Asset Purchase Agreement - OS Prime Inc. and Fleming Prime Steakhouse I LLC
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
OS PRIME, INC.,
AND
FLEMING PRIME STEAKHOUSE I, L.L.C.
DATED OCTOBER 1, 1999
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
1. PURCHASE OF THE RESTAURANTS..........................................1
1.1 Purchase of the Restaurants...................................1
1.2 Estimated Purchase Price......................................2
1.3 Credits to Buyer .............................................3
1.4 Determination of Final Purchase Price.........................3
1.5 Payment of the Final Purchase Price...........................3
1.6 Adjustment for Temporary Restaurant Closing...................4
1.7 Allocation of Purchase Price..................................4
2. TRANSFER OF ASSETS ..................................................4
2.1 Definition of Purchased Assets................................4
2.2 Prorations....................................................6
2.3 Excluded Assets...............................................6
3. ASSUMPTION OF LIABILITIES............................................6
3.1 Liabilities to be Assumed.....................................7
3.2 Liabilities Not to be Assumed.................................7
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................8
4.1 General.......................................................8
4.2 Authority.....................................................9
4.3 No Violation..................................................9
4.4 Financial Statements..........................................9
4.5 Tax Matters...................................................9
4.6 Accounts Receivable..........................................10
4.7 Inventory....................................................10
4.8 Absence of Certain Changes...................................10
4.9 Absence of Undisclosed Liabilities...........................11
4.10 No Litigation................................................11
4.11 Compliance With Laws and Orders..............................11
4.12 Title to and Condition of Properties.........................12
4.13 Insurance....................................................13
4.14 Contracts and Commitments....................................13
4.15 Labor Matters................................................14
4.16 Employee Benefit Plans.......................................14
4.17 Employment Compensation......................................15
4.18 Trade Rights.................................................15
4.19 Major Suppliers..............................................15
4.20 Affiliates' Relationships to the Company.....................15
4.21 Assets Necessary to Business.................................15
4.22 No Brokers or Finders........................................15
4.23 Disclosure...................................................16
5. REPRESENTATIONS AND WARRANTIES OF BUYER.............................16
5.1 Corporate....................................................16
5.2 Authority....................................................16
5.3 No Brokers or Finders........................................16
5.4 Disclosure...................................................16
i
<PAGE> 3
5.5 Buyer's Cooperation...........................................16
5.6 Other Action..................................................16
6. EMPLOYEES - EMPLOYEE BENEFITS.......................................17
6.1 Affected Employees............................................17
6.2 Retained Responsibilities.....................................17
6.3 Payroll Tax...................................................17
6.4 Termination Benefits..........................................17
7. OTHER MATTERS.......................................................17
7.1 Pre-Closing Revenue and Expenses..............................17
7.2 Post Closing Revenue and Expenses.............................17
7.3 Noncompetition................................................18
7.4 Confidentiality...............................................18
7.5 Non-Solicitation..............................................18
7.6 Reasonableness of Restrictions; Reformation; Enforcement......18
7.7 Specific Performance..........................................19
8. FURTHER COVENANTS OF THE COMPANY....................................19
8.1 Access to Information and Records.............................19
8.2 Conduct of Business Pending the Closing.......................20
8.3 Change of Company's Name......................................20
8.4 Consents......................................................21
8.5 Other Action..................................................21
8.6 Disclosure....................................................21
9. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.........................21
9.1 Representations and Warranties True on the
Closing Date............................................21
9.2 Compliance With Agreement.....................................21
9.3 Absence of Litigation.........................................21
9.4 Consents and Approvals........................................21
9.5 Estoppel Certificates.........................................21
10. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS.......................22
10.1 Representations and Warranties True on the
Closing Date...........................................22
10.2 Compliance With Agreement.....................................22
10.3 Absence of Litigation.........................................22
11. INDEMNIFICATION.....................................................22
11.1 By the Company ...............................................22
11.2 By Buyer......................................................22
11.3 Indemnification of Third-Party Claims.........................23
11.4 Payment.......................................................23
11.5 No Waiver.....................................................24
11.6 Survival of Indemnification...................................24
12. CLOSING.............................................................24
12.1 Closing Date..................................................24
12.2 Place of Closing..............................................24
12.3 Documents to be Delivered by the Company......................24
ii
<PAGE> 4
12.4 Documents to be Delivered by Buyer............................25
13. TERMINATION..........................................................26
13.1 Right of Termination Without Breach...........................26
13.2 Termination for Breach........................................26
14. MISCELLANEOUS........................................................26
14.1 Disclosure Schedules..........................................26
14.2 Further Assurance.............................................26
14.3 Disclosures and Announcements.................................26
14.4 Assignment; Parties in Interest...............................26
14.5 Law Governing Agreement.......................................27
14.6 Amendment and Modification....................................27
14.7 Notice........................................................27
14.8 Expenses......................................................28
14.9 Entire Agreement..............................................29
14.10 Counterparts..................................................29
14.11 Headings.....................................................29
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated October 1,
1999, and entered into by and between OS PRIME, INC., a Florida corporation
("Buyer"), and FLEMING PRIME STEAKHOUSE I, L.L.C., an Arizona limited liability
company (the "Company").
RECITALS
A. The Company is engaged in the business of developing, building,
owning and operating certain upscale steakhouse restaurants utilizing the
Fleming's Prime Steakhouse and Wine Bar concept and operating system.
B. The Company currently owns and operates a total of two Fleming's
Prime Steakhouse and Wine Bar restaurants in Newport Beach, California and
Scottsdale, Arizona and presently is scheduled to open a third Fleming's Prime
Steakhouse restaurant in La Jolla, California in or about November of 1999 (the
"Restaurants").
C. Pursuant to the provisions hereof, Buyer desires to purchase from
the Company and the Company desires to sell to Buyer substantially all of the
property and assets of the Company, including the Restaurants.
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 RESTAURANTS
1.1. PURCHASE OF THE RESTAURANTS.
1.1(a) PURCHASED ASSETS. Subject to the terms and conditions
of this Agreement, on the Closing Date (as defined in SECTION 12.1),
the Company 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 Company, together with all
rights and privileges associated with such assets and with the
Restaurants and the business of the Company, 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. With respect to the Company, the term "Affiliate" shall
include Paul Fleming and A. William Allen III. The term "control," as
used in the immediately preceding sentence, 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.
1.1(b) LA JOLLA RESTAURANT. The Purchased Assets which relate
to the La Jolla Restaurant shall be transferred to Buyer simultaneously
with the transfer to Buyer of the alcoholic beverage license for the La
Jolla Restaurant. Seller shall, subsequent to the Closing Date,
<PAGE> 6
complete construction of the La Jolla Restaurant and pay for all
assets, expenses and other costs, including pre-opening costs,
necessary to open the La Jolla Restaurant for business.
