located at 453 Newport Center Drive,
Newport Beach, California 92660 ("Restaurant").
D. The Restaurant utilizes trademarks, recipes and operating
systems as a licensee of Roy Yamaguchi and Roy's Worldwide, Inc. pursuant to a
Licensing and Services Agreement dated October 3, 1998, as amended by that
certain First Amendment to Licensing and Services Agreement dated October 3,
1998, (collectively, the "Licensing Agreement").
E. Pursuant to the provisions hereof, Buyer desires to purchase
from the Seller and the Seller desires to sell to Buyer substantially all of the
property and assets of the Seller, including the Restaurant.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and intending to be legally bound hereby, the parties hereto agree as
follows.
1. PURCHASE OF THE RESTAURANT
1.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, on the Closing Date (as defined in SECTION 12.1), the Seller shall
sell, transfer, convey, assign and deliver to Buyer (or upon Buyer's request, to
an Affiliate of Buyer) and Buyer shall purchase and accept all of the business,
rights, claims and assets (of every kind, nature, character and description,
whether real, personal or mixed, whether tangible or intangible, whether
accrued, contingent or otherwise, and wherever situated) of the Seller, together
with all rights and privileges associated with such assets and with the
Restaurant and the business of the Seller, other than the Excluded Assets (as
hereinafter defined) (collectively, the "Purchased Assets"), free and clear of
any debts, liabilities, claims, encumbrances or obligations other than the
Assumed Liabilities, as hereafter defined. The Purchased Assets shall include,
but not be limited to, those assets listed in ARTICLE 2 hereof. For purposes of
this Agreement, the term "Affiliate" shall mean any individual or entity
(hereafter a "Person"), directly or indirectly, through one or more
intermediaries, controlling, controlled by, or under common control with such
Person, as applicable. The term "control," as used in this section, shall mean
with respect to a corporation or limited liability company, the right to
exercise, directly or indirectly, more than fifty percent (50%) of the voting
rights attributable to the controlled corporation or limited liability company,
and, with respect to any individual, partnership, trust, other entity or
association, the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of the controlled entity.
1
<PAGE>
1.2 Purchase Price.
1.2(a) Amount. The Purchase Price shall be Two Million Six
Hundred Ninety Seven Thousand Dollars ($2,697,000), subject to
adjustments as provided herein.
1.2(b) Payment. On the date of execution of this Agreement by
both Buyer and Seller, Buyer shall deliver the Purchase Price to Bank
One, N.A., as escrow agent ("Escrow Agent") pursuant to that certain
Escrow Agreement described in SECTION 12.3(E) hereof (the "Escrow
Agreement"). The funds held by the Escrow Agent shall be held in an
interest bearing account (the "Escrow Account") approved by the Seller
and the Buyer. The Purchase Price, as adjusted pursuant to SECTION 1.3
hereof, shall be paid to the Seller on the Closing Date. Any interest
accrued on the funds in the Escrow Account and any other funds remaining
in the Escrow Account after payment to the Seller of the Purchase Price,
as adjusted pursuant to SECTION 1.3 hereof, shall be paid to the Buyer
immediately following the Closing. In the event this Agreement is
terminated prior to the Closing Date pursuant to SECTION 13 hereof, the
Purchase Price, and all interest accrued thereon shall be returned to
the Buyer.
1.3 Adjustments to Purchase Price.
1.3(a) Credits to Seller. The Purchase Price paid to the Seller
in cash on the Closing Date pursuant to SECTION 1.2 shall be increased
by the amount of any security deposits paid by the Seller pursuant to
any Real Property Lease transferred to the Buyer in accordance with the
terms of this Agreement, any utility and other deposits paid by Seller
and transferred to Buyer, the value of any inventory transferred to
Buyer on the Closing Date; and the present value, as of the Closing Date
(discounted at 5%), of the unused percentage rent recapture transferred
to Buyer pursuant to the assignment of the Real Property Lease [as such
term is defined in SECTION 2.1(A)].
1.3(b) Credits to Buyer. Buyer shall assume and Buyer shall
receive a credit against the Purchase Price paid to the Seller in cash
on the Closing Date pursuant to SECTION 1.2 in an amount equal to: all
vacation, holiday and sick pay unpaid by the Seller as of the Closing
Date attributable to any period or partial period of employment by the
Seller prior to the Closing Date, plus employee payroll taxes applicable
thereto due or to become due, for those employees of the Seller who will
be employed by Buyer after the Closing Date and who have not as of the
Closing Date taken vacation, holiday or sick time earned prior to the
Closing Date.
1.3(c) Invoices in Lieu of Credit. In lieu of the credits
provided for in SECTIONS 1.3(A) and 1.3(B), either party may, subsequent
to the Closing Date, invoice the other party for any item for which such
party would be entitled to a credit under SECTIONS 1.3(A) or 1.3(B) and
the other party shall pay the undisputed amount within thirty (30) days
of receipt of the invoice.
1.3(d) Invoices for Gift Certificates in Lieu of Adjustment at
Closing. In lieu of an adjustment to the Purchase Price at Closing, for
a period of one (1) year following Closing ("Gift Certificate Redemption
Period"), Buyer shall from time to time invoice Seller for any gift
certificates redeemed subsequent to the Closing Date that were sold on
or prior to the Closing Date but unredeemed as of the Closing Date.
Seller shall not be obligated to reimburse Buyer for any such gift
certificates redeemed after the expiration of the Gift Certificate
Redemption Period. Seller shall place Fifty Thousand Dollars ($50,000)
into an escrow account ("Gift Certificate Escrow Account") for the
purpose of assuring reimbursement to the Buyer for the redemption of
such gift certificates during the Gift Certificate Redemption Period.
Seller shall pay the invoiced amount to the Buyer, or direct the escrow
agent to release the invoiced amount to the Buyer within thirty (30)
days of receipt of the invoice. In the event that the funds in the Gift
Certificate Escrow Account are depleted prior to the end of the Gift
Certificate Redemption Period, Schoch and Marsh, jointly and severally,
agree to place an additional Twenty-Five Thousand Dollars ($25,000) into
the Gift Certificate Escrow Account. The Gift Certificate Escrow
2
<PAGE>
Account shall be closed forty-five (45) days after the end of the Gift
Certificate Redemption Period and any funds held therein shall be
returned to the Seller. The cost of the escrow agent and escrow account
described in this paragraph shall be paid by the Seller.
1.4 Allocation of Purchase Price. The aggregate Purchase Price
(including the assumption by Buyer of the Assumed Liabilities) shall be
allocated among the Purchased Assets for tax purposes in accordance with IRS
Form 8594, attached hereto as SCHEDULE 1.4, which is required to be filed by the
Seller and Buyer with the Internal Revenue Service ("IRS"). The Seller and Buyer
agree to file the IRS Form 8594 with their respective tax returns in
substantially the same form as is attached hereto. The Seller and Buyer will
follow and use such allocation in all other tax returns, filings or other
related reports made by them to any governmental agencies
2. TRANSFER OF ASSETS
2.1 Definition of Purchased Assets. The Purchased Assets shall include,
but not be limited to, the following:
2.1(a) Leased Real Property. The lease of real property dated
September 30, 1998, between Irvine Retail Properties Company, a Division
of the Irvine Company as Landlord, and Seller, as Tenant, for the
Restaurant located at 453 Newport Center Drive, Newport Beach,
California 92660 (the "Real Property Lease") with respect to the real
property described therein (the "Leased Real Property").
2.1(b) Personal Property. All machinery, equipment, vehicles,
tools, supplies, spare parts, furniture, smallwares and all other
personal property owned, utilized or held for use by the Seller in the
operation of the Restaurant or located at the Restaurant.
2.1(c) Inventory. All inventory held by the Seller on the
Closing Date, which shall be that level of inventory typically held at
the Restaurant in the ordinary course of business.
2.1(d) Contracts. All rights in, to and under the Licensing
Agreement and those agreements, contracts and purchase orders
(hereinafter "Contracts") of the Seller specified in SCHEDULE 2.1(D) and
every contract entered into in the ordinary course of business pursuant
to SECTION 3.2(A)(III). Buyer does not assume any agreement, contract or
purchase order of Seller not specified in SCHEDULE 2.1(D) or not entered
into in the ordinary course of business pursuant to SECTION 3.2(A)(III).
To the extent that any Contract for which assignment to Buyer as
provided herein is not assignable without the consent of another party,
this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would
constitute a breach thereof. The Seller and Buyer agree to use their
reasonable best efforts (without any requirement on the part of Buyer or
Seller to pay any money or, on the part of Buyer, to agree to any change
in the terms of any such Contract) to obtain the consent of such other
party to the assignment of any such Contract to Buyer in all cases in
which such consent is or may be required for such assignment. If any
such consent shall not be obtained, the Seller agrees to cooperate with
Buyer in any reasonable arrangement designed to provide for Buyer the
benefits intended to be assigned to Buyer under the relevant Contract,
including enforcement at the cost and for the account of Buyer of any
and all rights of the Seller against the other party thereto arising out
of the breach or cancellation thereof by such other party or otherwise.
If and to the extent that such arrangement cannot be made, Buyer, upon
notice, shall have no obligation pursuant to SECTION 3.2 or otherwise
with respect to any such Contract and any such Contract shall not be
deemed to be a Purchased Asset hereunder.
2.1(e) Computer Software. All computer source codes, programs
and other software of the Seller, including all machine-readable code,
printed listings of code, documentation and related property and
information of the Seller.
3
<PAGE>
2.1(f) Literature. All menus, sales literature and promotional
literature and similar materials of the Seller.
2.1(g) Records and Files. Access to and, on request, copies of
all records, files, invoices, supplier lists, blueprints,
specifications, designs, drawings, accounting records, business records,
operating data and other data of the Seller.
2.1(h) Licenses; Permits. All licenses, permits and approvals of
the Seller to the extent the same may be assigned to Buyer.
2.1(i) General Intangibles. All causes of action arising out of
occurrences before or after the Closing Date, and all other intangible
rights and assets of the Seller.
