EXHIBIT
10.1
Stock
Purchase Agreement
Among
Wise
Acquisition Corp.,
Chanticleer
Holdings, Inc. (solely for purposes of Section 5.11, Section 6.5, and Article
10),
Sellers
that are party hereto,
Brandon
Realty Venture, Inc., as Seller Representative
and
the
Acquired Companies.
as
of March 7,
2008
TABLE
OF CONTENTS
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Page
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1.
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DEFINITIONS
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1
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2.
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SALE
AND TRANSFER OF SHARES; CLOSING |
14
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2.1
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Delivery
of Estimate; Calculation of Initial Adjustment Amount
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14
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2.2
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Purchase
and Sale of Shares
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14
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2.3
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The
Closing
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15
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2.4
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Closing
Obligations
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16
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2.5
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Final
Net Working Capital Determination
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21
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2.6
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New
Store Purchase Price Determination
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22
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2.7
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Acquired
Companies Final EBITDA Determination
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24
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2.8
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Letter
of Credit
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28
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2.9
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Withholding
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31
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3.
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REPRESENTATIONS
AND WARRANTIES OF SELLERS
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31
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3.1
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Organization
and Good Standing
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31
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3.2
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Authority;
No Conflict
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32
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3.3
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Capitalization
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33
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3.4
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Financial
Statements
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34
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3.5
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Books
and Records
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34
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3.6
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Title
to Properties; Encumbrances
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35
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3.7
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Condition
and Sufficiency of Assets
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35
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3.8
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No
Undisclosed Liabilities
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35
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3.9
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Taxes
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36
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3.10
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Employee
Benefits
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39
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3.11
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Compliance
with Legal Requirements
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42
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3.12
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Legal
Proceedings; Orders
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43
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3.13
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Absence
of Certain Changes and Events
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44
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3.14
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Contracts;
No Defaults
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46
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3.15
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Insurance
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49
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3.16
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Environmental
Matters
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50
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3.17
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Employees
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52
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3.18
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Labor
Relations; Compliance
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53
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3.19
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Intellectual
Property
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53
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3.20
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Governmental
Authorizations
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54
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3.21
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Suppliers
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54
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3.22
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Relationships
with Related Persons
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55
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3.23
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Brokers
or Finders
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55
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3.24
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No
Liability From Property Transfers
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55
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3.25
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No
Conflicts
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55
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3.26
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Restricted
Securities
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55
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3.27
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Accredited
Investor
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56
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3.28
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Acknowledgment
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57
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3.29
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Election
Acknowledgment
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57
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3.30
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Disclaimer
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57
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4.
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REPRESENTATIONS
AND WARRANTIES OF BUYER
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58
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4.1
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Organization
and Good Standing
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58
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4.2
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Authority;
No Conflict
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58
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4.3
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Investment
Intent
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58
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4.4
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Brokers
or Finders
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59
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4.5
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Acknowledgment
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59
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4.6
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Chanticleer
Organization and Good Standing
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59
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4.7
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Chanticleer
Authority; No Conflict
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59
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4.8
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Capitalization
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59
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4.9
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Securities
Matters
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60
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4.10
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No
Material Adverse Effect
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60
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5.
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COVENANTS
OF SELLERS AND THE ACQUIRED COMPANIES
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60
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5.1
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Access
and Investigation
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60
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5.2
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Operation
of the Businesses of the Acquired Companies
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60
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5.3
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Required
Approvals
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62
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5.4
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Notification
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63
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5.5
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Payment
of Indebtedness by Related Persons
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63
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5.6
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No
Negotiation
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63
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5.7
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Insurance
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64
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5.8
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Employee
Matters
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64
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5.9
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Charity
Commitments
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64
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5.10
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Commercially
Reasonable Efforts
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65
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5.11
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Assistance
with Financing
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65
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5.12
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Shares
Held in Trust
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66
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5.13
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Powers
of Attorney
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66
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6.
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COVENANTS
OF BUYER
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66
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6.1
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Approvals
of Governmental Bodies
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66
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6.2
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Commercially
Reasonable Efforts
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66
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6.3
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Notification
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67
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6.4
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Board
of Directors
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67
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6.5
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SEC
Filings and Reports
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67
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6.6
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Registration
Rights
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68
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6.7
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Refunds
and Rebates
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68
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7.
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CONDITIONS
PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
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68
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7.1
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Accuracy
of Representations
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68
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7.2
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Sellers’
Performance
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69
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7.3
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Consents
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69
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7.4
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Additional
Documents
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69
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7.5
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No
Proceedings
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69
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7.6
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No
Claim Regarding Stock Ownership or Sale Proceeds
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70
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7.7
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No
Prohibition
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70
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7.8
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Financing
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70
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7.9
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Acquired
Companies Performance
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70
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7.10
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Employment
Agreements
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70
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7.11
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Sale
Bonus Payment Releases
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70
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8.
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CONDITIONS
PRECEDENT TO SELLERS’ OBLIGATION TO CLOSE
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70
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8.1
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Accuracy
of Representations
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71
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8.2
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Buyer’s
Performance
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71
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8.3
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Additional
Documents
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71
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8.4
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No
Proceedings
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71
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8.5
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No
Prohibition
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71
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9.
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TERMINATION
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72
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9.1
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Termination
Events
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72
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9.2
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Effect
of Termination
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72
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10.
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INDEMNIFICATION;
REMEDIES
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72
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10.1
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Survival;
Right to Indemnification Not Affected by Knowledge
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72
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10.2
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Indemnification
and Payment of Damages by Sellers
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73
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10.3
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Indemnification
and Payment of Damages by an Individual Seller
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74
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10.4
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Indemnification
and Payment of Damages by Buyer and Chanticleer
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74
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10.5
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Exclusive
Remedy
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74
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10.6
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Time
Limitations
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75
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10.7
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Other
Limitations
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75
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10.8
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Procedure
for Indemnification--Third Party Claims
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76
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10.9
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Procedure
for Indemnification--Other Claims
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78
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10.10
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Tax
Matters
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78
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11.
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SELLER
REPRESENTATIVE
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83
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11.1
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Appointment
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83
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11.2
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Authority
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83
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11.3
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Authorized
Actions
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83
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11.4
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Resignation
and Removal
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84
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12.
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GENERAL
PROVISIONS
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84
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12.1
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Expenses
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84
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12.2
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Public
Announcements
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84
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12.3
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Notices
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84
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12.4
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Jurisdiction;
Service of Process
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87
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12.5
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Further
Assurances
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87
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12.6
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Waiver
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87
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12.7
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Entire
Agreement and Modification
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87
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12.8
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Assignments,
Successors, and No Third-Party Rights
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88
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12.9
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Severability
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88
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12.10
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Section
Headings, Construction
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88
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12.11
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Governing
Law
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88
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12.12
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Legal
Representation.
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88
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12.13
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Counterparts
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89
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EXHIBITS
TO AGREEMENT
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Attached
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DISCLOSURE
SCHEDULE
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Attached
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STOCK
PURCHASE AGREEMENT
This
Stock Purchase Agreement (“Agreement”)
is
made as of March 7, 2008, by and among Wise Acquisition Corp., a Delaware
corporation (“Buyer”),
Chanticleer Holdings, Inc., a Delaware corporation (“Chanticleer”)
(solely for purposes of Section 5.11, Section 6.5, and Article 10), Hooter’s,
Inc., a Florida corporation (“HI”),
the
other companies listed on Exhibit
A
hereto
(together with HI, the “Acquired
Companies”),
the
selling stockholders of the Acquired Companies listed on Exhibit
B
hereto
(each a “Seller”
and,
collectively, “Sellers”)
and
Brandon Realty Venture, Inc., a Florida corporation, as “Seller
Representative.”
RECITALS
WHEREAS,
all of the outstanding shares of capital stock of the Acquired Companies
listed
on Exhibit
C
hereto
that are corporations (other than HG and HMC) are owned by Sellers as shown
on
Exhibit
2.2(a)
hereto;
WHEREAS,
all of the outstanding shares of capital stock of HGHC and HMHC are owned
by
Sellers;
WHEREAS,
all of the outstanding shares of capital stock of HG are owned by HGHC and
all
of the outstanding shares of capital stock of HMC are owned by HMHC;
and
WHEREAS,
(a) Sellers who own all of the issued and outstanding shares of capital stock
of
HI desire to sell all of such shares to Buyer, and Buyer desires to purchase
such shares of HI, (b) Sellers who own all of the issued and outstanding
capital
stock of the Acquired Companies that are corporations, other than HI, HG
and
HMC, desire to sell such shares to HI, and HI desires to purchase such shares
from such Sellers, (c) Sellers who own all of the issued and outstanding
shares
of capital stock of HGHC desire to cause HGHC to sell to HI, and HI desires
to
purchase from HGHC, all of the outstanding shares of capital stock of HG,
and
(d) Sellers who own all of the issued and outstanding shares of capital of
HMHC
desire to cause HMHC to sell to HI, and HI desires to purchase from HMHC,
all of
the outstanding shares of capital stock of HMC (the shares of stock described
in
clauses (a), (b) and (c) being collectively called the “Shares”),
for
the consideration and on the terms set forth in this Agreement.
AGREEMENT
The
parties, intending to be legally bound, agree as follows:
DEFINITIONS
For
purposes of this Agreement, the following terms have the meanings specified
or
referred to in this Article 1:
“1999
Agreement”—as
defined in Section 3.14(a)(i).
“2001
Agreement”—as
defined in Section 3.14(a)(i).
“2004
and 2005 Balance Sheets”—as
defined in Section 3.4.
“2004
and 2005 Financial Statements”—as
defined in Section 3.4.
“2006
Balance Sheet”—as
defined in Section 3.4.
“2006
Financial Statements”—as
defined in Section 3.4.
“2007
Financial Statements”—the
audited combined balance sheets of HI and certain other related entities
as at
December 30, 2007 and the related audited combined statements of income,
changes
in stockholders’ equity, and cash flow for the fiscal year ended December 30,
2007.
“Acquired
Companies”—as
defined in the Preamble of this Agreement.
“Acquired
Companies Accounting Practices and Procedures”—the
customary accounting methods, policies, practices and procedures, including
classification and estimation methodology, used by the Acquired Companies
in the
preparation of the 2006 Financial Statements.
“Acquired
Companies Initial EBITDA”—
the
sum of the EBITDA for the fiscal year ended December 30, 2007 of each of
the
Acquired Companies, except the New Store, set forth as “Acquired Companies
Initial EBITDA” in Exhibit
J.
“Acquired
Companies Final EBITDA”—the
sum
of the EBITDA for the fiscal year ended December 30, 2007 of each of the
Acquired Companies, except the New Store, as finally determined pursuant
to
Section 2.7(a).
“Acquired
Companies’ Release”—as
defined in Section 2.4(b)(ii)(D).
“Acquisition
Transaction”—as
defined in Section 5.6.
“Adjusted
Percentage Share”—
for
each Seller, the percentage set forth as such Seller’s “Adjusted Percentage
Share” in Exhibit
I.
“Adjustment
Draw”—as
defined in Section 2.8(d).
“Advertising
Assumption Agreement”—as
defined in Section 2.4(a)(ii)(M).
“Affiliate”—of
any
particular Person means any other Person controlling, controlled by or under
common control with such particular Person. For the purposes of this definition,
“control” means the possession, directly or indirectly, of the power to direct
the management and policies of a Person whether through the ownership of
voting
securities, contract or otherwise.
“Aggregate
Purchase Price”—the
amount equal to (a) the Initial Cash Purchase Price, as adjusted by the
adjustments, if any, under Section 2.5 and Section 2.7, plus
(b)
the
Stock Purchase Price, as adjusted by the adjustments, if any, under Section
2.7,
plus
(c) the
New Store Purchase Price.
“Agreement”—as
defined in the Preamble of this Agreement.
“Assumption
Agreement”—as
defined in Section 2.4(a)(ii)(H).
“Authorized
Action”—as
defined in Section 11.3.
“BofA
Agreement”—as
defined in Section 2.4(a)(xii).
“Brandon
Realty”—Brandon
Realty Venture, Inc., a Florida corporation.
“Brandon
Lease Companies”—Hooters
of Aurora, Inc., Hooters of Brandon, Inc., Hooters of Downers Grove, Inc.,
HG,
Hooters of Joliet, Inc., HPRI, Hooters on Roosevelt, Inc. and Hooters of
Spring
Hill, Inc.
“Breach”—means
an inaccurate representation or a breach of a warranty, covenant, obligation,
or
other provision of this Agreement or any certificate of a party to this
Agreement delivered to the other party (or other parties) at the Closing
will be
deemed to have occurred if there is or has been any breach of, or any failure
to
perform or comply with, such warranty, covenant, obligation, or other
provision.
“Buyer”—as
defined in the Preamble of this Agreement.
“Buyer
Indemnified Persons”—as
defined in Section 10.2.
“Buyer’s
Advisors”—as
defined in Section 5.1.
“Buyer’s
EBITDA Objections Statement”—as
defined in Section 2.7(a)(i).
“Buyer’s
EBITDA Statement”—as
defined in Section 2.7(a)(ii).
“Cap”—as
defined in Section 10.7(b).
“Cash
Percentage”—
for
each Seller, the percentage set forth as such Seller’s “Cash Percentage” in
Exhibit
K.
“Chanticleer”—
as
defined in the Preamble of this Agreement.
“Chanticleer
Charter”—as
defined in Section 4.6.
“Chanticleer
Common Stock”—as
defined in Section 2.2(b).
“Chanticleer
Material Adverse Change”—any
change or event that has had, or would reasonably be expected to have,
individually or in the aggregate, an effect materially adverse to the business,
condition (financial or otherwise), or results of operations of Chanticleer
and
its Subsidiaries, taken as a whole; provided, however, that none of the
following shall be deemed to constitute, and none of the following shall
be
taken into account in determining whether there has been, a Chanticleer Material
Adverse Change: any adverse change, event, development, or effect arising
from,
resulting from or relating to (a) general business or economic conditions,
but
only to the extent any such change, event, development, or effect does not
disproportionately impact Chanticleer and its Subsidiaries, (b) conditions
within the industry in which Chanticleer and its Subsidiaries conduct business,
but only to the extent any such change, event, development, or effect does
not
disproportionately impact Chanticleer and its Subsidiaries, (c) national
or
international political or social conditions, including the engagement by
the
United States in hostilities, whether or not pursuant to the declaration
of a
national emergency or war, or any military or terrorist attack upon the United
States, or any of its territories, possessions, or diplomatic or consular
offices or upon any military installation, equipment or personnel of the
United
States and (d) any change in accounting principles, rules or procedures
announced by the Financial Accounting Standards Board.
“Chanticleer
Shares”—as
defined in Section 2.2(b).
“Charity
Commitments”—as
defined in Section 5.9.
“Closing”—as
defined in Section 2.3(a).
“Closing
Date”—as
defined in Section 2.3(a).
“Code”—the
Internal Revenue Code of 1986, as amended, and regulations and rules issued
pursuant to that Code or any successor law.
“Consent”—any
approval, consent, ratification, waiver, notice, or other authorization
(including any Governmental Authorization).
“Consulting
Termination Agreement”—the
Agreement of Termination, dated as of April 23, 2007, by and among Edward
Droste, the Acquired Companies and certain Affiliates of the Acquired Companies.
“Contemplated
Transactions”—the
following transactions contemplated by this Agreement:
(a)
the
sale
of the Shares by Sellers to Buyer or HI, and the purchase of such Shares
by
Buyer or HI, as specified in this Agreement;
(b)
the
receipt and ownership of shares of Chanticleer Common Stock by Option 1 Sellers
under the terms of this Agreement; and
(c)
the
execution, delivery, and performance of the Lease Agreements, the Noncompetition
Agreements, the Employment Agreements, the Assumption Agreement, the Advertising
Assumption Agreement, the Marketing Services Agreement and the Transition
Services Agreement.
“Contract”—any
agreement, contract, license, sublicense, covenant not to compete, exclusivity
arrangement, obligation, promise, or undertaking (whether written or oral
and
whether express or implied) (a) that is legally binding on any of the Acquired
Companies, (b) under which any Acquired Company has or may acquire or license
any rights, (c) under which any Acquired Company has or may become subject
to
any obligation or liability, or (d) by which any Acquired Company or any
of the
assets owned, licensed or used by it is or may become bound.
“Damages”—as
defined in Section 10.2.
“Deductible”—as
defined in Section 10.7(a).
“Di
Giannantonio Revocable Trust”—in
the
case of (a) Gilbert Di Giannantonio, the Gilbert Di Giannantonio Revocable
Trust
dated October 30, 1997 (as amended), FBO Gilbert Di Giannantonio, of which
Gilbert Di Giannantonio and Paulette Di Giannantonio are co-trustees, or
(b)
Paulette Di Giannantonio, the Paulette Di Giannantonio Revocable Trust dated
October 30, 1997 (as amended), FBO Paulette Di Giannantonio, of which Paulette
Di Giannantonio is trustee.
“Disclosure
Schedule”—the
disclosure schedule attached to this Agreement. When
the
term “Disclosure Schedule” is used in reference to a Seller or Sellers, it shall
mean the Disclosure Schedule that pertains to Article 3 of this Agreement,
and
when such term is used in reference to Buyer, it shall mean the Disclosure
Schedule that pertains to Article 4 of this Agreement.
“Dispute
Independent Auditor”—as
defined in Section 2.5(a).
“EBITDA”—the
earnings before interest expense, income tax, depreciation and amortization,
with the adjustments set forth in Exhibit
D.
“EBITDA
Adjustment Amount”—as
defined in Section 2.7(c).
“EBITDA
Deficiency Adjustment Amount”—as
defined in Section 2.7(b)
“EBITDA
Excess Adjustment Amount”—as
defined in Section 2.7(b)
“EBITDA
Multiple”—for
each Seller, the number set forth opposite such Seller’s name in Exhibit
H.
“Edward
Droste Release”—as
defined in Section 2.4(a)(vii).
“Employment
Agreements”—as
defined in Section 7.10.
“Encumbrance”—any
charge, claim, community property interest, equitable interest, lien, option,
pledge, security interest, mortgage, challenge to title, chain of title defect,
revocation right, termination right, reversionary interest, reservation of
rights, right of first or last negotiation, refusal or offer, or restriction
of
any kind, including any restriction on use, voting, transfer, receipt of
royalties, fees or other income, or exercise of any other attribute of
ownership.
“Environment”—soil,
land surface or subsurface strata, surface waters (including navigable waters,
ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life, and any other environmental medium or natural
resource.
“Environmental
Law”—any
Legal Requirement that requires or relates to:
(a)
protecting
human health;
(b)
advising
appropriate authorities, employees, and the public of intended or actual
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have significant
impact
on the Environment;
(c)
preventing
or reducing to acceptable levels the release of pollutants or hazardous
substances or materials into the Environment;
(d)
reducing
the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(e)
assuring
that products are designed, formulated, packaged, and used so that they do
not
present unreasonable risks to human health or the Environment when used or
disposed of;
(f)
protecting
resources, species, or ecological amenities;
(g)
reducing
to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil, or other potentially harmful
substances;
(h)
cleaning
up pollutants that have been released, preventing the threat of release,
or
paying the costs of such clean up or prevention; or
(i)
making
responsible parties pay private parties, or groups of them, for damages done
to
their health or the Environment, or permitting self-appointed representatives
of
the public interest to recover for injuries done to public assets.
“Environmental
Permits”—all
Governmental Authorizations pursuant to Environmental Laws.
“Environmental,
Health, and Safety Liabilities”—any
cost, damages, expense, liability, obligation, or other responsibility arising
from or under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a)
any
environmental, health, or safety matters or conditions (including on-site
or
off-site contamination, occupational safety and health, and regulation of
chemical substances or products);
(b)
fines,
penalties, judgments, awards, settlements, legal or administrative proceedings,
damages, losses, claims, demands and response, investigative, remedial, or
inspection costs and expenses arising under Environmental Law or Occupational
Safety and Health Law;
(c)
financial
responsibility under Environmental Law or Occupational Safety and Health
Law for
cleanup costs or corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response actions (“Cleanup”)
required by applicable Environmental Law or Occupational Safety and Health
Law
(whether or not such Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource damages; or
(d)
any
other
compliance, corrective, investigative, or remedial measures required under
Environmental Law or Occupational Safety and Health Law.
The
terms
“removal,” “remedial,” and “response action,” include the types of activities
covered by the United States Comprehensive Environmental Response, Compensation,
and Liability Act, 42 U.S.C. § 9601 et seq., as amended.
“ERISA”—as
defined in Section 3.10(a).
“ERISA
Affiliate”—as
defined in Section 3.10(f).
“Estimated
Net Working Capital”—as
defined in Section 2.1(a).
“Estimated
New Store Purchase Price”—as
defined in Section 2.6(a).
“Exchange
Act”—the
Securities Exchange Act of 1934, as amended, and regulations and rules issued
pursuant to that act or any successor law.
“Facilities”—any
real property, leaseholds, or other interests owned or operated by any Acquired
Company and any buildings, plants, structures, or equipment (including motor
vehicles) owned or operated by any Acquired Company.
“Final
Allocation”—as
defined in Section 10.10(h)(iii).
“Financial
Statements”—as
defined in Section 3.4.
“Financing”—as
defined in Section 7.8.
“GAAP”—generally
accepted United States accounting principles, applied on a basis consistent
with
the basis on which the 2006 Financial Statements were prepared.
“Governmental
Authorizations”—all:
permits;
licenses
(including, but not limited to, licenses to sell alcoholic
beverages);
authorizations;
and
approvals;
issued
by
any Governmental Bodies.
“Governmental
Body”—any
federal, state, local, municipal or other government (including any governmental
division, subdivision, department, agency, authority, bureau, branch, office,
commission, council, board, instrumentality, official, representative,
organization, unit, body, or entity).
“Hazardous
Activity”—the
distribution, generation, handling, importing, management, manufacturing,
processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of groundwater)
of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act, business, operation, or thing
that increases the danger, or risk of danger, or poses an unreasonable risk
of
harm to persons or property on or off the Facilities, or that may materially
adversely affect the value of the Facilities or the Acquired
Companies.
“Hazardous
Materials”—any
waste or other substance that is listed, defined, designated, or classified
as,
or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant
or a contaminant under or pursuant to any Environmental Law, including any
admixture or solution thereof, and specifically including petroleum and all
derivatives thereof or synthetic substitutes therefor and asbestos or
asbestos-containing materials.
“HG”—Hooters
on Golf, Inc., a Florida corporation.
“HG
Shares”—all
of
the issued and outstanding shares of capital stock of HG.
“HGHC”—Hooters
on Golf Holding Co., a Florida corporation.
“HGLC”—Hooters
on Golf Land Co., a Florida corporation.
“HI”—as
defined in the Preamble of this Agreement.
“HI
Acquisition”—as
defined in Section 2.2(a).
“HI
Limited Partnership”—HI
Limited Partnership, a Florida limited partnership.
“HI
Shares”—all
of
the issued and outstanding shares of capital stock of HI.
“HMC”—Hooters
Management Corporation, a Florida corporation.
“HMC
Shares”—all
of
the issued and outstanding shares of capital stock of HMC.
“HMHC”—Hooters
Management Holding Co., a Florida corporation.
“HMLC”—Hooters
Management Land Co., a Florida corporation.
“HOA”—as
defined in Section 3.14(a)(i).
“HOA
Agreements”—as
defined in Section 3.14(a)(i).
“HOA
Acquisition Transaction”—any
transaction involving the acquisition of a substantial portion of the business,
assets or capital stock of HOA or its material Subsidiaries, or any merger,
consolidation, business combination, or similar transaction involving HOA
or its
material Subsidiaries.
“Hooters
Trademarks”—the
trademarks and service marks listed in Exhibit
F.
“HPRI”—Hooters
of Port Richey, Inc., a Florida corporation.
“HPRI
Dock Landlord”—as
defined in Section 2.4(a)(xi).
“HPRI
Dock Lease”—as
defined in Section 2.4(a)(xi).
“Illinois
Land Trust”—Trust
Number 3386, an Illinois Land Trust.
“Indebtedness”—without
duplication, (a) obligations created, issued, or incurred by an Acquired
Company
for borrowed money (whether by loan, the issuance and sale of debt securities,
or the sale of property to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such property from such
Person
and including all accrued interest and any termination fees or prepayment
penalties); (b) obligations of an Acquired Company to pay the deferred purchase
or acquisition price of property, other than trade accounts payable (other
than
for borrowed money) arising, and accrued expenses incurred, in the Ordinary
Course of Business; (c) indebtedness of others secured by a lien on the property
of an Acquired Company, whether or not the indebtedness so secured has been
assumed by such Acquired Company, excluding, if such Acquired Company is
the
lessee of property (whether pursuant to an operating lease or capital lease),
liens on such property securing indebtedness of the lessor; (d) amounts drawn
on
letters of credit, surety bonds or similar obligations of an Acquired Company
and not repaid to the issuer of the letter of credit, surety bond or similar
obligation as of or immediately prior to the Closing; (e) capital lease
obligations of an Acquired Company; and (f) indebtedness of others guaranteed
by
such Person to the extent of the amount of such indebtedness that such Person
has agreed to guarantee; provided, however, that Indebtedness shall not include
any items assumed under the Assumption Agreement.
“Indebtedness
Payoff Amount”—the
amount required to repay all Indebtedness of the Acquired Companies outstanding
as of immediately prior to the Closing.
“Independent
Auditor”—as
defined in Section 3.4.
“Initial
Adjustment Amount”—as
defined in Section 2.1(b).
“Initial
Cash Purchase Price”—the
total amount of cash to be paid to the Sellers under Section
2.2(b)(i).
“Initial
Payment Certificate”—as
defined in Section 2.1(a).
“Intellectual
Property”—all
of
the following in any jurisdiction throughout the world: (a) all patents;
(b) all
trademarks, service marks, trade dress, logos, slogans, trade names, together
with all applications, registrations, and renewals in connection therewith;
(c)
all corporate names; (d) all Internet domain names and website addresses;
(e)
all rights to telephone numbers; (f) all copyrightable works, all copyrights,
and all applications, registrations, and renewals in connection therewith;
(g)
all trade secrets and confidential business information (not including any
trade
secrets or confidential business information that has become publicly known,
or
generally known within the restaurant industry or any segment of the restaurant
industry, or known by any competitor of any of the Acquired Companies without
an
express disclosure of such trade secret or information by any of the Acquired
Companies); (h) all rights to use the names and likenesses of natural persons
and so called “publicity rights”; and (i) all computer software (including data
and related documentation).
“Interim
Balance Sheet”—as
defined in Section 3.4.
“Interim
Financial Statements”—as
defined in Section 3.4.
“Investment
Company Act”—the
Investment Company Act of 1940, as amended, and regulations and rules issued
pursuant to that act or any successor law.
“IRS”—the
United States Internal Revenue Service or any successor agency, and, to the
extent relevant, the United States Department of the Treasury.
