AMENDED AND RESTATED ASSETS PURCHASE AGREEMENT

 

Agreement :

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                       Purchase and Sale .

 

(a)                                   Acquired Assets .  Upon the terms and subject to the conditions set forth herein, Sellers hereby agree to sell, transfer, convey, assign and deliver to Buyer at the Closing, and Buyer hereby agrees to purchase and acquire from Sellers at the Closing, free and clear of all Security Interests (as defined below), all of Sellers’ right, title and interest in and to certain assets of Sellers which are all of the assets required to operate the Stores and Business as presently conducted and are in such amount, quality and specifications required to operate the Stores in compliance with all Papa John’s current specifications and standards (the “Acquired Assets”):

 

As used in this Agreement, “Security Interests” means any mortgage, pledge, assessment, security interest, lien, liability, obligation, option, restriction, adverse claim or other encumbrance or debt of any kind or nature, other than (i) such as shall be included in the Assumed Liabilities (as defined herein), and (ii) such as shall have been created by the terms of the Leases, the Licenses or the Assigned Contracts validly transferred by Sellers to Buyer in accordance with this Agreement.

 

(i)                                     all machinery, equipment, signage, smallwares, telephone systems, computers (including — to the extent owned by Sellers —  laptops, desktops, PDAs, cellular telephones and Blackberry devices currently used by any personnel directly associated with the Stores or the operation of the Business), computer systems, software and data licenses (exclusive of Sellers’ proprietary software and data relating to Papa John’s franchised system generally to be made available to Buyer pursuant to the Franchise Agreement(s), as hereinafter defined), furniture, fixtures and all other tangible personal property owned by either Seller and located in the Stores, including, without limitation, the personal property listed on Schedule 1(a)(i)  of the Disclosure Schedules (as defined in Section 6 of this Agreement) by Sellers and also

 

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including (to the extent assignable) all warranties and guaranties, express or implied, relating thereto;

 

(ii)                                 Sellers’ right, title and interest in and to the Leased Real Property (as defined in Section 6(f) hereof) for the Stores pursuant to and as more fully described in the Leases (as defined in Section 6(f) hereof).  As of the Closing Date, Sellers shall have obtained all of the required Third Party Consents (as defined in Section 6(k)(2) of this Agreement) to validly assign and transfer the Leases for the Leased Real Property to Buyer;

 

(iii)                             all licenses, permits or franchises listed on Schedule 1(a)(iii)  of the Disclosure Schedules which are all of the licenses, permits or franchises necessary to operate the Stores and Business as presently conducted issued by any Governmental Entity (as defined below) to either Seller and relating to the operations of the Business (collectively, the “Licenses”) to the extent they are transferable (for purposes of this Agreement, “ Governmental Entity ” means any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency).  As of the Closing Date, Sellers shall have received the required Third Party Consents necessary to assign and validly transfer the Licenses to Buyer, except where the failure to obtain such Third Party Consent would not have a Business Material Adverse Effect;

 

(iv)                                the rights under all contracts or agreements to which either Seller is a party listed in
Schedule 6(g)  of the Disclosure Schedules and which are designated as Assigned Contracts (as defined in Section 6(g) hereof) which are all of the contracts or agreements necessary to operate the Stores and Business as presently conducted.  As of the Closing Date, Sellers shall have received the required Third Party Consents necessary to assign and validly transfer the Assigned Contracts to Buyer, except where the failure to obtain such consent would not have a Business Material Adverse Effect;

 

(v)                                    all telephone and facsimile numbers;

 

(vi)                                all Stores’ inventory (including all materials and supplies), uniforms, signs, advertising and marketing materials located in the Stores and listed in Schedule 1(a)(vi)  of the Disclosure Schedules which inventory is in such amount, quality and

 

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specifications required to operate the Stores in compliance with all Papa John’s current specifications and standards (but excluding Sellers’ respective proprietary rights in trademarks, tradenames, trade dress, copyrights or other intellectual property, the use of which by Buyer following the Closing are to be governed by the Franchise Agreement(s));

 