1.2 ESTIMATED PURCHASE PRICE. On the Closing Date, the Buyer shall pay
to the Company an initial estimated purchase price ("Estimated Purchase Price")
of TWELVE MILLION DOLLARS ($12,000,000). The Estimated Purchase Price shall be
allocated as follows: $5,200,000 to the Scottsdale, Arizona Restaurant,
$5,200,000 to the Newport Beach, California Restaurant and $1,600,000 to the La
Jolla, California Restaurant.
1.2(a) CASH TO COMPANY. The FIVE MILLION TWO HUNDRED THOUSAND
DOLLARS ($5,200,000) of the Estimated Purchase Price allocated to the
Scottsdale, Arizona Restaurant shall be paid in the form of certified
or bank cashier's check payable to the order of the Company, or at the
Company's option, by wire transfer of immediately available funds to an
account designated by the Company.
1.2(b) ESCROW ACCOUNT.
(i) CASH TO ESCROW AGENT. The SIX MILLION EIGHT
HUNDRED THOUSAND DOLLARS ($6,800,000) of the Estimated
Purchase Price allocated to the Newport Beach, California
Restaurant and the La Jolla, California Restaurant shall be
delivered to Business Title Escrow as escrow agent ("Escrow
Agent") pursuant to that certain Escrow Agreement described in
SECTION 12.3(D) hereof (the "Escrow Agreement"). Funds held by
the Escrow Agent shall be held in an interest bearing account
(the "Escrow Account") approved by the Buyer and the Company
and any and all interest thereon shall be paid to the party
specified in SECTION 1.5 hereof.
(ii) PARTIAL RELEASE OF ESCROWED FUNDS. THREE MILLION
THREE HUNDRED THOUSAND DOLLARS ($3,300,000) of the Estimated
Purchase Price allocated to the Newport Beach, California
Restaurant, and any interest accrued thereon, shall be
delivered by the Escrow Agent to the Company upon receipt of
final approval from the State of California of the transfer of
the alcoholic beverage license for the Newport Beach,
California Restaurant from the Company to the Buyer. The
remaining THREE MILLION FIVE HUNDRED THOUSAND DOLLARS
($3,500,000) of the Estimated Purchase Price shall be
distributed pursuant to SECTION 1.5 hereof.
1.2(c) ALLOCATIONS. The allocations contained in this SECTION
1.2 are for escrow purposes only. Allocation of the Purchase Price for
federal income tax purposes shall be made as provided in SECTION 1.7
hereof.
1.3 ADJUSTMENT TO ESTIMATED PURCHASE PRICE.
1.3(a) CREDITS TO COMPANY. The portion of the Estimated
Purchase Price paid to the Company in cash on the Closing Date pursuant
to SECTION 1.2(a) shall be increased by the amount of the following:
(i) any security deposits paid by the Company
pursuant to any Real Property Leases transferred to the Buyer
in accordance with the terms of this Agreement; and
(ii) the actual cost to the Company of any inventory
of food and/or beverages purchased by the Company, held at the
Restaurants on the Closing Date and transferred to Buyer in
accordance with the terms of this Agreement and the inventory
of the La Jolla restaurant to be determined at a later date
pursuant to SECTION 1.3(c).
2
<PAGE> 7
1.3(b) CREDITS TO BUYER. Buyer shall assume and Buyer shall
receive a credit against the portion of the Estimated Purchase Price
paid to the Company in cash on the Closing Date pursuant to SECTION
1.2(A) in an amount equal to:
(i) all vacation, holiday and sick pay unpaid by the
Company as of the Closing Date attributable to any period or
partial period of employment by the Company prior to the
Closing Date, plus employee payroll taxes applicable thereto
due or to become due, for those employees of the Company 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; and
(ii) forty-five percent (45%) of the outstanding
amount of the credit held by Eric Jackson which may be used
toward the purchase of food and beverages at the Newport Beach
Restaurant.
(iii) the amount of unredeemed gift certificates.
1.3(c) INVOICE. 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.
1.4 DETERMINATION OF FINAL PURCHASE PRICE. The final purchase price
("Final Purchase Price") shall be calculated by the parties within thirty (30)
days after the La Jolla, California Restaurant has been open for business for
fifteen (15) full calendar months. The Final Purchase Price shall be equal to
five (5) times the total of the following: earnings before interest, taxes,
depreciation and amortization ("EBITDA"), calculated in accordance with
generally accepted accounting principles ("GAAP"), of the three (3) Restaurants
for the twelve (12) full, consecutive calendar months ending on the last day of
the month in which the date that the La Jolla, California Restaurant has been
open for fifteen (15) full calendar months occurs (the "Valuation Date"). The
overhead of the Company described in SECTION 3.2(C)(I), (II) AND (III) hereof
for such time period and any other overhead allocations reasonably agreed to by
the parties shall be expensed in determining EBITDA.
1.5 PAYMENT OF THE FINAL PURCHASE PRICE. On or before the fifteenth
(15th) day following the date the Final Purchase Price is calculated (such
payment date being hereinafter referred to as the "Settlement Date"):
1.5 (a) in the event the Final Purchase Price exceeds
$8,500,000, but is less than $12,000,000, the Escrow Agent shall pay:
(i) to the Company from the Escrow Account, the amount by which the
Final Purchase Price exceeds $8,500,000, plus any interest accumulated
on such excess; and (ii) to the Buyer from the Escrow Account, the
balance of the Escrow Account, plus any interest accumulated on such
balance; or
1.5(b) in the event the Final Purchase Price is equal to or
exceeds $12,000,000, the Escrow Agent shall pay to the Company all
amounts held in the Escrow Account, including any interest accumulated
thereon, and the Buyer shall pay to the Company the amount by which
the Final Purchase Price exceeds $12,000,000; or
1.5(c) in the event the Final Purchase Price is less than
$8,500,000; (i) the Escrow Agent shall pay to Buyer all amounts held
in the Escrow Account, including any interest accumulated thereon; and
(ii) and the Company shall pay to the Buyer the amount by which
$8,500,000 exceeds the Final Purchase Price.
3
<PAGE> 8
All payments under this section shall be payable in the form of
certified or bank cashier's check payable to the order of the recipient, or at
the recipient's option, by wire transfer of immediately available funds to an
account designated by the recipient.
