STOCK PURCHASE AGREEMENT
BY AND AMONG
PEASANT HOLDING CORP., A DELAWARE CORPORATION ("SELLER"),
MORTON'S RESTAURANT GROUP, INC., A DELAWARE CORPORATION ("SELLER PARENT"),
AND
PRI ACQUISITION CORPORATION, A DELAWARE CORPORATION ("BUYER")
DECEMBER 31, 1996
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
PURCHASE AND SALE OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Payment of Purchase Price.. . . . . . . . . . . . . . . . . . . 4
Section 3.2. Post-Closing Adjustment.. . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER PARENT AND SELLER . . . . . . . . . . . . 6
Section 4.1. Corporate Organization. . . . . . . . . . . . . . . . . . . . . 6
Section 4.2. Capitalization of PRI.. . . . . . . . . . . . . . . . . . . . . 6
Section 4.3. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.4. Consents and Approvals; No Violations.. . . . . . . . . . . . . 7
Section 4.5. Financial Statements. . . . . . . . . . . . . . . . . . . . . . 7
Section 4.6. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.7. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.8. Title to Properties; Inventories. . . . . . . . . . . . . . . . 9
Section 4.9. Absence of Changes. . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.10. Intellectual Property.. . . . . . . . . . . . . . . . . . . . . 11
Section 4.11. Leases and Contracts. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.12. Bank Accounts.. . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 4.13. Licenses and Permits. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.14. Related Transactions. . . . . . . . . . . . . . . . . . . . . . 13
Section 4.15. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.16. Labor Matters.. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.17. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . 14
Section 4.18. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.19. Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . 16
Section 4.20. Environmental Matters.. . . . . . . . . . . . . . . . . . . . . 16
Section 4.21. Disclosures.. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.22. Transactional Effect. . . . . . . . . . . . . . . . . . . . . . 17
Section 4.23. Sufficient Assets.. . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.24. Operation of the Business.. . . . . . . . . . . . . . . . . . . 17
Section 4.25. Brokers and Finders.. . . . . . . . . . . . . . . . . . . . . . 17
Section 4.26. Limitation on Seller Parent's and Seller's
Representations and Warranties. . . . . . . . . . . . . . . . . 17
Section 4.27. TRAC Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 18
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . . . . . . . . . 18
Section 5.1. Corporate Organization. . . . . . . . . . . . . . . . . . . . . 18
Section 5.2. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.3. Consents and Approvals; No Violations.. . . . . . . . . . . . . 18
Section 5.4. Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.5. Investment Intent . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.6. Buyer's Investigation.. . . . . . . . . . . . . . . . . . . . . 19
Section 5.7. Brokers and Finders.. . . . . . . . . . . . . . . . . . . . . . 19
Section 5.8. No Reliance.. . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.9. Financing Commitment. . . . . . . . . . . . . . . . . . . . . . 20
Section 5.10. Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.11. No HSR Filing . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.12. Liquor Licenses.. . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI
FURTHER COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.1. Covenants of Seller Parent and Seller Pending the Closing . . . 20
Section 6.2. Covenants of Buyer Pending the Closing. . . . . . . . . . . . . 22
Section 6.3. Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.4. Effective Time of Closing and Transfer. . . . . . . . . . . . . 22
Section 6.5. Announcements . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.6. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.7. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 23
Section 6.8. Cooperation and Preservation of Records.. . . . . . . . . . . . 23
Section 6.9. Limitation of Liabilities.. . . . . . . . . . . . . . . . . . . 25
Section 6.10. Employees and Employee Benefit Plans. . . . . . . . . . . . . . 26
Section 6.11. Distributions and Dividends.. . . . . . . . . . . . . . . . . . 27
Section 6.12. Transfer of Bank Accounts.. . . . . . . . . . . . . . . . . . . 27
Section 6.13. Reserves and Writeup or Writedown of
Assets or Liabilities . . . . . . . . . . . . . . . . . . . . . 27
Section 6.14. Tax Allocation Agreement. . . . . . . . . . . . . . . . . . . . 27
Section 6.15. Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.16. Forgiveness of Intercompany Indebtedness. . . . . . . . . . . . 28
Section 6.17. Extraordinary Compensation. . . . . . . . . . . . . . . . . . . 28
Section 6.18. Stockholders Agreement. . . . . . . . . . . . . . . . . . . . . 29
Section 6.19. Intentionally Omitted.. . . . . . . . . . . . . . . . . . . . . 29
Section 6.20. Winfield's Transaction. . . . . . . . . . . . . . . . . . . . . 29
Section 6.21. Termination of Certain Agreements . . . . . . . . . . . . . . . 29
Section 6.22. Other Business Indemnification. . . . . . . . . . . . . . . . . 29
Section 6.23. Lease Guaranties. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.24. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . 30
Section 6.25. Morton's Stock Options. . . . . . . . . . . . . . . . . . . . . 30
Section 6.26. Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
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Section 6.27. Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 6.28. Workmen's Compensation Obligations. . . . . . . . . . . . . . . 30
ARTICLE VII
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.1. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 7.2. Procedure and Effect of Termination . . . . . . . . . . . . . . 31
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 8.1. Seller's Closing Deliveries . . . . . . . . . . . . . . . . . . 32
Section 8.2. Representations and Warranties True.. . . . . . . . . . . . . . 33
Section 8.3. Performances. . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 8.4. Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.5. No Injunction or Proceeding . . . . . . . . . . . . . . . . . . 34
Section 8.6. Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.7. Governmental Consents and Approvals . . . . . . . . . . . . . . 34
Section 8.8. Release of Lien . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.9. Simultaneous Acquisition. . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX
CONDITIONS TO SELLER PARENT'S AND SELLER'S OBLIGATIONS . . . . . . . . . . . . . . 34
Section 9.1. Payment of Purchase Price . . . . . . . . . . . . . . . . . . . 34
Section 9.2. Buyer's Closing Deliveries. . . . . . . . . . . . . . . . . . . 35
Section 9.3. Representations and Warranties True . . . . . . . . . . . . . . 35
Section 9.4. Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.5. Legal Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.6. Governmental Consents and Approvals . . . . . . . . . . . . . . 36
Section 9.7. No Injunction or Proceeding . . . . . . . . . . . . . . . . . . 36
Section 9.8. Release of Lien . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.9. TRAC Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.10. Simultaneous Acquisition. . . . . . . . . . . . . . . . . . . . 36
ARTICLE X
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.1. Buyer Claims. . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 10.2. Assertion of Buyer Claims . . . . . . . . . . . . . . . . . . . 38
Section 10.3. Seller Claims . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.4. Assertion of Seller Claims. . . . . . . . . . . . . . . . . . . 39
Section 10.5. Other Rights and Remedies . . . . . . . . . . . . . . . . . . . 40
Section 10.6. Immaterial Breaches . . . . . . . . . . . . . . . . . . . . . . 40
Section 10.7. Survival of Representations and Warranties. . . . . . . . . . . 40
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ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.1. Hiring Limitations. . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.2. Entire Understanding, Waiver, Etc . . . . . . . . . . . . . . . 41
Section 11.3. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.4. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 11.6. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 42
Section 11.7. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.8. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.9. Construction of Terms. . . . . . . . . . . . . . . . . . . . . . 42
Section 11.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 43
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made and entered into as of December 31,
1996, by and among PEASANT HOLDING CORP., a Delaware corporation ("Seller"),
MORTON'S RESTAURANT GROUP, INC., a Delaware corporation ("Seller Parent"),
and PRI ACQUISITION CORPORATION, a Delaware corporation ("Buyer").
RECITALS
WHEREAS, Seller owns all of the issued and outstanding shares (the
"Stock") of common stock of The Peasant Restaurants, Inc., a Delaware
corporation ("PRI"); and
WHEREAS, Seller desires to sell 80.1% of the Stock of PRI (the "PRI
Shares") to Buyer, and Buyer desires to purchase the PRI Shares from Seller,
on the terms and subject to the conditions hereinafter set forth; and
WHEREAS, Seller Parent, the parent of Seller, has joined in the execution
of this Agreement for the purposes expressly provided for herein;
NOW, THEREFORE, in consideration of the promises and of the mutual
representations, warranties, covenants and agreements set forth below and for
other good and valuable consideration, the receipt and sufficiency of which
are expressly acknowledged by Seller and Buyer, the parties agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article shall have the meanings set forth below
for all purposes of this Agreement:
SECTION 1.1. "Accountants" means KPMG Peat Marwick, LP.
SECTION 1.2. "Affiliate" of a Person means a Person controlling,
controlled by or under common control with such Person.
SECTION 1.3. "Borrowings" means the financing by the Lenders of certain
of the transactions contemplated herein, including, but not limited to, the
payment by Buyer of a portion of the Purchase Price.
1
SECTION 1.4. "Business" means the business presently conducted by PRI
and the MRI Group (unless in the context of this Agreement a reference only
to the business of PRI is indicated), including the operation of white
tablecloth restaurants utilizing various names and the operation of casual
dining restaurants under the name Mick's; provided, however, that for the
purposes of this Agreement the term "Business" shall exclude the business
conducted by the Repositioned Subsidiaries.
SECTION 1.5. "Business Day" means any day on which banks are open for
business in New York City.
SECTION 1.6. "Closing" means the consummation and effectuation of the
transactions contemplated herein pursuant to the terms and conditions of this
Agreement and the MRI Agreement which shall be held on the fifth business day
after the conditions specified in Articles VIII and IX shall have been
satisfied or waived, at the offices of Baker, Donelson, Bearman & Caldwell in
Nashville, Tennessee, or at such other time, date and place as the parties
hereto shall mutually agree in writing.
SECTION 1.7. "Closing Date" means the date on which the Closing occurs,
which shall be on or prior to February 28, 1997, unless extended as provided
in Section 7.1(b).
SECTION 1.8. "Code" means the Internal Revenue Code of 1986, as amended.
SECTION 1.9. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
SECTION 1.10. "Financial Statements" means the financial statements as
identified and defined in Section 4.7 hereof.
SECTION 1.11. "GAAP" means generally accepted accounting principles.
SECTION 1.12. "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
SECTION 1.13. "Independent Accounting Firm" means Coopers & Lybrand,
L.L.P.
SECTION 1.14. "Lenders" means certain providers of financing in
conjunction with certain of the transactions contemplated herein, including,
but not limited to, the payment by Buyer of a portion of the Purchase Price.
SECTION 1.15. "Permitted Encumbrances" means (i) liens for Taxes and
other governmental charges not yet past due or that are being contested in
good faith through appropriate proceedings, (ii) title exceptions that are
immaterial to the Business and (iii) special assessments with respect to the
personal property owned by the MAP Group for 1996 and subsequent years.
2
SECTION 1.16. "Person" means an individual, partnership, limited
liability company, corporation, trust, unincorporated organization,
association or joint venture or a government, agency, political subdivision
or instrumentality thereof.
SECTION 1.17. "Post-Closing Adjustment" means the amount to be
determined pursuant to Section 3.2 hereof.
SECTION 1.18. "MRIACQ" means MRI Acquisition Corporation, a Delaware
corporation which is an Affiliate of Buyer and which has entered into a stock
purchase agreement of even date herewith with Seller Parent and Seller (the
"MRI Agreement") for the purchase of 80.1% of the outstanding common stock of
Mick's Restaurants, Inc. ("MRI" and, together with its subsidiaries which are
not Repositioned Subsidiaries, the "MRI Group") pursuant to which, among
other things, MRIACQ will issue to Seller a promissory note (the "MRI Note").
SECTION 1.19. "PRI Stock" means the issued and outstanding shares of
common stock of PRI, 80.1% of which shall be sold by Seller to Buyer pursuant
to this Agreement (the "PRI Shares").
SECTION 1.20. "Purchase Price" means $2,723,400, as adjusted (if at all)
pursuant to Section 3.2 hereof.
SECTION 1.21. "Related Agreements" means the Stockholders Agreement (as
defined in Section 6.18 hereof), the Guarantee Agreement (as defined in
Section 6.2 hereof) and the Note (as defined in Section 3.1(a)(ii)).
SECTION 1.22. "Repositioned Subsidiaries" means those subsidiary
corporations owned by MRI or PRI on the date of this Agreement (and
identified on Schedule 1.22 hereto), the ownership of which shall be
transferred to Seller or its designee on or prior to the Closing Date.
SECTION 1.23. "Schedule" means any schedule referred to in this
Agreement, which shall be an integral part of this Agreement.
SECTION 1.24. "Taxes" means all taxes, assessments, and charges imposed
by any federal, state, local, or foreign taxing authority, including
interest, penalties and additions thereto.
3
ARTICLE II
PURCHASE AND SALE OF SHARES
Upon the terms and subject to the conditions of this Agreement, at the
Closing, Seller shall sell, assign, transfer, convey and deliver to Buyer,
and Buyer shall purchase and accept from Seller, all of Seller's right, title
and interest in and to the PRI Shares, for the Purchase Price, free and clear
of all pledges, security interests, liens, claims, options, charges,
encumbrances and restrictions.
ARTICLE III
PURCHASE PRICE
SECTION 3.1. PAYMENT OF PURCHASE PRICE. (a)(i) At the Closing, Buyer
shall pay to Seller against delivery of the PRI Shares and to such account as
Seller shall have designated in writing to Buyer at least two Business Days
prior to the Closing Date immediately available funds in an amount of
$1,723,400.
(ii) At the Closing, Buyer shall deliver to Seller its
unsecured promissory note in the principal amount of $1,000,000,
substantially in the form attached hereto as Exhibit A (the "Note").