“Knowledge”—
(a)
A
Seller
will be deemed to have “Knowledge” of a particular fact or other matter if such
individual is a director of any Acquired Company and is actually aware of
such
fact or other matter.
(b)
The
Acquired Companies will be deemed to have “Knowledge” of a particular fact or
other matter if Neil Kiefer or Bruce Clark is actually aware of such fact
or
other matter or if Neil Kiefer or Bruce Clark could be expected to discover
or
otherwise become aware of such fact or other matter if Neil Kiefer or Bruce
Clark, acting within the scope of his duties to the Acquired Companies, had
conducted a reasonable investigation within the Acquired Companies concerning
the existence of such fact or other matter (taking into account, in determining
whether a reasonable investigation has been made, the nature and size of
the
Acquired Companies and the customary reporting relationships within the Acquired
Companies).
“Lease
Agreements”—as
defined in Section 2.4(a)(iv).
“Legal
Requirement”—any
federal, state, local, municipal, foreign, international, multinational,
or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, rule, statute, or treaty.
“Letter
of Credit”—as
defined in Section 2.8.
“license”—license
or sublicense, whether or not capitalized.
“Marketing
Services Agreement”—as
defined in Section 2.4(c).
“Material
Adverse Change”—any
change or event that has had, or would reasonably be expected to have,
individually or in the aggregate, an effect materially adverse to the business,
condition (financial or otherwise), or results of operations of the Acquired
Companies, taken as a whole, or on the ability of any of the Acquired Companies
or Sellers to consummate the Contemplated Transactions or to perform any
of
their respective material obligations under this Agreement or other transaction
documents with respect to this Agreement; provided, however, that none of
the
following shall be deemed to constitute, and none of the following shall
be
taken into account in determining whether there has been, a Material Adverse
Change: any adverse change, event, development, or effect arising from,
resulting from or relating to (a) general business or economic conditions,
but
only to the extent any such change, event, development, or effect does not
disproportionately impact the Acquired Companies, (b) conditions within the
industry in which the Acquired Companies conduct business, but only to the
extent any such change, event, development, or effect does not
disproportionately impact the Acquired Companies, (c) national or international
political or social conditions, including the engagement by the United States
in
hostilities, whether or not pursuant to the declaration of a national emergency
or war, or any military or terrorist attack upon the United States, or any
of
its territories, possessions, or diplomatic or consular offices or upon any
military installation, equipment or personnel of the United States and (d)
any
change in accounting principles, rules or procedures announced by the Financial
Accounting Standards Board.
“Multiemployer
Plan”—as
defined in Section 3.10(f).
“Net
Working Capital”— the
result of (i) the sum of all current assets of the Acquired Companies (excluding
any assets assigned under the Assumption Agreement), minus (ii) the sum of
all
current liabilities (excluding Indebtedness and the items assumed under the
Assumption Agreement) of the Acquired Companies, in each case determined
in
accordance with GAAP applied on a basis consistent with the Acquired Companies
Accounting Practices and Procedures, as adjusted to remove those items which
as
a result of the consummation of the transactions contemplated by this Agreement
would not be included as a current asset or current liability on the
consolidated balance sheet of Buyer and its Subsidiaries immediately after
the
Closing. For the avoidance of doubt, the Sellers’ Expenses shall not be deemed
to be a current liability of the Acquired Companies.
“Net
Working Capital Adjustment Amount”—as
defined in Section 2.5(c).
“Net
Working Capital Objections Statement”—as
defined in Section 2.5(a).
“Net
Working Capital Statement”—as
defined in Section 2.5(a).
“New
Store”—the
Restaurant owned and operated by Hooters of Melrose Park, Inc. pursuant to
a
valid and enforceable license to use the Hooters Trademarks and operate it
as a
Hooters restaurant.
“New
Store Adjusted Percentage Share”—
for
each Seller, the percentage set forth as such Seller’s “New Store Adjusted
Percentage Share” in Exhibit
E.
“New
Store End Date”—the
last day of the New Store Period.
“New
Store Objections Statement”—as
defined in Section 2.6(a).
“New
Store Payment”—as
defined in Section 2.6(b).
“New
Store Period”—the
first
13 full four week reporting periods completed after the New Store first opened
for business to the public.
“New
Store Purchase Price”—the
amount equal to the product of (a) the New Store Weighted Average EBITDA
Multiple, multiplied
by
(b) the
New Store’s EBITDA for the New Store Period.
“New
Store Statement”—as
defined in Section 2.6(a).
“New
Store Weighted Average EBITDA Multiple”—the
number set forth as “New Store Weighted Average EBITDA Multiple” in Exhibit
L.
“Noncompetition
Agreements”—as
defined in Section 2.4(a)(i)(C).
“Occupational
Safety and Health Law”—any
Legal Requirement designed to provide safe and healthful working conditions
and
to reduce occupational safety and health hazards.
“Option
1 Seller”—a
Seller that will receive cash consideration and Chanticleer Common Stock
consideration in accordance with Exhibit
2.2(b)(ii).
“Option
2 Seller”—a
Seller that will receive only cash consideration in accordance with Exhibit
2.2(b)(ii).
“Order”—any
award, decision, injunction, judgment, order, ruling, or verdict entered,
issued, made, or rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator and any settlement or agreement which
the
parties thereto have agreed shall be administered or enforced by a court
or
arbitral body.
“Ordinary
Course of Business”—an
action taken by a Person will be deemed to have been taken in the “Ordinary
Course of Business” only if such action is consistent with the past practices of
such Person and is taken in the ordinary course of the normal operations
of such
Person.
“Organizational
Documents”—(a)
the
articles or certificate of incorporation and the bylaws of a corporation;
(b)
the limited partnership agreement and the certificate of limited partnership
of
a limited partnership; and (c) any amendment to any of the
foregoing.
“Ownership
Interests”—the
Shares and the Partnership Interests.
“Partnership
Interests”—the
partnership interests of Hooters of Manhattan, Ltd.
“Percentage
Share”—for
each Seller, the percentage set forth as such Seller’s “Percentage Share” in
Exhibit
G.
“Permitted
Encumbrances”—as
defined in Section 3.6.
“Person”—any
individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, organization,
or
other entity (but not including a Governmental Body).
“Proceeding”—any
action, arbitration, audit, hearing, investigation, mediation, suit or other
litigation (whether civil, criminal, administrative or investigative) commenced,
brought, conducted, or heard by or before, or otherwise involving, any
Governmental Body, court, arbitrator or mediator.
“Proposed
Allocation”—as
defined in Section 10.10(h)(iii).
“Proprietary
Rights Agreement”—as
defined in Section 3.17(b).
“Ranieri
Revocable Trust”—in
the
case of (a) Eleanor Ranieri, the Eleanor Ranieri Revocable Living Trust dated
December 19, 1991 (as amended), of which Eleanor Ranieri and William Ranieri
are
co-trustees, or (b) William Ranieri, the William R. Ranieri Revocable Living
Trust dated December 19, 1991 (as amended), of which Eleanor Ranieri and
William
Ranieri are co-trustees.
“Related
Person”—any
member of an individual’s immediate family or Affiliate thereof.
“Release”—any
spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, or other releasing into the Environment, whether intentional or
unintentional.
“Remaining
Companies Acquisition”—as
defined in Section 2.2(a).
“Remaining
Companies Interests”—all
of
the Shares (other than the issued and outstanding shares of capital stock
of
HI).
“Representative”—with
respect to a particular Person, any director, officer, employee, agent,
consultant, advisor, or other representative of such Person, including legal
counsel, accountants, prospective lenders, and financial advisors.
“Required
Financial Information”—as
defined in Section 5.11.
“Restaurants”—the
restaurants operated by the Acquired Companies or an Affiliate of the Acquired
Companies.
“Sale
Bonus Payment Releases”—as
defined in Section 7.11.
“Sale
Bonus Payments”—amounts
owed to each of Neil Kiefer, Bruce Clark and Sal Melilli under his Sale
Participation Agreement.
“Sale
Participation Agreement”—
in
the
case of (a) Neil Kiefer, an Amended and Restated Sale Participation Agreement,
dated October 13, 1999, by and among, inter alia, HMC and Neil Kiefer, (b)
Bruce
Clark, an Amended and Restated Sale Participation Agreement, dated October
13,
1999, by and among, inter alia, HMC and Bruce Clark, or (c) Sal Melilli,
a Sale
Participation Agreement, dated September 12, 2006, by and among, inter alia,
HMC
and Sal Melilli.
“SEC”—the
Securities and Exchange Commission.
“Section
338 Allocation Forms”—as
defined in Section 10.10(h)(iii).
“Section
338 Election Forms”—as
defined in Section 10.10(h)(ii).
“Section
338 Elections”—as
defined in Section 10.10(h)(i).
“Securities
Act”—the
Securities Act of 1933, as amended, and regulations and rules issued pursuant
to
that act or any successor law.
“Seller(s)”—as
defined in the Preamble of this Agreement.
“Seller
Indemnified Persons”—as
defined in Section 10.4.
“Seller
Individual Representations”—as
defined in Article 3.
“Seller
Representative”—as
defined in the Preamble of this Agreement.
“Seller
Revocable Trust”—in
the
case of (a) Gilbert Di Giannantonio, his Di Giannantonio Revocable Trust,
(b)
Paulette Di Giannantonio, her Di Giannantonio Revocable Trust, (c) Susan
G.
Johnson, The Susan G. Johnson Revocable Living Trust dated September 7, 2006,
of
which Susan G. Johnson is trustee, (d) Eleanor Ranieri, her Ranieri Revocable
Trust, or (e) William Ranieri, his Ranieri Revocable Trust.
“Sellers’
Closing Documents”—as
defined in Section 3.2(a).
“Sellers’
EBITDA Objections Statement”—as
defined in Section 2.7(a)(ii).
“Sellers’
EBITDA Statement”—as
defined in Section 2.7(a)(i).
“Sellers’
Expenses”—all
fees and expenses payable to the Acquired Companies’ and Sellers’ advisors in
connection with the transactions contemplated by this Agreement, in each
case to
the extent unpaid as of the Closing Date.
“Sellers
Fundamental Representation(s)”—as
defined in Section 10.6.
“Seller’s
Release”—as
defined in Section 2.4(a)(i)(B).
“Serviced
Companies”—Brandon
Realty, BWC LP Co., Florida Hooters LLC, Hampton Road Development LLP, HG
Casino
Management Inc., Hooters Foods, Inc., Hooters Gaming Corporation, Hooters
Gaming
LLC, Hooters of Palm Harbor, Inc., Hooters of Staten Island Ltd., Hooters
of
Staten Island, Inc., Hooters of Vernon Hills, Inc., Illinois Land Trust,
Moes of
Oakbrook, LLC, NGK LP Co., Pete & Shorty’s of Clearwater, Inc., Pete &
Shorty’s, Inc., Southwest Grill Development, LLC, HGHC, HGLC, HMHC and
HMLC.
“Shareholders
Agreement”—the
Amended and Restated Shareholders Agreement dated as of May 20, 1994, by
and
among William and Eleanor Ranieri, Gilbert and Paulette Di Giannantonio,
Dennis
and Susan Johnson, Edward Droste and Pamela Blakely.
“Shares”—as
defined in the Recitals of this Agreement.
“Stock
Percentage”—
for
each Seller, the percentage set forth as such Seller’s “Stock Percentage” in
Exhibit
K.
“Stock
Purchase Price”—the
value of Chanticleer Shares to be paid to the Sellers under Section 2.2(b)(ii).
“Straddle
Period”—as
defined in Section 10.10(a).
“Subsidiary”—with
respect to any Person (the “Owner”),
any
corporation or other Person of which securities or other interests having
the
power to elect a majority or plurality of that corporation’s or other Person’s
board of directors or similar governing body, or otherwise having the power
to
direct the business and policies of that corporation or other Person are
held by
the Owner or one or more of its Subsidiaries.
“Tail
Letter of Credit”—as
defined in Section 2.8(a).
“Target
Benefit Plan”—as
defined in Section 3.10(a).
“Target
Net Working Capital”—means
$1,082,000.
“Tax”—any
and
all taxes, including, without limitation: (a) any net income, alternative
or
add-on minimum, gross income, gross receipts, sales, use, ad valorem, value
added, transfer, franchise, profits, license, registration, recording,
documentary, conveyancing, gains, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, environmental or windfall
profit, custom duty or other tax, governmental fee or other like assessment
or
charge of any kind whatsoever, together with any interest, penalty, addition
to
tax or additional amount imposed by any Governmental Body responsible for
the
imposition of any such tax (United States (federal, state or local) or foreign);
(b) in the case of any Acquired Company, liability for the payment of any
amount
described in clause (a) as a result of being or having been before the date
hereof a member of an affiliated, consolidated, combined or unitary group;
and
(c) liability for the payment of any amounts of the type described in clause
(a)
as a result of being party to any agreement or any express or implied obligation
to indemnify any other Person.
“Tax
Claim”—as
defined in Section 10.10(e).
“Tax
Indemnification Agreement”—the
Tax
Indemnification Agreement dated as of April 23, 2007, by and among Edward
Droste, the Acquired Companies and certain Affiliates of the Acquired Companies.
“Tax
Period”—any
period prescribed by any Governmental Body for which a Tax Return is required
to
be filed or a Tax is required to be paid.
“Tax
Return”—any
return, report, information return, or other document (including schedules
thereto, other attachments thereto, amendments thereof, or any related or
supporting information) filed or required to be filed with any taxing authority
in connection with the determination, assessment, or collection of any Tax
or
the administration of any laws, regulations, or administrative requirements
relating to any Tax.
“Threat
of Release”—a
substantial likelihood of a Release that may require action in order to prevent
or mitigate damage to the Environment that may result from such
Release.
“Threatened”—a
claim, Proceeding, dispute, action, or other matter will be deemed to have
been
“Threatened” against a Person if, to the Knowledge of Sellers and the Acquired
Companies, any demand, statement or notice in the nature of a threat of a claim
or Proceeding has been made in writing or, to the actual knowledge of Neil
Kiefer or Bruce Clark, with no duty to investigate, orally.
“Transition
Services Agreement”—as
defined in Section 2.4(a)(ii)(F).
“Wachovia
Agreement”—as
defined in Section 2.4(a)(xiii).
SALE
AND TRANSFER OF SHARES; CLOSING
Delivery
of Estimate; Calculation of Initial Adjustment Amount
Not
later
than two (2) business days prior to the Closing Date, the Acquired Companies
shall deliver to Buyer a certificate (the “Initial
Payment Certificate”)
setting forth (i) a good faith estimate of the Net Working Capital as of 11:59
p.m. Tampa, Florida time on the day immediately preceding the Closing Date
(such
estimate is referred to as the “Estimated
Net Working Capital”),
(ii)
the Indebtedness Payoff Amount, (iii) the Sellers’ Expenses, and (iv) the Sale
Bonus Payments.
For
purposes hereof, the “Initial
Adjustment Amount”
means
an amount equal to (A) the amount, if any, by which the Estimated Net Working
Capital exceeds the Target Net Working Capital, minus
(B) the
amount, if any, by which the Target Net Working Capital exceeds the Estimated
Net Working Capital, minus
(C) the
Sellers’ Expenses, minus
(D) the
Indebtedness Payoff Amount.
Purchase
and Sale of Shares
At
the
Closing, upon the terms and subject to the conditions set forth in this
Agreement, (i) each Seller shall sell, assign and transfer to Buyer, and Buyer
shall purchase and acquire from each such Seller, all of the HI Shares held
by
such Seller as such ownership is set forth in Exhibit
2.2(a)
(the
“HI
Acquisition”)
(ii)
immediately following the HI Acquisition, each Seller shall sell, assign,
transfer, and convey to HI, and HI shall purchase and acquire from each such
Seller, and Buyer shall cause HI to purchase
and acquire from each Seller, all of the Remaining Companies Interests (other
than the HG Shares and HMC Shares) held by such Seller as such ownership is
set
forth in Exhibit
2.2(a)
and
(iii) immediately following the HI Acquisition, Sellers shall cause HGHC to
sell, assign, transfer, and convey to HI, and HI shall purchase and acquire
from
HGHC, the HG Shares, and (iv) immediately following the HI Acquisition, Sellers
shall cause HMHC to sell, assign, transfer, and convey to HI, and HI shall
purchase and acquire from HMHC, the HMC Shares (the acquisition of shares of
capital stock being described in subsections (ii),(iii) and (iv) above being
collectively called the “Remaining
Companies Acquisition”).
Buyer
agrees to pay the Aggregate Purchase Price to Sellers for the Shares in
accordance with the terms of this Agreement.
At
the
Closing, Buyer shall pay (i) to each Seller, by wire transfer of immediately
available funds to the account designated by such Seller, the sum of (x) the
amount of cash set forth opposite such Seller’s name in the “Amount of Cash”
column of Exhibit
2.2(b)(ii)
and (y)
the
product of the Initial Adjustment Amount (which may be a positive or negative
amount or zero), multiplied
by such
Seller’s Adjusted Percentage Share and (ii) to each Option 1 Seller, the number
of shares of common stock of Chanticleer, par value $0.0001 per share
(“Chanticleer
Common Stock”),
set
forth opposite such Seller’s name in the “Number of Shares of Chanticleer Common
Stock” column of Exhibit
2.2(b)(ii) (the
“Chanticleer
Shares”).
Buyer
and the Seller Representative shall complete the “Number of Shares of
Chanticleer Common Stock” column of Exhibit
2.2(b)(ii)
at or
prior to the Closing. For purposes of this Section 2.2(b) and Exhibit
2.2(b)(ii),
the
value of each share of Chanticleer Common Stock shall be the cash purchase
price
per share of Chanticleer Common Stock paid by each equity investor in connection
with the Financing (irrespective of any warrants exercisable for Chanticleer
Common Stock issued to the purchasers of Chanticleer Common Stock in connection
with the Financing); provided that if Chanticleer or any of its Affiliates
enters into an HOA Acquisition Transaction or publicly announces the execution
of a letter of intent relating thereto prior to Closing, such value shall not
exceed $7.00 per share after giving effect to a 10 for 1 reverse stock split
of
the Chanticleer Common Stock. Any warrants issued to the purchasers of
Chanticleer Common Stock in connection with the Financing as of the Closing
shall have an exercise price per share not less than the cash purchase price
per
share of Chanticleer Common Stock paid by each equity investor in connection
with the Financing, subject to customary adjustments for stock splits, stock
dividends, combinations, recapitalizations and the like.
The
Closing
Subject
to the terms and conditions of this Agreement, the closing of the transactions
contemplated by this Agreement (the “Closing”)
shall
take place at the offices of HMC, 107 Hampton Road, Suite 200, Clearwater,
FL
33759, at 9:00 am local time on the second business day following satisfaction
or waiver of all of the closing conditions set forth in Articles 7 and 8 (other
than those to be satisfied at the Closing) or at such other location and on
such
other date as is mutually agreed to by Buyer and Sellers. The date on which
the
Closing shall occur is referred to herein as the “Closing
Date.”
Closing
Obligations
Obligations
of Sellers at Closing:
each
Seller will deliver to Buyer:
the
certificate(s) representing all of the shares of capital stock of HI held by
such Seller duly endorsed for transfer or accompanied by appropriate transfer
documents;
a
release in the form of Exhibit
2.4(a)(i)(B)
executed by each Seller (the “Seller’s
Release”);
a
noncompetition agreement in the form of Exhibit
2.4(a)(i)(C)
executed by each Seller (all of such noncompetition agreements being
collectively called the “Noncompetition
Agreements”);
Sellers
will deliver to Buyer:
the
executed Letter of Credit;
a
termination of the Shareholders Agreement and a waiver of any prohibitions
or
restrictions on the transfer of the Shares to Buyer under the terms of this
Agreement, each executed by each Seller;
executed
Section 338 Election Forms;
evidence
to Buyer that notices executed by each Seller have been given to each charity
listed in Exhibit
2.4(a)(ii)(D)
stating that Sellers assume the respective monetary charity commitments listed
in Exhibit
2.4(a)(ii)(D)
in form and substance reasonably satisfactory to Buyer, which notices shall
be
in full force and effect as of the Closing;
a
form of notice to the IRS in accordance with the requirements of Treasury
Regulations Section 1.1445-2(b)(2) executed by each Seller and in form and
substance reasonably acceptable to Buyer, along with written authorization
for
Buyer to deliver such notice form to the IRS on behalf of the Acquired
Companies;
a
transition services agreement, in the form of Exhibit
2.4(a)(ii)(F)
executed by each of the Serviced Companies, under which Buyer will provide
certain services to the Serviced Companies under the terms of such agreement
(the “Transition
Services Agreement”);
evidence
to Buyer (1) of the receipt of Consents to the consummation of the Contemplated
Transactions from the parties listed in Sections 3.2(c) and 3.2(d) of the
Disclosure Schedule except to the extent that the terms of Sections 3.2(c)
and
3.2(d) of the Disclosure Schedule
expressly provide that such Consents shall not be obtained by the Acquired
Companies at or prior to the Closing; and (2) that notices of the consummation
of the Contemplated Transactions have been given to the parties listed in
Sections 3.2(c) and 3.2(d) of the Disclosure Schedule except to the extent
that
Sections 3.2(c) and 3.2(d) of the Disclosure Schedule expressly provide that
such notices will not be given by the Acquired Companies at or prior to the
Closing;
an
assignment and assumption agreement in the form of Exhibit
2.4(a)(ii)(H)
executed by each Seller (the “Assumption
Agreement”)
under which the Acquired Companies shall assign to Sellers, and Sellers shall
assume and agree to hold Buyer and the Acquired Companies harmless against
(1)
the suite lease at Raymond James Stadium, the security deposits therefor and
the
season tickets for the Tampa Bay Buccaneers relating thereto; (2) the
obligations of any one or more of the Acquired Companies under the Consulting
Termination Agreement and the Tax Indemnification Agreement; (3) the Charity
Commitments; and (4) certain worker’s compensation insurance policies and
programs;
(i)
replacement letters of credit for, (ii) evidence of the cash collateralization
of or (iii) assignment to a Person other than an Acquired Company of, those
letters of credit listed in Exhibit
2.4(a)(ii)(I)
and, in each case, an agreement to irrevocably release the account parties
thereunder and to terminate all such letters of credit from the letter of credit
beneficiary thereunder on terms satisfactory to Buyer;
a
memorandum of lease relating to the leased real property of each Brandon Lease
Company Restaurant substantially in the form of Exhibit
2.4(a)(ii)(J);
a
Sellers real estate certificate relating to the leased real property of each
Restaurant in the form of Exhibit
2.4(a)(ii)(K);
a
certificate evidencing the accuracy of the representations and warranties set
forth in Article 3 in the form of Exhibit
2.4(a)(ii)(L);
and
an
assignment and assumption agreement in the form of Exhibit 2.4(a)(ii)(M)
executed by HMC (the “Advertising
Assumption Agreement”)
under which Hooters-on-Location, Inc. and Provident Advertising & Marketing,
Inc. assign to HMC, and HMC assumes and agrees to perform (or caused to be
performed) and to hold Hooters-on-Location, Inc. and Provident Advertising
&
Marketing, Inc. harmless against, the agreements listed in Exhibit 2.4(a)(ii)(M)
that
were entered into by Hooters-on-Location, Inc. or Provident Advertising &
Marketing, Inc. (or an Affiliate of either) for the benefit of the Acquired
Companies; and
(A)
each Seller will deliver to HI certificates, if any, representing the Remaining
Companies Interests held directly by such Seller in the Acquired Companies
that
are corporations (except HG and HMC), (B) Sellers who are
shareholders of HGHC will cause HGHC to deliver to HI certificates, if any,
representing the HG Shares, and (C) Sellers who are shareholders of HMHC will
cause HMHC to deliver to HI certificates, if any, representing the HMC Shares,
in each case duly endorsed (or accompanied by duly executed stock powers) for
transfer to HI;
Sellers
shall cause Brandon Realty, HGLC or HMLC, as the case may be, as landlord,
to
execute and deliver to Buyer a lease agreement between such landlord and the
applicable Brandon Lease Company, as tenant, substantially in the form attached
to this Agreement as Exhibit
2.4(a)(iv)
(the “Lease
Agreements”);
the rental amounts for each of the applicable Brandon Lease Companies are
attached to Exhibit
2.4(a)(iv);
Sellers
shall cause the Illinois Land Trust, HG and HMC to distribute or otherwise
transfer the real properties listed in Exhibit
2.4(a)(v) to
HGLC and HMLC, respectively, as provided in Exhibit
2.4(a)(v),
and shall take all other necessary actions such that the combined balance sheet
of the Acquired Companies as of the Closing Date shall not be required to
include such real property or any Encumbrances that constitute a lien on such
real property, and all Indebtedness with respect to such real properties shall
be paid off in full by the Acquired Companies or re-financed by Sellers so
that
such Indebtedness is no longer an obligation of any of the Acquired
Companies;
Sellers
shall have caused the Acquired Companies to pay the Sale Bonus Payments at
or
prior to the Closing;
Edward
Droste shall have executed and delivered to the Acquired Companies a release
of
all obligations of the Acquired Companies under the Consulting Termination
Agreement and the Tax Indemnification Agreement in the form of
Exhibit 2.4(a)(vii) (the “Edward Droste
Release”);
Sellers
shall deliver a subordination and non-disturbance agreement for each Lease
Agreement, executed by Brandon Realty, HGLC, or HMLC, as the case may
be, Wachovia Bank, N.A. and the respective Brandon Lease Companies
substantially
in the form of Exhibit
2.4(a)(viii);
Edward
Droste shall make a capital contribution totaling Two Hundred Ninety Seven
Thousand One Hundred Eighty Nine Dollars ($297,189) to HI, pursuant to the
Consulting Termination Agreement, for the benefit of HI and such other Acquired
Companies to which Edward Droste is required to make such capital contribution
under the Consulting Termination Agreement. Such amount shall be included as
a
current asset of the Acquired Companies for purposes of determining the Net
Working Capital unless otherwise included in such determination as cash;
Sellers
shall have caused the Acquired Companies, at or prior to Closing, to terminate
and satisfy all outstanding obligations under each of (i) the Amended and
Restated Executive Retirement Bonus Agreement with Neil G. Kiefer, dated October
13, 1999, (ii) the Amended and Restated Executive Retirement Bonus Agreement
with Bruce W. Clark, dated October 13, 1999, and (iii) the Executive Retirement
Bonus Agreement with Salvatore Melilli, dated September 12, 2006;
Sellers
and the Acquired Companies shall use their commercially reasonable efforts
to
attempt to obtain the consent of the Board of Trustees of the Internal
Improvement Trust Fund of the State of Florida (the “HPRI
Dock
Landlord”)
to the assignment of Brandon Realty's interest in the Sovereignty Submerged
Lands Lease Renewal, effective June 5, 2006 to June 5, 2011, by and between
Brandon Realty and the HPRI Dock Landlord (the “HPRI
Dock
Lease”),
to HPRI. If Brandon Realty does not obtain such consent prior to Closing,
Sellers shall cause Brandon Realty to, prior to the Closing, to the extent
permitted by law, grant HPRI a license to use the 12-slip docking facility
and
related amenities that are the subject of the HPRI Dock Lease at no cost to
HPRI
on the terms and conditions set forth in the Port Richey Lease Rider in the
form
of Exhibit
2.4(a)(xi);
Sellers
shall cause the Acquired Companies, not later than two (2) business days prior
to the Closing Date, to deliver to Buyer a payoff letter in form and substance
reasonably satisfactory to Buyer relating to all Indebtedness under that certain
Amended and Restated Loan Agreement dated April 11, 2007, by and between Bank
of
America, N.A., certain of the Acquired Companies, and certain other Affiliates
of the Acquired Companies (the “BofA
Agreement”),
indicating the aggregate amount of such Indebtedness outstanding as of the
Closing Date (including any interest or fees accrued thereon and any prepayment
or similar penalties and expenses associated with the prepayment of such
Indebtedness on the Closing Date) and an agreement that, if such aggregate
amount so indicated is paid to the applicable lender on the Closing Date, such
Indebtedness shall be repaid in full, such agreement shall be terminated, all
Encumbrances securing such Indebtedness encumbering any real or personal
property of any of the Acquired Companies shall be released, and the Acquired
Companies shall have been released from any and all liabilities and obligations
of any nature thereunder and under any related documents; and
Sellers
shall cause the Acquired Companies to be released from all Indebtedness and
other liabilities and obligations of any nature under that certain Loan
Agreement dated May 23, 2000, by and between Brandon Realty, HG, Western Springs
National Bank and Trust, and First Union National Bank, as amended (the
“Wachovia
Agreement”)
and under any related documents, and all Encumbrances securing such Indebtedness
encumbering any real or personal property of any of the Acquired Companies
shall
be released.