1.6 ADJUSTMENT FOR TEMPORARY RESTAURANT CLOSING. Except for de minimus
closures of not more than seven (7) days, in the event any of the Restaurants
has not been open for the twelve (12) full, consecutive calendar months
immediately preceding the Valuation Date (a "Closed Restaurant"), the Final
Purchase Price shall be determined with respect to the Restaurants other than
the Closed Restaurant and paid to the Company on the Settlement Date pursuant to
SECTION 1.5 hereof. The Final Purchase Price for the Closed Restaurant shall be
calculated as follows:
1.6(a) if the Closed Restaurant has been open for the six (6)
full, consecutive calendar months immediately preceding the Valuation
Date, the Final Purchase Price for the Closed Restaurant shall be paid
on the Settlement Date and shall be equal to five (5) times the total
of the following: the annualized EBITDA, calculated in accordance with
GAAP, for the Closed Restaurant for the six (6) full, consecutive
calendar months ending on the Valuation Date. The overhead of the
Company described in SECTION 3.2(C)(I), (II) AND (III) hereof for a
twelve month period, and any other overhead allocations reasonably
agreed by the parties shall be expensed in determining EBITDA; or
1.6(b) if the Closed Restaurant has not been open for the six
(6) full, consecutive calendar months immediately preceding the
Valuation Date, the Final Purchase Price for the Closed Restaurant
shall be paid within fifteen (15) days of the date the Closed
Restaurant has been re-opened for six (6) full, consecutive calendar
months and shall be equal to five (5) times the total of the following:
the annualized EBITDA, calculated in accordance with GAAP, for the
Closed Restaurant for such six (6) full, consecutive calendar months.
The overhead of the Company described in SECTION 3.2(C)(I), (II) AND
(III) hereof for a twelve month period, and any other overhead
allocations reasonably agreed by the parties shall be expensed in
determining EBITDA.
1.7 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 the
provisions of Section 1060 of the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations thereunder. The Company and Buyer will follow and
use such allocation in all tax returns, filings or other related reports made by
them to any governmental agencies. To the extent that disclosures of this
allocation are required to be made by the parties to the Internal Revenue
Service ("IRS"), Buyer and the Company will disclose such reports to the other
prior to filing with the IRS.
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. All of the leases of real
property with respect to real property leased by the Company, including
the leases (the "Real Property Leases") described on SCHEDULE 2.1(A)
with respect to the real property described thereon (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 Company.
2.1(c) INVENTORY. All inventory held by the Company on the
Closing Date.
2.1(d) PERSONAL PROPERTY LEASE. The lease for the copy machine
described in SCHEDULE 2.1(D).
4
<PAGE> 9
2.1(e) TRADE RIGHTS. The royalty free, perpetual license held
by the Company to use the Trade Rights associated with the Fleming's
Prime Steakhouse and Wine Bar concept and operating system in the
operation of the Restaurants, and all claims for infringement or breach
thereof. As used herein, the term "Trade Rights" shall mean and include
any and all: (i) trademark and service mark licenses or rights,
business identifiers, trade dress, service marks, trade names, and
brand names, and all goodwill associated with the foregoing; (ii)
copyrights and all other rights associated with the foregoing and the
underlying works of authorship; (iii) contracts or agreements granting
any right, title, license or privilege under the intellectual property
rights of any third party; (iv) inventions, know-how, discoveries,
improvements, designs, trade secrets, employee covenants and agreements
respecting intellectual property and non-competition and all other
types of intellectual property; (v) the right, pursuant to a perpetual,
royalty free license, to utilize the Fleming's Prime Steakhouse and
Wine Bar concept and operating system in the operation of the
Restaurants.
2.1(f) CONTRACTS. Except as otherwise specifically provided
herein, all rights in, to and under all contracts and purchase orders
(hereinafter "Contracts") of the Company disclosed in SCHEDULE 2.1(F).
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 Company and Buyer agree to use their
reasonable best efforts (without any requirement on the part of Buyer
or Company 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 Company 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 Company 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(g) COMPUTER SOFTWARE. All computer source codes, programs
and other software of the Company, including all machine readable code,
printed listings of code, documentation and related property and
information of the Company.
2.1(h) LITERATURE. All menus, sales literature and promotional
literature and similar materials of the Company.
2.1(i) RECORDS AND FILES. All records, files, invoices,
supplier lists, blueprints, specifications, designs, drawings,
accounting records, business records, operating data and other data of
the Company.
2.1(j) NOTES AND ACCOUNTS RECEIVABLE. All notes, drafts and
accounts receivable of the Company.
2.1(k) LICENSES; PERMITS. All licenses, permits and approvals
of the Company to the extent the same may be assigned to Buyer.
2.1(l) 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 Company.
5
<PAGE> 10
2.2 PRORATIONS. The following prorations relating to the Purchased
Assets will be made as of the Closing Date, with the Company 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, and other taxes, if any, on or with respect to the
Purchased Assets; provided that special assessments levied prior to the
Closing Date shall be paid by the Company.
2.2(b) Rents, additional rents, taxes and other items payable
by the Company 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
Company 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
Company shall not sell, transfer, assign, convey or deliver to Buyer, and Buyer
will not purchase or accept the following assets of the Company (collectively
the "Excluded Assets"):
2.3(a) CASH AND CASH EQUIVALENTS. All cash and cash
equivalents, other than petty cash balances at the Restaurants.
2.3(b) CONSIDERATION. The consideration delivered by Buyer
pursuant to this Agreement, Company'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.
2.3(d) ORGANIZATIONAL DOCUMENTS. The Company, its Articles of
Organization, Operating Agreement, minute book and other records having
exclusively to do with the organization and capitalization of the
Company; 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.
2.3(f) CORONADO RESTAURANT. Any and all assets or Contracts
relating to the Coronado, California restaurant under development.
6
<PAGE> 11
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 Company agrees
to timely pay and discharge all Liabilities which relate to periods on or before
the Closing Date. Except as and to the extent specifically set forth in SECTION
3.2, Buyer is not assuming any Liabilities of the Company and all such
Liabilities shall be and remain the responsibility of the Company. Without
limiting the generality of the foregoing, Buyer is not assuming and the Company
shall not be deemed to have transferred to Buyer the following Liabilities of
the Company:
3.1(a) INCOME AND FRANCHISE TAXES. Any Liability of the
Company 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) INSURED CLAIMS. Any Liability insured against, to the
extent such Liability is or will be paid by an insurer.
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 4.10.
3.1(d) INFRINGEMENTS. Any Liability to a third party for
infringement of such third party's Trade Rights.
3.1(e) TRANSACTION EXPENSES. Except as provided in SECTION
14.8, or elsewhere in this Agreement, all Liabilities incurred by
Company in connection with this Agreement and the transactions
contemplated herein.
3.1(f) LIABILITY FOR BREACH. Liabilities of the Company for
any breach or failure to perform any of the Company'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 disclosed in
SCHEDULE 4.16(A).
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").