SECTION 3.2. POST-CLOSING ADJUSTMENT. (a) At the Closing Date, the
Seller shall deliver to Buyer a notice containing an estimate of the Adjusted
Working Capital Percentage (as hereinafter defined) as of the Closing Date
(the "Estimated Adjusted Working Capital Percentage") and shall provide the
Buyer with a schedule setting forth the basis of such computation in
reasonable detail, which shall be accompanied by a certificate of an officer
of the Seller to the effect that (x) such estimate represents a good faith
effort to determine accurately the Adjusted Working Capital Percentage as of
the Closing Date and (y) the amounts reflected in such statement are based on
amounts reflected on the books and records of the Business and are calculated
consistently with past practices of the Business. The "Adjusted Working
Capital Percentage" shall be defined as the quotient (expressed as a
percentage) of (x) the Current Assets of the Business (excluding deferred Tax
assets) and (y) the Current Liabilities of the Business, in the case of (x)
and (y), as calculated to give effect to the forgiveness of intercompany
debt. For purposes of the foregoing, "Current Assets" shall include (i)
cash, cash equivalents and marketable securities, (ii) accounts receivable,
(iii) inventory and (iv) prepaid and other current assets, but shall exclude
deferred Tax assets. For purposes of the foregoing, "Current Liabilities"
shall include (i) accounts payable, (ii) accrued expenses, (iii) book
overdrafts, (iv) the current portion of capital leases and (v) other current
liabilities, excluding Tax liabilities and workmen's compensation claims
liabilities.
4
(b) Following the Closing, the Seller and its accountants shall be
afforded full access to the financial accounting records of PRI (through and
including the Closing Date) and any work papers of PRI utilized by the Seller
or its independent accountants in the calculation of the Estimated Adjusted
Working Capital Percentage and any officers, employees or other
representatives of PRI who participated in the preparation thereof. Within
30 days after the Closing, the Seller shall notify the Buyer in writing of
its revised Estimated Adjusted Working Capital Percentage (which shall
indicate no revision is necessary if such be the case) (the "Revised
Estimated Working Capital Percentage"). Within 90 days after the Closing,
the Buyer (which, with its accountants, shall have been afforded full access
to any work papers prepared by Seller or its independent accountants in the
calculation of the Revised Estimated Working Capital Percentage and any
officers, employees or other representatives of the Seller who participated
in the preparation thereof) shall notify the Seller in writing that either
(A) it concurs with the calculation of Revised Estimated Adjusted Working
Capital Percentage or (B) it disagrees with such calculation, specifying in
reasonable detail the items as to which disagreement exists (the "Closing
Disputed Matters") and setting forth its calculation of the Adjusted Working
Capital Percentage. If a notice of disagreement is delivered by the Buyer,
the Buyer and the Seller shall negotiate in good faith to resolve in writing
any Closing Disputed Matters. If the Buyer and the Seller are unable to
reach an agreement within a period of 45 days after the receipt by the Seller
of notice of the existence of any Closing Disputed Matter, then all Closing
Disputed Matters as to which written agreement has not been reached shall be
reviewed by the Independent Accounting Firm. The parties shall make
available to the Independent Accounting Firm all work papers and all other
information and materials in their respective possessions relating to such
dispute. The Independent Accounting Firm shall consider only the Closing
Disputed Matters. The Independent Accounting Firm shall be instructed by the
parties to act promptly to resolve all Closing Disputed Matters, and its
decision with respect thereto shall be final and binding upon the parties.
The determination of the Adjusted Working Capital Percentage resulting from
the resolution of all Closing Disputed Matters, whether by the Independent
Accounting Firm or by the Seller and the Buyer, shall thereafter be for all
purposes hereunder the "Final Adjusted Working Capital Percentage".
(c) Within five business days after the earlier of (i) receipt by
the Seller of the Buyer's concurrence with the Revised Estimated Adjusted
Working Capital Percentage and (ii) the final resolution of any Closing
Disputed Matters: (A) if the Final Adjusted Working Capital Percentage
exceeds 81%, the Buyer shall pay to the Seller the amount equal to (x)
Current Assets (as finally determined) minus (y) the product of (1) 0.81 and
(2) Current Liabilities (as finally determined), or (B) if the Final Adjusted
Working Capital Percentage is less than 81%, the Seller (or if not Seller,
then Seller Parent) shall pay to the Buyer the amount equal to (x) the
product of (1) 0.81 and (2) Current Liabilities (as finally determined) minus
(y) Current Assets (as finally determined). Forty (40%) percent of any cash
payments to be made by Buyer and MRIACQ pursuant to this Section 3.2(c) and
Section 3.2(c) of the MRI Agreement shall be attributable to Buyer, and sixty
(60%) percent shall be attributable to MRIACQ. Any payment pursuant to (A)
or (B) above shall be made by wire transfer in immediately available funds
and shall be accompanied by interest
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thereon from the Closing Date at a rate equal to 11% per annum; provided,
however, that in the case of clause (B) above, at Seller's sole option and by
written notice to Buyer no later than four business days after the event
described in clause (i) or (ii) above, Seller may elect to offset an amount
equal to 37% of the amount payable by Seller pursuant to clause (B) above by
reducing the principal amount of the Note and the MRI Note by such amount
payable by Seller, in which case Seller and Buyer shall promptly amend the
Note and the MRI Note to reflect such reduction (effective as of the Closing
Date); provided further, that the aggregate amount of the reduction shall not
exceed $50,000. Sixty (60%) percent of (i) any cash payments shall be paid
to MRIACQ and (ii) any such reduction shall be allocated to the MRI Note, and
forty (40%) percent of (i) any cash payments shall be paid to Buyer and (ii)
any such reduction shall be allocated to the Note.
(d) Each party shall bear its own expenses and the fees and
expenses of its own representatives and experts, including its independent
auditors, in connection with the preparation, review and dispute (if any),
and the final determination, of the Final Adjusted Working Capital
Percentage. The parties shall share equally in the costs, expenses and fees
of the Independent Accounting Firm.
(e) The provisions of this Article III shall be applied to PRI and
the MRI Group on a consolidated basis as if both the MRI Group and PRI were a
single company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER PARENT AND SELLER
Seller Parent and Seller, jointly and severally, hereby represent and
warrant to Buyer and PRI as follows:
SECTION 4.1. CORPORATE ORGANIZATION. Each of Seller Parent, Seller and
PRI is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the full corporate right,
power and authority to own, lease and operate all of its properties and
assets and to carry out its business as it is presently conducted. PRI is
duly licensed or qualified to do business as a foreign corporation and is in
good standing in each jurisdiction, a list of which for PRI is set forth in
Schedule 4.1, in which the ownership of property or the conduct of its
business requires such qualification or license. PRI has (or on the Closing
Date will have) no subsidiaries, and there are no corporations, joint
ventures, partnerships or other entities or arrangements in which PRI,
directly or indirectly, owns any capital stock or an equity interest. Seller
is a majority owned subsidiary of Seller Parent.
SECTION 4.2. CAPITALIZATION OF PRI. The authorized capital stock of
PRI consists solely of two thousand (2,000) shares of voting common stock,
$10.00 par value per share, of which one thousand (1,000) shares are issued
and outstanding and constitute the PRI
6
Stock. All issued and outstanding shares of capital stock of PRI have been
duly authorized and validly issued, are fully paid and nonassessable, were
issued without violation of any preemptive rights and are free of any
preemptive rights. Except for this Agreement, there are no outstanding
options, warrants or other rights, nor any agreements, commitments or
arrangements of any kind, relating to the subscription for issuance, voting,
acquisition, sale, repurchase, transfer or disposition of (i) any capital
stock of PRI or securities convertible into or exchangeable for capital stock
of PRI or (ii) any options, warrants or subscription rights relating to any
such capital stock or securities of PRI. Seller is the sole record and
beneficial holder of all the outstanding capital stock of PRI subject, except
as set forth in Schedule 4.2, to no pledges, security interests, liens,
claims, options, proxies, voting agreements, charges, restrictions on
transfer or encumbrances of any kind whatsoever. The consummation of the
transactions contemplated hereby will convey to Buyer good and marketable
title to the PRI Shares free and clear of all pledges, claims, liens,
security interests, charges, proxies, voting agreements, restrictions on
transfer or encumbrances of any nature whatsoever.
SECTION 4.3. AUTHORITY. Each of Seller Parent and Seller has all
requisite corporate right, power and authority to execute, deliver and
perform this Agreement and the Related Agreements and all other agreements
necessary to effectuate the provisions of this Agreement. The execution,
delivery and performance of this Agreement and the Related Agreements by each
of Seller Parent and Seller have been (or will be) duly and validly
authorized and approved by all necessary corporate action of Seller and
Seller Parent. This Agreement and the Related Agreements have been (or will
be) duly and validly executed and delivered by each of Seller Parent and
Seller and constitute (or upon execution and delivery thereof will
constitute) the legal, valid and binding obligation of each of Seller Parent
and Seller, enforceable against it in accordance with its terms, except as
may be limited by bankruptcy, insolvency or other laws affecting creditors'
rights generally or as may be modified by a court of equity in an action for
specific performance.
SECTION 4.4. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set
forth on Schedule 4.4, the execution, delivery and performance of this
Agreement by Seller Parent and Seller will not (with or without the giving of
notice or the passage of time, or both) (i) violate any applicable provision
of law or any rule or regulation of any federal, state or local
administrative agency or governmental authority applicable to Seller Parent,
Seller or PRI, or any order, writ, injunction, judgment or decree of any
court, administrative agency or governmental authority applicable to Seller
Parent, Seller or PRI, (ii) violate the Certificate of Incorporation or
Bylaws of Seller Parent, Seller or PRI, (iii) require any consent under or
constitute a default under any agreement (including any Contract), indenture,
mortgage, deed of trust, lease, license, permit or other instrument to which
Seller Parent, Seller or PRI is a party or by which any of them or any of
their properties or assets is bound, or any license, permit or certificate
held by any of them, (iv) require any consent or approval by, notice to or
registration with any governmental authority other than the appropriate
filings pursuant to the HSR Act, if required, and the expiration of the
applicable waiting period
7
thereunder or (v) result in the creation of any lien, claim, encumbrance or
charge upon any of the PRI Shares or any property or assets of PRI.
SECTION 4.5. FINANCIAL STATEMENTS. Schedule 4.5 contains complete and
correct copies of (i) the audited consolidated balance sheets and the related
audited consolidated statements of operations and accumulated deficit and
cash flows (including any related notes thereto) of PRI as of and for the
fiscal year ended December 31, 1995, together with a report thereon by the
Accountants, (ii) the audited consolidated balance sheets and the related
audited consolidated statements of operations and accumulated deficit and
cash flows of PRI for the fiscal year ended January 1, 1995, together with a
report thereon by the Accountants and (iii) the unaudited consolidated
balance sheets and the related consolidated statement of operations of PRI
for the period January 1, 1996, to September 29, 1996 (collectively, the
"Financial Statements"). A complete and correct reconciliation of PRI to the
audited consolidated statements of operations of PRI is included on Schedule
4.5. Except as set forth on Schedule 4.5, the Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved and fairly present (i) the consolidated financial position
of PRI as of the respective dates thereof and (ii) the consolidated income,
retained earnings or accumulated deficits and cash flows, respectively, of
PRI for the fiscal years ended December 31, 1995, and January 1, 1995, and
for the period January 1, 1996, to September 29, 1996, except, in the case of
interim financial statements, for normal year-end audit adjustments. The
Financial Statements do not reflect the operations of any entity or business
not intended to constitute a part of the Business, other than the
Repositioned Subsidiaries.
SECTION 4.6. INDEBTEDNESS. Except as disclosed in Schedule 4.6, there
exists (i) no indebtedness that would be required by GAAP to be reported in
the Financial Statements, except for intercompany indebtedness of PRI to
Seller Parent or Seller (or any of their respective Affiliates), all of which
indebtedness shall be forgiven at or prior to the Closing and (ii) no
guaranty or similar undertaking by PRI with respect to any obligation of the
Repositioned Subsidiaries or any other Affiliate of Seller Parent.
SECTION 4.7. TAXES. Except as set forth in Schedule 4.7, PRI has
timely filed all returns, declarations, reports, information returns and
statements required to be filed by it (as a member of an affiliated group or
otherwise) in respect of any Taxes and has paid all Taxes currently due and
payable by any of them. Except as set forth in Schedule 4.7, no written
notice of any proposed tax deficiency, assessment or levy has been received
by PRI. PRI has duly withheld from each payment from which such withholding
is required by law, and of which it had actual knowledge, the amount of all
Taxes required to be withheld therefrom and has paid the same (to the extent
due), or otherwise set aside, together with the employer's share of the same,
if any, to the proper tax receiving officers. There are, except for
Permitted Encumbrances, no tax liens on any of the assets of PRI. PRI has
not filed a consent under Code Section 341(f) concerning collapsible
corporations. PRI has not made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be
8
deductible under Code Section 280G. Seller is not a "foreign person" within
the meaning of Treasury Regulations Section 1.1445-2(b)(2). Except as set
forth in Schedule 4.7, PRI is not a party to any tax allocation or sharing
agreement. PRI (A) has not been a member of an affiliated group (within the
meaning of Section 1504 of the Code) filing a consolidated federal income tax
return (other than a group the common parent of which was Seller Parent or
its predecessors) or (B) has no liability for the Taxes of any Person under
Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise.
SECTION 4.8. TITLE TO PROPERTIES; INVENTORIES.
(a) Except for Permitted Encumbrances, as set forth in Schedule 4.8
and assets disposed of in the ordinary course of business, PRI has good and
marketable title to all (i) personal property and assets (tangible and
intangible) reflected as owned by it on the Financial Statement for the
fiscal year ended December 31, 1995, or otherwise used in the conduct and
operation of the Business (except for leased property used in the Business,
with respect to which PRI has good and marketable title to the leasehold
estate appertaining thereto) and (ii) properties and assets acquired since
such date in the ordinary course of business and consistent with past
practice and has such title free and clear of all liens, charges, mortgages,
rights of first refusal and set-off, security interests or other encumbrances
of any nature whatsoever.
(b) All inventories are of good, usable and merchantable quality in
all respects and do not include any obsolete or discontinued items. Except as
set forth in Schedule 4.8, (i) all inventories are of such quality as to meet
the quality control standards of PRI and any applicable governmental quality
control standards and (ii) all inventories are recorded on the books of PRI
at the lower of cost, determined on the FIFO basis, or market.