Obligations
of Buyer at Closing:
Buyer,
on behalf of itself and HI, shall deliver to each of Sellers the consideration
specified in Section 2.2(b) in the manner provided in Section
2.2(b);
Buyer
shall deliver to Sellers:
the
Lease Agreements, executed by the Acquired Companies that are designated as
tenants or lessees in the Lease Agreements and the related guarantee in the
form
of Exhibit
2.4(b)(ii)(A);
the
Noncompetition Agreements, executed by Buyer;
the
Transition Services Agreement, executed by HMC;
an
Acquired Companies’ Release in the form of Exhibit
2.4(b)(ii)(D)
(the “Acquired
Companies’ Release”),
executed by the Acquired Companies; and
a
certificate evidencing the accuracy of the representations and warranties set
forth in Article 4 in the form of Exhibit
2.4(b)(ii)(E);
and
Buyer
shall pay, or cause to be paid and satisfied,
the Sellers’ Expenses that remain outstanding as of the
Closing.
Additional
Delivery. At or prior to the Closing, the Acquired Companies and Provident
Advertising & Marketing, Inc. will enter into a Marketing Services Agreement
(the “Marketing
Services Agreement”),
a
copy of which is attached to this Agreement as Exhibit
2.4(c).
National
Advertising Fund Contribution. On the date immediately preceding the Closing,
or
prior thereto, Sellers shall cause the Acquired Companies to have made $200,000
of voluntary contributions to the HOA National Advertising Fund between January
1, 2008 and the date immediately preceding the Closing.
Final
Net Working Capital Determination
As
promptly as possible, but in any event within 60 days after the Closing Date,
Buyer will deliver to Seller Representative a combined balance sheet of the
Acquired Companies as of 11:59 p.m. Tampa, Florida time on the day immediately
preceding the Closing Date and a reasonably detailed statement (the
“Net
Working Capital Statement”)
setting forth Buyer’s calculation of the Net Working Capital as of 11:59 p.m.
Tampa, Florida time on the day immediately preceding the Closing Date. After
delivery of the Net Working Capital Statement, Seller Representative and
Sellers’ accountants shall be permitted reasonable access to review the Acquired
Companies’ books, records, and work papers related to the preparation of the Net
Working Capital Statement. Seller Representative and Sellers’ accountants may
make inquiries of Buyer, the Acquired Companies, and their respective
accountants and employees regarding questions
concerning or disagreements with the Net Working Capital Statement arising
in
the course of their review thereof, and Buyer shall use its, and shall cause
the
Acquired Companies to use their, commercially reasonable efforts to cause any
such accountants and employees to cooperate with and respond to such inquiries
and provide necessary documentation to Seller Representative. If Seller
Representative has any objections to the Net Working Capital Statement, Seller
Representative shall deliver to Buyer a statement setting forth Seller
Representative’s objections thereto (“Net
Working Capital Objections Statement”).
If a
Net Working Capital Objections Statement is not delivered to Buyer within 30
days after delivery of the Net Working Capital Statement, the Net Working
Capital Statement shall be final, binding on, and non-appealable by, the parties
hereto. Seller Representative and Buyer shall negotiate in good faith to resolve
any objections set forth in the Net Working Capital Objections Statement (and
all such discussions related thereto shall, unless otherwise agreed by Buyer
and
Seller Representative, be governed by Rule 408 of the Federal Rules of Evidence
(and any applicable similar state rule)), but if they do not reach a final
resolution within 30 days after the delivery of the Net Working Capital
Objections Statement, Seller Representative and Buyer shall submit such dispute
to an accounting firm of national standing mutually agreed to by the Seller
Representative and Buyer (the “Dispute
Independent Auditor”).
Seller Representative and Buyer shall use reasonable efforts to cause the
Dispute Independent Auditor to resolve all such disagreements as soon as
practicable. For purposes of resolving any such disagreements, the Net Working
Capital shall be calculated in accordance with the definition thereof in this
Agreement. The resolution of the dispute by the Dispute Independent Auditor
shall be final, binding on, and non-appealable by, the parties hereto. The
Net
Working Capital Statement shall be modified if necessary to reflect such
resolution. The fees and expenses of the Dispute Independent Auditor shall
be
allocated to be paid by Buyer, on the one hand, and/or Sellers, on the other
hand, based upon the percentage which the portion of the contested amount not
awarded to each party bears to the amount actually contested by such party,
as
determined by the Dispute Independent Auditor.
If
the
Net Working Capital, as finally determined pursuant to Section 2.5(a) above,
is
greater than the Estimated Net Working Capital, Buyer shall pay to each Seller
such Seller’s Adjusted Percentage Share of such excess in accordance with
Section 2.5(c). If the Net Working Capital, as finally determined pursuant
to
Section 2.5(a) above, is less than the Estimated Net Working Capital, Sellers
shall pay such shortfall to Buyer in accordance with Section 2.5(c), with each
Seller jointly and severally obligated to pay such shortfall.
The
net
amount (if any) owed pursuant to Section 2.5(b) by Buyer to Sellers, on the
one
hand, or Sellers to Buyer, on the other hand, is referred to as the
“Net
Working Capital Adjustment Amount.”
Payment of the Net Working Capital Adjustment Amount shall be paid by delivery
of immediately available funds to an account designated by the recipient
party(ies) within five (5) business days after the date of final
determination.
New
Store Purchase Price Determination
As
promptly as possible, but in any event within 60 days after the later of the
New
Store End Date and the Closing Date, Buyer will deliver to Seller Representative
a reasonably detailed statement (the “New
Store Statement”)
setting forth Buyer’s calculation of the New Store’s EBITDA for the New Store
Period and the New Store Purchase Price (the “Estimated
New Store Purchase Price”).
After
delivery of the New Store Statement, Seller Representative and Sellers’
accountants shall be permitted reasonable access to review the New Store’s
books, records, and work papers related to the preparation of the New Store
Statement. Seller Representative and Sellers’ accountants may make inquiries of
Buyer and the New Store and their respective accountants and employees regarding
questions concerning or disagreements with the New Store Statement arising
in
the course of the Sellers’ or Seller Representative’s review thereof, and Buyer
shall use its, and shall cause the New Store to use its, commercially reasonable
efforts to cause any such accountants and employees to cooperate with and
respond to such inquiries and provide necessary documentation to Seller
Representative. If Seller Representative has any objections to the New Store
Statement, Seller Representative shall deliver to Buyer a statement setting
forth Seller Representative’s objections thereto (the “New
Store Objections Statement”).
If
the New Store Objections Statement is not delivered to Buyer within 30 days
after delivery of the New Store Statement, the New Store Statement shall be
final, binding on, and non-appealable by, the parties hereto. Seller
Representative and Buyer shall negotiate in good faith to resolve any objections
set forth in the New Store Objections Statement (and all such discussions
related thereto shall, unless otherwise agreed by Buyer and Seller
Representative, be governed by Rule 408 of the Federal Rules of Evidence (and
any applicable similar state rule)), but if they do not reach a final resolution
within 30 days after the delivery of the New Store Objections Statement, Seller
Representative and Buyer shall submit such dispute to the Dispute Independent
Auditor. Seller Representative and Buyer shall use reasonable efforts to cause
the Dispute Independent Auditor to resolve all such disagreements as soon as
practicable. For purposes of resolving any such disagreements, the EBITDA of
the
New Store shall be calculated in accordance with the definition of EBITDA in
this Agreement (with respect to the New Store Period). The resolution of the
dispute by the Dispute Independent Auditor, other than any dispute regarding
whether Buyer has complied with Section 2.6(c), shall be final, binding on,
and
non-appealable by, the parties hereto. The New Store Statement shall be modified
if necessary to reflect such resolution. The fees and expenses of the Dispute
Independent Auditor shall be allocated to be paid by Buyer, on the one hand,
and/or Sellers, on the other hand, based upon the percentage which the portion
of the contested amount not awarded to each party bears to the amount actually
contested by such party, as determined by the Dispute Independent
Auditor.
Buyer
will pay to each Seller such Seller’s New Store Adjusted Percentage
Share of
the
New Store Purchase Price, as finally determined pursuant to Section 2.6(a)
and
less such Seller’s New Store Adjusted Percentage Share of any fees and expenses
of the Dispute Independent Auditor allocated to Sellers pursuant to Section
2.6(a) (the “New
Store Payment”),
as
follows:
the
product of (x) such Seller’s Cash Percentage, multiplied by(y) such
Seller’s New Store Payment will be paid by delivery of immediately available
funds to an account designated by such Seller, within five (5) business days
after the date of final determination pursuant to Section 2.6(a);
and
the
product of (x) such Seller’s Stock Percentage,
multiplied by(y) such Seller’s New
Store Payment will be paid to such Seller in shares of Chanticleer Common Stock,
within five (5) business days after the date of final determination pursuant
to
Section 2.6(a). For purposes of this Section 2.6(b)(ii), the value of each
share
of Chanticleer Common Stock shall be the cash purchase price per share of
Chanticleer Common Stock paid by each equity investor in connection with the
Financing (irrespective of any warrants exercisable for Chanticleer Common
Stock
issued to the purchasers of Chanticleer Common Stock in connection with the
Financing); provided that if Chanticleer or any of its Affiliates enters into
an
HOA Acquisition Transaction or publicly announces the execution of a letter
of
intent relating thereto prior to Closing, such value shall not exceed $7.00
per
share after giving effect to a 10 for 1 reverse stock split of the Chanticleer
Common Stock.
Buyer
shall have the right to offset any amounts owed but unpaid by Sellers to Buyer
with respect to the Net Working Capital Adjustment Amount, as specified in
Section 2.5(c), and EBITDA Adjustment Amount, as specified in Section 2.7(c)(i),
against its payment of the New Store Purchase Price.
Buyer
shall operate the New Store during the New Store Period in a manner reasonably
consistent with the pre-Closing operation of the New Store by Hooters of Melrose
Park, Inc., subject to reasonable adjustments (based on the advice and input
of
Neil Kiefer and Bruce Clark) that are necessary in order to respond to market
conditions that affect the New Store.
Acquired
Companies Final EBITDA Determination
The
procedure for determining the Acquired Companies Final EBITDA shall be
determined in accordance with (x) Section 2.7(a)(i) hereof if the Independent
Auditor completes and delivers to the Acquired Companies its audit report
relating to the 2007 Financial Statements on or before the Closing Date and
(y)
Section 2.7(a)(ii) hereof if the Independent Auditor completes and delivers
its
audit report relating to the 2007 Financial Statements after the Closing Date.
As
promptly as possible, but in any event within 10 days after the date the
Independent Auditor completes and delivers to the Acquired Companies its audit
report relating to the 2007 Financial Statements, Seller Representative will
deliver to Buyer a reasonably detailed statement (the “Sellers’ EBITDA
Statement”) setting forth Sellers’ calculation of the Acquired Companies Final
EBITDA. After delivery of the Sellers’ EBITDA Statement, Buyer’s accountants
shall be permitted reasonable access to review the Acquired Companies’ books,
records, and work papers related to the preparation of the Sellers’ EBITDA
Statement. Buyer’s accountants may make inquiries of Sellers and the Acquired
Companies, and their respective accountants and employees, regarding questions
concerning or disagreements with the Sellers’ EBITDA Statement arising in the
course of their review thereof, and Sellers shall use their commercially
reasonable efforts (and, prior to the Closing Date, shall cause the Acquired
Companies to use their commercially reasonable efforts to cause any such
accountants and employees of the Acquired Companies) to cooperate with and
respond to such inquiries and provide necessary documentation to Buyer. If
Buyer
has any objections to the Sellers’ EBITDA Statement, Buyer shall deliver to
Seller Representative a statement setting forth Buyer’s objections thereto (the
“Buyer’s EBITDA Objections Statement”). If the Buyer’s EBITDA Objections
Statement is not delivered to Seller Representative within 30 days after
delivery of the Sellers’ EBITDA Statement, the Sellers’ EBITDA Statement shall
be final, binding on, and non-appealable by, the parties hereto. Seller
Representative and Buyer shall negotiate in good faith to resolve any objections
set forth in the Buyer’s EBITDA Objections Statement (and all such discussions
related thereto shall, unless otherwise agreed by Buyer and Seller
Representative, be governed by Rule 408 of the Federal Rules of Evidence (and
any applicable similar state rule)), but if they do not reach a final resolution
within 30 days after the delivery of the Buyer’s EBITDA Objections Statement,
Seller Representative and Buyer shall submit such dispute to the Dispute
Independent Auditor. Seller Representative and Buyer shall use reasonable
efforts to cause the Dispute Independent Auditor to resolve all such
disagreements as soon as practicable. For purposes of resolving any such
disagreements, the Acquired Companies Final EBITDA shall be calculated in
accordance with the definition of EBITDA in this Agreement. The resolution
of
the dispute by the Dispute Independent Auditor, other than any dispute regarding
whether Buyer has complied with Section 2.7(c), shall be final, binding on,
and
non-appealable by, the parties hereto. The Sellers’ EBITDA Statement shall be
modified if necessary to reflect such resolution. The fees and expenses of
the
Dispute Independent Auditor shall be allocated to be paid by Buyer, on the
one
hand, and/or Sellers, on the other hand, based upon the percentage which the
portion of the contested amount not awarded to each party bears to the amount
actually contested by such party, as determined by the Dispute Independent
Auditor.
As
promptly as possible, but in any event within 10 days after the date the
Independent Auditor completes and delivers to the Acquired Companies its audit
report relating to the 2007 Financial Statements, Buyer will deliver to Seller
Representative a reasonably detailed statement (the “Buyer’s EBITDA
Statement”) setting forth Buyer’s calculation of the Acquired
Companies Final EBITDA. After delivery of the Buyer’s EBITDA
Statement, Seller Representative and Sellers’ accountants shall be permitted
reasonable access to review the Acquired Companies’ books, records, and work
papers related to the preparation of the Buyer’s EBITDA Statement. Seller
Representative and Sellers’ accountants may make inquiries of Buyer and the
Acquired Companies, and their respective accountants and employees, regarding
questions concerning or disagreements with the Buyer’s EBITDA Statement arising
in the course of their review thereof, and Buyer shall use its, and shall cause
the Acquired Companies to use their, commercially reasonable efforts to cause
any such accountants and employees to cooperate with and respond to such
inquiries and provide necessary documentation to Seller Representative. If
Seller Representative has any objections to the Buyer’s EBITDA Statement, Seller
Representative shall deliver to Buyer a statement setting forth Seller
Representative’s objections thereto (the “Sellers’ EBITDA Objections
Statement”). If the Sellers’ EBITDA Objections Statement is not
delivered to Buyer within 30 days after delivery of the Buyer’s EBITDA
Statement, the Buyer’s EBITDA Statement shall be final, binding on, and
non-appealable by, the parties hereto. Seller Representative and Buyer shall
negotiate in good faith to resolve any objections set forth in the Sellers’
EBITDA Objections Statement (and all such discussions related thereto shall,
unless otherwise agreed by Buyer and Seller Representative, be governed by
Rule
408 of the Federal Rules of Evidence (and any applicable similar state rule)),
but if they do not reach a final resolution within 30 days after the delivery
of
the Sellers’ EBITDA Objections Statement, Seller Representative and Buyer shall
submit such dispute to the Dispute Independent Auditor. Seller Representative
and Buyer shall use reasonable efforts to cause the Dispute Independent Auditor
to resolve all such disagreements as soon as practicable. For purposes of
resolving any such disagreements, the Acquired Companies Final EBITDA shall
be
calculated in accordance with the definition of EBITDA in this Agreement. The
resolution of the dispute by the Dispute Independent Auditor, other than any
dispute regarding whether Buyer has complied with Section 2.7(c), shall be
final, binding on, and non-appealable by, the parties hereto. The Buyer’s EBITDA
Statement shall be modified if necessary to reflect such
resolution. The fees and expenses of the Dispute Independent Auditor shall
be
allocated to be paid by Buyer, on the one hand, and/or Sellers, on the other
hand, based upon the percentage which the portion of the contested amount not
awarded to each party bears to the amount actually contested by such party,
as
determined by the Dispute Independent Auditor.
If
the
Acquired Companies Final EBITDA, as finally determined pursuant to either
Section 2.7(a)(i) or Section 2.7(a)(ii) above, is greater than the Acquired
Companies Initial EBITDA, Buyer shall pay to each Seller, in accordance with
Section 2.7(c), the product of (i) such excess, multiplied
by (ii)
such
Seller’s Percentage Share, multiplied
by
(iii)
such Seller’s EBITDA Multiple (the “EBITDA
Excess Adjustment Amount”).
If
the Acquired Companies Final EBITDA, as finally determined pursuant to either
Section 2.7(a)(i) or Section 2.7(a)(ii) above, is less than the Acquired
Companies Initial EBITDA, each Seller shall pay to Buyer, in accordance with
Section 2.7(c), the product of (i) such shortfall, multiplied
by (ii)
such
Seller’s Percentage Share, multiplied
by
(iii)
such Seller’s EBITDA Multiple (the “EBITDA
Deficiency Adjustment Amount”).
The
net
amount (if any) owed pursuant to Section 2.7(b) by Buyer to Sellers, on the
one
hand, or Sellers to Buyer, on the other hand, is referred to as the “EBITDA
Adjustment Amount.” If Sellers are owed the EBITDA Adjustment Amount from Buyer,
Buyer shall, within fifteen (15) days after the date of the final determination
of the Acquired Companies Final EBITDA, pay (i) to each Option 2 Seller such
Seller’s EBITDA Excess Adjustment Amount by delivering immediately available
funds equal to such Seller’s EBITDA Excess Adjustment Amount to the account
designated by such Seller, and (ii) to each Option 1 Seller such Seller’s EBITDA
Excess Adjustment Amount by delivering to such Seller (A) immediately available
funds to the account designated by such Seller equal to such Seller’s Cash
Percentage of such Seller’s EBITDA Excess Adjustment Amount and (B) shares of
Chanticleer Common Stock equal in value to such Seller’s Stock Percentage of
such Seller’s EBITDA Excess Adjustment Amount. If Buyer is owed the EBITDA
Adjustment Amount from Sellers, (i) each Option 2 Seller shall pay to Buyer
such
Seller’s EBITDA Deficiency Adjustment Amount by delivering immediately available
funds equal to such Seller’s EBITDA Deficiency Adjustment Amount to the account
designated by Buyer, and (ii) each Option 1 Seller shall pay to Buyer such
Seller’s EBITDA Deficiency Adjustment Amount by delivering to Buyer (A)
immediately available funds to the account designated by Buyer equal to such
Seller’s Cash Percentage of such Seller’s EBITDA Deficiency Adjustment Amount
and (B) shares of Chanticleer Common Stock, endorsed for transfer or accompanied
by appropriate transfer documents, equal in value to such Seller’s Stock
Percentage of such Seller’s EBITDA Deficiency Adjustment Amount, in each case,
within fifteen (15) days after the date of the final determination of the
Acquired Companies Final EBITDA. For purposes of this Section 2.7(c), the value
of each share of Chanticleer Common Stock shall be the cash purchase price
per
share of Chanticleer Common Stock paid by each equity investor in connection
with the Financing (irrespective of any warrants exercisable for
Chanticleer Common Stock issued to the purchasers of Chanticleer Common Stock
in
connection with the Financing);
provided that if Chanticleer or any of its Affiliates enters into an HOA
Acquisition Transaction or publicly announces the execution of a letter of
intent relating thereto prior to Closing, such value shall not exceed $7.00
per
share after giving effect to a 10 for 1 reverse stock split of the Chanticleer
Common Stock.
Letter
of Credit
At
the
Closing, Sellers will deliver to Buyer an irrevocable, unconditional letter
of
credit issued by a bank in the United States having at least $100 billion in
assets and a Standard & Poor’s credit rating of AA- or higher on the Closing
Date, which letter of credit will be in the form of, and shall contain the
terms
in, Exhibit
2.8
(the
“Letter
of Credit”).
The
Letter of Credit shall be in the amount of Six Million Dollars ($6,000,000),
and
shall secure any of Sellers’ obligations under Sections 2.5 and 2.7 and any
claim of the Buyer Indemnified Persons, or any of them, pursuant to Article
10,
subject to the terms and limitations of this Agreement. The term of the Letter
of Credit shall be the eighteen (18) months immediately following the Closing
Date; provided,
however,
that,
at Sellers’ election, either (x) the term of the Letter of Credit shall continue
beyond such 18-month term, and Sellers shall cause such term to continue, in
the
amount of any then outstanding claims that are then pending by any Buyer
Indemnified Person pursuant to Sections 2.5 or 2.7 or Article 10, notice of
which has been given to Seller Representative or to the applicable Seller under
the terms of this Agreement, until such claims have been finally resolved or
(y)
the term of the Letter of Credit shall terminate upon expiration of such
18-month term and Sellers shall, at Sellers’ election, either (i) deliver to
Buyer a letter of credit in the amount of all then outstanding claims that
are
then pending by any Buyer Indemnified Person pursuant to Sections 2.5 or 2.7
or
Article 10, notice of which has been given to Seller Representative or to the
applicable Seller under the terms of this Agreement, which letter of credit
shall contain the same terms as the Letter of Credit, except for (A) information
regarding the issuer, which may be a banking institution in the United States
of
America having at least $100 billion in assets and a Standard & Poor’s
credit rating of AA- or higher, and (B) the amount of the letter of credit
(the
“Tail
Letter of Credit”)
or
(ii) deliver to an escrow agent, mutually agreed upon by Seller Representative
and Buyer, funds in the amount of the then outstanding claims that are then
pending by any Buyer Indemnified Person pursuant to Sections 2.5 or 2.7 or
Article 10, notice of which has been given to Seller Representative or to the
applicable Seller under the terms of this Agreement, which delivery of funds
shall be subject to the terms of an escrow agreement to be entered into by
and
among Seller Representative, on behalf of Sellers, Buyer and such escrow agent,
in a form mutually agreed upon using good faith efforts by Seller Representative
and Buyer; provided,
however,
that
the term of the Tail Letter of Credit or the availability of such escrow funds
shall continue, and Sellers shall cause such term or availability to continue,
until all such outstanding claims have been finally resolved. Buyer will be
entitled to make a draw under the Letter of Credit or the Tail Letter of Credit
only if Seller Representative has consented to such draw in writing and the
draw
and the consent of Seller Representative are delivered to the issuer;
provided,
however,
the
consent of Seller Representative and delivery of such consent of the Seller
Representative to the issuer shall not be required if:
a
court of competent jurisdiction, under a final non-appealable judgment in favor
of any Buyer Indemnified Person, has ordered a draw under the Letter of Credit
or the Tail Letter of Credit, in which case Buyer may deliver a draw request
to
the issuer for up to the amount of such judgment, subject to the time and dollar
limitations of Article 10;
the
Dispute Independent Auditor makes a final determination of a Net Working Capital
Adjustment Amount owed to Buyer under Section 2.5, or of an EBITDA Adjustment
Amount owed to Buyer under Section 2.7, in which case Buyer may make a draw
under the Letter of Credit or the Tail Letter of Credit for up to the amount
of
(A) such finally determined Net Working Capital Adjustment Amount (that has
not
already been paid to Buyer by Sellers) or (B) such finally determined EBITDA
Adjustment Amount (that has not already been paid to Buyer by Sellers), as
the
case may be; or
there
are any outstanding claims pending pursuant to Sections 2.5 or 2.7 or Article
10, notice of which has been given to Seller Representative or to the applicable
Seller under the terms of this Agreement, at the expiration of the Letter of
Credit and Sellers do not either (A) renew the Letter of Credit, in the amount
of such then outstanding claims, (B) deliver the Tail Letter of Credit, in
the
amount of such then outstanding claims, or (C) deliver to an escrow agent funds
in the amount of such then outstanding claims.
On
the
first annual anniversary of the Closing Date, Seller Representative and Buyer
shall cause the amount of the Letter of Credit, as previously reduced by draws
thereunder, if any (other than Adjustment Draws), to be reduced by the amount,
if any, by which (i) Six Million Dollars ($6,000,000), less (x) the amounts
that
have been drawn by Buyer under the Letter of Credit (other than Adjustment
Draws) on or prior to such anniversary and less (y) the amounts of then
outstanding claims that are then pending by any Buyer Indemnified Person
pursuant to Sections 2.5 or 2.7 or Article 10 on such anniversary, notice of
which claims have been given to Seller Representative or to the applicable
Seller under the terms of this Agreement, exceeds (ii) Three Million Dollars
($3,000,000). Additionally, on the day 18 months after the Closing Date, Seller
Representative and Buyer shall cause the amount of the Letter of Credit to
be
reduced to the amount of the outstanding claims, if any, that are then pending
by any Buyer Indemnified Person pursuant to Sections 2.5 or 2.7 or Article
10,
notice of which has been given to Seller Representative or to the applicable
Seller under the terms of this Agreement.