3.2 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 Company
(collectively the "Assumed Liabilities"):
3.2(a) CONTRACTUAL LIABILITIES. The Company's Liabilities
arising from events occurring after the Closing Date under and pursuant
to the following Contracts:
(i) The Real Property Leases specified in SCHEDULE
2.1(A).
(ii) All Contracts described in SCHEDULE 2.1(F); and
7
<PAGE> 12
(iii) Every Contract entered into by the Company in the
ordinary course of business which does not involve
consideration or other expenditure by the Company 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
Paul M. Fleming, A. William Allen III and Steakhouse Concept, L.L.C.
for any Liability, including reasonable attorneys' fees, resulting from
any and all guarantees executed in connection with the Real Property
Leases 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.
3.2(b) LIABILITIES UNDER PERMITS AND LICENSES. The Company'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) OVERHEAD LIABILITIES. The Company's obligation, after
the Closing Date, to pay:
(i) One-third (1/3) of the overhead costs and expenses
associated with the Company's Newport office located at 455
Newport Center Drive, Newport Beach, California, including,
but not limited to the salary of an accountant and
administrative assistant.
(ii) One-quarter (1/4) of the salary of A. William
Allen III.
(iii) One-half (1/2) of the salary of Rick Scott.
3.2(d) 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 COMPANY
The Company 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 herein for the longer of:
two (2) years from the Closing Date; or through the date the Final Purchase
Price is determined for all three Restaurants.
4.1 GENERAL.
4.1(a) ORGANIZATION. The Company 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 Company has all requisite limited liability
company 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 Company pursuant hereto and to carry
out the transactions contemplated hereby and thereby.
8
<PAGE> 13
4.1(c) QUALIFICATION. The Company 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 qualification necessary. The states in which the Company
is licensed or qualified to do business are listed in SCHEDULE 4.1(C).
4.1(d) NO SUBSIDIARIES. The Company 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 Company
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary limited liability company
action on the part of the Company. 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 Company is necessary to authorize this Agreement
or the other documents and instruments to be executed and delivered by the
Company 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 Company
pursuant hereto will constitute, valid binding agreements of the Company,
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 Company pursuant hereto, nor the
consummation by the Company 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
4.12(A)) upon any of the assets of the Company under, any term or provision of
the Articles of Organization or Operating Agreement of the Company or of any
material contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which the Company is a party or by which
the Company or any of its assets or properties may be bound or affected.
4.4 FINANCIAL STATEMENTS. Included as SCHEDULE 4.4 are true and
complete copies of the financial statements of the Company consisting of (i)
balance sheets of the Company 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),
which financial statements have been reported on, and are accompanied by, the
signed, unqualified opinions of Jeff Brooks & Company, independent auditors for
the Company for such years, and (ii) an unaudited balance sheet of the Company
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). All of such financial
statements (including all notes and schedules contained therein or annexed
thereto) are true, complete and accurate, have been prepared in accordance with
generally accepted accounting principles (except, in the case of unaudited
statements, for the absence of footnote disclosure) applied on a consistent
basis, have been prepared in accordance with the books and records of the
Company, and fairly present, in accordance with generally accepted accounting
principles, the assets, liabilities and financial position, the results of
operations and cash flows of the Company as of the dates and for the years and
periods indicated.
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 Company
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.
9
<PAGE> 14
The Company 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 Company.
4.6 ACCOUNTS RECEIVABLE. All accounts receivable of the Company
reflected on the Recent Balance Sheet, and as incurred in the normal course of
business since the date thereof represent arm's length transactions actually
made in the ordinary course of business; to the best of the Company's knowledge,
are collectible (net of the reserves shown on the Recent Balance Sheet for
doubtful accounts) in the ordinary course of business without the necessity of
commencing legal proceedings; are subject to no counterclaim or setoff; and are
not in dispute.
4.7 INVENTORY. All inventory of the Company 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 Company is located on premises leased by the Company as
reflected in this Agreement.
4.8 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth
in SCHEDULE 4.8, since the date of the Recent Balance Sheet there has not been:
4.8(a) NO ADVERSE CHANGE. Any material adverse change in the
financial condition, assets, Liabilities, business, prospects or
operations of the Company;
4.8(b) NO DAMAGE. Any material loss, damage or destruction,
whether covered by insurance or not, affecting Company's business or
properties;
4.8(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 Company (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;
4.8(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 Company;
4.8(e) NO COMMITMENTS. Any material commitment or transaction
by the Company (including, without limitation, any borrowing or capital
expenditure) other than in connection with the opening of the third
Restaurant or in the ordinary course of business consistent with past
practice;
4.8(f) NO DISPOSITION OF PROPERTY. Any sale, lease or other
transfer or disposition of any properties or assets of the Company,
except in the ordinary course of business;
4.8(g) NO INDEBTEDNESS. Any indebtedness for borrowed money
incurred, assumed or guaranteed by the Company;
4.8(h) NO LIENS. Any Lien made on any of the properties or
assets of the Company other than liens for taxes not yet due and
payable;
4.8(i) NO AMENDMENT OF CONTRACTS. Any entering into, amendment
or termination by the Company of any contract, or any waiver of
material rights thereunder, other than in the ordinary course of
business;
10
<PAGE> 15
4.8(j) NO UNUSUAL EVENTS. Any other event or condition not in
the ordinary course of business of the Company.
4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent
specifically disclosed in the Recent Balance Sheet, or in SCHEDULE 4.9, the
Company 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 Company. Except as and to the extent described in the Recent
Balance Sheet or in SCHEDULE 4.9, the Company has no knowledge of any basis for
the assertion against the Company of any Liability and to the knowledge of the
Company, 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
Company's business.
4.10 NO LITIGATION. Except as set forth in SCHEDULE 4.10 there is no
Litigation pending or, to the knowledge of the Company, threatened against the
Company, its managers or members (in such capacity), its business or its assets,
nor does the Company know, or have grounds to know, of any basis for any such
Litigation. SCHEDULE 4.10 also identifies all Litigation to which the Company or
its managers or members (in such capacity) have been parties since July 31,
1998. Except as set forth in SCHEDULE 4.10, neither the Company nor its business
or assets are subject to any Order of any Government Entity.
4.11 COMPLIANCE WITH LAWS AND ORDERS.
4.11(a) COMPLIANCE. Except as set forth in SCHEDULE 4.11(A),
the Company (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 4.11(A), the Company 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. All reports and returns required to be filed by the Company
with any Government Entity have been filed, and were accurate and
complete when filed. Without limiting the generality of the foregoing:
(i) The Company 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 Company has delivered to Buyer copies of all
reports of the Company for the past five (5) years required
under all applicable health and safety laws and regulations.
The deficiencies, if any, noted on such reports have been
corrected.