SECTION 4.9. ABSENCE OF CHANGES. Except (i) as set forth in Schedule
4.9, (ii) consented to in writing by Buyer, (iii) with respect to the
Repositioned Subsidiaries or (iv) in connection with the Winfield's
Transaction, since December 31, 1995, there has not been:
(i) any material and unrepaired damage or destruction, loss or
other casualty, however arising and whether or not covered by insurance;
(ii) any indebtedness incurred by PRI for borrowed money (except by
endorsement for collection or for deposit of negotiable instruments received
in the ordinary course of business), or any agreement to incur any such
indebtedness other than intercompany indebtedness;
(iii) any change in the accounting methods or practices of PRI or
any change in depreciation or amortization policies or rates theretofore
adopted;
9
(iv) any amendment or termination, or any written notice of
termination, of any contract, agreement, lease (except contracts, agreements or
leases which are Immaterial Contracts as defined in Section 4.13 hereof),
franchise or license to which PRI is a party or by which it is bound;
(v) any amendment of the Certificate of Incorporation or Bylaws of
PRI;
(vi) except for Permitted Encumbrances and other than in the ordinary
course of business, any mortgage, pledge or other encumbering of any property or
assets of PRI;
(vii) any liability or obligation incurred by PRI, except current
liabilities for trade or business obligations incurred in the ordinary course of
business consistent with past practice, or any cancellation or compromise by PRI
of any debt or claim, or any waiver or release by PRI of any right of
substantial value to the Business;
(viii) any sale, transfer, lease, abandonment or other disposal of
any material portion of the properties or assets of PRI (real, personal or
mixed, tangible or intangible), except in the ordinary course of business
consistent with past practice;
(ix) (a) any assignment, transfer, licensing, grant or other disposal
of any right, title or interest of PRI in any patent, trademark, service mark,
trade name, copyright, invention or discovery, (b) any assignment, transfer,
licensing, or other disposal of or disclosure to any Person other than
representatives of Buyer of any trade secrets, including but not limited to any
formulas, processes, knowhow or software source and object codes, owned by PRI,
or (c) any assignment or sublicense of any licensed rights with respect to which
PRI is a licensee;
(x) any grant by PRI, Seller Parent or Seller of any general
increase in the compensation of any of the officers, employees or directors
of PRI; or any grant by PRI of any increase in compensation payable to or to
become payable to any officer, employee or director; or any agreement by PRI
entered into with any officer, employee or director; except, in each case,
(x) in the ordinary course of business and consistent with past practice and
(y) with respect to such officers, employees and directors who will continue
as officers, employees or directors of Seller or Seller Parent or their
Affiliates after the Closing Date;
(xi) any capital expenditure made, or any commitment to make any
capital expenditure, for any tangible or intangible capital assets, additions
or improvements, except capital expenditures in the ordinary course of
business and capital expenditures that do not exceed $10,000 in any instance
or, together with capital expenditures of the MRI Group, $100,000 in the
aggregate;
(xii) any declaration, payment or reservation for payment of any
dividend or other distribution in respect of the capital stock or other
securities of PRI, or any
10
redemption, purchase or other acquisition, directly or indirectly, of any
shares of capital stock or other securities of PRI or the granting of any
options or rights with respect thereto;
(xiii) except in the ordinary course of business and consistent
with past practice, any grant or extension of any power-of-attorney or guaranty
in respect of the obligation of any Person; or
(xiv) any action taken or omitted to be taken that would result in
the occurrence of any of the foregoing.
SECTION 4.10. INTELLECTUAL PROPERTY. Schedule 4.10 lists and indicates
the ownership of all patents, patent applications, inventions and discoveries
owned by PRI, all copyrights, trademarks, trade names, and service marks used in
the Business or for which registrations have been obtained or applications
therefor filed for or by PRI, all trade secrets as described in Section 4.9(ix)
hereof and all other unregistered marks and trade names owned by PRI
(collectively, the "Intellectual Property"). Except as set forth in Schedule
4.10, (i) no Person other than PRI has the right to use any of the Intellectual
Property, PRI has all right, title and interest in and to all Intellectual
Property, and the use by PRI of any of the Intellectual Property will not, to
the knowledge of Seller and Seller Parent, cause conflict with the intellectual
property rights of any third party, and (ii) documentation for the continuance
of registrations and applications for registration have been timely filed with
the appropriate authorities for the patents, trademarks, trade names, service
marks and copyrights as indicated in Schedule 4.10. Except as set forth in
Schedule 4.10, none of Seller, Seller Parent and PRI has received any written
notice that (a) any operation or activity of PRI infringes the intellectual
property rights of third parties or requires payment to any third parties or
otherwise infringes or interferes with any patent, trademark, trade name,
service mark or copyright of any third party, (b) any of the Intellectual
Property has been declared invalid by a judicial or administrative tribunal or
is the subject of a pending or threatened interference, opposition or
cancellation proceeding or an action for declaration of invalidity, or is
infringed by the activities of another, or (c) any third party has filed a
patent, trademark or service mark, or copyright application for registration of
any aspect of the Intellectual Property.
SECTION 4.11. LEASES AND CONTRACTS.
(a) Schedule 4.11 of sets forth a complete and accurate list of
all contracts, agreements, consulting arrangements, leases, subleases,
options and commitments other than purchase orders, oral or written, and all
assignments, amendments, schedules, exhibits and appendices thereof,
affecting or relating to the Business, to which PRI is a party or guarantor
or by which any such member or the Business is bound or affected, including,
without limitation, service contracts, equipment leases, and leases of space
and ground leases pertaining to real estate (collectively, the "CONTRACTS");
provided there shall be no breach of this Section 4.11 if Immaterial
Contracts, as defined below, are omitted. "IMMATERIAL CONTRACTS" shall mean
contracts (other than equipment leases and leases of spaces and
11
ground leases pertaining to real estate) having a remaining term of less than
one (1) year and involving expenditures only or remaining (after the
execution date of this Agreement) estimated gross receipts or payment by PRI
of less than $25,000 under any one contract. Attached to Schedule 4.11 are
accurate and complete copies of all written Contracts and written
descriptions of all oral Contracts.
(b) None of the Contracts has been modified, amended, assigned or
transferred except as specified in Schedule 4.11 or in connection with the
Winfield's Transaction; and each is, in full force and effect; and each is
valid, binding and enforceable against PRI that is a party thereto in
accordance with its terms, except as limited by bankruptcy, reorganization,
insolvency, moratorium or other similar laws presently or hereafter in effect
affecting the enforcement of creditors' rights generally.
(c) Except as set forth in Schedule 4.11, no event or condition
presently exists which constitutes a default or breach, or, after notice or
lapse of time or both, would constitute a default or breach by PRI or, to the
knowledge of Seller, Seller Parent or PRI, of any other party thereto, under any
of the Contracts, and neither Seller, Seller Parent nor PRI will do any act or
omit to do any act which would cause such a default or breach. Except as set
forth in Schedule 4.11, there are no claims or offsets asserted in writing under
any of the Contracts, and neither Seller Parent, Seller nor PRI has received any
written notice that any such Contract is to be terminated or not renewed.
(d) Except as described in Schedule 4.11, there does not exist any
security interest, lien, encumbrance or claim of others created or suffered to
exist on any interest created under any of the Contracts.
(e) No purchase commitment by PRI is in excess of its ordinary
business requirements.
(f) Except for radius restrictions contained in certain lease
agreements, none of the Contracts contains any agreement or covenant not to
compete limiting the ability of the Buyer and PRI to operate the Business
without restriction after the Closing Date.
SECTION 4.12. BANK ACCOUNTS. Schedule 4.12 sets forth the names and
locations of all banks, trust companies, savings and loan associations and other
financial institutions at which PRI maintains safe deposit boxes or accounts of
any nature, all account numbers, and the names of all persons authorized to draw
thereon, make withdrawals therefrom or have access thereto.
SECTION 4.13. LICENSES AND PERMITS. Subject to any governmental approvals
required to be obtained after the Closing, which shall be the obligation of
Buyer to obtain, PRI has all local, state and federal licenses, including liquor
licenses, permits, registrations, certificates, consents, accreditations and
approvals (collectively, the "LICENSES AND PERMITS")
12
necessary to conduct the Business in the manner currently conducted. There
is no default by PRI under any of the Licenses and Permits and no written
notices have been received by PRI or any of its senior employees, agents or
representatives with respect to threatened, pending, or possible revocation,
termination, suspension or limitation of any such License or Permit.
SECTION 4.14. RELATED TRANSACTIONS. Except as set forth in Schedule 4.14,
neither Seller Parent nor Seller nor any director or officer of PRI has any
material interests, direct or indirect, in any Person which (i) is a material
subcontractor or supplier of PRI or (ii)] has an existing material relationship
with, or a material interest in, PRI, including but not limited to lessors of
real or personal property and Persons against which rights or options are
exercisable by PRI.
SECTION 4.15. INSURANCE. Schedule 4.15 contains a complete and correct
list of all policies of insurance presently maintained with respect to PRI or
the Business, including, without limitation, "key man" insurance with respect to
any employee. All such policies are in full force and effect, all premiums due
thereon have been paid and no currently pending written notice of cancellation
or termination has been received with respect to any such policy and there is no
default (which has not been cured) by PRI with respect to its obligations under
any such policy. Except as set forth in Schedule 4.15, none of Seller Parent,
Seller and PRI has received during the past two (2) years any written notice or
other written communication from any insurance company declining to write
insurance with respect to the Business, or canceling or materially amending any
of the insurance policies of PRI or proposing to do so.
SECTION 4.16. LABOR MATTERS. Except to the extent set forth in Schedule
4.16, (a) there is no unfair labor practice charge, complaint or decision
against PRI pending before or issued by the National Labor Relations Board or
any other federal agency, authority or tribunal; (b) there is no labor strike,
dispute, slowdown, lockout or stoppage pending or threatened against or
affecting PRI and PRI has not experienced any such labor controversy within the
last five years; (c) PRI is not a party to any collective bargaining agreement
or contract with any labor union and, to the knowledge of any of Seller Parent,
Seller and PRI, no union representation question has been raised by the
employees of PRI; (d) no grievance nor any arbitration proceeding arising out of
or under any collective bargaining agreement is pending; (e) no event has
occurred, and PRI will not take any action prior to the Closing, which would
require notification after the date hereof to employees under the Worker
Adjustment and Retraining Act of 1988 and the regulations promulgated thereunder
or which would require notification under any collective bargaining agreement or
law; (f) there is no other controversy pending between PRI and any of its
employees, including, without limitation, claims arising under any local, state
or federal labor and employment laws; (g) PRI has no obligation to continue the
employment of any employee or the funding of any employee benefits who or which
is the subject or beneficiary of any collective bargaining agreement in the
event of termination of any contract for the provision of goods or services in
the geographic area related to such collective bargaining
13
agreement; (h) PRI is not a party to any written employment or consulting
contract or agreement with any Person nor are any such contracts or
agreements presently being negotiated; (i) to the knowledge of any of Seller
Parent, Seller and PRI there are no campaigns being conducted to solicit
cards from any employees or election petitions pending with respect to PRI to
authorize representation by any labor organization; (j) PRI is not a party
to, or otherwise bound by, any consent decree with, or citation by, any
government agency relating to employees or employment practices; and (k) PRI
has complied with all provisions of applicable laws or regulations pertaining
to the employment of employees and access to facilities, including without
limitation, relating to labor relations, equal employment, fair employment
practices, entitlements, prohibited discrimination or other similar
employment practices or acts.
SECTION 4.17. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.17 sets forth a true and complete list of each
employee benefit plan within the meaning of Section 3(3) of ERISA and all
other employee benefit plans, programs, policies, contracts or arrangements,
whether or not subject to ERISA, for employees or former employees of PRI and
any entity required to be aggregated with PRI pursuant to Section 414 of the
Code (each, a "Commonly Controlled Entity") as to which PRI is a party or
obligated to contribute or has any actual or contingent liability
(collectively, the "Employee Benefit Plans"). Each Employee Benefit Plan has
been maintained and operated in substantial compliance with all applicable
laws and its terms. PRI is not a party to an Employee Benefit Plan which is
a defined benefit plan.
(b) Except as set forth in Schedule 4.17, no "party in interest"
(as such term is defined in Section 3(14) of ERISA) or "disqualified person"
(as such term is defined in Section 4975(e) of the Code) with respect to any
of the Employee Benefit Plans has engaged in any "prohibited transaction" (as
such term is defined in ERISA or the Code) which would subject the Buyer,
PRI, any of the Employee Benefit Plans, any trusts thereunder, any trustee,
custodian or administrator thereof, any person or entity holding or
controlling assets of any of the Employee Benefit Plans, any party in
interest or disqualified person or any other person or entity dealing with
such Employee Benefit Plans to any tax, penalty or other cost or liability of
any kind.
(c) Except as set forth in Schedule 4.17, there is no matter
relating to any Employee Benefit Plan of PRI which is pending before the
Internal Revenue Service, United States Department of Labor or Pension
Benefit Guaranty Corporation.
(d) Except as set forth in Schedule 4.17, PRI has no or will not
have any liability for post-retirement health or life insurance benefits,
whether under COBRA or otherwise.
(e) Any Plan intended to be "qualified" (within the meaning of
Section 401(a) of the Code) either (x) has received a favorable determination
letter from the
14
Internal Revenue Service and, to the knowledge of Seller Parent, Seller and
PRI, no event has occurred or condition exists which could reasonably be
expected to result in the revocation of such determination letter, or (y) is
the subject of an application for such determination letter and, to the
knowledge of Seller Parent, Seller and PRI, no event has occurred or
condition exists which could reasonably be expected to result in the denial
of such letter.
(f) Neither Seller Parent, Seller, PRI nor any Commonly
Controlled Entity has incurred any withdrawal liability with respect to any
Employee Benefit Plan which is a "multiemployer plan" (within the meaning of
Section 4001(a)(3) of ERISA) and the termination of or a withdrawal from all
such multiemployer plans as of the Closing Date would not subject PRI or the
Buyer to any liabilities under Title IV of ERISA.
(g) Except as set forth in Schedule 4.17, no Employee Benefit
Plan provides for an increase in benefits other than in the ordinary course
of business on or after the Closing Date and each Employee Benefit Plan may
be amended or terminated without obligation or liability (other than those
obligations and liabilities accrued through the date of such amendment or
termination for which specific assets have been set aside in trust or in any
other funding vehicle or reserved for on the Financial Statements to the
extent required by GAAP).