Following
the Closing Date, Sellers or Seller Representative shall be entitled to deliver
(i) to Buyer, in lieu of the Letter of Credit, a substitute letter of credit
containing the
same
terms as the Letter of Credit, except for information regarding the issuer,
which may be a banking institution in the United States of America having at
least $100 billion in assets and a Standard & Poor’s credit rating of AA- or
higher (and such substitute letter of credit shall be subject to the terms
of
this Section 2.8 as if it were the Letter of Credit), or (ii) to an escrow
agent
mutually agreed upon by Seller Representative and Buyer, funds in the amount
of
the then undrawn amount of the Letter of Credit, which delivery of funds shall
be subject to the terms of an escrow agreement to be entered into by and among
Seller Representative, Buyer and such escrow agent, in form mutually agreed
upon
using good faith efforts by Seller Representative and Buyer.
Should
the Letter of Credit be drawn by Buyer under the terms of Section 2.8(a)(ii)
or
with the prior written consent of Seller Representative to satisfy Sellers’
obligations under Sections 2.5 or 2.7 (each an “Adjustment
Draw”),
Sellers shall cause the Letter of Credit to be reinstated in the amount
available under the Letter of Credit immediately prior to the Adjustment Draw
within fifteen (15) days of such Adjustment Draw. In addition to its right
to
damages and any other rights it may have, Buyer shall have the right to obtain
injunctive or other equitable relief to restrain any breach or threatened breach
or otherwise to specifically enforce the provisions of the preceding sentence
of
this Section 2.8(d), it being agreed that money damages alone would be
inadequate to compensate Buyer and would be an inadequate remedy for such
breach.
Withholding
Buyer
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to Sellers such amounts as it is required
to
deduct and withhold with respect to such payment under the Code, or any
provision of state, local, or foreign Tax law. To the extent that amounts are
so
withheld by Buyer, such withheld amounts shall be treated for all purposes
of
this Agreement as having been paid to Sellers in respect of which such deduction
and withholding was made by Buyer.
REPRESENTATIONS
AND WARRANTIES OF SELLERS
Sellers
represent and warrant to Buyer as follows (except that: (i) each Seller
represents and warrants, solely as to such Seller, and Sellers collectively
do
not make, any representations or warranties in this Article 3 that are qualified
by the phrases “the representing Seller”, or “such Seller”, “each Seller
represents, solely as to himself or herself” or any similar phrase; (ii) each
Option 1 Seller, solely as to such Option 1 Seller, makes the representations
and warranties in Sections 3.25, 3.26, 3.27 and 3.29(a), and neither any Option
2 Seller nor Sellers collectively make any of such representations or
warranties; and (iii) each Option 2 Seller, solely as to such Option 2 Seller,
makes the representation and warranty in Section 3.29(b), and neither any Option
1 Seller nor Sellers collectively make such representation and warranty (the
representations and warranties described in clauses (i), (ii), and (iii) of
this
parenthetical being collectively called the “Seller
Individual Representations”)):
Organization
and Good Standing
Section
3.1 of the Disclosure Schedule contains a complete and accurate list for each
Acquired Company of its name, its jurisdiction of incorporation or formation,
other jurisdictions
in which it is authorized to do business, and its capitalization or ownership
(including the identity of each stockholder or partner and the number of Shares
held by each). Each Acquired Company is a corporation or limited partnership
duly organized, validly existing, and in good standing or having active status
under the laws of its jurisdiction of incorporation or formation, with full
corporate or partnership power and authority to conduct its business as it
is
now being conducted, to own, lease, license, or use the properties and assets
that it purports to own, lease, license, or use, and to perform all its
obligations, and exploit and enforce its rights, under each Contract listed
(or
required to be listed) in Section 3.14(a) of the Disclosure Schedule. Each
Acquired Company is duly qualified or authorized to transact business as a
foreign corporation or foreign limited partnership, as the case may be, and
is
in good standing under the laws of each state or other jurisdiction in which
either the ownership or use of the properties owned, leased, licensed, or used
by it, or the nature of the activities conducted by it, requires such
qualification.
The
Acquired Companies have made available to Buyer copies of the Organizational
Documents of each Acquired Company, as currently in effect.
Authority;
No Conflict
This
Agreement constitutes the legal, valid, and binding obligation of the
representing Seller and each Acquired Company party hereto, enforceable against
such Person in accordance with its terms. Upon the execution and delivery by
such Seller of certificates representing the Shares held by the representing
Seller duly endorsed (or accompanied by duly executed stock powers) for transfer
to Buyer or HI, the Noncompetition Agreements and the other documents under
the
terms of this Agreement to be executed and delivered by such Seller at the
Closing (collectively, the “Sellers’
Closing Documents”),
the
Sellers’ Closing Documents executed and delivered by such Seller will constitute
the legal, valid, and binding obligations of such Seller, enforceable against
such Seller in accordance with their respective terms. The representing Seller
and each Acquired Company party hereto has the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and the
Sellers’ Closing Documents to be executed and delivered by such Seller or
Acquired Company, as the case may be, and to perform such Seller’s or Acquired
Company’s respective obligations under this Agreement and the Sellers’ Closing
Documents executed and delivered by such Seller and Acquired
Company.
Except
as
set forth in Section 3.2(b) of the Disclosure Schedule, neither the execution
and delivery of this Agreement by the representing Seller and each Acquired
Company party hereto nor the consummation or performance by the representing
Seller or the Acquired Companies of any of the Contemplated Transactions to
which the representing Seller or the Acquired Companies, as the case may be,
are
a party or parties will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to,
and
will not contravene, conflict with, result in a violation of, or otherwise
give
another Person the right to exercise any remedy under:
any
provision of the Organizational Documents of any of the Acquired
Companies;
any
resolution adopted by the boards of directors, shareholders, or holders of
Partnership Interests of any of the Acquired Companies;
any
Legal Requirement, Order, or Governmental Authorization binding upon the
representing Seller, any Acquired Company or any of the assets owned, or to
the
actual knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate,
leased or licensed, by any Acquired Company;
or
any
Contract; or
result
in the imposition or creation of any Encumbrance upon or with respect to any
of
the assets owned, leased, licensed, or used by any Acquired
Company.
Except
as
set forth in Section 3.2(c) of the Disclosure Schedule, no Acquired Company
is
or will be required to give any notice to or obtain any Consent from any Person
in connection with the execution and delivery by Sellers and the Acquired
Companies of this Agreement or the consummation or performance by Sellers and
the Acquired Companies of any of the Contemplated Transactions.
Except
as
set forth in Section 3.2(d) of the Disclosure Schedule, each Seller represents,
solely as to himself or herself, that such Seller is not and will not be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery by such Seller of this Agreement
or
the consummation or performance by such Seller of any of the Contemplated
Transactions.
Capitalization
Section
3.3 of the Disclosure Schedule sets forth the Ownership Interests of each
Acquired Company. Except as set forth in Section 3.3 of the Disclosure Schedule,
the representing Seller is and will be as of the Closing the record and
beneficial owner and holder of the Shares (other than any of the HG Shares
or
HMC Shares) listed in Section 3.3 of the Disclosure Schedule, free and clear
of
all Encumbrances. HGHC is and will be as of the Closing the record and
beneficial owner and holder of the HG Shares listed in Section 3.3 of the
Disclosure Schedule, free and clear of all Encumbrances. HMHC is and will be
as
of the Closing the record and beneficial owner and holder of the HMC Shares
listed in Section 3.3 of the Disclosure Schedule, free and clear of all
Encumbrances. Except as provided in Section 3.3 of the Disclosure Schedule,
no
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of any Acquired Company held by
the
representing Seller, HGHC or HMHC. Except as provided in Section 3.3 of the
Disclosure Schedule, all of the Shares of each Acquired Company that have been
issued to the representing Seller, to HGHC, or HMHC have
been
duly authorized and validly issued and are fully paid and nonassessable. With
respect to the representing Seller, except as described in Section 3.3 of the
Disclosure Schedule, there are no contracts to which the representing Seller
is
a party relating to the issuance, sale, redemption, repurchase or transfer
of
any equity securities or other securities of any Acquired Company. With respect
to HGHC, except as described in Section 3.3 of the Disclosure Schedule, there
are no contracts to which HGHC is a party relating to the issuance, sale,
redemption, repurchase or transfer of any equity securities or other securities
of HG. With respect to HMHC, except as described in Section 3.3 of the
Disclosure Schedule, there are no contracts to which HMHC is a party relating
to
the issuance, sale, redemption, repurchase or transfer of any equity securities
or other securities of HMC. Except as described in Section 3.3 of the Disclosure
Schedule, no Acquired Company owns, or has any Contract to acquire, any equity
securities or other securities of any Person or any direct or indirect equity,
voting, or ownership interest in any other business. Except as described in
Section 3.3 of the Disclosure Schedule, no Acquired Company has any
Subsidiaries, and no Acquired Company has granted or issued, or has made any
commitment, whether written or oral, to grant or issue to any Person, any stock
purchase right, stock option, stock appreciation right, phantom stock,
restricted stock, stock unit or other compensatory equity or award measured
by
reference to the value of the equity of one or more Acquired Companies. Hooters
III, Inc., one of the Acquired Companies, was previously the owner of the entire
general partnership interest of, and acquired as of December 2, 2007 all of
the
limited partnership interests of, Tyrone Hooters Ltd. In accordance with
applicable law, upon the acquisition of the limited partnership interests of
Tyrone Hooters Ltd. by Hooters III, Inc., Tyrone Hooters Ltd. was dissolved
and
all assets and liabilities of Tyrone Hooters Ltd. were transferred to Hooters
III, Inc. Hooters of Manhattan, Inc. owns the general partnership interests
of
Hooters of Manhattan, Ltd. (the “Limited
Partnership”).
As of
the date hereof, the Adjusted Capital Contribution (as defined in that certain
Agreement of Limited Partnership of Hooters of Manhattan, Ltd. dated March
16,
2000, by and between Hooters of Manhattan, Inc. and Hootrich LLC) of Hooters
of
Manhattan, Inc. in Hooters of Manhattan, Ltd. is $3,564,548.
Financial
Statements
Section
3.4 of the Disclosure Schedule contains complete copies of the: (a) audited
combined balance sheets of HI and certain other related entities, as stated
in
each of such audited combined balance sheets, as at December 26, and December
25
respectively, in each of the years 2004 and 2005 (together, the “2004
and 2005 Balance Sheets”),
and
the related audited combined statements of income, changes in stockholders’
equity, and cash flow for each of the fiscal years then ended (collectively,
with the 2004 and 2005 Balance Sheet, the “2004
and 2005 Financial Statements”)
together with the report thereon of Pricewaterhouse Coopers, independent
certified public accounts (the “Independent
Auditor”);
(b)
audited combined balance sheet of HI and certain other related entities, as
stated in such audited combined balance sheet, as at December 31, 2006
(including notes thereto, the “2006 Balance
Sheet”),
and
the related audited combined statements of income, changes in stockholders’
equity, and cash flow for the fiscal year then ended (collectively, with the
2006 Balance Sheet, the “2006
Financial Statements”),
together with the report thereon of the Independent Auditor; and (c) an
unaudited combined balance sheet of HI and certain other related entities,
as
stated in such unaudited combined balance sheet, as at December 30, 2007 (the
“Interim
Balance Sheet”)
and
the related unaudited combined statement of income for the fiscal year then
ended (together, with the Interim Balance Sheet, the “Interim
Financial Statements”).
The
2004 and 2005 Financial Statements, the 2006 Financial Statements and the
Interim Financial Statements are collectively called the “Financial
Statements.”
Except
as provided in Section 3.4 of the Disclosure Schedule, each of the Financial
Statements and notes fairly presents the financial condition and the results
of
operations, and, except for the Interim Financial Statements, the changes in
stockholders’ equity and cash flow of the entities included in such financial
statement as at the respective dates of and for the periods referred to therein,
all in accordance with GAAP, subject, in the case of the Interim Financial
Statements, to normal recurring year-end adjustments and the absence of
footnotes. Except as provided in Section 3.4 of the Disclosure Schedule, the
Financial Statements reflect the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
Person other than the entities included in any Financial Statement are required
by GAAP to be included in such Financial Statement.
Books
and Records
The
books
of account, minute books, stock record books, and other records of the Acquired
Companies have been made available to Buyer and have been maintained in
accordance with the Acquired Companies’ customary business practices. At the
Closing, all of those books and records will be in the possession of the
Acquired Companies.
Title
to Properties; Encumbrances
None
of
the Acquired Companies owns any real property other than those properties
described in Exhibit 2.4(a)(v). Section 3.6 of the Disclosure Schedule contains
a complete and accurate list of all leaseholds held by any Acquired Company.
Sellers have delivered or made available to Buyer copies of the lease agreements
with respect to such leaseholds. The Acquired Companies own (with good and
assignable title, subject only to the matters permitted by the following
sentence) all the tangible personal property that they purport to own located
in
the Facilities operated by the Acquired Companies, and all of the tangible
personal property purchased by the Acquired Companies since the date of the
2006
Balance Sheet (except for tangible personal property purchased and sold since
the date of the 2006 Balance Sheet in the Ordinary Course of Business and except
as set forth in Section 3.6 of the Disclosure Schedule). Except as described
in
Section 3.6 of the Disclosure Schedule, all material items of tangible personal
property reflected in the 2006 Balance Sheet and the Interim Balance Sheet
or
acquired after the date thereof, and not sold in the Ordinary Course of
Business, are free and clear of all Encumbrances except, with respect to any
of
such assets, (a) security interests shown on the 2006 Balance Sheet or the
Interim Balance Sheet as securing specified liabilities or obligations, with
respect to which no default by the Acquired Companies (or event that, with
notice or lapse of time or both, would constitute a default by the Acquired
Companies) exists, (b) security interests or finance or capital leases incurred
in the Ordinary Course of Business in connection with the acquisition of
tangible personal property after the date of the Interim Balance Sheet, with
respect to which no default by the Acquired Companies (or event that, with
notice or lapse of time or both, would constitute a default by the Acquired
Companies) exists, and (c) liens for current taxes not yet due (such
Encumbrances set forth in clauses (a)-(c), “Permitted
Encumbrances”).
Condition
and Sufficiency of Assets
Except
as
set forth in Section 3.7 of the Disclosure Schedule, (a) the buildings, plants,
structures, and equipment of the Acquired Companies are in good operating
condition and repair (subject to ordinary wear and tear), and are adequate
for
use in the Ordinary Course of Business to which they are being put, and (b)
such
buildings, plants, structures, or equipment are not in need of maintenance
or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. Except as set forth in Section 3.7 of the Disclosure
Schedule, the building, plants, structures, and equipment of the Acquired
Companies are adequate for the conduct of the Acquired Companies’ businesses as
currently conducted.
No
Undisclosed Liabilities
Except
as
set forth in Section 3.8 of the Disclosure Schedule, the Acquired Companies
have
no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) that would be required
to
be stated in the liabilities column of a balance sheet prepared in accordance
with GAAP, except for liabilities or obligations reflected or reserved against
in the 2006 Balance Sheet or the Interim Balance Sheet and current liabilities
and contractual obligations incurred in the Ordinary Course of Business since
the respective dates thereof.
Taxes
The
Acquired Companies have duly and timely filed with the appropriate Tax
authorities all Tax Returns required to be filed. Except as set forth in Section
3.9(a) of the Disclosure Schedule, all such Tax Returns are complete and
accurate in all material respects. Except as provided in Section 3.9(a) of
the
Disclosure Schedule, all Taxes due and owing by any of the Acquired Companies
on
or before the date hereof (whether or not shown on any Tax Returns) have been
paid. Except as provided in Section 3.9(a) of the Disclosure Schedule, none
of
the Acquired Companies currently is the beneficiary of any extension of time
within which to file any Tax Return. Except as described in Section 3.9(a)
of
the Disclosure Schedule, no claim has ever been made by a Tax authority in
a
jurisdiction where any Acquired Company does not file Tax Returns that it is
or
may be subject to taxation by that jurisdiction.
The
unpaid Taxes of the Acquired Companies (i) did not, as of the date of the
Interim Balance Sheet, exceed the reserve for Tax liability (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Interim Balance Sheet (rather
than in any notes thereto), and (ii) will not, as of the Closing Date, exceed
the reserve for Tax liability (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth
on the face of balance sheet set forth in the Net Working Capital Statement
(rather than in any notes thereto) and taken into account in calculating Net
Working Capital as of the Closing Date. Since the date of Interim Balance Sheet,
no Acquired Company has incurred any liability for Taxes outside the Ordinary
Course of Business or otherwise inconsistent with past custom and
practice.
Since
January 1, 2001, except as provided in Section 3.9(c) of the Disclosure
Schedule, no deficiencies for Taxes with respect to any of the Acquired
Companies have been claimed, proposed or assessed by any Tax authority or other
Governmental Body as to which any of the Acquired Companies has received written
notice. Except as provided in Section 3.9(c) of the Disclosure Schedule, there
are no pending or Threatened audits, assessments or other actions for or
relating to any liability in respect of Taxes of any of the Acquired Companies.
Except as provided in Section 3.9(c) of the Disclosure Schedule, there are
no
matters under discussion between any of the Acquired Companies and any Tax
authority, with respect to Taxes that are likely to result in an additional
liability for Taxes with respect to any of the Acquired Companies. The Acquired
Companies have delivered or made available to Buyer complete and accurate copies
of federal, state and local income Tax Returns of each of the Acquired Companies
and their predecessors for Tax Periods ending on or after December 31, 2003,
and
complete and accurate copies of all examination reports and statements of
deficiencies assessed against or agreed to by any of the Acquired Companies
or
any predecessors since December 31, 2003, with respect to Taxes of any type.
Since December 31, 2001, except as provided in Section 3.9(c) of the Disclosure
Schedule, (i) no Acquired Company nor any predecessor has waived any statute
of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency, and (ii) no request has been made in writing
by any Tax authority and received by any Acquired Company for any such extension
or waiver. Except as provided in Section 3.9(c) of the Disclosure Schedule,
no
power of attorney (other than powers of attorney authorizing employees of any
Acquired Company to act on behalf of such Acquired Company) with respect to
any
Taxes has been executed or filed with any Tax authority that is still in effect.
There
are
no liens for Taxes upon any property or asset of any Acquired Company (other
than for current Taxes not yet due and payable).
Except
as
provided in Section 3.9(e) of the Disclosure Schedule, each Acquired Company
has
timely withheld, collected, deposited or paid all Taxes required to have been
withheld, collected, deposited or paid, as the case may be, in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
Except
as
provided in Section 3.9(f) of the Disclosure Schedule, there are no Tax sharing
agreements or similar arrangements (including indemnity arrangements) with
respect to or involving any Acquired Company.
Except
as
provided in Section 3.9(g) of the Disclosure Schedule, no Acquired Company
has
ever been a member of an affiliated group, as defined in the Code. No Acquired
Company has any liability for the Taxes of any other Person (other than another
Acquired Company) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee, by Contract, or
otherwise.
No
Acquired Company has constituted either a “distributing corporation” or a
“controlled corporation” in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement, or (ii) in a distribution which could otherwise constitute
part of a “plan” or “series of related transactions” (within the meaning of
Section 355(e) of the Code) that includes the Contemplated
Transactions.
Except
as
provided in Section 3.9(i) of the Disclosure Schedule, no Acquired Company
(i)
has consented at any time under former Section 341(f)(1) of the Code to have
the
provisions of former Section 341(f)(2) of the Code apply to any disposition
of
the assets of any of the Acquired Companies; (ii) has agreed, or is required,
to
make any adjustment under Section 481(a) of the Code by reason of a change
in
accounting method or otherwise; (iii) has made an election, or is required,
to
treat any of its assets as owned by another Person pursuant to the provisions
of
former Section 168(f) of the Code or as tax-exempt bond financed property or
tax-exempt use property within the meaning of Section 168 of the Code; (iv)
has
acquired or owns any assets that directly or indirectly secure any debt the
interest on which is tax exempt under Section 103(a) of the Code; (v) has made
or will make a consent dividend election under Section 565 of the Code; or
(vi)made any of the foregoing elections or is required to apply any of the
foregoing rules under any comparable state or local Tax provision.
No
Acquired Company (i) has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; (ii) has been a stockholder
of a “controlled foreign corporation” as defined in Section 957 of the Code (or
any similar provision of state, local or foreign law); (iii) has been a
“personal holding company” as defined in Section 542 of the Code (or any similar
provision of state, local or foreign law); (iv) has been a stockholder of a
“passive foreign investment company” within the meaning of Section 1297 of the
Code; or (v) has engaged in a trade or business, had a permanent establishment
(within the meaning of an applicable Tax treaty) or has otherwise become subject
to Tax jurisdiction in a country other than the country of its formation.
Except
as
provided in Section 3.9(k) of the Disclosure Schedule, no Acquired Company
(i)
is a partner for Tax purposes with respect to any joint venture, partnership,
or
other arrangement or Contract which is treated as a partnership for Tax purposes
or (ii) owns a single member limited liability company which is treated as
a
disregarded entity.
None
of
the outstanding indebtedness of any of the Acquired Companies constitutes
indebtedness with respect to which any interest deductions may be disallowed
under Sections 163(i) or 163(l) or 279 of the Code or under any other provision
of applicable law.
Each
Acquired Company has been a validly electing S corporation within the meaning
of
Section 1361(a)(1) of the Code or limited partnership (and any comparable
provision of state and local Law in each jurisdiction in which such Acquired
Company is obligated to file income or franchise Tax Returns) at all times
since
its formation, and each Acquired Company that is a corporation will be an S
corporation up to an including the Closing Date. No Acquired Company has (i)
acquired any assets from any other corporation in a transaction in which the
adjusted Tax basis in the acquired assets was determined by reference (in whole
or in part) to the adjusted Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (ii) acquired the stock of any
corporation which is a qualified subchapter S corporation. No Acquired Company
shall be liable for any Tax under Section 1374 of the Code in connection with
the deemed sale of such Acquired Company's assets (including the assets of
any
qualified subchapter S subsidiary) caused by the Section 338(h)(10)
Elections.
No
Acquired Company has been a party to a transaction that is or is substantially
similar to a “listed transaction,” as such term is defined in Treasury
Regulations Section 1.6011-4(b)(2), or any other transaction requiring
disclosure under analogous provisions of state, local or foreign Tax law. If
any
Acquired Company has entered into any transaction such that, if the treatment
claimed by it were to be disallowed, the transaction would constitute a
substantial understatement of federal income tax within the meaning of Section
6662 of the Code, then such Acquired Company believes that it has either (x)
substantial authority for the tax treatment of such transaction or (y) disclosed
on its Tax Return the relevant facts affecting the tax treatment of such
transaction.
Each
Seller is, and has been at all times during the period in which (i) each
Acquired Company that is a corporation has been an S corporation within the
meaning of Section 1361(a)(1) of the Code and (ii) such Seller has been a
shareholder of each such Acquired Company, a valid shareholder of an S
corporation within the meaning of Section 1361(a)(1) of the Code (and any
comparable provision of state and local law in each jurisdiction in which each
such Acquired Company is obligated to file income or franchise Tax
Returns).
Employee
Benefits
List
of Plans.
Section
3.10(a) of the Disclosure Schedule sets forth a complete list of each “employee
benefit plan” as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended, (“ERISA”)
and
each other plan, policy, program practice, agreement, understanding or
arrangement (whether written or oral) providing compensation or other benefits
to any current or former director, officer, employee or consultant (or to any
dependent or beneficiary thereof) of any Acquired Company which is now, or
was
within the past six years, entered into, maintained, sponsored or contributed
to
by any Acquired Company or under the terms of which any Acquired Company has
or
is reasonably likely to have any obligation or liability, whether actual or
contingent, including, without limitation, all employment, consulting,
severance, termination, incentive, bonus, deferred compensation, retirement,
pension, savings, profit sharing, retention, change in control, vacation,
holiday, cafeteria, medical, disability, life, accident, fringe benefit, welfare
and stock-based
compensation plans,
policies, programs, practices or arrangements (each, a “Target
Benefit Plan”).
Compliance.
Except
as described in Section 3.10(b) of the Disclosure Schedule, the Acquired
Companies have made available to Buyer true and complete copies, as applicable,
of (i) each Target Benefit Plan (or, if not written, a written summary of its
material terms), including without limitation all plan documents, trust
agreements, insurance contracts or other funding vehicles and all amendments
thereto, (ii) all summaries and summary plan descriptions, including any summary
of material modifications, (iii) the three most recent annual reports (Form
5500
series) filed with the IRS, (iv) the most recent actuarial report or other
financial statement relating to such Target Benefit Plan, (v) the most recent
determination or opinion letter, if any, issued by the IRS and any pending
request for such a letter, (vi) the most recent nondiscrimination tests
performed under the Code, and (vii) all filings made with any governmental
entities, including but not limited any filings under the Employee Plans
Compliance Resolution System or the Department of Labor Delinquent Filer
Program.
General
Compliance.
Each
Target Benefit Plan complies in all material respects in form and operation,
and
has been administered in all material respects in accordance with, its terms
and
all applicable laws, including ERISA and the Code, and all contributions
required to be made under the terms of any of the Target Benefit Plans as of
the
date of this Agreement have been timely made or, if not yet due, have been
properly reflected on the Interim Balance Sheet or as an accrual on the
accounting records of one or more of the Acquired Companies. With respect to
each Target Benefit Plan, all tax, annual reporting and other governmental
filings required by ERISA, the Code or other Legal Requirements have been timely
filed with the appropriate governmental entity and all notices and disclosures
have been timely provided to participants in all material respects. With respect
to the Target Benefit Plans, no event has occurred and, to the Knowledge of
Sellers and the Acquired Companies, there exists no condition or set of
circumstances in connection with which any Acquired Company is reasonably likely
to be subject to any material liability (other than for routine benefit
liabilities) under the terms of, or with respect to, such Target Benefit Plans,
ERISA, the Code or any other Legal Requirements.
Tax
Qualification of Plans.
Each
Target Benefit Plan that is intended to qualify under Section 401(a), Section
401(k), Section 401(m), or Section 4975(e)(7) of the Code has either (A)
received a favorable determination letter from the IRS as to its qualified
status, or (B) may rely upon a favorable prototype opinion letter from the
IRS,
and each trust established in connection with any Target Benefit Plan which
is
intended to be exempt from federal income taxation under Section 501(a) of
the
Code is so exempt, and to the Knowledge of Sellers and the Acquired Companies,
no fact or event has occurred that is reasonably likely to adversely affect
the
qualified status of any such Target Benefit Plan or the exempt status of any
such trust.
Prohibited
Transactions, Legal Actions, Ability to Amend, and
Deductibility.
To the
Knowledge of Sellers and the Acquired Companies, there has been no prohibited
transaction (within the meaning of Section 406 of ERISA, or Section 4975 of
the
Code and other than a transaction that is exempt under a statutory or
administrative exemption) with respect to any Target Benefit Plan. None of
the
Acquired Companies, nor to the Knowledge of Sellers and the Acquired Companies,
any other Person has any legally enforceable right or commitment to adopt,
modify or terminate any Target Benefit Plan, other than with respect to a
modification or termination required by ERISA or the Code. No suit,
administrative proceeding, action or other litigation has been brought within
the last six years or is Threatened against or with respect to any such Target
Benefit Plan, including any audit or inquiry by the IRS or United States
Department of Labor. Neither the Acquired Companies nor any ERISA Affiliate
has
any liability under ERISA Section 502. All contributions and payments to each
Target Benefit Plan are deductible under Code Sections 162 or 404. No excise
tax
could reasonably be expected to be imposed upon any of the Acquired Companies
under Chapter 43 of the Code.
