STOCK PURCHASE AGREEMENT
BY AND AMONG
MORRISON RESTAURANTS INC.
AND
THE STOCKHOLDERS OF TIAS, INC. NAMED HEREIN
JANUARY 16, 1995
TABLE OF CONTENTS
Page
STOCK PURCHASE AGREEMENT. . . . . . . . . . . . . . . . 1
1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF SHARES . . . . . . . . . . . . 5
2.1 Agreement to Sell. . . . . . . . . . . . . . 5
2.2 Agreement to Purchase. . . . . . . . . . . . 5
2.3 Purchase Price . . . . . . . . . . . . . . . 5
2.4 Exchange of and Payment for Shares . . . . . 5
2.5 Fractional Shares. . . . . . . . . . . . . . 5
2.6 Closing. . . . . . . . . . . . . . . . . . . 5
3. REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS. . . . . . . . . . . . . . . . . . . 6
3.1 Organization; Power; Qualification . . . . . 6
3.2 Authorization; Enforceability. . . . . . . . 6
3.3 Subsidiaries . . . . . . . . . . . . . . . . 6
3.4 Transactions with Affiliates . . . . . . . . 6
3.5 Capital Stock and Related Matters. . . . . . 7
3.6 Title to Shares. . . . . . . . . . . . . . . 7
3.7 No Third Party Options . . . . . . . . . . . 7
3.8 Compliance with Laws and Validity
of Contemplated Transactions . . . . . . . . 7
3.9 Contracts. . . . . . . . . . . . . . . . . . 8
3.10 Necessary Authorizations . . . . . . . . . . 9
3.11 Intellectual Property Matters. . . . . . . . 9
3.12 Taxes. . . . . . . . . . . . . . . . . . . . 10
3.13 Financial Statements . . . . . . . . . . . . 10
3.14 No Adverse Change. . . . . . . . . . . . . . 10
3.15 Liabilities, Litigation, etc.. . . . . . . . 10
3.16 ERISA. . . . . . . . . . . . . . . . . . . . 10
3.17 Labor Matters. . . . . . . . . . . . . . . . 11
3.18 Environmental Matters. . . . . . . . . . . . 12
3.19 OSHA . . . . . . . . . . . . . . . . . . . . 13
3.20 Real Property. . . . . . . . . . . . . . . . 13
3.21 Personal Property. . . . . . . . . . . . . . 14
3.22 Insurance. . . . . . . . . . . . . . . . . . 14
3.23 Completeness of Disclosure . . . . . . . . . 15
4. REPRESENTATIONS AND WARRANTIES OF MORRISON . . . . 15
4.1 Corporate Existence. . . . . . . . . . . . . 15
4.2 Authorization; Enforceability. . . . . . . . 15
4.3 Compliance with Laws and Validity of
Contemplated Transactions. . . . . . . . . . 15
4.4 Investment Representation. . . . . . . . . . 15
4.5 Capital Stock and Related Matters. . . . . . 16
4.6 Transaction Stock. . . . . . . . . . . . . . 16
4.7 No Adverse Change. . . . . . . . . . . . . . 16
4.8 SEC Filings. . . . . . . . . . . . . . . . . 16
4.9 Financial Statements . . . . . . . . . . . . 16
4.10 Liabilities; Litigation. . . . . . . . . . . 16
5. COVENANTS . . . . . . . . . . . . . . . . . . . . . 17
5.1 [Intentionally omitted]. . . . . . . . . . . 17
5.2 No Solicitation. . . . . . . . . . . . . . . 17
5.3 Access to Information. . . . . . . . . . . . 17
5.4 Best Efforts . . . . . . . . . . . . . . . . 17
5.5 Excluded Assets and Excluded Liabilities . . 18
5.6 Company Options. . . . . . . . . . . . . . . 18
5.7 Tias Beverage Company. . . . . . . . . . . . 18
5.8 Disclosure . . . . . . . . . . . . . . . . . 18
5.9 Notification of Certain Matters. . . . . . . 18
5.10 No Change. . . . . . . . . . . . . . . . . . 18
5.11 Company Employees. . . . . . . . . . . . . . 18
5.12 Real Property Leases to be Renegotiated. . . 19
5.13 NYSE Listing . . . . . . . . . . . . . . . . 19
5.14 Indemnification and Severance Rights . . . . 19
6. CONDITIONS TO CONSUMMATION OF THE TRANSACTION . . . 19
6.1 Conditions to Obligations of Morrison. . . . 19
6.2 Conditions to Obligations of the Stockholders 21
7. CLOSING RELATED OBLIGATIONS. . . . . . . . . . . . . 23
7.1 Certain Rights and Limitations
Regarding Transaction Stock. . . . . . . . . 23
(a) Registration of Transaction Stock.. . . 23
(b) Furnishing Information. . . . . . . . . 23
(c) Prospectus Requirements . . . . . . . . 23
(d) Registration Rights, Etc. . . . . . . . 23
(e) Indemnification . . . . . . . . . . . . 25
(f) Fees and Expenses of Registration . . . 26
7.2 Release of Stockholders from Obligations
Under the Loan Agreement . . . . . . . . . . 26
8. INDEMNIFICATION . . . . . . . . . . . . . . . . . . 26
8.1 Definitions. . . . . . . . . . . . . . . . . 26
8.2 Indemnification of Morrison by Stockholders. 26
8.3 Indemnification of the Stockholders
by Morrison. . . . . . . . . . . . . . . . . 27
8.4 Method of Asserting Claims, Etc. . . . . . . 27
8.5 Limitations of Liability . . . . . . . . . . 29
8.6 Payment. . . . . . . . . . . . . . . . . . . 29
8.7 Arbitration. . . . . . . . . . . . . . . . . 29
9. COVENANT NOT TO COMPETE . . . . . . . . . . . . . . 30
9.1 Definitions. . . . . . . . . . . . . . . . . 30
9.2 Agreement Not to Compete . . . . . . . . . . 30
9.3 Agreement Not to Solicit Employees . . . . . 30
9.4 Confidentiality. . . . . . . . . . . . . . . 30
9.5 Remedies . . . . . . . . . . . . . . . . . . 31
10. TERMINATION; AMENDMENTS; WAIVER. . . . . . . . . . 31
10.1 Termination. . . . . . . . . . . . . . . . . 31
10.2 Effect of Termination. . . . . . . . . . . . 32
10.3 Amendment. . . . . . . . . . . . . . . . . . 32
10.4 Extension; Waiver. . . . . . . . . . . . . . 32
11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . 32
11.1 Entire Agreement; Assignment . . . . . . . . 32
11.2 Remedies . . . . . . . . . . . . . . . . . . 32
11.3 Validity . . . . . . . . . . . . . . . . . . 32
11.4 Notices. . . . . . . . . . . . . . . . . . . 33
11.5 Governing Law. . . . . . . . . . . . . . . . 33
11.6 Descriptive Headings . . . . . . . . . . . . 34
11.7 Counterparts . . . . . . . . . . . . . . . . 34
11.8 Expenses . . . . . . . . . . . . . . . . . . 34
11.9 Parties in Interest. . . . . . . . . . . . . 34
11.10Effective Time . . . . . . . . . . . . . . . 34
EXHIBITS
EXHIBIT A STOCKHOLDERS
EXHIBIT B STOCK TRANSFER AGREEMENT
EXHIBIT C OPINION OF STOCKHOLDERS' COUNSEL
EXHIBIT D FORM OF NON-COMPETITION AGREEMENT
EXHIBIT E OPINION OF POWELL, GOLDSTEIN, FRAZER &
MURPHY
SCHEDULES
1.24 NECESSARY CONSENTS
3.5 CAPITAL STOCK AND RELATED MATTERS
3.9 CONTRACTS
3.11 INTELLECTUAL PROPERTY
3.13 FINANCIAL STATEMENTS
3.15 LIABILITIES
3.16 ERISA
3.18 ENVIRONMENTAL MATTERS
3.20(a) OWNED REAL PROPERTY
3.20(b) LEASED REAL PROPERTY
3.21(a) PERSONAL PROPERTY
3.21(b) LEASED EQUIPMENT, FURNITURE, AND FIXTURES
5.5 COMPUTER/VIDEO EQUIPMENT
5.12 REAL ESTATE LEASES TO BE RENEGOTIATED
6.2(h) DIVIDENDS AND SHAREHOLDER LOANS
EXECUTION COPY
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered
into as of January 16, 1995 by and among Morrison Restaurants
Inc., a Delaware corporation ("Morrison"), and those holders of
the issued and outstanding shares of stock of Tias, Inc., a Texas
corporation (the "Company"), whose names are listed on Exhibit A
attached hereto and made a part hereof (such stockholders being
referred to herein individually as a "Stockholder" and
collectively as the "Stockholders") and, together with the Stock
Transfer Agreements described in Section 6.1(e) of this
Agreement, provides for the purchase by Morrison of all
outstanding shares of stock of the Company (the "Transaction").
Accordingly, the parties hereto, in consideration of the
mutual representations, warranties and covenants contained
herein, agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have
the respective meanings set forth below:
1.1 "Business" means the Tex-Mex-style restaurant business
operated under the trade name "Tia's" conducted by the Company.
1.2 "Closing" means the closing of the Transaction
described in this Agreement as provided in Section 2.6.
1.3 "Code" means the Internal Revenue Code of 1986, as
amended.
1.4 "Commission" means the Securities and Exchange
Commission, or any other Federal agency at the time administering
the Securities Act.
1.5 "Company Option" means the outstanding options or
warrants to purchase Shares from the Company as set forth on
Schedule 3.5. Company Option shall not include any options held
by Morrison or any conversion rights under the terms of the
Series A Preferred Stock of the Company.
1.6 "Company's knowledge" means the knowledge of
Larry Lavine or Frank Sbordone only.
1.7 "Confidential Information" means all information of any
kind concerning the Company, except information (i) ascertainable
or obtained from public or published information, (ii) received
from a third party not known to Morrison to be under an
obligation to the Company to keep such information confidential,
(iii) that is or becomes known to the public (other than through
a breach of this Agreement or any other agreement under which
Morrison has a confidentiality obligation with respect to
information of the Company), (iv) that was in Morrison's
possession before disclosure thereof to it in connection with
this Agreement or any other agreement under which Morrison has a
confidentiality obligation with respect to information of the
Company, or (v) that was independently developed by Morrison.
1.8 "Contract" or "Contracts" means one or more than one,
respectively, of the contracts, leases, licenses, warranties,
commitments, agreements, arrangements, credit guaranties, and
purchase and sale orders, whether oral or written, pursuant to
which the Company enjoys any right or benefit, together with the
right to receive income in respect of such contracts.
1.9 "Environmental Laws" means any and all federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any governmental
authority regulating, relating to or imposing liability or
standards of conduct concerning environmental protection matters,
including, without limitation, Hazardous Materials, as now or may
at any time hereinafter be in effect.
1.10 "Equipment" means all machinery, apparatus, equipment,
fittings and motor vehicles owned by the Company or in which the
Company has an interest, whether now owned or hereinafter
acquired by the Company and wherever located, and all parts,
accessories and special tools and all increases and accessories
thereto and substitutions and replacements therefor.