(h) Except as set forth in Schedule 4.17 or as specifically
provided in this Agreement, no Employee Benefit Plan provides for the payment
to any Transferred Employee (as defined in Section 6.10(a)) of any money or
other property or rights or the acceleration of any other rights or benefits
to any such employee as a result of the transaction contemplated by this
Agreement, whether or not such payment would constitute a parachute payment
within the meaning of Section 280G of the Code.
(i) With respect to employees of PRI (a list of which is set
forth in Schedule 4.17) who are signatories to those certain letter
agreements between such employees and Quantum Restaurant Group, Inc. (the
former name of Seller Parent) relating to the payment of "special bonuses"
(the "Special Bonus Letters"), PRI shall not have, after the Closing Date,
any obligation to such employees for severance, accrued vacation, bonus or
other payments that might otherwise be payable to such employees upon the
termination, voluntary or otherwise, of their employment, except for vested
pension entitlements; provided, however, that the representation set forth in
this Section 4.17(i) shall have no force or effect with respect to those
employees whose employment is not terminated within 15 days after the Closing
Date. PRI shall be a third party beneficiary of the Special Bonus Letters.
SECTION 4.18. LITIGATION. Except as set forth in Schedule 4.18 or for
matters totally covered by insurance (excluding consideration of any
deductibles), there are no claims, demands, summons, subpoenas, inquiries,
investigations, actions, suits, or proceedings of any nature, civil,
criminal, regulatory or otherwise, pending or, to the knowledge of Seller
Parent,
15
Seller and PRI, threatened, against PRI relating to this Agreement or the
transactions contemplated hereby or to the Business or with respect to any
Employee Benefit Plan, at law or in equity or before or by any federal,
state, local, or foreign court or other governmental department, commission,
board, agency, instrumentality or authority, nor any arbitration or mediation
proceeding, in each case including, without limitation, any claims relating
to environmental matters. PRI is not the named subject of any judgment,
order, writ, injunction or decree of any court or governmental body.
SECTION 4.19. COMPLIANCE WITH LAWS. Except as set forth in Schedule 4.19,
each of Seller Parent, Seller and PRI is not in violation of, nor has it
received any written notice claiming it is in violation of, any order, law,
ordinance, statute, rule or regulation applicable to it, or to the Business or
any of the property or assets of PRI.
SECTION 4.20. ENVIRONMENTAL MATTERS. Except as set forth in Schedule
4.20:
(a) all activities of PRI, with respect to properties owned,
operated, managed, occupied or used by PRI, have been conducted in compliance
with all applicable federal, state and local environmental, health and safety
laws, regulations, judgments, orders, agreements and permits, and all
applicable environmental permits for the Business have been obtained and are
in effect;
(b) none of Seller Parent, Seller and PRI has knowledge of, is
aware of, or has received direct or indirect written notification from any
governmental authority or from any other party with respect to, any pending
or threatened litigation or administrative actions relating to the Business
or any current existing or past uncorrected violations of any federal, state
or local environmental, health or safety laws, regulations, judgments,
orders, agreements or permits relating to the Business;
(c) none of Seller Parent, Seller and PRI has knowledge that, is
aware that, or has received direct or indirect written notification from any
federal, state or local environmental agency or any private entity or other
person asserting that, PRI has any potential investigation, cleanup,
remediation, cost-recovery or contribution liability for any site (as an
owner, operator, transporter, generator or party that arranged for treatment
or disposal) due to the alleged release or threatened release at or from that
site of any hazardous substance, hazardous waste, toxic substance, petroleum,
asbestos, PCB's, hazardous material or other such substance as defined or
regulated by any federal, state or local environmental, health or safety law,
regulation, judgment, order, agreement or permit, including without
limitation the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601 et seq., and any state law
analogues, and, to the knowledge of Seller Parent, Seller and PRI, there is
no currently or formerly existing event or condition that would reasonably be
expected to result in such an assertion being made in the future; and
16
(d) PRI has not contractually assumed from any non-governmental
entity any liabilities or obligations under any federal statute or local
environmental, health or safety law, regulation, judgement, order, agreement
or permit.
SECTION 4.21. DISCLOSURES. None of the representations or warranties by
Seller Parent and Seller herein or in any Schedule attached hereto contains
or will contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to make the statements contained
herein or therein not misleading.
SECTION 4.22. TRANSACTIONAL EFFECT. The sale of the Shares pursuant to
this Agreement will not result in any liability of Buyer or any of its agents,
shareholders or lenders to creditors or shareholders of Seller Parent or Seller
and will not result in any lien upon or claim to the Shares or any assets of PRI
in favor of creditors or shareholders of Seller Parent or Seller.
SECTION 4.23. SUFFICIENT ASSETS. Except as set forth in Schedule 4.23,
PRI has all of the non-monetary assets, tangible or intangible, necessary for
the continued operation and conduct of the Business as now being conducted,
regardless of whether such assets are set forth in the Financial Statements.
SECTION 4.24. OPERATION OF THE BUSINESS. Except as set forth in Schedule
4.24 the Business has been conducted only through PRI and not through any
division or direct or indirect subsidiary or Affiliate of Seller Parent or the
Seller.
SECTION 4.25. BROKERS AND FINDERS. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of Seller Parent or the Seller
or their respective Affiliates other than Lazard Freres & Co. LLC and Schulte
Roth & Zabel LLP (the responsibility for the payment of each of which shall be
that of Seller), and no broker or finder acting on behalf of Seller will have
any valid claim against the Buyer for any brokerage or finder's commission.
SECTION 4.26. LIMITATION ON SELLER PARENT'S AND SELLER'S REPRESENTATIONS
AND WARRANTIES. Notwithstanding anything contained herein to the contrary, the
parties agree that the representations and warranties of Seller and Seller
Parent contained in this Article IV are strictly limited as follows:
(a) SELLER'S KNOWLEDGE. As used herein, all references to
"Seller's knowledge" means the actual knowledge of the Seller's and Seller
Parent's executive officers after reasonable inquiry which shall include
inquiries of management employees of Seller Parent, Seller and PRI.
(b) REPOSITIONED SUBSIDIARIES. No representation or warranty is
made by Seller Parent or the Seller with respect to any of the Repositioned
Subsidiaries.
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(c) WINFIELD'S TRANSACTION. Schedule 4.26 hereto contains a
true, correct and complete copy of the third amendment to lease agreement and
option to lease relating to the real property lease by and between PRI and
Insurance Company of North America. The transactions described on Schedule
4.26 shall hereinafter be referred to as the "Winfield's Transaction".
(d) SCHEDULES. An item included on any Schedule shall be deemed
to be included on all Schedules to which such item is applicable.
SECTION 4.27. TRAC AGREEMENT. No event or condition presently exists
which constitutes a default or breach, or, after notice or lapse of time or
both, would constitute a default or breach by Seller Parent, Seller or PRI under
the TRAC Agreement (as defined in Section 9.9 hereof), and neither Seller
Parent, Seller nor PRI will do any act or omit to do any act which would cause
such a default or breach.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller Parent and Seller as
follows:
SECTION 5.1. CORPORATE ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has the full corporate right, power and authority to own, lease and operate all
of its properties and assets and to carry out its business as it is presently
contemplated to be conducted. Buyer was formed for the purpose of acquiring the
PRI Shares and operating the Business and has not conducted any business other
than in connection with its formation, the transactions contemplated in this
Agreement and the Borrowing.
SECTION 5.2. AUTHORITY. Buyer has all requisite corporate right, power
and authority to execute, deliver and perform this Agreement and the Related
Agreements and all other agreements necessary to effectuate the provisions of
this Agreement (including in connection with the Borrowings). The execution,
delivery and performance of this Agreement and the Related Agreements by Buyer
have been (or will be) duly and validly authorized and approved by all necessary
corporate action. This Agreement and the Related Agreements have been (or will
be) duly and validly executed and delivered by Buyer and constitute (or upon
execution and delivery thereof will constitute) the legal, valid and binding
obligation of Buyer enforceable against it in accordance with its terms, except
as may be limited by bankruptcy, insolvency or other laws affecting creditors'
rights generally or as may be modified by a court of equity in an action for
specific performance.
SECTION 5.3. CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
in Schedule 5.3, the execution, delivery and performance of this Agreement by
Buyer will not (with or
18
without the giving of notice or the passage of time, or both), (i) violate
any applicable provision of law or any rule or regulation of any federal,
state or local administrative agency or governmental authority applicable to
Buyer, or any order, writ, injunction, judgment or decree of any court,
administrative agency or governmental authority applicable to Buyer, (ii)
violate the Certificate of Incorporation or Bylaws of Buyer, (iii) require
any consent under or constitute a default under any agreement, indenture,
mortgage, deed of trust, lease, license, permit or other instrument to which
Buyer is a party or by which it or any of its properties or assets is bound,
or any license, permit or certificate held by it, or (iv) require any consent
or approval by, notice to or registration with any governmental authority
other than the appropriate filings pursuant to the HSR Act, if required, and
the expiration of the applicable waiting period thereunder or (v) result in
the creation of any lien, claim, encumbrance or charge upon any property or
assets of Buyer. No part of this Section 5.3 shall apply to any consent or
approval required to be delivered by Seller Parent or Seller pursuant to
Section 8.1(vii).
SECTION 5.4. LITIGATION. Buyer is not engaged in, nor is there pending
or, to Buyer's knowledge, threatened, any action, dispute, claim, litigation,
arbitration, investigation or other proceeding at law or in equity or before any
governmental or other administrative agency against or involving Buyer or which
could affect Buyer's ability to perform any of its payment or other obligations
hereunder or the transactions contemplated by this Agreement.
SECTION 5.5. INVESTMENT INTENT. Buyer is acquiring the PRI Shares for
its own account for investment and not with a view to, or for resale in
connection with, the distribution thereof, nor with any present intention of
distributing or selling the PRI Shares. Buyer agrees that the PRI Shares may
not be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of without registration under the Securities Act of 1933, as amended,
and/or any applicable state securities laws, except pursuant to an exemption
from registration under such Act and such laws.
SECTION 5.6. BUYER'S INVESTIGATION. Buyer is an informed and
sophisticated purchaser, and has engaged expert advisors, experienced in the
evaluation and purchase of companies such as PRI. Buyer has undertaken such
investigation as it has deemed necessary to enable it to make an informed
decision with respect to this Agreement and the transactions contemplated hereby
and Buyer acknowledges that Seller Parent, Seller, and PRI have allowed Buyer
such access as has been requested by Buyer to the personnel, properties,
premises and records of PRI for this purpose. To the extent expressly permitted
hereafter under this Agreement, Buyer will undertake such further investigation
as it deems necessary. Buyer acknowledges that in entering into this Agreement,
in acquiring the PRI Shares and in consummating the other transactions
contemplated herein, Buyer has relied solely upon its own investigation analysis
and, to the extent expressly permitted by this Agreement, the representations
and warranties contained in this Agreement and that none of Seller Parent,
Seller, and PRI (or their agents, officers, directors, employees, Affiliates or
representatives) has made any representation or warranty as to PRI or the
Business, except as expressly set forth in this Agreement.
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SECTION 5.7. BROKERS AND FINDERS. All negotiations relating to this
Agreement and the transactions contemplated hereby have been carried on without
the participation of any Person acting on behalf of Buyer other than Equitable
Securities Corporation and Baker, Donelson, Bearman & Caldwell (the
responsibility for the payment of each of which shall be that of Buyer), and no
broker or finder acting on behalf of Buyer will have any valid claim against
Seller or Seller Parent for any brokerage or finder's commission.
SECTION 5.8. NO RELIANCE. Buyer represents, warrants and agrees that it
is purchasing PRI as a going concern and is not relying on any forecasted
operating results or budgets prepared by any other Person but rather upon its
own plan of operations and financial forecasts for PRI.
SECTION 5.9. FINANCING COMMITMENT. As of the date of this Agreement,
Buyer knows of no facts or circumstances that are likely to result in any of the
conditions precedent to the Borrowings not being satisfied.
SECTION 5.10. SOLVENCY. Upon the consummation of the transactions
contemplated by this Agreement, Buyer will be solvent.
SECTION 5.11. NO HSR FILING. No filing under the HSR Act is required due
to Buyer's failure to meet the condition set forth in 15 USC Section 18a(a)(2).
SECTION 5.12. LIQUOR LICENSES. As of the date of this Agreement, Buyer
knows of no circumstances or facts that are likely to prevent Buyer from
obtaining within the time periods contemplated by this Agreement all necessary
and required governmental consents and approvals pursuant to applicable federal,
state or municipal laws, regulations or ordinances relating to liquor licenses.
ARTICLE VI
FURTHER COVENANTS AND AGREEMENTS
SECTION 6.1. COVENANTS OF SELLER PARENT AND SELLER PENDING THE CLOSING.