Title
IV of ERISA.
No
Target Benefit Plan is a “multiemployer plan” (as defined in Section 3(37) of
ERISA) (a “Multiemployer
Plan”)
or
other pension plan subject to Title IV or Part 3 of Title I of ERISA or Section
412 of the Code, and neither any Acquired Company nor any ERISA Affiliate (as
defined below) has sponsored, maintained, participated in, contributed to,
or
has been required to participate in or contribute to a Multiemployer Plan or
other pension plan subject to Title IV or Part 3 of Title I of ERISA or Section
412 of the Code. None of the assets of the Acquired Companies or any ERISA
Affiliate is, or may reasonably be expected to become, the subject of any lien
arising under ERISA or Section 412(n) of the Code. For purposes of this
Agreement, “ERISA
Affiliate,”
with
respect to any Person, shall mean any entity (whether or not incorporated)
other
than such Person that, together with such Person, is required to be treated
as a
single employer under Section 414(b), (c), (m) or (o) of the Code.
Change
in Control.Except
as
provided in Section 3.10(g) of the Disclosure Schedule, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will result in any payment, acceleration, increase or
creation of any rights of any person to benefits under any Target Benefit Plan.
Golden
Parachutes.
Except
as provided in Section 3.10(h) of the Disclosure Schedule, no amount that will
be received (whether in cash, property, the vesting of property or otherwise)
as
a result of or in connection with the consummation of the Contemplated
Transactions (either alone or in combination with any other event) or by any
of
the ancillary agreements, by any shareholder, employee, officer, director or
other service provider of any Acquired Company who is a “disqualified
individual” (as such term is defined in Treasury Regulation Section 1.280G-1)
could reasonably be characterized as an “excess parachute payment” (as defined
in Section 280G(b)(1) of the Code).
Retiree
Health/COBRA.
Except
as provided in Section 3.10(i) of the Disclosure Schedule or except as required
by applicable Legal Requirements, no Target Benefit Plan provides any of the
following retiree or post-employment benefits to any person: medical, disability
or life insurance benefits. No Target Benefit Plan is a voluntary employee
benefit association under Section 501(a)(9) of the Code. The Acquired Companies
and each ERISA Affiliate are in compliance in all material respects with (i)
the
applicable requirements of the Consolidated Omnibus Budget Reconciliation Act
of
1985, as amended, and the regulations (including proposed regulations)
thereunder and any similar state law and (ii) the applicable requirements of
the
Health Insurance Portability and Accountability Act of 1996, as amended, and
the
regulations (including the proposed regulations) thereunder.
Code
Section 409A.
Except
as set forth in Section 3.10(j) of the Disclosure Schedule, no Target Benefit
Plan or payment or benefit provided pursuant to any Target Benefit Plan between
one or more Acquired Companies and any “service provider” (within the meaning of
Section 409A of the Code) provides or is reasonably likely to provide for the
deferral of compensation subject to Section 409A of the Code, whether pursuant
to the execution and delivery of this Agreement or the consummation of the
Contemplated Transactions (either alone or upon the occurrence of any additional
or subsequent events) or otherwise. Each Target Benefit Plan that is a
nonqualified deferred compensation plan subject to Section 409A of the Code
has
been operated and administered in good faith compliance with Section 409A of
the
Code from the period beginning January 1, 2005 through the date hereof.
Service
Provider Classification.
Within
the last six years, the Acquired Companies have properly classified all
individuals providing services to the Acquired Companies as employees or
non-employees for all relevant purposes.
Plans
Subject to Laws of Non-United States Jurisdictions.
Except
as set forth in Section 3.10(l) of the Disclosure Schedule, no Acquired Company
maintains, participates in, contributes to or has any liability with respect
to
any employee benefit plan, program, or other similar arrangement providing
compensation or benefits to any employee or former employee of any Acquired
Company (or any dependent thereof) which plan, program or other similar
arrangement is subject to the laws of any jurisdiction outside of the United
States.
Sale
Bonus Payments.
Section
3.10(m) of the Disclosure Schedule sets forth a preliminary, good faith estimate
of the amount to be owed by the Acquired Companies as a result of the
consummation of the Contemplated Transactions to each of Neil Kiefer, Bruce
Clark and Sal Melilli pursuant to his Sale Participation Agreement.
ERISA
Affiliates.
Section
3.10(n) of the Disclosure Schedule sets forth a list of each ERISA Affiliate
of
each of the Acquired Companies (except, with respect to any Acquired Company,
for any other Acquired Companies which are ERISA Affiliates of such Acquired
Company). Except as set forth in Section 3.10(n) of the Disclosure Schedule,
no
Target Benefit Plan is, and none of the Acquired Companies nor any ERISA
Affiliate thereof contributes to, has ever contributed to or has any liability
or obligation, whether actual or contingent, with respect to (i) any “multiple
employer plan” (within the meaning of Section 413(c) of the Code), or (ii) any
"multiple employer welfare arrangement" (within the meaning of Section 3(40)
of
ERISA).
Certain
Insured Plans. Except
as
described in Section 3.10(o) of the Disclosure Schedule, no Target Benefit
Plan
that is an "employee welfare benefit plan" within the meaning of Section 3(1)
of
ERISA provides health or welfare benefits that are not fully insured through
an
insurance contract, and no Acquired Company is obligated to directly pay any
such benefits or to reimburse any third Person payor for the payment of such
benefits.
Compliance
with Legal Requirements
Except
as
set forth in Section 3.11(a) of the Disclosure Schedule, and except with respect
to Taxes, which are covered by Section 3.9, employee benefits, which are
covered by Section 3.10, environmental matters, which are covered by Section
3.16, and labor relations, which are covered by Section 3.18, the Acquired
Companies are, and at all times since January 1, 2005 have been, in material
compliance with the Legal Requirements that are or were applicable to the
Acquired Companies or to the conduct or operation of their business or the
ownership or use of any of their assets, including in regards to licenses to
sell alcoholic beverages.
Except
as
set forth in Section 3.11(b) of the Disclosure Schedule, no Acquired Company
has
received, at any time since January 1, 2005, any written notice or, to the
actual knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate,
oral notice or other oral communication from any Governmental Body or any other
Person regarding (i) any actual, alleged, possible, or potential violation
by
the Acquired Company of, or failure by the Acquired Company to comply with,
any
Legal Requirement, or (ii) any actual, alleged, possible, or potential
obligation on the part of any Acquired Company to undertake, or to bear all
or
any portion of the cost of, any remedial action of any nature.
Legal
Proceedings; Orders
Except
as
set forth in Section 3.12(a) of the Disclosure Schedule, there is no pending
Proceeding:
that
has been commenced by or against any Acquired Company or any assets owned,
or to
the knowledge of Bruce Clark or Neil Kiefer, with no duty to investigate, leased
or licensed, by any Acquired Company; or
that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated
Transactions.
Except
as
set forth in Section 3.12(a) of the Disclosure Schedule, (i) no such Proceeding
has been Threatened and (ii) to the Knowledge of Sellers and the Acquired
Companies, no event has occurred or circumstance exists that is reasonably
likely to give rise to or serve as a basis for the commencement of any such
Proceeding. Sellers have delivered or made available to Buyer copies of all
pleadings, correspondence, and other documents relating to each Proceeding
listed in (or required to be listed in) Section 3.12(a) of the Disclosure
Schedule (except to the extent that any correspondence or other documents are
covered by the attorney-client privilege, work product, or similar doctrine;
provided, however, that prior to the Closing, the Acquired Companies will make
available to Buyer, upon Buyer’s reasonable request, any correspondence or
documents that are covered by such privilege or doctrine).
Except
as
set forth in Section 3.12(b) of the Disclosure Schedule:
there
is no Order that is binding upon any of the Acquired Companies or any of the
assets owned by any Acquired Company;
each
Seller represents, solely with respect to himself or herself, that such Seller
is not subject to any Order that is binding upon such Seller that relates to
the
business of, or any of the assets owned, leased, licensed, or used by, any
Acquired Company; and
to
the Knowledge of the Sellers and the Acquired Companies, no officer or director
of any Acquired Company is bound by any Order that prohibits such officer or
director from engaging in or continuing any conduct, activity, or practice
in
the business of any Acquired Company.
Except
as
set forth in Section 3.12(c) of the Disclosure Schedule:
each
Acquired Company is, and at all times since January 1, 2005 has
been, in full compliance with all of the terms and requirements of each Order
binding upon such Acquired Company or any of the assets owned, or to the
knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate, leased
or
licensed, by such Acquired Company;
to
the Knowledge of Sellers and the Acquired Companies, no event has occurred
or
circumstance exists that is reasonably likely to constitute or result in (with
or without notice or lapse of time) a material violation of or material failure
to comply with any Order binding upon any Acquired Company or any of the assets
owned, or to the knowledge of Neil Kiefer or Bruce Clark, with no duty to
investigate, leased or licensed, by such Acquired Company;
and
no
Acquired Company has received, at any time since January 1, 2005, any written
or, to the actual knowledge of Neil Kiefer or Bruce Clark, with no duty to
investigate, oral notice or other written or, to the actual knowledge of Neil
Kiefer or Bruce Clark, with no duty to investigate, oral communication from
any
Governmental Body or any other Person regarding any actual or alleged violation
of, or failure to comply with, any Order binding upon any of the Acquired
Companies or any of the assets owned, or to the actual knowledge of Neil Kiefer
or Bruce Clark, with no duty to investigate, leased or licensed, by any Acquired
Company.
Absence
of Certain Changes and Events
Except
as
set forth in Section 3.13 of the Disclosure Schedule, since the date of the
2006
Balance Sheet, the Acquired Companies have conducted their businesses only
in
the Ordinary Course of Business, and, except as set forth in Section 3.13 of
the
Disclosure Schedule, or as required by this Agreement, or as permitted under
Section 5.2 with respect to the period between the date of this Agreement and
the Closing, there has not been any:
change
in
any Acquired Company’s Ownership Interests; grant of any stock option or right
to purchase Ownership Interests of any Acquired Company; issuance of any
security convertible into such grant; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by any Acquired Company
of any Ownership Interests; or declaration or payment of any dividend or other
distribution or payment in respect of Ownership Interests other than dividends
with respect to Taxes;
amendment
to the Organizational Documents of any Acquired Company;
except
in
the Ordinary Course of Business, (i) payment or increase by any Acquired Company
of any bonuses, salaries, or other compensation to any stockholder, director,
officer, or employee or consultant; or (ii) entry into any employment,
consulting, severance, change of control, retention or similar Contract with
any
director, officer, employee or consultant;
except
in
the Ordinary Course of Business, or except as required by law or by the terms
of
any such Target Benefit Plan as in existence as of the date of this Agreement,
adoption of, or increase in the payments to or benefits under, any Target
Benefit Plan or any plan or arrangement that would constitute a Target Benefit
Plan;
material
damage to or destruction or loss of, or material diminution in value of, any
tangible asset or property owned, leased, licensed, or used by any Acquired
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business or financial condition of the Acquired
Companies, taken as a whole;
default
by any Acquired Company under, entry into, termination, non-renewal, or
modification of, or receipt of written, or to the actual knowledge of Neil
Kiefer or Bruce Clark, with no duty to investigate, oral notice of termination,
non-renewal, or modification of, or default by any party other than an Acquired
Company under: (i) any franchise, license (other than in-bound software licenses
for commercial software that is “off-the-shelf” or widely available entered into
in the Ordinary Course of Business), distributorship, dealer, sales
representative, joint venture, credit, or similar agreement to which any
Acquired Company is a party; or (ii) any Contract or transaction involving
a
total remaining commitment by or to any Acquired Company of at least
$250,000;
other
than sales in the Ordinary Course of Business, sale, license, lease, or other
disposition of any material asset or property of any Acquired Company or
mortgage, pledge, or imposition of any Encumbrance on any material asset or
property of any Acquired Company, including the sale, lease, license, or other
disposition of any Intellectual Property;
cancellation
or waiver of any claims or rights with a value to any Acquired Company in excess
of $250,000;
material
change in the accounting methods used by any Acquired Company;
change
of
any material Tax election, settlement or compromise of any claim, notice, audit
report or assessment in respect of Taxes, change of any annual Tax accounting
period, adoption or change of any method of Tax accounting, filing of any
amended Tax Return, entrance into any tax allocation agreement, tax sharing
agreement, tax indemnity agreement or closing agreement relating to any material
Tax, surrender of any right to claim a material Tax refund, or consent to any
extension or waiver of the statute of limitations applicable to any material
Tax
claim or assessment;
Contract
to do any of the foregoing; or
Material
Adverse Change.
Contracts;
No Defaults
Section
3.14(a) of the Disclosure Schedule contains a complete and accurate list, and
Sellers have delivered or made available to Buyer true and complete copies
(including all exhibits, schedules, appendices, amendments thereto and the
like), of:
each
Contract to which HOA or any of its Affiliates, officers or owners, on the
one
hand, is a party or by which any of them is bound, and to which HI or any of
its
Affiliates, officers or owners, on the other hand, is a party or by which any
of
them is bound, including, without limitation, the Settlement & Amendment to
License Agreement dated September 13, 1999, by and among HI, Hooters Foods,
Inc., Hooters of America, Inc. (“HOA”), Super Sports
Merchandisers, Inc., and Eastern Foods, Inc (as amended, the “1999
Agreement”) and the License Agreement dated March 21, 2001, by and among
HOA, individually and as general partner of the HI Limited Partnership, and
HI
(the “2001 Agreement”) (collectively, the “HOA
Agreements”);
each
Contract that involves performance of services or delivery of goods or materials
by one or more Acquired Companies of an amount or value in excess of
$250,000;
each
Contract that involves performance of services or delivery of goods or materials
to one or more Acquired Companies of an amount or value in excess of
$250,000;
each
Contract that was not entered into in the Ordinary Course of Business and that
involves expenditures or receipts of one or more Acquired Companies in excess
of
$250,000;
each
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property (except personal
property leases and installment and conditional sales agreements having a value
per item or aggregate payments of less than $250,000 per year or with terms
of
less than one year);
each
joint venture, partnership, and other Contract (however named), other than
the
Shareholders Agreement, involving a sharing of profits, losses, costs, or
liabilities by any Acquired Company with any other Person;
each
Contract containing covenants that prohibit any Acquired Company from engaging
in, or restrict the right of, any Acquired Company to engage in any aspect
of
its business as it is currently being conducted or to compete with any
Person;
each
Contract providing for payments to or by any Person based on sales, purchases,
or profits, other than direct payments for goods or incentive payments to
employees or independent contractors;
each
power of attorney granted by an Acquired Company to a party that is not an
Acquired Company that is currently effective and
outstanding;
each
Contract for capital expenditures in excess of $250,000;
each
written warranty, guaranty, and other similar undertaking with respect to
contractual performance extended by any Acquired Company other than in the
Ordinary Course of Business; and
each
amendment, supplement, and modification (whether oral or written) in respect
of
any of the foregoing.
Notwithstanding
anything herein to the contrary, any Contract entered into after the date hereof
that is not entered into in violation of Section 5.2(j) shall be deemed to
be
listed in Section 3.14(a) of the Disclosure Schedule as of the date of such
Contract for all purposes herein.
Except
as
set forth in Section 3.14(b) of the Disclosure Schedule, to the Knowledge of
Sellers and the Acquired Companies, no officer or director of any Acquired
Company is bound by any agreement that purports to limit the ability of such
officer or director to (i) engage in or continue any conduct, activity, or
practice on behalf of any Acquired Company with respect to the business of
such
Acquired Company or (ii) assign to any Acquired Company any rights to any
invention, improvement, or discovery.
Except
as
set forth in Section 3.14(c) of the Disclosure Schedule, each Contract
identified or required to be identified in Section 3.14(a) of the Disclosure
Schedule is in full force and effect and is valid and enforceable in accordance
with its terms except as enforceability may be affected by bankruptcy,
insolvency, or other laws affecting creditors rights, or principles of
equity.
Except
as
set forth in Section 3.14(d) of the Disclosure Schedule:
each
Acquired Company is in full compliance with all applicable terms and
requirements of each Contract;
to
the Knowledge of Sellers and the Acquired Companies, each other Person that
has
any obligation or liability under any Contract is in full compliance with all
applicable terms and requirements of such Contract;
no
event has occurred or circumstance exists that (with or without notice or lapse
of time) is reasonably likely to result in a violation or Breach by an Acquired
Company or, to the Knowledge of Sellers and the Acquired Companies, any other
Person who is a party to any Contract, or give any such Person or, to the
Knowledge of Sellers and the Acquired Companies, any Acquired Company, the
right
to declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, non-renew, or modify, any Contract;
and
no
Acquired Company has given to or received from, any other Person, at any time
since January 1, 2005 any written or, to the actual knowledge
of Neil Kiefer or Bruce Clark, with no duty to investigate, oral notice
regarding any actual or alleged violation or breach of, or default under, any
Contract.
Except
as
set forth in Section 3.14(e) of the Disclosure Schedule, none of the Acquired
Companies is renegotiating or attempting to renegotiate, and, to the Knowledge
of Sellers and the Acquired Companies, none of the other parties to any
Contract, has given written or, to the actual knowledge of Neil Kiefer or Bruce
Clark, with no duty to investigate, oral notice to any of the Acquired Companies
that such other party wishes to renegotiate, any territories covered by, scope
of rights granted under, duration, amounts paid or payable by or to any Acquired
Company, or any other material terms, under current or completed Contracts
with
any Person.
Insurance
Section
3.15(a) of the Disclosure Schedule lists each of the insurance policies
described in Section 3.15(a)(i) below, and the Acquired Companies have delivered
or made available to Buyer:
true
and complete copies of all policies of insurance to which any Acquired Company
is a party or under which any Acquired Company, or any director of any Acquired
Company with respect to his being a director of any Acquired Company, is or
has
been covered at any time within the two years preceding the date of this
Agreement;
true
and complete copies of all pending applications for policies of insurance;
and
any
written statement by the auditor of any Acquired Company’s financial statements
received by any Acquired Company since January 1, 2005, with
regard to the adequacy of such entity’s coverage or of the reserves for
claims.
Section
3.15(b) of the Disclosure Schedule describes any self-insurance arrangement
by
or affecting any Acquired Company, including any reserves established
thereunder.
Section
3.15(c) of the Disclosure Schedule sets forth, by year, for the current policy
year and each of the two preceding policy years:
a
summary of the loss experience under each policy;
a
statement describing each claim under an insurance policy for an amount in
excess of $250,000, which sets forth:
the
name of the claimant;
a
description of the policy by insurer, type of insurance, and period of coverage;
and
the
amount and a brief description of the claim; and
a
statement describing the loss experience for all such claims that were
self-insured, including the number and aggregate cost of such
claims.
Except
as
set forth on Section 3.15(d) of the Disclosure Schedule:
All
policies set forth in Section 3.15(a) of the Disclosure Schedule that are
currently in effect are valid and enforceable against the Acquired Companies
that are party thereto and the other party or parties thereto, except as
enforceability may be affected by bankruptcy, insolvency, or other laws
affecting creditors rights, or principles of equity.
Since
January 1, 2005, no Acquired Company has received any written or, to the actual
knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate, oral
notice (A) denying coverage under any policy set forth in Section 3.15(a) of
the
Disclosure Schedule or stating that a defense will be afforded with reservation
of rights or (B) of cancellation or that any insurance policy is no longer
in
full force or effect or will not be renewed or that the issuer of any policy
is
not willing or able to perform its obligations thereunder.
The
Acquired Companies have paid, on or before the due date or within any applicable
grace period, all premiums due, and have otherwise performed all of their
respective obligations, under each policy to which any Acquired Company is
a
party or that provides coverage to any Acquired Company or director
thereof.
The
Acquired Companies have given notice to the insurer of all material claims
that
may be insured thereby.
Environmental
Matters
Except
as
set forth in Section 3.16 of the Disclosure Schedule:
Each
Acquired Company is, and at all times since January 1, 2005, has been, in
material compliance with, and has not been and is not in violation of or liable
under, any Environmental Law. Since January 1, 2005, no Acquired Company has
received any written or, to the actual knowledge of Neil Kiefer or Bruce Clark,
with no duty to investigate, oral notice from:
any
Governmental Body or private citizen acting in the public interest; or
the
current or prior owner or operator of any Facilities;
of
any
actual or alleged violation or failure by the Acquired Company to comply with
any Environmental Law, or of any obligation on the part of the Acquired Company
to undertake or bear the cost of any Environmental, Health, and Safety
Liabilities with respect to any of the Facilities or any other properties or
assets (whether real, personal, or mixed) in which any Acquired Company has
or
has had an interest, or with respect to any property or Facility at or to which
Hazardous Materials were generated, manufactured, refined, transferred,
imported, used, or processed by any Acquired Company.
(i)
the
Acquired Companies have obtained and are in compliance with all Environmental
Permits necessary for their operation as currently conducted and (ii) since
January 1, 2002, no Acquired Company has been advised in writing by any
Governmental Body of any actual or potential change in the status or terms
and
conditions of any Environmental Permit.
There
are
no pending or Threatened claims, Encumbrances, or other restrictions against
the
Acquired Companies:
resulting
from any Environmental, Health, and Safety Liabilities; or
arising
under or pursuant to any Environmental Law, with respect to or affecting any
of
the Facilities or any other properties and assets (whether real, personal,
or
mixed) in which any Acquired Company has or had an
interest.
Since
January 1, 2005, no Acquired Company has received, any written or, to the actual
knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate, oral
citation, directive, inquiry, notice, Order, summons, warning or other
communication that relates to Hazardous Activity by the Acquired Company,
Hazardous Materials handled or stored by the Acquired Company, or any alleged
or
actual violation by the Acquired Company or failure by the Acquired Company
to
comply with any Environmental Law, or of any alleged or actual obligation by
the
Acquired Company to undertake or bear the cost of any Environmental, Health,
and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which the Acquired Company
had
an interest, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used, or
processed by the Acquired Company, or any other Person for whose conduct the
Acquired Company is or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received by the Acquired
Company.
No
Acquired Company has any Environmental, Health, and Safety Liabilities with
respect to the Facilities or with respect to any other properties and assets
in
which any Acquired Company has or had an interest, or at any property
geologically or hydrologically adjoining the Facilities or any such other
property or assets.
There
are
no Hazardous Materials present on or in the Environment at the Facilities
resulting from the operations of any Acquired Company, including any Hazardous
Materials contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities, or incorporated into any structure therein
or thereon. No Acquired Company has conducted any Hazardous Activity on or
in
the Facilities or any other properties or assets (whether real, personal, or
mixed) in which any Acquired Company has or had an ownership or possessory
interest.
There
has
been no Release by any of the Acquired Companies or, to the Knowledge of Sellers
and the Acquired Companies, Threat of Release by any of the Acquired Companies,
of any Hazardous Materials at or from the Facilities or at any other locations
where any Hazardous Materials were generated, manufactured, refined,
transferred, produced, imported, used, or processed by any of the Acquired
Companies from or by the Facilities, or by any of the Acquired Companies from
or
on any other properties and assets (whether real, personal, or mixed) in which
any Acquired Company has or had an interest.
Sellers
have delivered or made available to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by Sellers or any Acquired Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning compliance
by any Acquired Company with Environmental Laws.
Employees
Section
3.17(a) of the Disclosure Schedule contains a complete and accurate list of
the
following information for each employee of an Acquired Company presently earning
aggregate compensation of $100,000 or more per year (including each such
employee on leave of absence or layoff status): (i) job title; (ii) current
compensation paid or payable and any change in compensation since December
31,
2006; (iii) whether the employee is paid on a salary or hourly basis; (iv)
vacation accrued; and (v) years of service.
To
the
Knowledge of Sellers and the Acquired Companies, except as set forth in Section
3.17(b) of the Disclosure Schedule, no vice president-level or higher-level
employee of any Acquired Company is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement between such employee and any other Person
(“Proprietary
Rights Agreement”),
that
in any way materially restricts or is reasonably likely to materially restrict:
(i) the performance of his or her duties as an vice president-level or higher
employee of the Acquired Companies; or (ii) the ability of any Acquired Company
to conduct its business in the Ordinary Course of Business, including any
Proprietary Rights Agreement with any Seller or Acquired Company by any such
employee. Except as provided in Section 3.17(b) of the Disclosure Schedule,
to
the actual knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate,
no key employee of any Acquired Company intends to terminate his employment
with
any such Acquired Company.
Labor
Relations; Compliance
Since
January 1, 2005, no Acquired Company has been or is a party to any collective
bargaining or other organized labor or similar Contract. Except as stated in
Section 3.18 of the Disclosure Schedule, since January 1, 2005, there has not
been, there is not presently pending or existing, and there is not Threatened
against an Acquired Company: (a) any (i) strike, or (ii) collective slowdown,
picketing, work stoppage, or employee grievance process; (b) any Proceeding
against any Acquired Company that alleges a violation by any Acquired Company
of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission,
or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Acquired Companies, or their
premises; or (c) any application for certification of a collective bargaining
agent. To the Knowledge of Sellers and the Acquired Companies, no event has
occurred or circumstance exists that is reasonably likely to result in any
collective work stoppage or other collective labor dispute, in either case
by
organized labor. There is no lockout of any group of employees by the Acquired
Companies, and no such action is contemplated by any Acquired Company. Except
as
stated in Section 3.18 of the Disclosure Schedule, since January 1, 2005 each
Acquired Company has complied in all material respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. Except as stated in Section 3.18 of the Disclosure
Schedule, no Acquired Company is liable for the payment of any compensation,
damages, taxes, fines, penalties, or other amounts, however designated, for
failure to comply with any of the foregoing Legal Requirements.
Intellectual
Property
Except
as
provided in Section 3.19(a) of the Disclosure Schedule, and except for
Intellectual Property which is licensed from another Person pursuant to a valid
and enforceable Contract required to be listed under Section 3.19(c) (other
than
off the shelf software that has not been modified or misused by any of the
Acquired Companies), all Intellectual Property that
is
material to the operation of the business of any of the Acquired Companies
is
owned
entirely by one or more of the Acquired Companies. Except as provided in Section
3.19(a) of the Disclosure Schedule, each item of Intellectual Property owned,
licensed, or used by any of the Acquired Companies immediately prior to the
Closing will be owned, licensed to, or available for use by the Acquired
Companies on identical terms and conditions immediately subsequent to the
Closing, free and clear of any community property interests, equitable or other
liens, pledges, security interests, mortgages or any claims of any Seller.