4.11(b) LICENSES AND PERMITS. Except as set forth on SCHEDULE
4.11(B), the Company 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 and as proposed to
be conducted by the Company) and operation of the Restaurants. Except
as disclosed on SCHEDULE 4.11(B), all such licenses, permits,
approvals, authorizations and consents as described in SCHEDULE
4.11(B), are in full force and effect and are assignable to Buyer in
accordance with the terms hereof. Except as set forth in SCHEDULE
4.11(B), the Company (including its operations, properties and assets)
is and has been in compliance with all such permits and licenses,
approvals, authorizations and consents. This SECTION 4.11(B) shall not
apply to those licenses, permits, approvals, authorizations and
11
<PAGE> 16
consents related to the Company's third Restaurant, which the parties
acknowledge is not currently open and will not be open as of the
Closing Date; provided however, to the Company's knowledge, there is no
reason why the Company will not be able to obtain the necessary
licenses, permits, approvals, authorizations and consents necessary to
open such Restaurant.
4.12 TITLE TO AND CONDITION OF PROPERTIES.
4.12(a) MARKETABLE TITLE. The Company 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 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 4.12(A) and other than liens for taxes not yet due and
payable and the interests of the lessors under Real Property Leases and
Personal Property Leases (collectively, "Liens"). Except as described
on SCHEDULE 4.12(A), none of the Purchased Assets are subject to any
restrictions with respect to the transferability thereof. Except as
described on SCHEDULE 4.12(A), the Company 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 4.12(A).
4.12(b) CONDITION. 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 Company), have been maintained consistent with the standards
generally followed in the industry and are sufficient to carry on the
business of the Company as conducted during the preceding twelve (12)
months. All buildings and other structures constituting the
Restaurants' 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.
4.12(c) REAL PROPERTY. SCHEDULE 2.1(A) sets forth all real
property presently used or occupied by the Company and its Restaurants
(the "Real Property"). Except for the Company's La Jolla, California
Restaurant, there are now in full force and effect duly issued
certificates of occupancy permitting the Real Property and improvements
located thereon to be legally used and occupied as the same are now
constituted. All of the Real Property has permanent rights of access to
dedicated public highways. To the knowledge of the Company, no fact or
condition exists which would prohibit or adversely affect the ordinary
rights of access to and from the 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
Company's knowledge, no public improvements have been commenced and to
Company's knowledge none are planned which in either case may result in
special assessments against or otherwise materially adversely affect
any Real Property. To the Company's knowledge, no portion of any of the
Real Property has been used as a landfill or for storage or landfill of
hazardous or toxic materials. The Company does not have notice or
knowledge of any (i) Order requiring repair, alteration, or correction
of any existing condition affecting any 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 any 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 Real Property).
4.13 INSURANCE. Set forth in SCHEDULE 4.13 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 Company, true and correct copies
of which have heretofore been made available to Buyer for its inspection. No
12
<PAGE> 17
notice of cancellation or termination has been received with respect to any such
policy, and the Company has no knowledge of any act or omission of the Company
that could result in cancellation of any such policy prior to the Closing Date.
4.14 CONTRACTS AND COMMITMENTS.
4.14(a) REAL PROPERTY LEASES. Except as set forth in SCHEDULE
2.1(a), the Company has no leases of real property other than a lease
of real property in Coronado, California, which is excluded from the
Purchased Assets pursuant to SECTION 2.3(F) hereof. The Real Property
Leases are in full force and effect, the Company is not in default of
any term, covenant or obligation under any of the Real Property Leases,
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 Company under any Real Property Lease.
4.14(b) PERSONAL PROPERTY LEASES. Except as set forth in
SCHEDULE 2.1(d), the Company 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 except for personal property leases for dishwashers
in the Restaurants. Within sixty (60) days of the Closing Date, the
Company shall terminate such leases, purchase or otherwise acquire free
and clear title to the dishwashers and transfer ownership of the
dishwashers to Buyer as part of the Purchased Assets.
4.14(c) PURCHASE COMMITMENTS. The Company 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.
4.14(d) COLLECTIVE BARGAINING AGREEMENTS. The Company is not a
party to any collective bargaining agreement with any unions, guilds,
shop committees or other collective bargaining groups.
4.14(e) LOAN AGREEMENTS. Except as set forth in SCHEDULE
4.14(e), the Company is not obligated under any loan agreement,
promissory note, letter of credit, or other evidence of indebtedness as
a signatory, guarantor or otherwise.
4.14(f) GUARANTEES. Except as disclosed on SCHEDULE 4.14(f),
the Company 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.
4.14(g) BURDENSOME OR RESTRICTIVE AGREEMENTS. The Company is
not a party to or bound by any agreement, deed, lease or other
instrument which is so burdensome as to materially and adversely affect
or impair the operation of the Restaurants. Without limiting the
generality of the foregoing, the Company 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.
4.14(h) OTHER MATERIAL CONTRACTS. The Company 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 Restaurants, except as described in SCHEDULE 4.14(H)
or in any other Disclosure Schedule.
4.14(i) NO DEFAULT. To its knowledge, the Company 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
13
<PAGE> 18
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 Company, no third party is in default under any lease,
contract or commitment to which the Company 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.
4.15 LABOR MATTERS. The Company has not experienced any labor disputes,
union organization attempts or any work stoppage due to labor disagreements in
connection with its business; (a) the Company 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; (b) there is no unfair labor practice charge or complaint
against the Company pending or threatened; (c) there is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending or
threatened against or affecting the Company; (d) no question concerning
representation has been raised or is threatened respecting the employees of the
Company; (e) no grievance which might have a material adverse effect on the
Company, nor any arbitration proceeding arising out of or under collective
bargaining agreements, is pending and no such claim therefor exists; and (f)
there are no administrative charges or court complaints against the Company
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 4.10.
4.16 EMPLOYEE BENEFIT PLANS.
The Company 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 Company or any affiliate (as defined in
Section 407(d)(7) of ERISA) and covers any employee or former employee of the
Company or any affiliate or under which the Company 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 Company 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 Company 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 Company.
The Company has no liability in respect of post-retirement health and
medical benefits for retired employees of the Company 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 Company 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 Company
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 Company and any
affiliate have no (and will not incur any) loss, assessment, tax penalty or
other sanction with respect to any such plan.
14
<PAGE> 19
There has been no amendment to, written interpretation or announcement
(whether or not written) by the Company 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.
4.17 EMPLOYMENT COMPENSATION. SCHEDULE 4.17 contains a true and correct
list of all employees to whom the Company 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.