Seller Parent and Seller covenant and agree that, pending the Closing and prior
to the termination of this Agreement, and except (i) with respect to the
Repositioned Subsidiaries, (ii) with respect to the Winfield's Transaction or
(iii) with respect to the Current Assets and Liabilities or (iv) as otherwise
agreed to in writing by Buyer, Seller Parent and Seller shall or, as
appropriate, shall cause PRI to:
(a) Conduct the Business solely in the ordinary course and
consistent with the past practices of PRI;
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(b) Promptly notify Buyer (i) of any lawsuits, claims,
administrative actions or other proceedings asserted or commenced against PRI
or its directors or officers, involving or affecting in any way the Shares,
the Business or any of the assets of PRI and (ii) of any facts or
circumstances which come to its attention and which cause, or through the
passage of time may cause, any of the representations and warranties set
forth in Article IV to be untrue, incomplete or misleading at any time from
the date of this Agreement to the Closing;
(c) Continue to maintain and service the physical assets used by
PRI in the conduct of the Business consistent with its past practices;
(d) Use their reasonable efforts to keep available the services
of each member of PRI's present employees and agents and to maintain the
relations and goodwill with the suppliers, distributors and any others having
business relations with PRI in connection with the Business;
(e) Use their commercially reasonable efforts to cause all of the
conditions to the obligations of Buyer under this Agreement to be satisfied
on or prior to the Closing Date and to obtain, prior to the Closing, all
consents of all third parties and governmental authorities set forth in
Schedule 5.3. All such consents will be in writing and executed counterparts
thereof will be delivered to Buyer at or prior to the Closing;
(f) Without liability to Seller Parent or Seller or PRI (in the
event the Closing shall not occur) or any of their respective officers,
directors or agents, fully cooperate with Buyer (at Buyer's sole expense) in
Buyer's obtaining financing in conjunction with the Borrowings, including
assisting in obtaining consents or approvals necessary to effectuate the
Borrowings and complying with the provisions of that certain agreement of
even date herewith by and among Creditanstalt Small Business Investment
Corporation, Gregory M. Buckley, F-Peasant, L.L.C. and Seller relating, among
other things, to the pledge of stock of PRI by the parties thereto; PROVIDED,
that such cooperation shall not include the provision of any legal opinion
and in no event shall any amendment of or waiver under this Agreement or any
of the Related Agreements be required;
(g) Provide Buyer's officers, employees, counsel, accountants and
other representatives with full access to, during normal business hours, all
of the books and records of PRI, make available to representatives of Buyer
knowledgeable employees of PRI for reasonable periods of time to answer
inquiries of such representatives with respect to Buyer's investigation of
PRI and permit such representatives of Buyer to consult with the officers,
employees, accountants and counsel of Seller; provided that no such
activities shall unreasonably interfere with the operation of the Business;
(h) At all times prior to the Closing, promptly notify the Buyer
in writing of any fact, condition, event or occurrence that will or may
result in the failure of any of the
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conditions contained in Article VIII to be satisfied, promptly upon becoming
aware of the same; and
(i) Provide to Buyer copies of any monthly or other periodic
statements of assets and liabilities and statements of income and retained
earnings (including any related notes thereto) pertaining to PRI as may be
regularly prepared in the ordinary course of the Business.
SECTION 6.2. COVENANTS OF BUYER PENDING THE CLOSING. Buyer covenants and
agrees that, pending the Closing and except as otherwise agreed to in writing by
Seller:
(a) Buyer shall not engage in any business activities or conduct
any operations other than in connection with the transactions contemplated
herein and the Borrowings;
(b) Buyer shall use its commercially reasonable efforts to cause
all of the conditions to the obligations of Seller and Seller Parent under
this Agreement to be satisfied on or prior to the Closing Date and to obtain,
prior to the Closing, all consents of all third parties and governmental
authorities set forth on Schedule 4.5. All such consents will be in writing
and executed counterparts thereof will be delivered to Seller and Seller
Parent at or prior to the Closing;
(c) Buyer shall use its best efforts to consummate the Borrowings
and promptly disclose to Seller and Seller Parent any information which would
make fulfillment or performance of Buyer's Borrowings unlikely or impossible.
(d) Buyer shall use its best efforts to obtain all necessary and
required governmental consents and approvals pursuant to applicable federal,
state or municipal laws, regulations or ordinances relating to liquor laws.
(e) Buyer agrees to execute and deliver on the Closing Date the
guarantee agreement (the "Guarantee Agreement") in the form attached hereto
as Exhibit B, pursuant to which Buyer will guarantee the obligations of
MRIACQ pursuant to the MRI Agreement and the MRI Note.
SECTION 6.3. FILINGS. Promptly after the execution of this Agreement,
each of the parties hereto shall prepare and make or cause to be made any
required filings, submissions and notifications under the laws of any domestic
or foreign jurisdictions, including, at Buyer's sole expense, filings for
applicable liquor licenses under the laws of the State of Georgia, to the extent
that such filings are necessary to consummate the transactions contemplated
hereby and will use its reasonable efforts to take all other actions necessary
to consummate the transactions contemplated hereby in a manner consistent with
applicable law. Each of the parties hereto will furnish to the other party (at
such requesting party's sole expense)
22
such necessary information and reasonable assistance as such other party may
reasonably request in connection with the foregoing.
SECTION 6.4. EFFECTIVE TIME OF CLOSING AND TRANSFER. The Closing shall
be effective for all purposes as of the close of business on the Closing Date.
SECTION 6.5. ANNOUNCEMENTS. Except as expressly contemplated by this
Agreement or as set forth in the following sentence, the parties will mutually
agree as to the time, form and content before issuing any press releases or
otherwise making any public statements or statements to third parties with
respect to transactions contemplated hereby and shall not issue any press
release or, except as necessary to perform their respective obligations
hereunder, discuss the transactions contemplated hereby with any third party
prior to reaching mutual agreement with respect thereto, except as may be
required by law. Notwithstanding the foregoing, (i) in the event prior to the
Closing any party hereto is advised by counsel in connection with the rules of
any stock exchange on which such party's securities are traded to make a
statement with respect to the transactions contemplated herein, such party shall
consult with the other party hereto prior to making such statement, and (ii)
Buyer acknowledges that upon the execution of this Agreement by the parties
hereto Seller Parent will file with the Securities and Exchange Commission a
description of the transactions contemplated hereunder on Form 8-K.
SECTION 6.6. COSTS AND EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, each party hereto shall pay
its own costs and expenses (including legal fees and expenses) incurred in
connection with due diligence reviews, the preparation, negotiation and
execution of this Agreement and all other agreements, certificates,
instruments and documents delivered hereunder, and all other matters relating
to the transactions contemplated hereby. All transfer and intangible taxes,
if any, in connection with the sale and delivery of the Shares hereunder
shall be paid one-half by Seller and one-half by Buyer.
SECTION 6.7. FURTHER ASSURANCES. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the parties shall take or
cause to be taken all necessary action, including, without limitation, the
execution and delivery of such further instruments and documents as may be
reasonably requested by the other party for such purposes or otherwise to
consummate and give effect to the transactions contemplated hereby.
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SECTION 6.8. COOPERATION AND PRESERVATION OF RECORDS.
(a) The parties covenant that they will cooperate with each other
after the Closing to provide each other with reasonable information relating
to the Business. From and after the Closing Date, all books, records and
documents which were not acquired by Buyer pursuant to this Agreement and
which directly relate to the Business shall be available during regular
business hours, upon reasonable notice, to the officers, attorneys,
accountants and other authorized representatives of Buyer. Subject to the
following, Seller shall, for a period of at least six years from and after
the Closing Date, maintain and preserve all such books, records and
documents. If upon or prior to the end of six years Seller desires to
dispose of any such records, Seller shall give Buyer not less than sixty days
prior written notice specifying the categories desired to be destroyed and
shall give Buyer reasonable access to inspect such records, and Buyer shall
have the right to remove, at Buyer's expense, any records covered by such
notice it may desire to retain. Any records not removed within one hundred
twenty days after the date of the mailing of the notice to Buyer by Seller
may be disposed of, without further obligation to Buyer under this
subparagraph (a). Seller acknowledges and agrees that the books and records
of Seller Parent, Seller and PRI relating to the employees of PRI shall be
acquired by Buyer pursuant to this Agreement; provided, that Buyer
acknowledges and agrees that Seller may make and retain a copy of such books
and records relating to such employees.
(b) From and after the Closing Date, all books, records and
documents which were acquired by Buyer pursuant to this Agreement and/or
which directly relate to the Business shall be available during regular
business hours, upon reasonable notice, to the officers, attorneys,
accountants and other authorized representatives of Seller. Subject to the
following, Buyer shall for a period of at least six years from and after the
Closing Date, maintain and preserve all such books, records and documents.
If upon or prior to the end of six years Buyer desires to dispose of any such
records, Buyer shall give Seller not less than sixty days prior written
notice specifying the categories desired to be destroyed and shall give
Seller reasonable access to inspect such records, and Seller shall have the
right to remove, at Seller's expense, any records covered by such notice it
may desire to retain. Any records not removed within one hundred twenty days
after the date of the mailing of the notice to Seller by Buyer may be
disposed of, without further obligation to Seller under this subparagraph (b).
(c) In the event Seller Parent or Seller is required to defend
any action, suit or proceeding arising out of a claim pertaining to the
Business which involves actions or events occurring prior to the Closing
Date, Buyer shall provide assistance and cooperation to Seller and Seller
Parent, including witnesses and documentary or other evidence, as may
reasonably be requested by Seller Parent or Seller in connection with its
defense. Seller Parent and Seller shall reimburse Buyer for its reasonable
out-of-pocket expenses (including attorneys' fees and expenses) incurred in
providing such assistance and cooperation.
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(d) In the event Buyer is required to defend against any action,
suit or proceeding arising out of a claim pertaining to the Business which
involves actions or events occurring after the Closing Date, Seller Parent
and Seller shall provide assistance and cooperation to Buyer, including
witnesses and documentary or other evidence, as may reasonably be requested
by Buyer in connection with its defense. Buyer shall reimburse Seller Parent
and Seller for their reasonable out-of-pocket expenses (including attorneys'
fees and expenses) incurred in providing such assistance.
(e) Until the final adjudication or settlement of any dispute or
investigation involving Taxes arising out the Business or the operations or
affairs of PRI prior to the Closing Date, Buyer will cause PRI to maintain
all tax books and records of PRI relating to the Business or to the
operations and affairs of PRI before the closing on a basis consistent with
past practice, but in any event until final closing or remedy is reached with
respect to any such tax year.
(f) Without the prior written consent of Seller Parent, Buyer
shall take no action and Buyer shall cause PRI to refrain from taking any
action that affects any Tax return or tax liability of Seller Parent,
including without limitation amending any Tax return of PRI covering any
period or periods ending on or prior to the Closing Date or, with respect to
any period that includes (but does not end on) the Closing Date, the portion
of the period that ends on the Closing Date, or settling any examination,
administrative appeal or judicial action with respect to any such return. In
the event PRI shall receive any notice of examination, proposed deficiency,
statutory notice of deficiency or other communication from any taxing
authority with respect to any Tax liability or return of PRI for any period
ending prior to or on the Closing Date or, with respect to any period that
includes (but does not end on) the Closing Date, the portion of such period
that ends on the Closing Date, Buyer shall cause such communication to be
immediately forwarded to Seller Parent and shall cause PRI to cooperate with
Seller Parent in permitting Seller Parent to control, at its expense, the
response to and defense of any matter reflected on such communication that
could affect the Tax return or Tax liability of Seller Parent (including
liability under Section 6.15 hereof) provided that Seller Parent shall not
consent (without the written consent of Buyer, which consent shall not be
unreasonably withheld or delayed) to any settlement that may reasonably be
expected to have a material adverse effect on the Taxes of a member of PRI
with respect to the period after the Closing Date for which such member may
not seek indemnity under this Agreement.
SECTION 6.9. LIMITATION OF LIABILITIES. From and after the Closing Date,
except as expressly provided for in this Agreement, neither Seller Parent nor
Seller shall have any obligation or liability whatsoever relating to the
Business or the properties or assets of PRI attributable to events occurring
after the Closing Date, including, without limitation, obligations or
liabilities for any deductibles with respect to any insurance policies
(including, without limitation, any arrangement between PRI, on the one hand,
and Seller and/or Seller Parent, on the other hand, with respect to
self-insurance) and obligations or liabilities under any guaranties by Seller
and/or Seller Parent of PRI's worker's compensation or other
25
obligations or liabilities. Buyer shall release, indemnify and hold Seller
and Seller Parent and each of their respective successors, assigns,
directors, officers and employees harmless from all such obligations and
liabilities (including the cost of defense thereof and reasonable attorneys'
fees and expenses incurred in litigation or otherwise) that are alleged
against or might otherwise be imposed on Seller or Seller Parent. Before the
Closing, Buyer shall use its best efforts to provide a substitute guaranty or
other arrangement to release Seller and Seller Parent from any liability or
obligation under any guaranty of PRI's worker's compensation or other
obligations or liabilities. In addition, on or prior to the Closing, Buyer
will obtain, or will cause PRI (at Buyer's sole expense) to obtain, (a) one
or more insurance policies or other arrangements covering all liabilities and
obligations associated with worker's compensation claims by employees of PRI
and (b) replacement letters of credit or surety bonds for those letters of
credit or surety bonds identified (by issuer, amount and payee) in Schedule
6.9 which Seller Parent has caused to be issued on behalf of PRI.
SECTION 6.10. EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) TRANSFERRED EMPLOYEES. The term "Transferred Employees"
shall refer to (i) the direct, common law employees of PRI (other than those
on long-term disability, layoff or on a leave of absence with no prior
agreement or understanding to return to employment with PRI at the end of
such disability, layoff or leave) and (ii) any other employee of Seller or
Seller Parent who, with the permission of Seller prior to the Closing Date,
is offered employment with PRI by Buyer and who accepts such offer of
employment.
(b) SERVICE CREDIT. Buyer agrees that Transferred Employees'
service with PRI, Seller Parent or any Affiliate or predecessor of PRI or
Seller Parent shall be credited in determining eligibility and vesting (but
not benefit accruals) under any employee benefit plans, programs, policies or
arrangements covering such Transferred Employees established, continued, or
otherwise sponsored by PRI or Buyer after the Closing Date, to the extent
such service was credited for any such purpose by PRI as of December 1, 1996.
(c) BENEFIT PLANS. Seller and Seller Parent shall retain
responsibility for and continue to pay (if not covered by insurance) all
medical, life insurance, disability and other welfare plan expenses and
benefits for each Transferred Employee with respect to claims incurred by
such employees or their covered dependents prior to (or on) the Closing Date.
Expenses and benefits with respect to welfare claims incurred by Transferred
Employees or their covered dependents on or after the Closing Date shall be
the responsibility of Buyer in accordance with the terms of Buyer's plans (if
any) which are applicable to such claims and employees. For purposes of this
subsection (c), a claim is deemed incurred when the services that are the
subject of the claim are performed; in the case of life insurance, when the
death occurs; in the case of long-term disability benefits, when the
disability occurs and; in the case of a hospital stay, when the employee
first enters the hospital. Buyer and PRI assume no liability whatsoever with
respect to retiree health benefits or rights which exist or may exist as of
the Closing Date under any Employee Benefit Plan maintained by Seller
26
Parent or Seller, and any retiree health benefits for which Buyer or PRI may
be held liable based on events, representations or communications prior to
(or on) the Closing Date, whether actual, intended or merely perceived or
alleged, shall be and remain liabilities of Seller Parent and its Affiliates
other than PRI.