2.2 Prorations. The following prorations relating to the Purchased
Assets will be made as of the Closing Date, with the Seller liable to the extent
such items relate to any time period up to and including the Closing Date and
Buyer liable to the extent such items relate to periods subsequent to the
Closing Date. The net amount of all such prorations will be settled and paid on
the Closing Date, if possible, and if not possible then as soon as practicable
thereafter.
2.2(a) Personal property taxes, real estate taxes and
assessments (including special assessments levied prior to the Closing
Date), and other taxes, if any, on or with respect to the Purchased
Assets.
2.2(b) Rents, additional rents, taxes and other items payable by
the Seller under any lease, license, permit, contract or other agreement
or arrangement to be assigned to or assumed by Buyer.
2.2(c) The amount of rents, taxes and charges for sewer, water,
fuel, telephone, electricity and other utilities; provided that if
practicable, meter readings shall be taken on the applicable Closing
Date and the respective obligations of the parties determined in
accordance with such readings.
2.2(d) All other items normally adjusted in connection with
similar transactions.
If the actual expense of any of the above items for the billing period
within which the Closing Date falls is not known on the Closing Date, the
proration shall be made as soon as such actual expense becomes known. The Seller
agrees to furnish Buyer with such documents and other records as shall be
reasonably requested in order to confirm all proration calculations.
2.3 Excluded Assets. The provisions of SECTION 2.1 notwithstanding, the
Seller shall not sell, transfer, assign, convey or deliver to Buyer, and Buyer
will not purchase or accept the following assets of the Seller (collectively,
the "Excluded Assets"):
2.3(a) Cash and Cash Equivalents. All cash and cash equivalents,
other than petty cash balances at the Restaurant, accounts receivable
and notes to Seller.
2.3(b) Consideration. The consideration delivered by Buyer
pursuant to this Agreement, Seller's other rights under or in connection
with this Agreement, the Escrow Agreement, the Escrow Account and any
other agreements or instruments contemplated hereby or thereby.
2.3(c) Tax Credits and Records. Federal, state and local income
and franchise tax credits and tax refund claims and associated returns
and records; provided however, Buyer shall have reasonable access to
such returns and records and may make excerpts therefrom and copies
thereof.
4
<PAGE>
2.3(d) Organizational Documents. The Seller's Articles of
Organization, Operating Agreement, minute book and other records having
exclusively to do with the organization and capitalization of the
Seller; provided however, Buyer shall have reasonable access to such
books and records and may make excerpts therefrom and copies thereof.
2.3(e) Employee Records. Any and all employee books and records
to the extent that such transfer of books and records would be in
violation of any laws, provided Seller shall provide Buyer with copies
of such books and records.
2.3(f) Business Office Assets. Those certain tangible and
intangible assets and records of the Seller located at 4725 N.
Scottsdale Road, Suite 350, Scottsdale, Arizona 85251, and utilized
primarily in the operations of the business office of the Seller.
3. LIABILITIES
3.1 Liabilities Not to be Assumed. As used in this Agreement, the term
"Liability" shall mean and include any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, fixed or unfixed, known or unknown, asserted or
unasserted, liquidated or unliquidated, secured or unsecured. The Seller agrees
to timely pay and discharge all Liabilities that relate to periods on or before
the Closing Date that would result in a liability or charge to the Buyer or
against assets transferred to the Buyer pursuant to this Agreement. Except as
and to the extent specifically set forth in SECTION 3.2, Buyer is not assuming
any Liabilities of the Seller and all such Liabilities shall be and remain the
responsibility of the Seller. Without limiting the generality of the foregoing,
Buyer is not assuming and the Seller shall not be deemed to have transferred to
Buyer the following Liabilities of the Seller:
3.1(a) Income and Franchise Taxes. Any Liability of the Seller
for Federal income taxes and any state or local income, profit or
franchise taxes (and any penalties or interest due on account thereof).
3.1(b) Claims. Any Liability whether in tort, contract or
otherwise.
3.1(c) Litigation Matters. Any Liability with respect to any
action, suit, proceeding, arbitration, investigation or inquiry, whether
civil, criminal or administrative ("Litigation"), whether or not
described in SCHEDULE 4.9.
3.1(d) Infringements. Any Liability to a third party for
infringement of any third party's intellectual property.
3.1(e) Transaction Expenses. Except as provided in SECTION 14.8,
or elsewhere in this Agreement, all Liabilities incurred by Seller in
connection with this Agreement and the transactions contemplated herein.
3.1(f) Liability For Breach. Liabilities of the Seller for any
breach or failure to perform any of the Seller's covenants and
agreements contained in, or made pursuant to, this Agreement, or, prior
to the Closing Date, any other contract, whether or not assumed
hereunder, including breach arising from assignment of contracts
hereunder without consent of third parties.
3.1(g) Liabilities to Affiliates. Liabilities to present or
former Affiliates, except obligations for compensation for services
rendered as an employee pursuant to plans or practices discussed in
SECTION 4.15.
5
<PAGE>
3.1(h) Violation of Laws or Orders. Liabilities for any
violation of or failure to comply with any statute, law, ordinance, rule
or regulation (collectively, "Laws") or any order, writ, injunction,
judgment, plan or decree (collectively, "Orders") of any court,
arbitrator, department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, municipal,
foreign or other (collectively, "Government Entities").
3.1(i) Escheat Obligations. Any obligations to the State of
California or any other Governmental Entity arising from gift
certificate escheat laws, as the same may be applied to any gift
certificates sold but unredeemed on the Closing Date.
3.2 Liabilities to be Assumed. Subject to the terms and conditions of
this Agreement, on the Closing Date, Buyer shall assume and agree to perform and
discharge the following, and only the following Liabilities of the Seller
(collectively, the "Assumed Liabilities"):
3.2(a) Contractual Liabilities. The Seller's Liabilities arising
from events occurring after the Closing Date under and pursuant to the
following Contracts:
(i) The Real Property Lease.
(ii) All Contracts described in SCHEDULE 2.1(D); and
(iii) Every Contract entered into by the Seller in
the ordinary course of business which does not involve
consideration or other expenditure by the Seller payable or
performable on or after the Closing Date in excess of One
Thousand Dollars ($1,000) or performance over a period of more
than twelve (12) months.
The Contracts described in SECTIONS 3.2(A)(I), (II) and (III)
above are hereinafter collectively described as the "Assumed Contracts."
The Buyer agrees to indemnify, defend and hold harmless Seller for any
Liability, including reasonable attorneys' fees, resulting from any and
all guarantees executed in connection with the Real Property Lease
assumed by the Buyer pursuant to SECTION 3.2(A)(I) above, to the extent
such liability arises out of any events first occurring subsequent to
the Closing Date. Buyer assumes no agreement or contract of Seller
except the Assumed Contracts.
3.2(b) Liabilities Under Permits and Licenses. The Seller's
Liabilities arising from events occurring after the Closing Date under
any permits or licenses listed in SCHEDULE 3.2(B) and assigned to Buyer
at the Closing.
3.2(c) Other Obligations. The obligations set forth in SECTION
1.3(B) above, to the extent of the credit received by Buyer.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to Buyer that, each of the following
is true and correct in all material respects on the date hereof except to the
extent identified in disclosure schedules referred to below in this SECTION 4
and attached to this Agreement ("Disclosure Schedules"), shall remain true and
correct in all material respects to and including the Closing Date and shall be
unaffected by any investigation heretofore or hereafter made by Buyer, or,
except as specifically provided herein, any knowledge of Buyer, and shall
survive the closing of the transactions provided for one (1) year from the
Closing Date.
6
<PAGE>
4.1 General.
4.1(a) Organization. The Seller is a limited liability company
duly organized, validly existing and in good standing under the laws of
the State of Arizona.
4.1(b) Power. The Seller has all requisite power and authority
to own, operate and lease its properties, to carry on its businesses as
and where such are now being conducted, to enter into this Agreement and
the other documents and instruments to be executed and delivered by the
Seller pursuant hereto and to carry out the transactions contemplated
hereby and thereby.
4.1(c) Qualification. The Seller is duly licensed or qualified
to do business as a foreign entity, and it is in good standing, in each
jurisdiction wherein the character of the properties owned or leased by
is, or the nature of its business, makes such licensing or
qualifications necessary.
4.1(d) No Subsidiaries. The Seller does not own any interest in
any corporation, partnership or other entity.
4.2 Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by the Seller
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary member or manager action on
the part of the Seller. Other than as specifically provided in this Agreement or
disclosed in the Disclosure Schedules, no other or further act or proceeding on
the part of the Seller is necessary to authorize this Agreement or the other
documents and instruments to be executed and delivered by the Seller pursuant
hereto or the consummation of the transactions contemplated hereby and thereby.
This Agreement constitutes, and when executed and delivered, the other documents
and instruments to be executed and delivered by the Seller pursuant hereto will
constitute, valid binding agreements of the Seller, enforceable in accordance
with their respective terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
and by general equitable principles.
4.3 No Violation. Except as set forth on SCHEDULE 4.3, neither the
execution and delivery of this Agreement or the other documents and instruments
to be executed and delivered by the Seller pursuant hereto, nor the consummation
by the Seller of the transactions contemplated hereby and thereby (a) will
violate any applicable Law or Order, (b) will require any authorization,
consent, approval, exemption or other action by or notice to any Government
Entity, or (c) subject to obtaining the consents referred to in SCHEDULE 4.3,
will violate or conflict with, or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or will
result in the termination of, or accelerate the performance required by, or
result in the creation of any Lien (as defined in SECTION 4.11(A)) upon any of
the assets of the Seller under, any term or provision of the Operating Agreement
of the Seller or of any material contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which the
Seller is a party or by which the Seller or any of its assets or properties may
be bound or affected.