4.18 TRADE RIGHTS. In order to conduct the business of the Company, as
such is currently being conducted or proposed to be conducted, the Company does
not require the rights to any Trade Rights that it does not already have. To its
knowledge, the Company is not infringing and has not infringed any Trade Rights
of another in the operation of the business of the Company, nor is any other
person infringing the Trade Rights of the Company. The Company has not granted
any license or made any assignment of its rights in any Trade Right. The Company
does not pay any royalties or other consideration for the right to use any Trade
Rights of others. There is no Litigation pending or threatened to challenge the
Company's right, title and interest with respect to its continued use of any
Trade Rights. All Trade Rights of the Company are valid, enforceable and in good
standing, and there are no equitable defenses to enforcement based on any act or
omission of the Company.
4.19 MAJOR SUPPLIERS. SCHEDULE 4.19 contains a list of the five (5)
largest suppliers to the Company for the most recent fiscal year (determined on
the basis of the total dollar amount of purchases) showing the total dollar
amount of purchases from each such supplier during such year. The Company 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 4.19 will not
continue to be suppliers to the business of the Company after the Closing Date
and will not continue to supply the business with substantially the same
quantity and quality of goods at competitive prices.
4.20 AFFILIATES' RELATIONSHIPS TO THE COMPANY. Except for interests in
Fleming Prime Steakhouse II, L.L.C., STEAKHOUSE CONCEPT, L.L.C., and
OUTBACK/FLEMING'S, LLC, as of the Closing Date, no Affiliate of the Company will
have any direct or indirect interest in (i) any entity which does business with
the Company or is directly competitive with the Company's business of upscale
steakhouses with a per person check average in the $40-$55 price range, or (ii)
any property, asset or right which is used by the Company in the conduct of its
business.
4.21 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
Company as presently conducted and as conducted immediately prior to the Closing
Date.
4.22 NO BROKERS OR FINDERS. Neither the Company 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.
4.23 DISCLOSURE. No representation or warranty by the Company in this
Agreement, nor any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of the Company 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
15
<PAGE> 20
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 Company shall be deemed
representations and warranties of the Company.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents and warrants to the Company 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
Company or any knowledge of the Company, and shall survive the closing of the
transactions provided for herein for the longer of: two (2) years from the
Closing Date; or through the date the Final Purchase Price is determined for all
three Restaurants.
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 shall use its best efforts to cooperate
with the Company in obtaining the consents referred to in SECTION 8.4 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.
16
<PAGE> 21
6. EMPLOYEES - EMPLOYEE BENEFITS
6.1 AFFECTED EMPLOYEES. "Affected Employees" shall mean employees of
the Company who are employed by Buyer immediately after the Closing Date.
6.2 RETAINED RESPONSIBILITIES. Subject to SECTION 1.3(B) above, the
Company 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 Company's employee benefit programs brought by, or in respect of, Affected
Employees and other employees and former employees of the Company, 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 without interruption as a result of the employment by
Buyer of any such employees after the Closing Date.
6.3 PAYROLL TAX. The Company 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
Company 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, and except for any severance obligations to A. William Allen III,
pursuant to his employment agreement with the Company, if any action on the part
of the Company prior to the Closing Date, or if the sale to Buyer of the
business and assets of the Company 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 Company, 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 Company, and the Company shall indemnify
and hold harmless Buyer against such Liability.
7. OTHER MATTERS
7.1 PRE-CLOSING REVENUE AND EXPENSES. The Company shall be responsible
for all expenses, debts and other Liabilities of the Company and the Restaurants
arising out of or relating to periods prior to and including the Closing Date,
and shall be responsible for all costs, expenses, debts and other Liabilities
necessary to open the La Jolla Restaurant for business incurred or accrued
through the first day of business and shall be entitled to all revenue of the
Company and the Restaurants 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 Restaurants arising out of
or relating to periods subsequent to the Closing Date, except that Company shall
be responsible for all costs, expenses, debts and other Liabilities necessary to
open the La Jolla Restaurant for business incurred or accrued through the first
day of business and shall be entitled to all revenue of the Restaurants relating
to periods subsequent to the Closing Date.
7.3 NONCOMPETITION. As an inducement to Buyer to execute this Agreement
and complete the transactions contemplated hereby, and in order to preserve the
goodwill associated with the business of the Company being acquired pursuant to
this Agreement, and in addition to and not in limitation of any covenants
contained in any agreement executed and delivered pursuant to SECTION 7.3
hereof, the Company agrees as follows: Except as specifically permitted pursuant
to that certain Operating Agreement of Outback/Fleming's, LLC, for a period of
three (3) years from the Closing Date, the Company and its Affiliates shall not,
17
<PAGE> 22
individually or jointly with others, directly or indirectly, whether for its own
account or for that of any other Person, operate, engage in, own or hold any
ownership interest in, have any interest in or lend any assistance to any
steakhouse restaurant or Person or entity engaged in a business owning,
operating or controlling steakhouse restaurants, and the Company and its
Affiliates shall not act as an officer, director, employee, partner, independent
contractor, consultant, principal, agent 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 Company or its Affiliates to own a one percent (1%) or smaller interest in
any corporation required to file periodic reports with the Securities and
Exchange Commission so long as the Company and its Affiliates do not in any
manner provide any services or assistance to such company. For the purposes
hereof, the term "steakhouse restaurant" shall mean any restaurant for which:
(i) the word "steak" or any variation thereof is in its name; (ii) the sale of
steak or prime rib is specified in its advertising or marketing efforts; or
(iii) the sale of steak and prime rib constitutes thirty-five percent (35%) or
more of its entree sales, computed on a dollar basis.
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 Company,
which reasonably would be considered proprietary or confidential to the
business of the Company including but not limited to suppliers,
customers, 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 which has
entered the public domain.
7.4(b) NO DISCLOSURE, USE, OR CIRCUMVENTION. The Company and
its Affiliates shall not disclose any Proprietary Information to any
third parties and will not use any Proprietary Information in the
Company's business or any affiliated business (other than in the
business of Fleming Prime Steakhouse II, L.L.C. and Outback/Fleming's,
LLC and as otherwise specifically permitted pursuant to that certain
Operating Agreement of Outback/Flemings, LLC) 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 Company shall not contact any suppliers,
customers, employees, affiliates or associates to circumvent the
purposes of this provision.
7.4(c) MAINTENANCE OF CONFIDENTIALITY. The Company 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 Company 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 Company 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.