To
the
Knowledge of Sellers and the Acquired Companies, none of the Acquired Companies
has in the last five (5) years infringed upon, misappropriated, or otherwise
violated, and none of them does now, infringe, misappropriate, or otherwise
violate, any Intellectual Property rights of any other Person. To the Knowledge
of Sellers and the Acquired Companies, no other Person has in the last five
(5)
years infringed upon, misappropriated, or otherwise violated in any material
respect any Intellectual Property rights of any of the Acquired Companies within
North America.
Section
3.19(c) of the Disclosure Schedule identifies all (i) Intellectual Property
owned by or licensed to any of the Acquired Companies that is material to the
business of the Acquired Companies as presently conducted and (ii) each license,
sublicense, or agreement that any of the Acquired Companies has granted to
any
other Person with respect to any such Intellectual Property; provided, however,
that Section 3.19(c) of the Disclosure Schedule need not identify any licenses
for off the shelf software that has not been modified or misused by any of
the
Acquired Companies.
Except
as
set forth in Section 3.19(d) of the Disclosure Schedule, the Acquired Companies
have taken all actions necessary to maintain and protect all of the Intellectual
Property of the Acquired Companies that is material to the business of the
Acquired Companies as presently conducted.
Governmental
Authorizations
The
Acquired Companies currently have, and at all times since January 1, 2005 have
had, in effect all material Governmental Authorizations necessary for them
to
own, lease, or operate their assets and to carry on their businesses as now
conducted, including all Governmental Authorizations (whether or not material)
that relate to the sale of alcoholic beverages. Except as described in Section
3.20 of the Disclosure Schedule, there has occurred no violation by any Acquired
Company of, default by any Acquired Company under, or, to the Knowledge of
Sellers and the Acquired Companies, event giving to any Governmental Body any
right of termination, amendment, or cancellation of, with or without notice
or
lapse of time or both, any such Governmental Authorization. Except as described
in Section 3.20 of the Disclosure Schedule, since January 1, 2005, no Acquired
Company has received any written notice or other written communication or,
to
the actual knowledge of Neil Kiefer or Bruce Clark, with no duty to investigate,
any oral notice or other oral communication from any Governmental Body or any
other Person regarding any actual, alleged, possible, or potential violation
of
or failure to comply with any term or requirement of any material Governmental
Authorization (which violation or failure has not been cured) or revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
material Governmental Authorization (which has not been cured).
Suppliers
Section
3.21 of the Disclosure Schedule sets forth a complete and accurate list of
the
ten largest suppliers of materials, products, or services to each Acquired
Company (measured by the aggregate amount purchased by such Acquired Company)
during the Acquired Companies’ most recently ended fiscal year. Except as set
forth in Section 3.21 of the Disclosure Schedule, since January 1, 2007, none
of
such suppliers listed in Section 3.21 of the Disclosure Schedule has canceled,
terminated, or otherwise materially altered (including any material reduction
in
the rate or amount of sales or material increase in the prices charged) or
given
written or, to the actual knowledge of Neil Kiefer or Bruce Clark, with no
duty
to investigate, oral notice to any Acquired Company of any intention to do
any
of the foregoing or otherwise Threatened to cancel, terminate, or materially
alter (including any material reduction in the rate or amount of sales) its
relationship with any Acquired Company.
Relationships
with Related Persons
Each
Seller represents, solely as to himself or herself, that except as set forth
in
Section 3.22 of the Disclosure Schedule, neither such Seller nor any Affiliate
of such Seller has, or since January 1, 2005 has had, any interest in any
property (whether real, personal, or mixed and whether tangible or intangible),
used in or pertaining to the Acquired Companies’ businesses or has or is a party
to any Contract with, has any right or claim against, has had business dealings
with, or a material financial interest in any transaction with, any Acquired
Company.
Brokers
or Finders
Neither
the representing Seller nor his or her agents have incurred any obligation
or
liability, contingent or otherwise, for brokerage or finders’ fees or agents’
commissions or other similar payment in connection with this Agreement or the
Contemplated Transactions.
No
Liability From Property Transfers
Upon
the
Closing, none of the Acquired Companies will have any liabilities (contingent,
unknown or otherwise) with respect to the property to be transferred as
contemplated by Section 2.4(a)(v).
No
Conflicts
Except
as
set forth in Section 3.25 of the Disclosure Schedule, the representing Seller
is
not bound by any agreement that would prevent any transaction contemplated
by
this Agreement.
Restricted
Securities
The
representing Seller acknowledges and agrees that the Chanticleer Shares are
“restricted securities” with the meaning of the Securities Act, and the rules
and regulations thereunder, and that, under the Securities Act and applicable
regulations thereunder, such Chanticleer Shares may not be resold, pledged
or
otherwise transferred without registration under the Securities Act except
in
certain limited circumstances. The representing Seller acknowledges that (i)
the
Chanticleer Shares are being offered in a transaction exempt from registration
under Section 5 of the Securities Act and applicable state securities laws,
(ii)
such Chanticleer Shares may not be offered, resold, pledged or otherwise
transferred except (A) in a transaction meeting the requirements of Rule 144
under the Securities Act, or in accordance with another exemption from the
registration requirements of the Securities Act (and based upon an opinion
of
counsel if Chanticleer so requests), (B) to Chanticleer or (C) pursuant to
an
effective registration statement under the Securities Act, in each case in
accordance with the applicable securities laws of any state of the United States
or any other applicable jurisdiction, and (iii) the representing Seller will
be
required to notify any subsequent purchaser from such representing Seller of
the
resale restrictions set forth in this Section 3.26(a).
The
representing Seller acknowledges and agrees that (i) any registrar or transfer
agent for the Chanticleer Shares will not be required to accept for registration
of transfer any Chanticleer Shares except upon presentation of evidence
reasonably satisfactory to Chanticleer that the restrictions on transfer under
the Securities Act have been satisfied and (ii) any Chanticleer Shares in the
form of definitive physical certificates will bear a legend substantially in
the
form set forth below:
THE
SECURITIES EVIDENCED HEREBY WERE ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE
“SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS, AND THE SECURITIES
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. THE HOLDER
OF
THE SECURITIES EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A)
SUCH SECURITIES MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, EXCEPT
(1)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT,
OR IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE, IN ACCORDANCE WITH THE
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE.
Accredited
Investor
The
representing Seller is an “accredited investor” within the meaning of Rule
501(a) of Regulation D under the Securities Act or an entity in which all of
the
equity owners are accredited investors within the meaning of Rule
501(a).
The
representing Seller is purchasing the Chanticleer Shares for his or her own
account or for the account of one or more other accredited investors or as
a
fiduciary for the account of one or more entities, each of which is an
accredited investor within the meaning of Rule 501(a) (1), (2), (3) or (7)
under
the Securities Act, and for each of which it exercises sole investment
discretion. The representing Seller has such knowledge and experience in
financial and business matters that such representing Seller is capable of
evaluating the merits and risks of purchasing the Chanticleer Shares.
The
representing Seller is not acquiring the Chanticleer Shares with a view to
any
distribution thereof in a transaction that would violate the Securities Act
or
the securities laws of any state of the United States or any other applicable
jurisdiction; provided, however,
that the disposition of the representing Seller’s property and the property of
any accounts for which the representing Seller is acting as fiduciary shall
remain at all times within the representing Seller’s control.
The
representing Seller is a resident and domiciliary of the state or other
jurisdiction as previously described to Chanticleer in writing.
Acknowledgment
Other
than any representations and warranties by Buyer, if any, in the documents
to be
executed and delivered by Buyer under the terms of this Agreement, at or prior
to the Closing, Sellers acknowledge that they are not relying on any
representations or warranties by Buyer with respect to the transactions
contemplated hereby except for the representations and warranties expressly
provided in Section 4.1 through Section 4.10.
Election
Acknowledgment
Each
Option 1 Seller acknowledges that prior to the execution of this Agreement
it
had the opportunity to elect to be an Option 2 Seller with respect to some
or
all of its Shares and receive no equity consideration but more cash
consideration than it will receive as an Option 1 Seller.
Each
Option 2 Seller acknowledges that prior to the execution of this Agreement
it
had the opportunity to elect to be an Option 1 Seller with respect to some
or
all of its shares and receive less cash consideration but more equity
consideration than it will receive as an Option 2 Seller.
Disclaimer
Without
impacting any representations or warranties by Sellers in the Sellers’ Closing
Documents, neither any Seller nor all of Sellers shall be deemed to have made
to
Buyer any representation or warranty as to the Ownership Interests or pertaining
to this Agreement or any of the Acquired Companies other than as expressly
made
in Section 3.1 through Section 3.29. Without limiting the generality of the
foregoing or impacting any representations or warranties by Sellers, if any,
in
the Sellers’ Closing Documents, and notwithstanding any otherwise express
representations and warranties made in this Agreement, none of Sellers makes,
and Sellers do not make, any representation or warranty to Buyer with respect
to:
any
projections, estimates or budgets heretofore delivered to or made available
to
Buyer of future revenues, expenses or expenditures, future results of
operations; or
any
other
information or documents made available to Buyer or its counsel, accountants
or
advisors in any way pertaining to any Acquired Company except as expressly
covered by a representation and warranty contained in Section 3.1 through
Section 3.29.
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to each Seller (except (i) Buyer represents and warrants
solely to the Option 1 Sellers with respect to Sections 4.6, 4.7, 4.8, 4.9
and
4.10 and (ii) that the representations and warranties made in Sections 4.2
and
4.6 assume that the waiting period required by the SEC for the withdrawal of
Chanticleer’s election to be regulated as a business development corporation
under the Investment Company Act has expired and no comments from the SEC
relating thereto remain outstanding) as follows:
Organization
and Good Standing
Buyer
is
a corporation duly organized, validly existing, and in good standing under
the
laws of the State of Delaware.
Authority;
No Conflict
This
Agreement constitutes the legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. Buyer has the absolute
and unrestricted right, power, and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement.
Neither
the execution and delivery of this Agreement by Buyer nor the consummation
or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
any
provision of Buyer’s Organizational Documents;
any
resolution adopted by the board of directors or the stockholders of
Buyer;
any
Legal Requirement, Order or Governmental Authorization to which Buyer may be
subject; or
any
contract to which Buyer is a party or by which Buyer is
bound.
Except
as
set forth in Section 4.2(c) of the Disclosure Schedule, Buyer is not and will
not be required to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance
of
any of the Contemplated Transactions.
Investment
Intent
Buyer
is
acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities
Act.
Brokers
or Finders
Except
for fees and expenses payable to Global Hunter Securities, LLC, Buyer and its
officers and agents have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders’ fees or agents’ commissions or other
similar payment in connection with this Agreement or the Contemplated
Transactions.
Acknowledgment
Other
than any representations and warranties by Sellers, if any, contained in the
Sellers’ Closing Documents, Buyer acknowledges that it is not relying on any
representations or warranties by any or all Sellers with respect to the
Ownership Interests or pertaining in any way to any of the Acquired Companies
except for the representations and warranties expressly provided in Section
3.1
through Section 3.29.
Chanticleer
Organization and Good Standing
Chanticleer
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and is duly licensed or qualified to transact
business as a foreign corporation. Chanticleer has the corporate power and
authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted. Chanticleer is in full compliance
with all of the terms and provisions of its certificate of incorporation (the
“Chanticleer
Charter”)
and
its bylaws. Chanticleer does not own or control, directly or indirectly, any
investment or interest in any other corporation, partnership, limited liability
company, association or other business entity other than Buyer and as disclosed
in Chanticleer’s public filings with the SEC; provided, that Chanticleer will
indirectly own 100% of the equity interests of HI upon consummation of the
acquisition thereof.
Chanticleer
Authority; No Conflict
The
Chanticleer Shares have been duly authorized, and are validly issued, fully
paid
and nonassessable shares of Chanticleer Common Stock, and are free and clear
of
all claims, except as set forth in the Chanticleer Charter. The sale or delivery
of any of the Chanticleer Shares is not subject to any preemptive right of
stockholders of Chanticleer or to any right of first refusal or other right
in
favor of any person that has not been duly waived.
Capitalization
As
of the
date hereof, the authorized capital stock of Chanticleer consists of 100,000,000
shares of Chanticleer Common Stock, and 8,618,032 shares of Chanticleer Common
Stock are issued and outstanding, all of which have been duly authorized and
are
validly issued, fully paid and nonassessable. Between the date hereof and the
Closing Date, Chanticleer may (i) effect a reverse stock split with respect
to
the outstanding shares of Chanticleer Common Stock, (ii) issue additional shares
of Chanticleer Common Stock and warrants in connection with the Financing and/or
(iii) issue additional shares of Chanticleer Common Stock, options or other
equity rights in connection with equity compensation arrangements. Chanticleer
has no obligation (contingent or other) to purchase, redeem or otherwise acquire
any of its equity securities or any interest therein or to pay any dividend
or
make any other distribution in respect thereof. There are no voting trusts
or
agreements, stockholders’ agreements, pledge agreements, buy-sell agreements,
rights
of
first refusal, preemptive rights or proxies relating to any securities of
Chanticleer (whether or not Chanticleer is a party thereto). All of the
outstanding securities of Chanticleer were issued in compliance with all
applicable Federal and state securities laws. No Person has made any claim
in
writing for rescission of such Person’s purchase of securities of
Chanticleer.
Securities
Matters
As
of the
date of this Agreement, Chanticleer is a business development company, as
defined in the Investment Company Act. Chanticleer is subject to the periodic
reporting, proxy rules and other requirements of the Exchange Act. Chanticleer
has been subject to the filing requirements of the Exchange Act for at least
the
past ninety (90) days prior to the date of this Agreement, and has timely filed
all reports, statements or documents required to be filed under the Exchange
Act
in the last twelve (12) months. The reports and other filings made by
Chanticleer in the last twelve (12) months pursuant to the Investment Company
Act and the Exchange Act did not, at the time they were filed (or if
subsequently amended or supplemented, at the time of such amendment or
supplement), contain any untrue statement of a material fact or omit to state
a
material fact necessary to make the statements contained therein, in light
of
the circumstances in which they were made, not misleading.
No
Material Adverse Effect
There
is
no Proceeding pending, or to the actual knowledge, with no duty to investigate,
of the chief executive officer of Chanticleer threatened, against Chanticleer
or
any of its Subsidiaries that has had or would reasonably be expected to have,
if
determined adversely to Chanticleer, or any such Subsidiary, a Chanticleer
Material Adverse Effect.
COVENANTS
OF SELLERS
AND THE
ACQUIRED COMPANIES
Access
and Investigation
Between
the date of this Agreement and the Closing Date, each Acquired Company and
its
Representatives will (a) afford Buyer and its Representatives (including
prospective financing sources and their Representatives) (collectively,
“Buyer’s
Advisors”)
full
and free access during normal business hours and on reasonable prior notice
to
each Acquired Company’s personnel, properties, contracts, books and records, and
other documents and data, (b) furnish Buyer and its Representatives with copies
of all such contracts, books and records, and other existing documents and
data
as Buyer may reasonably request, and (c) furnish Buyer and its Representatives
with such additional financial, operating, and other data and information as
Buyer may reasonably request.
Operation
of the Businesses of the Acquired Companies
Except
as
expressly provided in this Agreement and except for the refinancing of the
BofA
Agreement as contemplated by Section 2.4(a)(xii) and the restructuring of the
Wachovia Agreement as contemplated by Section 2.4(a)(xiii), between the date
of
this Agreement and the Closing Date, each Acquired Company will:
conduct
the business of such Acquired Company only in the Ordinary Course of Business,
unless previously consented to in writing by Buyer;
maintain
all of the Acquired Companies’ material assets and properties, including
Facilities, in good working order and condition (normal wear and tear
excepted);
perform
in all material respects all of its obligations under its
Contracts;
keep
in
full force and effect present insurance policies or other comparable insurance
coverage;
comply
in
all material respects with all Legal Requirements applicable to the Acquired
Companies;
preserve
intact the current business organization of each Acquired Company, and use
commercially reasonable efforts to maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, contractors, agents,
and
others having business relationships with such Acquired Company;
confer
with Buyer concerning operational matters of a material nature;
otherwise
report periodically to Buyer concerning the status of the business, operations,
and finances of such Acquired Company at Buyer’s reasonable request;
give
any
notices to third parties and use commercially reasonable efforts to obtain
all
consents set forth in Section 3.2(c) of the Disclosure Schedule;
except
for a letter of intent and other documents and agreements with respect to the
development of a new restaurant in Hillsborough County, Florida, not enter
into
any new material Contract (or modify, amend, terminate or waive any material
right or obligation under any existing Contract) that is outside the Ordinary
Course of Business or that would obligate any of the Acquired Companies to
pay
in excess of $250,000 or which is not terminable by the Acquired Companies
upon
60 days notice without having to pay a fee, penalty or other amount, other
than
those Contracts contemplated by Section 2.4(a) hereof;
not
declare, set aside or pay any dividends
or other distributions to any holders of Shares, capital stock or any security
convertible into, or exchangeable or exercisable for Shares or capital stock
of
any of the Acquired Companies,
except
cash dividends paid to Sellers in the Ordinary Course of Business;
not
sell,
assign, lease, license, or otherwise transfer or dispose of any of its assets
or
properties, except (i) in the Ordinary Course of Business or (ii) sales,
assignments, leases, licenses, or other transfers of assets or properties with
an aggregate consideration of less than $250,000 individually or $1,000,000
in
the aggregate, or enter into, create or allow to be created or to exist any
Encumbrances on its assets or properties, except Permitted
Encumbrances;
not
make
or change any material Tax election, settle or compromise any claim, notice,
audit report or assessment in respect of Taxes, change any annual Tax accounting
period, adopt or change of any method of Tax accounting, file any amended Tax
Return without
conferring with Buyer in advance, enter into any tax allocation agreement,
tax
sharing agreement, tax indemnity agreement or closing agreement relating to
any
material Tax, surrender any right to claim a material Tax refund, or consent
to
any extension of waiver of the statute of limitations applicable to any material
Tax claim or assessment;
other
than as required by an applicable Legal Requirement or the terms of any Contract
existing on the date hereof, without the prior written consent of Buyer, not
make any change in, or accelerate the vesting of, the compensation or benefits
payable or become payable to any director or vice president or higher level
officer, or grant any severance or termination pay to, any of its officers,
directors, employees, agents or consultants or enter into or amend any
employment, consulting, severance, retention, change in control, termination
pay, collective bargaining or other agreement, any Target Benefit Plan, or
any
equity based compensation, pension, deferred compensation, welfare benefits
or
other employee benefit plan or arrangement, or make any loans to any of its
officers, directors, employees, affiliates or agents or consultants or make
any
change in its existing borrowing or lending arrangements for or on behalf of
any
of such Persons pursuant to a Target Benefit Plan or otherwise; provided,
however, that this paragraph (n) shall not prevent an Acquired Company from
entering into or modifying at-will offer letters with new non-officer employees
in the Ordinary Course of Business;
not
(i)
merge or consolidate with any other Person, (ii) make or incur any capital
expenditure (or series of related capital expenditures) outside the Ordinary
Course of Business, (iii) make any capital investment in, any loan to, or any
acquisition of the securities or all or any substantial portion of the assets
of, any other Person (or series of related capital investments, loans, and
acquisitions) outside the Ordinary Course of Business, or (iv) issue any note,
bond, or other debt security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease obligation outside the
Ordinary Course of Business and in no event in excess of $1,000,000 in the
aggregate;
not
pay
any amount to any third party with respect to any liability (excluding any
costs
and expenses incurred or which may be incurred in connection with this Agreement
and the transactions contemplated hereby) other than in the Ordinary Course
of
Business;
not
take
any action for its winding up, liquidation, dissolution, or reorganization
or
for the appointment of a receiver, administrator, or administrative receiver,
trustee, or similar officer of all or any of its assets or revenues;
and
not
enter
into any agreement containing any provision or covenant limiting in any respect
its ability to (i) sell or buy any products or services to or from any other
Person, (ii) engage in any line of business, or (iii) compete with any
Person.
Required
Approvals
As
promptly as reasonably practicable after the date of this Agreement, Sellers
will, and will cause each Acquired Company to, make all filings required by
Legal Requirements to be made by
them
in order for Sellers and the Acquired Companies to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause each Acquired Company to, (a) cooperate reasonably with
Buyer with respect to all filings that Buyer elects to make or is required
by
Legal Requirements to make in connection with the Contemplated Transactions
and
(b) cooperate reasonably with Buyer in obtaining all Consents, if any,
identified in Section 4.2(c) of the Disclosure Schedule. Buyer shall pay any
and
all attorneys’ and other fees and costs relative to any alcoholic beverage
license approvals, filings or amendments required because of the Contemplated
Transactions.
Notification
Between
the date of this Agreement and the Closing Date, Sellers (i) will promptly
notify Buyer in writing if any Seller or any Acquired Company becomes aware
of
any fact or condition that causes a representation or warranty by Sellers or
any
Seller in Article 3 to be inaccurate, and (ii) may, at their option, deliver
to
Buyer a supplement to the Disclosure Schedule specifying the occurrence after
the date of this Agreement of any new fact or condition that would cause a
representation or warranty by Sellers or any Seller in Article 3 to be
materially inaccurate had such representation or warranty been made as of the
time that any Seller or any Acquired Company became aware of such fact or
condition, or that is necessary to be disclosed to Buyer in order to make such
representation and warranty correct in all material respects.
Between
the date of this Agreement and the Closing Date, Sellers will promptly notify
Buyer if any Seller or any Acquired Company becomes aware of the occurrence
of
any Breach of any covenant of Sellers in this Article 5 or of the occurrence
of
any event that would reasonably be expected to make the satisfaction of the
conditions in Article 7 impossible or unlikely.
Except
as
provided in Section 5.4(a)(ii), no disclosure by any Seller or any Acquired
Company pursuant to this Section 5.4 shall be deemed to amend or supplement
the
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
Payment
of Indebtedness by Related Persons
Except
as
expressly provided in this Agreement, each Seller, solely with respect to
himself or herself, will cause all indebtedness owed to an Acquired Company
by
such Seller or any Affiliate of such Seller (other than the Acquired Companies)
to be paid in full prior to Closing.
No
Negotiation
Until
such time, if any, as this Agreement is terminated pursuant to Article 9,
Sellers will not, and will cause each Acquired Company and each of their
Representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, provide any
non-public information to, or consider the merits of any unsolicited inquiries
or proposals from, any Person (other than Buyer) relating to any transaction
involving the sale of the business or assets (other than in the Ordinary Course
of Business or in accordance with Section 5.2(l)) of any Acquired Company,
or
any of the capital stock of any Acquired Company, or
any
merger, consolidation, business combination, or similar transaction involving
any Acquired Company (any such transaction, an “Acquisition
Transaction”).
The
Acquired Companies, Seller Representative, and each Seller shall, and shall
cause the Acquired Companies’ officers, directors, employees, Subsidiaries, and
Affiliates to, (a) immediately cease and cause to be terminated any and all
contracts, discussions, and negotiations with third parties regarding the
foregoing, (b) immediately notify Buyer of any direct
or
indirect proposal to discuss, pursue, solicit, initiate, participate in,
encourage or otherwise enter into any discussions, negotiations, agreements
or
other arrangements regarding, an Acquisition Transaction with any Person other
than Buyer or its Affiliates, or any inquiry or contact with any Person other
than Buyer or its Affiliates with respect thereto which has been made as of
the
date hereof or is subsequently made, and the details of such contact (including
the identity of the third party, or third parties and the specific terms and
conditions discussed or proposed), and (iii) keep Buyer fully informed with
respect to the status of the foregoing.
Insurance
Effective
as of the Closing, the Acquired Companies shall purchase, and Buyer shall cause
the Acquired Companies to purchase, an extended reporting period endorsement
under the Acquired Companies’ existing directors’ and officers’ liability
insurance coverage for the Acquired Companies’ directors and officers, which
endorsement shall provide such directors and officers with coverage for a period
of not less than six years commencing on the Closing Date, and which endorsement
shall provide coverage amounts, terms, and conditions which are no less
favorable to the insured persons than the directors’ and officers’ liability
insurance coverage currently maintained by the Acquired Companies with respect
to acts or omissions occurring prior to or on the Closing Date. Fifty percent
(50%) of the cost of such policy shall be paid by Sellers or shall reduce the
amount otherwise payable to Sellers, in either case in connection with the
Initial Adjustment Amount. Buyer and the Acquired Companies shall not terminate,
modify or amend the terms of such endorsements in any manner.
Employee
Matters
At
or
prior to the Closing, the Acquired Companies shall pay to each of Neil Kiefer,
Bruce Clark and Sal Melilli all Sale Bonus Payments relating to the sale of
the
Acquired Companies under the terms of this Agreement and terminate and satisfy
all outstanding obligations with respect to the Acquired Companies under each
of
the Sale Participation Agreements.
At
or
prior to the Closing, the Acquired Companies shall terminate and satisfy all
outstanding obligations with respect to the Acquired Companies under each of
(i)
the Amended and Restated Executive Retirement Bonus Agreement with Neil G.
Kiefer, dated October 13, 1999, (ii) the Amended and Restated Executive
Retirement Bonus Agreement with Bruce W. Clark, dated October 13, 1999, and
(iii) the Executive Retirement Bonus Agreement with Salvatore Melilli, dated
September 12, 2006.
Charity
Commitments
At
or
prior to the Closing, Sellers shall make all payments required to be made at
such time and otherwise assume all liabilities and obligations as to the charity
commitments listed in Exhibit
2.4(a)(ii)(D) (the
“Charity
Commitments”).
Commercially
Reasonable Efforts
Between
the date of this Agreement and the Closing Date, Sellers and the Acquired
Companies will use their commercially reasonable efforts to cause the conditions
in Articles 7 and 8 to be satisfied; provided, however, that none of the Sellers
or the Acquired Companies shall be deemed not to have used such commercially
reasonable efforts solely because of any supplements to the Disclosure Schedule
made in accordance with Section 5.4(a)(ii).