4.4 Financial Statements. Included as SCHEDULE 4.4 are, to Seller's
knowledge, true and complete copies of the financial statements of the Seller
consisting of (i) unaudited balance sheets of the Seller as of December 31, for
the two (2) most recent calendar years, and the related statements of income and
cash flows for the years then ended (including the notes contained therein or
annexed thereto), and (ii) an unaudited balance sheet of the Seller as of June
30, of the current year (the "Recent Balance Sheet"), and the related unaudited
statements of income and cash flows for the six (6) months then ended and for
the corresponding period of the prior year (including the notes and schedules
contained therein or annexed thereto). To Seller's knowledge all of such
financial statements (including all notes and schedules contained therein or
annexed thereto) are true, complete and accurate, have been prepared on a tax
basis, have been prepared in accordance with the books and records of the
Seller, and fairly present the assets, liabilities, financial position, results
of operations and cash flows of the Seller as of the dates and for the years and
periods indicated.
7
<PAGE>
4.5 Tax Matters. Except as set forth on SCHEDULE 4.5 all state, county,
local and other tax returns required to be filed by or on behalf of the Seller
have been timely filed and when filed were true and correct in all material
respects, and the taxes shown as due thereon were paid or adequately accrued.
The Seller has duly withheld and paid all taxes that it is required to withhold
and pay relating to salaries and other compensation heretofore paid to the
employees of the Seller.
4.6 Inventory. All inventory of the Seller reflected on the Recent
Balance Sheet consisted of a quality and quantity usable and saleable in the
ordinary course of business, had a commercial value at least equal to the value
shown on such balance sheet and was valued in accordance with GAAP. All
inventory purchased since the date of such balance sheet consisted of a quality
and quantity usable and saleable in the ordinary course of business. All current
inventory of the Seller is located on premises leased by the Seller as reflected
in this Agreement.
4.7 Absence of Certain Changes. Except as and to the extent set forth in
SCHEDULE 4.7, since the date of the Recent Balance Sheet, to the Seller's
knowledge, there has not been:
4.7(a) No Adverse Change. Any material adverse change in the
financial condition, assets, Liabilities, business, prospects or
operations of the Seller;
4.7(b) No Damage. Any material loss, damage or destruction,
whether covered by insurance or not, affecting Seller's business or
properties;
4.7(c) No Increase in Compensation. Other than such thereof as
has occurred in the ordinary course of business, any increase in the
compensation, salaries or wages payable or to become payable to any
employee of the Seller (including, without limitation, any increase or
change pursuant to any bonus, pension, profit sharing, retirement or
other plan or commitment), or any bonus or other employee benefit
granted, made or accrued;
4.7(d) No Labor Disputes. Any labor dispute or disturbance,
other than routine individual grievances which are not material to the
business, financial condition or results of operations of the Seller;
4.7(e) No Commitments. Any material commitment or transaction by
the Seller (including, without limitation, any borrowing or capital
expenditure) other than in the ordinary course of business consistent
with past practice;
4.7(f) No Disposition of Property. Any sale, lease or other
transfer or disposition of any properties or assets of the Seller,
except in the ordinary course of business;
4.7(g) No Indebtedness. Any indebtedness for borrowed money
incurred, assumed or guaranteed by the Seller;
4.7(h) No Liens. Any Lien made on any of the properties or
assets of the Seller other than liens for taxes not yet due and payable;
4.7(i) No Amendment of Contracts. Any entering into, amendment
or termination by the Seller of any contract, or any waiver of material
rights thereunder, other than in the ordinary course of business;
4.7(j) No Unusual Events. Any other event or condition not in
the ordinary course of business of the Seller.
8
<PAGE>
4.8 Absence of Undisclosed Liabilities. Except as and to the extent
specifically disclosed in the Recent Balance Sheet, or in SCHEDULE 4.8, to the
Seller's knowledge, the Seller does not have any Liabilities other than
liabilities and obligations incurred since the date of the Recent Balance Sheet
in the ordinary course of business and consistent with past practice and none of
which has or will have a material adverse effect on the business, financial
condition or results of operations of the Seller. Except as and to the extent
described in the Recent Balance Sheet or in SCHEDULE 4.8, the Seller has no
knowledge of any basis for the assertion against the Seller of any Liability and
to the knowledge of the Seller, there are no circumstances, conditions,
happenings, events or arrangements, contractual or otherwise, which may give
rise to Liabilities, except for liabilities and obligations incurred in the
ordinary course of the Seller's business.
4.9 No Litigation. Except as set forth in SCHEDULE 4.9 there is no
Litigation pending or, to the knowledge of the Seller, threatened against the
Seller, its managers (in such capacity) or members (in such capacity), its
business or its assets, nor does the Seller know, or have grounds to know, of
any basis for any such Litigation. SCHEDULE 4.9 also identifies all Litigation
to which the Seller or its managers (in such capacity) or members (in such
capacity) have been parties since the formation of the Seller. Except as set
forth in SCHEDULE 4.9, neither the Seller nor its business or assets are subject
to any Order of any Government Entity.
4.10 Compliance With Laws and Orders.
4.10(a) Compliance. Except as set forth in SCHEDULE 4.10(A), to
the best of Seller's knowledge, the Seller (including its operations,
practices, properties and assets) is in material compliance with all
applicable Laws and Orders, including, without limitation, those
applicable to discrimination in employment, occupational safety and
health, trade practices, competition and pricing, product warranties,
zoning, building and sanitation, employment, retirement and labor
relations and product advertising. Except as set forth in SCHEDULE
4.10(A), the Seller has not received notice of any violation or alleged
violation of, and is subject to no Liability for past or continuing
violation of, any Laws or Orders. To the Seller's knowledge, all reports
and returns required to be filed by the Seller with any Government
Entity have been filed, and were accurate and complete when filed.
Without limiting the generality of the foregoing, to the Seller's
knowledge:
(i) The Seller has made all required payments to its
unemployment compensation reserve accounts with the appropriate
governmental departments of the states where it is required to
maintain such accounts, and each of such accounts has a positive
balance.
(ii) The Seller has delivered to Buyer copies of all
reports of the Seller required under all applicable health and
safety laws and regulations. The deficiencies, if any, noted on
such reports have been corrected.
4.10(b) Licenses and Permits. Except as set forth on SCHEDULE
4.10(B), to the Seller's knowledge, the Seller has, or will have on the
Closing Date, all licenses, permits, approvals, authorizations and
consents of all Government Entities and all certification organizations
required for the conduct of the business (as presently conducted by the
Seller) and operation of the Restaurant. Except as disclosed on SCHEDULE
4.10(B), all such licenses, permits, approvals, authorizations and
consents as described in SCHEDULE 4.10(B), are in full force and effect.
Except as set forth in SCHEDULE 4.10(B), the Seller (including its
operations, properties and assets) is and has been in compliance with
all such permits and licenses, approvals, authorizations and consents.
4.11 Title to and Condition of Properties.
4.11(a) Marketable Title. The Seller has, or will have on the
Closing Date, good and marketable title to all the Purchased Assets,
free and clear of all mortgages, liens (statutory or otherwise),
security
9
<PAGE>
interests, claims, pledges, licenses, equities, options, conditional
sales contracts, assessments, levies, easements, covenants,
reservations, restrictions, rights-of-way, exceptions, limitations,
charges or encumbrances of any nature whatsoever except those described
in SCHEDULE 4.11(A) and other than liens for taxes not yet due and
payable and the interests of the lessor under the Real Property Lease
and the Personal Property Lease (collectively, "Liens"). Except as
described on SCHEDULE 4.11(A), none of the Purchased Assets are subject
to any restrictions with respect to the transferability thereof. Except
as described on SCHEDULE 4.11(A), the Seller has complete and
unrestricted power and right to sell, assign, convey and deliver the
Purchased Assets to Buyer as contemplated hereby. On the Closing Date,
Buyer will receive good and marketable title to all the Purchased
Assets, free and clear of all Liens of any nature whatsoever except
those described in SCHEDULE 4.11(A).
4.11(b) Condition. To Seller's knowledge, all tangible assets
(real and personal) constituting Purchased Assets hereunder are in good
operating condition and repair, free from any defects (except such minor
defects as do not interfere with the use thereof in the conduct of the
normal operations of the Seller), have been maintained consistent with
the standards generally followed in the industry and are sufficient to
carry on the business of the Seller as conducted during the preceding
twelve (12) months. To Seller's knowledge, all buildings and other
structures constituting the Restaurant's premises are in good condition
and repair and have no structural defects or defects affecting the
plumbing, electrical, sewerage, or heating, ventilating or air
conditioning systems.
4.11(c) Real Property. The Leased Real Property is the only
real property presently used or occupied by the Seller and its
Restaurant. There are now in full force and effect duly issued
certificates of occupancy permitting the Leased Real Property and
improvements located thereon to be legally used and occupied, as the
same are now constituted. All of the Leased Real Property has rights of
access to dedicated public highways, as provided in and subject to the
Real Property Lease. To the knowledge of the Seller, no fact or
condition exists that would prohibit or adversely affect the ordinary
rights of access to and from the Leased Real Property from and to the
existing highways and roads and there is no pending or threatened
restriction or denial, governmental or otherwise, upon such ingress and
egress. To the Seller's knowledge, no public improvements have been
commenced and to Seller's knowledge none are planned which in either
case may result in special assessments against or otherwise materially
adversely affect the Leased Real Property. To the Seller's knowledge, no
portion of any of the Leased Real Property has been used as a landfill
or for storage or landfill of hazardous or toxic materials. The Seller
does not have notice or knowledge of any (i) Order requiring repair,
alteration, or correction of any existing condition affecting the Leased
Real Property or the systems or improvements thereat, (ii) condition or
defect which could give rise to an order of the sort referred to in
"(i)" above, or (iii) underground storage tanks, or any structural,
mechanical, or other defects of material significance affecting the
Leased Real Property or the systems or improvements thereat (including,
but not limited to, inadequacy for normal use of mechanical systems or
disposal or water systems at or serving the Leased Real Property).
4.12 Insurance. Set forth in SCHEDULE 4.12 is a complete and accurate
list of all policies of fire, liability, product liability, workers
compensation, health and other forms of insurance presently in effect with
respect to the business and properties of the Seller, true and correct copies of
which have heretofore been made available to Buyer for its inspection. No notice
of cancellation or termination has been received with respect to any such
policy, and the Seller has no knowledge of any act or omission of the Seller
that could result in cancellation of any such policy prior to the Closing Date.