(vii)                            cash of $500 per Store to be in the drawers on the Closing Date (“Till Cash”) which Till Cash is the amount of cash currently on hand in each Store and is an amount sufficient to operate the Stores and the Business as presently conducted; and

 

(viii)                        all prepaid expenses, deposits, claims for refunds after the Closing Date and rights to offset associated with the Acquired Assets or the Business; and

 

(ix)                               Sellers’ respective rights, claims, causes of action and defenses arising under or pursuant to the Leases, the Licenses and the Assigned Contracts, or relating to the Leased Real Property (or the Fee Properties), in each case relating to or connected with any party’s performance or non-performance thereof or any other event, circumstance, action or omission occurring thereunder or thereon at any time prior to the Closing, including without limitation, arising out of any breach, default or actionable misconduct by any other party to the Leases, the Licenses or the Assigned Contracts prior to the Closing.

 

This Agreement shall not constitute an agreement or attempted agreement to transfer, sublease, sublicense or assign any privilege, right or interest in any Lease, License or Assigned Contract or any claim, right or benefit arising thereunder or resulting therefrom, if an attempted assignment thereof without the required Third Party Consent would constitute a breach or violation thereof or affect adversely the rights of Sellers or Buyer thereunder.  If a Third Party Consent which is required in order to assign any interest is not obtained prior to the Closing Date, or if an attempted assignment would be ineffective or would adversely affect the ability of Sellers to convey their interest to Buyer, Sellers shall cooperate with Buyer in any lawful arrangement to provide that Buyer shall receive Sellers’ entire interest in the benefits under any such Lease as provided in Section 8(d), License or Assigned Contract, including, without limitation, enforcement for the benefit of Buyer of any and all rights of Sellers against any other party thereto arising out of the breach or cancellation thereof by such party or otherwise; provided , however , that if Buyer is unable to receive the benefit of any Lease via assignment, sublease or otherwise as provided above, such Lease will be excluded from the

 

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Acquired Assets and Buyer shall have nine (9) months to designate an alternate site within the same trade area as a replacement (“Replacement Store”).  Subject to it meeting Papa John’s standard criteria, Sellers shall at Sellers’ expense cause the necessary leasehold improvements to be constructed in the Replacement Store and Buyer may transfer, at Sellers’ sole cost and expense, the equipment and signage from the prior site.  Sellers shall also pay $10,000 to Buyer not less than 20 days prior to the scheduled opening date of the Replacement Store.   Notwithstanding the foregoing, the transfer of the Acquired Assets pursuant to this Agreement shall not include the assumption of any liability or encumbrance in respect thereof other than as set forth in this Agreement.

 

(b)                                   Excluded Assets .   Notwithstanding anything listed above, the following assets are expressly excluded from the definition of Acquired Assets:

 

(i)                                     all intellectual property rights in and to the software developed by or at the direction of Sellers, including the PROFIT system, OARS, Tool Kit;

 

(ii)                                 all assets and rights, tangible and intangible, real, personal and mixed of Sellers not expressly listed in Subsection (a) above;

 

(iii)                             all cash (except Till Cash in the amounts described in subclause (a)(vii) above) and receivables due in the ordinary course of business (including from credit cards) prior to the Closing Date;

 

(iv)                                Subject to the “Cross Option Agreement” substantially in the form attached hereto as Exhibit I (the “Cross Option Agreement”), the real property for the eight land parcels owned by Sellers and described (as to tax lot and block number, and metes and bounds) on Exhibit B hereto (the “Land”) together with Sellers’ respective interests (if any) in (A) any strips and gores adjacent to the Land and any land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land, adjacent to or adjoining the Land, to the center line thereof and (B) any easements, rights, privileges and appurtenances belonging or in any way pertaining to the Land and (C) all improvements on or pertaining to the Land (each parcel of the Land, together with all of the foregoing being herein referred to as a “Fee Property” and all parcels collectively as the “Fee Properties”);

 

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(v)                                    the lease rights and leasehold improvements for the following locations which the Parties agree shall continue to be operated as Papa John’s restaurants pursuant to a separate Contingent Store Agreement between Sellers and Buyer in the form of Exhibit C (the “Contingent Store Agreement”) to be executed on the Closing Date (hereinafter the “Contingent Stores”):