1.11 "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.12 "ERISA Affiliate" means any person whose employees,
together with the employees of the Company, are (or in the past
have been) deemed as being employed by a single employer for
purposes of Section 414 of the Code.
1.13 "Furniture and Fixtures" means all furniture, fixtures
and leasehold improvements, wherever located, owned by the
Company or in which the Company has an interest.
1.14 "Financial Statements" means the audited financial
statements of the Company for the year ended January 2, 1994 and
the unaudited financial statements of the Company for the period
ended December 4, 1994, all of which are attached hereto as
Schedule 3.13.
1.15 "GAAP" means the common set of accounting concepts,
standards and procedures established by the accounting profession
through the American Institute of Certified Public Accountants
used as a general guide when recording transactions.
1.16 "Hazardous Materials" means any hazardous materials,
hazardous wastes, hazardous constituents, hazardous or toxic
substances and petroleum products (including crude oil or any
fraction thereof) defined or regulated as such in any
Environmental Law.
1.17 "Holder" means each holder of Shares or Company
Options, excluding the Stockholders.
1.18 "Intellectual Property" means and includes all patents,
designs, art work, designs-in-progress, formulations, know-how,
prototypes, inventions, trademarks, trade names, trade styles,
service marks, and copyrights; all registrations and applications
therefor, both registered and unregistered, foreign and domestic;
trade secrets or processes; computer software (including
documentation and related object and, if applicable, source
codes); and confidential or proprietary information that is
either (i) owned by or negotiated in the name of the Company or
owned by or negotiated in the name of the Company or an affiliate
of the Company or (ii) as to which the Company, or any affiliate
of the Company, has rights as licensee.
1.19 "Knowledge" or "best knowledge" of a party that is an
entity means the knowledge of (i) if the party is a corporation,
the Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer and other executive officers of such party, or
(ii) if the party is a partnership, the managing general partner
of such partnership.
1.20 "Loan Agreement" means that certain Loan Agreement,
dated November 19, 1993, by and between Morrison and the Company.
1.21 "Material" means any event, change or effect related to
the condition (financial or otherwise), properties, assets,
liabilities, business, operations or results of operations of the
Business which would be material to the Business.
1.22 "Material Adverse Effect" means having a material
adverse effect on the business or financial condition of the
Company and its subsidiary or Morrison and its subsidiaries,
taken as a whole, as the case may be. For the purpose of this
definition, in the case of the Company, "material" shall be
determined in accordance with Section 1.21 above.
1.23 "Morrison Common Stock" means shares of Common Stock,
$.01 par value, of Morrison.
1.24 "Necessary Consents" means required consents of third
parties required to effect the Transaction, as set forth on
Schedule 1.24 hereto.
1.25 "Plan" means an employee benefit plan within the
meaning of Section 3(3) of ERISA or any other employee benefit
plan maintained for employees of the Company or any ERISA
Affiliate.
1.26 "Pro Rata Amount" as to each Stockholder, shall mean
the fraction, the numerator of which is the number of Shares held
by the Stockholder and the denominator of which is the number of
Shares held by all Stockholders and Holders at the Closing.
1.27 "Properties" means parcels of real property owned,
leased or operated by the Company, and "Property" shall mean any
of the foregoing parcels.
1.28 "Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each
may, from time to time, be in effect.
1.29 "Share" means a share of Common Stock, $.01 par value
per share, of the Company, or a share of Series A Preferred
Stock, $.01 par value per share (the "Series A Preferred Stock"),
of the Company and "Shares" means any combination of such shares.
1.30 "Stock Price" means the per share closing price of
Morrison Common Stock on the New York Stock Exchange as reported
by The Wall Street Journal for the trading day prior to the
Closing Date.
1.31 "Stock Transfer Agreements" means those certain
agreements, each in substantially the form attached as Exhibit B,
under which Holders shall transfer Shares to Morrison in exchange
for their Pro Rata Amount of the Total Consideration, at or
contemporaneous with the Closing.
1.32 "TBCA" means the Texas Business Corporation Act, as
amended.
1.33 "Total Consideration" means (i) the total number of
whole shares of Morrison Common Stock determined by dividing Nine
Million Dollars ($9,000,000) by the Stock Price, with an
appropriate adjustment for any cash to be delivered by Morrison
in lieu of fractional shares of Morrison Common Stock, or (ii)
cash in the amount of $9,000,000, or (iii) any combination of the
consideration described in the immediately preceding clauses (i)
and (ii) having an aggregate value of $9,000,000, as determined
by Morrison.
1.34 "Transaction Stock" means the shares of Morrison Common
Stock exchanged for Shares pursuant to Section 2.4 hereof and
pursuant to the Stock Transfer Agreements.
1.35 "Warehouse Lease" means that certain Lease Agreement
dated December 1, 1992 between the Company and Larry Lavine for
warehouse space located at 5641 Dyer Street, Dallas, Texas 75206.
2. PURCHASE AND SALE OF SHARES
2.1 Agreement to Sell. At the Closing, each Stockholder
shall grant, sell, convey, assign, transfer and deliver to
Morrison, upon and subject to the terms and conditions of this
Agreement, and in reliance on the representations, warranties and
covenants of Morrison contained herein, all of its Shares, as set
forth on Exhibit A hereto and as purchased upon exercise of any
Company Options held by such Stockholder, free and clear of all
mortgages, liens, pledges, security interests, charges, claims,
restrictions and encumbrances of any nature whatsoever, except
for restrictions imposed by applicable securities laws.
2.2 Agreement to Purchase. At the Closing, Morrison shall
purchase the Shares held by the Stockholders, upon and subject to
the terms and conditions of this Agreement and in reliance on the
representations, warranties and covenants of the Stockholders
contained herein.
2.3 Purchase Price. In exchange for the Shares sold to
Morrison by each Stockholder, such Stockholder shall receive his
or its Pro Rata Amount of the Total Consideration delivered by
Morrison at the Closing. Except with respect to payment for
fractional shares, each Stockholder shall receive the same
proportion of Morrison Common Stock and cash aggregating its Pro
Rata Amount of the Total Consideration.
2.4 Exchange of and Payment for Shares. At the Closing,
upon surrender by each Stockholder of the stock certificates
representing his or its Shares, duly endorsed or accompanied by
stock powers duly executed by such Stockholder, Morrison shall
cause to be delivered to each Stockholder certificates
representing the shares of Morrison Common Stock and cash, as
applicable, constituting that Stockholder's Pro Rata Amount of
the Total Consideration. Any shares of Transaction Stock
delivered by Morrison as part of the Total Consideration at the
Closing shall be represented by certificates registered in the
name of each Stockholder receiving such shares. Any cash paid by
Morrison will be delivered by wire transfer to an account
designated by each Stockholder.
2.5 Fractional Shares. Notwithstanding any other provision
of this Agreement, no certificates or scrip representing
fractional shares of Morrison Common Stock shall be issued upon
the surrender or exchange of certificates which represent any
Shares, no dividend or distribution of Morrison shall relate to
any fractional share and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a
shareholder of Morrison. In lieu of any fractional shares, at
the Closing there shall be paid to each holder of Shares who
otherwise would be entitled to receive a fractional share of
Morrison Common Stock an amount of cash (without interest)
determined by multiplying such fraction by the Stock Price.
2.6 Closing. The closing of the Transaction (the
"Closing") will be held on the date upon which the Registration
Statement for the Transaction Stock is effective (as contemplated
by Section 7.1 of this Agreement) or such other date which
Morrison shall select (and give reasonable prior notice to the
Stockholders of) in the event no Transaction Stock is delivered
pursuant to Section 2.4 (the "Scheduled Closing Date"), at the
offices of Powell, Goldstein, Frazer & Murphy in Atlanta, Georgia
(or such other place as the parties may agree). In the event the
conditions to Closing of a party set forth in Section 6 shall not
be satisfied by the Scheduled Closing Date, then the Closing, at
the option of the party in whose favor such conditions run, may
be postponed until such conditions are satisfied, but in no event
shall the Closing be held later than January 31, 1995. The
"Closing Date" shall be the date on which the Closing actually
occurs.
3. REPRESENTATIONS AND WARRANTIES OF
THE STOCKHOLDERS
The Stockholders, jointly and severally, hereby represent
and warrant to Morrison that as of the date hereof with respect
to Sections 3.1 through 3.8, and as of the Effective Date with
respect to Sections 3.9 through 3.23:
3.1 Organization; Power; Qualification. The Company is a
corporation duly organized, validly existing, and in good
standing under the laws of the state of Texas, has the corporate
power and authority to own or lease and operate its properties
and to carry on its business as now being conducted, and is duly
qualified and in good standing and authorized to do business as
a foreign corporation in each jurisdiction in which the character
of its properties or the nature of its business requires such
qualification and authorization, except where the failure to be
so qualified would not have a Material Adverse Effect on the
Company.
3.2 Authorization; Enforceability. Each Stockholder has
the individual capacity, or, if such Stockholder is a
partnership, has the partnership power and has taken all
necessary partnership action to authorize it, to execute,
deliver, and perform its obligations under this Agreement and to
consummate the Transaction as to such Stockholder. This
Agreement has been duly executed and delivered by each
Stockholder, and is a legal, valid, and binding obligation of
each Stockholder, enforceable against such Stockholder in
accordance with its terms, except as may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights
generally and by the effect of general principles of equity,
whether applied by a court of law or equity.
3.3 Subsidiaries. The Company has no subsidiaries other
than Tias Beverage Company, a Texas corporation ("Tias
Beverage"), forty percent (40%) of the outstanding common stock
of which is owned by the Company and the balance of which is
owned by Larry Lavine.
3.4 Transactions with Affiliates. Except for the Warehouse
Lease and as set forth in Section 3.3 hereof and on Schedule 3.5
or Schedule 3.9 hereto, no shareholder, officer or employee of
the Company, or any member of his or her immediate family or any
other of its, his or her affiliates, owns or has a 5% or more
ownership interest in any corporation or other entity (other than
Morrison) that is or was during 1993 and 1994 a party to, or in
any property which is or was during 1993 and 1994 the subject of,
any Material contract, agreement or understanding, business
arrangement or relationship with the Company.
3.5 Capital Stock and Related Matters. The authorized
capital stock of the Company consists of Nine Million Six Hundred
Thousand Six Hundred (9,600,600) shares of Common Stock, $0.01
par value per share, of which Two Million Seven Hundred Forty
Five Thousand (2,745,000) shares are currently issued and
outstanding and are fully paid and non-assessable, and Five
Million Six Hundred Thousand and Six Hundred (5,600,600) shares
of Series A Preferred Stock, $0.01 par value per share, of which
Two Million (2,000,000) shares are currently issued and
outstanding and are fully paid and non-assessable. All of such
issued and outstanding shares are owned or held of record as of
the date hereof as shown on Schedule 3.5 attached hereto, and are
not subject to any liens or other rights except as set forth on
Schedule 3.5. As of the date hereof, there are no options,
warrants, purchase agreements, put agreements, call agreements or
any other agreements to which the Company is a party which relate
to or affect the purchase or sale of the capital stock of the
Company except for any options held by Morrison or the Company
Options as set forth on Schedule 3.5.