4.13 Contracts and Commitments.
4.13(a) Real Property Lease. To the best of Seller's knowledge,
except for the Real Property Lease, the Seller has no leases of real
property. To the best of Seller's knowledge, the Real Property
10
<PAGE>
Lease is in full force and effect, the Seller is not in default of any
term, covenant or obligation under any of the Real Property Lease, and
no condition exists which, with the passage of time or giving of notice,
would constitute a default under any term, covenant or obligation of
Seller under the Real Property Lease.
4.13(b) Personal Property Leases. Except as set forth in
SCHEDULE 2.1(D), the Seller has no leases of personal property involving
consideration or other expenditure in excess of one thousand dollars
($1,000) or involving performance over a period of more than twelve (12)
months.
4.13(c) Purchase Commitments. The Seller has no purchase
commitments for inventory items or supplies that, together with amounts
on hand, constitute in excess of two (2) months normal usage, or which
are at an excessive price.
4.13(d) Collective Bargaining Agreements. The Seller is not a
party to any collective bargaining agreement with any unions, guilds,
shop committees or other collective bargaining groups.
4.13(e) Loan Agreements. Except as set forth in SCHEDULE
4.13(E), the Seller is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as
a signatory, guarantor or otherwise, which will not be paid in full
prior to Closing.
4.13(f) Guarantees. Except as disclosed on SCHEDULE 4.13(F), the
Seller has not guaranteed the payment or performance of any person, firm
or corporation, agreed to indemnify any person or act as a surety, or
otherwise agreed to be contingently or secondarily liable for the
obligations of any person.
4.13(g) Burdensome or Restrictive Agreements. Except as
disclosed hereby, the Seller is not a party to or bound by any
agreement, deed, lease or other instrument that is so burdensome as to
materially and adversely affect or impair the operation of the
Restaurant. Without limiting the generality of the foregoing, the Seller
is not a party to or bound by any agreement requiring it to assign any
interest in any trade secret or proprietary information, or prohibiting
or restricting it from competing in any business or geographical area or
soliciting customers or otherwise restricting it from carrying on its
business anywhere in the world, except as described in the Licensing
Agreement and the Lease.
4.13(h) Other Material Contracts. The Seller does not have a
lease, license, contract or commitment of any nature involving
consideration or other expenditure in excess of one thousand dollars
($1,000), or involving performance over a period of more than twelve
(12) months, or which is otherwise individually material to the
operations of the Restaurant, except as described in SCHEDULE 4.13(H) or
in any other Disclosure Schedule.
4.13(i) No Default. To its knowledge, the Seller is not in
default under any lease, contract or commitment, nor has any event or
omission occurred which through the passage of time or the giving of
notice, or both, would constitute a default thereunder or cause the
acceleration of any of its obligations or result in the creation of any
Lien on any of the assets owned, used or occupied by it. To the
knowledge of the Seller, no third party is in default under any lease,
contract or commitment to which the Seller is a party, nor has any event
or omission occurred which, through the passage of time or the giving of
notice, or both, would constitute a default thereunder or give rise to
an automatic termination, or the right of discretionary termination,
thereof.
4.14 Labor Matters. To Seller's knowledge: (a) the Seller has not
experienced any labor disputes, union organization attempts or any work stoppage
due to labor disagreements in connection with its business; (b) the Seller is in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice; (c) there is no unfair labor practice
charge or complaint against the Seller pending or threatened; (d) there is no
labor strike,
11
<PAGE>
dispute, request for representation, slowdown or stoppage actually pending or
threatened against or affecting the Seller; (e) no question concerning
representation has been raised or is threatened respecting the employees of the
Seller; (f) no grievance which might have a material adverse effect on the
Seller, nor any arbitration proceeding arising out of or under collective
bargaining agreements, is pending and no such claim therefor exists; and (g)
there are no administrative charges or court complaints against the Seller
concerning alleged employment discrimination or other employment related matters
pending or threatened before the U.S. Equal Employment Opportunity Commission or
any Government Entity, except as disclosed on SCHEDULE 4.9.
4.15 Employee Benefit Plans. To Seller's knowledge:
The Seller has provided and/or identified each "employee benefit plan,"
as defined in Section 3(3) of ERISA which (i) is subject to any provision of
ERISA and (ii) is or was at any time during the last 5 years maintained,
administered or contributed to by the Seller or any affiliate (as defined in
Section 407(d)(7) of ERISA) and covers any employee or former employee of the
Seller or any affiliate or under which the Seller or any affiliate has any
liability. Such plans are referred to collectively herein as the "Employee
Plans." None of the Employee Plans would, individually or collectively,
constitute an "employee pension benefit plan" as defined in Section 3(2) of
ERISA, including, without limitation, a "multiemployer plan," as defined in
Section 3(37) of ERISA, or a "defined benefit plan," as defined in Section 3(35)
and subject to Title IV of ERISA, and no Employee Plan is maintained in
connection with any trust described in Section 501(c)(9) of the Code. It is
understood and agreed that Buyer is not assuming any Employee Plans or
liabilities associated therewith, and that the Seller shall retain all such
Employee Plans, including all obligations deriving directly or indirectly from
sponsoring or participating in such Employee Plans.
Each Employee Plan has been maintained in compliance with its terms and
the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to, ERISA and the Code, which are
applicable to such Plan. No assets of the Seller are or could be subject,
directly or indirectly, to any liability or lien by reason of any action or
inaction taken with respect to any Employee Plan maintained by the Seller.
The Seller has no liability in respect of post-retirement health and
medical benefits for retired employees of the Seller or any affiliate,
determined using assumptions that are reasonable in the aggregate, over the fair
market value of any fund, reserve or other assets segregated for the purpose of
satisfying such liability (including for such purposes any fund established
pursuant to Section 401(h) of the Code). The Seller has reserved its right to
amend or terminate any Employee Plan or other benefit arrangement providing
health or medical benefits in respect of any active employee of the Seller under
the terms of any such plan and descriptions thereof given to employees. With
respect to any Employee Plans which are "group health plans" under Section 4980B
of the Code and Section 607(l) of ERISA, there has been timely compliance in all
material respects with all requirements imposed thereunder, and under Parts 6
and 7 of Title I of ERISA generally, so that the Seller and any affiliate have
no (and will not incur any) loss, assessment, tax penalty or other sanction with
respect to any such plan.
There has been no amendment to, written interpretation or announcement
(whether or not written) by the Seller or any affiliate relating to, or change
in employee participation or coverage under, any Employee Plan which would
increase the expense of maintaining such Employee Plan above the level of the
expense incurred in respect thereof for the fiscal year ended immediately prior
to the Closing Date.
4.16 Employment Compensation. SCHEDULE 4.16 contains a true and correct
list of all employees to whom the Seller is paying compensation, including
bonuses and incentives, at an annual rate in excess of Twenty Thousand Dollars
($20,000) for services rendered or otherwise; and in the case of salaried
employees such list identifies the current annual rate of compensation for each
employee and in the case of hourly or commission employees identifies certain
reasonable ranges of rates and the number of employees falling within each such
range.
12
<PAGE>
Neither any action on the part of the Seller prior to the Closing Date,
the sale by Seller to Buyer of the business and assets of the Seller pursuant to
this Agreement, the transactions contemplated hereby, nor the failure by Buyer
to hire as a permanent employee of Buyer any employee of Seller, shall directly
or indirectly result in any Liability (i) for severance payments or termination
benefits or (ii) by virtue of any state, federal or local law.
4.17 Intellectual Property. In order to conduct the business of the
Seller, as such is currently being conducted or proposed to be conducted, the
Seller does not require the rights to any intellectual property that it does not
already have. To its knowledge, the Seller is not infringing and has not
infringed any intellectual property of another in the operation of the business
of the Seller, nor is any other person infringing the intellectual property of
the Seller. The Seller has not granted any license or made any assignment of its
rights in any intellectual property. The Seller does not pay any royalties or
other consideration for the right to use any intellectual property of others.
There is no Litigation pending or threatened to challenge the Seller's right,
title and interest with respect to its continued use of any intellectual
property.
4.18 Major Suppliers. SCHEDULE 4.18 contains a list of the five (5)
largest suppliers (other than alcoholic beverages) to the Seller for the last
twelve (12) months (determined on the basis of the total dollar amount of
purchases) showing the total dollar amount of purchases from each such supplier
during the last twelve months. The Seller does not have any knowledge or
information of any facts indicating, nor any other reason to believe, that any
of the suppliers listed on SCHEDULE 4.18 will not continue to be suppliers to
the business of the Seller after the Closing Date and will not continue to
supply the business with substantially the same quantity and quality of goods at
competitive prices.
4.19 Assets Necessary to Business. The Purchased Assets include all
property and assets (except for the Excluded Assets), tangible and intangible,
and all leases, licenses and other agreements, which are necessary to permit
Buyer to carry on, or currently used or held for use in, the business of the
Seller as presently conducted and as conducted immediately prior to the Closing
Date.
4.20 No Brokers or Finders. Neither the Seller nor any of its managers,
officers, employees, members or agents have retained, employed or used any
broker or finder in connection with the transaction provided for herein or in
connection with the negotiation thereof.
4.21 Disclosure. To Seller's knowledge, no representation or warranty
by the Seller in this Agreement, nor any statement, certificate, schedule,
document or exhibit hereto furnished or to be furnished by or on behalf of the
Seller pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or shall contain any untrue statement of material
fact or omits or shall omit a material fact necessary to make the statements
contained therein not misleading. All statements and information contained in
any certificate or Disclosure Schedule delivered by or on behalf of the Seller
shall be deemed representations and warranties of the Seller.
Notwithstanding the foregoing provisions of this SECTION 4, if the
Seller learns of any actual or alleged inaccuracy in such representations or
warranties, the Seller shall promptly notify the Buyer in writing thereof. The
writing, to be a valid notification, must state the details causing the actual
or alleged inaccuracy and specify which representations or warranties the Seller
believes have been made inaccurate. The Seller shall, prior to five (5) days
before the earlier of the Closing Date or ten (10) days after receiving such
written notice from the Buyer or of learning of such actual or alleged
inaccuracy, make commercially reasonable efforts to cure such inaccuracy.