 

(a)                                   Store No. 993, 8065 Brooklyn Blvd, Brooklyn Park, MN 55445

(b)                                  Store No. 1041, 4250 Colfax, Denver, CO 80204

(c)                                   Store No. 1053, 1100 Ken Pratt Blvd, Longmont, CO 80501

(d)                                  Store No. 1372, 7973 Wedgewood Lane N, Maple Grove, MN 55369

(e)                                   Store No. 1459, 5609 N. Academy Blvd, Colorado Springs, CO 80918

(f)                                     Store No. 2083, 11456 Market Place Drive N, Champlin, MN 55316

(g)                                  Store No. 2702, 17121 South Golden Road, Golden, CO 80401

(h)                                  Store No. 2708, 7280 Lagae Road, Castle Rock, CO 80108

(i)                                      Store No. 2709, 5135 Chambers Road, Denver, CO 80239; and

 

(vi)                                the lease rights for Store No. 1480, 1148 W. Dillon Road, Louisville, CO 80027.

 

2.                                       Assumed Liabilities .   Sellers shall transfer the Acquired Assets to Buyer on the Closing Date free and clear of all Security Interests and Buyer shall not, by virtue of its purchase of the Acquired Assets, assume or become responsible for any debts, liabilities, obligations or encumbrances of Sellers or of any other person relating to the Acquired Assets, incurred prior to the Closing Date.  The only debts, liabilities, obligations or encumbrances of any nature of Sellers being assumed by Buyer (the “Assumed Liabilities”) are (a) the obligations of Sellers under the terms of the Leases, Licenses and Assigned Contracts arising after the Closing Date in the ordinary course provided, that such Leases, Licenses and Assigned Contracts have been assigned and validly transferred to Buyer, (b) the obligations of Sellers for telephone listings for the Stores arising after the Closing Date, and (c) the prorated share of personal and real property taxes for the Leased Properties and Fee Properties for periods after the Closing Date, or for periods after the Fee Property Closing Date with respect to the Fee Properties purchased pursuant to the Cross Option Agreement, except to the extent any such taxes have previously been pre-paid by Sellers.

 

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All other liabilities of Sellers or related to the Stores or the Business (whether known or unknown) shall remain obligations of Sellers (the “Excluded Liabilities”).  Except for the Assumed Liabilities, Buyer shall not assume or be liable for, and does not undertake to attempt to, assume or discharge, any Security Interest or any other payment obligation, performance obligation, contingency or liability, whether fixed, contingent, liquidated, unliquidated, matured, unmatured, asserted or unasserted, of either Seller whether or not relating to the Stores or the Business including, without limitation, Sellers’ liabilities with respect to:

 

(i)                                     any obligation for borrowed money or any debt of any kind now or hereafter;

 

(ii)                                 any obligation arising out of or relating to the operation of the Stores or the Business other than the Assumed Liabilities;

 

(iii)                             any obligation under any Lease, License (including license transfer fees arising from the transactions contemplated hereby) or Assigned Contract assumed by Buyer which arises after the Closing Date but which arises out of or relates to any action or inaction of Sellers occurring prior to the Closing Date or to Sellers breach of any Lease, License or Assigned Contract prior to the Closing Date;

 

(iv)                                any obligation for Taxes (as defined below) for periods ending prior to the Closing Date whether or not due as of the Closing Date (or with respect to the Fee Properties for periods ending on the Fee Property Closing Date whether or not due as of the Fee Property Closing Date for the Fee Properties), including (i) any Taxes arising as a result of Sellers’ operation of the Stores, the Business or ownership of the Acquired Assets or Fee Properties, (ii) any Taxes that will arise as a result of the sale of the Acquired Assets pursuant to this Agreement or the Fee Properties pursuant to the Cross Option Agreement that are attributed to Sellers and (iii) any deferred Taxes of any nature. For purposes of this Agreement, “ Taxes ” means all taxes however denominated imposed by any federal, state, local or foreign government or any agency or political subdivision of any such government, including all net income, alternative or add-on minimum taxes, gross income, gross receipts, sales, use, goods and services, capital, production, transfer, ad valorem, earnings, franchise, profits, license,