7.6 REASONABLENESS OF RESTRICTIONS; REFORMATION; ENFORCEMENT. The
parties hereto recognize and acknowledge that the limitations contained in
SECTIONS 7.3, 7.4 AND 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 SECTIONS 7.3, 7.4 AND 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 as 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
18
<PAGE> 23
unreasonable, arbitrary, or against public policy, a lesser time period or
geographical area which is determined to be reasonable, nonarbitrary, and not
against public policy may be enforced. If any of the covenants contained herein
are violated and if any court action is instituted by the Buyer to prevent or
enjoin such violation, 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
SECTIONS 7.3, 7.4 AND 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, 7.4 AND 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 which 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 COMPANY
The Company 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 Company 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
Company for the purpose of such inspection, investigation and testing as Buyer
deems appropriate (and the Company shall furnish or cause to be furnished to
Buyer and its representatives all information with respect to the business and
affairs of the Company 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
Company. 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 (other than in
the business of Fleming Prime Steakhouse II, L.L.C., OS Prime, Inc., and
Outback/Fleming's, LLC and as otherwise specifically permitted pursuant to that
certain Operating Agreement of Outback/Fleming's, LLC) without the prior written
consent of the Company and then only to the extent specified in that consent.
Consent may be granted or withheld at the sole discretion of the Company. 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:
19
<PAGE> 24
8.2(a) NO CHANGES. The Company will, in all material respects,
carry on its business diligently and in the same manner as heretofore
and, except for the development, construction and opening of a third
Restaurant as contemplated by this Agreement, will not make or
institute any material changes in its methods of purchase, sale,
management, accounting or operation.
8.2(b) MAINTAIN ORGANIZATION. The Company will take such
action as may be necessary to maintain, preserve, renew and keep in
favor the material rights and franchises of the Company and will use
its commercially reasonable best efforts, to the extent material
hereto, to preserve the business organization of the Company 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 Company.
8.2(c) NO BREACH. The Company will not do or omit any act, or
permit any omission to act, which may cause a breach of any material
contract, commitment or obligation, or any breach of any
representation, warranty, covenant or agreement made by the Company
herein, or which would have required disclosure on SCHEDULE 4.8 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. Other than reasonable and
necessary contracts entered into in connection with opening the third
Restaurant as contemplated by this Agreement, no contract or commitment
will be entered into, by or on behalf of the Company, except contracts,
commitments, purchases or sales which are in the ordinary course of
business and consistent with past practice, are not material to the
Company (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 CORPORATE CHANGES. The Company shall not materially
amend its Articles of Organization or Operating Agreement or make any
changes in ownership percentages.
8.2(f) MAINTENANCE OF INSURANCE. The Company shall maintain
all of the insurance in effect as of the date hereof.
8.2(g) MAINTENANCE OF PROPERTY. The Company shall use,
operate, maintain and repair all of their property in a normal business
manner.
8.2(h) INTERIM FINANCIALS. The Company will provide Buyer with
interim monthly financial statements and other management reports as
and when they are available.
8.2(i) NO NEGOTIATIONS. The Company 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 Company, any
Restaurants, the Company's assets or business or any part thereof or
any membership interest in the Company (an "acquisition proposal"), and
the Company shall immediately advise Buyer of the receipt of any
acquisition proposal.
8.3 CHANGE OF COMPANY'S NAME. On the Settlement Date, the Company shall
change its corporate name to a new name bearing no resemblance to its present
name so as to permit the use of its present name by Buyer (subject to any and
all rights of Outback/Fleming's, LLC thereto). Following the Closing Date, the
Company shall not, without the prior written consent of Buyer, make any use of
the name "Fleming's" or any other name confusingly similar thereto, except as
may be necessary for the Company to pay its liabilities, prepare tax returns and
other reports, and to otherwise wind up and conclude its business.
20
<PAGE> 25
8.4 CONSENTS. The Company will use its commercially reasonable best
efforts prior to the Closing Date to obtain all consents necessary for the
consummation of the transactions contemplated hereby.
8.5 OTHER ACTION. The Company shall use its best efforts to cause the
fulfillment at the earliest practicable date of all of the conditions to the
parties' obligations to consummate the transactions contemplated in this
Agreement.
8.6 DISCLOSURE. Through the Closing Date, the Company 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, but no such disclosure shall cure any breach of any
representation or warranty which is inaccurate.
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 Company in this Agreement, and
the statements contained in the Disclosure Schedule or in any instrument, list,
certificate or writing delivered by the Company 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 Company shall have in all material
respects 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, including the delivery of the closing documents specified in
SECTION 12.3.
9.3 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, the Company 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 Company shall use its best efforts to
obtain and deliver to Buyer within thirty (30) days from the Closing Date an
estoppel certificate or status letter from the landlord under each 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 Company
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. Buyer acknowledges
that the Newport Beach landlord is not obligated under the lease to provide an
estoppel certificate.
10. CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of the Company to be performed on the Closing
Date shall be subject to the satisfaction prior to or on the Closing Date of the
following conditions:
21
<PAGE> 26
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 Company or any of the
affiliates, officers, managers, directors or shareholders of either of them,
with respect to the transactions contemplated hereby.
11. INDEMNIFICATION
11.1 BY THE COMPANY. Subject to the terms and conditions of this
ARTICLE 11, the Company 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 Company contained in or made pursuant to this
Agreement (regardless of whether such breach is deemed "material"); (b) the
breach of any covenant of the Company contained in this Agreement (regardless of
whether such breach is deemed "material"); or (c) any Claim against the Company,
the Purchased Assets or the business of the Company not specifically assumed by
Buyer pursuant hereto or which arises out of or relates to any event first
occurring on or prior to 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 Company (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 Company, 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 of or against the Company specifically assumed by Buyer pursuant
hereto or which relate to the Purchased Assets and arise out of any event
occurring after the Closing Date.
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
22
<PAGE> 27
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.
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 three (3) years following the
Closing Date, except that the indemnification obligations relating to the
23
<PAGE> 28
representations and warranties regarding tax obligations shall survive until one
(1) year after the expiration of the applicable statute of limitations for such
tax obligations.
12. CLOSING
12.1 CLOSING DATE. The closing referred to in this Agreement shall take
place on October 1, 1999 or such other date as is mutually agreed to by the
parties (the "Closing Date").
12.2 PLACE OF CLOSING. The closing shall take place at the offices of
the Company in Newport Beach, California or at such other place as the parties
hereto shall agree upon.
12.3 DOCUMENTS TO BE DELIVERED BY THE COMPANY. On the Closing Date, the
Company 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 Company that each of the representations and warranties
made by the Company 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 Company has performed and complied with all of the Company's
obligations under this Agreement which are to be performed or complied
with on or prior to the Closing Date.
12.3(c) EMPLOYMENT AGREEMENT. The Employment Agreement in
substantially the form attached hereto as EXHIBIT A, duly executed by
A. William Allen III.
12.3(d) ESCROW AGREEMENT. The Escrow Agreement in
substantially the form attached hereto as EXHIBIT B, duly executed by
an authorized representative of Company.
12.3(e) CERTIFIED RESOLUTIONS. A certified copy of the
resolutions of the managers of the Company authorizing and approving
this Agreement and the consummation of the transactions contemplated by
this Agreement.