Failing such cure by the Seller or the Seller's election not to effect cure, the
Seller shall, within the period specified in the preceding sentence, notify the
Buyer in writing of such failure to cure, and the Buyer's sole and exclusive
remedy therefore shall be to elect, prior to the earlier of the Closing Date or
ten (10) business days after receiving such written notice from the Seller, to
either (y) proceed to Closing and waive such inaccuracy or (z) cancel this
Agreement, whereupon neither party will have any further rights or obligations
regarding this Agreement. If the Buyer proceeds to Closing, without exercising
such right of cancellation, the applicable
13
<PAGE>
representation or warranty shall be deemed automatically amended to conform with
such knowledge of the Buyer, and the Seller shall have no liability whatsoever
for such previously inaccurate representation or warranty. Notwithstanding the
foregoing, if any inaccuracy in the Seller's representations or warranties
occurs as a result of a misrepresentation intentionally made by the Seller, or
if the Seller hereafter intentionally takes an action to cause a breach of a
representation or warranty contained in this Agreement, then in either such
event the Buyer shall have the right to recover damages from the Seller as may
be allowed by law.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to the Seller that each of the following
is true and correct in all material respects on the date hereof, shall remain
true and correct in all material respects to and including the Closing Date,
shall be unaffected by any investigation heretofore or hereafter made by the
Seller or any knowledge of the Seller, and shall survive the closing of the
transactions provided for herein for one (1) year.
5.1. Corporate.
5.1(a) Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Florida.
5.1(b) Corporate Power. Buyer has all requisite corporate power
to enter into this Agreement and the other documents and instruments to
be executed and delivered by Buyer and to carry out the transactions
contemplated hereby and thereby.
5.2 Authority. The execution and delivery of this Agreement and the
other documents and instruments to be executed and delivered by Buyer pursuant
hereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by the Board of Directors of Buyer. No other corporate
act or proceeding on the part of Buyer or its shareholders is necessary to
authorize this Agreement or the other documents and instruments to be executed
and delivered by Buyer pursuant hereto or the consummation of the transactions
contemplated hereby and thereby. This Agreement constitutes, and when executed
and delivered, the other documents and instruments to be executed and delivered
by Buyer pursuant hereto will constitute, valid and binding agreements of Buyer,
enforceable in accordance with their respective terms, except as such may be
limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors' rights generally, and by general equitable principles.
5.3 No Brokers or Finders. Neither Buyer nor any of its directors,
officers, employees or agents have retained, employed or used any broker or
finder in connection with the transaction provided for herein or in connection
with the negotiation thereof.
5.4 Disclosure. No representation or warranty by Buyer in this
Agreement, nor any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of Buyer pursuant to this Agreement
or in connection with transactions contemplated hereby, contains or shall
contain any untrue statement of material fact or omits or shall omit a material
fact necessary to make the statements contained therein not misleading.
5.5. Buyer's Cooperation. Buyer will use commercially reasonable
efforts, without incurring unreasonable expense, to cooperate with the Seller in
obtaining the consents referred to in SECTION 8.3 hereof.
5.6 Other Action. The Buyer shall use its best efforts to cause the
fulfillment at the earliest practicable date of all the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
14
<PAGE>
6. EMPLOYEES - EMPLOYEE BENEFITS
6.1 Affected Employees. "Affected Employees" shall mean employees of the
Seller who are employed by Buyer immediately after the Closing Date.
6.2 Retained Responsibilities. Subject to SECTION 1.3(B) above, the
Seller agrees to satisfy, or cause its insurance carriers to satisfy, all claims
for benefits, whether insured or otherwise (including, but not limited to,
workers' compensation, life insurance, medical and disability programs), under
Seller's employee benefit programs brought by, or in respect of, Affected
Employees and other employees and former employees of the Seller, which claims
arise out of events occurring on or prior to the Closing Date, in accordance
with the terms and conditions of such programs or applicable workers'
compensation statutes, whether or not such employees are employed by Buyer after
the Closing Date.
6.3 Payroll Tax. The Seller agrees to make a clean cut-off of payroll
and payroll tax reporting with respect to the Affected Employees paying over to
the federal, state and city governments those amounts respectively withheld or
required to be withheld for periods ending on or prior to the Closing Date. The
Seller also agrees to issue, by the date prescribed by IRS Regulations, Forms
W-2 for wages paid through the Closing Date. Except as set forth in this
Agreement, Buyer shall be responsible for all payroll and payroll tax
obligations after the Closing Date for Affected Employees.
6.4 Termination Benefits. Subject to SECTION 1.3(B) above, and except as
provided in the following sentence, Buyer shall be solely responsible for, and
shall pay or cause to be paid, severance payments and other termination
benefits, if any, to Affected Employees who may become entitled to such benefits
by reason of any events occurring after the Closing Date. Subject to SECTION
1.3(B) above, if any action on the part of the Seller prior to the Closing Date,
or if the sale to Buyer of the business and assets of the Seller pursuant to
this Agreement or the transactions contemplated hereby, or if the failure by
Buyer to hire as a permanent employee of Buyer any employee of Seller, shall
directly or indirectly result in any Liability (i) for severance payments or
termination benefits or (ii) by virtue of any state, federal or local law, such
Liability shall be the sole responsibility of the Seller, and the Seller shall
indemnify and hold harmless Buyer against such Liability.
6.5 WARN Act Obligations. The Buyer will not take any actions within 60
days of the effective date of the Closing that, for more than 49 of the
full-time employees who are employed by the Seller as of the effective date of
the Closing, result in an "employment loss," as that term is defined under the
Worker Adjustment Retraining and Notification Act, 29 U.S.C. Sections 2101 to
2109 ("WARN Act"). The Seller and the Buyer each will be responsible for their
own notification obligations, if any, under the WARN Act, including without
limitation any notification obligations that may arise from any "employment
loss" by any employees who are employed as of the effective date of the Closing.
7. OTHER MATTERS
7.1 Pre-Closing Revenue and Expenses. The Seller shall be responsible
for all expenses, debts and other Liabilities of the Seller and the Restaurant
arising out of or relating to periods prior to and including the Closing Date.
7.2 Post-Closing Revenue and Expenses. The Buyer shall be responsible
for all expenses, debts and other Liabilities of the Restaurant arising out of
or relating to periods subsequent to the Closing Date.
7.3 Noncompetition. Subject to that certain side letter agreement of
even date, from the Closing Date for a two (2) year period thereafter, Seller,
Marsh and Schoch shall not, individually or jointly with others, directly or
indirectly, whether for his, her or its own account or for that of any other
person or entity, engage in or
15
<PAGE>
own or hold any ownership interest in any person or entity engaged in a
restaurant business that operates primarily with a theme, decor, menu or style
of cuisine (Hawaiian Fusion) the same as or substantially similar to that of the
Restaurant sold hereunder, regardless of the geographic location of such person,
entity or business, and neither Seller, Marsh nor Schoch shall act as an
officer, director, employee, partner, independent contractor, consultant,
principal, agent, proprietor, or in any other capacity for, nor lend any
assistance (financial or otherwise) or cooperation to, any such person, or
entity; PROVIDED, HOWEVER, that it shall not be a violation of this SECTION 7.3
for Seller, Marsh or Schoch to own a one percent (1%) or smaller interest in any
corporation required to file periodic reports with the Securities and Exchange
Commission.
7.4 Confidentiality.
7.4(a) Definition. For the purpose of this Agreement,
"Proprietary Information" shall include all information, whether owned,
licensed or otherwise used by or in the possession of the Seller, which
reasonably would be considered proprietary or confidential to the
business of the Seller including but not limited to proprietary or
confidential trade or industrial practices, marketing and technical
plans, technology, personnel, organization or internal affairs, plans
for products and ideas, recipes, menus, wine lists and proprietary
techniques and other trade secrets. Notwithstanding the foregoing,
"Proprietary Information" shall not include information that has entered
the public domain.
7.4(b) No Disclosure, Use, or Circumvention. The Seller and its
members and Affiliates shall not disclose any Proprietary Information to
any third parties and will not use any Proprietary Information in the
Seller's business or any affiliated business without the prior written
consent of the Buyer and then only to the extent specified in that
consent. Consent may be granted or withheld at the sole discretion of
the Buyer. The Seller, its members and Affiliates shall not contact any
suppliers, customers, employees, affiliates or associates to circumvent
the purposes of this provision.
7.4(c) Maintenance of Confidentiality. The Seller shall take all
steps reasonably necessary or appropriate to maintain the strict
confidentiality of the Proprietary Information and to assure compliance
with this Agreement.
7.5 Non-Solicitation. For a period two (2) years following the Closing
Date, the Seller, Marsh and Schoch shall not offer employment to any employee of
the Buyer or its Affiliates or otherwise solicit or induce any employee of the
Buyer or its Affiliates to terminate his or her employment, nor shall the
Seller, Marsh or Schoch act as partner, consultant, agent, owner or part owner,
or in any other capacity for any person or entity which solicits or otherwise
induces any employee of the Buyer or its Affiliates to terminate his or her
employment with the Buyer; provided however, it shall not be a violation of this
SECTION 7.5 if any server, busser, hostess and/or kitchen staff employee of
Buyer or its Affiliates are employed both at a restaurant owned by Buyer or its
Affiliates and also at a restaurant owned by Seller, Marsh, Schoch or any of
their Affiliates.
