EXHIBIT 2
[EXECUTION COPY]
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STOCK PURCHASE AGREEMENT
among
SWH CORPORATION,
THE EQUITY HOLDERS OF
SWH CORPORATION,
SAUNDERS KARP & MEGRUE, LLC (as Seller's Representative)
and
BOB EVANS FARMS, INC.
Dated as of June 11, 2004
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TABLE OF CONTENTS
Page
1. DEFINITIONS. For purposes of this Agreement:........................................................... 2
1.1. Cross Reference Table.......................................................................... 2
1.2. Certain Definitions............................................................................ 3
1.3. Certain Matters of Construction................................................................ 9
2. ACQUISITION............................................................................................. 9
2.1. Sale of Shares................................................................................. 9
2.2. Treatment of Options........................................................................... 10
2.3. Treatment of Warrants.......................................................................... 10
3. PAYMENT AND CLOSING..................................................................................... 10
3.1. Payments at Closing; Adjustments.............................................................. 10
3.2. Time and Place of Closing...................................................................... 11
3.3. Delivery....................................................................................... 12
3.4. Post-Closing Adjustment Mechanics.............................................................. 12
3.5. Adjustments to the Enterprise Value............................................................ 13
3.6. Escrow Hold-Back............................................................................... 13
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS........................................................... 14
4.1. Organization and Authority..................................................................... 14
4.2. Authorization and Enforceability............................................................... 14
4.3. Non-Contravention, etc......................................................................... 14
4.4. Title to Securities............................................................................ 14
4.5. Voting Trusts, etc............................................................................. 14
4.6. Brokers, etc................................................................................... 15
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY.................................................. 15
5.1. Organization, Power, Standing and Authority.................................................... 15
5.2. Capitalization and Investments................................................................. 16
5.3. Financial Statements, etc...................................................................... 16
5.4. Title to Assets................................................................................ 17
5.5. Licenses, Permits, Compliance with Laws, etc................................................... 17
5.6. Non-Contravention, etc......................................................................... 17
5.7. Real Property.................................................................................. 17
5.8. Litigation, etc................................................................................ 19
5.9. Intellectual Property Rights................................................................... 19
5.10. Contracts, etc................................................................................. 19
5.11. Change in Condition............................................................................ 21
5.12. Insurance...................................................................................... 23
5.13. Tax Matters.................................................................................... 23
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5.14. Employee Benefit Plans......................................................................... 25
5.15. Environmental Matters.......................................................................... 26
5.16. Labor Relations................................................................................ 26
5.17. Officers, Directors and Employees.............................................................. 27
5.18. Suppliers...................................................................................... 27
5.19. Financial Advisory, Finder's or Broker's Fees.................................................. 27
5.20. No Governmental Consent or Approval Required................................................... 27
5.21. No Undisclosed Material Liabilities............................................................ 27
5.22. Affiliate Transactions......................................................................... 28
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER............................................................. 28
6.1. Corporate Matters, etc......................................................................... 28
6.2. Financial Condition, etc....................................................................... 29
6.3. Investment Intent.............................................................................. 29
6.4. Litigation..................................................................................... 29
6.5. Brokers, etc................................................................................... 29
6.6. Investigation; No Additional Representations; No Reliance, etc................................. 29
7. CERTAIN AGREEMENTS OF THE PARTIES....................................................................... 30
7.1. Payment of Transfer Taxes and Other Charges.................................................... 30
7.2. Operation of Business, Related Matters......................................................... 30
7.3. Preparation for Closing........................................................................ 31
7.4. Access to Properties and Records............................................................... 32
7.5. Shareholders Agreement......................................................................... 33
7.6. Indemnification of Directors, Officers and Employees........................................... 33
7.7. Tax Matters.................................................................................... 33
7.8. Employee Benefits.............................................................................. 37
7.9. Other Offers................................................................................... 37
7.10. Notices of Certain Events...................................................................... 37
7.11. Non-Compete; Non-Solicitation.................................................................. 38
7.12. New Restaurant Expenditures.................................................................... 39
7.13. Related Party Accounts and Agreements.......................................................... 39
7.14. Sellers' Representative........................................................................ 39
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER...................................................... 40
8.1. Representations, Warranties and Covenants...................................................... 40
8.2. Legality; Governmental Authorization; Litigation............................................... 41
8.3. General........................................................................................ 41
8.4. Subsequent Sellers............................................................................. 41
8.5. Pay-Off Letter................................................................................. 41
8.6. Escrow Agreement............................................................................... 41
8.7. FIRPTA Statement............................................................................... 41
8.8. Option and Warrant Termination................................................................. 41
8.9. Resignations................................................................................... 41
8.10. Employment Agreements; Non-Competes............................................................ 42
8.11. Withdrawal of Registration Statement........................................................... 42
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9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE COMPANY AND THE SELLERS.................................... 42
9.1. Representations, Warranties and Covenants...................................................... 42
9.2. Legality; Government Authorization; Litigation................................................. 42
9.3. General........................................................................................ 42
9.4. Escrow Agreement............................................................................... 43
10. INDEMNIFICATION......................................................................................... 43
10.1. Buyer's Indemnification........................................................................ 43
10.2. Sellers' Indemnification....................................................................... 43
10.3. Monetary Limitations........................................................................... 44
10.4. Time Limitations............................................................................... 45
10.5. Limitation on Remedies......................................................................... 45
10.6. Third Party Claims............................................................................. 45
10.7. Equity Purchase Price Adjustment............................................................... 46
10.8. Tax Indemnity.................................................................................. 46
11. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.............................................................. 47
11.1. Consent to Jurisdiction........................................................................ 47
11.2. WAIVER OF JURY TRIAL........................................................................... 47
12. TERMINATION............................................................................................. 48
12.1. Termination of Agreement....................................................................... 48
12.2. Effect of Termination.......................................................................... 48
13. MISCELLANEOUS........................................................................................... 48
13.1. Entire Agreement; Waivers...................................................................... 48
13.2. Amendment or Modification...................................................................... 49
13.3. Severability................................................................................... 49
13.4. Successors and Assigns......................................................................... 49
13.5. Action by the Sellers' Representative.......................................................... 49
13.6. Notices........................................................................................ 49
13.7. Public Announcements........................................................................... 50
13.8. Headings, etc.................................................................................. 51
13.9. Disclosure..................................................................................... 51
13.10. Third Party Beneficiaries...................................................................... 51
13.11. Counterparts................................................................................... 51
13.12. Governing Law.................................................................................. 51
13.13. Expenses....................................................................................... 51
13.14. Effect of Execution by Subsequent Sellers...................................................... 51
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EXHIBITS
Exhibit 3.1.1 Form of Escrow Agreement
Exhibit 3.4 Accounting Methodology
Exhibit 8.12.1 Form of Employment Agreement with Thomas M. Simms
Exhibit 8.12.2 Form of Employment Agreement with Russell Bendel
Exhibit 8.12.3 Form of Employment Agreement with Daniel Dillon
Exhibit 8.12.4 Form of Employment Agreement with Ed Bartholemy
SCHEDULES
Schedule 1 Sellers and Allocation of Equity Purchase Price
Schedule 4.3 Sellers' Consents
Schedule 4.4 Title to Securities
Schedule 4.5 Voting /Share Transfer Restrictions
Schedule 5.1 Organization, Power, Standing and Authority
Schedule 5.2 Stock Obligations
Schedule 5.3 Financial Statements
Schedule 5.4 Title to Assets
Schedule 5.5 Licenses and Permits
Schedule 5.6 Company Consents
Schedule 5.7 Business Locations and Real Property
Schedule 5.8 Litigation
Schedule 5.9 Intellectual Property
Schedule 5.10 Contractual Obligations
Schedule 5.11 Change in Condition
Schedule 5.12 Insurance Policies
Schedule 5.13 Tax Matters
Schedule 5.14 Employee Benefit Plans
Schedule 5.15 Environmental Matters
Schedule 5.16 Labor Relations
Schedule 5.17 Directors
Schedule 5.18 Suppliers
Schedule 5.20 Governmental Consents
Schedule 5.21 No Undisclosed Material Liabilities
Schedule 5.22 Affiliate Transactions
Schedule 7.2 Operation of Business, Related Matters
Schedule 7.13 Related Party Agreements
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 11th
day of June, 2004, among SWH Corporation, a California corporation (the
"Company," which term shall include each Subsidiary (as defined below) of the
Company, except as the context otherwise requires), each holder of Shares,
Options and/or Warrants of the Company listed on Schedule 1 (each, an "Initial
Seller" and collectively, the "Initial Sellers"), each of the Subsequent Sellers
(as defined below) who executes the signature pages hereto after the date
hereof, Saunders Karp & Megrue, LLC, not in an individual capacity but solely as
representative for the Sellers as provided herein (the "Sellers'
Representative") and Bob Evans Farms, Inc., a Delaware corporation (the "Buyer,"
which term shall include the Purchase Subsidiary (as defined below), except as
the context otherwise requires).
RECITALS
1. Each of the Initial Sellers respectively owns the number of issued and
outstanding shares (the "Shares") of Common Stock of the Company, no par value
per share (the "Common Stock"), Options and/or Warrants as set forth opposite
such Seller's name on Schedule 1.
2. The Initial Sellers desire to sell and transfer the issued and
outstanding Shares held by such Initial Seller to the Buyer and the Buyer
desires to acquire such Shares from the Initial Sellers, and each Initial Seller
who holds Options and/or Warrants desires to cancel such Options and/or
Warrants, all upon the terms and subject to the conditions set forth in this
Agreement.
3. In addition to the Initial Sellers, each holder of Shares, Options
and/or Warrants of the Company listed on Schedule 1 as a "Subsequent Seller"
(each, a "Subsequent Seller" and, collectively, the "Subsequent Sellers" and,
together with the Initial Sellers, each a "Seller" and, collectively, the
"Sellers") respectively owns the number of issued and outstanding Shares,
Options and/or Warrants set forth opposite such person's name on Schedule 1
hereto.
4. The Initial Sellers shall present this Agreement to the Subsequent
Sellers and, in accordance with the terms of the Shareholders Agreement, shall
require, as a condition to this Agreement, that each of the Subsequent Sellers
execute a signature page hereto and (i) sell and transfer such Subsequent
Seller's Shares to Buyer, (ii) have such Subsequent Seller's Options and/or
Warrants cancelled upon the terms and subject to the conditions set forth in
this Agreement and (iii) assume the other rights and obligations of Sellers set
forth in this Agreement, all upon the terms and subject to the conditions set
forth in this Agreement.
AGREEMENT
Therefore, in consideration of the foregoing and the mutual agreements and
covenants set forth below, the parties hereto hereby agree as follows:
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1. DEFINITIONS. For purposes of this Agreement:
1.1. Cross Reference Table. The following terms defined elsewhere in this
Agreement in the Sections set forth below shall have the respective meaning
therein defined
Term Definition
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"Accountants" Section 3.4.2
"Acquisition Proposal" Section 7.10
"Agent" Section 1.2.5
"Agreement" Preamble
"Buyer" Preamble
"Buyer Indemnitees" Section 10.2
"Closing" Section 3.2
"Closing Balance Sheet" Section 3.4.1
"Closing New Store Expenditures Amount" Section 3.4.1
"Closing Date" Section 3.2
"Closing Working Capital Amount" Section 3.4.1
"Common Stock" Recitals
"Company" Preamble
"Competing Business" Section 7.11.1
"Contracts" Section 5.10
"EBITDA" Section 8.14
"Enterprise Value" Section 1.2.46
"Equity Purchase Price" Section 3.1
"Escrow Agent" Section 3.1.1
"Escrow Agreement" Section 3.1.1
"Estimated Closing New Store Expenditures Amount" Section 3.1.2
"Estimated Closing Working Capital Amount" Section 3.1.1
"Financial Statements" Section 5.3.1.2
"Fully Diluted Shares" Section 1.2.33
"Hazardous Substance" Section 5.15
"Hold-Back Amount" Section 3.1.1
"Indemnified Party" Section 10.6
"Indemnifying Party" Section 10.6
"Initial Sellers" Recitals
"Insurance Policies" Section 5.12
"Interim Financials" Section 5.3.1.2
"IRS" Section 5.13.4
"Lease Consents" Section 7.3.3
"Leases" Section 5.7.2
"Licenses" Section 5.9.2
"Maximum Aggregate Loss" Section 10.3.1
"Option Consideration" Section 2.2
"Option Hold-Back Amount" Section 3.1
"Options" Section 2.2
"Option Working Capital Hold-Back" Section 3.1
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Term Definition
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"PCBs" Section 5.15
"Pension Plan" Section 1.2.14
"Seller Indemnitees" Section 10.1
"Sellers" Preamble
"Share Consideration" Section 2.1
"Share Hold-Back Amount" Section 3.1
"Share Working Capital Hold- Back" Section 3.1
"Shares" Recitals
"Straddle Period" Section 7.7.1
"Subsequent Sellers" Recitals
"Third Party Claim" Section 10.6
"Threshold Amount" Section 10.3
"Warrant Consideration" Section 2.3
"Warrant Hold-Back Amount" Section 3.1
"Warrant Working Capital Hold-Back" Section 3.1
"Welfare Plan" Section 1.2.14
"Working Capital Hold-Back" Section 3.1.1
"Year End Financials" Section 5.3.1.1
1.2. Certain Definitions. The following terms shall have the following
meanings:
1.2.1. "Action" shall mean any judicial or administrative action,
suit, claim, order or proceeding, or, to the Knowledge of the Company, any audit
or investigation, brought or conducted by a third-party or any Governmental
Authority.
1.2.2. "Affiliate" shall mean, as to the Company (or other specified
Person), each Person directly or indirectly controlling or controlled by or
under common control with the Company (or such specified Person). For purposes
of this definition, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities or
otherwise.
1.2.3. "Balance Sheet" shall mean the audited balance sheet of the
Company as of December 31, 2003.
1.2.4. "Balance Sheet Date" shall mean December 31, 2003.
1.2.5. "Business" shall mean the business of the Company as such
business is currently conducted.
1.2.6. "Business Day" shall mean any day on which banking
institutions in New York, New York are customarily open for the purpose of
transacting business.
1.2.7. "By-laws" shall mean the corporate by-laws of a corporation,
as from time to time in effect.
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1.2.8. "Charter" shall mean the certificate or articles of
incorporation or organization or other charter or organizational documents of
any Person (other than an individual), each as from time to time in effect.
1.2.9. "Code" shall mean the federal Internal Revenue Code of 1986,
as amended and as in effect as of the date hereof.
1.2.10. "Compensation" shall mean, as applied to any Person, all
salaries, compensation, remuneration or bonuses, and all retirement, vacation,
insurance or other fringe benefits paid or provided, directly or indirectly, by
the Company to such Person.
1.2.11. "Contractual Obligation" shall mean, with respect to any
Person, any contract, agreement, deed, mortgage, lease, license, indenture,
note, bond, loan, insurance policy, sales order, purchase order or other
document or instrument (including any document or instrument evidencing any
indebtedness but excluding the Charter and By-laws of such Person) to which or
by which such Person is legally bound.
1.2.12. "Debt" means all obligations of the Company to any Person
(including a Seller or any of its Affiliates) in respect of, without
duplication: (i) borrowed money, (ii) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (iii) the deferred or unpaid purchase price
of goods or services (other than trade payables or accruals incurred in the
Ordinary Course of Business), (iv) capital leases, (v) conditional sale or other
title retention agreements, (vi) reimbursement obligations with respect to
letters of credit, bankers' acceptances or surety bonds (without duplication of
other obligations included in this definition that are guaranteed thereby and
net of cash collateral in respect thereof), (vii) dividends payable to any
Person, (viii) cash overdrafts, (ix) payments contingent upon the completion of
the transactions contemplated hereby, (x) Guarantees of the obligations
described in clauses (i) through (ix) above of any other Person and (xi)
interest, premium, penalties and other amounts owing in respect of any of the
items described in clauses (i) through (x) above. Notwithstanding anything to
the contrary contained herein, the Company's obligation to pay $2.5 million in
settlement costs relating to the Wage and Hour Disputes shall constitute Debt
for purposes of this Agreement.
1.2.13. "Distribution" shall mean, with respect to the capital stock
of, partnership interest of or other evidence of beneficial interest in any
Person, (i) the declaration or payment of any dividend on or in respect of any
shares of any class of such capital stock or beneficial interest; (ii) the
purchase, redemption or other retirement of any shares of any class of such
capital stock or beneficial interest, directly, or indirectly through a
Subsidiary or otherwise; and (iii) any other distribution on or in respect of
any shares of any class of such capital stock, partnership interest or other
beneficial interest, or on or in respect of any stock appreciation or similar
right.
1.2.14. "Employee Plan" shall mean any (i) welfare benefit plan
within the meaning of Section 3(1) of ERISA (a "Welfare Plan"); (ii) pension
benefit plan within the meaning of Section 3(2) of ERISA (a "Pension Plan");
(iii) stock bonus, stock purchase, stock option, restricted stock, stock
appreciation right or similar equity-based plan; or (iv) other
deferred-compensation, retirement, welfare-benefit, bonus, incentive or
fringe-benefit plan.
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1.2.15. "Enforceable" shall mean, with respect to any Contractual
Obligation, that such Contractual Obligation is the legal, valid and binding
obligation of the Person in question, enforceable against such Person in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other laws affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
at law or in equity).
1.2.16. "Environmental Laws" shall mean any federal, state, local or
municipal law, statute, regulation or ordinance imposing liability or
establishing standards of conduct for protection of the environment.
1.2.17. "ERISA" shall mean the federal Employee Retirement Income
Security Act of 1974 or any successor statute, as amended.
1.2.18. "GAAP" shall mean generally accepted accounting principles
in the United States as in effect from time to time.
1.2.19. "Governmental Authority" shall mean any domestic or foreign
national, state, multi-state or municipal or other local government or any
subdivision, agency, commission or authority or regulatory or administrative
agency thereof.
1.2.20. "Governmental Order" shall mean any ruling, award, decision,
injunction, judgment, order, decree or subpoena entered, issued or made by any
Governmental Authority.