3.6 Title to Shares. The Holders and the Stockholders own
the Shares and Company Options as set forth on Schedule 3.5. At
the Closing the Stockholders and the Holders will have good title
to the Shares, free and clear of any encumbrances or restrictions
on transfer, except for the restrictions imposed by those certain
Shareholder Option Agreement, Stock Pledge and Security
Agreements and the Voting Agreement each dated November 19, 1993,
with or in favor of Morrison (collectively, the "Morrison Option
Agreements") and restrictions imposed by applicable securities
laws. The Shares constitute all of the shares of outstanding
stock of the Company, and the Company Options constitute all
outstanding options to purchase shares of stock of the Company
other than any options held by Morrison or any conversion rights
under the terms of the Series A Preferred Stock of the Company.
At the Closing, the Stockholders will have full right, power and
authority to sell, transfer and deliver their Shares, and upon
delivery of the certificates therefor as contemplated in this
Agreement, the Stockholders will transfer all record and
beneficial ownership of the Stockholders in their Shares,
including all voting and other rights to such Shares, free and
clear of all encumbrances, except for the restrictions imposed by
the Morrison Option Agreements and restrictions imposed by
applicable securities laws.
3.8 No Third Party Options. There are no existing
agreements, options, commitments or rights with, of or to any
person to acquire any of the Company's assets, properties or
rights, or any interest therein, except (a) Company Options which
shall be exercised on or before the Closing or shall expire or be
terminated without expense to the Company, (b) as set forth in
Schedule 3.5 hereto, (c) this Agreement, and (d) as set forth in
Section 5.5 of this Agreement.
3.8 Compliance with Laws and Validity of Contemplated
Transactions. The execution, delivery, and performance of this
Agreement by the Stockholders in accordance with its terms and
the consummation of the transactions contemplated hereby do not
and will not (a)violate any law applicable to the Company or the
Stockholders, (b) conflict with, result in a breach of, or
constitute a default under the current Articles of Incorporation
or By-Laws of the Company or under any indenture, agreement, or
other instrument to which the Company or any Stockholder is a
party or by which they or any material portion of their
respective properties may be bound, or (c) result in or require
the creation or imposition of any lien upon or with respect to
any material property now owned or hereafter acquired by the
Company or any Stockholder.
3.9 Contracts.
(a) Schedule 3.9 contains a true and correct list of
each Contract (other than Real Property Leases, Personal Property
Leases and Contracts with Morrison) to which the Company is a
party or to which any of the assets or Business of the Company is
subject and is a:
(i) Written Contract with any present or former
employee or consultant for the employment of any
person, including any consultant, who is engaged in the
conduct of the Business, or noncompetition agreement
with any present or former employee or consultant for
the agreement not to compete by such person in the
conduct of the Business;
(ii) Contract for the future purchase of, or
payment for, supplies or products, or for the
performance of services by a third party, which
supplies, products or services are used in the conduct
of the Business involving in any one case $50,000 or
more;
(iii) Contract to sell or supply products or
to perform services in connection with the Business
involving in any one case $25,000 or more;
(iv) Contract relating to the Business not
otherwise listed on Schedule 3.9 hereto and continuing
over a period of more than six months from the date
hereof or involving the payment or receipt by the
Company exceeding $75,000 in any one case;
(v) distribution, dealer, representative, or
sales agency agreement, contract, or commitment
relating to the Business;
(vi) note, debenture, bond, equipment trust
agreement, letter of credit agreement, loan agreement,
or other Contract for the borrowing or lending of money
relating to the Business or agreement or arrangement
for a line of credit or guarantee, pledge, or
undertaking of the indebtedness of any other person
relating to the Business;
(vii) Contract limiting or restraining the
Company, the Business or any successor thereto (except
as contemplated hereby) or, to the best of each
Stockholder's knowledge, any employee of the Company
engaged in the conduct of the Business from engaging or
competing in any manner or in any business;
(viii) Contract relating to the Business not
made in the ordinary course of business; and
(ix) Commitment for capital expenditures in excess
of $25,000 that have been approved or made prior to the
date of this Agreement by the Company and that remain
outstanding as of the date hereof.
(b) Each of the Contracts is in full force and effect,
and except for actions specifically contemplated by this
Agreement or as set forth on Schedule 3.9, (i) there exists no
breach or violation of or default by the Company under any of
such Contracts (except for the Loan Agreement and Contracts
executed and delivered in connection therewith) or any event
which, with notice or the lapse of time, or both, will constitute
a breach or violation by the Company thereof or default by the
Company thereunder, or (ii) the continuation, validity, and
effectiveness of the Contracts will in no way be affected under
the terms of such Contracts by the consummation of the
Transaction. True and complete copies of all of the Contracts
have been furnished previously to Morrison.
(c) Except as set forth on Schedule 3.15, there exists
no actual or, to the knowledge of any Stockholder or the Company,
threatened termination, cancellation, or limitation of, or any
amendment, modification, or change to any Contract, which would
have a Material Adverse Effect on the Company, including without
limitation the business relationship of the Company with any
Material supplier to the Company.
(d) To the Company's knowledge, none of the Contracts
is for materials, supplies, equipment, or services in excess of
the Company's normal requirements or reasonably anticipated needs
of the Business (assuming operation of the Business consistent
with recent past practices).
(e) Except as set forth on Schedule 3.9 hereto or any
power of attorney granted to Morrison, the Company has not
granted any power of attorney affecting or with respect to its
business, affairs, or assets that remains outstanding.
3.10 Necessary Authorizations. The Company has secured all
Material authorizations, consents, approvals, permits, licenses
and exemptions, filings and registrations with, and reports to,
all governmental and other regulatory authorities, whether
federal, state or local, and all agencies thereof (including,
without limitation, any specific authorizations, licenses,
franchises, etc.) that may be required for the due operation of
the Business as now conducted by the Company ("Necessary
Authorizations"), and except as may have been previously
disclosed to Morrison, all such Necessary Authorizations are in
full force and effect and not subject to any pending attachment
or revocation.
3.11 Intellectual Property Matters. Schedule 3.11 contains
an accurate and complete list of all trade names used by the
Company and registered trademarks and patents constituting
Intellectual Property, owned or licensed, used by the Company in
the conduct of the Business. All Intellectual Property listed as
owned on Schedule 3.11 is owned totally and exclusively by the
Company free and clear of any liens, claims, charges or
encumbrances other than Permitted Encumbrances. To the best
knowledge of each Stockholder, the Company does not infringe upon
or unlawfully or wrongfully use any patent, trademark, trade
name, service mark, copyright or trade secret owned or claimed by
another. The Company has not received any notice of any claim of
infringement or any other claim or proceeding relating to any
patent, trademark, trade name, service mark, copyright or trade
secret. Except by virtue of the ownership of Shares (or rights
to acquire Shares), no present or former employee of the Company
and no other person owns or has any proprietary, financial or
other interest, direct or indirect, in whole or in part, in any
patent, trademark, trade name, service mark or copyright, or in
any application therefor, or in any trade secret, which the
Company owns and uses in its operations as now conducted.
3.12 Taxes. All federal, state, and other tax and
informational returns of the Company and each Plan required by
law to be filed have been duly filed, and all federal, state, and
other taxes, assessments, and other governmental charges or
levies upon the Company and any of its properties, income,
profits, and assets that are due and payable have been paid,
except for any such taxes, assessments and other governmental
charges or levies the payment of which the Company is contesting
in good faith by appropriate proceedings and for which adequate
reserves have been provided on the books of the Company to the
extent required by GAAP. The Company has complied or will comply
with all applicable payroll tax reporting and withholding
requirements with respect to the exercise of any Company Options.
3.13 Financial Statements. On or before the date hereof,
the Company has furnished, or caused to be furnished, to Morrison
the Financial Statements set forth on Schedule 3.13 which present
fairly in all material respects in accordance with GAAP, except
in the case of interim unaudited statements for any required
footnote disclosures and recording of normal year-end
adjustments, the financial position of the Company at January 2,
1994 and December 4, 1994 and the results of operations of the
Business for the periods then ended.
3.14 No Adverse Change. Since December 4, 1994, there has
occurred no event which would have a Material Adverse Effect on
the Company.
3.15 Liabilities, Litigation, etc.
(a) The Company has no Material (individually or in
the aggregate) liabilities or obligations, direct or indirect,
matured or unmatured or absolute, contingent or otherwise, except
for:
(i) Liabilities reflected on the Financial
Statements and not heretofore paid or discharged;
(ii) Liabilities reflected on Schedule 3.15
attached hereto;
(iii) Liabilities arising under any agreement,
contract, commitment, lease or plan specifically
disclosed in a Schedule hereto or not required to be
disclosed in any Schedule hereto because of the amount
involved; and
(iv) Liabilities incurred since December 4, 1994,
consistent with past practice and in the ordinary
course of business.
(b) There is no litigation pending or, to the
knowledge of the Stockholders, threatened, against the Company,
except as set forth in Schedule 3.15.
3.16 ERISA. The Company and each ERISA Affiliate and each
of their respective Plans are in Material compliance with ERISA
and the Code. Except as disclosed on Schedule 3.16, the Company
and each of its ERISA Affiliates have complied in all Material
respects with all requirements of ERISA Sections 601 through 608
and Code Section 4980B. Neither the Company nor any of its ERISA
Affiliates has made any promises of retiree coverage or other
post-employment benefits to employees, except as set forth on
Schedule 3.16. Neither the Company nor any ERISA Affiliate
maintains or has ever maintained a Plan that is or was an
"employee pension benefit plan," within the meaning of ERISA
Section 3(2). No Plan or trust created thereunder, or party in
interest (as defined in Section 3(14) of ERISA), or any fiduciary
(as defined in Section 3(21) of ERISA), has engaged in a
prohibited transaction (as defined in Section 406 of ERISA or
Section 4975 of the Code) which would subject such Plan or any
other Plan of the Company or any of its ERISA Affiliates, any
trust created thereunder, or any such party in interest or
fiduciary, or any party dealing with any such Plan or any such
trust to the penalty or tax on prohibited transactions imposed by
Section 502 of ERISA or Section 4975 of the Code. Neither the
Company nor any of its ERISA Affiliates is a participant in or is
obligated to make any payment to a multiemployer plan (as defined
in Section 3(37) of ERISA). Except as listed in Schedule 3.16,
any Plan can be terminated on or prior to the Closing without
liability to the Company, any ERISA Affiliate or Morrison,
including, without limitation, any additional contributions,
penalties, premiums, fees or any other charges as a result of the
termination, except to the extent of funds set aside for such
purpose or reflected as reserved for such purpose on the
Financial Statements. Neither the Company nor any ERISA
Affiliate is obligated, contingently or otherwise, under any
agreement to pay any amount which would be treated as a
"parachute payment," as defined in Code Section 280G(b)
(determined without regard to Code Section 280G(b)(2)(A)(ii)).