(d) COOPERATION AND TEMPORARY SUPPORT. Seller Parent will
cooperate with Buyer to transfer such employee records as may be reasonably
necessary to facilitate the transactions contemplated by this Agreement or as
otherwise may be necessary in compliance with applicable law. Buyer agrees
to maintain such records in confidence as required by applicable law.
(e) NO CLAIMS BASED ON AGREEMENT. No person (other than parties
to this Agreement), including without limitation Transferred Employees,
former employees of PRI, and their spouses and beneficiaries, shall have,
acquire or be entitled to assert any right or claim, as third party
beneficiary or otherwise, under or based on any of the provisions of this
section against any party to this Agreement (or any of their Affiliates).
SECTION 6.11. DISTRIBUTIONS AND DIVIDENDS. Notwithstanding any other
provision of this Agreement to the contrary, from and after the date hereof, PRI
shall not be entitled to declare and pay dividends (other than from Current
Assets in the ordinary course of business) and make other distributions to its
respective parent corporation; provided, however, that PRI may make
distributions or dividends of the Repositioned Subsidiaries; and further
provided that PRI shall have no liability for (a) any Taxes resulting from or
attributable to such dividends or distributions and (b) any payments to be made
after the Closing Date under any real estate or equipment leases relating to
restaurants owned or operated by the Repositioned Subsidiaries.
SECTION 6.12. TRANSFER OF BANK ACCOUNTS. The parties stipulate and agree
that, effective as of the Closing, the bank accounts identified by an
asterisk(*) in Schedule 4.12 shall be transferred as directed by Seller to
Seller Parent, Seller or any other Affiliate of Seller, and Buyer shall take
necessary and appropriate actions to establish the requisite operating accounts
for the operation of PRI following the Closing.
SECTION 6.13. RESERVES AND WRITEUP OR WRITEDOWN OF ASSETS OR LIABILITIES.
Seller Parent and Seller will not cause PRI to change any of its accounting
reserves and will not write up or down any of its assets or liabilities, other
than as reflected in the Financial Statements or as required by GAAP.
SECTION 6.14. TAX ALLOCATION AGREEMENT. Seller Parent and Seller shall
take such action as is necessary to insure that, from and after the Closing
Date, PRI shall not be a party to, or have any liability under, any tax
allocation or sharing agreement to which Seller Parent and Seller shall also be
parties, and the certificates to be delivered by Seller Parent and Seller
pursuant to Section 8.3 shall contain a statement to that effect.
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SECTION 6.15. CERTAIN TAX MATTERS.
(a) Notwithstanding Section 10.1(b), Seller Parent and Seller shall
be responsible for and shall indemnify and hold PRI and Buyer harmless from
and against any liability for federal, state or local Taxes (including,
without limitation, interest and penalties imposed thereon as well as
reasonable legal, accounting and other expenses; provided that Buyer and PRI
shall be paid their legal, accounting and other expenses only if Seller
Parent or Seller shall not have paid such liabilities within thirty days of
being notified in writing of the same) sustained by Buyer or PRI to the
extent that such liability relates to (i) any tax period ending prior to or
on the Closing Date other than Taxes imposed on transactions, if any,
occurring on the Closing Date subsequent to the Closing, (ii) any Straddle
Period Taxes (as defined below) that relate to the portion of the taxable
period ending on the Closing Date other than Taxes imposed on transactions,
if any, occurring on the Closing Date subsequent to the Closing, and (iii)
any taxes for which PRI is liable pursuant to Treas. Reg. Section 1.1502-6
(or any similar portion of state, local or foreign law) in connection with
having been a member of a consolidated group immediately prior to the Closing
Date.
(b) For purposes of this Section, "Straddle Period Taxes" are any
federal, state or local Taxes that are imposed on a periodic basis and are
payable for a taxable period that includes (but does not end on) the Closing
Date and the portion of the Straddle Period Taxes that relate to the portion
of the taxable period ending on the Closing Date shall be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date determined on the basis of an interim closing of the books on
the Closing Date. Exemptions, allowances and deductions that are calculated
on an annual basis, such as for depreciation, shall be apportioned on a daily
basis. Buyer and PRI shall be responsible for Straddle Period Taxes
attributable to the portion of any taxable period beginning on the Closing
Date.
(c) Seller Parent or Seller shall cause to be prepared and filed all
Tax returns that include PRI for all taxable periods of PRI that end on or
before the Closing Date; PROVIDED, HOWEVER, that Buyer and PRI will not be
consulted with respect to any Tax returns filed by or on behalf of Seller
Parent or Seller. Buyer shall cause to be prepared and filed all Tax returns
that include PRI for taxable periods ending after but including the Closing
Date; provided, however, that no such Tax returns shall be filed prior to the
receipt of a written consent from Seller Parent, which consent shall not be
unreasonably withheld or delayed.
(d) Any refunds or credits of Taxes of PRI attributable to any
taxable period ending on or before the Closing Date shall be for the account
of Seller Parent and Seller. Any refunds or credits of Taxes of PRI
attributable to any taxable period beginning after the Closing Date shall be
for the account of Buyer. Any refunds or credits of Taxes of PRI
attributable to a taxable period that includes (but does not end on) the
Closing Date shall be allocated between Seller Parent, Seller and Buyer in
accordance with the methodology set forth in Section 6.15(b).
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SECTION 6.16. FORGIVENESS OF INTERCOMPANY INDEBTEDNESS. Simultaneously
with the Closing, Seller Parent and Seller shall cause the forgiveness of all
intercompany indebtedness between PRI and Seller Parent or Seller (or any of
their respective Affiliates), and the certificates to be delivered by Seller
Parent and Seller pursuant to Section 8.3 shall contain a statement to that
effect.
SECTION 6.17. EXTRAORDINARY COMPENSATION. In the event that, as a result
of the consummation of the transactions contemplated hereunder, any employee,
officer or director of PRI shall be entitled to any severance, bonus or other
extraordinary payment, such payment shall be made by Seller Parent or Seller,
and PRI shall have no liability therefor.
SECTION 6.18. STOCKHOLDERS AGREEMENT. On the Closing Date, Buyer, Seller
and the shareholders of Buyer shall execute and deliver a shareholders'
agreement (the "Stockholders Agreement"), in the form attached hereto as
Exhibit C.
SECTION 6.19. INTENTIONALLY OMITTED.
SECTION 6.20. WINFIELD'S TRANSACTION. Buyer has reviewed the Winfield's
Transaction and agrees to be bound by the terms thereof (other than with
respect to the Termination Fee, as such term is defined therein, which shall
be paid and retained by Seller or Seller Parent). Following the Closing,
Buyer will cause PRI to strictly comply with the terms and conditions of the
Winfield's Transaction. In the event that the leased space currently
occupied by Winfield's shall be cancelled or terminated and PRI is not
tendered a replacement lease in the New Premises (as such term is defined by
the Winfield's Transaction), Seller Parent shall pay to Buyer, within thirty
days following Seller Parent's receipt of written notice to such effect, the
amount of $290,000 (of which 63% shall be paid in cash and 37% shall be paid
by reducing the principal amount of the Note, effective as of the Closing
Date). In the event PRI is tendered a replacement lease in the New Premises,
Seller Parent shall pay to Buyer, within thirty days following Seller
Parent's receipt of written notice to such effect, the amount of $150,000 in
cash.
SECTION 6.21. TERMINATION OF CERTAIN AGREEMENTS. On or before the Closing
Date, the Seller Parent and Seller shall terminate all management and other
agreements between the Seller Parent or Seller and its Affiliates, on the one
hand, and PRI, on the other hand, and the certificates to be delivered by
Seller Parent and Seller pursuant to Section 8.3 shall contain a statement to
that effect.
SECTION 6.22. OTHER BUSINESS INDEMNIFICATION. Seller Parent and Seller
shall indemnify, defend and hold harmless the Buyer and PRI from and against
all third party claims (which may be attributable to events occurring before
or after the Closing Date) related to (i) the Repositioned Subsidiaries,
(ii) any subsidiary of PRI liquidated or distributed to Seller or its
designee prior to the Closing Date or (iii) any restaurant owned by PRI which
shall have been closed prior to the Closing Date.
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SECTION 6.23. LEASE GUARANTIES. Each of the parties hereto covenants and
agrees that it will use its best efforts to obtain the release of those
parties set forth on Schedule 6.23 as guarantors of the equipment or real
estate lease obligations also set forth on Schedule 6.23 (which shall include
any guaranties made by PRI with respect to the obligations of any of the
Repositioned Subsidiaries or other Affiliates of Seller Parent). Any party
(including any Affiliate thereof following the Closing) hereto which is a
lessee further covenants and agrees that, in the event any of such guaranties
shall not be released, such party (i) shall not, nor permit any of its
Affiliates, including any Affiliates thereof following the Closing, to take
or commit any act, or fail to perform any act, that will result in an
obligation under any of such guaranties and (ii) shall indemnify the
guarantor with respect to any obligation thereunder.
SECTION 6.24. ESTOPPEL CERTIFICATES. Seller Parent and Seller shall use
reasonable efforts (without the obligation to incur any expense other than
its attorneys fees) to obtain from each lessor under those real property and
equipment leases set forth in Schedules 4.11 to deliver to Buyer, on or
before the Closing Date, estoppel certificates substantially in the form
attached hereto as Exhibit D.
SECTION 6.25. MORTON'S STOCK OPTIONS. All options to purchase stock of
Seller Parent granted to any employee of the Business shall expire or vest
solely in accordance with the plan and/or agreement pursuant to which such
options were issued.
SECTION 6.26. RELEASE. From and after the Closing Date, Buyer hereby
releases, remises and forever discharges each of the directors and officers
of PRI from and against any and all actions, causes of action, suits,
damages, judgments, executions, liabilities, claims and demands whatsoever,
at law or in equity, in connection with the Business as it was operated prior
to the Closing Date. For purposes of this Section 6.26, Buyer shall be
deemed to include its Affiliates, subsidiaries, successors and permitted
assigns.
SECTION 6.27. MERGER. Buyer agrees to execute and deliver and to cause
PRI to execute and deliver on the Closing Date an agreement and plan of
merger in a form which, together with an amended and restated certificate of
incorporation of PRI attached thereto, shall (i) authorize for PRI a class of
class A voting preferred stock, a class of class B nonvoting preferred stock,
a class of common stock and a class of junior common stock, pursuant to which
the preferred stock classes shall have equal per share liquidation
preferences and, with the junior common stock, shall be convertible to common
stock, (ii) the preferred, common and junior common classes shall be entitled
to participate equally on an as if converted per share basis in any
liquidation proceeds following payment to the preferred classes of their
liquidation preferences, with the junior common stock class receiving, on a
per share basis, 2.5% of the amounts receivable by the common stock and (iii)
in general, Seller shall have a 19.9% fully diluted common stock interest in
PRI following the merger, and the shareholders of Buyer shall divide the
remaining 80.1% interest in proportion to their respective stock interests in
the Buyer, with each shareholder of Buyer receiving stock of PRI of an
identical class as such shareholder held in Buyer,
30
except that the common stock interest held by Gregory M. Buckley in Buyer
shall be converted to junior common stock of PRI. Buyer shall be merged into
PRI, and Seller agrees to vote its stock of PRI to effectuate the merger
pursuant to the Merger Agreement. In connection therewith, Seller agrees to
cause PRI, not later than two (2) days prior to the Closing Date, to pre-file
with the Secretary of State of Delaware an amended and restated certificate
of incorporation of PRI to be effective upon the filing of the articles of
merger.
SECTION 6.28. WORKMEN'S COMPENSATION OBLIGATIONS. Seller Parent and
Seller shall indemnify Buyer and PRI with respect to and pay all workmen's
compensation claims arising from the operation or conduct of the Business, to
the extent such claims shall be attributable to events occurring prior to or
on the Closing Date, within thirty days following the date of written notice
thereof.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) By mutual written agreement executed by Seller, Seller Parent and
Buyer;
(b) By Seller, Seller Parent or Buyer at any time after
February 28, 1997, if the Closing shall not have occurred and the party
seeking termination has not materially breached or defaulted under this
Agreement; provided, however, that in the event that the receipt by PRI of
liquor licenses from the State of Georgia and applicable political
subsidiaries thereof shall not have been obtained by the Closing Date there
shall be no termination under this Section 7.1(b) prior to March 30, 1997;
(c) By Seller, Seller Parent or Buyer, if any governmental or
regulatory authority, agency or commission, including courts of competent
jurisdiction, domestic or foreign, shall have (i) failed to issue all liquor
licenses required to consummate the transactions contemplated hereunder prior
to March 30, 1997, or (ii) issued an order, decree, or ruling or taken other
action, restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and such order, decree, ruling or other action shall have
become final and nonappealable;
(d) By Buyer, if there has been a material violation or breach by
Seller or Seller Parent of any covenant, agreement, representation or
warranty contained in this Agreement which (i) singularly or in the
aggregate, shall or would reasonably be expected to result in a material
adverse impact on the Business and which is not curable by Seller or Seller
Parent prior to Closing or has rendered the satisfaction of any condition to
the
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obligations of Buyer impossible and (ii) in any of such events, has not been
waived in writing by Buyer;
(e) By Seller Parent and Seller, if there has been a material
violation or breach by Buyer of any covenant, agreement, representation or
warranty contained in this Agreement which (i) is not curable by Buyer prior
to Closing or has rendered the satisfaction of any condition to the
obligations of Seller impossible and (ii) in either event, has not been
waived in writing by Seller; or
(f) Notwithstanding any provision of this Agreement to the contrary,
Seller and Seller Parent shall have the absolute and unilateral right to
terminate this Agreement and the MRI Agreement, without any liability
hereunder or otherwise to Buyer or any of its Affiliates, if (i) the PRI
Shares or the Business shall be sold (or Seller, Seller Parent or PRI shall
enter into any agreement to sell) prior to or on the Closing Date and
(ii) Seller or Seller Parent shall pay, within three days following any such
sale or the execution of any such agreement to sell, to Gregory M. Buckley,
as the agent for the stockholders of Buyer, the sum of $1,000,000 in
immediately available funds to such account as shall be designated in writing
to Seller Parent and Seller. The total amount of payments to be made by
Seller Parent or Seller pursuant to this Section 7.1(f) and Section 7.1(f) of
the MRI Agreement shall not exceed $1,000,000.