1.2.21. "Guarantee" shall mean (i) any guarantee of the payment or
performance of, or any contingent obligation in respect of, any indebtedness or
other obligation of any other Person, (ii) any other arrangement whereby credit
is extended to one obligor on the basis of any promise or undertaking of another
Person (A) to pay the indebtedness of such obligor, (B) to purchase any
obligation owed by such obligor, (C) to purchase or lease assets (other than
inventory in the Ordinary Course of Business) under circumstances that would
enable such obligor to discharge one or more of its obligations, or (D) to
maintain the capital, working capital, solvency or general financial condition
of such obligor, and (iii) any liability as a general partner of a partnership
or as a venturer in a joint venture in respect of indebtedness or other
obligations of such partnership or venture.
1.2.22. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.2.23. "Intangible" shall mean any patent; patent application;
tradename; trademark; service mark; registration application; domain name;
proprietary customer, supplier or potential market partner list; logo;
copyright; copyright application; proprietary recipe, ingredient list, process
or store concept; trade secret or computer software (other than commercially
available, prepackaged computer software generally available to the public
pursuant to non-exclusive end-user license).
1.2.24. "Investment" shall mean (i) any share of capital stock,
partnership or other equity interest, evidence of indebtedness or other security
issued by any other Person, (ii)
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any loan, advance, prepayment or extension of credit to, or contribution to the
capital of, any other Person (other than the creation of receivables in the
Ordinary Course of Business), (iii) any acquisition of a business of any other
entity or (iv) any commitment or option to acquire or make any of the foregoing.
1.2.25. "Knowledge" shall mean, with respect to a Person, the actual
knowledge of the specified Person. In the case of the Knowledge of the Company,
"Knowledge" shall mean the actual knowledge of each of Thomas M. Simms, Russel
W. Bendel, Edward T. Bartholemy, Daniel R. Dillon, Ira Fils and James Stiefel.
1.2.26. "Legal Requirement" shall mean any federal, state, local,
municipal, foreign, international or multinational constitution, treaty,
statute, ordinance, code, rule or regulation, or any Governmental Order, or any
license, franchise, consent, approval, permit or similar right granted under any
of the foregoing.
1.2.27. "Lien" shall mean any mortgage, pledge, lien, security
interest, attachment or other similar encumbrance.
1.2.28. "Loss" shall mean any and all liabilities, obligations,
losses, damages, deficiencies, demands, claims, suits, actions or causes of
action, awards, assessments, interest, fines, penalties, costs and expenses of
all investigations, proceedings, judgments, orders or settlements (including
reasonable fees and expenses of attorneys, accountants and other experts);
provided, however, that the amount of any such Losses for the purposes of
indemnification hereunder shall be determined net of any amounts recovered by
the Indemnitee under insurance policies in effect prior to the Closing with
respect to such Loss or any Tax Benefit realized by the Indemnitee.
1.2.29. "Material Adverse Effect" shall mean any change, effect,
event, occurrence, state of facts, circumstance or development that,
individually or in the aggregate with any other change, effect, event,
occurrence, state of facts, circumstance or development is materially adverse to
the Business, assets or liabilities, financial condition, results of operations
or properties of the Company and its Subsidiaries, taken as a whole, or that
materially and adversely affects the ability of the Sellers to perform their
obligations under this Agreement or consummate the transactions contemplated
hereby.
1.2.30. "Ordinary Course of Business" shall mean the ordinary course
of the Business, consistent with past practices.
1.2.31. "Permitted Lien" shall mean (i) statutory liens for Taxes to
the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the use of real property if the same do not materially
impair the use of such property in the Business, (iii) liens to secure
landlords, lessors or renters under leases or rental agreements confined to the
premises rented, (iv) deposits or pledges made in connection with, or to secure
payment of, worker's compensation, unemployment insurance, old age pension
programs mandated under applicable Legal Requirements or other social security
regulations, (v) liens in favor of carriers, warehousemen, mechanics and
materialmen, liens to secure claims for labor, materials or
6
supplies and other similar liens, and (vi) restrictions on transfer of
securities imposed by applicable state and federal securities laws.
1.2.32. "Person" shall mean any individual, partnership,
corporation, limited liability company, association, trust, joint venture,
unincorporated organization, labor union or other entity other than any
Governmental Authority.
1.2.33. "Price Per Common Share" shall mean an amount equal to (i)
the sum of (a) the Equity Purchase Price, (b) the aggregate exercise price of
all Options outstanding immediately prior to the Closing and (c) the aggregate
exercise price of all Warrants outstanding immediately prior to the Closing
divided by (ii) the sum of (x) the number of shares of Common Stock which are
issued and outstanding immediately prior to the Closing, (y) the number of
shares of Common Stock subject to Options outstanding immediately prior to the
Closing and (z) the number of shares of Common Stock subject to Warrants
outstanding immediately prior to the Closing (the sum of (x), (y) and (z) shall
be referred to herein as the "Fully Diluted Shares").
1.2.34. "Purchase Subsidiary" shall mean Mimi's Cafe, LLC, a
Delaware limited liability company and wholly-owned subsidiary of the Buyer to
be created prior to the Closing Date.
1.2.35. "Seller's Percentage" shall mean, as to each Seller
(calculated as of the Closing Date), a percentage equal to (i) the sum of (a)
the number of shares of Common Stock owned by such Seller, (b) the number of
shares of Common Stock subject to Options owned by such Seller and (c) the
number of shares of Common Stock subject to Warrants owned by such Seller
divided by (ii) the Fully Diluted Shares.
1.2.36. "Shareholders Agreement" shall mean the Company's
Shareholders Agreement dated as of October 31, 1996, as amended from time to
time.
1.2.37. "SKM Sellers" shall mean, collectively, SK Equity Fund,
L.P., SKM Equity Fund III, L.P., SK Investment Fund, L.P. and SKM Investment
Fund.
1.2.38. "Subsidiary" shall mean any Person of which the Company (or
other specified Person) shall own directly or indirectly through a Subsidiary, a
nominee arrangement or otherwise at least a majority of the outstanding capital
stock (or other shares of beneficial interest) entitled to vote generally or
otherwise have the power to elect a majority of the board of directors or
similar governing body or the legal power to direct the business or policies of
such Person.
1.2.39. "Tax" shall mean (i) any federal, state, local or foreign
income, gross receipts, franchise, withholding, estimated, alternative minimum,
add-on minimum, sales, use, transfer, registration, value added, ad valorem,
excise, severance, stamp, occupation, premium, windfall profit, custom, duty,
real property, personal property, capital stock, social security, employment,
unemployment, disability, payroll, license, employee or other tax, including all
interest, fines, penalties and additions with respect to any of the foregoing,
and (ii) any liability for the payment of any amounts of the type described in
clause (i) of this definition as a result of being a member of an affiliated,
consolidated, combined or unitary group for any period, as a
7
result of any tax sharing or tax allocation agreement, arrangement or
understanding, or as a result of being liable for another Person's taxes as a
transferee or successor, by contract or otherwise.
1.2.40. "Tax Benefit" shall mean, with respect to a taxable year of
a Person and without duplication, the excess, if any, of (i) such Person's
cumulative liability for Taxes through the end of such taxable year, calculated
by excluding any Tax items attributable to the Loss or other payment at issue
for all taxable years, over (ii) such Person's actual cumulative liability for
Taxes through the end of such taxable year, calculated by taking into account
any Tax items attributable to the Loss or other payment at issue for all taxable
years (to the extent permitted by relevant Tax law and treating such Tax items
as the last items claimed for any taxable year), such Person's calculation
(which calculation shall be made in good faith and shall be accompanied by a
reasonably detailed explanation delivered to the Indemnifying Party and such
other information as is reasonably requested by the Indemnifying Party) being
binding on all parties hereto without any other party's review of any books,
records or Tax Returns of such Person; provided, however, that if all or a
portion of the Tax Benefit associated with a Loss or other payment is expected
to reduce such Person's Taxes in one or more taxable years subsequent to the
taxable year in which an indemnification payment is due pursuant to this
Agreement, the Tax Benefit for the taxable year in which such indemnification
payment is due shall be equal to the portion, if any, of such Tax Benefit that
actually reduces such Person's Taxes as described above for such taxable year
(and/or one or more prior taxable years), with the indemnifying party making the
indemnification payment without reduction for any future Tax Benefits, on a
present-value basis or otherwise; and provided further, however, that to the
extent the indemnified party recognizes Tax Benefits with respect to a Loss or
other payment in any future taxable year(s) with respect to which the
indemnified party has received one or more indemnification payments, the
indemnified party shall pay the amount of such Tax Benefits to the indemnifying
party as such Tax Benefits are actually recognized by the indemnified party (but
not in excess of the indemnification payment(s) actually received from the
indemnifying party with respect to the Loss or other payment generating the Tax
Benefits).
1.2.41. "Tax Return" shall mean any federal, state, local or foreign
return, report, statement or form relating to any Tax and any claim for refund
of Tax, and any declaration of estimated Tax, and any schedule or attachment to
any of the foregoing or amendment thereto, including, where permitted or
required, any consolidated, combined or unitary returns for any group of
entities.
1.2.42. "Transaction Expenses" shall mean all fees and expenses
incurred by the Company (at or prior to the Closing) in connection with the
negotiation and preparation of this Agreement, related agreements and the
transactions contemplated hereby and thereby, including the fees and expenses of
Straddling Yocca Carlson & Rauth, Ropes & Gray LLP, Piper Jaffray & Co. and
Ernst & Young LLP and the $100,000 fee payable to the Company's Vice President,
Finance, in connection with the Closing.
1.2.43. "Wage and Hour Disputes" means (a) the claim set forth in
Ahmed Elzarie v. SWH Corporation, et al. which is the subject of the Joint
Stipulation of Settlement and Release to which the Company is a party dated as
of January 29, 2004, and (b) the claim set forth in Kortnee Sagely vs. SWH
Corporation, et al. which is the subject of the summons and complaint filed
March 30, 2004 naming the Company as a party and any claim by a similarly
8
situated current or former employee with respect to any pre-Closing Date period
and based on the specific causes of action asserted therein with respect to (i)
the Company's failure to provide appropriate rest and meal periods and/or to
provide itemized records and pay hourly wages and overtime in connection
therewith and (ii) employees' not being furnished with at least half of a
scheduled day's work.
1.2.44. "Warrants" shall mean (a) the Warrant to purchase shares of
Common Stock issued to FSC Corp. on October 31, 1996 and (b) the Warrant to
purchase shares of Common Stock issued to Comerica Bank - California on October
31, 1996.
1.2.45. "Working Capital" shall mean the amount equal to (i) current
assets of the Company minus (ii) current liabilities of the Company, calculated
in accordance with the methodology set forth on Exhibit 3.4 attached hereto.
1.2.46. "Equity Purchase Price" shall mean the agreed upon
enterprise value of the Company of $182,000,000 (the "Enterprise Value") less:
(i) an amount sufficient to pay the Company's outstanding Debt (including any
prepay penalties in respect of Debt actually being prepaid) and (ii) an amount
sufficient to pay the Transaction Expenses.
1.3. Certain Matters of Construction. In addition to the definitions
referred to or set forth in this Section 1:
1.3.1. The words "hereof," "herein," "hereunder" and words of
similar import shall refer to this Agreement as a whole and not to any
particular Section or provision of this Agreement, and reference to a particular
Section of this Agreement shall include all subsections thereof.
1.3.2. The words "party" and "parties" shall refer to the Sellers,
the Sellers' Representative, the Company and the Buyer.
1.3.3. Definitions shall be equally applicable to both the singular
and plural forms of the terms defined, and references to the masculine, feminine
or neuter gender shall include each other gender.
1.3.4. Accounting terms used herein and not otherwise defined herein
are used herein as defined by GAAP in effect as of the date hereof, consistently
applied.
1.3.5. The word "including" shall mean including without limitation.
2. ACQUISITION.
Upon the terms, subject to the conditions, and in reliance on the
representations, warranties and covenants set forth herein, each of the Sellers
and the Buyer hereby agree that on the Closing Date:
2.1. Sale of Shares. Each of the Sellers severally will sell, transfer and
deliver to the Buyer, free and clear of any Liens, the number of Shares of
Common Stock set forth opposite such Seller's name on Schedule 1 and, in
consideration thereof, the Buyer will pay to each Seller
9
an amount equal to the number of Shares of Common Stock so transferred by such
Seller multiplied by the Price Per Common Share (in the aggregate, the "Share
Consideration"), subject to Section 3 below.
2.2. Treatment of Options. Each option to purchase Common Stock of the
Company (the "Options") shall expire and terminate on the Closing Date and the
holder of such Options shall be entitled to receive from the Company on or after
the first Business Day after the Closing Date, upon delivery by such Seller of
an acknowledgement of such expiration and termination, in form and substance
reasonably satisfactory to the Buyer, an amount equal to (i) the Price Per
Common Share less the exercise price of such Option multiplied by (ii) the
number of shares of Common Stock subject to such Option (the "Option
Consideration"), less applicable Tax withholding, subject to Section 3 below.
2.3. Treatment of Warrants. The Warrants shall terminate on the Closing
Date and each holder of the Warrants shall be entitled to receive, upon delivery
by such Seller of an acknowledgement of such termination, in form and substance
reasonably satisfactory to the Buyer, an amount equal to (i) the Price Per
Common Share less the exercise price of such Warrant multiplied by (ii) the
number of shares of Common Stock subject to such Warrant (the "Warrant
Consideration"), subject to Section 3 below.
3. PAYMENT AND CLOSING.
3.1. Payments at Closing; Adjustments.
3.1.1. At the Closing, the Buyer shall (w) deliver to the Sellers'
Representative the Share Consideration less $8,169,413 (the "Share Hold-Back
Amount") and $2,693,213 (the "Share Working Capital Hold-Back") for payment by
the Sellers' Representative to the Sellers as contemplated by Section 3.1.1.1,
(x) deliver the Option Consideration less $861,850 (the "Option Hold-Back
Amount") and $284,127 (the "Option Working Capital Hold-Back") to the Company
for payment by the Company to the holders of Options on or after the Business
Day immediately following the Closing Date as contemplated by Section 3.1.1.2,
(y) deliver to the Sellers' Representative the Warrant Consideration less
$68,737 (the "Warrant Hold-Back Amount" and, together with the Share Hold-Back
Amount and the Option Hold-Back Amount, the "Hold-Back Amount") and $22,660 (the
"Warrant Working Capital Hold-Back" and, together with the Share Working Capital
Hold-Back and the Option Working Capital Hold-Back, the "Working Capital
Hold-Back") for payment by the Sellers' Representative to the holders of
Warrants as contemplated by Section 3.1.1.3, and (z) deliver the Hold-Back
Amount and the Working Capital Hold-Back in immediately available funds by wire
transfer to a mutually agreed upon escrow agent (the "Escrow Agent") under an
escrow agreement to be entered into at Closing by Sellers' Representative, Buyer
and the Escrow Agent substantially in the form attached hereto as Exhibit 3.1.1
(the "Escrow Agreement"). The Equity Purchase Price and Enterprise Value are
subject to adjustment as provided herein.
3.1.1.1 Each Seller shall be entitled to receive from the
Sellers' Representative out of the Equity Purchase Price in respect of
their Shares of Common Stock, to such account or accounts as each Seller
specifies, an amount equal to (A) the Price Per Common Share multiplied by
(B) the number of Shares of Common Stock
10
owned by such Seller immediately prior to the Closing, less such Seller's
Seller's Percentage of the Share Hold-Back Amount and the Share Working
Capital Hold-Back.
3.1.1.2 Each Seller who holds Options and delivers the
documentation referred to in Section 2.2 shall be entitled to receive from
the Company on or after the first Business Day after the Closing Date, at
the account or accounts specified by the holder of such Options, the
Option Consideration attributable to such Seller, less such Seller's
Seller's Percentage of the Option Hold-Back Amount and the Option Working
Capital Hold-Back.
3.1.1.3 Each Seller who holds Warrants and delivers the
documentation referred to in Section 2.3 shall be entitled to receive from
the Sellers' Representative out of the Equity Purchase Price, to such
account or accounts as each holder of Warrants specifies, the Warrant
Consideration attributable to such Seller, less such Seller's Seller's
Percentage of the Warrant Hold-Back Amount and the Warrant Working Capital
Hold-Back.
3.1.2. At the Closing, the Buyer shall also pay by wire transfer of
immediately available funds: (i) to such account or accounts as the Company
specifies, an amount sufficient to prepay the Company's outstanding Debt in
respect of borrowed money pursuant to the Financing Agreement as defined on
Schedule 5.6 hereto, and (ii) to such account or accounts as the Company
specifies, an amount sufficient to pay the Transaction Expenses.
3.1.3. Working Capital Adjustment. Not less than two days prior to
the Closing Date, the Sellers' Representative, on behalf of the Sellers, will
cause the Company to prepare an estimate of the Working Capital of the Company
as of the Closing (the "Estimated Closing Working Capital Amount"), determined
in accordance with Section 3.4.1, as if it were the actual Closing Working
Capital Amount, but based on the Sellers' Representative's review of financial
information then reasonably available to the Sellers' Representative and
inquiries of personnel responsible for the preparation of the financial
information of the Company in the ordinary course. The Enterprise Value will be
reduced or increased, as the case may be, by the amount by which the Estimated
Closing Working Capital Amount is less than or more than an amount equal to
$(201,700) multiplied by the number of restaurants open as of the Closing Date
(which amount would be $(16,338,000) as of the date hereof).
3.2. Time and Place of Closing. The consummation of the transactions
described above (the "Closing") (other than the transactions described in
Section 3.1.1.2, which shall take place as described therein), shall take place
at the offices of Straddling Yocca Carlson & Rauth, at 10:00 a.m. (local time)
on July 7, 2004 or, if all conditions precedent to Closing set forth in Sections
8 and 9 hereof shall not have been satisfied at such date, two Business Days
after the satisfaction or waiver of all conditions precedent to Closing which
can be satisfied prior to Closing (the day on which the Closing takes place
being referred to herein as the "Closing Date"). Except as otherwise provided in
Section 12, the failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place specified herein will not
relieve any party to this Agreement of any obligation under this Agreement.