Other than routine claims for benefits, there are no actions,
audits, investigations, suits or claims pending or, to the
knowledge of any Stockholder, threatened against any Plan, any
trust or other funding agency created thereunder, or against any
fiduciary of any Plan or against the assets of any Plan. Except
as disclosed on Schedule 3.16, the consummation of the
transactions contemplated hereby will not accelerate or increase
any liability under any Plan because of an acceleration or
increase of any of the rights or benefits to which Employees may
be entitled thereunder. Except as disclosed on Schedule 3.16,
since December 31, 1993, neither the Company nor any ERISA
Affiliate has (i) increased the rate of compensation payable or
to become payable to any of the employees of the Company or any
ERISA Affiliate, other than in the normal course of business and
consistent with past practice; (ii) made any commitment or
incurred any liability to any labor union; (iii) paid or agreed
to pay any bonuses or severance pay other than the stay bonus
plan and bonuses to Frank Sbordone and Thomas Koenigsberg
described on Schedule 3.16; (iv) increased any benefits or rights
under any Plan; or (v) adopted any new plan, program, policy or
arrangement, which if it existed as of the Effective Time, would
constitute a Plan.
3.17 Labor Matters. The Company is not a party to any
collective bargaining agreement, no such agreement determines the
terms and conditions of employment of any employee of the
Company, no collective bargaining agent has been certified as a
representative of any of the employees of the Company, and, to
the Company's knowledge, no representation campaign or election
is now in progress with respect to any of the employees of the
Company. Neither the Company nor any of its officers or
employees has been charged or, to the Stockholders' or the
Company's knowledge, threatened with the charge of any unfair
labor practice. The Company is in Material compliance with all
applicable federal, state, and foreign laws and regulations
concerning the employer-employee relationship or under any
agreements relating to the employment of the Company's employees,
including applicable wage and hour laws, worker compensation
statutes, unemployment laws, and social security laws. There are
no pending or, to the Stockholders' or the Company's knowledge,
threatened claims, investigations, charges, citations, hearings,
consent decrees, or litigation concerning: wages, compensation,
bonuses, commissions, awards, or payroll deductions; equal
employment or human rights violations regarding race, color,
religion, sex, national origin, age, handicap, veteran's status,
marital status, disability, or any other recognized class,
status, or attribute under any federal, state, or foreign equal
employment law prohibiting discrimination; representation
petitions or unfair labor practices; grievances or arbitrations
pursuant to current or expired collective bargaining agreements;
occupational safety and health; workers' compensation; wrongful
termination, negligent hiring, invasion of privacy or defamation;
or immigration. The Company is not liable for any Material
unpaid wages, bonuses, or commissions (other than those not yet
due) or any tax, penalty, assessment, or forfeiture for failure
to comply with any of the foregoing. Except as set forth on
Schedule 3.16, all officers and employees of the Company are
employees at-will and for indefinite terms and there is no
outstanding agreement or arrangement with respect to severance
payments.
3.18 Environmental Matters. Except as would not,
individually or in the aggregate, have a Materially Adverse
Effect, and except as described on Schedule 3.18 attached hereto
or in the Phase I environmental reports received by Morrison,
with respect to each of the Properties:
(a) The Properties do not contain, in, on or under,
including, without limitation, the soil and groundwater
thereunder, any Hazardous Materials in violation of Environmental
Laws or in amounts that have given or are reasonably expected to
give rise to any Material liability of the Company under
Environmental Laws.
(b) The Properties and all of the Company's operations
and facilities at the Properties are in compliance in all
Material respects with all Environmental Laws, and there is no
contamination or violation of any Environmental Law which has
interfered, or is reasonably expected to interfere, with the
continued operation of any of the Properties or is reasonably
expected to Materially impair the financial condition of the
Company.
(c) The Company has not received from any governmental
authority any complaint, notice of violation, alleged violation,
investigation or advisory action or notice of potential liability
regarding matters of environmental protection or permit
compliance under applicable Environmental Law with regard to the
Properties, nor does any Stockholder have knowledge that any
governmental authority is contemplating delivering to the Company
any such notice. To the Company's knowledge, there has been no
pending or threatened complaint, notice of violation, alleged
violation, investigation or notice of potential liability under
Environmental Laws with regard to any of the Properties.
(d) Hazardous Materials have not been generated,
treated, stored, disposed of, at, on or under any of the
Properties by the Company in Material violation of any
Environmental Laws or in a manner that has given or could
reasonably be expected to give rise to Material liability of the
Company under Environmental Laws, nor have any Hazardous
Materials been transported or disposed of from any of the
Properties by the Company to any other location in Material
violation of any Environmental Laws or in a manner that has given
or could reasonably be expected to give rise to Material
liability of the Company under Environmental Laws.
(e) There are no governmental administrative actions
or judicial proceedings pending under any Environmental Law to
which the Company is a party with respect to any of the
Properties obligating the Company, nor are there any consent
decrees or other decrees, consent orders, administrative orders
or other orders, or other administrative or judicial requirements
obligating the Company outstanding under any Environmental Law
with respect to any of the Properties.
(f) There has been no release or threat of release by
the Company of Hazardous Materials into the environment at or
from any of the Properties, or arising from or relating to the
operations of the Company, in Material violation of Environmental
Laws or in amounts that has given or could reasonably be expected
to give rise to Material liability of the Company under
Environmental Laws.
3.19 OSHA. All of the Company's operations are
conducted in substantial compliance with all applicable rules and
regulations promulgated by the Occupational Safety and Health
Administration of the United States Department of Labor.
3.20 Real Property.
(a) Schedule 3.20(a) contains a true and correct list
of all real property owned by the Company ("Real Property"). The
Company has good and marketable (i.e., insurable by a national
title insurance company at standard premium rates) title to the
Real Property, free and clear of all liens and encumbrances,
except for permitted encumbrances set forth on Schedule 3.20(a)
("Permitted Encumbrances").
(b) Schedule 3.20(b) contains a description of each
lease with respect to each parcel of leased real property of the
Company ("Leased Real Property"). A true and correct copy of
each lease pursuant to which the Company leases the Leased Real
Property and any amendments, extensions, and renewals thereof
(the "Real Property Leases") has been previously delivered to
Morrison. Each Real Property Lease is in full force and effect
and there is no existing default by the Company or event of
default by the Company, real or claimed, or event which with
notice or lapse of time or both would constitute a default by the
Company thereunder. Except as set forth in Schedule 3.20(b), the
Company's interest in the Real Property Leases is free and clear
of any mortgages and liens other than Permitted Encumbrances and
is not subject to any deeds of trust, assignments, subleases, or
rights of any third parties other than the lessor thereof.
Except for consents required under the terms of the Real Property
Leases, the Transaction shall not cause a breach, default, or
event of default under the Real Property Leases.
(c) All improvements on the Real Property and Leased
Real Property conform in all Material respects to all applicable
state and local laws and ordinances, and each parcel of Real
Property and Leased Real Property is zoned for the various
purposes for which the Real Property and Leased Real Property and
improvements thereon are presently being used.
(d) The Company has received no written notice of any
pending or threatened condemnations, planned public improvements,
annexation, special assessments, zoning or subdivision changes,
or other adverse claims affecting the Real Property and Leased
Real Property.
3.21 Personal Property.
(a) Schedule 3.21(a) contains a true and correct list
of
(i) All Equipment owned by the Company (excluding
items of equipment having a net book value of less than
$25,000) which are included in the assets of the
Company, and
(ii) All Furniture and Fixtures and other
items of tangible personal property (excluding items
having a net book value of less than $25,000) owned by
the Company and included in its assets.
The Company has good title to the Equipment and the
Furniture and Fixtures owned by it free and clear of all liens
and encumbrances except for Permitted Encumbrances, including,
without limitation, the existing liens described in
Schedule 3.21(a) hereto. The Equipment, Furniture and Fixtures
are, and, at the Effective Time will be, in operating condition
sufficient for the operation of the Business as then conducted by
the Company. At the Effective Time, all Equipment, Furniture and
Fixtures will be located on the Properties or as otherwise
indicated on Schedule 3.21(a).
(b) Schedule 3.21(b) contains a true and correct list
of (i) all Equipment, Furniture and Fixtures or other items of
tangible personal property leased by the Company, as lessee
(except that Schedule 3.21(b) may exclude any item or group of
items leased under a single lease presently calling for aggregate
annual rental payments of not more than $5,000), and (ii) a true
and correct list of agreements pursuant to which the Company
leases tangible personal property (as lessee), a true and correct
copy of each of which has been provided to Morrison (the
"Personal Property Leases"). Except as described on
Schedule 3.21(b), each Personal Property Lease is in full force
and effect and there is no existing default by the Company or
event of default by the Company, real or claimed, or event which
with notice or lapse of time or both would constitute a default
thereunder by the Company. Except for Permitted Encumbrances,
the Company's interest in the Personal Property Leases is free
and clear of any mortgages and liens and is not subject to any
deeds of trust, assignments, subleases or rights of any third
parties, other than in favor of the lessor thereof.
3.22 Insurance. The assets, properties and operations
of the Company are insured under various policies of general
liability and other forms of insurance. All such policies are in
full force and effect in accordance with their terms, no notice
of cancellation has been received by the Company, and there is no
existing default by the Company or event which, with the giving
of notice or lapse of time or both, would constitute a default by
the Company thereunder. All premiums due to date have been paid
in full.
3.23 Completeness of Disclosure. No representation or
warranty by the Company in this Agreement nor any certificate,
schedule, statement, document or instrument furnished or to be
furnished to Morrison pursuant hereto contains or will contain
any untrue statement of a Material fact or omits or will omit to
state a Material fact required to be stated herein or therein or
necessary to make, in light of the circumstances under which they
were made, any statement herein or therein not Materially
misleading.
4. REPRESENTATIONS AND WARRANTIES
OF MORRISON
Morrison represents and warrants to the Stockholders as
follows:
4.1 Corporate Existence. Morrison is a corporation duly
organized, validly existing and in good standing under the laws
of the state of Delaware, has the corporate power and authority
to own or lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified and in
good standing and authorized to do business in each jurisdiction
in which the character of its properties or the nature of its
business requires such qualification and authorization, except
where the failure to be so qualified would not have a Material
Adverse Effect on Morrison.
4.2 Authorization; Enforceability. Morrison has the
corporate power and has taken all necessary corporate action to
authorize it to execute, deliver, and perform this Agreement and
to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Morrison and is
a legal, valid, and binding obligation of Morrison, enforceable
against Morrison in accordance with its terms, except as may be
limited by bankruptcy, insolvency and other laws affecting
creditors' rights generally, and the effect of general principles
of equity, whether applied by a court of law or equity.
4.3 Compliance with Laws and Validity of Contemplated
Transactions. The execution, delivery and performance of this
Agreement by Morrison in accordance with its terms and the
consummation of the transactions contemplated hereby do not and
will not (a) violate any applicable law, (b) conflict with,
result in a breach of, or constitute a default under the articles
of incorporation or by-laws of Morrison or under any indenture,
agreement or other instrument to which Morrison is a party or by
which it or any of its properties may be bound, or (c) result in
or require the creation or imposition of any lien upon or with
respect to any property now owned or hereafter acquired by
Morrison.
4.4 Investment Representation. Morrison is aware that the
Shares are not registered under the Securities Act. Morrison
possesses such knowledge and experience in business matters such
that it is capable of evaluating the merits and risks of an
investment in the Shares hereunder. Morrison is acquiring the
Shares for its own account, for investment purposes only and not
with the view to the distribution thereof. Morrison agrees that
the Shares will not be sold, transferred, pledged, offered for
sale or otherwise disposed of without registration under the
Securities Act, except pursuant to a valid exemption from
registration under the Securities Act.