Assistance
with Financing
The
Acquired Companies and their Subsidiaries shall, and shall use commercially
reasonable efforts to cause their respective Representatives to, cooperate
in
connection with the arrangement of the Financing as may be reasonably requested
by Buyer including by (i) participating in meetings, presentations, road shows,
due diligence sessions and sessions with rating agencies; (ii) assisting with
the preparation of materials for rating agency presentations, offering
documents, private placement memoranda, bank information memoranda, prospectuses
and similar documents required in connection with the Financing; (iii)
furnishing Buyer and its financing sources with historical financial information
and similar information regarding the Acquired Companies and their Subsidiaries
as may be reasonably requested by Buyer, including all historical financial
statements and financial data of the type reasonably identified by Buyer as
being required by Regulation S-X, Regulation S-K and Regulation D under the
Securities Act, to use in connection with the Financing or any other financing
transaction executed in connection with the transactions contemplated hereby
(the “Required
Financial Information”);
(iv)
cooperate with Buyer and its financing sources in providing business and
financial projections regarding the Acquired Companies and their Subsidiaries
as
may be reasonably requested by Buyer; (v) using commercially reasonable efforts
to obtain customary accountants’ comfort letters, legal opinions, surveys,
affidavits, subordination and non-disturbance agreements, memoranda of leases,
consents, waivers, title policies and commitments, and pay-off letters as may
be
reasonably requested by Buyer and its financing sources; provided, however,
that
the Acquired Companies shall not be required to request any opinion letter
with
respect to the HOA Agreements; (vi) executing and delivering, as of the Closing
Date, such definitive financing documents as may be reasonably requested by
Buyer; (vii) taking all corporate actions necessary to authorize the
consummation of the Financing and to permit the proceeds thereof to be made
available pursuant to the terms of the definitive agreements as to the
Financing; (viii) reasonably facilitating the pledge of collateral and the
perfection of the security interests therein; and (ix) taking all other actions
reasonably requested by Buyer in connection with the Financing; provided,
however, that notwithstanding the foregoing, (a) neither the Acquired Companies
nor any of their Subsidiaries shall be required to pay any commitment or other
similar fee or incur any other liability or expense in connection with the
Financing prior to the Closing Date, (b) neither the Acquired Companies nor
any
of their Subsidiaries shall be required to issue any private placement memoranda
or prospectus (and no such private placement memoranda or prospectus shall
reflect the Acquired Companies or any of their Subsidiaries as the issuer)
and
(c)
neither the Acquired Companies nor their Representatives shall be required
to
take any of the foregoing actions where such actions would violate the
attorney-client privilege or work product or similar doctrines of any one or
more of Sellers or the Acquired Companies. Buyer and Chanticleer shall jointly
and severally indemnify and hold harmless the Acquired Companies from and
against any and all liabilities, losses, damages, claims, costs, expenses,
interest, awards, judgments and penalties suffered or incurred by any one or
more of them in connection with arrangement of the Financing that would not
otherwise be or have been incurred by any one or more of the Acquired Companies.
Without limiting the generality of the immediately preceding sentence, Buyer
shall pay each of the Acquired Companies’ fees, charges, title premiums and
expenses, and each portion of such fees, charges, title premiums and expenses,
incurred in connection with the duties of the Acquired Companies under this
Section 5.11 by the later of (a) fifteen (15) days after the Acquired Companies,
or any of them, delivers a statement to Buyer or (b) the date when any such
fees, charges, title premiums and expenses are due and payable under the invoice
of the applicable service provider or other applicable third party, each with
respect to any of such fees, charges, title premiums and expenses including,
without limitation, the auditing fees and expenses of the Acquired Companies
in
excess of what the auditing fees and expenses of the Acquired Companies and
Affiliates would have been (without regard to the requirements in connection
with the Financing or the transactions under this Agreement) with respect to
their financial statements as at and for the two years ended December 30, 2007
and any incremental costs for re-auditing the 2005 and 2006 financial
statements.
Shares
Held in Trust
Sellers
shall not sell, assign or otherwise transfer the Shares held in the Seller
Revocable Trusts out of the Seller Revocable Trusts until the earlier of (a)
the
sale, assignment and transfer to Buyer and HI of the Shares pursuant to Section
2.2(a) or (b) the termination of this Agreement pursuant to Article
9.
Powers
of Attorney
At
or
prior to the Closing, Sellers shall cause the Acquired Companies to revoke
all
powers of attorney granted to Hooters-on-Location, Inc.
COVENANTS
OF BUYER
Approvals
of Governmental Bodies
As
promptly as reasonably practicable after the date of this Agreement, Buyer
will
make all filings required by Legal Requirements to be made by it in order for
Buyer to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Buyer will cooperate reasonably with Sellers
with respect to all filings that Sellers are required by Legal Requirements
to
make in connection with the Contemplated Transactions and cooperate reasonably
with Sellers in obtaining all Consents identified in Section 3.2(c) of the
Disclosure Schedule; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or, except as
otherwise contemplated in Section 4.2(c) and Section 5.3, to incur any expense
or other burden to obtain a Governmental Authorization or other
Consent.
Commercially
Reasonable Efforts
Except
as
set forth in the proviso to Section 6.1, between the date of this Agreement
and
the Closing Date, Buyer will use its commercially reasonable efforts to cause
the conditions in Articles 7 and 8 to be satisfied; provided, however, that
Buyer shall not be deemed not to have used such commercially reasonable efforts
solely because of any supplements to the Disclosure Schedule made in accordance
with Section 6.3(a)(ii).
Notification
Between
the date of this Agreement and the Closing Date, Buyer (i) will promptly notify
Seller Representative in writing if Buyer becomes aware of any fact or condition
that causes a representation or warranty by Buyer in Article 4 to be inaccurate,
and (ii) may, at its option, deliver to Seller Representative a supplement
to
the Disclosure Schedule specifying the occurrence after the date of this
Agreement of any new fact or condition that would cause a representation or
warranty by Buyer in Article 4 to be materially inaccurate had such
representation or warranty been made as of the time that Buyer became aware
of
such fact or condition, or that is necessary to be disclosed to Seller
Representative in order to make such representation and warranty correct in
all
material respects.
Between
the date of this Agreement and the Closing Date, Buyer will promptly notify
Sellers of the occurrence of any Breach of any covenant of Buyer in this Article
6 or of the occurrence of any event that would reasonably be expected to make
the satisfaction of the conditions in Article 8 impossible or
unlikely.
Except
as
provided in Section 6.3(a)(ii), no disclosure by Buyer pursuant to this Section
6.3 shall be deemed to amend or supplement the Disclosure Schedule or to prevent
or cure any misrepresentation, breach of warranty or breach of
covenant.
Board
of Directors
Immediately
following the Closing, Buyer shall cause the board of directors of HI to consist
of five (5) directors, of which three (3) directors will be chosen by
Chanticleer, one (1) director will be chosen by the Option 1 Sellers if such
Sellers elect to designate such a director, and one (1) director will be the
chief executive officer of HI if such chief executive officer elects to be
a
director of HI. For as long as all Option 1 Sellers continue to hold, in the
aggregate, not less than 50% of the shares of Chanticleer Common Stock issued
to
such Sellers at the Closing, Buyer shall cause one (1) director of HI to be
chosen by the Option 1 Sellers if such Sellers elect to designate such a
director, and one (1) director of HI to be the chief executive officer of HI
if
such chief executive officer elects to be a director of HI.
SEC
Filings and Reports
Chanticleer
will exercise its best efforts to file timely all reports required to be filed
by Chanticleer under the Exchange Act or the Investment Company Act, or, if
Chanticleer has no class of stock registered under Section 12(b) or 12(g) of
the
Exchange Act and is not otherwise required to file such reports under Sections
13 or 15(d) of the Exchange Act, it will, upon the reasonable request of any
holder of the Chanticleer Common Stock issued pursuant to this Agreement,
make publicly available such other information required under Rule 144 for
so
long as necessary to permit sales pursuant to Rule 144 under the Securities
Act), and it will take such further action as any holder of such shares of
Chanticleer Common Stock may reasonably request to the extent required from
time
to time to enable such holder to sell shares of Chanticleer Common Stock without
registration under the Securities Act within the limitations of the exemptions
provided by: (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time; or (ii) any similar rule or regulation hereafter adopted
by
the SEC. Upon the request of any such holder, Chanticleer will deliver to holder
a written statement as to whether it has complied with such requirements.
Registration
Rights
If
in
connection with the Financing purchasers of Chanticleer Common Stock receive
resale registration rights, each Option 1 Seller shall be entitled to
participate on substantially the same terms and conditions as such purchasers
in
any resale shelf registration statement prepared in connection therewith. If
in
connection with the Financing purchasers of Chanticleer Common Stock receive
“piggyback” registration rights on any registration statement filed by
Chanticleer to register for sale to the public shares of Chanticleer Common
Stock, each Option 1 Seller shall be entitled to participate on substantially
the same “piggyback” rights as such purchasers in any such registration
statement, subject to usual and customary cutbacks for transactions of that
nature. If in connection with the Financing purchasers of Chanticleer Common
Stock receive demand registration rights, each Option 1 Seller shall be entitled
to “piggyback” on such demand registration rights, subject to usual and
customary cutbacks for transactions of that nature.
Refunds
and Rebates
Because
of the obligations of Sellers under the Assumption Agreement, Sellers shall
be
entitled to any refund of premium, rebate, refund or other sum paid to any
of
the Acquired Companies with respect to any or all of the worker’s compensation
insurance policies and programs listed in the Assumption Agreement. Buyer shall
pay to each Seller such Seller’s Adjusted Percentage Share of any such amount,
within five Business Days after the receipt of such amount by any Acquired
Company, by delivery of immediately available funds to an account designated
by
each of Sellers. Despite anything to the contrary in this Section 6.7, none
of
Sellers shall be entitled to any payment under this Section 6.7 to the extent
that a premium, rebate, refund or other sum described in this Section 6.7 is
recorded as a current asset in the final determination of Net Working Capital
under Section 2.5.
CONDITIONS
PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s
obligation to purchase the Shares and to take the other actions required to
be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to
the
Closing, of each of the following conditions (any of which may be waived by
Buyer, in whole or in part):
Accuracy
of Representations
All
of
Sellers’ representations and warranties in Article 3 and all of the Seller
Individual Representations (considered collectively), and each of such
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement, and must
be
accurate in all material respects as of the Closing Date as if made
on
the Closing Date (in each case without regard to any notifications or
supplements made in accordance with Section 5.4), except that those
representations and warranties that are qualified by materiality or relate
to a
“Material Adverse Change” and those representations and warranties set forth in
Sections 3.3, 3.26 and 3.27 must be accurate in all respects (in each case
without regard to any notifications or supplements made in accordance with
Section 5.4).
Sellers’
Performance
All
of
the covenants and obligations that Sellers or the Acquired Companies are
required to perform or to comply with pursuant to this Agreement at or prior
to
the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
Each
document required to be delivered by Sellers and each other obligation of
Sellers pursuant to Section 2.4(a) must have been delivered or satisfied, and
each of the other covenants and obligations in Sections 5.3, 5.5, 5.6, 5.8,
5.9,
5.12 and 5.13 must have been performed and complied with in all
respects.
Consents
Each
of
the Consents identified in Sections 3.2(c) and 3.2(d) of the Disclosure Schedule
must have been obtained and must be in full force and effect (except to the
extent that the terms of Sections 3.2(c) and 3.2(d) of the Disclosure Schedule
expressly provide that such Consents shall not be obtained by the Acquired
Companies at or prior to the Closing), each of the notices identified in
Sections 3.2(c) and 3.2(d) of the Disclosure Schedule must have been given
(except to the extent that Sections 3.2(c) and 3.2(d) of the Disclosure Schedule
expressly provide that such notices will not be given by the Acquired Companies
at or prior to the Closing), and the waiting period required by the SEC for
the
withdrawal of Chanticleer’s election to be regulated as a business development
corporation under the Investment Company Act of 1940, as amended, shall have
expired and no comments relating thereto from the SEC shall remain
outstanding.
Additional
Documents
Sellers
must have delivered to Buyer such other documents as Buyer may reasonably
request for the purpose of (a) evidencing the accuracy of Sellers’
representations and warranties and each of the Seller Individual Representations
under the certificate described in Section 2.4(a)(ii)(L), (b) evidencing the
performance by Sellers of, or the compliance by, the Sellers with, any covenant
or obligation required to be performed or complied with by such Seller, (c)
evidencing the satisfaction of any condition referred to in this Article 7,
or
(d) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
No
Proceedings
No
Proceeding shall be pending before any Governmental Body wherein an unfavorable
Order would (a) prevent consummation of any of the Contemplated Transactions,
(b) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (c) adversely affect the right of Buyer to own directly
or indirectly the Shares and to control the Acquired
Companies, or (d) adversely affect the right of the Acquired Companies to own
their assets and to operate their businesses.
No
Claim Regarding Stock Ownership or Sale Proceeds
There
must not have been made or Threatened by any Person any claim asserting that
such Person (a) is the holder or the beneficial owner of, or has the right
to
acquire or to obtain beneficial ownership of, any stock of, or any other voting,
equity, or ownership interest in, any of the Acquired Companies (except in
respect of any such claim, in connection with Hooters of Manhattan, Ltd., by
Richard Yudenfriend (or any of his heirs or assigns) or Hootrich LLC (or any
of
its members, successors, Affiliates, or assigns) or (b) is entitled to all
or
any portion of the Aggregate Purchase Price payable for the Shares.
No
Prohibition
Neither
the consummation nor the performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time),
materially contravene, or conflict with, or result in a material violation
of,
or cause Buyer or any Person affiliated with Buyer to suffer any material
adverse consequence under, (a) any applicable Legal Requirement or Order or
(b)
any Legal Requirement or Order that has been published, introduced, or otherwise
proposed by or before any Governmental Body.
Financing
Buyer
will have obtained financing as of the Closing sufficient to consummate the
Contemplated Transactions and to fund the working capital requirements of the
Acquired Companies after the Closing on terms reasonably satisfactory to Buyer
(the “Financing”),
and
Buyer shall have received replacement letters of credit for those letters of
credit listed on Exhibit
7.8.
Acquired
Companies Performance
Since
December 31, 2006, there shall not have been any event, Proceeding, development,
or occurrence which had, or could reasonably be expected to have, a Material
Adverse Change.
Employment
Agreements
Buyer
shall have received employment agreements executed by each of Neil Kiefer,
Bruce
Clark and Sal Melilli, on the terms and conditions satisfactory to Buyer (the
“Employment
Agreements”),
which
Employment Agreements shall be in full force and effect.
Sale
Bonus Payment Releases
Buyers
shall have received releases in the form of Exhibit 7.11 (the “Sale
Bonus Payment Releases”)
executed by each of Neil Kiefer, Bruce Clark and Sal Melilli of all rights
pursuant to his Sale Participation Agreement, which Sale Bonus Payment Releases
shall be in full force and effect.
CONDITIONS
PRECEDENT TO SELLERS’ OBLIGATION TO CLOSE
Sellers’
obligation to sell the Shares and to take the other actions required to be
taken
by Sellers at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Seller Representative on behalf of the Sellers, in whole or in
part):
Accuracy
of Representations
All
of
Buyer’s representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date (in each case without regard to
any
notifications or supplements made in accordance with Section 6.3), except that
those representations and warranties that are qualified by materiality and
those
representations and warranties set forth in Section 4.8 must be accurate in
all
respects (in each case without regard to any notifications or supplements made
in accordance with Section 6.3).
Buyer’s
Performance
All
of
the covenants and obligations that Buyer is required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), must have been performed and complied with in all material
respects.
Buyer
must have delivered each of the documents required to be delivered by Buyer
pursuant to Section 2.4(b) and must have made the cash payments and grants
of
Chanticleer Common Stock required to be made by Buyer pursuant to Section
2.2(b), Section 2.4(b)(i), and Section 2.4(b)(iii).
Additional
Documents
Buyer
must have delivered such other documents as Sellers may reasonably request
for
the purpose of (i) evidencing the accuracy of any representation or warranty
of
Buyer
under
the certificate described in Section 2.4(b)(ii)(E),
(ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer or
(iii) evidencing the satisfaction of any condition referred to in this Article
8.
No
Proceedings
No
Proceeding shall be pending before any Governmental Body wherein an unfavorable
Order would (a) prevent consummation of any of the Contemplated Transactions,
or
(b) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation.
No
Prohibition
Neither
the consummation nor the performance of any of the Contemplated Transactions
will, directly or indirectly (with or without notice or lapse of time),
materially contravene, or conflict with, or result in a material violation
of,
or cause any Seller or any Person affiliated with any Seller
to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental
Body.
TERMINATION
Termination
Events
This
Agreement may, by notice given prior to or at the Closing, be
terminated:
by
either
Buyer or Seller Representative if a material Breach of any provision of this
Agreement has been committed by the other party and such Breach has not been
waived;
(i)
by
Buyer if satisfaction of any of the conditions in Article 7 is or becomes
impossible (other than through the willful failure of Buyer to comply with
its
obligations under this Agreement) and Buyer has not waived such condition on
or
before the Closing Date; or (ii) by Seller Representative, if satisfaction
of
any of the conditions in Article 8 is or becomes impossible (other than through
the willful failure of Sellers to comply with their obligations under this
Agreement) and Seller Representative has not waived such condition on or before
the Closing Date;
by
mutual
consent of Buyer and Seller Representative;
by
either
Buyer or Seller Representative if the Closing has not occurred (other than
through the willful and material failure of any party seeking to terminate
this
Agreement to comply with its obligations under this Agreement) on or before
July
31, 2008, or such later date as the parties may agree upon in writing;
by
Buyer
if any supplement to the Disclosure Schedule is made pursuant to Section
5.4(a)(ii); or
by
Seller
Representative if any supplement to the Disclosure Schedule is made pursuant
to
Section 6.3(a)(ii).
Effect
of Termination
Each
party’s right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement
is
terminated pursuant to Section 9.1, all further obligations of the parties
under
this Agreement will terminate; provided, however, that if this Agreement is
terminated by a party because of the willful Breach of this Agreement by the
other party or because one or more of the conditions to the terminating party’s
obligations under this Agreement is not satisfied as a result of the other
party’s willful failure to comply with its obligations under this Agreement, the
terminating party’s right to pursue all legal remedies will survive such
termination unimpaired.
INDEMNIFICATION;
REMEDIES
Survival;
Right to Indemnification Not Affected by Knowledge
All
representations and warranties (including, for such purposes, the Disclosure
Schedule), covenants and obligations in this Agreement will survive the Closing
subject to the limitations in this Article 10. The right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at
any
time, whether on, before or after the Closing Date with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation.
Indemnification
and Payment of Damages by Sellers
Sellers,
jointly and severally, will indemnify and hold harmless Buyer, the Acquired
Companies, and their respective Representatives, stockholders, controlling
persons, and affiliates (collectively, the “Buyer
Indemnified Persons”)
for,
and will pay to the Buyer Indemnified Persons the amount of, any loss,
liability, claim, damage, expense (including, except to the extent limited
under
Section 10.8, costs of investigation and defense and reasonable attorneys’
fees), whether
or not involving a third-party claim (collectively, “Damages”),
to
the extent caused by:
any
Breach of any representation or warranty made by Sellers (but not any Breach
of
any Seller Individual Representation) on the date of this Agreement in Article
3
(including, for such purposes, the Disclosure Schedule as it exists on the
date
of this Agreement) or in the certificate delivered by Sellers at the Closing
pursuant to Section 2.4(a)(ii)(L) (other than any Breach of any Seller
Individual Representation);
any
Breach by Sellers or the Acquired Companies of any covenant or obligation of
Sellers or the Acquired Companies in this Agreement; provided, however, that
no
Seller shall have any obligation to indemnify or hold harmless any Buyer
Indemnified Person after the Closing for any Breach of the covenants or
obligations set forth in Sections 5.1, 5.2, 5.3, 5.4, 5.6, 5.10 or 5.11;
any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by Sellers
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions;
any
Indebtedness Payoff Amount and Sellers’ Expenses that are not set forth in the
Initial Payment Certificate;
any
(i)
amount drawn by the beneficiary under, and any fees, expenses or other amounts
payable with respect to, any letter of credit listed in Exhibit
2.4(a)(ii)(I),
and
(ii) amount drawn by the beneficiary under any letter of credit listed in
Exhibit
7.8,
but (A)
in the case of the first letter of credit listed in Exhibit
7.8,
only
with respect to worker’s compensation injuries or claims that arose or the basis
of which arose prior to the Closing Date, or (B) in the case of any other letter
of credit listed in Exhibit
7.8,
only
with respect to a claim by the landlord, that arose or the basis of which arose
prior to the Closing Date, under the lease agreement to which the letter of
credit applies; or
relating
to any liabilities, obligations, or other Damages of
whatever kind or nature assigned or assumed under the Assumption Agreement
(whether known or unknown, whether asserted or unasserted, whether absolute
or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes
assumed
under the Assumption Agreement.
Indemnification
and Payment of Damages by an Individual Seller
Each
Seller, solely with respect to himself or herself, will indemnify and hold
harmless the Buyer Indemnified Persons
for, and will pay to the Buyer Indemnified Persons the amount of, any Damages
to
the
extent caused by:
any
Breach of any Seller Individual Representation made by such Seller;
or
any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Seller individually (or any Person acting on such Seller’s behalf), and not made
by or on behalf of all Sellers, in connection with any of the Contemplated
Transactions.
Indemnification
and Payment of Damages by Buyer and Chanticleer
Buyer
and
Chanticleer will jointly and severally indemnify and hold harmless each Seller,
and such Seller’s heirs, successors, and assigns (collectively, the
“Seller
Indemnified Persons”)
for,
and will pay to the Seller Indemnified Persons the amount of any Damages to
the
extent caused by:
any
Breach of any representation or warranty made by Buyer on the date of this
Agreement in Article 4 or in the certificate delivered by Buyer at Closing
pursuant to Section 2.4(b)(ii)(E);
any
Breach by Buyer of any covenant or obligation of Buyer in this Agreement;
provided, however, that Buyer and Chanticleer shall have no obligation to
indemnify or hold harmless any Seller Indemnified Person after the Closing
for
any Breach of the covenants or obligations set forth in Sections 6.1, 6.2 and
6.3; or
any
claim
by any Person for brokerage or finder’s fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by such
Person with Buyer (or any Person acting on its behalf) in connection with any
of
the Contemplated Transactions.
Exclusive
Remedy
Except
to
the extent of fraud by Sellers and as provided in the Sellers’ Closing
Documents, the remedies provided in Section 10.2 (subject to the limitations
of
this Article 10) will be the sole and exclusive remedies against Sellers with
respect to any of the Breaches or claims described in such Section or otherwise
arising against Sellers under, out of or relating to this
Agreement.
Except
to
the extent of fraud by an individual Seller and as provided in the Sellers’
Closing Documents, the remedies provided in Section 10.3 (subject to the
limitations of this Article 10) will be the sole and exclusive remedies against
such Seller with respect to any of the Breaches or claims described in such
Section or otherwise arising solely against such Seller under, out of or
relating to this Agreement.
Except
to
the extent of fraud by Buyer and as provided in the Sellers’ Closing Documents,
the remedies provided in Section 10.4 (subject to the limitations of Article
10)
will be the sole and exclusive remedies against Buyer and Chanticleer with
respect to any of the Breaches or claims described in such Section or otherwise
arising under, out of or relating to this Agreement.
Time
Limitations
Sellers
will have no liability (for indemnification or otherwise) with respect to any
representation or warranty (other than those in Sections 3.2(a), 3.2(b)(iii),
3.3, 3.9, 3.24, 3.25, 3.26 and 3.27 (each a “Sellers
Fundamental Representation”
and,
collectively the “Sellers
Fundamental Representations”))
made
by Sellers, unless on or before the eighteen month anniversary of the Closing
Date, Buyer gives notice to Seller Representative of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Buyer. No Seller will have liability (for indemnification or otherwise) with
respect to any representation or warranty (other than any Sellers Fundamental
Representations) made solely by such Seller with respect to himself or herself,
unless on or before the eighteen month anniversary of the Closing Date, Buyer
gives notice to such Seller of a claim specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer. A claim for Breach
of any Sellers Fundamental Representation may be made at any time within the
applicable statute of limitations plus 90 days provided that Buyer has given
notice of such claim, within such time, to Seller Representative (in the case
of
a breach of a Sellers Fundamental Representation by Sellers) or to the
representing Seller (in the case of a breach of a Sellers Fundamental
Representation made solely by such Seller as to himself or herself). All claims
for Breach of covenants survive in accordance with their terms subject to the
limitations of this Article 10.
Other
Limitations
Deductible
Sellers
will have no liability with respect to the matters described in Section 10.2(a)
until the total of all Damages with respect to the matters described in Sections
10.2 and 10.3 exceeds $300,000 (the “Deductible”), and then
only for the amount by which such Damages exceed the Deductible; provided,
however, the Deductible will not apply to (i) any fraudulent Breach by Sellers
of any of the representations and warranties in Article 3, or (ii) any Breach
of
any Sellers Fundamental Representations.
Maximum
Liability
Notwithstanding
anything contained in this Agreement or otherwise to the contrary, the maximum
aggregate liability of all Sellers with respect to the matters described in
Sections 10.2(a) and 10.3(a) shall not exceed 14.25% of the Aggregate Purchase
Price (the “Cap”), and the maximum liability of each Seller
under the Cap shall not exceed such Seller’s Adjusted Percentage Share of the
Cap; provided, however, that the Cap shall not apply to (i) any Breach of any
Sellers Fundamental Representations, or (ii) any fraudulent Breach of any of
the
representations and warranties in Article 3.
Insurance
None
of
the Buyer Indemnified Persons shall be entitled to any remedy for any Breach
of
any representation, warranty, covenant or agreement to the extent that insurance
proceeds have been received by any or all of the Buyer Indemnified Persons
and
the amount of such insurance proceeds shall be an offset against such claim;
provided, however, that the Buyer Indemnified Persons have no obligation
hereunder to seek insurance proceeds or make any insurance claim.
Letter
of Credit
None
of
Sellers shall be personally liable for any Breach of any representation,
warranty, covenant or agreement of any Seller or Sellers, or any payment
required to be made by Sellers under Section 2.8, to the extent that proceeds
under the Letter of Credit have been received by any or all of the Buyer
Indemnified Persons, or proceeds are available to any or all of the Buyer
Indemnified Persons under the terms of the Letter of Credit, with respect to
such Breach or required payment.
Net
Working Capital Determination; and EBITDA Determination
Despite
anything to the contrary in this Article 10, none of Sellers shall have any
liability with respect to a claim under this Article 10 to the extent and solely
to the extent that the amount of such claim is taken into account by a current
liability recorded in the final determination of Net Working Capital under
Section 2.5. Despite anything to the contrary in this Article 10, none of
Sellers shall have any liability with respect to a claim under this Article
10
to the extent and solely to the extent that the amount of such claim is taken
into account by an EBITDA Adjustment Amount.
Procedure
for Indemnification—Third Party Claims
Promptly
after receipt by an indemnified party under Section 10.2, 10.3, or 10.4 of
notice of the commencement of any Proceeding against it, such indemnified party
will, if a claim is to be made against an indemnifying party under such Section,
give notice to the indemnifying party of the commencement of such claim,
provided that if Sellers are the indemnifying party under Section 10.2 then
Buyer need only give notice to Seller Representative and Seller Representative
shall take all actions for Sellers as an indemnifying party pursuant to this
Section 10.8 with respect to such Proceeding. Failure to give notice to the
indemnifying party will not relieve the indemnifying party of any liability
that
it may have to any indemnified party, except to the extent that the indemnifying
party demonstrates that the defense of such action is prejudiced by the
indemnified party’s failure to give such notice.