11
3.3. Delivery. At the Closing: (a) each of the Sellers shall deliver to
the Buyer the certificate or certificates evidencing all of the Shares of Common
Stock owned by such Seller, together with a duly executed stock power; (b) each
holder of Options and Warrants shall deliver to the Buyer evidence of the
cancellation of all Options and Warrants owned by such holder in form and
substance reasonably satisfactory to the Buyer; and (c) each party will deliver
to the other such certificates and other documents as are contemplated hereby.
3.4. Post-Closing Adjustment Mechanics.
3.4.1. As soon as practicable (and in no event later than 45 days
after the Closing), the Buyer and the Sellers' Representative shall jointly
prepare or cause to be prepared (a) a balance sheet of the Company as of the
close of business on the Closing Date (the "Closing Balance Sheet") and (b) a
statement of the Working Capital of the Company reflected on the Closing Balance
Sheet (the "Closing Working Capital Amount"). The Closing Balance Sheet and the
Closing Working Capital Amount will be prepared and determined in accordance
with GAAP, using the same policies, principles and methodology used in
connection with the preparation of the Financial Statements and in accordance
with the methodology set forth in Exhibit 3.4 attached hereto. To the extent of
any inconsistency between the methodology described on Exhibit 3.4 and that used
in the preparation of the Financial Statements, the terms of Exhibit 3.4 will
govern. In connection with the preparation of the Closing Balance Sheet and the
Closing Working Capital Amount, the Buyer and the Sellers shall each provide the
other party and their representatives with reasonable access to the personnel,
books, records, documents and other information of the Company. Each party
agrees to make reasonable representations or provide such other assurances as
are reasonably requested by the other party's independent accountants in
connection with such access. The Buyer and the Seller's Representative shall
jointly notify the Escrow Agent of the Closing Working Capital Amount promptly
following its determination.
3.4.2. If the Buyer and the Sellers' representatives cannot agree on
the final Closing Balance Sheet and the Closing Working Capital Amount within 60
days after the Closing, the parties shall submit their final calculations of the
items in dispute to KPMG LLP or, if such firm declines to serve, then to another
nationally recognized accounting firm selected upon mutual agreement of the
parties (the "Accountants"), for resolution within 30 days or as soon thereafter
as reasonably practicable. If the Buyer and the Sellers' Representative are
unable to agree upon the Accountants within the 60 day period after the Closing,
then the Accountants shall be determined by the American Arbitration
Association. The Accountants shall review such final calculations and render a
report as to the disputes and the resulting Closing Balance Sheet and Closing
Working Capital Amount. In resolving any disputed item, the Accountants may not
assign a value to any particular item greater than the greatest value for such
item claimed by either party or less than the lowest value for such item claimed
by either party, in each case as presented to the Accountants. The decision by
the Accountants shall be final and binding on the parties. The costs and
expenses of the Accountants shall be paid on a proportionate basis by the
Sellers, on the one hand, and the Buyer, on the other, based on the inverse
proportion of the respective percentages of the dollar value of disputed issues
determined in favor of the Sellers' Representative and the Buyer. The Buyer and
the Sellers' Representative shall make available to the Accountants all relevant
books and records relating to the calculations submitted and all other
information reasonably requested by the Accountants.
12
3.5. Adjustments to the Enterprise Value. Upon the final determination of
the Closing Working Capital Amount, the Enterprise Value will be adjusted as
follows:
3.5.1. If the Closing Working Capital Amount exceeds the Estimated
Closing Working Capital Amount, then the Enterprise Value will be increased by,
and the Buyer will pay the Sellers' Representative, on behalf of the Sellers,
the amount of such difference.
3.5.2. If the Closing Working Capital Amount is less than the
Estimated Closing Working Capital Amount, then the Enterprise Value will be
decreased by the amount of such difference, and the Buyer shall be entitled to
payment of such amount from the Working Capital Hold-Back (and, if necessary,
the Hold-Back Amount) pursuant to the Escrow Agreement.
Any payment in respect of the net adjustment required to be made pursuant to
this Section 3.5 will be made by the Buyer or by the Escrow Agent, as
applicable, in cash by wire transfer of immediately available funds to an
account or accounts specified by the Buyer or the Sellers' Representative, on
behalf of the Sellers, as applicable, in writing, within five Business Days
after the final determination of the Closing Working Capital Amount.
3.6. Escrow Hold-Back.
3.6.1. The parties agree that the Hold-Back Amount and the Working
Capital Hold-Back shall be deposited in an account (the "Hold-Back Account")
with Escrow Agent, to be held and administered in accordance with the terms and
conditions of the Escrow Agreement against which Hold-Back Account the Buyer
shall be entitled to recover any (a) amounts owing to the Buyer pursuant to
Sections 3.5.2 out of the Working Capital Hold-Back and, if necessary, the
Hold-Back Amount and (b) Losses that may be suffered by the Buyer or another
Buyer Indemnitee for which the Buyer or such Buyer Indemnitee is entitled to
indemnity pursuant to Section 7.7 or Section 10 (an "Escrow Claim"), all in
accordance with the Escrow Agreement.
3.6.2. Escrow Claims shall be made, and may be disputed, in
accordance with the terms and conditions of the Escrow Agreement. Upon
determination by the parties as to the agreed amount of the Losses as provided
in the Escrow Agreement, amounts shall be released from the Hold-Back Account to
satisfy such claims as determined in accordance with the terms of the Escrow
Agreement.
3.6.3. In accordance with the terms of the Escrow Agreement, on the
first anniversary of the Closing Date, the Escrow Agent shall distribute the
remaining balance in the Hold-Back Account to the Sellers' Representative, on
behalf of the Sellers, less the then existing Claim Reserves (as defined in the
Escrow Agreement), in each case in the proportions set forth on Schedule 1. The
amount, if any, remaining after the resolution of any Open Claims (as defined in
the Escrow Agreement) shall be distributed to the Sellers promptly after their
resolution pursuant to the terms of the Escrow Agreement, in each case in the
proportions set forth on Schedule 1.
13
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers, solely as
to itself, represents and warrants that:
4.1. Organization and Authority. In the case of a Seller that is not an
individual, such Seller is an entity duly formed, legally existing and in good
standing under the laws of the jurisdiction of its organization. Such Seller has
full power and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
4.2. Authorization and Enforceability. This Agreement has been duly
authorized, executed and delivered by such Seller and, assuming the due
authorization, execution and delivery by the other parties hereto, is
Enforceable against such Seller.
4.3. Non-Contravention, etc. Except as set forth in Schedule 4.3, the
execution and delivery of this Agreement by such Seller and the consummation by
such Seller of the transactions contemplated hereby in accordance with the terms
and conditions of this Agreement do not and will not conflict with or result in
the breach of any of the terms or provisions of, or constitute a default under,
any Contractual Obligation to which such Seller is a party or by which such
Seller is, or the Shares to be sold by such Seller hereunder are, bound or any
Legal Requirement applicable to such Seller or to the Shares to be sold by such
Seller. Assuming expiration or termination of all applicable waiting periods
under the HSR Act, no consent or approval is required to be obtained by such
Seller in connection with the execution, delivery and performance of this
Agreement by such Seller or the sale of the Shares to be sold by such Seller as
contemplated hereby, except as set forth in Schedule 4.3, and other than any
consent where the failure of such Seller to obtain such consent would not
adversely affect the Seller's ability to consummate the Closing hereunder in
accordance with the terms and conditions of this Agreement.
4.4. Title to Securities. Except as set forth on Schedule 4.4, such Seller
is the record and beneficial owner of and has good and valid title to the Shares
of Common Stock, Options and/or Warrants set forth opposite such Seller's name
on Schedule 1, free and clear of any Liens except as created by the Shareholders
Agreement (which Lien shall be terminated at or prior to Closing). There are no
pending proceedings against such Seller affecting its respective Shares of
Common Stock, Options and/or Warrants. In the case of any Seller who owns Shares
of Common Stock, upon delivery of the certificate(s) representing such Seller's
Shares of Common Stock at the Closing duly endorsed in blank or accompanied by a
duly executed stock power with respect to such Shares, such Shares will be
assigned, conveyed and delivered to the Buyer, free and clear of any and all
Liens.
4.5. Voting Trusts, etc. Except as set forth on Schedule 4.5, there are no
voting trusts, shareholder agreements, commitments, undertakings,
understandings, proxies or other restrictions to which such Seller is a party
which directly or indirectly restrict or limit in any manner, or otherwise
relate to, the voting, sale or other disposition of any shares of capital stock
of the Company or Options and/or Warrants, if held by such Seller. Each voting
trust, shareholder agreement, commitment, undertaking, understanding, proxy or
other restriction set forth on Schedule 4.5, will be terminated in its entirety
at or prior to the Closing.
14
4.6. Brokers, etc. Except as contemplated by Section 5.19, no broker,
finder, investment bank or similar agent is entitled to any brokerage or
finder's fee from the Company or such Seller in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of such Seller.
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. The Company
represents and warrants to the Buyer that:
5.1. Organization, Power, Standing and Authority.
5.1.1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California, and has all
requisite power and authority to execute, deliver and perform this Agreement, to
own its property, to carry on the Business as currently conducted and to
consummate the transactions contemplated hereby. The Company has heretofore made
available to the Buyer a true and complete copy of (a) the Charter and By-laws
of the Company, (b) the minute books of the Company, and (c) the stock ledger
(or equivalent document) of the Company, each of which is accurate and complete
through the date hereof. The Company is duly qualified or licensed to do
business as a foreign corporation, and is in good standing as such, in each
jurisdiction where the failure to be so qualified or licensed and in good
standing would not reasonably be expected to have a Material Adverse Effect. The
execution, delivery and performance of this Agreement by the Company has been
duly authorized by all necessary corporate (or other) action of the Company.
This Agreement has been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by the other parties hereto, is
the legal, valid and binding obligation of the Company, Enforceable against the
Company in accordance with its terms.
5.1.2. Schedule 5.1 sets forth: (1) the name and jurisdiction of
organization of each Subsidiary of the Company; (2) the number of shares of
authorized capital stock of each class of capital stock, or membership
interests, of each such Subsidiary; and (3) the number of issued and outstanding
shares of each class of capital stock, or membership interests, of each such
Subsidiary, the names of the record holders thereof and the number of shares
held by each such holder. Each Subsidiary of the Company is duly organized,
validly existing and in good standing as a corporation or limited liability
company, as the case may be, under the laws of the jurisdiction of its
organization. Each Subsidiary of the Company has full corporate or limited
liability company power and authority, as the case may be, to carry on the
business in which it is engaged and to own and use the properties owned and used
by it. Each Subsidiary of the Company is duly qualified or licensed as a foreign
corporation or limited liability company, as the case may be, to do business,
and is in good standing, in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing as could not be reasonably
expected to have a Material Adverse Effect. All of the issued and outstanding
shares of capital stock or membership interests of each Subsidiary of the
Company are duly authorized, have been validly issued, are fully paid and
non-assessable, were not issued in violation of any law or the preemptive right
of any stockholder and are held of record by the Company. There is no warrant,
right, option, conversion privilege, stock purchase plan, put, call or other
Contractual Obligation relating to the offer, issuance, purchase or redemption,
exchange, conversion, voting or transfer of any shares of capital stock or
15
membership interests of any Subsidiary of the Company or other securities
convertible into or exchangeable for capital stock of any Subsidiary of the
Company (now, in the future or upon the occurrence of any contingency) or that
provides for any stock appreciation or similar right. There are no agreements to
register any securities of any Subsidiary of the Company or sales or resales
thereof under the federal or state securities laws.
5.2. Capitalization and Investments.
5.2.1. As of the date hereof, the authorized capital stock of the
Company consists of 200,000 shares of Common Stock. As of the date hereof, the
total capital stock issued and outstanding of the Company (including a list of
the record holders of the outstanding capital stock of the Company and the
number of shares held) is set forth on Schedule 1. All of such outstanding
shares of capital stock of the Company are duly authorized, validly issued,
fully paid and nonassessable.
5.2.2. Except as set forth on Schedule 5.2, there is no Contractual
Obligation, Charter, or By-law provision which obligates the Company to issue,
purchase or redeem, or make any payment in respect of, any shares of capital
stock or other securities convertible into or exchangeable or exercisable for
shares of capital stock or partnership interests or which provides for any stock
appreciation or similar right or grants any right to share in the equity,
income, revenues or cash flow of the Company.
5.2.3. Except as set forth on Schedule 5.2, there are no voting
trusts, shareholder agreements, commitments, undertakings, understandings,
proxies or other restrictions to which the Company is a party which directly or
indirectly restrict or limit in any manner, or otherwise relate to, the voting,
sale or other disposition of any shares of capital stock of the Company. Each
voting trust, shareholder agreement, commitment, undertaking, understanding,
proxy or other restriction set forth on Schedule 5.2, will be terminated in its
entirety at or prior to the Closing.
5.2.4. Except as set forth on Schedule 5.2, the Company has no
Investment in any Person other than Investments in (a) demand deposit or money
market accounts and (b) cash equivalents (i.e., marketable obligations issued or
guaranteed by the government of the United States that mature within 180 days of
the acquisition thereof or money market funds that invest in securities similar
to such United States government securities).
5.3. Financial Statements, etc.
5.3.1. Financial Information. The Company has heretofore delivered
to the Buyer true and complete copies of each of the following:
5.3.1.1 The audited consolidated balance sheets of the Company
as of December 31, 2001, 2002 and 2003, and the audited consolidated
statements of operations, of shareholders' equity (deficiency), and of
cash flow for the respective fiscal years ended December 31, 2001, 2002
and 2003, together with the notes thereto, each accompanied by the audit
report of Ernst & Young LLP (the "Year End Financials").
16
5.3.1.2 An unaudited financial statement of the Company,
consisting of a consolidated balance sheet as of May 31, 2004, and the
related statements of operations, of shareholders' equity (deficiency) and
of cash flow for the five month period ending on that date (the "Interim
Financials" and together with the Year End Financials, the "Financial
Statements").
5.3.2. Character of Financial Information. Except as set forth on
Schedule 5.3, the Financial Statements (including the notes thereto) were
prepared in accordance with GAAP consistently applied throughout the periods
specified therein, and present fairly, in all material respects, the financial
position and results of operations of the Company for the periods specified
therein, subject in the case of the Interim Financials to an absence of notes
and normal year-end adjustments, and are consistent with the books and records
of the Company.
5.4. Title to Assets. The Company has good title to or, in the case of
property held under lease or any other Contract, a valid and Enforceable right
to use, all of the properties, rights and assets reflected on the Balance Sheet
(collectively, the "Assets"), except for Assets which have been sold or
otherwise disposed of since the Balance Sheet Date as described under Section
5.11 hereof. The Assets are not subject to any Lien other than Liens described
on Schedule 5.4 and Permitted Liens. To the Knowledge of the Company, the
tangible Assets are in good working order, operating condition and state of
repair, ordinary wear and tear excepted.
5.5. Licenses, Permits, Compliance with Laws, etc. The Company holds all
licenses, permits, franchises and other authorizations under any Legal
Requirement necessary for the conduct of the Business as currently conducted,
except licenses, permits, franchises and other authorizations the failure of
which to have been obtained has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The
operations of the Business as heretofore or currently conducted were not and are
not in violation of, nor is the Company in default or violation under, any Legal
Requirement, except for such violations or defaults as have not had and would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
5.6. Non-Contravention, etc. Neither the execution and delivery of this
Agreement nor the consummation by the Company of any of the transactions
contemplated hereby does or will constitute, result in or give rise to (a) a
breach of or a default or violation under any provision of the Charter or
By-laws of the Company or (b) except as set forth on Schedule 5.6 or as would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) a breach or violation under any provision of any Contract of
the Company, (ii) the acceleration of the time for performance of any obligation
under any such Contract, (iii) the imposition of any Lien upon or the forfeiture
of any asset of the Company (including any such asset held under a lease or
license) or (iv) a requirement that any consent under, or waiver of, any such
Contract, Charter or By-law provision be obtained.
5.7. Real Property.
5.7.1. Schedule 5.7 sets forth a list of the addresses of each
location at which any furniture, fixtures, equipment or inventory is located or
where the Company has an office or other place of business.
17
5.7.2. The Company does not own any real property.
5.7.3. Schedule 5.7 lists all contracts for the lease or sublease of
real property by the Company currently in effect (the "Leases"). The Company has
made available to the Buyer correct and complete copies of the Leases (as
amended or modified to date). With respect to each Lease, except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect:
5.7.3.1 the Lease is Enforceable;
5.7.3.2 except as set forth on Schedule 5.7, neither the
Company nor any other party to the Lease is in material breach or default,
and no event has occurred (including the failure to obtain any consent)
which, with notice or lapse of time or both, would constitute a material
breach or default or permit termination, modification, or acceleration
thereunder;
5.7.3.3 with respect to each Lease that is a sublease, the
representations and warranties set forth in subsections 5.7.3.1 through
5.7.3.2 above are true and correct with respect to the underlying Lease;
and
5.7.3.4 all facilities leased or subleased thereunder have
received all approvals of Governmental Authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules and
regulations.
5.7.4. With respect to all real property set forth on Schedule 5.7,
whether owned or leased, except as specifically set forth on Schedule 5.7.
5.7.4.1 The Company is in exclusive possession thereof and of
all easements, licenses or rights required by applicable laws, rules and
regulations for use and occupancy as are necessary to conduct the Business
thereon and has not received written notice of any violation of any law,
rule or regulation with respect thereto except as would not be reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect;
5.7.4.2 To the Knowledge of the Company (i) no portion thereof
is subject to any pending condemnation proceeding or other proceeding by
any public or quasi-public authority, and (ii) there is no threatened
condemnation or other proceeding with respect thereto;
5.7.4.3 The Company is not a party to any material written or
oral agreement or undertaking with any Governmental Authority or any
owners or users of properties adjacent to any restaurant or other facility
located on any parcel of such real property relating to the use, operation
or maintenance of such restaurant or other facility or any adjacent real
estate;
5.7.4.4 The transactions contemplated by this Agreement will
not result in the incurrence of any conveyance or real estate Taxes by the
Company or the
18
Buyer and will not require the Company or the Buyer to make any filing
with any Governmental Authority in connection with such real property; and
5.7.4.5 The Company has not received any written notice of (i)
any contemplated or pending change in the zoning classification or
permitted use of any such real property; (ii) of any special assessments
payable after the date hereof with respect to any such real property; or
(iii) any default under any easement, covenant, document or agreement
included in the Permitted Liens, except for defaults which would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the manner in which such real property is currently
being used by the Company.