SECTION 7.2. PROCEDURE AND EFFECT OF TERMINATION. In the event of
termination of this Agreement pursuant to Section 7.1, written notice shall
forthwith be given to the other parties and this Agreement (other than
Section 6.6 and as provided in paragraph (b) below) shall terminate and the
transactions contemplated hereby shall be abandoned without further action by
the parties. If this Agreement is terminated as provided herein:
(a) All information received by Buyer with respect to the Business,
PRI, Seller Parent or any of their Affiliates shall be held confidential.
All copies of such information in Buyer's possession or in the possession of
any of its representatives shall be returned to Seller Parent or destroyed by
Buyer. Buyer shall comply with the provisions set forth in the
Confidentiality Agreement dated June 6, 1996, between Seller and Gregory M.
Buckley.
(b) Any termination pursuant to subparagraph (b), (c), (d) or (e) of
Section 7.1 shall not be deemed a waiver of any rights or remedies otherwise
available under this Agreement, by operation of law or otherwise; provided,
however, that in any action by a party hereto against any other party for
specific performance or damages or to assert or enforce any of its rights or
remedies hereunder, no shareholder (other than Seller Parent in its capacity
as a party), director, officer, representative or agent of such other party
shall have any liability in connection therewith;
(c) Concurrently with the execution and delivery of this Agreement,
Buyer and/or MRIACQ has delivered to Seller an irrevocable letter of credit
issued by
32
Creditanstalt-Bankverein in the amount of $250,000. Upon the Closing or if
the Closing shall not have occurred because of (i) the failure of PRI to
receive all required liquor licenses, (ii) Buyer having rightfully and
unilaterally terminated this Agreement pursuant to Section 7.1(b) or
(d) hereof or (iii) a termination of this Agreement pursuant to Section
7.1(a) or (f) hereof, such letter of credit shall be returned to Buyer or
MRIACQ, as appropriate. If the Closing does not occur as a result of the
unilateral and rightful termination of this Agreement by Seller or Seller
Parent pursuant to Section 7.1(b) (except in the event PRI has not received
all required liquor licenses by March 30, 1997) or (e) hereof, Seller shall
be entitled to draw against the full amount of such letter of credit as
liquidated damages and not as a penalty (the parties acknowledging that
actual damages may be difficult or impossible to quantify); and
(d) All filings, applications and other submissions made pursuant to
Section 6.3 or prior to the execution of this Agreement in contemplation
thereof shall, to the extent practicable, be withdrawn from the agency or
other person to which made.
(e) Any termination of this Agreement shall also act as and be deemed
to be a termination of the PRI Agreement, and a termination of the MRI
Agreement shall be deemed to be a termination of this Agreement.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
Each and every obligation of Buyer to consummate the transactions described
in this Agreement shall be subject to the fulfillment, on or before the
Closing Date, of the following conditions precedent:
SECTION 8.1. SELLER'S CLOSING DELIVERIES. Seller Parent or Seller, as
applicable, shall have delivered, or caused to be delivered, to Buyer at the
Closing each of the following:
(i) stock certificates representing the PRI Shares,
duly endorsed in blank, or accompanied by duly endorsed stock transfer powers;
(ii) a copy of the Certificate of Incorporation,
certified by the Secretary of State of the applicable state of incorporation,
of PRI as in effect on the Closing Date;
(iii) with respect to PRI, a certificate of good standing
issued by the secretary of state of each of the states of incorporation and a
certificate of qualification of good standing in each of the states in which
PRI is qualified to transact business issued by the secretary of state or
other appropriate authority of each such state, dated on or after January 1,
1997 (all of which states are listed in Schedule 4.1);
33
(iv) a copy of the bylaws of PRI, which shall be
certified to be accurate and complete as of the Closing Date by the Secretary
of such entity;
(v) the minute book and corporate seal of PRI;
(vi) the resignations of those officers and directors
PRI identified by the Buyer prior to the Closing;
(vii) consents of all Persons whose consent or approval
is set forth in Schedule 4.4;
(viii) a certified copy of the resolutions of the Board of
Directors of each of Seller Parent and Seller authorizing the execution,
delivery and performance of this Agreement and all Related Agreements and
authorizing the performance of the obligations of Seller Parent and Seller
thereunder;
(ix) the certificates referenced in Sections 8.2 and 8.3
hereof; and
(x) the Stockholders Agreement, duly executed by Seller.
SECTION 8.2. REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Seller Parent and Seller contained in this Agreement shall
have been complete and correct on the date hereof, and shall be complete and
correct on the Closing Date with the same effect as though such
representations were made as of such date except for representations and
warranties made as of a specified date and except for such failures to be
complete and correct that do not result, singularly or in the aggregate, in a
material adverse effect on the Business, and each of Seller Parent and Seller
shall have delivered to Buyer on the Closing Date a certificate, dated the
Closing Date, to such effect.
SECTION 8.3. PERFORMANCES. Each of Seller Parent and Seller shall have,
in all respects, performed and complied with all covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing
and each of Seller Parent and Seller shall have delivered to Buyer on the
Closing Date a certificate, dated the Closing Date, to such effect.
SECTION 8.4. LEGAL OPINION. Independent counsel for Seller Parent and
Seller shall have delivered to Buyer its opinion dated the Closing Date in
customary form.
SECTION 8.5. NO INJUNCTION OR PROCEEDING. No governmental or regulatory
authority, agency or commission, including courts of competent jurisdiction,
domestic or foreign, shall have issued an order, decree, or ruling or taken
other action, restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby, which order, decree, ruling or other action
remains in effect.
34
SECTION 8.6. FUNDING. Without liability to Seller Parent, Seller or,
prior to the Closing Date, PRI and without amendment of this Agreement,
Seller Parent and Seller shall have caused (at Buyer's sole expense) PRI to
execute and deliver all agreements, contracts, certificates, releases, and
other documentation and actions reasonably necessary to consummate the
Borrowings to the extent required under Section 6.1(f).
SECTION 8.7. GOVERNMENTAL CONSENTS AND APPROVALS. All governmental
consents, approvals, notices and filings set forth in Schedule 4.4, including
those pursuant to any federal, state or municipal laws, regulations or
ordinances relating to liquor shall have been obtained or made and all
applicable waiting periods (including any extensions thereof) relating
thereto shall have expired or otherwise terminated.
SECTION 8.8. RELEASE OF LIEN. The Seller shall have complied with the
provisions of Section 9.8 hereof.
SECTION 8.9. SIMULTANEOUS ACQUISITION. Seller and Seller Parent shall
have consummated (or shall consummate simultaneously herewith) the
transaction described in the MRI Agreement.
ARTICLE IX
CONDITIONS TO SELLER PARENT'S AND SELLER'S OBLIGATIONS
Each and every obligation of Seller Parent and Seller to consummate the
transactions described in this Agreement shall be subject to the fulfillment,
on or before the Closing Date, of the following conditions precedent:
SECTION 9.1. PAYMENT OF PURCHASE PRICE. Buyer shall have paid the cash
portion of the Purchase Price and delivered the Note.
SECTION 9.2. BUYER'S CLOSING DELIVERIES. Buyer shall deliver, or cause
to be delivered, to Seller at the Closing each of the following:
(i) consents of all Persons, if any, whose consent or
approval is required to be set forth in Schedule 5.3;
(ii) a copy of the Certificate of Incorporation,
certified by the Secretary of State of the state of incorporation of Buyer as
in effect on the Closing Date;
(iii) a certificate of good standing issued by the
Secretary of State of the Buyer's state of incorporation and a certificate of
qualification of good standing in each of the states in which Buyer is
qualified to transact business issued by the Secretary of State or other
appropriate authority of each such state, dated on or after January 1, 1997;
35
(iv) a copy of the bylaws of Buyer, which shall be
certified to be accurate and complete as of the Closing Date by the Secretary
of Buyer;
(v) a certified copy of the resolutions of the Board of
Directors of Buyer authorizing the execution, delivery and performance of
this Agreement, agreement with Lenders and all related agreements and
certificates and authorizing the performance of Buyer's obligations
thereunder;
(vi) the certificates referenced in Sections 9.3 and 9.4
hereof;
(vii) the replacement letters of credit or surety bonds
referenced in Section 6.9 hereof;
(viii) written evidence of insurance and benefits required
under Section 6.9 hereof;
(ix) the Stockholders Agreement, duly executed by Buyer
and the shareholders of Buyer;
(x) consents of all Persons whose consent or approval
is set forth in Schedule 4.6;
(xi) the merger agreement referenced in Section 6.27
hereof, duly executed by Buyer; and
(xii) the Guarantee Agreement, duly executed by Buyer.
SECTION 9.3. REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Buyer contained in this Agreement shall have been complete
and correct on the date hereof in all respects and shall be complete and
correct on the Closing Date in all respects, with the same effect as though
such representations were made as of such date except for representations and
warranties made as of a specified date and Buyer shall have delivered to
Seller on the Closing Date a certificate, dated as of the Closing Date, to
such effect.
SECTION 9.4. PERFORMANCE. Buyer shall have, in all respects, performed
and complied with all covenants required by this Agreement to be performed or
complied with by it prior to or at the Closing, and Buyer shall have
delivered to Seller on the Closing Date a certificate, dated as of the
Closing Date, to such effect.
SECTION 9.5. LEGAL OPINION. Counsel for Buyer shall have delivered to
Seller its opinion dated the Closing Date in customary form.
36
SECTION 9.6. GOVERNMENTAL CONSENTS AND APPROVALS. All necessary and
appropriate governmental consents, approvals and filings set forth in
Schedule 5.3, including those pursuant to any federal, state or municipal
laws, regulations or ordinances relating to liquor licenses, if required,
shall have been obtained or made and all applicable waiting periods
(including any extensions thereof) relating thereto shall have expired or
otherwise terminated.
SECTION 9.7. NO INJUNCTION OR PROCEEDING. No governmental or regulatory
authority, agency or commission, including courts of competent jurisdiction,
domestic or foreign, shall have issued an order, decree, or ruling or taken
other action, restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby, which order, decree, ruling or other action
remains in effect.
SECTION 9.8. RELEASE OF LIEN. The Seller shall have obtained, on or
before the Closing Date, the full and complete release of the security
interest in the Shares in favor of The First National Bank of Boston
("FNBB"), and Seller shall cause, on or before the Closing Date, each
security interest or other encumbrance in favor of FNBB on any assets (other
than assets of the Repositioned Subsidiaries) of PRI to terminate and FNBB to
deliver termination statements with respect thereto to the Buyer.
SECTION 9.9. TRAC AGREEMENT. Buyer shall have delivered to Seller and/or
its Affiliates an addendum to Attachment A of the Tip Reporting Alternative
Commitment (the "TRAC Agreement") between the Internal Revenue Service (the
"IRS") and Seller for filing with the District Director of the Manhattan
District of the IRS. Such addendum shall inform the IRS that Buyer has
purchased the PRI Shares and shall indicate which restaurants are owned by
PRI. Such addendum shall also provide the address and employer identification
number of Buyer.
SECTION 9.10. SIMULTANEOUS ACQUISITION. MRIACQ shall have consummated (or
shall consummate simultaneously herewith) the transactions described in the
MRI Agreement.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. BUYER CLAIMS. (a) Seller Parent and Seller shall jointly and
severally indemnify and hold harmless Buyer, PRI, their respective successors
and assigns, and each of their officers, directors and employees (collectively
the "Indemnitee") against, and in respect of, any and all damages, fines,
claims, deficiencies, losses, liabilities, and expenses (including out of pocket
expenses, reasonable attorneys' and accountants' fees incurred in the
investigation or defense of any of the same or in asserting any of their
respective rights hereunder) (collectively, "Losses") resulting after the
Closing Date from (i) any failure by Seller Parent or Seller to fulfill any
obligation set forth herein which either of them is
37
required to perform after Closing or (ii) any breach of any of the
representations and warranties set forth in this Agreement (collectively
items (i) and (ii) are hereinafter referred to as the "Buyer Claims"). All
Buyer Claims under this Agreement and the MRI Agreement aggregating less than
$150,000 shall be paid 63% in cash and 37% by reducing the principal amount
of the Note (effective as of the Closing Date), and all Buyer Claims under
this Agreement and the MRI Agreement which aggregate in excess of $150,000
shall be paid in cash.
(b) Seller Parent and Seller shall not be responsible to an
Indemnitee with respect to any Losses as to which such Indemnitee is
otherwise entitled to indemnity under item (ii) of paragraph (a) of this
Section 10.1 and Section 10.1 of the MRI Agreement unless and until the
aggregate amount of such Losses exceed $150,000 (the "Seller Stop Amount");
provided, however, that in the event the Seller Stop Amount shall be
exceeded, Seller Parent and Seller shall pay to Indemnitee the amount of the
Seller Stop Amount plus the amount of any excess; and provided further, that
under no circumstances shall the aggregate of the Seller Stop Amount and any
excess with respect to item (ii) of paragraph (a) of Section 10.1 of this
Agreement and Section 10.1 of the MRI Agreement exceed $6,808,500. Seller
Parent and Seller shall have no obligation under this Section 10.1 to the
extent that an Indemnitee shall receive insurance proceeds relating to a
Buyer Claim for which there is insurance coverage, and the amount of any
Buyer Claim shall be exclusive of any such insurance proceeds. Indemnitee's
insurance shall be considered primary coverage, and Seller Parent's and
Seller's insurance (if any) shall be considered secondary coverage with
respect to any Buyer Claim for which Indemnitee shall have insurance
coverage. Buyer shall cause PRI to maintain after the Closing Date
comprehensive general liability, liquor liability, automobile liability and
umbrella liability insurance coverage in amounts reasonable for the Business.