4.5 Capital Stock and Related Matters. The authorized
capital stock of Morrison consists of One Hundred Million
(100,000,000) shares of Common Stock, $0.01 par value per share,
of which Thirty-three Million, Nine Hundred Ninety-One Thousand,
Nine Hundred Fifty-Two (33,991,952) shares are currently issued
and outstanding and are fully paid and non-assessable, and Two
Hundred Fifty Thousand (250,000) shares of Preferred Stock, $0.01
par value per share, of which zero (0) shares are currently
issued and outstanding.
4.6 Transaction Stock. Each share of Transaction Stock,
when issued and delivered as contemplated hereby, will be duly
authorized and validly issued and fully paid and non-assessable.
None of the Transaction Stock is subject to any liens or other
rights, and there are no options, warrants, purchase agreements,
put agreements, call agreements or any other agreement to which
Morrison is a party which relate to or affect the transfer of the
Transaction Stock.
4.7 No Adverse Change. Since September 3, 1994, there has
occurred no event which would have a Material Adverse Effect on
Morrison.
4.8 SEC Filings. Morrison has previously furnished the
Stockholders with true and complete copies of (a) its Annual
Report on Form 10-K for the fiscal year ended June 4, 1994 (the
"Annual Report"), (b) its Quarterly Report on Form 10-Q for the
fiscal quarter ended September 3, 1994 (the "Quarterly Report");
and (c) all of its Current Reports on Form 8-K filed with the
Commission subsequent to June 4, 1994 (the documents referred to
in clauses (a) through (c) being hereinafter referred to as the
"SEC Filings"). As of their respective dates, the SEC Filings
did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except,
in the case of any SEC Filing, any statement or omission therein
that has been corrected or otherwise disclosed or updated in a
subsequent SEC Filing.
4.9 Financial Statements. The audited financial statements
and unaudited interim financial statements of Morrison included
or incorporated by reference in the Annual Report and the
Quarterly Report, respectively, present fairly in all material
respects in accordance with GAAP, except in the case of interim
unaudited statements for any required footnote disclosures and
recording of normal year-end adjustments, the financial condition
of Morrison as at the dates thereof and the results of operations
for the periods then ended.
4.10 Liabilities; Litigation. Except as set forth in
Morrison's financial statements and liabilities incurred in the
normal course of business, to the knowledge of Morrison, Morrison
has no material (individually or in the aggregate) liabilities or
obligations, direct or indirect, matured or unmatured, absolute,
contingent or otherwise, nor any litigation (pending or
threatened) as of the date hereof that would have a Material
Adverse Effect on Morrison or the Transaction.
5. COVENANTS
5.1 [Intentionally omitted]
5.2 No Solicitation. The Stockholders shall not, nor shall
they permit the Company or any of its officers, directors,
employees, agents, or representatives (including, without
limitation, investment bankers, attorneys and accountants),
directly or indirectly, to (a) initiate, solicit or encourage any
inquiries or proposals by, or (b) (except as may be required to
comply with directors' fiduciary duties owed to the shareholders
of the Company) enter into any discussions or negotiations with,
or disclose directly or indirectly any information concerning its
business and properties to, or afford any access to its
properties, books, and records to, any corporation, partnership,
person, or other entity or group, other than Morrison, in
connection with any possible proposal (an "Acquisition Proposal")
regarding a sale of the Company's capital stock or a merger,
consolidation, or sale of all or a substantial portion of its
assets, that is Material to the Company or any similar
transaction. The Stockholders will notify Morrison immediately
if any discussions or negotiations are sought to be initiated,
any inquiry or proposal is made, or any such information is
requested with respect to an Acquisition Proposal or potential
Acquisition Proposal or if any Acquisition Proposal is received
or indicated to be forthcoming.
5.3 Access to Information.
(a) From the date of this Agreement until the Closing,
the Stockholders will cause the Company to give Morrison and its
authorized representatives full access to the offices and other
facilities and to the books and records of the Company, will
permit Morrison and its authorized representatives to make such
inspections as it and they may require, and will cause the
Company's officers and use their reasonable best efforts to cause
the Company's representatives (including, without limitation, its
firm of independent certified public accountants), to furnish
Morrison and its authorized representatives with such financial
and operating data and other information with respect to the
business, operations, assets, and liabilities of the Company as
Morrison and its authorized representatives may from time to time
reasonably request.
(b) Morrison will, and will cause its employees,
representatives and agents to, hold in confidence, unless
compelled to disclose by judicial or administrative process or,
in the opinion of its counsel, by other requirements of law, all
Confidential Information and will not disclose the same to any
person. If this Agreement is terminated, Morrison will promptly
return to the Company or destroy all documents (including,
without limitation, all copies thereof) received or obtained by
Morrison containing or constituting any such Confidential
Information. The provisions of this subsection (b) shall not
limit the generality of or effect of prior confidentiality
agreements.
5.4 Best Efforts. Subject to the terms and conditions
hereof, each party to this Agreement agrees to fully cooperate
with the others and the others' counsel, accountants and
representatives in connection with any steps reasonably required
to be taken as part of its obligations under this Agreement.
Each party to this Agreement agrees that it will use its best
efforts to cause all conditions to its obligations under this
Agreement to be satisfied as promptly as possible, and will not
knowingly undertake a course of action inconsistent with this
Agreement or which would make any of its representations,
warranties, agreements or covenants in this Agreement untrue in
any Material respect or any conditions precedent to its
obligations under this Agreement unable to be satisfied at or
prior to the Closing. In this Agreement, the "best efforts" of
a party shall consist of commercially reasonable actions, without
requiring any material expense or commencement or prosecution of
any litigation.
5.5 Excluded Assets and Excluded Liabilities. Morrison and
the Stockholders shall take all necessary action to cause the
following to occur at or prior to the Closing: (a) the Company
to transfer the computer and video equipment listed on Schedule
5.5 to Larry Lavine, and (b) the Company and Larry Lavine shall
terminate the Warehouse Lease, so that the Company has no further
obligation thereunder arising after December 31, 1994.
5.6 Company Options. Each Stockholder shall exercise any
and all Company Options held by such Stockholder prior to the
Closing or such unexercised Company Options shall expire or be
terminated without expense to the Company as of the Closing.
Each such Stockholder shall deliver to the Company the exercise
price in cash.
5.7 Tias Beverage Company. At the Closing Larry Lavine
shall transfer to the Company his sixty percent (60%) interest in
Tias Beverage for $10.00.
5.8 Disclosure. All public announcements, notices or other
communications regarding this Agreement and the transactions
contemplated hereby to third parties other than the parties
hereto and their respective employees, agents, advisors and the
Holders shall require the prior approval of Morrison.
Notwithstanding the foregoing, each party shall be permitted to
make such disclosures to the public or to governmental agencies
as its counsel shall deemed necessary to maintain compliance with
and to prevent violation of applicable federal or state laws.
5.9 Notification of Certain Matters. Each of the parties
(the "Notifying Party") shall give prompt notice to the other
parties of (a) the occurrence or non-occurrence of any event
that, to such party's knowledge, would be likely to cause any
representation or warranty of the Notifying Party contained in
this Agreement to be untrue or inaccurate in any material respect
at or prior to the Effective Time and (b) any material failure
known to the Notifying Party to comply with or satisfy any
covenant, condition, or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.9 shall not limit or
otherwise affect the remedies available hereunder to the party
receiving such notice.
5.10 No Change. The Stockholders shall not permit the
Company to take or agree to take any action which would make any
representation or warranty of the Stockholders contained in this
Agreement untrue or incorrect in any Material respect as of the
date when made or at any time through the Effective Time.
5.11 Company Employees. Morrison shall credit each
Company employee who continues employment with the Company
immediately following the Effective Time for his or her years of
service with the Company through the Effective Time under
Morrison's employee benefit plans: (a) to determine (i) the date
such a Company employee (and eligible dependents of that Company
employee) becomes eligible to participate as a participant of,
and (ii) the potential application of any pre-existing condition
limitations set forth in, Morrison's group medical, dental, life,
long-term disability and short-term disability plans; and (b) to
determine (i) the date such a Company employee may otherwise
become eligible to participate in the Morrison Restaurants Inc.
Salary Deferral Plan, Morrison Restaurants Inc. Executive
Supplemental Pension Plan or Morrison Restaurants Inc. Management
Retirement Plan and (ii) the amount of any benefit accrued by, or
any employer contribution made on behalf of, as the case may be,
any such eligible Company employee and the vested amount of the
benefit so calculated under the Morrison Restaurants Inc. Salary
Deferral Plan, Morrison Restaurants Inc. Deferred Compensation
Plan, Morrison Restaurants Inc. Executive Supplemental Pension
Plan and the Morrison Restaurants Inc. Management Retirement
Plan. For the plan year of Morrison's group health and dental
plans in which the Effective Time falls, each Company employee
who continues employment with the Company immediately following
the Effective Time shall also be given credit for covered
expenses paid by such Company employee under comparable plans of
the Company for the same period towards satisfaction of any
annual deductible limitation and out-of-pocket maximum applied
under such Morrison plans. Except as provided herein, Company
employees (1) shall be subject to any other eligibility criteria
and conditions, other than those relating to length of service,
relating to participation in Morrison's employee benefit plans;
and (2) shall have no right to participate in any particular type
of employee benefit plan and neither Morrison nor the Company
shall be obligated to establish or maintain any such plan for the
benefit of Company employees.
5.12 Real Property Leases to be Renegotiated. Before
the Closing, Larry Lavine, Frank Sbordone and Crosspoint Venture
Partners III shall use their best efforts, and Morrison shall
cooperate therewith, to renegotiate the Real Property Leases on
the Leased Real Property described on Schedule 5.12 in favor of
Morrison in recognition of Morrison's credit strength.
5.13 NYSE Listing. Morrison shall cause the shares of
Transaction Stock to be issued to the Stockholders and the
Holders at the Closing to be approved for listing on the New York
Stock Exchange, Inc. (the "NYSE") prior to the Closing Date.
5.14 Indemnification and Severance Rights. For a
period of five (5) years from and after the Closing Date,
Morrison will not take any action to amend, repeal, or otherwise
impair any exculpatory or indemnification provisions now existing
in the Articles of Incorporation or the Bylaws of the Company or
its subsidiary for the benefit of any individual who served as a
director or officer of the Company or its subsidiary at any time
before the Effective Time.
6. CONDITIONS TO CONSUMMATION OF THE TRANSACTION
6.1 Conditions to Obligations of Morrison. The obligation
of Morrison to consummate the Transaction are subject to the
satisfaction at the Closing, or waiver by Morrison in writing, in
whole or in part, of each of the following conditions:
(a) Each of the representations and warranties of the
Stockholders shall be true and correct in all Material respects
as of, and shall not have been violated in any Material respect
at, the Closing as though made on and as of the Closing, except
for representations and warranties which make reference to a
specific date, which need only be true and correct in all
Material respects as of such date; the Stockholders shall, on or
before the Closing, have performed in all Material respects all
of their respective obligations under this Agreement which by the
terms hereof are to be performed on or before the Closing; and
the Stockholders shall have delivered to Morrison a certificate
signed on behalf of and in the name of the Stockholders dated as
of the date of the Closing to the foregoing effect.