5.8. Litigation, etc. Except as set forth on Schedule 5.8, (i) there is no
Action pending or threatened in writing against the Company or any property or
assets of the Company and (ii) the Company is not subject to any judgment,
decree, writ, injunction or order of any Governmental Authority.
5.9. Intellectual Property Rights.
5.9.1. Owned Intangibles. Schedule 5.9 lists all Intangibles that
are owned by the Company. Except as disclosed on Schedule 5.9, (i) the Company
possesses all right, title and interest in and to each Intangible listed on
Schedule 5.9, free and clear of any Lien, (ii) to the Knowledge of the Company,
the ownership and uses, as the case may be, by the Company of any Intangibles
does not infringe any rights of any third party, (iii) such Intangibles are not
subject to any outstanding injunction, judgment, order, decree or ruling, (iv)
no Action is pending or, to the Knowledge of the Company, threatened which
challenges the legality, validity, enforceability, use or ownership of such
Intangibles, (v) there is no license or other Contractual Obligation under which
the Company is a licensor with respect to any such Intangible and (vi) to the
Knowledge of the Company, no activity of any third party infringes upon the
rights of the Company with respect to any such Intangible.
5.9.2. Licensed Intangibles. Schedule 5.9 lists all material
Intangibles not owned by the Company which are used in the Business, other than
commercially available computer software programs licensed under "shrink wrap"
or other comparable standard form licenses, and lists each license or other
Contractual Obligation under which any such Intangible is used by the Company
(collectively, the "Licenses"). Except for such exceptions as, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect, (i) the use by the Company of the Intangibles listed on
Schedule 5.9 does not infringe any rights of any third party, (ii) each License
is legal, valid, binding, Enforceable and in full force and effect, (iii) no
party to a License is in breach or default thereof, (iv) the Intangibles
underlying each License are not subject to any outstanding injunction, judgment,
order, decree or ruling and (v) no activity of any third party infringes upon
the rights of the Company with respect to any of the Licenses.
5.10. Contracts, etc. Set forth on Schedule 5.10 hereto is a true and
complete list of all of the following Contractual Obligations of the Company
(collectively, the "Contracts"):
19
5.10.1. all Contractual Obligations involving collective bargaining
agreements and other labor agreements, all employment or consulting agreements,
and all other plans, agreements, arrangements, practices or other Contractual
Obligations (other than any Employee Plan) which constitute Compensation or
benefits, including post-retirement, severance or termination benefits, to any
of the officers or employees or former officers or employees of the Company,
except for non-written obligations arising generally in connection with
employment-at-will employment relationships;
5.10.2. all Contractual Obligations under which the Company is or
may become obligated to pay any brokerage, finder's or similar fees or expenses
in connection with, or has incurred any severance pay or special Compensation
obligations which would become payable by reason of, this Agreement or
consummation of the transactions contemplated hereby, other than any such fees
payable to Piper Jaffray & Co.;
5.10.3. all Contractual Obligations (including options) to sell or
otherwise dispose of any assets other than in the Ordinary Course of Business;
5.10.4. all Contractual Obligations under which the Company has or
will have after the Closing any liability or obligation to or for the benefit of
any shareholder, any Affiliate of any shareholder or any other Affiliate of the
Company;
5.10.5. all Contractual Obligations (other than Leases) under which
the Company has any liability or obligation for any Debt or constituting a
Guarantee of any liability or obligation of any Person, or under which any
Person has any liability or obligation constituting a Guarantee of any liability
or obligation of the Company (including partnership and joint venture
agreements), in each case having a value of at least $100,000 in any year or
$1,000,000 in the aggregate;
5.10.6. all Contractual Obligations under which the Company is or
may become obligated to pay any amount in respect of deferred or conditional
purchase price (other than ordinary trade terms), indemnification obligations,
purchase price adjustment or otherwise in connection with any (i) acquisition or
disposition of all or substantially all of the assets or securities constituting
a line of business of any Person, (ii) merger, consolidation or other business
combination, or (iii) series or group of related transactions or events of a
type specified in subclauses (i) and (ii);
5.10.7. all Contractual Obligations for the sale or purchase of
products or provision of services by or to the Company (other than ordinary
course purchase orders or sales orders) that (i) involve products or services
having a value of at least $100,000 in any year or $1,000,000 in the aggregate,
(ii) have a term extending more than one year after the Closing Date, or (iii)
to which the United States federal government or any state, local or foreign
government or any agency or department of any of the foregoing is a party;
5.10.8. all Contractual Obligations relating to advertising having a
value of at least $100,000 in any year or $1,000,000 in the aggregate;
20
5.10.9. all Contractual Obligations having a value of at least
$100,000 in any year or $1,000,000 in the aggregate under which any tangible
personal property is held or used by the Company;
5.10.10. all Contractual Obligations having a value of at least
$100,000 in any year or $1,000,000 in the aggregate under which the Company is
liable as lessor with respect to any tangible personal property;
5.10.11. all Contractual Obligations under which the Company is a
licensor with respect to any Intangibles or otherwise grants or receives any
franchise, royalty, license fees or similar rights;
5.10.12. all Contractual Obligations under which the Company is or
may be prohibited or restricted from competing (i) in any business, (ii) in any
geographic area and/or (iii) for any current or potential customers anywhere in
the world;
5.10.13. all Contractual Obligations with any representative or
agent of the Company that has, or could reasonably be likely to have, a value of
at least $100,000 in any year or $1,000,000 in the aggregate;
5.10.14. all Contractual Obligations involving a joint venture or
partnership between the Company and any third party, including any employee or
agent of the Company and specifically including each of the Company's current or
former employees who have entered into a "market partner" or other
profit-sharing arrangement with the Company; and
5.10.15. all other Contractual Obligations (other than Leases and
ordinary course purchase orders and other than Contractual Obligations of the
type described in Section 5.10.7) which individually have a value in excess of
$100,000 in any year or $1,000,000 in the aggregate.
The Company has heretofore made available to the Buyer a true and complete copy
of each of the Contracts. Each Contract is Enforceable by the Company, except
for such failures to be so Enforceable as have not had and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. No breach or default by the Company under any Contract has occurred and
is continuing, and no event has occurred which with notice or lapse of time
would constitute such a breach or default, other than such breaches and defaults
as have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect. To the Knowledge of the Company,
except as set forth on Schedule 5.10 hereto, no breach or default by any other
Person under any Contract has occurred and is continuing, and no event has
occurred which with notice or lapse of time would constitute such a breach or
default, other than breaches and defaults which have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
5.11. Change in Condition. From and after the Balance Sheet Date to and
including the date hereof, the Company has conducted its Business in the
Ordinary Course of Business and, except as set forth on Schedule 5.11, since the
Balance Sheet Date the Company has not:
21
5.11.1. (i) entered into any transaction otherwise than on an arms'
length basis, (ii) entered into any transaction with any Affiliate, any of its
shareholders or any Affiliate thereof, or (iii) made any Distributions or any
other payments or transfers of assets to any shareholder or Affiliate of the
Company other than Compensation paid in the Ordinary Course of Business;
5.11.2. incurred or otherwise become liable in respect of any Debt,
except for borrowings and deferred purchase payments in the Ordinary Course of
Business that do not exceed $2,000,000 in the aggregate;
5.11.3. created or suffered the imposition of any Lien upon any
assets, whether tangible or intangible, of the Company;
5.11.4. amended the Charter or By-laws of the Company;
5.11.5. (i) sold, leased to others or otherwise disposed of any of
its assets other than in the Ordinary Course of Business; (ii) entered into or
accelerated, terminated, modified or cancelled any Contractual Obligation
relating to (A) the purchase of any capital stock of or interest in any Person,
(B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination; (iii) canceled or compromised any
Debt or claim (other than compromises of accounts receivable in the Ordinary
Course of Business) which individually have a value in excess of $100,000 or
$1,000,000 in the aggregate, (iv) waived or released any right of material
value; or (v) instituted, settled or agreed to settle any material Action;
5.11.6. (i) made any changes in the rate of Compensation of any
director, officer, employee, or consultant to, or agent of the Company, except
for changes in the Ordinary Course of Business, or (ii) paid or agreed to pay
any Compensation in connection with the transactions contemplated hereby;
5.11.7. suffered any material damage, destruction or loss (whether
or not covered by insurance) to any of its assets, whether tangible or
intangible;
5.11.8. written off or written down, or determined to write off or
write down, any of the assets or properties of the Company which individually
have a value in excess of $100,000 or $1,000,000 in the aggregate;
5.11.9. made any change in its customary methods of accounting or
accounting practices, other than as required by GAAP, or made any changes it its
pricing policies or payment or credit practices, or granted any extensions of
credit, other than in the Ordinary Course of Business;
5.11.10. made any change in the Company's cash management, including
with respect to payment of Debt, collection of receivables, payment of payables
or maintenance of working capital levels;
5.11.11. entered into any Contractual Obligation to do any of the
things referred to in clauses 5.11.1 through 5.11.10 above; or
22
5.11.12. suffered or incurred any Material Adverse Effect, nor any
event or events which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
5.12. Insurance. Set forth on Schedule 5.12 is a list of all liability
(including public liability, products liability and automobile liability),
workers' compensation, property, casualty, directors and officers, errors and
omissions and other policies by which the Company has been insured since January
1, 2004 (the "Insurance Policies"), copies of which have been made available to
the Buyer. All premiums for such policies have been timely paid, such policies
are in full force and effect and there has been no threatened termination or
modification of any such policy. The Company is not in default under any such
policy and no event has occurred which with notice or lapse of time, or both,
would permit termination or modification of any such policy. Such list includes
the type of policy, form of coverage, policy number and insurer, coverage dates,
named insured, limit of liability and deductible. There are no material claims
by the Company under any such Insurance Policies as to which coverage has been
questioned, denied or disputed by the underwriters of such Insurance Policies or
in respect of which the underwriters have reserved their rights. Since January
1, 2002, the Company has not been denied insurance coverage for which it has
applied (or withdrawn such an application for insurance in anticipation of being
denied coverage).
5.13. Tax Matters. Except as set forth on Schedule 5.13:
5.13.1. all material Tax Returns that are required to have been
filed by or with respect to the Company have been duly and timely filed and the
Company has not received any written claim made by any taxing authority in a
jurisdiction where the Company does not file Tax Returns that the Company is or
may be subject to taxation by that jurisdiction;
5.13.2. the Company has timely paid all Taxes due and payable,
whether or not shown as due on such Tax Returns;
5.13.3. the unpaid Taxes of the Company (including Taxes for which
no Tax Returns were yet due) did not as of the date of the most recent Financial
Statements exceed the reserve for Taxes on such Financial Statements (excluding
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) and will not exceed that reserve as adjusted for operations
and transactions within the Ordinary Course of Business through the Closing Date
in accordance with past custom and practice of the Company in filing its Tax
Returns.
5.13.4. no Tax Return of the Company (for a period with respect to
which the statute of limitations period has not expired) has been the subject of
examination or audit by the Internal Revenue Service ("IRS") or any state, local
or foreign taxing authority;
5.13.5. no deficiency has been received by the Company which was
asserted or assessed in writing as a result of any examination of any Tax Return
of the Company by the IRS and/or a state, local or foreign taxing authority;
5.13.6. there is no action, suit, proceeding, audit, claim,
deficiency or assessment pending (or, to the Knowledge of the Company,
threatened) with respect to any Taxes of the
23
Company, and there are no Liens on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any Tax other than
for current Taxes not yet due and payable;
5.13.7. no waiver of any statute of limitations (other than a waiver
no longer in force) has been given or requested in writing by or with respect to
any Taxes of the Company, and the Company is not currently a party to any
agreement extending the time with respect to a Tax assessment or deficiency;
5.13.8. no power of attorney with respect to Taxes of the Company is
currently in force;
5.13.9. the Company does not have any equity interest in another
entity (other than the Subsidiaries) that is classified for tax purposes as a
corporation or partnership;
5.13.10. the Company does not have any 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, and is not a party to or bound by any Contractual Obligation relating
to any allocation or sharing of Taxes;
5.13.11. the Company has made available to the Buyer true and
complete copies of all material income Tax Returns filed by it with taxing
authorities for tax periods ending on or after December 31, 2000 and all
requests for extensions or waivers and notices or claims given or received with
respect thereto;
5.13.12. no consent to the application of Section 341(f) of the Code
has been made by or on behalf of the Company with regard to any assets or
property held, acquired or to be acquired by the Company;
5.13.13. the Company is not as of the Closing, and has not been
during the five-year period ending on the Closing Date, a United States real
property holding corporation, and none of the securities issued by the Company
pursuant to this transaction either constitute a United States real property
interest or are being issued in exchange for a United States real property
interest, in each case as determined under Section 897 of the Code;
5.13.14. the Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party;
5.13.15. the Company has never been a member of a combined,
consolidated or unitary group for any Tax purpose, other than a group of which
the Company is the common parent;
5.13.16. no federal or state tax attribute (including the FICA tip
credits and any net operating losses) of the Company determined as of the
Closing Date is subject to limitation on its use pursuant to Section 382 of the
Code, Section 383 of the Code or any comparable provision of state law as a
result of any "ownership change" (within the meaning of Section
24
382(g) of the Code or any comparable provision of state law) occurring prior to
the Closing Date;
5.13.17. the Company has disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income tax within the meaning of Section 6662 of the Code; and
5.13.18. the Company has not made any payments, nor is the Company
obligated to make any payments or a party to any agreement that could obligate
it to make any payments, that may be treated as an "excess parachute payment"
under Section 280G of the Code.
5.14. Employee Benefit Plans.
5.14.1. Disclosure. Set forth on Schedule 5.14 is a list of all
material Employee Plans. With respect to each Employee Plan, the Company has
made available to the Buyer true and complete copies of each of the following:
(i) the Employee Plan document together with all amendments; (ii) where
applicable, any trust agreements, custodial agreements, insurance policies,
administration agreements and similar agreements, and investment management or
investment advisory agreements; (iii) any summary Employee Plan descriptions,
employee handbooks or similar employee communications; (iv) in the case of any
Employee Plan that is intended to be qualified under Section 401(a) of the Code,
the most recent determination letter, if any, from the IRS and a copy of any
request for such a determination; (v) in the case of any funding arrangement
intended to qualify as a VEBA under Section 501(c)(9) of the Code, the IRS
letter determining that it so qualifies; and (vi) in the case of any Employee
Plan for which Forms 5500 are required to be filed, the most recently filed
Forms 5500, with schedules attached.
5.14.2. No Defined Benefit Pension or Multiemployer Plans. None of
the Company nor any corporation, trust, partnership or other entity that would
be considered as a single employer with the Company under Section 4001(b)(1) of
ERISA or Sections 414(b) or (c) of the Code has ever (i) maintained or been
required to contribute to any Employee Plan subject to either Title IV of ERISA
or the minimum funding requirements of Code Section 412; or (ii) been obligated
to contribute to any multiemployer plan, as defined in Section 3(37) of ERISA.
5.14.3. Employee Plan Qualification; Employee Plan Administration;
Certain Taxes and Penalties. Except as set forth on Schedule 5.14, (i) each
Employee Plan that is intended to be qualified under Section 401(a) of the Code
has received a determination or opinion letter as to the qualification of its
form and, to the knowledge of the Company, nothing has occurred or failed to
occur that is reasonably expected to cause the IRS to revoke such qualification,
except such acts or failures to act as may be corrected by the Company pursuant
to Revenue Procedure 2003-44, (ii) each Employee Plan, including any associated
trust or fund, has been administered in compliance with its terms and applicable
Legal Requirements, except to the extent that a failure to do so would not
result in a Material Adverse Effect, and (iii) nothing has occurred with respect
to any Employee Plan that has subjected or could subject the Company to a
material liability under Section 409 or Section 502 of ERISA or Chapter 43 of
Subtitle D or section 6652 of the Code. Each participant directed Pension Plan,
if any, is intended to constitute an "ERISA Section 404(c) Plan" within the
meaning of Department of Labor Regulation Section 1.404(c)-1, and each Pension
Plan is in compliance with the applicable
25
provisions of such Department of Labor Regulations, except to the extent that a
failure to do so would not result in a Material Adverse Effect.
5.14.4. All Contributions and Claims and Premiums Paid. Except as
set forth in Schedule 5.14, (i) all required contributions, assessments and
premium payments required to be made by the Company on account of each Employee
Plan have been made or, to the extent not made, accrued in accordance with GAAP,
(ii) there are no existing (or, to the Knowledge of the Company, threatened)
lawsuits, claims or other controversies relating to an Employee Plan, other than
routine claims for information or benefits in the normal course that would be
reasonably expected to result in material liability to the Company, and (iii) no
Employee Plan is or within the last three calendar years has been the subject of
examination by a Governmental Authority or a participant in a government
sponsored amnesty, voluntary compliance or similar program.
5.14.5. Retiree Benefits; Certain Welfare Plans. Other than as
required under Section 601 et seq. of ERISA, no Employee Plan that is a Welfare
Plan provides benefits or coverage following retirement or other termination of
employment. The Company does not have any trust or fund that is intended to be
exempt under Section 501(c)(9) of the Code that is associated with any Employee
Plan.