 

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withholding (including all obligations to withhold or collect for Taxes imposed on others), payroll, disability, employer health, employment, excise, estimated, severance, stamp, occupation, premium, property, environmental, excess profit or windfall profit taxes, custom duty, value added or other taxes, governmental fees or other like assessments or charges of any kind whatsoever, together with any interest and any penalties or additions to tax;

 

(v)                                    any obligation to any current or former employees including, without limitation, payroll, vacation, sick leave, worker’s compensation, unemployment benefits, pension benefits, employee stock option or profit-sharing plans, health care plans or benefits, or any other employee plans or benefits of any kind;

 

(vi)                                any employment, severance, retention, termination or similar agreement with any current or former employee of Sellers, any obligation of Sellers to indemnify, reimburse or advance amounts to any officer, director, employee or agent of such Seller, or to any third party or otherwise;

 

(vii)                            any obligation for Sellers’ accounts payable related to the Stores or the Business prior to the Closing Date;

 

(viii)                        any obligation for trade accounts payable prior to the Closing Date;

 

(ix)                               any obligation to distribute to any of Sellers’ stockholders or otherwise apply all or any part of the consideration received hereunder;

 

(x)                                   any obligation arising out of any legal proceeding finally adjudicated, pending or threatened as of the Closing Date, whether or not set forth in the Disclosure Schedules;

 

(xi)                               any obligation arising out of any legal proceeding commenced after the Closing Date and arising out of, or relating to, any occurrence or event happening prior to the Closing Date;

 

(xii)                           any obligation arising out of or resulting from Sellers’ non-compliance with any legal requirement or order of any Governmental Entity;

 

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(xiii)                       any obligation under this Agreement or any other document executed in connection with the transactions contemplated hereby;

 

(xiv)                          any obligation based upon Sellers’ acts or omissions occurring after the Closing Date; or

 

(xv)                              any obligation for insurance claims arising out of or that relate to any act, omission, occurrence or event happening prior to the Closing Date, regardless when such claim is made.

 

3.                                       Purchase Price; Deposit .

 

(a)                                   Purchase Price .   The purchase price to be delivered by Buyer to Sellers for the Acquired Assets shall be $6,473,000 (the “Purchase Price”).  The Purchase Price shall consist of (i) the Deposit (as defined in Section 3(b)); and (ii) $6,223,000 in cash (the “Closing Date Cash Payment”).

 

(b)                                   Deposit .   Buyer shall tender to Sellers an earnest-money deposit of $250,000 upon execution of this Agreement (“Deposit”).  Such Deposit shall be credited against the Purchase Price.  In the event the transactions contemplated by this Agreement do not close in accordance with the terms hereof, the Deposit shall be refunded to Buyer only if the failure to close is due to (a) a decision by Sellers to not proceed for any reason other than a breach or default by Buyer under this Agreement, or (b) Sellers’ noncompliance, breach or default under this Agreement or any of the Ancillary Agreements or (c) Sellers’ failure to meet the applicable conditions precedent to Closing or to fulfill Sellers’ deliveries and actions at Closing, as provided in Section 9 or Section 10, as applicable.

 

4.                                       Allocation of Purchase Price .   The Purchase Price shall be allocated in accordance with Schedule 4.1 attached hereto.  The Parties shall prepare for filing all returns, declarations, reports, estimates, information returns and statements required to be filed or sent by such Party to any applicable taxing authority with respect to the transactions contemplated by this Agreement in a manner consistent with such allocation.  The Parties agree to provide the

 

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other Party, for the purpose of preparing such returns, with such information and other documents filed by such other Party as each may reasonably require within 60 days of the Allocation Date.