(b) Each Company Option held by a Stockholder which is
outstanding on the date hereof shall have been exercised by such
Stockholder or shall expire or be terminated without expense to
the Company. Each such Stockholder shall deliver to the Company
the exercise price in cash to exercise the Company Option.
(c) Each Holder shall have (i) exercised all Company
Options held by such Holder (which have not expired or been
terminated as of the Closing), the purchase price for which may
be paid either (A) by delivery of cash if the Company Option is
not one granted under the Company's 1990 Stock Option Plan or (B)
by delivery of cash or a note to the Company which shall be due
and payable not later than 30 days after Closing; and (ii) if
such Company Option has been exercised, executed and delivered to
Morrison a Stock Transfer Agreement, in the form set forth as
Exhibit B, pursuant to which each Holder shall sell to Morrison
all of the Shares which it owns for a purchase price per share
equal to such Holder's Pro Rata Amount of the Total
Consideration.
(d) Morrison shall have received any consents required
to consummate the Transaction to prevent default under any Real
Property Lease from the landlords and any other Necessary
Consents, in each case on terms and conditions satisfactory to
Morrison in its sole discretion.
(e) Morrison shall have obtained all Necessary
Authorizations to consummate the transaction.
(f) The Stockholders shall have submitted to Morrison
resignations of all current officers and directors of the
Company.
(g) No action or proceeding by or before any court or
other governmental body shall have been instituted by any
governmental body or other person or entity, or threatened in
writing by any governmental body, which seeks to restrain,
prohibit or invalidate the Transaction or which would have a
Material Adverse Effect on the right of Morrison to conduct the
Business as presently conducted by the Company or which claims
material damages from Morrison with respect to the Transaction.
(h) Larry Lavine shall have transferred to the Company
his sixty percent (60%) interest in Tias Beverage for $10.00.
(i) Frank Sbordone and Thomas Koenigsberg shall have
accepted employment with Morrison after the Closing and shall
have agreed to relocate to Mobile, Alabama no later than March
31, 1995.
(j) The Company shall be released from any liability
under the Warehouse Lease arising after December 31, 1994.
(k) Morrison shall have received the opinions of
counsel to the Stockholders, dated the Closing Date and in form
and substance reasonably satisfactory to the Morrison and its
counsel, substantially to the effect set forth on Exhibit C.
(l) All proceedings taken by the Stockholders and the
Company and all instruments executed and delivered by the
Stockholders and the Company prior to the Closing Date in
connection with the transactions herein contemplated shall be
reasonably satisfactory in form and substance to counsel for
Morrison.
(m) No statute, rule or regulation shall have been
enacted or promulgated which makes illegal or prohibits
consummation of the Transaction or which would have a Material
Adverse Effect on the ability of Morrison to conduct the Business
as presently conducted by the Company.
(n) Frank Sbordone and Thomas Koenigsberg shall have
executed and delivered to Morrison Non-Competition and Non-
Disclosure Agreements substantially in the form attached hereto
as Exhibit D.
(o) The Company shall have taken such action as is
necessary to terminate, effective no later than December 31,
1994, the flexible health care spending account program
maintained for the benefit of its employees.
6.2 Conditions to Obligations of the Stockholders. The
obligation of the Stockholders to consummate the Transaction as
applied to them is subject to the satisfaction at the Closing, or
waiver by the Stockholders in writing, in whole or in part, of
each of the following conditions:
(a) Each of the representations and warranties of
Morrison shall be true and correct in all material respects as
of, and shall not have been violated in any material respect at,
the Closing as though made on and as of the Closing except for
representations and warranties which make reference to a specific
date, which need only be true and correct in all material
respects as of such date; Morrison shall, on or before the
Closing, have performed in all material respects all of its
obligations under this Agreement which by the terms hereof are to
be performed on or before the Closing; and Morrison shall have
delivered to the Stockholders a certificate of one of its
officers signed on its behalf and in its name dated as of the
date of the Closing to the foregoing effect.
(b) No action or proceeding by or before any court or
other governmental body shall have been instituted by any
governmental body or other person or entity or threatened in
writing by any governmental body which seeks to restrain,
prohibit or invalidate the Transaction or which would materially
adversely affect the right of the Stockholders to consummate the
Transaction as applied to them or which claims material damages
from the Stockholders with respect to the transactions
contemplated hereby.
(c) A registration statement on Form S-3 filed with
the Commission under and pursuant to the provision of the
Securities Act for the purpose of registering the resale of the
Transaction Stock by the Stockholders and the Holders (the
"Registration Statement") shall have become effective, and no
stop order, injunction or similar order shall have been issued by
the Commission or any other governmental authority suspending the
effectiveness of the Registration Statement or preventing or
suspending the use thereof or of any related prospectus.
(d) The Stockholders shall have received the opinion,
dated the Closing Date and in form and substance reasonably
satisfactory to the Stockholders and their counsel, of Powell,
Goldstein, Frazer & Murphy, counsel to Morrison, substantially to
the effect set forth on Exhibit E.
(e) All proceedings taken by Morrison and all
instruments executed and delivered by Morrison prior to Closing
in connection with the transactions herein contemplated shall be
reasonably satisfactory in form and substance to counsel for the
Stockholders.
(f) No statute, rule or regulation shall have been
enacted or promulgated which makes illegal or prohibits
consummation of the Transaction or which would have a Material
Adverse Effect on the ability of Morrison to conduct the Business
as presently conducted by the Company.
(g) Morrison shall have delivered to the Stockholders
a certificate of its Secretary, certifying as to requisite
corporate or other action authorizing the transactions
contemplated by this Agreement and incumbency with respect to the
signatory to this Agreement.
(h) All dividends on the Series A Preferred Stock
accrued through the Closing Date and all principal and accrued
but unpaid interest through the Closing Date due with respect to
the loans to the Company from Larry Lavine and Crosspoint Venture
Partners III identified on Schedule 6.2(h) hereof shall have been
paid, and all security interests, liens and other encumbrances on
assets or properties of the Company in favor of Larry Lavine and
Crosspoint Venture Partners III with respect thereto shall have
been released.
(i) The Company shall have obtained all material
consents to all Real Property Leases and Personal Property Leases
for which any of the Stockholders have currently effective
guaranties.
(j) The Company shall have received all Necessary
Consents and Necessary Authorizations.
(k) The Shares of Transaction Stock shall have been
approved for listing on the NYSE.
7. CLOSING RELATED OBLIGATIONS
7.1 Certain Rights and Limitations Regarding Transaction
Stock.
(a) Registration of Transaction Stock. Morrison has
filed with the Commission the Registration Statement, pursuant to
which Morrison has requested that the Transaction Stock be
registered for resale by the Stockholders. Each Stockholder
acknowledges that it has received a copy of the Registration
Statement for review, and each Stockholder represents and
warrants that the information contained in the Registration
Statement concerning it and the intended method of distribution
of such securities is true, complete, and correct.
(b) Furnishing Information. Each Stockholder shall
furnish to Morrison such additional information regarding itself
or the Transaction Stock held by it, and the intended method of
disposition of such securities, as shall be reasonably requested
by Morrison in order to effect the registration of its
Transaction Stock.
(c) Prospectus Requirements. Each Stockholder hereby
covenants with Morrison that it will promptly advise Morrison of
any changes in the information concerning each Stockholder
contained in the Registration Statement and that such Stockholder
will not make any sale of the Transaction Stock pursuant to the
Registration Statement without complying with the prospectus
delivery requirements of the Securities Act. Each Stockholder
acknowledges that occasionally there may be times when Morrison
must temporarily suspend the use of the prospectus forming a part
of the Registration Statement until such time as an amendment to
the Registration Statement has been filed by Morrison and
declared effective by the Commission, the relevant prospectus has
been supplemented by Morrison or until such time as Morrison has
filed an appropriate report with the Commission pursuant to the
Securities Exchange Act of 1934, as amended. During any such
period in which sales are suspended and upon reasonable prior
notice of such suspension from Morrison, each Stockholder agrees
not to sell any such Transaction Stock pursuant to any such
prospectus. Each Stockholder covenants that it will not sell any
Transaction Stock pursuant to any such prospectus during the
period commencing at the time at which Morrison gives such
Stockholder notice of the suspension of the use of said
prospectus and ending at the time Morrison gives notice that such
Stockholder may thereafter effect sales pursuant to said
prospectus.
(d) Registration Rights, Etc.
(i) Morrison agrees to (1) use its best efforts to
keep the Registration Statement continuously effective
(including by filing amendments and supplements thereto) in
order to permit the disposition of the Transaction Stock
until the third anniversary of the Closing Date or the sale
by the Stockholders and Holders of all of the Transaction
Stock, whichever is earlier (collectively, the "Effective
Period"), and (2) prepare and file with the Commission, as
soon as reasonably practicable, such amendments and
supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective
continuously during the Effective Period.
(ii) Morrison agrees to cause the Registration
Statement and the related prospectus, and any amendment or
supplement thereto, as of the effective date of the
Registration Statement, amendment, or supplement during the
Effective Period, (1) to comply in all material respects
with the applicable requirements of the Securities Act and
the rules and regulations promulgated by the Commission
thereunder, and (2) not to contain any untrue statement of
a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading, other than information confirmed by
the Stockholders pursuant to Section 7.1(a) or statements or
omissions made in reliance upon and in conformity with
information furnished to Morrison in writing by or on behalf
of the Stockholders and Holders expressly for use in the
Registration Statement and the related prospectus, or any
amendment or supplement thereto.
(iii) In connection with the Registration
Statement, Morrison agrees to, as soon as reasonably
practicable:
(A) furnish to each Stockholder such number of
copies of the Registration Statement, each amendment and
supplement thereto, and prospectus included in the
Registration Statement and such other related documents as
such Stockholder may reasonably request;
(B) notify each Stockholder promptly of any
request by the Commission for the amending or supplementing
of the Registration Statement or prospectus forming a part
thereof;
(C) advise each Stockholder after Morrison
receives notice or otherwise obtains knowledge of the
issuance of any order by the Commission suspending the
effectiveness of the Registration Statement or amendment or
supplement thereto or of the initiation or threatening of
any proceeding for that purpose, and promptly use its best
efforts to prevent the issuance of any stop order or to
obtain its withdrawal promptly if such stop order should be
issued;
(D) use its best efforts to register or qualify
the Transaction Stock under such other securities or blue
sky laws of such jurisdictions within the United States and
Puerto Rico as each Stockholder shall reasonably request
(provided that Morrison shall not be obligated to qualify as
a foreign corporation to do business under the laws of any
jurisdiction in which it is not then qualified or to file
any general consent to service or to file any general
consent to service of process), and do such other reasonable
acts and things as may be required of it to enable each
Stockholder to consummate the disposition in such
jurisdiction of such securities; and
(E) notify each Stockholder, at any time when a
prospectus relating to the Registration Statement is
required to be delivered under the Securities Act, of the
happening of any event as a result of which the Registration
Statement contains an untrue statement of material fact or
omits to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, and prepare a supplement or amendment to the
Registration Statement so that the Registration Statement
will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading.