5.15. Environmental Matters. There is no Action pending or, to the
Knowledge of the Company, threatened, against the Company in respect of (a)
noncompliance by the Company with any Environmental Law or (b) release into the
environment of any pollutant, contaminant or toxic or hazardous material,
substance or waste, whether solid, liquid or gas, (each, a "Hazardous
Substance") on, at or from any property presently or formerly occupied or
operated by the Company. Except as set forth on Schedule 5.15, (i) there has
been no release or threatened release, and no spill, disposal or discharge, of
Hazardous Substances on, upon, into or from any site currently or heretofore
owned, leased or otherwise used by the Company, other than such releases or
threatened releases, spills, disposals or discharges that, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect and (ii) to the Knowledge of the Company, no release,
spill, disposal or discharge of any Hazardous Substance has occurred on, in,
from or under any real property now owned or leased, or formerly owned or
leased, by the Company that would be reasonably likely to result in a material
liability by the Company pursuant to any Environmental Law. Except as set forth
on Schedule 5.15, to the Knowledge of the Company, there have been no Hazardous
Substances generated by the Company that have been disposed of or come to rest
at any site that has been included in any published U.S. federal, state or local
"superfund" site list or any other similar list of hazardous or toxic waste
sites published by any governmental authority in the United States. Except as
set forth on Schedule 5.15, to the Knowledge of the Company, there are no
underground storage tanks located on, no polychlorinated biphenyls ("PCBs") or
PCB-containing equipment used or stored on, and no hazardous waste as defined by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned or operated by the Company, except for the storage of hazardous waste in
quantities that are used by the Company in the Ordinary Course of Business.
5.16. Labor Relations. None of the employees of the Company is represented
by a labor union, and, to the Knowledge of the Company, no petition has been
filed, nor has any proceeding been instituted by any employee or group of
employees with any labor relations
26
board or commission seeking recognition of a collective bargaining
representative. To the Knowledge of the Company, (i) there is no organizational
effort currently being made or threatened by or on behalf of any labor union to
organize any employees of the Company, and (ii) no demand for recognition of any
employees of the Company has been made by or on behalf of any labor
organization. There is no pending or, to the Knowledge of the Company,
threatened employee strike, work stoppage or slowdown or other material labor
dispute, allegation, charge, complaint or petition of unfair labor practice or
employment discrimination with respect to any employees of the Company.
5.17. Officers, Directors and Employees. The Buyers have been provided
with a schedule that sets forth: (a) the name, title and total Compensation of
each officer of the Company; and (b) the name, title and total Compensation of
each other employee, consultant, agent or other representative of the Company
whose total Compensation for the calendar year 2003 exceeded or whose current or
committed annual rate of Compensation (including bonuses and commissions)
exceeds $100,000. Except as contemplated by this Agreement, none of such persons
has stated orally or in writing to the Company that he or she is planning to
terminate such person's employment or service relationship with the Company.
Schedule 5.17 also sets forth the name of each director of the Company.
5.18. Suppliers. Except as set forth on Schedule 5.18, since the Balance
Sheet Date no vendor or group of vendors of the Business has given the Company
notice or, to the Knowledge of the Company, has taken any other action which has
given the Company any reason to believe that such vendor or group of vendors
will cease to supply or adversely change its price or terms to the Company of
any products or services, which such cessation or changes would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
5.19. Financial Advisory, Finder's or Broker's Fees. No financial advisor,
finder agent or similar intermediary other than Piper Jaffray & Co. has acted on
behalf of the Sellers or the Company in connection with this Agreement or the
transactions contemplated hereby, and there are no brokerage commissions,
finders' fees or similar fees or commissions payable in connection therewith
based on any agreement, arrangement or understanding with the Sellers or the
Company or on any action taken by the Sellers or the Company other than fees and
commissions that will be paid to Piper Jaffray & Co. pursuant to Section 3.1.
5.20. No Governmental Consent or Approval Required. Except as disclosed on
Schedule 5.20 and except for (a) filings required by the HSR Act, (b) any
consents, approvals, authorizations, permits, filings or notifications as shall
have been obtained or made at or prior to Closing, or (c) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications would not reasonably be expected to have a Material
Adverse Effect, no authorization, consent, approval or other order of,
declaration to, or filing with, any Governmental Authority by or on behalf of
the Company is required for or in connection with the authorization, execution,
delivery and performance by the Sellers or Company of their respective
obligations under this Agreement.
5.21. No Undisclosed Material Liabilities. There are no liabilities of the
Company of the type required by GAAP to be provided for in the Balance Sheet or
specifically disclosed in the notes thereto, whether or not the subject of
another representation or warranty, other than:
27
5.21.1. liabilities provided for in the Balance Sheet (including to
the extent specifically reserved therefor therein) or specifically disclosed in
the notes thereto;
5.21.2. liabilities disclosed in, related to or arising under any
Contract and liabilities and obligations related to or arising under any other
Contractual Obligation not constituting a Contract because of its failure to
meet the materiality or minimum dollar thresholds set forth in Section 5.10;
5.21.3. liabilities incurred in the Ordinary Course of Business
since the Balance Sheet Date; and
5.21.4. other undisclosed liabilities that are not material to the
Company and its Subsidiaries, taken as a whole.
5.22. Affiliate Transactions. Schedule 5.22 contains a true and complete
list of all intercompany balances as of May 31, 2004, between the Company, on
the one hand, and any of the Sellers or their Affiliates (other than the
Company), on the other. Since May 31, 2004, other than as set forth on Schedule
5.22, there are no liabilities owing to the Company from any of the Sellers or
any of their Affiliates, and there has not been any accrual of liability by the
Company to any of the Sellers or their Affiliates or other transactions between
the Company, on the one hand, and any of the Sellers or their Affiliates (other
than the Company), on the other.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Sellers that:
6.1. Corporate Matters, etc.
6.1.1. Organization, Power and Standing of the Buyer. The Buyer is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has full power and authority, corporate and
otherwise, to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The Purchaser Subsidiary
will be, upon its creation, a limited liability company duly organized, validly
existing in good standing under the laws of the State of Delaware with full
power, limited liability company or otherwise, to enter into this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The Purchaser Subsidiary will be organized for the purpose
of acquiring the Shares as contemplated by this Agreement and will have had no
prior operations.
6.1.2. Authorization and Enforceability. This Agreement has been
(or, in the case of the Purchase Subsidiary, will be) duly authorized, executed
and delivered by the Buyer and the Purchaser Subsidiary and, assuming the due
authorization, execution and delivery by the other parties hereto, is (or, in
the case of the Purchase Subsidiary, will be) Enforceable against the Buyer and
the Purchaser Subsidiary, respectively.
6.1.3. Non-Contravention, etc. The execution, delivery and
performance of this Agreement by the Buyer and the Purchaser Subsidiary and the
consummation by the Buyer and the Purchaser Subsidiary of the Closing hereunder
in accordance with the terms and conditions of this Agreement does not and will
not conflict with or result in the breach of any
28
terms or provisions of, or constitute a default under, any Contractual
Obligation or the Charter or By-laws of the Buyer or the Purchaser Subsidiary or
a breach of any Legal Requirement applicable to the Buyer or the Purchaser
Subsidiary. Assuming expiration or termination of all applicable waiting periods
under the HSR Act, no approval, consent, waiver, authorization or other order
of, and no declaration, filing, registration, qualification or recording with,
any Governmental Authority is required to be obtained or made by or on behalf of
the Buyer in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby, except
(a) for items which shall have been obtained or made on or prior to, and shall
be in full force and effect at, the Closing Date and (b) where failure to obtain
such approval, consent, waiver, authorization or other order, or to make such
declaration, filing, registration, qualification or recording, would not
adversely affect the Buyer's or the Purchaser Subsidiary's ability to consummate
the Closing hereunder in accordance with the terms and conditions of this
Agreement and would not prevent the Buyer or the Purchaser Subsidiary from
performing in all material respects any of their respective other obligations
under this Agreement.
6.2. Financial Condition, etc. The Buyer will have as of the Closing funds
in an amount sufficient to pay the Enterprise Value.
6.3. Investment Intent. The Buyer is acquiring the Shares for its own
account for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof. The Buyer can bear the risk of loss
of the entire value of its purchase of the Shares. The Buyer acknowledges that
the Shares have not been registered or qualified under any federal or state
securities laws, and may not be offered, sold, transferred, pledged,
hypothecated or otherwise assigned unless they are registered under the
Securities Act of 1933, as amended, and any applicable "Blue Sky" laws of any
state or an exemption from such registration is available. The Buyer has been
provided access to such information and documents regarding the Company as it
has requested and has been afforded an opportunity to ask questions of, and
receive answers from, representatives of the Company concerning the terms and
conditions of this Agreement and the Shares.
6.4. Litigation. There is no Action pending or threatened in writing (a)
against the Buyer or any of its Affiliates which has had or would reasonably be
expected to have a material adverse effect on the ability of the Buyer to
perform its obligations under this Agreement or (b) which seeks rescission of or
seeks to enjoin the consummation of this Agreement or any of the transactions
contemplated hereby.
6.5. Brokers, etc. No broker, finder, investment bank or similar agent is
entitled to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of the Buyer or any of its Affiliates.
6.6. Investigation; No Additional Representations; No Reliance, etc. The
Buyer acknowledges that the Sellers and the Company have not made nor shall any
of them be deemed to have made, nor has the Buyer relied on, any representation,
warranty, covenant or agreement, express or implied, with respect to the
Company, the Business or the transactions contemplated by this Agreement, other
than those explicitly set forth herein. The Buyer acknowledges and
29
agrees that it (a) has made its own inquiry and investigation into, and based
thereon has formed an independent judgment concerning, the Business and the
Company, (b) to the knowledge of the Buyer, the Buyer has been furnished with or
given adequate access to such information about the Business and the Company as
it has requested, (c) to the extent it has deemed appropriate, has addressed in
this Agreement any matters arising out of its investigation and the information
provided to it, and (d) except to the extent provided in Section 10 and
excluding any claims for fraud, which the Buyer explicitly does not waive, will
not assert any claim against the Company, the Sellers or any of their respective
partners, directors, officers, employees, advisors, agents, shareholders,
consultants, investment bankers, brokers, representatives or controlling
persons, or any Affiliate of any of the foregoing, or, except to the extent
provided in Section 10 and excluding any claims for fraud, which the Buyer
explicitly does not waive, hold the Company, the Sellers or any such persons
liable, for any inaccuracies, misstatements or omissions with respect to
information furnished by the Company, the Sellers, or such persons concerning
the Business, the Company, this Agreement or the transactions contemplated
hereby.
7. CERTAIN AGREEMENTS OF THE PARTIES.
7.1. Payment of Transfer Taxes and Other Charges. The Buyer and the
Sellers each shall be responsible for and shall pay one half of all stock
transfer taxes, real property transfer taxes, sales taxes, documentary stamp
taxes, recording charges and other similar Taxes, if any, arising in connection
with the transactions contemplated by this Agreement; provided, however, that
such Taxes shall not include any income taxes payable by the Sellers in
connection with the transactions contemplated by this Agreement. Each of the
parties hereto shall prepare and file, and shall fully cooperate with each other
party with respect to the preparation and filing of, any Tax Returns and other
filings relating to any such Taxes or charges as may be required.
7.2. Operation of Business, Related Matters. From the date hereof through
the earlier of the date this Agreement is terminated pursuant to Section 12 or
the Closing Date, unless the Buyer shall otherwise agree in writing and except
as otherwise permitted or required by this Agreement, the Company will conduct
the Business in the Ordinary Course of Business and substantially in the same
manner as presently operated and use reasonable commercial efforts to maintain
the value of the Business as a going concern. Except as set forth in Schedule
7.2, from the date hereof and prior to the Closing Date, the Company shall not,
without the prior written consent of Buyer, which will not be unreasonably
withheld or delayed:
7.2.1. (i) enter into any transaction otherwise than on an arms'
length basis, (ii) enter into any transaction with any Affiliate, any of its
shareholders or any Affiliate thereof (other than as contemplated by this
Agreement), or (iii) make any Distribution or any other payment or transfer of
assets to any shareholder or Affiliate of the Company other than Compensation
paid in the Ordinary Course of Business;
7.2.2. (i) make any changes in the rate of Compensation of any
director, officer, employee or agent of, or consultant to, the Company, other
than in the Ordinary Course of Business on an individual basis for employees
other than directors and officers, deemed to be in the best interests of the
Company or (ii) pay or agree to pay any Compensation in connection with the
transactions contemplated hereby;
30
7.2.3. incur or otherwise become liable for any Debt except (i)
capital leases listed on Schedule 5.7 and (ii) Debt for borrowed money incurred
in the Ordinary Course of Business that does not exceed $2,500,000 in the
aggregate;
7.2.4. amend the Charter or By-laws of the Company or sell, lease or
otherwise dispose of any material assets except (i) for sales or other
dispositions of inventory or excess equipment in the Ordinary Course of Business
and (ii) as may otherwise be specifically permitted by the terms of this
Agreement;
7.2.5. (i) sell, lease to others or otherwise dispose of any of its
assets other than in the Ordinary Course of Business, (ii) enter into any
Contractual Obligation relating to (A) the purchase of any capital stock of or
interest in any Person (other than in connection with the formation of any
wholly-owned Subsidiaries of the Company), (B) the purchase of assets
constituting a business or (C) any merger, consolidation or other business
combination, (iii) cancel or compromise any Debt or claim (other than
compromises of accounts receivable in the Ordinary Course of Business), (iv)
waive or release any right of material value or (v) institute, settle or agree
to settle any material Action;
7.2.6. incur Liens, except for Liens securing Debt permitted by
Section 7.2.3;
7.2.7. make any change in the Company's customary methods of
accounting or accounting practices, pricing policies or payment or credit
practices, or grant any extensions of credit other than in the Ordinary Course
of Business;
7.2.8. write off or write down any of the assets of properties of
the Company which individually have a value in excess of $100,000 or $1,000,000
in the aggregate;
7.2.9. with respect to Taxes, (i) make or change any election, (ii)
adopt or change any accounting method, (iii) file any amended Tax Return, (iv)
settle any Tax claim or assessment, or (v) consent to any extension or waiver of
any limitation period applicable to any Tax claim or assessment;
7.2.10. make any change in the Company's cash management, including
with respect to payment of Debt, collection of receivables, payment of payables
or maintenance of working capital levels; provided, however, that nothing herein
shall prevent the Company from making any payments in respect of existing Debt
for borrowed money or under capital leases; or
7.2.11. enter into any Contractual Obligation to do any of the
actions referred to in this Section 7.2.
7.3. Preparation for Closing. The Buyer on the one hand and the Company
and the Sellers on the other hand will each use all commercially reasonable
efforts to bring about the fulfillment of each of the conditions precedent to
the obligations of the other set forth in this Agreement, subject to the
following:
7.3.1. Regulatory Compliance. Promptly upon execution and delivery
of this Agreement, each of the Buyer and the Company will use their commercially
reasonable efforts to prepare and, as promptly as practicable, file, or cause to
be prepared and filed, with the
31
appropriate Governmental Authorities, a notification with respect to the
transactions contemplated by this Agreement pursuant to the HSR Act. The parties
will use their commercially reasonable efforts to supply all information
requested by Governmental Authorities in connection with the HSR Act
notification and cooperate with each other in responding to any such request.
The Buyer shall be solely responsible for all filing fees required to be paid in
connection therewith. The parties will use their respective commercially
reasonable efforts and will cooperate fully with one another to comply as
promptly as practicable with all governmental requirements applicable to the
transactions contemplated by this Agreement and to obtain promptly all
approvals, orders, permits or other consents of any applicable Governmental
Authorities necessary for the consummation of the transactions contemplated by
this Agreement. Each of the parties will furnish to the other parties and, upon
request, to any Governmental Authorities such information and assistance as may
be reasonably requested in connection with the foregoing, including by
responding promptly to and complying fully with any request for additional
information or documents under the HSR Act. The parties will use their
respective commercially reasonable efforts to resolve favorably any review or
consideration of the antitrust aspects of the transactions contemplated hereby
by any Governmental Authority with jurisdiction over the enforcement of any
applicable antitrust laws.
7.3.2. Consents, etc. Prior to the Closing Date, upon the Buyer's
written request, the Company shall use its commercially reasonable efforts (but
the Company and the Sellers shall have no obligation to pay any fees or incur
any material expenses) to assist the Buyer in securing such written consents or
waivers under or with respect to the Contracts (other than the Leases) that the
Buyer reasonably requests in connection with the consummation of the
transactions contemplated by this Agreement.
7.3.3. Leases. Prior to the Closing Date, the Company shall use its
commercially reasonable efforts to obtain consents in form and substance
reasonably satisfactory to the Buyer with respect to the Leases set forth under
the heading "Contracts Requiring Consent or Waiver to Transactions Contemplated
by the Agreement" on Schedule 5.6 to this Agreement.
7.3.4. Liquor Licenses. The Company and the Sellers will take all
actions reasonably required prior to the Closing to ensure the continued and
uninterrupted ability to serve alcoholic beverages immediately after the Closing
at each restaurant location to the same extent as immediately prior to the
Closing. In furtherance, and not in limitation, of the foregoing, the Company
and the Sellers agree prior to the Closing to file such notices, applications
and other documents and enter into such arrangements as may be required by any
applicable state or local liquor regulatory authority and to seek such temporary
licenses or permits as are reasonably requested by the Buyer.
7.3.5. Further Assurances. Each party, upon the request from time to
time of any other party hereto after the Closing, and at the expense of the
requesting party but without further consideration, will take such actions as
may be necessary or reasonably requested to consummate the transactions
contemplated hereby in an orderly fashion.
7.4. Access to Properties and Records. Subject to the provisions of
Section 13.7, the Company will permit the Buyer and its appropriate
representatives to have reasonable access, prior to the Closing Date, to the
employees, properties and books and records of the Company,
32
during normal working hours and upon reasonable notice, to familiarize itself
with the Company's respective properties, business and operating and financial
conditions; provided, however, that the Buyer and its representatives shall not
unreasonably disrupt the personnel and operations of the Company.
7.5. Shareholders Agreement. The Company and each of the Sellers that is a
party to the Shareholders Agreement hereby agree that the Shareholders Agreement
shall terminate as of the Closing and shall thereafter be of no further force
and effect.