 

5.                                       (a)                                   Closing .  The closing of the transactions contemplated herein (the “Closing”) shall occur on September 26, 2005, or at such other date and time as the Parties mutually agree subject to the satisfaction or waiver of the conditions precedent set forth in Section 9.  The date on which the Closing shall occur is referred to in this Agreement as the “Closing Date”.  Title and risk of loss to the Acquired Assets (other than the Fee Properties) shall pass to Buyer effective as of 12:01 a.m. on the Closing Date, regardless of the actual time of the Closing (the “Effective Time”).  The title and risk of loss to a Fee Property shall transfer to Buyer, or its assignee, effective as of 3:00 a.m. the day of the transfer of the Fee Properties to Buyer in accordance with the Cross Option Agreement and the Special Warranty Deed (“Fee Property Closing Date”). Possession of and title to the Acquired Assets and the premises of the Stores, including the Leased Properties, the Fee Properties, all keys thereto, and the combinations to any safes, shall be delivered to Buyer at the time the actual Closing is conducted.  The Closing shall be conducted by courier exchange of executed closing documents, or in such other manner as the Parties mutually agree.   At the Closing or, where noted, the Fee Property Closing Date:

 

(i)                                     Sellers shall cause to be delivered to Buyer the certificate required to be delivered under Section 9(a)(iv);

 

(ii)                                 Buyer shall cause to be delivered to Sellers the certificate required to be delivered under Section 9(b)(iv);

 

(iii)                             the relevant Seller(s) shall execute and deliver a Bill of Sale and Assignment in the form attached as Exhibit D ;

 

(iv)                                on the Fee Property Closing Date, the relevant Seller(s) shall execute Special Warranty Deeds in the form attached to the Cross Option Agreement (“Special Warranty Deeds”);

 

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(v)                                    Buyer and Sellers shall execute and deliver the Accounting Services Agreement in the form attached hereto as Exhibit H (the “Accounting Services Agreement”) and the Contingent Store Agreement;

 

(vi )                                on the Closing Date and/or the Fee Property Closing Date, as applicable, the relevant Seller(s) and Buyer shall execute and deliver such other instruments of conveyance as the others may reasonably request in order to effect the sale, transfer, conveyance and assignment to Buyer of title to the Acquired Assets and the Fee Properties in the manner contemplated in this Agreement and the Cross Option Agreement;

 

(vii)                            the relevant Seller(s) shall execute and deliver to Buyer an Assignment and Assumption Agreement providing for the transfer of the Leases, Licenses and Assigned Contracts in the form attached hereto as Exhibit J (the “Assignment Agreement”).

 

(viii)                        Sellers shall supply the Assignment Consent and Estoppel Certificate in the form annexed hereto as Exhibit E (the “Landlord Consent and Estoppel Certificate”), duly signed by the landlord under each of the Leases (with such changes to that form as shall have been approved by the Parties hereto); and evidencing said landlord’s consent to the assignment of its Lease by Sellers to Buyer (or an alternate arrangement as provided in Section 8(d) or as set forth in the last paragraph of Section 1(a));

 

(ix)                               Buyer and Sellers shall enter into “Leases” (as defined below) for each of the Fee Properties;

 

(x)                                   Buyer and Sellers shall enter into the Cross Option Agreement;

 

(xi)                               Buyer and the relevant Seller(s) shall execute and deliver such other instruments as Sellers may reasonably request in order to effect the assumption by Buyer of the Assumed Liabilities;

 

(xii)                           Sellers shall deliver to Buyer, or otherwise put Buyer in possession and control of, all of the Acquired Assets of a tangible nature owned by Sellers; and

 

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(xiii)                       Buyer and Papa John’s shall execute and deliver the Development Agreement in the form attached hereto as Exhibit F (the “Development Agreement”), the Franchise Agreement(s) for each Store in the form attached hereto as Exhibit G and as contemplated in Section 8(h) (the “Franchise Agreement”) and the letter agreement of changes to the Development Agreement and the Franchise Agreement in the form attached hereto as Exhibit K (the “Letter Agreement”).

 

The agreements and instruments referred to in clauses (iii) through (xiii) above, together with any other documents or instruments executed and delivered pursuant hereto, are referred to herein as the “ Ancillary Agreements .”

 

(b)                                   Further Assurances .   At any time and from time to time, whether before or after the Closing Date, as and when requested by any Party hereto and at such Party’s expense, the other Party or Parties shall promptly execute and deliver, or cause to be executed and delivered, all such documents, instruments and certificates and shall take, or cause to be taken, all such further or other actions as are necessary to evidence and effectuate the transactions contemplated by this Agreement and the Ancillary Agreements.