If
any
Proceeding referred to in Section 10.8(a) is brought against an indemnified
party and it gives notice to the indemnifying party of the commencement of
such
Proceeding, the indemnifying party, subject to the terms of Section 10.10,
will
be entitled to participate in such Proceeding and, to the extent that it wishes
(unless the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding and
provide indemnification (to the extent not covered by the Letter of Credit)
with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel reasonably satisfactory to the indemnified party at any time within
thirty (30) days after the indemnified party has given notice of the
commencement of such Proceeding and, after notice from the indemnifying party
to
the indemnified party of its election to assume the exclusive defense of such
Proceeding, the indemnifying party will not, as long as it conducts such defense
with reasonable diligence, be liable to the indemnified party under this Article
10 for any fees of other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other
than
as expressly set forth in this Section 10.8. If the indemnifying party assumes
the defense of a Proceeding, (i) no compromise or settlement of such claims
may
be effected by the indemnifying party without the indemnified party’s consent
(which may not be unreasonably withheld or delayed) unless (A) there is no
finding or admission of any violation of Legal Requirements that would
reasonably be expected to adversely affect the Acquired Companies in any
material respect or any violation of the rights of any Person and no effect
on
any other claims that may be made against the indemnified party and (B) the
sole
relief provided is monetary damages that are paid in full by the indemnifying
party, (ii) the indemnified party will have no liability with respect to any
compromise or settlement of such claims effected without its consent, (iii)
the
indemnified party may participate in the defense, settlement or compromise
of
the Proceeding and employ separate counsel at its sole expense except as
expressly provided in this Section 10.8, and (iv) the indemnifying party shall
consult with the indemnified party and take into account the advice and opinions
of the indemnified party and its counsel in the conduct of such defense or
settlement, and the indemnifying party shall bear the reasonable fees, costs
and
expenses of such separate counsel if: (A) the indemnified party reasonably
believes that the there is a reasonable likelihood of a conflict of interest
between the indemnifying party and the indemnified party or (B) the indemnifying
party shall not have employed counsel to represent the indemnified party within
a reasonable time after the indemnifying party has received notice of the
institution of such Proceeding. If notice is given to an indemnifying party
of
the commencement of any Proceeding and the indemnifying party does not, within
thirty (30) days after the indemnified party’s notice is given, give notice to
the indemnified party of its election to assume the defense of such Proceeding,
the indemnifying party will be bound by any determination made in such
Proceeding or any compromise or settlement effected by the indemnified party.
Notwithstanding
the foregoing, if an indemnified party determines in good faith after consulting
with counsel that (i) there is a reasonable probability that a Proceeding may
adversely affect the indemnified party or its affiliates other than as a result
of monetary damages for which it would be entitled to indemnification under
this
Agreement, (ii) there is a conflict of interest that would prevent the
indemnifying party from fully or adequately representing the indemnified party’s
interests with respect to a Proceeding, (iii) the indemnifying party assumes
such defense but fails to conduct the defense of such Proceeding with reasonable
diligence or (iv) the indemnifying party declines to direct the defense of
any
such claims or Proceeding pursuant to this Section 10.8 or withdraws from such
defense, the indemnified party may, by notice to the indemnifying party, assume
the exclusive right to defend, compromise, or settle such Proceeding, but the
indemnifying party will be entitled to participate in such Proceedings at its
own expense. The indemnifying party will not be bound by any determination
of a
Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld or delayed).
Sellers
hereby consent to the non-exclusive jurisdiction of any court in which a
Proceeding is brought against any Buyer Indemnified Person for purposes of
any
claim that a Seller Indemnified Person may have under this Agreement with
respect to such Proceeding or the matters alleged therein, and agree that
process may be served on Sellers with respect to such a claim anywhere in the
world.
Procedure
for Indemnification--Other Claims
A
claim
for indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought provided
that that if Sellers are the indemnifying party under Section 10.2, Buyer need
only give notice to Seller Representative (and any persons who are designated
to
receive copies of any notices to Seller Representative under Section 12.3)
and
Seller Representative shall take all actions for Sellers as an indemnifying
party pursuant to this Section 10.9 with respect to any claim
hereunder.
Tax
Matters
Tax
Indemnification.
Sellers
shall indemnify, save and hold Buyer harmless from and against any and all
(i)
Taxes of the Acquired Companies with respect to any Tax year or portion thereof
ending on or before the Closing Date (or for any Tax year beginning before
and
ending after the Closing Date, to the extent allocable (as determined in the
following sentence) to the portion of such period beginning before and ending
on
the Closing Date), except to the extent that such Taxes are reflected in the
reserve for Tax liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown
on
the face of the balance sheet (rather than in any notes thereto) included in
the
Net Working Capital Statement and taken into account in calculating Net Working
Capital at Closing, (ii) the unpaid Taxes of any Person (other than the Acquired
Companies) under Treasury Regulations Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract,
or
otherwise, and (iii) any Taxes arising from or related to the sale, distribution
or other transfer of the real properties as described in Section 2.4(a)(v)
under
the terms of such Section. For purposes of the preceding sentence, except as
provided in the following sentence, in the case of any Taxes that are imposed
on
a periodic basis and are payable for a Tax Period that includes (but does not
end on) the Closing Date (a “Straddle
Period”),
the
portion of such Tax that relates to the portion of such Tax Period ending on
the
Closing Date shall (i) in the case of any Taxes other than Taxes based upon
or
related to income or receipts, be deemed to be the amount of such Tax for the
entire Tax Period multiplied by a fraction the numerator of which is the number
of days in the Tax Period ending on the Closing Date and the denominator of
which is the number of days in the entire Tax Period, and (ii) in the case
of
any Tax based upon or related to income or receipts, be deemed equal to the
amount which would by payable if the relevant Tax Period ended on the Closing
Date. Taxes for Tax Periods or portions thereof ending on or before the Closing
Date shall be determined without regard to any items of deduction, loss or
credit attributable to the effectuation of this Agreement, to the extent paid
directly or indirectly by Buyer.
Transfer
Taxes.
All
transfer Taxes, if any, arising out of or in connection with the Contemplated
Transactions shall be paid by Sellers when due, and Sellers shall, at their
own
expense, file all necessary Tax Returns and other documentation with respect
to
all such transfer Taxes. Buyer, the Acquired Companies and Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in the preparation, execution and filing of, all Tax Returns, applications
or
other documents regarding any transfer Taxes that become payable in connection
with the Contemplated Transactions.
Responsibility
for Filing Tax Returns.
Tax
Periods Ending On or Before the Closing Date. The Seller
Representative shall prepare or cause to be prepared and file or cause to be
filed all Tax Returns for the Acquired Companies for all periods ending on
or
prior to the Closing Date that are filed after the Closing Date. The Seller
Representative shall permit Buyer to review and comment on each such Tax Return
described in the preceding sentence prior to filing. To the extent permitted
by
applicable law, Sellers shall include any income, gain, loss, deduction or
other
Tax items for such period on their Tax Returns in a manner consistent with
the
Schedule K-1s furnished by the Acquired Companies to Sellers for such periods.
Taxes for Tax periods or portions thereof ending on or before the Closing Date
shall be determined without regard to any items of deduction, loss or credit
of
the Acquired Companies attributable to the effectuation of this Agreement,
to
the extent paid directly or indirectly by Buyer.
Straddle
Tax Periods.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of any of the Acquired Companies for any Straddle Period. For
purposes of this Section 10.10(c)(ii), Taxes shall be allocated in the manner
set forth in Section 10.10(a). Sellers shall pay to Buyer within fifteen (15)
days after the date on which Taxes are paid with respect to such periods, that
amount equal to the portion of such Taxes which relates to the portion of such
taxable period ending on the Closing Date, except to the extent that such Taxes
are reflected in the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the balance sheet (rather than in any notes
thereto) included in the Net Working Capital Statement and taken into account
in
calculating Net Working Capital as of the Closing
Date.
Cooperation
on Tax Matters.
Buyer,
Sellers, Seller Representative and the Acquired Companies shall cooperate
reasonably, as and to the extent reasonably requested by the other parties,
in
connection with the filing of Tax Returns pursuant to this Agreement and any
Proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party’s request) the provision of records and information
which are reasonably relevant to any such Proceeding and making employees
available on a mutually convenient basis to provide additional information
and
explanation of any material provided hereunder. Buyer, Sellers, Seller
Representative and the Acquired Companies agree (i) to retain all books and
records with respect to Tax matters pertinent to the Acquired Companies relating
to any Tax Period beginning before the Closing Date until the expiration of
the
applicable statute of limitations (and, to the extent notified by Buyer, any
extensions thereof), and to abide by all record retention agreements entered
into with any Governmental Body, (ii) to deliver or make available to Buyer,
within 60 days after the Closing Date, copies of all such books and records,
and
(iii) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party
so
requests, Buyer, Sellers, Seller Representative and the Acquired Companies,
as
the case may be, shall allow the other party to take possession of such books
and records at such other party’s expense. Buyer, Sellers and Seller
Representative further agree, upon request, to use reasonable efforts to obtain
any certificate or other document from any Governmental Body or any other Person
as may be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
Tax
Claims.
If,
subsequent to the Closing, any of Buyer, the Acquired Companies, or Sellers
receives notice of a claim by any Governmental Body that, if successful, might
result in an indemnity payment hereunder (a “Tax
Claim”),
then
within 15 days after receipt of such notice, Buyer, the Acquired Companies,
Seller Representative, as the case may be, shall give notice of such Tax Claim
to the other parties. Seller Representative shall have the right to control
the
conduct and resolution of any such Tax Claim for which Sellers agree that any
resulting Tax is covered by the indemnity provided in Section 10.10(a) hereof;
provided, however, that if the resolution of any such Tax Claim (or any portion
thereof) may affect the Taxes of any Acquired Company for a post-Closing Tax
Period, then Seller Representative and Buyer shall jointly control the conduct
and resolution of such Tax Claim (or portion thereof) and in no event shall
either such party settle or otherwise resolve any such Tax Claim without the
written consent of the other party, which shall not be unreasonably withheld
or
delayed. Seller Representative and Buyer shall jointly control the conduct
and
resolution of any Tax Claim relating to a Straddle Period. If Seller
Representative elects not to control the conduct and resolution of any Tax
Claim
relating to a Tax Period ending on or prior to the Closing Date, or to
participate in the conduct and resolution of any Tax Claim relating to a
Straddle Period, Seller Representative shall notify Buyer in writing and Buyer
shall have the right to control the conduct and resolution of such Tax Claim;
provided, however, that Buyer shall keep Seller Representative informed of
all
developments on a timely basis. Each party shall bear its own costs incurred
in
participating in any proceeding relating to any Tax Claim.
Tax-Sharing
Agreements.
All
tax-sharing agreements or similar agreements with respect to or involving the
Acquired Companies shall be terminated as of the Closing Date and, after the
Closing Date, the Acquired Companies shall not be bound thereby or have any
liability thereunder.
S
Corporation Status.
Neither
the Acquired Companies nor Sellers will revoke the Acquired Companies’ elections
to be taxed as S corporations within the meaning of Sections 1361 and 1362
of
the Code. Neither the Acquired Companies nor Sellers will take or allow any
action, or fail to take or allow any action, that would result in the
termination of the Acquired Companies’ status as validly electing S corporations
within the meaning of Sections
1361 and 1362 of the Code.
Section
338(h)(10) Election.
Buyer
(and to the extent necessary, the Acquired Companies) and Sellers jointly shall
make timely and irrevocable elections under Section 338(h)(10) of the Code
with
respect to Buyer’s acquisition of the Shares pursuant to this Agreement and, if
permissible, similar elections under any applicable state and local Tax laws
(collectively, the “Section 338 Elections”). Buyer and Sellers
agree not to take any action that could cause the Section 338 Elections to
be
invalid, and shall take no position contrary thereto unless required pursuant
to
a determination as defined in Section 1313(a) of the Code or any similar
provision of any state, foreign or local law.
As
soon as practicable hereafter, Buyer shall prepare Internal Revenue Service
Form
8023 and any similar forms necessary to effectuate the Section 338 Elections
under applicable state and local laws (collectively, the “Section
338 Election Forms”).
Sellers shall cooperate with Buyer in the preparation of the Section 338
Election Forms and shall deliver duly completed, executed copies thereof on
the
Closing Date. Buyer and Sellers shall cooperate with each other and take all
actions necessary and appropriate (including filing such additional forms,
Tax
Returns, elections, schedules and other documents as may be required) to effect
and preserve the Section 338 Elections in accordance with the provisions of
Treasury Regulation Section 1.338(h)(10)-1 and comparable provisions of
applicable state and local Tax Laws.
Within
one hundred twenty (120) days after Closing, Buyer shall prepare a determination
of the Aggregate Deemed Sales Price (“ADSP”)
(as defined in the applicable Treasury Regulations under Section 338) and a
proposed allocation of the ADSP among the assets of the Acquired Companies
(the
“Proposed
Allocation”)
and shall deliver the Proposed Allocation to the Seller Representative, together
with a copy of any appraisals on which the Proposed Allocation is based. Buyer
and the Seller Representative shall consult in good faith with regard to the
determination of the ADSP and the Proposed Allocation, provided, however, that
the Seller Representative shall accept Buyer’s determination of the ADSP and the
Proposed Allocation, to the extent that the ADSP and Proposed Allocation are
reasonable and consistent with applicable law (as finally agreed, the
“Final
Allocation”).
As soon as practicable after determination of the Final Allocation, Buyer shall
prepare consistently therewith Internal Revenue Service Form 8883 and any
similar forms required by applicable state and local Tax laws (collectively,
the
“Section
338 Allocation Forms”),
and promptly deliver copies of the Section 338 Allocation Forms to the Seller
Representative.
Buyer,
the Acquired Companies and Sellers shall file all Tax Returns (including but
not
limited to the Section 338 Election Forms and the Section 338 Allocation Forms)
consistent with the Final Allocation and shall not voluntarily take any action
inconsistent therewith upon any audit or examination of any Tax Return or in
any
other filing or proceeding relating to Taxes, unless required pursuant to a
determination as defined in Section 1313(a) of the Code or any similar provision
of any foreign, state or local law.
Buyer
shall bear all costs and expenses of preparing the Section 338 Election Forms,
the Proposed and Final Allocations and the Section 338 Allocation Forms, other
than costs and expenses incurred by Sellers or the Seller Representative in
connection with their review and execution thereof.
SELLER
REPRESENTATIVE
Appointment
Each
of
Sellers, by the execution of this Agreement, hereby appoints Seller
Representative as the agent, proxy and attorney in fact (coupled with an
interest) for Sellers for the limited purposes of Seller Representative
expressly set forth in this Article or elsewhere in this Agreement.
Authority
Seller
Representative shall have the full power and authority on Sellers’ behalf (a) to
disburse to Sellers any funds received under this Agreement for the benefit
of
Sellers, and (b) to take all actions permitted to be taken by or on behalf
of
Sellers, and to bind Sellers, under Section 2.5, Section 2.6, Section 2.7,
Section 2.8, Article 8, Article 9, Article 10 (other than Section 10.3), Section
12.3, Section 12.4, Section 12.5 and Section 12.11 of this Agreement. For the
avoidance of doubt, under no circumstances shall Seller Representative be
entitled to enter into any amendment of or modification to this Agreement,
waive
any provision of this Agreement, or assign any of the rights of any Seller
under
this Agreement or with respect to any of the Contemplated Transactions. Except
to the extent that Seller Representative violates the authority of Seller
Representative under this Article 11, no Seller shall have the right, against
Buyer Indemnified Persons, to object, dissent, protest or otherwise contest
the
same; provided, however, that Seller Representative shall not take any such
action where such action materially and adversely affects the substantive rights
or obligations of one Seller, or group of Sellers, without a similar
proportionate effect upon the substantive rights or obligations of all Sellers,
unless each such disproportionately affected Seller consents in writing thereto
and other than such disproportionate effects resulting from a Seller’s election
to be an Option 1 Seller and not an Option 2 Seller, or to be an Option 2 Seller
and not an Option 1 Seller, as applicable.
Authorized
Actions
Each
Seller agrees that Buyer shall be entitled to rely on any action taken by Seller
Representative, on behalf of Sellers, pursuant to Section 11.2 (an
“Authorized
Action”).
All
decisions and actions by Seller Representative (to the extent expressly
authorized by this Agreement) shall be binding upon all of Sellers. Buyer agrees
that Seller Representative, in the capacity as Seller Representative, shall
have
no liability to Buyer for any Authorized Action, except to the extent that
such
Authorized Action is found by a final order of a court of competent jurisdiction
to have constituted fraud or bad faith.
Resignation
and Removal
Seller
Representative may resign by giving not less than 60 days notice to Buyer and
the other Sellers. Sellers may remove Seller Representative provided that one
or
more Sellers have given Seller Representative and Buyer written notice of such
removal not less than 10 days prior to such removal. Upon any resignation,
removal or death of Seller Representative, Sellers shall designate another
Seller Representative and shall give Buyer prompt written notice of such
designation (and in no event later than ten days after such
designation).
GENERAL
PROVISIONS
Expenses
Except
as
otherwise expressly provided in this Agreement, each party to this Agreement
will bear its respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions,
including all fees and expenses of agents, representatives, counsel, and
accountants.
Public
Announcements
Unless
consented to by the other parties in advance or required by Legal Requirements,
the New York Stock Exchange, NASDAQ, AMEX or any other national securities
exchange or as necessary or advisable in connection with the Financing, prior
to
the Closing, Buyer and Sellers shall, and Sellers shall cause the Acquired
Companies to, and after the Closing, Sellers and Buyer shall, and Buyer shall
cause the Acquired Companies to, keep this Agreement strictly confidential
and,
except as may be required by law, the New York Stock Exchange, NASDAQ, AMEX
or
any other national securities exchange or with respect to any Proceeding
concerning this Agreement, shall not make any disclosure of this Agreement
or
any public announcement or similar publicity with respect to this Agreement
or
the Contemplated Transactions to any Person except to their respective advisors,
agents and sources of financing who have a need to know.
Notices
All
notices, consents, waivers, and other communications under this Agreement must
be in writing and will be deemed to have been duly given, delivered and received
when (a) delivered by hand (with written confirmation of receipt) or (b) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses set
forth
below (or to such other addresses as a party may designate by notice to the
other parties):
Sellers:
Pamela
W.
Blakely
1287
Osprey Trail
Naples,
FL 34105
17140
El
Mirador
Rancho
Santa Fe, California 92067
Gilbert
Di Giannantonio
3717
Woodridge Place
Palm
Harbor, FL 34684
Paulette
Di Giannantonio
3717
Woodridge Place
Palm
Harbor, FL 34684
Edward
C.
Droste
136
Midway Island
Clearwater,
FL 33767
Dennis
Johnson
277
Aberdeen St.
Dunedin,
FL 34698
Susan
Johnson
302
Garner Dr.
Waverly,
IA 50677
Eleanor
Ranieri
949
Skye
Lane
Palm
Harbor, FL 34683
William
Ranieri
949
Skye
Lane
Palm
Harbor, FL 34683
Linda
H.
Rice
19501
Angel Lane
Odessa,
FL 33556
with
a
copy to:
Carlton
Fields, P.A.
Corporate
Center Three at International Plaza
4221
W.
Boy Scout Boulevard
Tampa,
Florida 33607-5736
Attention:
Nathaniel L. Doliner
Buyer:
Wise
Acquisition Corp.
4201
Congress Street, Suite 145
Charlotte,
NC 28209
Attention:
Michael Pruitt
with
a
copy to:
Latham
& Watkins LLP
633
West
Fifth Street, Suite 4000
Los
Angeles, CA 90071
Attention:
James P. Beaubien
Jason
H.
Silvera
Chanticleer:
Wise
Acquisition Corp.
4201
Congress Street, Suite 145
Charlotte,
NC 28209
Attention:
Michael Pruitt
with
a
copy to:
Latham
& Watkins LLP
633
West
Fifth Street, Suite 4000
Los
Angeles, CA 90071
Attention:
James P. Beaubien
Jason
H.
Silvera
Seller
Representative:
Brandon
Realty Venture, Inc.
John
Blakely
1287
Osprey Trail
Naples,
Florida 34105
-and-
Brandon
Realty Venture, Inc.
Edward
Droste
c/o
Provident Advertising & Marketing, Inc.
107
Hampton Road, Suite 120
Clearwater,
Florida 33759
with
a
copy to:
Carlton
Fields, P.A.
Corporate
Center Three at International Plaza
4221
W.
Boy Scout Boulevard
Tampa,
Florida 33607-5736
Attention:
Nathaniel L. Doliner
Jurisdiction;
Service of Process
Any
action or proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement: (a) if brought by any Buyer Indemnified Person
against Sellers, Seller Representative, or any Seller, shall be brought, except
as provided in Section 10.8(d), solely in the courts of the State of Florida
located in Pinellas County, Florida, or, alternatively, if it has or can acquire
jurisdiction, in the United States District Court for the Middle District of
Florida, Tampa Division; or (b) if brought by any Seller, by Sellers or by
Seller Representative against Buyer, shall be brought solely in the courts
of
the State of New York, or, alternatively, if it has or can acquire jurisdiction,
in the United States District Court for the Southern District of New York.
Each
of the parties consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein.
Further
Assurances
The
parties agree (a) to execute and deliver to each other such other documents,
and
(b) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the terms of this
Agreement.
Waiver
Neither
the failure nor any delay by any party in exercising any right, power, or
privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single
or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law: (a) any waiver of a claim or right arising out of this Agreement is
effective only if such waiver is in a writing signed by the party against which
or whom the waiver is being asserted; (b) no waiver that may be given by a
party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
Entire
Agreement and Modification
Without
impacting any provisions of the Sellers’ Closing Documents or other agreements
expressly contemplated to be entered into in connection herewith, this Agreement
supersedes all prior agreements between the parties, and all prior
representations, warranties or other assurances, with respect to its subject
matter or with respect to the Acquired Companies and Shares and constitutes
a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party or parties that would be
affected by such amendment.
Assignments,
Successors, and No Third-Party Rights
Neither
party may assign any of its rights under this Agreement without the prior
consent of the other parties, except that Buyer may assign any of its rights
under this Agreement to any Affiliate of Buyer provided that Buyer shall remain
liable for all representations, warranties, covenants, obligations and
agreements of Buyer under this Agreement and for all obligations of HI to
purchase the Remaining Companies Interests under the terms of this Agreement;
provided, however, that Buyer may collaterally assign this Agreement and any
or
all rights or obligations hereunder (including Buyer’s right to seek
indemnification hereunder) to any Person from which Buyer or one of its
Affiliates have borrowed money in order to enter into and consummate the
transactions under this Agreement. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of, the heirs, successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement and the parties’ respective heirs,
successors and permitted assigns any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement.
This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their respective heirs,
successors and permitted assigns.
Severability
If
any
provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain
in
full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the
extent not held invalid or unenforceable.
Section
Headings, Construction
The
headings in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to “Article,” “Articles,”
“Section,” or “Sections” refer to the corresponding Article, Articles, Section
or Sections of this Agreement. All words used in this Agreement will be
construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word “including” does not limit the preceding
words or terms.
Governing
Law
This
Agreement and all claims arising out of or relating to it will be governed
by
the laws of the State of New York, and federal law as applied by courts located
in the State of New York or the Second Circuit Court of Appeals, without regard
to conflicts of laws rules or principles that would result in the application
of
the laws of any jurisdiction other than the laws of the State of New York and
such federal law.
Legal
Representation.
Each
Seller hereby agrees and acknowledges that such Seller has had the opportunity
to consult his or her own counsel with regard to this Agreement, its contents,
the Contemplated Transactions and the related documents.
Counterparts
This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
[signature
pages follow]
The
parties have executed and delivered this Agreement as of the date first written
above.
BUYER:
|
|
ACQUIRED
COMPANIES:
|
|
|
|
Wise
Acquisition Corp.
|
|
HOOTER’S,
INC.
|
|
|
|
HOOTER’S
II, INC.
|
|
|
|
HOOTERS
III, INC.
|
By:
|
|
|
HOOTERS
MANAGEMENT CORPORATION
|
Name:
|
|
HOOTERS
OF AURORA, INC.
|
Title:
|
|
HOOTERS
OF BRANDON, INC.
|
|
|
|
HOOTERS
OF CHANNELSIDE, INC.
|
|
|
|
HOOTERS
OF CLEARWATER, INC.
|
|
|
|
HOOTERS
OF CRYSTAL LAKE, INC.
|
|
|
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HOOTERS
OF DOWNERS GROVE, INC.
|
CHANTICLEER
(solely for purposes of Section 5.11,
|
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HOOTERS
OF JOLIET, INC.
|
Section
6.5, and Article 10):
|
|
HOOTERS
OF LANSING, INC.
|
Chanticleer
Holdings, Inc. |
|
HOOTERS
OF MANHATTAN, INC.
|
|
|
|
HOOTERS
OF MANHATTAN, LTD.
|
|
|
|
HOOTERS
OF MELROSE PARK, INC.
|
By:
|
|
|
HOOTERS
OF NORTH TAMPA, INC.
|
Name:
|
|
HOOTERS
OF OAK LAWN, INC.
|
Title:
|
|
HOOTERS
OF ORLAND PARK, INC.
|
|
|
|
HOOTERS
OF PORT RICHEY, INC.
|
|
|
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HOOTERS
OF SOUTH TAMPA, INC.
|
|
|
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HOOTERS
OF SPRING HILL, INC.
|
|
|
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HOOTERS
OF WELLS STREET, INC.
|
SELLER
REPRESENTATIVE:
|
|
HOOTERS
ON GOLF, INC.
|
Brandon
Realty Venture, Inc.
|
|
HOOTERS
ON HIGGINS, INC.
|
|
|
|
HOOTERS
ON ROOSEVELT, INC.
|
|
|
|
HTRS
SERVICES CORP.
|
By:
|
|
|
|
|
Name:
|
|
By:
|
|
Title:
|
|
|
Neil
Kiefer
|
|
|
|
|
Chief
Executive Officer and President
|
[
signature page of Sellers follows]
|
|
|
|
|
|
|
|
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PAMELA
BLAKELY,
individually
|
|
DENNIS
JOHNSON,
individually
|
|
|
|
|
|
|
EDWARD
C. DROSTE,
individually
|
|
SUSAN
G. JOHNSON,
individually, and as trustee of The Susan G. Johnson Revocable Living
Trust dated September 7, 2006
|
|
|
|
|
|
|
GILBERT
DI GIANNANTONIO,
individually, and as trustee of his Di Giannantonio Revocable
Trust
|
|
ELEANOR
RANIERI,
individually, and as co-trustee of each of the Ranieri Revocable
Trusts
|
|
|
|
|
|
|
PAULETTE
DI GIANNANTONIO,
individually, and as co-trustee of each of the Di Giannantonio Revocable
Trusts
|
|
WILLIAM
RANIERI,
individually, and as co-trustee of each of the Ranieri Revocable
Trusts
|
|
|
|
|
|
|
|
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LINDA
RICE, individually
|