7.6 Reasonableness of Restrictions; Reformation; Enforcement. The
parties hereto recognize and acknowledge that the geographical and time
limitations contained in SECTION 7.3, SECTION 7.4 and SECTION 7.5 hereof are
reasonable and properly required for the adequate protection of the Buyer's
interests. It is agreed by the parties hereto that if any portion of the
restrictions contained in SECTION 7.3, SECTION 7.4 or SECTION 7.5 are held to be
unreasonable, arbitrary, or against public policy, then the restrictions shall
be considered divisible, both as to the time and to the geographical area, with
each month of the specified period being deemed a separate period of time and
each radius mile of the restricted territory being deemed a separate
geographical area, so that the lesser period of time or geographical area shall
remain effective so long as the same is not unreasonable, arbitrary, or against
public policy. The parties hereto agree that in the event any court of competent
jurisdiction determines the specified period or the specified geographical area
of the restricted territory to be unreasonable, arbitrary, or against public
policy, a lesser time period or geographical area that is determined to be
reasonable, nonarbitrary, and not against public policy may be enforced. If any
of the covenants contained herein are violated
16
<PAGE>
and if any court action is instituted by the Buyer to prevent or enjoin such
violation, then the period of time during which the business activities shall be
restricted, as provided in this Agreement, shall be lengthened by a period of
time equal to the period between the date of the breach of the terms or
covenants contained in this Agreement and the date on which the decree of the
court disposing of the issues upon the merits shall become final and not subject
to further appeal.
In the event it is necessary for the Buyer to initiate legal
proceedings to enforce, interpret or construe any of the covenants contained in
SECTION 7.3, SECTION 7.4 and SECTION 7.5 hereof, the prevailing party in such
proceedings shall be entitled to receive from the non-prevailing party, in
addition to all other remedies, all costs, including reasonable attorneys' fees,
of such proceedings including appellate proceedings.
7.7 Specific Performance. The parties agree that a breach of any of the
covenants contained in SECTION 7.3, SECTION 7.4 and SECTION 7.5 hereof will
cause irreparable injury to the Buyer for which the remedy at law will be
inadequate and would be difficult to ascertain and therefore, in the event of
the breach or threatened breach of any such covenants, the Buyer shall be
entitled, in addition to any other rights and remedies it may have at law or in
equity, to obtain an injunction to restrain any threatened or actual activities
in violation of any such covenants. The parties hereby consent and agree that
temporary and permanent injunctive relief may be granted in any proceedings that
might be brought to enforce any such covenants without the necessity of proof of
actual damages, and in the event the Buyer does apply for such an injunction,
that the Buyer has an adequate remedy at law shall not be raised as a defense.
8. FURTHER COVENANTS OF THE SELLER
The Seller covenants and agrees as follows:
8.1 Access to Information and Records. During the period commencing
thirty (30) days prior to the Closing Date, the Seller shall give Buyer, its
counsel, accountants and other representatives (i) access during normal business
hours to all of the properties, books, records, contracts and documents of the
Seller for the purpose of such inspection, investigation and testing as Buyer
deems appropriate (and the Seller shall furnish or cause to be furnished to
Buyer and its representatives all information with respect to the business and
affairs of the Seller as Buyer may request); (ii) access to employees, agents
and representatives for the purposes of such meetings and communications as
Buyer reasonably desires; and (iii) access to vendors, customers, manufacturers
of its machinery and equipment, and others having business dealings with the
Seller. Through the Closing Date, the Buyer and its Affiliates shall not
disclose any Proprietary Information obtained pursuant to this paragraph to any
third parties and until the Closing Date will not use any such Proprietary
Information in the Buyer's business or any affiliated business without the prior
written consent of the Seller and then only to the extent specified in that
consent. Consent may be granted or withheld at the sole discretion of the
Seller. The Buyer shall not contact any suppliers, customers, employees,
affiliates or associates to circumvent the purposes of this provision. The Buyer
shall take all steps reasonably necessary or appropriate to maintain the strict
confidentiality of the Proprietary Information through the Closing Date.
8.2 Conduct of Business Pending the Closing. From the date hereof until
the Closing Date, except as otherwise approved in writing by the Buyer, which
approval shall not be unreasonably withheld:
8.2(a) No Changes. The Seller will, in all material respects,
carry on its business diligently and in the same manner as heretofore
and will not make or institute any material changes in its methods of
purchase, sale, management, accounting or operation; provided however,
it shall be permissible hereunder for Seller to defer executing any
contract or incurring any obligation that would not constitute an
Assumed Liability pursuant to SECTION 3.2.
17
<PAGE>
8.2(b) Maintain Organization. The Seller will take such action
as may be necessary to maintain, preserve, renew and keep in favor the
material rights and franchises of the Seller and will use its
commercially reasonable best efforts, to the extent material hereto, to
preserve the business organization of the Seller intact, to keep
available to Buyer the present officers and employees, and to preserve
for Buyer its present relationships with suppliers and customers and
others having business relationships with the Seller.
8.2(c) No Breach. The Seller will not do or omit any act, or
permit any omission to act, which may cause a breach by Seller of any
material contract, commitment or obligation, or any breach by Seller of
any representation, warranty, covenant or agreement made by the Seller
herein, or which would have required disclosure on SCHEDULE 4.7 had it
occurred after the date of the Recent Balance Sheet and prior to the
date of this Agreement.
8.2(d) No Material Contracts. No contract or commitment will be
entered into, by or on behalf of the Seller, except contracts,
commitments, purchases or sales which are in the ordinary course of
business and consistent with past practice, are not material to the
Seller (individually or in the aggregate) and would not have been
required to be disclosed in the Disclosure Schedule had they been in
existence on the date of this Agreement.
8.2(e) No Organizational Changes. The Seller shall not
materially amend its Operating Agreement or make any changes in
ownership percentages.
8.2(f) Maintenance of Insurance. The Seller shall maintain all
of the insurance in effect as of the date hereof.
8.2(g) Maintenance of Property. The Seller shall use, operate,
maintain and repair all of their property in a normal business manner.
8.2(h) Interim Financials. The Seller will provide Buyer with
interim monthly financial statements and other management reports as and
when they are available.
8.2(i) No Negotiations. The Seller will not directly or
indirectly (through a representative or otherwise) solicit or furnish
any information to any prospective buyer, commence, or conduct presently
ongoing, negotiations with any other party or enter into any agreement
with any other party concerning the sale of the Seller, the Restaurant,
the Seller's assets or business or any part thereof or any membership
interest in the Seller (an "acquisition proposal"), and the Seller shall
immediately advise Buyer of the receipt of any acquisition proposal.
8.3 Consents. The Seller will use commercially reasonable efforts,
without incurring unreasonable expense, to obtain all consents necessary for the
consummation of the transactions contemplated hereby prior to the Closing Date.
8.4 Other Action. The Seller shall use its best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to
Seller's obligations to consummate the transactions contemplated in this
Agreement.
8.5 Disclosure. Through the Closing Date, the Seller shall have a
continuing obligation to promptly notify Buyer in writing with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
Disclosure Schedule as provided in the last paragraph of SECTION 4.
18
<PAGE>
8.6 Amendment to Real Property Lease. Seller agrees to use its best
efforts to assist the Buyer in obtaining an amendment to the Real Property
Lease, including the following: (i) addition of another five year option at a
fixed rent, for a total of two renewal options; (ii) allowing a change in the
trade name used at the Restaurant with Landlord's consent, not to be
unreasonably withheld; (iii) allowing closure of the Restaurant for reasonable
periods of time for repair, remodeling or renovation; (iv) allowing assignment
to and affiliate without the Landlord's consent; and (v) adding a present value
discount calculation to the default provision.
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or on the Closing Date of each of
the following conditions:
9.1 Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by the Seller in this Agreement, and the
statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by the Seller pursuant to this Agreement, shall
be true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date,
except for any changes permitted by the terms of this Agreement or consented to
in writing by Buyer.
9.2 Compliance With Agreement. The Seller shall have performed and
complied with all of its agreements and obligations under this Agreement which
are to be performed or complied with by it prior to or on the Closing Date.
9.3 Absence of Litigation. No Litigation shall have been commenced or
threatened, and no material investigation by any Government Entity shall have
been commenced, against Buyer, the Seller or any of the Affiliates, officers,
directors or managers of any of them, with respect to the transactions
contemplated hereby.
9.4 Consents and Approvals. Except as otherwise specifically provided in
this Agreement, all approvals, consents and waivers that are required to effect
the transactions contemplated hereby shall have been received, and copies
thereof shall have been delivered to Buyer on or prior to the Closing Date.
9.5 Estoppel Certificates. The Buyer shall have obtained an estoppel
certificate or status letter, dated within thirty (30) days of the Closing Date,
from the landlord under the lease of real property, which estoppel certificate
or status letter will certify (i) the lease is valid and in full force and
effect; (ii) the amounts payable by the Seller under the lease and the date to
which the same have been paid; (iii) whether there are, to the knowledge of said
landlord, any defaults thereunder, and, if so, specifying the nature thereof;
and (iv) that the transactions contemplated by this Agreement will not
constitute a default under the lease and that the landlord consents to the
assignment of the lease to Buyer.
9.6 Transfer of Alcoholic Beverage License. The State of California
permanent alcoholic beverage license for the Restaurant shall have been issued
in the Buyer's name.
9.7 Delivery of Closing Documents. The Seller shall have delivered the
closing documents specified in SECTION 12.3.
9.8 Simultaneous Closing. All contingencies to the Buyer's purchase of
Roy's Scottsdale shall have been satisfied.
10. CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Each and every obligation of the Seller to be performed on the Closing
Date shall be subject to the
19
<PAGE>
satisfaction prior to or on the Closing Date of the following conditions:
10.1 Representations and Warranties True on the Closing Date. Each of
the representations and warranties made by Buyer in this Agreement shall be true
and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
10.2 Compliance With Agreement. Buyer shall have in all material
respects performed and complied with all of Buyer's agreements and obligations
under this Agreement which are to be performed or complied with by Buyer prior
to or on the Closing Date, including the delivery of the closing documents
specified in SECTION 12.4.
10.3 Absence of Litigation. No material Litigation shall have been
commenced or threatened, and no material investigation by any Government Entity
shall have been commenced, against Buyer, or the Seller or any of the
affiliates, officers, managers, directors or shareholders of either of them,
with respect to the transactions contemplated hereby.
10.4 Transfer of Alcoholic Beverage License. The State of California
alcoholic beverage license for the Restaurant shall have been issued in the
Buyer's name.