 

6.                                       Representations and Warranties of Sellers .  Sellers jointly and severally represent and warrant to Buyer that on the date hereof and as of the Closing Date or Fee Property Closing Date, as applicable, except as set forth in the section of the written disclosure schedules delivered on or prior to the date hereof by Sellers (the “ Disclosure Schedules ”) corresponding to each representation and warranty made hereunder by Sellers (for purposes of this Section 6, the phrase “to the knowledge of Sellers” (or words of similar import) shall mean the actual knowledge of Sellers’ respective executive officers after due inquiry).

 

(a)                             Organization, Qualification and Corporate Power .   PJUSA and Papa John’s are corporations duly organized, validly existing and in good standing under the laws of the Commonwealth of Kentucky and the State of Delaware, respectively, and each is duly qualified to conduct business under the laws of each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification necessary.  Sellers have all requisite corporate power and authority to carry on the business in which it is now engaged and to own, lease and use the properties now owned,

 

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leased and used by it.  Sellers’ are not in violation of any provisions of its or their charter documents or bylaws.

 

(b)                             Authority .  Sellers have all requisite corporate power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it will be a party and to perform its or their obligations hereunder and thereunder, including, without limitation, to sell and transfer the Acquired Assets pursuant to this Agreement and the Ancillary Agreements.  The execution and delivery by Sellers of this Agreement and such Ancillary Agreements and the consummation by Sellers of the transactions contemplated hereby and thereby have been validly authorized by all necessary corporate action on the part of Sellers.  This Agreement has been, and such Ancillary Agreements will be, validly executed and delivered by Sellers and constitutes or will constitute a valid and binding obligation of Sellers, enforceable against them in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally and by equitable principles (including for purposes of such exception those limiting the availability of specific performance, injunctive relief and other equitable remedies and those providing for equitable defenses).

 

(c)                             Financial Statements .   Schedule 6(c)  of the Disclosure Schedule includes copies of the unaudited statement of income and expenses of the Stores as of and for the 12-month period ended December 26, 2004 and the year-to-date period ended July 24, 2005 (collectively, the “Financial Statements”).  Not less than three (3) days before the Closing Date, Seller shall also deliver the unaudited statements of income for the year-to-date period ended August 21, 2005, which shall be deemed part of the Financial Statements.  The Financial Statements have been prepared in accordance with Generally Accepted Accounting Principles consistently applied throughout the periods to which they relate and fairly present, in all material respects, the combined results of operations of the Business for the periods referred to therein.  Since December 31, 2004, (1) there have not been any material changes in the financial condition, assets (including the Acquired Assets) or the results of operations of the Business that would have a Business Material Adverse Effect (as defined in Section 9(a)(x)) and (2) the Business has been operated in the ordinary course in a manner consistent with past practice.  As of the Closing Date, or as of the Fee Property Closing Date with respect to the Fee Properties, Sellers shall have satisfied all indebtedness and all liabilities related to the

 

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(1) Acquired Assets, and the Business, other than the Assumed Liabilities, and (2) the Fee Properties.

 

(d)                             Undisclosed Liabilities/Net Assumed Liabilities .   There is no circumstance, condition, event or arrangement that would reasonably be expected to give rise hereafter to any material liabilities of Sellers that would adversely affect the ability of Sellers to convey good, valid, exclusive and marketable title to the Acquired Assets in the manner contemplated in this Agreement or the Fee Properties, except those that may be incurred in the ordinary course of business and which have been disclosed to Buyer.

 

(e)                             Title to Assets; Suitability of Tangible Property .   Sellers are the sole owner of the Acquired Assets (and the Fee Properties).  All of the representations and warranties set forth in the Cross Option Agreement with respect to the title and condition of the Fee Properties and with respect to environmental matters are incorporated herein by this reference as if they were set forth in full herein.  Sellers have good, valid, exclusive and marketable title to, a valid leasehold interest in or a valid license or right to use, such Acquired Assets, free and clear of all Security Interests.  The tangible Acquired Assets are in good repair and operating condition and are suitable to conduct the operation of the Stores and business related thereto substantially in the same manner in which the Business has been conducted prior to the date hereof and the Closing Date.  Upon consummation of the transactions contemplated hereby, Buyer will have acquired good, valid, exclusive and marketable title to the Acquired Assets free and clear of all Security Interests and upon consummation of the Fee Properties purchase in accordance with the Cross Option Agreement, Buyer will have acquired good, valid, exclusive and marketable title to the Fee Properties free and clear of all Security Interests and Defects of Title (as defined in the Cross Option Agreement).