(c) The indemnification obligations of Seller Parent and Seller
pursuant to Section 10.1(a)(ii) shall expire and terminate on March 30, 1998,
(March 30, 2004, in the case of any Buyer Claim pursuant to Sections 4.17 and
4.20) unless an Indemnitee shall have provided notice of a Buyer Claim to
Seller Parent or Seller in accordance with Section 10.2. If an Indemnitee
provides such notice prior to March 31, 1998, (March 31, 2004, in the case of
any Buyer Claim pursuant to Sections 4.17 and 4.20) the indemnification
obligations under Section 10.1(a)(ii) shall continue as to the Buyer Claim
identified in the notice(s) until the appropriate amount of indemnification,
if any, is determined, paid and satisfied in full.
(d) Notwithstanding any provision of this Agreement to the contrary,
all indemnification with respect to (i) any Tax matter shall be determined
and conducted pursuant to Section 6.15, (ii) any lease guaranties shall be
determined and conducted pursuant to Section 6.23 and (iii) any workmen's
compensation obligations shall be determined and conducted pursuant to
Section 6.28, and not this Section 10.1 (except that any claim made pursuant
to Sections 6.15, 6.23 or 6.28 shall, for the purposes of Section 10.2, be
deemed a Buyer Claim (and, with respect to Section 6.23, a Seller Claim if
applicable)).
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SECTION 10.2. ASSERTION OF BUYER CLAIMS. Any Buyer Claim shall be
asserted by written notice given by Indemnitee to the indemnifying parties
promptly after Indemnitee has become aware of the Buyer Claim. The notice
shall state the amount or the estimated amount of the Buyer Claim to the
extent then feasible, but the estimate shall not be conclusive of the final
amount of such Buyer Claim. With respect to any claim under Section 10.1
relating to a third party claim or demand, Indemnitee shall provide Seller
Parent or Seller with prompt written notice thereof in accordance with
Section 11.5 and the appropriate indemnifying parties may defend, in good
faith and at their expense, by legal counsel chosen by them and reasonably
acceptable to Indemnitee, any such claim or demand, and Indemnitee, at its
expense, shall have the right to participate in the defense of any such third
party claim. So long as the appropriate indemnifying parties are defending
in good faith any such third party claim, Indemnitee shall not settle or
compromise such third party claim. In any event, Indemnitee shall cooperate
in the settlement or compromise of, or defense against, any such asserted
claim. If Seller Parent elects or is deemed to have elected not to assume
the defense of any Buyer Claim, the Indemnitee shall have the right to
defend, compromise and settle the Buyer Claim subject to the prior consent of
Seller Parent, which consent shall not be unreasonably withheld or unduly
delayed. The Indemnitee shall or shall direct in writing its counsel to
deliver to Seller Parent copies of all correspondence and matters relating to
such Buyer Claim. If the Buyer Claim involves or could result in claims
against, or potential liability of, Seller Parent the extent or nature of
which were not known by Seller Parent as of the date Seller Parent elected or
is deemed to have elected not to take over the defense of such claim or
demand, Seller Parent shall, by written notice to the Indemnitee, be entitled
to take over the defense of such claim or demand at Seller Parent's expense.
In computing the Losses to be indemnified hereunder (the "Indemnification
Amount"), the indemnity shall be for the net amount of such Loss after giving
effect to any tax benefit (but only to the extent of any benefit accruing for
the tax period with respect to which the Loss shall have occurred) to the
Indemnitee that the Indemnitee reasonably expects. Upon determination of the
Buyer Indemnification Amount, the indemnifying party shall pay Indemnitee by
check within ten (10) days of the date such amount is determined an amount
equal to the Buyer Indemnification Amount; provided, however, that the amount
to be paid by check shall be subject to the provisions of the last sentence
of Section 10.1(a).
SECTION 10.3. SELLER CLAIMS. Buyer shall indemnify and hold harmless
Seller Parent and Seller and their respective successors and assigns against,
and in respect of, any and all Losses resulting after the Closing Date from: (a)
any breach or violation by Buyer of any covenant set forth herein or any failure
to fulfill any obligation set forth herein or (b) any breach of any of the
representations and warranties made in this Agreement by Buyer (collectively
items (a) and (b) are hereinafter referred to as the "Seller Claims"). Buyer
shall not be responsible to Seller Parent and Seller with respect to any Losses
as to which Seller Parent and Seller are otherwise entitled to indemnity under
item (b) of this Section 10.3 and Section 10.3 of the MRI Agreement unless and
until the aggregate amount of such Losses exceeds $150,000 (the "Buyer Stop
Amount"); provided, however, that in the event the Buyer Stop Amount shall be
exceeded, Buyer shall pay to Seller Parent and Seller the amount of
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the Buyer Stop Amount plus the amount of any excess; and provided further,
that under no circumstances shall the aggregate of the Buyer Stop Amount and
any excess under both this Agreement and the MRI Agreement exceed $1,000,000.
Buyer shall have no obligation under this Section 10.3 to the extent that
Seller Parent or Seller (or any Affiliate thereof) shall receive insurance
proceeds relating to a Seller Claim for which there is insurance coverage,
and the amount of any Seller Claim shall be exclusive of any such insurance
proceeds. Insurance maintained by Seller Parent or Seller shall be
considered primary coverage, and Buyer's insurance shall be considered
secondary coverage with respect to a Seller Claim for which Seller or Seller
Parent shall have insurance coverage. The indemnification provisions of
Buyer pursuant to item (b) of this Section 10.3 shall expire and terminate on
March 30, 1998, unless Seller Parent or Seller, as appropriate, shall have
provided written notice of a claim to Buyer prior to or on such date. If
Seller Parent or Seller provides such notice prior to March 31, 1998, the
indemnification obligations under item (b) of this Section 10.3 shall
continue until the appropriate amount of indemnification, if any, is
determined, paid and satisfied in full.
SECTION 10.4. ASSERTION OF SELLER CLAIMS. Any Seller Claim shall be
asserted by written notice given by Seller Parent or Seller to Buyer promptly
after Seller Parent or Seller has become aware of the Seller Claim. The
notice shall state the amount or the estimated amount of the Seller Claim to
the extent then feasible, but the estimate shall not be conclusive of the
final amount of such Seller Claim. With respect to any claim under Section
10.3 relating to a third party claim or demand, Seller Parent or Seller shall
provide Buyer with prompt written notice thereof in accordance with Section
11.5 and the Buyer may defend, in good faith and at its expense, by legal
counsel chosen by it and reasonably acceptable to Seller Parent or Seller,
any such claim or demand, and Seller Parent or Seller, at its expense, shall
have the right to participate in the defense of any such third party claim.
So long as the Buyer is defending in good faith any such third party claim,
Seller Parent or Seller shall not settle or compromise such third party
claim. In any event, Seller Parent or Seller shall cooperate in the
settlement or compromise of, or defense against, any such asserted claim. If
Buyer elects or is deemed to have elected not to assume the defense of any
Seller Claim, Seller Parent or Seller shall have the right to defend,
compromise and settle the Seller Claim subject to the prior consent of Buyer,
which consent shall not be unreasonably withheld or unduly delayed. Seller
Parent or Seller shall or shall direct in writing its counsel to deliver to
Buyer copies of all correspondence and matters relating to such Seller Claim.
If the Seller Claim involves or could result in claims against, or potential
liability of, Buyer the extent or nature of which were not known by Buyer as
of the date Buyer elected or is deemed to have elected not to take over the
defense of such claim or demand, Buyer shall, by written notice to the Seller
Parent or Seller, be entitled to take over the defense of such claim or
demand at Buyer's expense. In computing the Losses to be indemnified
hereunder (the "Seller Indemnification Amount"), the indemnity shall be for
the net amount of such Loss after giving effect to any tax benefit (but only
to the extent of any benefit accruing for the tax period with respect to
which the Loss shall have occurred) to the Seller and Seller Parent that the
Seller and Seller Parent reasonably expect. Upon determination of the Seller
Indemnification Amount, Buyer shall apy Seller and Seller Parent
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by check within ten (10) days of the date such amount is determined an amount
equal to the Seller Indemnification Amount.
SECTION 10.5. OTHER RIGHTS AND REMEDIES. Except as otherwise set forth in
this Agreement, the rights and remedies of the parties under this Article X
shall be the sole and exclusive rights and remedies for any misrepresentation
or breach of warranty hereunder or in connection with the transactions
contemplated or consummated hereunder (but not with respect to the Related
Agreements). In the event of a termination of this Agreement pursuant to
Article VII, the remedies available to the parties hereto shall be as set
forth therein.
SECTION 10.6. IMMATERIAL BREACHES. The fact that a breach of any
covenant, agreement, representation or warranty shall have been deemed
immaterial for the purposes of Sections 7.1(d) and (e) and Section 8.2 shall,
for the purposes of this Article X, have no effect on the application of the
provisions of this Article. No claims for indemnification shall be made by
Buyer with respect to any individual Buyer Claim involving a Loss of less
than $5,000 or by Seller with respect to any individual Seller Claims
involving a Loss of less than $5,000.
SECTION 10.7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
limitations set forth in Sections 10.1 (c) and 10.3, the representations and
warranties contained in this Agreement shall survive the execution and
delivery of this Agreement, any examination or investigation by or on behalf
of the parties hereto prior to the Closing Date and the completion of the
transactions contemplated herein.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. HIRING LIMITATIONS.
(a) During the period ending two years following the Closing Date,
none of the parties hereto (or their Affiliates following the Closing) shall
solicit for employment any salaried employees of any other party (or its
Affiliates following the Closing); provided, however, that during such period
non-salaried employees may be hired by any other party (or any of its
Affiliates following the Closing) if not so solicited, and salaried employees
shall not be employed during such period under any circumstances.
(b) Each party hereto acknowledges and agrees that a breach by it (or
any Affiliate thereof following the Closing) of the covenant contained in this
Section 11.1 will result in harm and continuing damage for which there is no
adequate remedy of law; and, in the event of a breach of such covenant by a
party hereto (or any Affiliate thereof following the Closing), any other party
(or its Affiliates following the Closing) shall be
41
entitled to injunctive relief but in no event shall be entitled to damages
other than reasonable attorneys fees.
(c) This Section 11.1 shall apply only to the employment of employees
(salaried or non-salaried) that would entail such employees performing
substantially all of their duties in the State of Georgia; provided, however,
that no regional manager or general manager may be hired by an other party
during the period ending six (6) months after the Closing Date.
SECTION 11.2. ENTIRE UNDERSTANDING, WAIVER, ETC. This Agreement sets
forth the entire understanding of the parties and supersedes any and all
prior or contemporaneous agreements, arrangements, understandings,
representations and warranties relating to the subject matter hereof, and the
provisions hereof may not be changed, modified, waived or altered except by
an agreement in writing signed by the party entitled to the benefit of the
provision(s) to be waived. A waiver by any party of any of the terms or
conditions of this Agreement, or of any breach, shall not be deemed a waiver
of such term or condition for the future, or of any other term or condition,
or of any subsequent breach.
SECTION 11.3. SEVERABILITY. If any provision of this Agreement or the
application of such provision shall be held by a court of competent
jurisdiction to be unenforceable, the remaining provisions of this Agreement
shall remain in full force and effect.
SECTION 11.4. CAPTIONS. The captions herein are for convenience only and
shall not be considered a part of this Agreement for any purpose, including,
without limitation, the constructions or interpretation of any provision
hereof.
SECTION 11.5. NOTICES. All notices, requests, demands and other
communications (collectively, "Notices") that are required or may be given
under this Agreement shall be in writing. All Notices shall be deemed to
have been duly given or made: if by hand, immediately upon delivery; if by
telecopier or similar device, immediately upon sending, provided notice is
sent on a Business Day during the hours of 9:00 a.m. and 4:00 p.m. Eastern
Time, but if not, then immediately upon the beginning of the first Business
Day after being sent; if by Federal Express, Airborne, Express Mail or any
other reputable overnight delivery service, one day after being placed in the
exclusive custody and control of said courier; and if mailed by certified
mail, return receipt requested, five (5) Business Days after mailing.
Notwithstanding the foregoing, with respect to any Notice given or made by
telecopier or similar device, such Notice shall not be effective unless and
until (i) the telecopier or similar advice being used prints a written
confirmation of the successful completion of such communication by the party
sending the Notice, and (ii) a copy of such Notice is deposited in first
class mail to the appropriate address for the party to whom the Notice is
sent. In addition, notwithstanding the foregoing, a notice of a change of
address shall not be effective until received by other party. All notices
are to be given or made to the parties at the following addresses (or to such
other address as either party may designate by notice in accordance with the
provisions of this Section):
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(a) If to Seller Parent or Seller at:
3333 New Hyde Park Road
New Hyde Park, New York 11042
Telecopier: (516) 627-2050
(b) If to Buyer at:
401 Valley Road, N.W.
Atlanta, Georgia 30305
Telecopier: (404) 869-9863
SECTION 11.6. SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of
the rights or obligations arising hereunder shall be assignable without the
prior written consent of the parties.
SECTION 11.7. PARTIES IN INTEREST. This Agreement shall be binding upon
and shall inure to the benefit of the parties and their respective successors
and permitted assigns. Nothing in this Agreement, express or implied, shall
confer upon any Person, other than the parties, and their successors and
permitted assigns, any rights or remedies under or by reason of this
Agreement.
SECTION 11.8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute one and the same instrument.
SECTION 11.9. CONSTRUCTION OF TERMS. Any reference to the masculine or
neuter shall include the masculine, the feminine and the neuter, and any
reference to the singular or plural shall include the opposite thereof. The
parties acknowledge that each party and its counsel has participated in the
drafting of this Agreement and agree that this Agreement shall not be
interpreted against one party or the other based upon who drafted it.
SECTION 11.10. GOVERNING LAW. This Agreement shall be controlled,
construed and enforced in accordance with the laws of the State of Georgia
applicable to agreements made and to be performed in that State.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first above written.
SELLER:
PEASANT HOLDING CORP.
By: /s/ Thomas J. Baldwin
--------------------------------
Thomas J. Baldwin
Title: Sr. Vice President - Finance
and Chief Financial Officer
BUYER:
PRI ACQUISITION CORPORATION
By: /s/ [illegible]
--------------------------------
Title: President
--------------------------------
SELLER PARENT:
MORTON'S RESTAURANT GROUP, INC.
By: /s/ Thomas J. Baldwin
--------------------------------
Thomas J. Baldwin
Title: Sr. Vice President - Finance
and Chief Financial Officer
44