7.6. Indemnification of Directors, Officers and Employees. The parties
agree that following the Closing, the Company shall, and the Buyer shall cause
the Company to, (a) maintain for a period of six years the coverage provided by
the Directors and Officers Liability Insurance policy of the Company, as in
effect on the Closing Date, with respect to acts or omissions of the Persons
covered thereby occurring prior to the Closing; provided, that the Buyer or the
Company may substitute therefor policies of substantially the same coverage
containing substantially comparable terms and conditions with respect to matters
occurring prior to the Closing Date; provided, further, that in no event shall
the Buyer or the Company be required to expend more than an amount per year
equal to 200% of current annual premiums paid by the Company (which the Sellers
represent and warrant to be not more than $150,000) to maintain or procure such
coverage; and (b) ensure that no change will be made to the Company's Charter or
By-laws that would materially adversely affect any individual's right to
indemnification in such individual's capacity as a director or officer of the
Company with respect to any act or omission in such capacity occurring on or
prior to the Closing Date under the Company's Charter or By-Laws and Delaware
General Corporation Law as in effect as of the Closing Date; provided, that
nothing contained in this Section 7.6 shall affect or limit (i) any Seller's
obligation to indemnify the Buyer Indemnitees as provided in Section 10 or (ii)
the Buyer's ability to merge the Company with or into the Buyer or any of the
Buyer's Subsidiaries, whether such Subsidiary is currently in existence or
created after the date hereof and whether or not such Subsidiary is a
corporation, limited liability company, limited partnership or other similar
entity. This Section 7.7 shall be for the benefit of, and shall be enforceable
by, the directors and officers of the Company, and their respective heirs and
estates.
7.7. Tax Matters.
7.7.1. Preparation and Filing of Tax Returns. The Buyer and the
Company shall prepare, or cause to be prepared, in accordance with applicable
Legal Requirements and in a manner consistent with the Company's prior Tax
Returns, all Tax Returns that (i) are required to be filed by, or with respect
to, the Company for Tax periods ending on or before the Closing Date, and for
Tax periods that begin before the Closing Date and end after the Closing Date
(the "Straddle Period"), and (ii) are not filed as of the Closing Date. The
Buyer shall provide each such Tax Return to the Sellers' Representative, not
later than 20 days before the due date for such Tax Return (taking into account
any extensions of such due date), for the Sellers' Representative's review and
approval. The Sellers' Representative's approval of each such Tax Return shall
not be unreasonably withheld. Subject to resolving any dispute with the Seller's
Representative, the Buyer shall cause the Company to timely file each such Tax
Return. The Buyer and the Company shall not file any amended Tax Returns or make
any Tax election with respect to Taxes of or relating to the Company for (i) any
taxable year or taxable period that ends
33
on or before the Closing Date, or (ii) the portion of the Straddle Period ending
on the Closing Date (the "Pre-Closing Tax Periods") which would reasonably be
likely to result in an indemnity payment pursuant to Section 7.7.5, without the
prior written consent of the Sellers' Representative, which consent shall not be
unreasonably withheld.
7.7.2. Liability for Taxes. Except as provided in Section 7.1, the
Buyer shall be responsible for all Taxes for Pre-Closing Tax Periods to the
extent that the liability for such Taxes does not exceed the accrued liability
for Taxes (excluding any liability for deferred Taxes established to reflect
timing differences between book and Tax income) in determining the Closing
Working Capital Amount. Except as provided in Section 7.1, the Sellers shall be
responsible for all Taxes for Pre-Closing Tax Periods to the extent that the
liability for such Taxes exceeds the accrued liability for Taxes (excluding any
liability for deferred Taxes established to reflect timing differences between
book and Tax income) in determining the Closing Working Capital Amount.
7.7.3. Division of the Straddle Period. In order to apportion
appropriately any Taxes relating to a Straddle Period, the parties hereto shall,
to the extent permitted under applicable Legal Requirements, elect with the
relevant Governmental Authority to treat for all purposes the Closing Date as
the last day of the Tax year or period of the Company. In any case where
applicable Legal Requirements do not permit the Company to treat the Closing
Date as the last day of the Tax year or period with respect to Taxes that are
payable with respect to a Straddle Period, the portion of any such Tax that is
allocable to the portion of the Straddle Period ending on the Closing Date will
be:
(i) in the case of Taxes that are either (x) income Taxes or
(y) imposed in connection with any sale or other transfer or
assignment of property (other than any Taxes imposed on any sales
conveyance made pursuant to this Agreement or contemplated by
transactions described herein, the payment of which is governed by
Section 7.1 of this Agreement), deemed equal to the amount that
would have been payable had the relevant Tax year or period ended on
the Closing Date (except that, solely for purposes of determining
the marginal tax rate applicable to the income or receipts during
such period in a jurisdiction in which such tax rate depends upon
the level of income or receipts, annualized income or receipts may
be taken into account, if appropriate for an equitable sharing of
such Taxes); and
(ii) in the case of Taxes not included in clause (i) of this
Section 7.7.3 that are imposed on a periodic basis and measured by
the level of any item (including real estate tax and whether such
tax is payable to a taxing authority, a landlord or other third
party), deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the
amount of such Taxes for the immediately preceding period)
multiplied by a fraction the numerator of which is the number of
calendar days in the portion of the Straddle Period ending on the
Closing Date and the denominator of which is the number of calendar
days in the entire Straddle Period.
34
7.7.4. Tax Proceedings.
7.7.4.1 In the event that the Sellers would be liable for the
payment of any Taxes under Section 7.7.2, if assessed or imposed, and such
Taxes are assessed against or imposed on the Company or the Buyer by any
Governmental Authority, the Sellers, in their sole and absolute
discretion, will have the right to participate at their own expense in any
audit involving any such Taxes and/or to contest any assertion that any
such Taxes are payable in any proceedings available to the Company or the
Buyer. The Sellers, on the one hand, and the Company and the Buyer, on the
other hand, shall fully cooperate in good faith in connection with any
such audit or other proceeding.
7.7.4.2 In respect of any Taxes for which Sellers would be
liable under Section 7.7.2, the Sellers will have the right to control all
proceedings in connection with such contest or audit; provided, however,
that, as a precondition to Sellers' right to control such proceedings, (i)
the Sellers shall deliver to the Buyer a written statement in which the
Sellers agree to indemnify the Company and the Buyer, severally and not
jointly based on each Seller's Seller's Percentage, from and against the
entirety of any Taxes and other Losses that the Company and/or the Buyer
may incur resulting from, arising out of, relating to or caused by such
proceedings, and (ii) the Sellers shall conduct the defense actively and
diligently; and provided further, however, that the Sellers shall not
consent to the entry of any judgment or enter into any settlement without
the prior written consent of the Company and/or the Buyer, which consent
shall not be unreasonably withheld, if (x) (A) such judgment or settlement
is likely to establish a precedential custom or practice materially
adverse to the continuing business of the Company and/or the Buyer for
periods beginning after the Closing Date or (B) the Taxes at issue in the
proceeding relate to a Straddle Period, and (y) the Buyer agrees to limit
the Sellers' liability with respect to the Tax items relating to such
judgment or settlement to the amount of such judgment or settlement.
7.7.4.3 So long as the Sellers are conducting the defense in
accordance with Section 7.7.4.2, and subject to the Buyer's rights in
Section 7.7.4.2, the Company and/or the Buyer may retain separate
co-counsel at their sole cost and expense and may participate in, but not
control, such defense.
7.7.4.4 In the event that any of the conditions in Section
7.7.4.2 is or becomes unsatisfied, (i) the Company and/or the Buyer may
control the defense, and consent to the entry of any judgment or enter
into any settlement, in any manner that they reasonably may deem
appropriate, with the consent of the Sellers, which consent shall not be
unreasonably withheld, (ii) the Sellers shall reimburse the Company and/or
the Buyer promptly and periodically for the costs of defense (including
reasonable attorneys' fees and expenses) and (iii) the Sellers shall
remain severally but not jointly responsible, on the basis of each
Seller's Seller's Percentage, for any Taxes and other Losses that the
Company and/or the Buyer may incur resulting from, arising out of,
relating to or caused by such proceedings.
35
7.7.5. Indemnification for Taxes.
7.7.5.1 Sellers will severally but not jointly (on the basis
of each Seller's Seller's Percentage) indemnify and hold harmless, to the
fullest extent permitted by law, the Buyer and the Company from, against
and in respect of (without duplication) all (i) Taxes for which the
Sellers are liable under Section 7.1 and/or Section 7.7.2, (ii) Buyer's
and/or the Company's Losses to the extent required under Section 7.7.4,
and (iii) breaches of any representation or warranty made by the Company
in Section 5.13.
7.7.5.2 The Buyer and the Company will indemnify and hold
harmless, to the fullest extent permitted by law, the Sellers from and
against any Taxes of the Company for which Buyer and the Company are
liable under Section 7.1 and Section 7.7.2. Buyer and the Company shall
not take any action or position which would reasonably be likely to result
in an indemnity payment pursuant to Section 7.7.5, without the prior
written consent of the Sellers' Representative, which consent shall not be
unreasonably withheld.
7.7.5.3 The Sellers will be entitled to all refunds of Taxes
of the Company, and any amounts credited against Taxes to which the
Company becomes entitled, to the extent such refunds or credits relate to
any Pre-Closing Tax Period (other than any refunds that are addressed
through the calculation of the Closing Working Capital Amount). The Buyer
and the Company agree to carry back any losses of the Company from Tax
periods that end on or before the Closing Date to Pre-Closing Tax Periods
to the extent permitted. If the Buyer or the Company receives any refund
or credit to which the Sellers are entitled under this Section 7.7.5.3,
the Buyer will promptly pay in cash the amount of such refund or credit to
the Sellers' Representative. Upon request of the Sellers' Representative,
the Buyer agrees to obtain a transcript of account for the Company from
federal and state authorities and deliver the same to the Sellers'
Representative.
7.7.5.4 The amount of any payment otherwise required under
this Section 7.7 will be reduced to take into account any Tax Benefit
realized as a result of the recognition of the liability for Taxes (and,
as applicable, related Losses) of the indemnified party.
7.7.5.5 Anything contained in this Agreement to the contrary
notwithstanding, Section 5.13, Section 7.1 and this Section 7.7 shall
exclusively govern the parties' respective liability for, and
indemnification rights and obligations with respect to, Taxes. Article 10
(including the indemnification procedures and any limitations on
indemnification set forth therein) shall not apply to Tax matters.
7.7.5.6 The representations, warranties and covenants
contained in Section 5.13, Section 7.1 and this Section 7.7 shall survive
until the expiration of the statutes of limitations applicable to the
Taxes at issue (giving effect to any extension thereof); provided,
however, that a party's obligations to indemnify with respect to Taxes
shall not terminate with respect to any item as to which the person to be
indemnified shall have, before the expiration of the applicable period,
previously made a
36
claim by delivering a notice of such claim (stating in reasonable detail
the basis of such claim) to the indemnifying party.
7.8. Employee Benefits. The Buyer agrees that for purposes of
participation, vesting and accrual of vacation time and other benefits, as
applicable (i) service under any qualified defined contribution plans of the
Company shall be treated as service under the Buyer's qualified defined
contribution plans, and (ii) service under any other employee benefit plans of
the Company shall be treated as service under any corresponding employee benefit
plans maintained by the Buyer. The Buyer shall cause the Buyer's welfare benefit
plans that cover the Company's employees after the Closing to (i) waive any
waiting period and restrictions and limitations for pre-existing conditions or
insurability (except for pre-existing conditions that were excluded under the
Company's welfare benefit plans), and (ii) cause any deductible, co-insurance or
maximum out-of-pocket payments made by the Company's employees under the
Company's welfare benefit plans to be credited to such employees under the
Buyer's welfare benefit plans, so as to reduce the amount of any deductible,
co-insurance or maximum out-of-pocket payments payable by the Company's
employees under the Buyer's welfare benefit plans.
7.9. Other Offers. From the date hereof until the Closing Date or earlier
termination of this Agreement, no Seller shall, and Sellers will cause the
Company and its directors, officers, employees and representatives not to,
directly or indirectly, take any action to solicit, initiate, encourage, or
furnish any information in connection with, or enter into any discussions or
negotiations concerning, any Acquisition Proposal. For purposes hereof, an
"Acquisition Proposal" means any offer or proposal for, or any indication of
interest in, a business combination involving the Company or the acquisition of
any equity interest in, or a material portion of the assets of, the Company,
other than the transactions contemplated by this Agreement. The Company shall
promptly notify the Buyer of any Acquisition Proposal, which notice shall
include the identity of all relevant parties thereto. The Company further agrees
not to amend its Registration Statement on Form S-1 (File No. 333-115201) after
the date hereof.
7.10. Notices of Certain Events.
7.10.1. The Company shall promptly notify the Buyer of:
7.10.1.1 any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; and
7.10.1.2 any Action commenced or threatened against, relating
to or involving or otherwise affecting the Company that, if pending on the
date of this Agreement would have been required to be disclosed pursuant
to Section 5.8, or that relate to the consummation of the transactions
contemplated by this Agreement.
7.10.2. The Buyer shall promptly notify the Company and the Sellers'
Representative of:
7.10.2.1 any notice or other communication from any Person
alleging that the consent of such Person is or may be required in connection
with the transactions contemplated by this Agreement; and
37
7.10.2.2 any Action commenced or threatened against, relating
to or involving or otherwise affecting the Buyer that, if pending on the
date of this Agreement would have been required to be disclosed pursuant
to Section 6.4, or that relate to the consummation of the transactions
contemplated by this Agreement.
7.11. Non-Compete; Non-Solicitation.
7.11.1. Each SKM Seller agrees that for a period of three years
following the Closing Date, such SKM Seller shall not, either directly or
indirectly, as a principal or for its own account, own, manage, operate, join,
control or participate in the ownership, management, operation or control of,
any Competing Business together with any Seller that is a current or former
employee of the Company; provided, however, that the ownership of not more than
5% of the outstanding stock of any publicly traded company shall not be a
violation of the restrictions set forth in this sentence. Notwithstanding the
foregoing or anything else to the contrary contained herein, the acquisition or
possession of an equity or partnership interest, for investment purposes, by a
non-SKM Seller in a Seller that is an Affiliate of the Sellers' Representative
shall not be deemed to violate the provisions of this Section 7.11.1. For
purposes of this Section 7.11.1, a "Competing Business" means a restaurant
business that (i) is in the "upscale family casual" category; (ii) has a guest
check average within 20% (plus or minus) of the Company's guest check average;
and (iii) has a menu, theme or decor that is similar to the menu, theme or decor
of the Company's restaurants.
7.11.2. Each Seller agrees that for a period of two years following
the Closing Date, such Seller shall not, directly or indirectly, request, induce
or seek to induce any employee of the Company to terminate his or her employment
with the Company, other than any such employee whose employment with the Company
terminates other than as a result of the direct or indirect solicitation by such
Seller; provided, that advertisements by a Seller and contacts by recruiters
directed generally and not to such employee by a Seller shall not constitute a
violation hereof.
7.11.3. If any provision contained in this Section 7.11 shall for
any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
of this Section, but this Section shall be construed as if such invalid, illegal
or unenforceable provision had never been contained herein. It is the intention
of the parties that if any of the restrictions or covenants contained herein is
held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and of no
effect, but to the extent such provision would be valid or enforceable under
applicable law, a court of competent jurisdiction shall construe and interpret
or reform this Section 7.11 to provide for a covenant having the maximum
enforceable geographic area, time period and other provisions (not greater than
those contained herein) as shall be valid and enforceable under such applicable
law. Each Seller acknowledges that the Buyer would be irreparably harmed by any
breach of this Section 7.11 and that there would be no adequate remedy at law or
in damages to compensate the Buyer for any such breach. Each Seller agrees that
the Buyer shall be entitled to injunctive relief requiring specific performance
by such Seller of this Section 7.11.
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7.12. New Restaurant Expenditures. Sellers shall cause the Company to make
capital expenditures, including with respect to new restaurants, in the Ordinary
Course of Business.
7.13. Related Party Accounts and Agreements. As of the Closing, no
accounts reflecting transactions between any Seller or any Affiliate of a
Seller, on the one hand, and the Company, on the other, will be outstanding
other than those arising in the Ordinary Course of Business, and any agreements
relating to any such transactions shall have been terminated. In order to avoid
confusion, in the event that any such agreement remains existing on the Closing
Date, the parties to such agreement hereby terminate any such agreement
effective as of the Closing Date other than those agreements listed on Schedule
7.13. In addition, any loan outstanding, directly or indirectly, from the
Company to any officer, director or employee of the Company shall have been
repaid in full as of the Closing Date, except to the extent that such loan would
not violate the provisions of the Sarbanes-Oxley Act of 2002.
7.14. Sellers' Representative.
7.14.1. Each of the Sellers hereby irrevocably appoints Saunders
Karp & Megrue, LLC or its designee (as appointed in writing), as the agent,
proxy, and attorney-in-fact for such Seller for all purposes under this
Agreement (including full power and authority to act on the Seller's behalf) to
take any action in accordance with and pursuant to the terms of this Agreement
(i) to consummate the transactions contemplated under this Agreement in
accordance with the terms hereof, and in connection therewith to waive any
condition set forth in Section 9 and to act on behalf of the Sellers for all
purposes of Sections 3.4 and 3.5; (ii) to conduct or cease to conduct the
defense of all claims against any of the Sellers in connection with this
Agreement, other than claims made solely under Section 10.2.1, and to settle all
such claims on behalf of all the Sellers and exercise any and all rights which
the Sellers are permitted or required to do or exercise under Section 10; (iii)
in connection with any claim against or by the Sellers under this Agreement
(excluding any claim based solely on Section 10.2.1), to the extent such amounts
cannot then be recovered from the Escrow Account, to require each Seller from
time to time to deposit into a common account such amounts (pro rated among the
Sellers based on their respective Sellers' Percentages) as in the judgment of
the Sellers' Representative are necessary to investigate, defend or prosecute
such claim and to spend such amounts for such purpose and then as promptly as in
the judgment of the Sellers' Representative is prudent to pay to each Seller its
pro rata share (based on its Seller's Percentage) of any amounts remaining in
such account; (iv) to execute and deliver on behalf of the Sellers any amendment
to this Agreement so long as (A) such amendment applies to all Sellers equally
(based on their respective Sellers' Percentages) and (B) such amendment does not
impose any material obligation on any Seller or materially reduce the Equity
Purchase Price; and (v) to hold in escrow and release to the Company or the
Buyer executed signature pages to this Agreement, Certificates, letters of
transmittal and any other documents or instruments delivered to the Sellers'
Representative in connection with the transactions contemplated hereby.