(e) Indemnification.
(i) Morrison agrees to indemnify, defend and hold
harmless each Stockholder and its respective officers,
directors, affiliates, agents, employees and
controlling persons (within the meaning of Section 15
of the Securities Act) from and against all loss,
damages, liabilities, expenses, costs, fees and
disbursements of counsel (including the reasonable fees
and expenses of legal counsel to each Stockholder), and
actions to which they may become subject, under the
Securities Act or otherwise, insofar as such loss,
damage, liability, expense or claim (or action in
respect thereof) arises out of or is based upon any
untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
or prospectus contained therein (or any amendment or
supplement thereto) or arises out of or is based upon
any omission or alleged omission to state therein a
material fact required to be stated therein or
necessary to make the statements in any thereof not
misleading, and will reimburse each Stockholder and
such other persons for any legal or any other expenses
incurred in connection with investigating or defending
any such action or claim, except insofar as the same
may have been caused by any untrue statement or
omission contained in this information confirmed by
such Stockholder pursuant to Section 7.1(a) or based
upon information furnished to Morrison in writing by or
on behalf of such Stockholder expressly for use
therein.
(ii) Each Stockholder agrees to indemnify,
defend and hold harmless Morrison and its officers,
directors, affiliates, agents, employees and
controlling persons (within the meaning of Section 15
of the Securities Act) from and against all loss,
damages, liabilities, expenses, costs, fees and
disbursements of counsel (including the reasonable fees
and expenses of legal counsel to Morrison), and actions
to which they may become subject, under the Securities
Act or otherwise, insofar as such loss, damage,
liability, expense or claim (or action in respect
thereof) arises out of or is based upon (1) any untrue
statement or alleged untrue statement of a material
fact contained in any final prospectus contained in the
Registration Statement (or any amendment or supplement
thereto) or arises out of or is based upon any omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement in any thereof not misleading, to the extent
that such untrue statement or omission is contained in
the information confirmed by such Stockholder pursuant
to Section 7.1(a) or is made in reliance upon or in
conformity with information furnished in writing by or
on behalf of such Stockholder expressly for inclusion
in the Registration Statement or prospectus contained
therein (or any amendment or supplement thereto), and
(2) the failure by such Stockholder to comply with the
covenants contained in Section 7.1(c) above, and will
reimburse Morrison and such other persons for any legal
or any other expenses incurred in connection with
investigating or defending any such action or claim.
(f) Fees and Expenses of Registration. Morrison will
pay all expenses and fees incident to the performance of its
obligations in Sections 7.1(a), 7.1(c) and 7.1(d) other than
selling commissions and fees and expenses of counsel or other
advisors to any Stockholder.
7.2 Release of Stockholders from Obligations Under the Loan
Agreement. Effective as of the Closing, Morrison shall release
each of the Stockholders from any and all liabilities or
obligations arising under the Loan Agreement, including, without
limitation, the Morrison Option Agreements and the Amended and
Restated Agreement to Defer Dividends.
8. INDEMNIFICATION
8.1 Definitions. As used in this Article 8:
(a) "Damages" means claims, damages, losses,
judgments, settlements, and expenses, including, without
limitation, all reasonable fees and disbursements of counsel
incident to the investigation or defense of any claim or
proceeding or threatened claim or proceeding, less the amount of
any actual tax or insurance benefits then available to or
received by the Indemnified Party with respect thereto.
(b) "Indemnified Party" means the party seeking
indemnification under Section 8.2 or Section 8.3 hereof.
(c) "Indemnifying Party" means the party having or
allegedly having an indemnification obligation to the Indemnified
Party pursuant to Section 8.2 or Section 8.3 hereof.
8.2 Indemnification of Morrison by Stockholders. On the
terms set forth in this Agreement, the Stockholders shall, from
and after the Effective Time, indemnify, defend, and hold
Morrison and its subsidiaries harmless from, against and in
respect of any and all Damages incurred by Morrison and its
subsidiaries arising from or in connection with any breach of any
representation, warranty or covenant made by the Stockholders in
this Agreement.
The Stockholders' representations, warranties and covenants
set forth in this Agreement shall, for purposes of this Section
8.2, be deemed to have survived for a three (3) year period
following the Effective Time; provided, however, that with
respect to any representations, warranties and covenants of
Crosspoint Venture Partners III, such representations, warranties
or covenants shall be deemed to have survived for a one (1) year
period following the Effective Time; provided, however, that the
Stockholders' covenants set forth in Section 7.1(e) shall be
deemed to survive for five (5) years following the Closing Date.
Morrison hereby acknowledges that Morrison and the Company
entered into the Loan Agreement in November of 1993, and pursuant
thereto Morrison obtained an option to purchase the Company.
Morrison further acknowledges that Mr. Samuel E. Beall, III,
President and Chief Executive Officer of Morrison, has served on
the Board of Directors of the Company since the date of the Loan
Agreement, and Morrison has participated in the management of the
Company since December 13, 1994.
8.3 Indemnification of the Stockholders by Morrison.
(a) Morrison shall, from and after the Effective Time,
indemnify, defend, and hold Larry Lavine harmless from, against
and in respect of any and all Damages incurred by Larry Lavine
arising from or in connection with any liability of Larry Lavine
under any personal guaranty of any Personal Property Lease or
Real Property Lease of the Company which liabilities arise from
and after the Effective Time.
(b) On the terms set forth in this Agreement, Morrison
shall, from and after the Effective Time, indemnify, defend, and
hold each of the Stockholders harmless from, against and in
respect of any and all Damages incurred by any Stockholder
arising from or in connection with any breach of any
representation, warranty or covenant made by Morrison in this
Agreement. Morrison's representations and warranties and
covenants set forth in this Agreement shall, for purposes of this
Section 8.3(b), be deemed to survive for a three (3) year period
following the Effective Time; provided, however, that Morrison's
covenants set forth in Sections 5.14, 7.1(e), and 8.3(a) shall be
deemed to survive for five (5) years after the Closing Date or,
with respect to Section 8.3(a), until the guarantees expire.
Each such representation and warranty shall be deemed to have
been relied upon by the Stockholders, notwithstanding any
investigation or inspection made by or on behalf of the
Stockholders, and shall not be affected in any respect by such
investigation or inspection.
8.4 Method of Asserting Claims, Etc.
(a) In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party
hereunder is asserted against or sought to be collected from an
Indemnified Party by a third party (a "Third Party Claim"), the
Indemnified Party shall notify the Indemnifying Party within the
Notice Period (as defined below) in writing of such Third Party
Claim, specifying the nature of such Third Party Claim and the
amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the final
amount of such Third Party Claim) (the "Claim Notice"). The
Indemnifying Party shall have twenty calendar days (or such
earlier period of time as may be required for the filing of
responsive pleadings to any legal action instituted with respect
to the Third Party Claim or required due to contractual deadlines
imposed upon the Indemnified Party by the contract in dispute but
in any event, not less than 10 days) from the receipt of the
Claim Notice (the "Response Notice Period") to notify the
Indemnified Party, (A) whether or not it disputes its liability
to the Indemnified Party hereunder with respect to such Third
Party Claim and (B) notwithstanding any such dispute, whether or
not it will defend, at its sole cost and expense, the Indemnified
Party against such Third Party Claim. For purposes of this
Article 8, the term "Notice Period", as applied to any Third
Party Claim for which an Indemnified Party seeks to be
indemnified hereunder shall mean twenty calendar days after the
Third Party Claim is first overtly asserted against the
Indemnified Party.
(b) If the Indemnifying Party disputes its liability
with respect to such Third Party Claim or the amount thereof
(whether or not the Indemnifying Party desires to defend the
Indemnified Party against such Third Party Claim as provided in
paragraphs (c) and (d) below), such dispute shall be resolved in
accordance with Section 8.7 hereof. Pending the resolution of
any dispute by the Indemnifying Party of its liability with
respect to any Third Party Claim, such Third Party Claim shall
not be settled without the prior written consent of the
Indemnified Party and the Indemnifying Party, which consent shall
not be unreasonably withheld.
(c) In the event that the Indemnifying Party notifies
the Indemnified Party within the Response Notice Period that it
will defend the Indemnified Party against such Third Party Claim,
then the Indemnifying Party shall assume the defense thereof with
counsel reasonably acceptable to the Indemnified Party, and the
Indemnified Party shall cooperate in all reasonable respects in
such defense, including without limitation in making any
appropriate counterclaim against the person asserting the Third
Party Claim or any appropriate cross-complaint against any person
(unless such counterclaim or cross-complaint would be against any
other entity with which the Indemnified Party has ongoing
business relations and would have a significant likelihood in the
good faith judgment of the Indemnified Party of damaging such
business relationships); provided, however, the Indemnifying
Party shall not, without the prior written consent of the
Indemnified Party which consent shall not be unreasonably
withheld, consent to the entry of any judgment against the
Indemnified Party or enter into any settlement or compromise
which does not include, as an unconditional term thereof, the
giving by the claimant or plaintiff to the Indemnified Party of
a release, in form and substance reasonably satisfactory to the
Indemnified Party, from all liability in respect of such Third
Party Claim. If any Indemnified Party desires to participate in,
but not control, any such defense or settlement, it may do so at
its sole cost and expense. If, in the reasonable opinion of the
Indemnified Party, any such Third Party Claim or the litigation
or resolution of any such Third Party Claim involves an issue or
matter which could reasonably be expected to have a Material
Adverse Effect on the Indemnified Party, then the Indemnified
Party shall have the right to control the defense or settlement
of any such Third Party Claim at its cost and expense, and such
legal fees and expenses shall be included as part of the
indemnification obligation of the Indemnifying Party hereunder;
provided, however, that the Indemnified Party shall not settle
any such Third Party Claim without the prior written consent of
the Indemnifying Party, which consent shall not be unreasonably
withheld. If the Indemnified Party should elect to exercise such
right, the Indemnifying Party shall have the right to participate
in, but not control, the defense or settlement of such Third
Party Claim at its sole cost and expense.
(d) (i) If the Indemnifying Party elects not to
defend the Indemnified Party against such Third Party
Claim, whether by not giving the Indemnified Party
timely notice within the Response Notice Period as
provided above or otherwise, then the Indemnified Party
shall, at the expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification
hereunder), have the right to defend, settle or
compromise any such Third Party Claim with counsel of
its own choosing. In the event the Indemnified Party
proposes to settle a Third Party Claim, the Indemnified
Party shall deliver to the Indemnifying Party written
notice of the proposed settlement of the Third Party
Claim, which the Indemnifying Party may reject in its
reasonable judgment within thirty days of receipt of
such notice. In the event the Indemnified Party
settles such Third Party Claim over the objection of
Indemnifying Party, dispute over such settlement shall
be resolved as provided in Section 8.7 hereof.
(ii) In the event an Indemnified Party has a
claim for indemnification against the Indemnifying
Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall send within 20 days
a Claim Notice with respect to such claim to the
Indemnifying Party. If the Indemnifying Party disputes
its liability with respect to such claim or demand,
such dispute shall be resolved in accordance with
Section 8.7 hereof; if the Indemnifying Party accepts
or agrees with such claim or does not notify the
Indemnified Party within the Response Notice Period
that it disputes such claim, the amount of such claim
shall be conclusively deemed a liability of the
Indemnifying Party hereunder.