11. INDEMNIFICATION
11.1 By the Seller. Subject to the terms and conditions of this ARTICLE
11, the Seller hereby agrees to indemnify, defend and hold harmless Buyer, and
its directors, officers, employees and Affiliates (hereinafter "Buyer's
Indemnitees"), from and against all Claims asserted against, resulting to,
imposed upon, or incurred by Buyer's Indemnitees or the business and assets
transferred to Buyer pursuant to this Agreement, directly or indirectly, by
reason of, arising out of or resulting from (a) the inaccuracy or breach of any
representation or warranty of the Seller contained in or made pursuant to this
Agreement (regardless of whether such breach is deemed "material"); (b) the
breach of any covenant of the Seller contained in this Agreement (regardless of
whether such breach is deemed "material"); (c) any Claim against the Seller, the
Purchased Assets or the business of the Seller not specifically assumed by Buyer
pursuant hereto and which arises out of or relates to any event first occurring
on or prior to the Closing Date; or (d) any obligations to the State of
California or any other Governmental Entity arising from gift certificate
escheat laws, as the same may be applied to any gift certificates sold but
unredeemed on the Closing Date. As used in this ARTICLE 11, the term "Claim"
shall include (i) all Liabilities; (ii) all losses, damages (including, without
limitation, consequential damages), judgments, awards, settlements approved by
the Seller (such approval shall not be unreasonably withheld or delayed), costs
and expenses (including, without limitation, interest (including prejudgment
interest in any litigated matter), penalties, court costs and reasonable
attorneys' fees and expenses); and (iii) all demands, claims, suits, actions,
costs of investigation, causes of action, proceedings and assessments, whether
or not ultimately determined to be valid.
11.2 By Buyer. Subject to the terms and conditions of this ARTICLE 11,
Buyer hereby agrees to indemnify, defend and hold harmless the Seller, its
controlling persons, its Affiliates, its managers, members, officers, employees
and controlling persons, from and against all Claims asserted against, resulting
to, imposed upon or incurred by any such person, directly or indirectly, by
reason of or resulting from (a) the inaccuracy or breach of any representation
or warranty of Buyer contained in or made pursuant to this Agreement (regardless
of whether such breach is deemed "material"); (b) the breach of any covenant of
Buyer contained in this Agreement (regardless of whether such breach is deemed
"material"); or (c) all Claims (i) of or against the Seller, the Purchased
Assets or the business of the Seller, specifically assumed by Buyer pursuant
hereto or (ii) which relate to the Purchased Assets, the business of the Buyer
or the Restaurant and arise out of any event occurring after the Closing Date.
20
<PAGE>
11.3 Indemnification of Third-Party Claims. The obligations and
liabilities of any party to indemnify any other under this ARTICLE 11 with
respect to Claims relating to third parties shall be subject to the following
terms and conditions:
11.3(a) Notice and Defense. The party or parties to be
indemnified (whether one or more, the "Indemnified Party") will give the
party from whom indemnification is sought (the "Indemnifying Party")
written notice of any such Claim, and the Indemnifying Party will
undertake the defense thereof by representatives chosen by it. Failure
to give such notice shall not affect the Indemnifying Party's duty or
obligations under this ARTICLE 11, except to the extent the Indemnifying
Party is prejudiced thereby. So long as the Indemnifying Party is
defending any such Claim actively and in good faith, the Indemnified
Party shall not settle such Claim. The Indemnified Party shall make
available to the Indemnifying Party or its representatives all records
and other materials required by them and in the possession or under the
control of the Indemnified Party, for the use of the Indemnifying Party
and its representatives in defending any such Claim, and shall in other
respects give reasonable cooperation in such defense.
11.3(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of any such Claim, fails to defend such
Claim actively and in good faith, the Indemnified Party will (upon
further notice) have the right to undertake the defense, compromise or
settlement of such Claim or consent to the entry of a judgment with
respect to such Claim, on behalf of and for the account and risk of the
Indemnifying Party, and the Indemnifying Party shall thereafter have no
right to challenge the Indemnified Party's defense, compromise,
settlement or consent to judgment.
11.3(c) Indemnified Party's Rights. Anything in this ARTICLE 11
to the contrary notwithstanding, (i) if there is a reasonable
probability that a Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right to defend,
compromise or settle such Claim, and (ii) the Indemnifying Party shall
not, without the written consent of the Indemnified Party, settle or
compromise any Claim or consent to the entry of any judgment which does
not include as an unconditional term thereof the giving by the claimant
or the plaintiff to the Indemnified Party of a release from all
Liability in respect of such Claim.
11.4 Payment. The Indemnifying Party shall promptly pay the Indemnified
Party any amount due under this ARTICLE 11, which payment may be accomplished in
whole or in part, at the option of the Indemnified Party, by the Indemnified
Party setting off any amount owed to the Indemnifying Party by the Indemnified
Party. To the extent set-off is made by an Indemnified Party in satisfaction or
partial satisfaction of an indemnity obligation under this ARTICLE 11 that is
disputed by the Indemnifying Party, upon a subsequent determination by final
judgment not subject to appeal that all or a portion of such indemnity
obligation was not owed to the Indemnified Party, the Indemnified Party shall
pay the Indemnifying Party the amount which was set off and not owed together
with interest from the date of set-off until the date of such payment at an
annual rate equal to the average annual rate in effect as of the date of the
set-off, on those three maturities of United States Treasury obligations having
a remaining life, as of such date, closest to the period from the date of the
set-off to the date of such judgment. Upon judgment, determination, settlement
or compromise of any third party Claim, the Indemnifying Party shall pay
promptly on behalf of the Indemnified Party, and/or to the Indemnified Party in
reimbursement of any amount theretofore required to be paid by it, the amount so
determined by judgment, determination, settlement or compromise and all other
Claims of the Indemnified Party with respect thereto, unless in the case of a
judgment an appeal is made from the judgment. If the Indemnifying Party desires
to appeal from an adverse judgment, then the Indemnifying Party shall post and
pay the cost of the security or bond to stay execution of the judgment pending
appeal. Upon the payment in full by the Indemnifying Party of such amounts, the
Indemnifying Party shall succeed to the rights of such Indemnified Party, to the
extent not waived in settlement, against the third party who made such third
party Claim.
21
<PAGE>
11.5 No Waiver. The closing of the transactions contemplated by this
Agreement shall not constitute a waiver by any party of its rights to
indemnification hereunder, regardless of whether the party seeking
indemnification has knowledge of the breach, violation or failure of condition
constituting the basis of the Claim at or before the closing, and regardless of
whether such breach, violation or failure is deemed to be "material".
11.6. Survival of Indemnification. The indemnification obligations of
the parties contained in this ARTICLE 11 shall survive the date of this
Agreement and the Closing Date for a period of one (1) year following the
Closing Date, except that the indemnification obligations relating to the
representations and warranties regarding tax obligations and/or obligations
pursuant to gift certificate escheat laws shall survive until one (1) year after
the expiration of the applicable statute of limitations for such obligations.
12. CLOSING
12.1 Closing Date. The closing referred to in this Agreement (the
"Closing Date") shall take place five (5) days after the satisfaction of all
conditions precedent required by SECTIONS 9.2, 9.4, 9.5, 9.6, 9.7, 9.8 and 10.4
of this Agreement
12.2 Place of Closing. The closing shall take place at Buyer's corporate
office or at such other place as the parties hereto shall agree upon.
12.3 Documents to be Delivered by the Seller. On the Closing Date, the
Seller shall deliver to Buyer the following documents, in each case duly
executed or otherwise in proper form:
12.3(a) Bills of Sale. Bills of sale and such other instruments
of assignment, transfer, conveyance and endorsement as will be
sufficient in the opinion of Buyer and its counsel to transfer, assign,
convey and deliver to Buyer the Purchased Assets as contemplated hereby.
12.3(b) Compliance Certificate. A certificate signed by the
manager of the Seller that each of the representations and warranties
made by the Seller in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though
such representations and warranties had been made or given on and as of
the Closing Date (except for any changes permitted by the terms of this
Agreement or consented to in writing by Buyer), and that the Seller has
performed and complied with all of the Seller's obligations under this
Agreement which are to be performed or complied with on or prior to the
Closing Date.
12.3(c) Certified Resolutions. A certified copy of the
resolutions of the manager of the Seller authorizing and approving this
Agreement and the consummation of the transactions contemplated by this
Agreement and certifying that the consent of the members of the Seller
has been obtained or is not required.
12.3(d) Incumbency Certificate. Incumbency certificates relating
to each person executing any document executed and delivered to Buyer
pursuant to the terms hereof.
12.3(e) Escrow Agreement. The Escrow Agreement in substantially
the form attached hereto as EXHIBIT A, duly executed by an authorized
representative of the Seller.
12.3(f) Gift Certificate Escrow Agreement. The Gift Certificate
Escrow Agreement in substantially the form attached hereto as EXHIBIT B,
duly executed by an authorized representative of the Seller.
22
<PAGE>
12.3(g) Certification of Financial Statements. A letter signed
by Marsh, Schoch and the Chief Financial Officer of the Seller
certifying that to their knowledge, the financial statements of Seller,
provided pursuant to SECTION 4.4, are true, complete and accurate, have
been prepared on a tax basis, have been prepared in accordance with the
books and records of the Seller, and fairly present the assets,
liabilities, financial position, results of operations and cash flows of
the Seller as of the dates and for the years and periods indicated.
12.3(h) Indemnification and Guaranty Agreement. An
indemnification and Guaranty Agreement executed by the Seller, Marsh and
Schoch, whereby the Seller agrees to indemnify the Buyer for any
liability or expense arising out of the Litigation identified by Seller
on SCHEDULE 4.9, and Marsh and Schoch personally guarantee such
indemnification obligation.
12.3(i) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer on or prior to the Closing
Date pursuant to this Agreement and such other certificates of authority
and documents as Buyer may reasonably request.
12.4 Documents to be Delivered by Buyer. At the Closing, Buyer shall
deliver to the Seller the following documents, in each case duly
executed or otherwise in proper form:
12.4(a) Assumption of Liabilities. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of the Seller and its counsel to evidence the assumption of
Assumed Liabilities as provided for in SECTION 3.2.