7.14.2. Reimbursement; Indemnification. Each Seller hereby
unconditionally and irrevocably agrees to pay to the Sellers' Representative,
promptly upon request and in any event within 10 days of such request, such
Seller's pro rata share (based on the respective Sellers' Percentages) of any
amounts paid or to be paid by the Sellers' Representative on behalf of the
Sellers and agrees to pay its pro rata share (based on the respective Sellers'
Percentages)
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of any and all costs and expenses (including legal fees and expenses) incurred
by the Sellers' Representative on behalf of the Sellers in connection with the
protection, defense, expense or enforcement of any rights under this Agreement.
Further, each of the Sellers hereby agrees not to assert any claim against, and
to indemnify and hold harmless the Sellers' Representative from and against such
Seller's pro rata share (based on the respective Sellers' Percentages) of any
and all Losses incurred by, the Sellers' Representative or any of its partners,
directors, officers, employees, agents, Sellers, consultants, investment
bankers, representatives or controlling persons, or any Affiliate of any of the
foregoing, relating to the Sellers' Representative's capacity as a Sellers'
Representative other than such claims or Losses resulting from the Sellers'
Representative's gross negligence or willful misconduct.
7.14.3. Miscellaneous. Any settlement entered into or other action
taken by any individual Seller shall be valid only to the extent not
inconsistent with this Section 7.14, and no such settlement or action shall bind
or otherwise affect the rights or obligations of the Sellers' Representative or
any other Seller. In the event of the default by any Seller of any payment
obligations under this Section 7.14, the defaulted amount shall, as between the
Sellers' Representative and the Sellers (but without creating any obligations to
the Buyer), be pro rated (based on their respective Sellers' Percentages) among
the non-defaulting Sellers. The Sellers' Representative may resign such position
at any time, effective with respect to each Seller thirty days after written
notice thereof is delivered to such Seller or is delivered to the last address
of such Seller provided by such Seller to the Sellers' Representative; provided,
however, that if any such resignation occurs prior to the termination of the
Sellers' indemnification obligations under Section 10.2.1, the Sellers'
Representative shall assign its obligations under this Section 7.14 to a
successor Sellers' Representative in connection with such resignation, and the
effectiveness of such assignment shall be a condition to the effectiveness of
such resignation. Any and all payments made by any of the Sellers under this
Section 7.14 shall be made free and clear of any present or future taxes,
deductions, charges or withholdings and all liabilities with respect thereto.
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER. The obligations of the
Buyer to consummate the Closing under this Agreement are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing by the Buyer in its sole discretion:
8.1. Representations, Warranties and Covenants. All representations and
warranties of the Sellers and the Company contained in this Agreement and in any
certificate delivered by any Seller or Company pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Affect, shall be true and correct in all respects except for
inaccuracies that, individually or in the aggregate, do not have, and would not
reasonably be expected to have, a Material Adverse Effect as of the Closing Date
as if made on the Closing Date, except for (a) changes expressly permitted or
required by this Agreement and (b) those representations and warranties which
address matters only as of a particular date (which, as of such date, shall be
true and correct to the same extent as set forth above). The Sellers, the
Sellers' Representative and the Company shall have performed and satisfied, in
all material respects, all covenants and agreements required by this Agreement
to be performed or satisfied by them at or prior to the Closing. The Sellers
shall have furnished to the Buyer a certificate, signed by or on behalf of each
of the Sellers, dated as of the Closing Date, to the
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effect that the conditions specified in this Section, to the extent relating to
representations, warranties, covenants and agreements of the Company or such
Seller, have been satisfied.
8.2. Legality; Governmental Authorization; Litigation. The acquisition of
the Shares and the consummation of the other transactions contemplated hereby
shall not be prohibited by any Legal Requirement, and all necessary filings, if
any, pursuant to the HSR Act shall have been made and all applicable waiting
periods thereunder shall have expired or been terminated. No nonfrivolous Action
shall have been instituted at or prior to the Closing by any Person other than a
party hereto or any Affiliate thereof, or instituted by any Governmental
Authority, relating to this Agreement or any of the transactions contemplated
hereby, the result of which would prevent, materially adversely affect or make
illegal the consummation of any such transaction.
8.3. General. All corporate proceedings required to be taken on the part
of the Company in connection with the transactions contemplated by this
Agreement shall have been taken. The Buyer shall have received copies of such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as the Buyer may reasonably request in
connection with the transactions contemplated hereby.
8.4. Subsequent Sellers. Each of the Subsequent Sellers shall have
executed a counterpart signature page to this Agreement and fully assumed the
obligations of a Seller under this Agreement with respect to such Subsequent
Seller's Shares, Options and/or Warrants.
8.5. Pay-Off Letter. The Company shall have received a letter from the
lenders under its existing credit agreement(s) stating (a) the aggregate amount
of any outstanding Debt thereunder as of the Closing Date and (b) that, if such
aggregate amount so identified is paid to such lenders on the Closing Date, such
lenders will release any and all Liens that they or their Affiliates may have
with respect to the Company or any of its assets and will take all actions
necessary to effectuate such release (including executing and delivering to the
Buyer all reasonably necessary documentation in form suitable for filing with
all appropriate government Persons).
8.6. Escrow Agreement. The Buyer shall have received a copy of the Escrow
Agreement executed by each of the Sellers and the Sellers' Representative.
8.7. FIRPTA Statement. The Buyer shall have received a statement, issued
by the Company pursuant to Treas. Reg. Section 1.897-2(h) and dated not more
than thirty (30) days prior to the Closing Date, certifying that none of the
Shares, the Options or the Warrants is a U.S. real property interest.
8.8. Option and Warrant Termination. The Buyer shall have received
evidence in form and substance reasonably satisfactory to the Buyer from the
holders of each outstanding Option and Warrant an acknowledgement by such holder
of the expiration and termination of such Option or the termination of such
Warrant, as the case may be.
8.9. Resignations. The Buyer shall have received the resignations of
officers and directors of the Company and any of its Subsidiaries selected by
the Buyer and provided to the Company at least five business days prior to the
Closing Date.
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8.10. Employment Agreements; Non-Competes. The Company shall have entered
into employment agreements, containing, among other things, non-competition
provisions, with each of Messrs. Simms, Bendel, Dillon and Bartholemy in
substantially the form of the employment agreements attached hereto as Exhibits
8.12.1, 8.12.2, 8.12.3 and 8.12.4.
8.11. Withdrawal of Registration Statement. The Buyer shall have received
evidence in form and substance reasonably satisfactory to the Buyer that the
Company has made any appropriate filing necessary to withdraw the Registration
Statement on Form S-1 (File No. 333-115201) and the initial public offering of
the securities contemplated thereby pursuant to Rule 477 under the Securities
Act of 1933, as amended.
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE COMPANY AND THE SELLERS. The
obligations of the Company and the Sellers to consummate the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of all of
the following conditions, compliance with which, or the occurrence of which, may
be waived prior to the Closing by the Company and the Sellers' Representative,
on behalf of the Sellers, in their sole discretion:
9.1. Representations, Warranties and Covenants. All representations and
warranties of the Buyer contained in this Agreement and in any certificate
delivered by the Buyer pursuant hereto, disregarding all qualifications and
exceptions contained therein relating to materiality, shall be true and correct
in all respects except for inaccuracies that, individually or in the aggregate,
do not have, and would not reasonably be expected to have, a material adverse
effect on the business, assets or liabilities, financial condition, results of
operations or properties of the Buyer and its Subsidiaries, taken as a whole, as
of the Closing Date as if made on the Closing Date, except for (a) changes
expressly permitted or required by this Agreement and (b) those representations
and warranties which address matters only as of a particular date (which, as of
such date, shall be true and correct to the same extent as set forth above). The
Buyer shall have performed and satisfied, in all material respects, all
covenants and agreements required by this Agreement to be performed or satisfied
by the Buyer at or prior to the Closing. The Buyer shall have furnished to the
Company a certificate signed by the President or any Vice President of the
Buyer, dated as of the Closing Date, to the effect that the conditions specified
in this Section have been satisfied.
9.2. Legality; Government Authorization; Litigation. The Sellers'
consummation of the transactions contemplated hereby shall not be prohibited by
any Legal Requirement, and all necessary filings, if any, pursuant to the HSR
Act shall have been made and all applicable waiting periods thereunder shall
have expired or been terminated. No nonfrivolous Action shall have been
instituted at or prior to the Closing by any Person other than a party hereto or
any Affiliate thereof, or instituted by any Governmental Authority, relating to
this Agreement or any of the transactions contemplated hereby, the result of
which would prevent, materially adversely affect or make illegal the
consummation any such transaction.
9.3. General. All corporate proceedings required to be taken by the Buyer
in connection with the transactions contemplated by this Agreement shall have
been taken. The Sellers shall have received copies of such officers'
certificates, good standing certificates,
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incumbency certificates and other customary closing documents as the Sellers may
reasonably request in connection with the transactions contemplated hereby.
9.4. Escrow Agreement. The Sellers shall have received a copy of the
Escrow Agreement executed by the Buyer.
10. INDEMNIFICATION.
10.1. Buyer's Indemnification. Subject to the limitations set forth in
this Section 10, from and after the Closing, each of the Buyer and the Company
shall jointly and severally indemnify and hold harmless, to the fullest extent
permitted by law, the Sellers, their Affiliates and their respective officers
and directors (collectively, the "Seller Indemnitees") from, against and in
respect of Losses incurred as a result of any of the following:
10.1.1. any breach or default in performance by the Buyer of any
covenant or agreement of the Buyer contained in this Agreement and any breach or
default in performance by the Company of any covenant or agreement made by the
Company contained in this Agreement that is to be performed after the Closing;
or
10.1.2. any breach of, or inaccuracy in, any representation or
warranty made by the Buyer in this Agreement.
10.2. Sellers' Indemnification. Subject to the limitations set forth in
this Section 10, from and after the Closing, each of the Sellers shall severally
(but not jointly) indemnify and hold harmless, to the fullest extent permitted
by law, the Buyer, the Company, their Affiliates and their respective officers
and directors (collectively, the "Buyer Indemnitees") from, against and in
respect of:
10.2.1. Losses incurred as a result of any breach or default in
performance by such Seller of any covenant or agreement of such Seller contained
in this Agreement;
10.2.2. Losses incurred as a result of any breach of, or any
inaccuracy in, any representation or warranty made by such Seller in this
Agreement;
10.2.3. such Seller's Seller's Percentage of Losses incurred as a
result of any breach or default in performance by the Company of any covenant or
agreement of the Company contained in this Agreement that is to be performed at
or prior to the Closing;
10.2.4. such Seller's Seller's Percentage of Losses incurred as a
result of any breach of, or any inaccuracy in, any representation or warranty
made by the Company in this Agreement;
10.2.5. such Seller's Seller's Percentage of Losses incurred as a
result of (i) rent increases and/or consent payments required in connection with
Leases set forth under the heading "Contracts Requiring Consent or Waiver to
Transactions Contemplated by the Agreement" on Schedule 5.6 to this Agreement,
(ii) the items set forth on Schedule 5.8 and (iii) the inability of the Company
to serve alcoholic beverages immediately after the Closing Date at any of the
Company's restaurant locations to the same extent as immediately prior to the
Closing
43
Date (unless such inability is a result of actions taken, or the failure to act,
by the Buyer or its officers, directors, agents or other representatives or the
failure of the Buyer or its officers, directors or affiliates, including any
holder of 5% or more of the Buyer's outstanding common stock, to meet the
licensing requirements of the applicable state liquor licensing agency).
10.3. Monetary Limitations.
10.3.1. Except as otherwise provided in this Section 10.3 and in
Section 7.7, (i) no Seller shall have any obligation to indemnify any Buyer
Indemnitee pursuant to Sections 10.2.2, 10.2.3, 10.2.4 or 10.2.5 unless and
until, and only to the extent that, the aggregate of all such individual Losses
incurred or sustained by all Buyer Indemnitees with respect to which Buyer
Indemnitees are entitled to indemnification under Sections 10.2.2, 10.2.3,
10.2.4 and 10.2.5 exceeds $1,250,000 (the "Threshold Amount"), in which case the
Sellers shall only be liable for the amount by which all such Losses exceed the
Threshold Amount, (ii) the aggregate liability of the Sellers to indemnify the
Buyer Indemnitees for Losses under Sections 10.2.2, 10.2.3, 10.2.4 and 10.2.5
shall in no event exceed $20,000,000 (the "Maximum Aggregate Loss"), (iii) each
Seller's aggregate indemnification obligation under Sections 10.2.2, 10.2.3,
10.2.4 and 10.2.5 shall be limited to such Seller's Seller's Percentage of the
Maximum Aggregate Loss; and (iv) each Seller's aggregate obligation under this
Section 10 shall in no event exceed the portion of the Equity Purchase Price
received by such Seller.
10.3.2. Except as provided in Section 7.7, (i) the Buyer shall not
have any obligation to indemnify any Seller Indemnitee pursuant to Section
10.1.2 unless and until, and only to the extent that, the aggregate of all
individual Losses incurred or sustained by all Seller Indemnitees with respect
to which Seller Indemnitees are entitled to indemnification under Section 10.1.2
exceeds the Threshold Amount, in which case the Buyer shall only be liable for
the amount by which all such Losses exceed the Threshold Amount and (ii) the
aggregate liability of the Buyer to indemnify the Seller Indemnitees for Losses
under Section 10.1.2 shall in no event exceed the Maximum Aggregate Loss.
10.3.3. For purposes of determining whether any breach of a
representation or warranty or any breach of a covenant has occurred with respect
to a claim for indemnification or for the purposes of measuring Losses, such
representations, warranties and covenants shall be deemed to have been made
without any materiality, Material Adverse Effect or similar qualifications and
without any dollar thresholds.
10.3.4. Notwithstanding any other provision of this Agreement, the
provisions of Sections 10.3.1 and 10.4 shall not apply to any Losses suffered by
the Buyer or any Buyer Indemnitee arising out of any Wage and Hour Dispute for
which Losses the Buyer or such Buyer Indemnitee shall be entitled to recovery
from the first dollar and without limitation as to amount or time. To the extent
that any claim raised in a Wage and Hour Dispute relates to any period after the
Closing Date, the amount of any Losses payable under this Section 10.3.4 shall
be allocated between the Sellers and the Buyer on the basis of the number of
days on which the alleged wrongful action or conduct occurred that took place on
or prior to the Closing Date and the number of days during which the alleged
wrongful action or conduct occurred that took place after the Closing Date.
44
10.4. Time Limitations. Regardless of any investigation made at any time
by or on behalf of any party hereto or of any information any party may have in
respect thereof, no claim for indemnification pursuant to this Section 10 as a
result of a breach of a representation or warranty (other than for breach of the
representations and warranties contained in Sections 4.2, 4.4, 5.2, 5.14.2,
5.14.3 and 6.1.2, claims for which shall survive indefinitely (subject to any
applicable statutes of limitation with respect to the subject matter of such
representations and warranties)) shall be valid unless notice thereof,
describing with reasonable specificity (in light of the facts then known) the
amount and basis of such claim, is delivered to the relevant indemnifying
parties on or prior to the close of business on the date which is eighteen (18)
months following the Closing Date.
10.5. Limitation on Remedies. From and after the Closing, the sole and
exclusive remedy of each Seller Indemnitee and Buyer Indemnitee as against any
Person, with respect to all claims relating to the subject matter of this
Agreement (other than claims relating to Taxes), shall be pursuant to the
indemnification provisions set forth in this Section 10. From and after the date
hereof until the Closing, the sole and exclusive remedy of each Seller
Indemnitee (including the Company) and each Buyer Indemnitee with respect to any
breach or inaccuracy of any of the representations and warranties set forth in
Sections 4, 5 and 6 or any breach of any of the covenants and agreements set
forth in Section 7 shall be termination of this Agreement pursuant to Section
12. In furtherance of the foregoing, effective as of the Closing Date, (i) each
Seller shall be deemed to release, remise and forever discharge any and all
rights, claims and causes of action it may now or hereafter have against the
Buyer and any of its respective Affiliates, members, partners, shareholders,
officers, directors, employees, agents and representatives and their respective
Affiliates (including the Company) relating to the subject matter of this
Agreement, other than (w) claims for indemnification asserted as permitted by
and in accordance with the provisions set forth in this Section 10, (x) claims
by directors, officers and employees of the Company for indemnification with
respect to any periods prior to the Closing, (y) to the extent permitted under
Section 12.2, claims asserted after termination of this Agreement and (z) claims
arising out of fraud, (ii) the Buyer shall be deemed to release, remise and
forever discharge any and all rights, claims and causes of action it may now or
hereafter have against any and all of the Sellers, their respective Affiliates,
members, partners, shareholders, officers, directors, employees, agents and
representatives and their respective Affiliates relating to the subject matter
of this Agreement, other than (x) claims for indemnification asserted as
permitted by and in accordance with the provisions set forth in this Section 10,
(y) to the extent permitted under Section 12.2, claims asserted after
termination of this Agreement, and (z) claims arising out of fraud, and (iii)
the parties agree that the waiver in writing of any condition to Closing based
on the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant, agreement or obligation, shall be deemed a waiver
of the right to indemnification under this Section 10 or Section 7.7 with
respect to the specific inaccuracy of such representation or warranty, or the
specific failure to perform or compliance with such covenant, agreement or
obligation, in any such case as set forth in such written waiver. The Buyer
represents that it has no Knowledge of the inaccuracy or non-compliance of any
representation, warranty, covenant or obligation made or undertaken by the
Sellers or the Company in this Agreement or the Schedules attached hereto.