12.3(f) INCUMBENCY CERTIFICATE. Incumbency certificates
relating to each person executing any document executed and delivered
to Buyer pursuant to the terms hereof.
12.3(g) 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 Company the following documents, in each case duly executed or
otherwise in proper form:
12.4(a) CASH PORTION OF ESTIMATED PURCHASE PRICE. A certified
or bank cashier's check (or wire transfer) as required by ARTICLE 1.
12.4(b) ASSUMPTION OF LIABILITIES. Such undertakings and
instruments of assumption as will be reasonably sufficient in the
opinion of the Company and its counsel to evidence the assumption of
Assumed Liabilities as provided for in SECTION 3.2.
24
<PAGE> 29
12.4(c) 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 Company), 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(d) EMPLOYMENT AGREEMENT. The Employment Agreement
substantially in the form attached hereto as EXHIBIT A, executed by an
authorized representative of the Buyer.
12.4(e) ESCROW AGREEMENT. The Escrow Agreement substantially
in the form attached hereto as EXHIBIT B, duly executed by an
authorized representative of the Buyer and the Escrow Agent.
12.4(f) GUARANTEE OF OBLIGATIONS. The Guarantee of
Obligations, a form of which is attached hereto as EXHIBIT C, executed
by an authorized representative of Outback Steakhouse, Inc., a Delaware
corporation and the sole shareholder of Buyer ("OSI").
12.4(g) 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 and a certified copy of the resolutions
of the Board of Directors of OSI authorizing the execution of the
Guarantee of Obligations.
12.4(h) INCUMBENCY CERTIFICATE. Incumbency certificates
relating to each person executing any document executed and delivered
to the Company by Buyer or OSI pursuant to the terms hereof.
12.4(i) OTHER DOCUMENTS. All other documents, instruments or
writings required to be delivered to the Company on or prior to the
Closing Date pursuant to this Agreement and such other certificates of
authority and documents as the Company 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 Company.
13.1(b) BY EITHER PARTY. This Agreement may be terminated
without further liability of any party, by either Buyer or the Company
if the Closing Date of the transaction contemplated in SECTION 1.1
shall not have occurred on or before November 30, 1999, 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
Company 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
Company 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 Company at any time prior to the closing that
25
<PAGE> 30
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 COMPANY. The Company 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 Company,
or (ii) there has been a failure of satisfaction of a condition to the
obligations of the Company 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 Company 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, SECTIONS 7.3
- 7.7 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 Company or Buyer shall be
subject to the approval of the other in all essential respects, except that
Company approval shall not be required as to any statements and other
information which Buyer may submit to the Securities and Exchange Commission,
NASDAQ 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 NASDAQ, or otherwise required by law.
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 Company 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.
26
<PAGE> 31
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 Company 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 Prime, Inc.
550 N. Reo Street - Suite 200
Tampa, Florida 33609
Attention: Mike O'Donnell, CEO
Facsimile: 813-281-2114
(with a copy to)
Joseph J. Kadow, Vice President and General Counsel
Outback Steakhouse, Inc.
550 N. Reo Street - Suite 200
Tampa, Florida 33609
Facsimile: 813-281-2114
or to such other person or address as Buyer shall furnish to the Company in
writing.
(b) If to the Company, to:
Fleming Prime Steakhouse I, L.L.C.
455 Newport Center Drive
Newport Beach, California 92660
Attention: A. William Allen III
Facsimile: (949) 759-9545
(with a copy to)
Ronald D. Garber, Esquire
Richman, Lawrence, Mann, Chizever & Phillips
9601 Wilshire Boulevard, Penthouse
Beverly Hills, California 90210
Facsimile: (310) 274-2831
or to such other person or address as the Company 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
27
<PAGE> 32
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 Company 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 Company 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 Company agrees to hold Buyer harmless from and
against all claims for brokerage commissions or finder's fees incurred
through any act of the Company 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. Buyer shall pay all retail sales taxes arising
from the transactions contemplated in this Agreement.
(ii) COST OF ESCROW. All fees and costs of the Escrow
Agent pursuant to the Escrow Agreement referred to in SECTION
12.3(d) hereof.
(iii) OTHER EXPENSES. 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.
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.
28
<PAGE> 33
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date and year first above written.
ATTEST: "BUYER"
OS PRIME, INC., a Florida corporation
___________________________ By:__________________________________
Joseph J. Kadow, Secretary Robert D. Basham, Co-Chairman
"COMPANY"
FLEMING PRIME STEAKHOUSE I, L.L.C.,
an Arizona limited liability company
By its manager:
STEAKHOUSE CONCEPT, L.L.C., an
Arizona limited liability company
By:__________________________________
A. William Allen III, Manager
29
<PAGE> 34
EXHIBIT A
EMPLOYMENT AGREEMENT OF A. WILLIAM ALLEN III
30
<PAGE> 35
EXHIBIT B
ESCROW AGREEMENT
31
<PAGE> 36
EXHIBIT C
GUARANTEE OF OBLIGATIONS
As an inducement to FLEMING PRIME STEAKHOUSE I, L.L.C.
("Fleming's") to execute that certain Asset Purchase Agreement of even date
herewith by and between Fleming's and OS PRIME, INC. ("OSP"), relating to the
sale of certain Fleming's Prime Steakhouse and Wine Bar restaurants by Fleming's
to OSP, the undersigned hereby agrees to be individually bound by the terms and
conditions of SECTIONS 1.2-1.6 AND 14.8 of the Asset Purchase Agreement,
including any amendments thereto whenever made (hereinafter the "Agreement"),
and unconditionally guarantee to Fleming's and its successors and assigns that
all of OSP's obligations under SECTIONS 1.2-1.6 AND 14.8 of the Agreement will
be punctually paid and performed.
Upon default by OSP and notice from Fleming's, the undersigned
will immediately make each payment and perform each obligation required of OSP
under SECTIONS 1.2-1.6 AND 14.8 of the Agreement.
In the event that it be necessary for Fleming's to enforce any
of its rights under this Guaranty, the undersigned agrees to pay to Fleming's
all costs of collection or enforcement, including reasonable attorneys' fees,
paralegals' fees, legal assistants' fees, costs and expenses, whether incurred
with respect to collection, litigation, bankruptcy proceedings, interpretation,
dispute, negotiation, trial, appeal, enforcement of any judgment based on this
Guaranty, or otherwise, whether or not a suit to collect such amounts or to
enforce such rights is brought or, if brought, is prosecuted to judgment.
IN WITNESS WHEREOF, the undersigned has signed this Guarantee
effective as of the date of the Agreement.
GUARANTOR:
ATTEST: OUTBACK STEAKHOUSE, INC., a
Delaware corporation
By: _______________________________ By: _______________________________
Joseph J. Kadow, Secretary Robert D. Basham, President
32