12.4(b) Compliance Certificate. A certificate signed by the
chief executive officer of Buyer that the representations and warranties
made by Buyer in this Agreement are true and correct on and as of the
Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except
for any changes permitted by the terms of this Agreement or consented to
in writing by the Seller), and that Buyer has performed and complied
with all of Buyer's obligations under this Agreement which are to be
performed or complied with on or prior to the Closing Date.
12.4(c) Certified Resolutions. A certified copy of the
resolutions of the Board of Directors of Buyer authorizing and approving
this Agreement and the consummation of the transactions contemplated by
this Agreement.
12.4(d) Incumbency Certificate. Incumbency certificates relating
to each person executing any document executed and delivered to the
Seller by Buyer pursuant to the terms hereof.
12.4(e) Escrow Agreement. The Escrow Agreement in substantially
the form attached hereto as EXHIBIT A, duly executed by an authorized
representative of the Buyer.
12.4(f) Other Documents. All other documents, instruments or
writings required to be delivered to the Seller on or prior to the
Closing Date pursuant to this Agreement and such other certificates of
authority and documents as the Seller may reasonably request.
13. TERMINATION
13.1 Right of Termination Without Breach.
13.1(a) Mutual Agreement. This Agreement may be terminated
without further liability of either party at any time prior to the
closing by mutual written agreement of Buyer and the Seller.
23
<PAGE>
13.1(b) By Either Party. This Agreement may be terminated
without further liability of any party, by either Buyer or the Seller if
the Closing Date of the transaction contemplated in SECTION 1.1 shall
not have occurred on or before December 31, 2002, provided the
terminating party has not, through breach of a representation, warranty
or covenant, prevented such closing from occurring on or before such
date.
13.2 Termination for Breach.
13.2(a) Termination by Buyer. This Agreement may be terminated
by Buyer if (i) there has been a material violation or breach by the
Seller of any of the agreements, representations or warranties contained
in this Agreement which has not been waived in writing by Buyer, or (ii)
there has been a failure of satisfaction of a condition to the
obligations of Buyer which has not been so waived, or (iii) the Seller
shall have attempted to terminate this Agreement under this ARTICLE 13
or otherwise without grounds to do so, then Buyer may, by written notice
to the Seller at any time prior to the closing that such violation,
breach, failure or wrongful termination attempt is continuing, terminate
this Agreement with the effect set forth in SECTION 13.2(C) hereof.
13.2(b) Termination by the Seller. The Seller may terminate this
Agreement if (i) there has been a material violation or breach by Buyer
of any of the agreements, representations or warranties contained in
this Agreement which has not been waived in writing by the Seller, or
(ii) there has been a failure of satisfaction of a condition to the
obligations of the Seller which has not been so waived, or (iii) Buyer
shall have attempted to terminate this Agreement under this ARTICLE 13
or otherwise without grounds to do so, then the Seller may, by written
notice to Buyer at any time prior to the closing that such violation,
breach, failure or wrongful termination attempt is continuing, terminate
this Agreement with the effect set forth in SECTION 13.2.(C) hereof.
13.2(c) Effect of Termination. Termination of this Agreement
pursuant to this SECTION 13.2 shall not in any way terminate, limit or
restrict the rights and remedies of any party hereto against any other
party which has violated, breached or failed to satisfy any of the
representations, warranties, covenants, agreements, conditions or other
provisions of this Agreement prior to termination hereof. Subject to the
foregoing, the parties' obligations under ARTICLE 11 and SECTION 14.5 of
this Agreement shall survive termination.
14. MISCELLANEOUS
14.1 Disclosure Schedules. The Disclosure Schedules shall not vary,
change or alter the language of the representations and warranties contained in
this Agreement.
14.2 Further Assurance. From time to time, upon request and without
further consideration, the parties will execute and deliver such documents and
take such other action as may be reasonably requested in order to consummate
more effectively the transactions contemplated hereby, including, but not
limited to, vesting in Buyer good, valid and marketable title to the business
and assets being transferred hereunder.
14.3 Disclosures and Announcements. Both the timing and the content of
all disclosure to third parties and public announcements concerning the
transactions provided for in this Agreement by the Seller or Buyer shall be
subject to the approval of the other in all essential respects, except that
Seller approval shall not be required as to any statements and other information
which Buyer may submit to the Securities and Exchange Commission, NYSE or the
stockholders of Buyer or Buyer's Affiliates, or be required to make pursuant to
any rule or regulation of the Securities and Exchange Commission or NYSE, or
otherwise required by law.
24
<PAGE>
14.4 Assignment; Parties in Interest.
14.4(a) Assignment. Except as expressly provided herein, the
rights and obligations of a party hereunder may not be assigned,
transferred or encumbered without the prior written consent of the other
parties. Notwithstanding the foregoing, Buyer may, without consent of
any other party, cause one or more subsidiaries or Affiliates of Buyer
to carry out all or part of the transactions contemplated hereby;
provided, however, that Buyer shall, nevertheless, remain liable for all
of its obligations, and those of any such subsidiary, to the Seller
hereunder.
14.4(b) Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective
successors and permitted assigns of the parties hereto. Nothing
contained herein shall be deemed to confer upon any other person any
right or remedy under or by reason of this Agreement.
14.5 Law Governing Agreement. This Agreement may not be modified or
terminated orally, and shall be construed and interpreted according to the
internal laws of the State of Delaware, excluding any choice of law rules that
may direct the application of the laws of another jurisdiction.
14.6 Amendment and Modification. Buyer and the Seller may amend, modify
and supplement this Agreement in such manner as may be agreed upon by them in
writing.
14.7 Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; or
(b) sent to the parties at their respective addresses indicated herein by
registered or certified U.S. mail, return receipt requested and postage prepaid,
or by private overnight mail courier service. The respective addresses to be
used for all such notices, demands or requests are as follows:
(a) If to Buyer, to:
OS Pacific, Inc.
1300 Dove Street, Suite 105
Newport Beach, CA 92660
Attention: A. William Allen, III, President
Facsimile: (949) 759-9545
(with a copy to)
Joseph J. Kadow, Vice President and General Counsel
Outback Steakhouse, Inc.
2202 North Westshore Boulevard
Tampa, Florida 33607
Facsimile: 813-281-2114
or to such other person or address as Buyer shall furnish to the Seller in
writing.
(b) If to the Seller, to:
Roy's - Newport Beach, L.L.C.
4725 N. Scottsdale Road
Suite 350
Scottsdale, Arizona 85251
25
<PAGE>
Attention: Randy Schoch and James Marsh
Facsimile: 480-945-4747
(with a copy to)
Gallagher & Kennedy, P.A.
2775 East Camelback Road
Phoenix, Arizona 85016-9225
Attention: Gregory L. Mast
Facsimile: 602-530-8500
or to such other person or address as the Seller shall furnish to Buyer in
writing.
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if sent by overnight courier pursuant to this paragraph,
such communication shall be deemed delivered upon receipt; and if sent by U.S.
mail pursuant to this paragraph, such communication shall be deemed delivered as
of the date of delivery indicated on the receipt issued by the relevant postal
service, or, if the addressee fails or refuses to accept delivery, as of the
date of such failure or refusal. Any party to this Agreement may change its
address for the purposes of this Agreement by giving notice thereof in
accordance with this Section. Notices sent by facsimile or other electronic
means shall not constitute notice under this Agreement.
14.8 Expenses. Regardless of whether or not the transactions
contemplated hereby are consummated:
14.8(a) Brokerage. The Seller and Buyer each represent and
warrant to each other that there is no broker involved or in any way
connected with the transfer provided for herein. Buyer agrees to hold
the Seller harmless from and against all claims for brokerage
commissions or finder's fees incurred through any act of Buyer in
connection with the execution of this Agreement or the transactions
provided for herein. The Seller agrees to hold Buyer harmless from and
against all claims for brokerage commissions or finder's fees incurred
through any act of the Seller in connection with the execution of this
Agreement or the transactions provided for herein.
14.8(b) Expenses to be Shared Equally by the Parties. The
parties shall equally share the cost of the following:
(i) Taxes Arising from Transaction. Any taxes applicable
to, imposed upon or arising out of the sale or transfer of the
Purchased Assets to Buyer and the other transactions
contemplated by this Agreement, including but not limited to any
transfer, use, gross receipts or documentary stamp taxes.
(ii) Cost of Escrow. All fees and costs of the Escrow
Agent pursuant to the Escrow Agreement referred to in SECTION
12.3(E) hereof.
(iii) Other Expenses. Except as otherwise provided
herein, all other costs and expenses of third parties engaged
jointly by the parties hereto in connection with the
consummation of the transactions contemplated hereby, normally
shared by the parties in similar transactions.
14.8(c) Other. Except as otherwise provided herein, each of the
parties shall bear its own expenses and the expenses of its counsel,
accountants, and other agents in connection with the transactions
contemplated hereby.
26
<PAGE>
14.8(d) Costs of Litigation. The parties agree that the
prevailing party in any action brought with respect to or to enforce any
right or remedy under this Agreement shall be entitled to recover from
the other party or parties all reasonable costs and expenses of any
nature whatsoever incurred by the prevailing party in connection with
such action, including without limitation reasonable attorneys' fees and
prejudgment interest.
14.9 Entire Agreement. This instrument and the agreements referred to
herein embody the entire agreement between the parties hereto with respect to
the transactions contemplated herein, and there have been and are no agreements,
representations or warranties between the parties other than those set forth or
provided for herein.
14.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.11 Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
"BUYER"
OS PACIFIC, INC.,
a Florida corporation
By:
-----------------------------------
A. William Allen, III, President
"SELLER"
ROY'S - NEWPORT BEACH, L.L.C.,
an Arizona limited liability company
By:
------------------------------------
W. Randall Schoch, Managing Member
"SCHOCH"
-------------------------------------
W. Randall Schoch, individually as to
Sections 7.3 through 7.7 and 1.3(d)
"MARSH"
-------------------------------------
James E. Marsh, individually as to
Sections 7.3 through 7.7 and 1.3(d)
27