10.6. Third Party Claims. Promptly after the receipt by any Person
entitled to indemnification pursuant to this Section 10 (the "Indemnified
Party") of notice of the
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commencement of any action against such Indemnified Party by a third party (such
action, a "Third Party Claim"), such Indemnified Party shall, if a claim with
respect thereto is to be made against any party obligated to provide
indemnification pursuant to this Section 10 (the "Indemnifying Party"), give
such Indemnifying Party written notice of such Third Party Claim in reasonable
detail in light of the circumstances then known to such Indemnified Party. The
failure to give such notice shall not relieve any Indemnifying Party from any
obligation hereunder except to the extent that such failure materially
prejudices such Indemnifying Party. Such Indemnifying Party shall have the right
to defend such Third Party Claim, at such Indemnifying Party's expense and with
counsel of its choice reasonably satisfactory to the Indemnified Party, provided
that the Indemnifying Party conducts the defense of such Third Party Claim
actively and diligently, and provided further there is not a conflict of
interest between the positions of the Indemnifying Party and the Indemnified
Party in conducting the defense of such claim as determined by the Indemnified
Party, in consultation with outside counsel and the ABA Model Rules of
Professional Conduct. If the Indemnifying Party assumes the defense of such
Third Party Claim, the Indemnified Party agrees to reasonably cooperate in such
defense at the expense of the Indemnifying Party. So long as the Indemnifying
Party is conducting the defense of such claim actively and diligently, the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and may participate in the defense of such Third Party Claim, and neither any
Indemnifying Party nor any Indemnified Party will consent to the entry of any
judgment or enter into any settlement with respect to such Third Party Claim
without the prior written consent of the other, which consent will not be
unreasonably withheld or delayed, unless (i) the proposed settlement imposes
only monetary payment obligations which are to be paid exclusively by the
Indemnifying Party, and (ii) such settlement includes a full release of the
Indemnified Party in respect of all indemnifiable Losses resulting therefrom,
related thereto or arising therefrom. In the event the Indemnifying Party does
not or ceases to conduct the defense of such Third Party Claim actively and
diligently (x) the Indemnified Party may defend against, and, with the prior
written consent of the Indemnifying Party (which consent shall not be
unreasonably withheld or delayed), consent to the entry of any judgment or enter
into any settlement with respect to, such Third Party Claim (provided that the
Indemnifying Party may retain separate co-counsel at its sole cost and expense
and may participate in the defense of such Third Party Claim), (y) the
Indemnifying Party will reimburse the Indemnified Party for the costs of
defending against such Third Party Claim to the extent provided in this Section
10 and (z) the Indemnifying Party will remain responsible for any Losses the
Indemnified Party may suffer as a result of such Third Party Claim to the extent
provided in this Section 10. The parties agree that any Wage and Hour Dispute
and the items set forth on Schedule 5.8 hereto shall be treated as a Third Party
Claim and shall be subject to the provisions of this Section 10.6.
10.7. Equity Purchase Price Adjustment. Any indemnification payment made
by the Company, the Buyer or the Sellers pursuant to this Agreement shall be
treated by the Buyer and the Sellers as an adjustment to the Equity Purchase
Price for Tax and all other purposes.
10.8. Tax Indemnity. Notwithstanding any other provision of this
Agreement, Section 7.7, rather than this Section 10, shall apply exclusively to
indemnification with respect to Taxes.
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11. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.
11.1. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (a) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the exclusive jurisdiction of the state courts of
the State of New York located in New York County or the United States District
Court for the Southern District of New York for the purpose of any action,
claim, cause of action or suit (in contract, tort or otherwise), inquiry
proceeding or investigation arising out of or based upon this Agreement or
relating to the subject matter hereof, (b) hereby waives, and agrees to cause
each of its Subsidiaries to waive, to the extent not prohibited by applicable
law, and agrees not to assert, and agrees not to allow any of its Subsidiaries
to assert, by way of motion, as a defense or otherwise, in any such action, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that
any such proceeding brought in one of the above-named courts is improper, or
that this Agreement or the subject matter hereof may not be enforced in or by
such court and (c) hereby agrees not to commence or to permit any of its
Subsidiaries to commence any action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation arising out
of or based upon this Agreement or relating to the subject matter hereof other
than before one of the above-named courts nor to make any motion or take any
other action seeking or intending to cause the transfer or removal of any such
action, claim, cause of action or suit (in contract, tort or otherwise),
inquiry, proceeding or investigation to any court other than one of the
above-named court whether on the grounds of inconvenient forum or otherwise.
Each party hereby consents to service of process in any such proceeding in any
manner permitted by New York law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 13.6 is reasonably calculated to give actual notice.
11.2. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES TO
CAUSE EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT NEITHER IT NOR ANY
OF ITS SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE)
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, ACTION, CLAIM,
CAUSE OF ACTION, SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. THE
BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE SELLERS THAT THIS SECTION
11.2 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE SELLERS ARE RELYING AND
WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY OTHER AGREEMENTS RELATING
HERETO OR CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART
OR A COPY OF THIS SECTION 11.2 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT
OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
47
12. TERMINATION.
12.1. Termination of Agreement. This Agreement may be terminated by the
parties only as provided below:
12.1.1. The Buyer and the Sellers' Representative may terminate this
Agreement by mutual written consent at any time prior to the Closing.
12.1.2. The Buyer may terminate this Agreement by delivering written
notice to the Sellers at any time prior to the Closing in the event the Sellers
or the Company are in material breach of any representation, warranty, covenant
or agreement contained in this Agreement, the Buyer has notified the Sellers and
the Company of the breach in writing, there is a reasonable likelihood that such
breach (unless cured, if curable) will result in an inability of the Sellers or
the Company to satisfy the conditions set forth in Section 8 and such breach, if
curable, has continued without cure for a period of 10 days after delivery of
such notice of breach.
12.1.3. The Sellers' Representative, on behalf of the Sellers, may
terminate this Agreement by delivering written notice to the Buyer at any time
prior to the Closing in the event the Buyer is in material breach of any
representation, warranty, covenant or agreement contained in this Agreement, the
Sellers have notified the Buyer of the breach in writing, there is a reasonable
likelihood that such breach will (unless cured, if curable) result in an
inability of the Buyer to satisfy the conditions set forth in Section 9 and such
breach, if curable, has continued without cure for a period of 10 days after
delivery of such notice of breach.
12.1.4. The Buyer or the Sellers' Representative, on behalf of the
Sellers, may terminate this Agreement by providing written notice to the other
at any time on or after July 30, 2004, if the Closing of the transactions
contemplated by this Agreement shall not have occurred by reason of the failure
of any condition set forth in Section 8, in the case of the Buyer, or Section 9,
in the case of the Sellers' Representative, to be satisfied (other than through
the failure of any party seeking to terminate this Agreement to comply fully
with its obligations under this Agreement).
12.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1, all obligations of the parties hereunder
(other than obligations under Sections 11 and 12, which shall survive
termination) shall terminate without any liability of any party to any other
party; provided, however, that no termination by a party pursuant to Sections
12.1.2, 12.1.3 and 12.1.4 shall relieve such party from any liability arising
from or relating to any material breach of any covenant or agreement by such
party prior to termination.
13. MISCELLANEOUS.
13.1. Entire Agreement; Waivers. This Agreement, together with the
Confidentiality Agreement dated as of February 26, 2004, and the Schedules and
Exhibits attached hereto, constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties with respect to such subject matter. No
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other
48
provision hereof (whether or not similar), shall constitute a continuing waiver
unless otherwise expressly provided nor shall be effective unless in writing and
executed (a) in the case of a waiver by the Buyer, by the Buyer, and (b) in the
case of a waiver by the Sellers, by the Sellers' Representative.
13.2. Amendment or Modification. The parties hereto may amend or modify
this Agreement only by a written instrument executed by the Buyer and the
Sellers' Representative, and any such amendment or modification shall be
Enforceable against the Buyer and all the Sellers.
13.3. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted under applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
13.4. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted transferees and assigns (each of which
transferees and assigns shall be deemed to be a party hereto for all purposes
hereof); provided, however, that (a) no transfer or assignment by any party
hereto shall be permitted without the prior written consent of the other parties
hereto and any such attempted transfer or assignment without consent shall be
null and void and (b) no transfer or assignment by any party shall relieve such
party of any of its obligations hereunder; provided, further, that Buyer may
assign its rights, but not its obligations, under this Agreement, in whole or in
part, to any Affiliate; and provided, further, that after the Closing, the Buyer
may assign its rights under this Agreement (i) to any lender providing financing
to the Buyer in connection with the transactions contemplated by this Agreement,
or (ii) to any purchaser of all or substantially all capital stock or assets of
the Company.
13.5. Action by the Sellers' Representative. Any action taken by the
Sellers' Representative in accordance with and pursuant to the terms of this
Agreement shall bind and otherwise affect any rights and obligations of each
Seller hereunder.
13.6. Notices. Any notices or other communications required or permitted
hereunder shall be deemed to have been properly given and delivered if in
writing by such party or its legal representative and delivered personally or
sent by facsimile, nationally recognized overnight courier service guaranteeing
overnight delivery, or registered or certified mail, postage prepaid, addressed
as follows:
If to the Company to: SWH Corporation
17852 East 17th Street
South Building, Suite 108
Tustin, CA 92780
Attention: Thomas Simms
49
With a copy to: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Daniel S. Evans, Esq.
Facsimile: 617-951-7050
If to any Seller or the Sellers'
Representative to: c/o the Sellers' Representative
Saunders Karp & Megrue, LLC
262 Harbor Drive
Stamford, Connecticut 06902
With a copy to: Ropes & Gray LLP
One International Place
Boston, MA 02110
Attention: Daniel S. Evans, Esq.
Facsimile: 617-951-7050
If to the Buyer, Purchase Subsidiary Bob Evans Farms, Inc.
or, after the Closing, the Company, to: Corporate Headquarters
3776 South High Street
Columbus, OH 43207
Attention: Stewart Owens/Don Radkoski
Facsimile: 617-492-4934
With a copy to: Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, OH 43215
Attention: Webb I. Vorys, Esq.
Ronald A. Robins, Jr., Esq.
Facsimile: 614-464-6350
Unless otherwise specified herein, such notices or other communications shall be
deemed given (a) on the date delivered, if delivered personally, (b) one
Business Day after being sent by a nationally recognized overnight courier
guaranteeing overnight delivery, (c) on the date delivered, if delivered by
facsimile during business hours (or one Business Day after the date of delivery
if delivered after business hours) and (d) five Business Days after being sent,
if sent by registered or certified mail. Each of the parties hereto shall be
entitled to specify a different address by delivering notice as aforesaid to
each of the other parties hereto.
13.7. Public Announcements. Except as reasonably necessary or advisable to
comply with applicable law and/or the rules and regulations of the U.S.
Securities and Exchange Commission or the Nasdaq Stock Market, no party hereto
will issue or make any report, statement or release to the public (including
employees, customers and suppliers of the parties) with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other parties hereto, which consent shall not be unreasonably withheld. If any
party hereto
50
determines that it is reasonably necessary or advisable in order to comply with
applicable law and/or the rules and regulations of the U.S. Securities and
Exchange Commission or the Nasdaq Stock Market to issue a public report,
statement or release without the consent of the other parties hereto, then such
party will promptly furnish the other parties with a copy thereof prior to its
release with reasonably sufficient time to comment thereon. Subject to the
foregoing, each party hereto will also obtain the prior approval by the other
parties hereto of any press release to be issued announcing the consummation of
the transactions contemplated by this Agreement.
13.8. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are not
intended to be full or accurate descriptions of the content thereof and shall
not affect the construction hereof.
13.9. Disclosure. Any item listed or referred to in any Schedule pursuant
to any Section of this Agreement shall be deemed to have been listed in or
incorporated by reference into any other Schedule to the extent that the
applicability of the information disclosed to such other representation and
warranty or Schedule is reasonably apparent from the face of such Schedule.
13.10. Third Party Beneficiaries. Except as otherwise set forth herein,
nothing in this Agreement is intended or shall be construed to entitle any
Person, other than the parties hereto, their respective transferees and assigns
permitted hereby, to any claim, cause of action, remedy or right of any kind.
13.11. Counterparts. This Agreement and any claims related to the subject
matter hereof may be executed in any number of counterparts, each of which shall
be deemed an original, but all of which together shall constitute but one and
the same instrument.
13.12. Governing Law. This Agreement and any claims related to the subject
matter hereof shall be governed by and construed in accordance with the domestic
substantive laws of the State of New York, without giving effect to any choice
or conflict of law provision or rule that would cause the application of the
laws of any other jurisdiction.
13.13. Expenses. Whether or not the transactions contemplated hereby are
consummated, all Transaction Expenses shall be paid by the Company and/or the
Sellers (including payment from the Enterprise Value in the manner contemplated
by Section 3.1) and all fees and expenses incurred by the Buyer in connection
with the negotiation and preparation of this Agreement, related agreements and
the transactions contemplated hereby and thereby shall be paid by the Buyer.
13.14. Effect of Execution by Subsequent Sellers. Upon the execution of a
counterpart signature page hereof by a Subsequent Seller, such Subsequent Seller
shall become a party to this Agreement for all purposes hereunder as if such
Subsequent Seller had originally executed this Agreement on the date hereof.
[signature pages to follow]
51
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the date first above
written by their respective officers thereunto duly authorized.
THE COMPANY: SWH CORPORATION
By: /s/ Thomas M. Simms
-------------------------------------
Name: Thomas M. Simms
Title: Chairman
THE SELLERS: THE SK EQUITY FUND, L.P.
By: SKM Partners, L.P., its General
Partner
By: Saunders Karp & Megrue Partners,
L.L.C., its General Partner
By: /s/ Christopher K. Reilly
-------------------------------------
Name: Christopher K. Reilly
Title: Partner
SK INVESTMENT FUND, L.P.
By: SKM Partners, L.P., its General
Partner
By: Saunders Karp & Megrue Partners,
L.L.C., its General Partner
By: /s/ Christopher K. Reilly
------------------------------------
Name: Christopher K. Reilly
Title: Partner
THE SKM EQUITY FUND III, L.P.
By: SKM Partners, L.P., its General
Partner
By: Saunders Karp & Megrue Partners,
L.L.C., its General Partner
By: /s/ Christopher K. Reilly
-------------------------------------
Name: Christopher K. Reilly
Title: Partner
SKM INVESTMENT FUND
By: SKM Partners, L.P., its General
Partner
By: Saunders Karp & Megrue Partners,
L.L.C., its General Partner
By: /s/ Christopher K. Reilly
------------------------------------
Name: Christopher K. Reilly
Title: Partner
By: /s/ Howard Baldini
------------------------------------
Name: Howard Baldini
Date:
By: /s/ Edward T. Bartholemy
------------------------------------
Name: Edward T. Bartholemy
Date:
By: /s/ Russell W. Bendel
------------------------------------
Name: Russell W. Bendel
Date:
By: /s/ James A. Benson
------------------------------------
Name: James A. Benson
Date:
By: /s/ Laura L. Dewey
-------------------------------------
Name: Laura L. Dewey
Date:
By: /s/ Randal Hughes
-------------------------------------
Name: Randal Hughes
Date:
By: /s/ Jay Hutchison
-------------------------------------
Name: Jay Hutchison
Date:
By: /s/ Stephanie Jacobi
-------------------------------------
Name: Stephanie Jacobi
Date:
By: /s/ Joseph Paul Kurz
------------------------------------
Name: Joseph Paul Kurz
Date:
By: /s/ Jeff B. Looney
-------------------------------------
Name: Jeff B. Looney
Date:
By: /s/ Terrance Lung
-------------------------------------
Name: Terrance Lung
Date:
By: /s/ Gregory S. Lynds
-------------------------------------
Name: Gregory S. Lynds
Date:
By: /s/ Dannelle C. Mayer
-------------------------------------
Name: Dannelle C. Mayer
Date:
By: /s/ Christopher Parker
-------------------------------------
Name: Christopher Parker
Date:
By: /s/ Thomas F. Patterson
-------------------------------------
Name: Thomas F. Patterson
Date:
By: /s/ Robert M.Schwarz
-------------------------------------
Name: Robert M. Schwarz
Date:
By: /s/ Richard Seegmiller
-------------------------------------
Name: Richard Seegmiller
Date:
By: /s/ Steven S. Shaw
-------------------------------------
Name: Steven S. Shaw
Date:
By: /s/ Matthew Sims
-------------------------------------
Name: Matthew Sims
Date:
By: /s/ Thomas Simms
-------------------------------------
Name: Thomas Simms
Date:
By: /s/ Steven Standlea
-------------------------------------
Name: Steven Standlea
Date:
By: /s/ James C. Stiefel
-------------------------------------
Name: James C. Stiefel
Date:
By: /s/ Julie Suess
-------------------------------------
Name: Julie Suess
Date:
By: /s/ J. Brian Taylor
-------------------------------------
Name: J. Brian Taylor
Date:
FSC CORP.
By: /s/ John J. Quintal
-------------------------------------
Name: John J. Quintal
Title: Vice President
COMERICA INCORPORATED, as successor in
interest to Imperial Bancorp.
By: /s/ Anthony G. Morrow
-------------------------------------
Name: Anthony G. Morrow
Title: Vice President, Corporate
Counsel and Assistant Secretary
By: /s/ Joseph D. Truebe
------------------------------------
Name: Joseph D. Truebe
Date:
ARTHUR J. SIMMS REVOCABLE TRUST
By: Thomas Simms, Trustee
By: /s/ Thomas Simms
------------------------------------
Thomas Simms
DILLON FAMILY TRUST
By: Daniel Dillon, Trustee
By: /s/ Daniel Dillon
------------------------------------
Daniel Dillon
THE BUYER: BOB EVANS FARMS, INC.
By: /s/ Stewart Owens
------------------------------------
Name: Stewart Owens
Title: CEO
PURCHASE SUBSIDIARY: MIMI'S CAFE, LLC
By: /s/ Stewart Owens
-------------------------------------
Name: Stewart Owens
Title: Manager and President
SELLERS' REPRESENTATIVE: SAUNDERS KARP & MEGRUE, LLC
By: /s/ Christopher K. Reilly
-------------------------------------
Name: Christopher K. Reilly
Title: Partner