 

(f)                                     Leased Real Property.

 

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(1)                                  Schedule 6(f)(1)  of the Disclosure Schedules describes the leased real property included in the Acquired Assets (the “ Leased Real Property ”) and each lease in effect with respect thereto (the “ Leases ”).  Schedule 6(f)(1)  of the Disclosure Schedules lists all of the Leases for the Stores and the information set forth thereon accurately summarizes the terms and conditions currently in effect for all such Leases.  With respect to each of the Leases (a true, complete and accurate copy of which has been provided to Buyer):

 

(i)                                           it is a valid and binding obligation of Sellers and, to the knowledge of Sellers, each other party to such Lease, enforceable and in full force and effect;

 

(ii)                                       neither Sellers nor, to the knowledge of Sellers, any other party to the Lease is in breach or default thereof, and to Sellers’ knowledge no event has occurred which, with notice or lapse of time or both, would constitute a breach or default or permit termination, modification or acceleration thereunder, and no written claim and, to Sellers’ knowledge, no oral claim has been made by any other party to such Lease alleging that Sellers are in breach of default thereunder;

 

(iii)                                   Sellers have not assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in the leasehold or subleasehold of such Lease;

 

(iv)                                      There is no Security Interest, easement, covenant or other restriction applicable to the Leased Real Property subject to such Lease, except for such as have been created by the terms of the Lease and except for recorded easements, covenants and other restrictions which do not materially impair the current uses or the occupancy of Sellers of such Leased Real Property;

 

(v)                                          There are no outstanding or threatened requirements by any insurance company that has issued an insurance policy covering the Leased Real Property, or by any board of fire underwriters or other body exercising similar functions, requiring any repairs or alterations to be done on the Leased Real Property;

 

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(vi)                                      To Sellers knowledge, there are no Hazardous Materials (as defined in the Cross Option Agreement) on or under the Leased Real Property and Sellers have not deposited any Hazardous Materials on or under the Leased Real Property nor have Sellers transported to or from the Leased Real Property or used, generated, manufactured, stored or disposed of any Hazardous Materials on or under the Leased Real Property; and

 

(vii)                                  Sellers have obtained, or will obtain prior to the Closing Date, all material required consents to assign and validly transfer the Leases to Buyer.

 

As used in this Agreement, “ Affiliate ” means, with respect to a Party, any legal entity controlling, controlled by or under common control with such Party.  For purposes of this definition, “control” means the legal, beneficial or equitable ownership, directly or indirectly of: at least 50% of the aggregate of all voting interests in such entity or at least 35% of the aggregate of all voting interest of such entity combined with management control of such entity.

 

(g)                                  Assigned Contracts .  Schedule 6(g)  of the Disclosure Schedules lists all of the contracts or agreements (other than the Leases), whether written or oral, to which Sellers are a party or by which it is bound as of the date of this Agreement relating to a Store or to the Business which are being assigned to and assumed by Buyer as part of the Acquired Assets hereunder (the “Assigned Contracts”), and identifies all prepaid deposits under Assigned Contracts, including deposits delivered or held as security or in escrow.  Sellers have made available to Buyer a true, complete and accurate copy of each contract and agreement listed in Schedule 6(g)  of the Disclosure Schedules.  The Assigned Contracts are all of the material contracts and agreements that are necessary to operate the Stores and the Business as presently conducted. Each Assigned Contract is a valid and binding obligation of Sellers and, to the knowledge of Sellers, of each other party thereto, in full force and effect.  Neither Sellers nor, to the knowledge of Sellers, any other party to an Assigned Contract is in breach or default and to the knowledge of Sellers no event has occurred which, with notice or lapse of time or both, would constitute