8.5 Limitations of Liability. Notwithstanding anything
contained in this Article 8 to the contrary:
(a) Indemnification Threshold. With respect to any
breach of a representation or warranty of this Agreement, the
Indemnified Party shall be entitled to indemnification under this
Article 8 only if, and only to the extent that, the aggregate
Damages incurred or suffered or to be incurred or suffered
exceeds Ninety Thousand Dollars ($90,000).
(b) Maximum Liability. In no event will the aggregate
Damages recoverable from the Stockholders exceed Nine Million
Dollars ($9,000,000) and the amount of Damages recoverable from
any individual Stockholder shall be limited to the Pro Rata
Amount of Total Consideration it receives pursuant to this
Agreement.
8.6 Payment. The Indemnifying Party shall pay the
Indemnified Party, within ten days after the final determination
of liability under this Article 8, the amount of any
indemnification to which the Indemnified Party is entitled,
subject to Section 8.5 hereunder. Upon the payment in full of
any claim, the Indemnifying Party shall be subrogated to the
rights of the Indemnified Party against any person, firm or
corporation with respect to the subject matter of such claim.
8.7 Arbitration. All disputes under this Article 8 shall
be settled by arbitration in Houston, Texas, before a single
arbitrator pursuant to the rules of the American Arbitration
Association (the "AAA"). Arbitration may be commenced at any
time by any party hereto giving written notice to each other
party to a dispute that such dispute has been referred to
arbitration under this Section 8.7. The arbitrator shall be
selected by the joint agreement of the parties, but if they do
not so agree within 20 days after the date of the notice referred
to in the preceding sentence, the selection shall be made
pursuant to the rules from the panels of arbitrators maintained
by the AAA. Any award rendered by the arbitrator shall be
conclusive and binding upon the parties hereto; provided,
however, that any such award shall be accompanied by a written
opinion of the arbitrator giving the reasons for the award. This
provision for arbitration shall be specifically enforceable by
the parties, and the decision of the arbitrator in accordance
herewith shall be final and binding and there shall be no right
of appeal therefrom. Each party shall pay its own expenses of
arbitration and the expenses of the arbitrator shall be equally
shared.
9. COVENANT NOT TO COMPETE
8.8 Definitions. Capitalized terms used in this Article 9
shall have the following meanings:
(a) "Area" shall mean the states of Texas, Alabama,
Arkansas, Florida, Oklahoma, Colorado and Virginia.
(b) "Competing Business" shall mean any business
organization of whatever form engaged, either directly or
indirectly, in any business or enterprise which is the same as,
or substantially the same as, the Business as conducted by the
Company on or before the Effective Time.
(c) "Proprietary Information" shall mean information
related to the Company or the Business (i) which derives economic
value, actual or potential, from not being generally known to, or
readily ascertainable by, other persons who can obtain economic
value from its disclosure or use and, (ii) which is the subject
of efforts that are reasonable under the circumstances to
maintain its secrecy. Assuming the foregoing criteria are met,
Proprietary Information includes, but is not limited to, the
financial affairs, processes, services, employees, employees'
compensation, research, development, existing and future products
and services, product and service plans and designs, purchasing,
accounting, distribution systems, marketing, formulae,
compilations, programs, methods, techniques, drawings, and
suppliers of the Company.
(d) "Restricted Period" shall mean the period
commencing with the Effective Time and ending on the third (3rd)
anniversary thereof.
9.2 Agreement Not to Compete. Unless otherwise consented
to in writing by Morrison, the Stockholders agree that during the
Restricted Period they will not, within the Area, either directly
or indirectly, on their own behalf or in the service or on behalf
of others, engage in any Competing Business or provide
managerial, supervisory, administrative, financial or consulting
services or assistance to, or own a beneficial interest in, any
Competing Business except for the ownership of less than five
(5%) percent of a publicly traded company.
9.3 Agreement Not to Solicit Employees. The Stockholders
agree that during the Restricted Period, they will not, without
the prior written consent of Morrison, either directly or
indirectly, on their own behalf or in the service or on behalf of
others, solicit, divert, or hire away, or attempt to solicit,
divert, or hire away, from the employment of Morrison or the
Company, any exempt person employed by Morrison or the Company.
9.4 Confidentiality.
(a) After the Closing, the Stockholders (i) will hold
the Proprietary Information in confidence, and (ii) will not use,
duplicate, reproduce, distribute, disclose or otherwise
disseminate the Proprietary Information. In the event that the
Stockholders determine that it is required by law to disclose any
Proprietary Information, the Stockholders will not make such
disclosure unless (and then only to the extent that) the
Stockholders have been advised by independent legal counsel that
such disclosure is required by law and then only after prior
written notice is given to Morrison (if reasonably practical)
that such disclosure has been requested and is required by law.
(b) Any and all reproductions of the Proprietary
Information in the custody or control of the Stockholders will
prominently display a confidentiality legend.
(c) The Stockholders covenant and agree that on or
before the Closing Date the Stockholders will destroy or will
deliver to Morrison all tangible copies and embodiments of the
Proprietary Information in their possession or control.
9.5 Remedies. The parties hereto specifically acknowledge
and agree that the remedy at law for breach of this Article 9
will be inadequate and that any party, in addition to any other
relief available to it, shall be entitled to temporary and
permanent injunctive relief without the necessity of proving
actual damages.
10. TERMINATION; AMENDMENTS; WAIVER
10.1 Termination. This Agreement may be terminated,
and the Transaction may be abandoned, at any time prior to the
Closing Date:
(a) by the written consent of the Stockholders and
Morrison;
(b) by Morrison or the Stockholders if, without a
material breach of the terminating party, the Closing shall not
have occurred on or before January 31, 1995, which date may be
extended by mutual consent of Morrison and the Stockholders;
(c) by Morrison or the Stockholders if any court of
competent jurisdiction in the United States or other governmental
body in the United States shall have issued an order, decree, or
ruling or taken any other action restraining, enjoining, or
otherwise prohibiting the Transaction and such order, decree,
ruling, or other action shall have become final and nonappealable
or shall be appealable only with more than commercially
reasonable efforts;
(d) by Morrison if there has been a material
misrepresentation, breach of covenant or agreement by the
Stockholders in their representations, warranties, covenants or
agreements set forth herein; or
(e) by the Stockholders if there has been a material
misrepresentation, breach of warranty or breach of covenant or
agreement by Morrison in its representations, warranties,
covenants or agreements set forth herein.
10.2 Effect of Termination. In the event of the
termination and abandonment of this Agreement pursuant to Section
10.1 hereof, this Agreement shall forthwith become void and have
no effect, other than the provisions of Sections 5.3(b) and 11.7,
which shall survive. Nothing contained in this Section 10.2
shall relieve any party from liability for any breach of this
Agreement occurring before such termination.
10.3 Amendment. This Agreement may be amended by
Morrison and the Stockholders owning Shares constituting greater
than 66-2/3% of the outstanding Shares at any time but no
amendment shall be made that decreases the amount or changes the
type of consideration into which each Share shall be converted
upon consummation of the Transaction without the approval of each
of the Stockholders. This Agreement may not be amended except by
an instrument in writing signed on behalf of such agreeing
parties.
10.4 Extension; Waiver. At any time before the
Closing, any party hereto may (i) extend the time for the
performance of any obligation or other act of any other party
hereto in favor of the extending party subject to Section 10.1(b)
hereof, (ii) waive any inaccuracy in the representations and
warranties contained herein by any other party or in any
document, certificate, or writing delivered pursuant hereto by
any other party and (iii), waive compliance with any of the
agreements of any other party in favor of the waiving party or
with any conditions to its own obligations. Any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of the party or parties to be bound
thereby.
11. MISCELLANEOUS
11.1 Entire Agreement; Assignment. This Agreement,
together with any confidentiality agreements between the parties
hereto, (a) constitutes, with the Schedules and the Exhibits
hereto, the entire agreement among the parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof and thereof and
(b) shall not be assigned by operation of law or otherwise,
provided that Morrison may assign its respective rights and
obligations to any direct or indirect subsidiary of Morrison, but
no such assignment shall relieve Morrison of its obligations
hereunder.
11.2 Remedies. The remedies for money damages provided
for in this Agreement shall be the exclusive remedies for money
damages available to a party hereto for any misrepresentation,
breach of warranty or representation or nonperformance or breach
of a covenant, obligation or agreement hereunder, except that
nothing herein shall limit any remedy available to a party for
fraud.
11.3 Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, each of
which shall remain in full force and effect.
11.4 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be
deemed to have been duly given, effective and received when
delivered in person or by electronic facsimile transmission,
cable, telegram, telex, or a courier, or five (5) days following
the date such notice is mailed by registered or certified mail
(postage prepaid, return receipt requested), to the respective
parties as follows:
If to Morrison, to it at:
Morrison Restaurants Inc.
4721 Morrison Drive
P.O. Box 160266
Mobile, Alabama 36625-0001
Telecopy: 205/344-3066
Attention: Pfilip G. Hunt, Esq.
with a copy to:
Powell, Goldstein, Frazer & Murphy
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy: 404/572-6999
Attention: Thomas R. McNeill, Esq.
If to the Stockholders, to them at the address set forth
opposite his or her name on Exhibit A attached hereto
with a copy to:
Gardere & Wynne, L.L.P.
1601 Elm Street
Suite 3000
Dallas, Texas 75201
Telecopy: 214/999-4467
Attention: Richard A. Tulli, Esq.
or to such other address as the person to whom notice is given
may have previously furnished to the others in writing in the
manner set forth above (provided that notice of any change of
address shall be effective only upon actual receipt thereof).
11.4 Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws of the
State of Texas, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws thereof.
11.4 Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation
of this Agreement.
11.4 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same agreement.
11.4 Expenses. Except for not more than $50,000 of the
Stockholders' expense, which shall be paid by Morrison, all costs
and expenses incurred in connection with the Transaction shall be
paid by the party incurring such expenses.
11.4 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies
of any nature whatsoever under or by reason of this Agreement.
11.4 Effective Time. The parties hereto intend that
the transaction contemplated hereby, when closed on the Closing
Date, shall be effective as of January 2, 1995 (the "Effective
Time"), to the extent the same is consistent with applicable
legal, tax, accounting, financial reporting and similar
principles.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed as of the day and year first above
written.
MORRISON RESTAURANTS INC.
By: /s/ Pfilip G. Hunt
Title: S.V.P., General Counsel &
Secretary
STOCKHOLDERS:
CROSSPOINT VENTURE PARTNERS III
By: /s/ John B. Mumford
Name: John B. Mumford
/s/ Larry Lavine
Larry Lavine
/s/ Jack Lavine
Jack Lavine
EXHIBIT A
STOCKHOLDERS
Stockholder: Address:
Crosspoint Venture Partners III One First Street
Los Altos, CA 94022
Telecopy: 415/948-6172
Attention: John B. Mumford
Larry Lavine 5641 Dyer Street
Dallas, TX 75206
Telecopy: 214/739-7082
Jack Lavine 14156 Magnolia Blvd.
Sherman Oaks, CA 91423
Telecopy: 818/995-7476