STOCK PURCHASE AGREEMENT

Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

among

BUCA, INC.,

BUCA RESTAURANTS 3, INC.,

BERTUCCI’S CORPORATION

and

VINNY T’S ACQUISITION CORPORATION

Dated as of September 25, 2006

 

TABLE OF CONTENTS

 

 

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EXHIBITS

 

 

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This Stock Purchase Agreement is dated as of September 25, 2006, by and among BUCA, Inc., a Minnesota corporation (“Seller”), BUCA Restaurants 3, Inc., a Minnesota corporation (the “Company”), Bertucci’s Corporation, a Delaware corporation (the “Parent”), and Vinny T’s Acquisition Corporation, a Delaware corporation (the “Buyer”).

WITNESSETH:

WHEREAS, the Company is engaged in the business of owning and operating a chain of restaurants doing business under the name “Vinny T’s” (the “Business”);

WHEREAS, Seller owns all of the issued and outstanding shares of capital stock of the Company;

WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires to purchase from Seller, all of the issued and outstanding shares of capital stock of the Company, as more specifically provided herein; and

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and subject to and on the terms and conditions herein set forth, the parties hereto agree as follows (certain capitalized terms used in this Agreement are defined in Article X hereof):

ARTICLE I

Purchase and Sale of Shares; Closing

Section 1.1 Purchase and Sale of Shares.

(a) Subject to the terms and conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell to Buyer, all of the issued and outstanding shares (the “Shares”) of common stock, $.01 par value per share, of the Company for an aggregate purchase price of $6,800,000.00 (the “Purchase Price”), subject to adjustment as provided in Article II below.

(b) The Purchase Price shall be paid by the Buyer to the Seller as follows:

 

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The Buyer shall pay the Seller $3,000,000.00 of the Purchase Price by wire transfer of immediately available funds on the Closing Date to an account designated by the Seller (the “Cash Payment”); and

 

(ii)

At the Closing, the Buyer shall deliver to the Seller a promissory note, in the form attached hereto as Exhibit A (the “Promissory Note”), in the original principal amount of $3,800,000.00, provided however , that the amounts due under the Promissory Note may be increased and/or reduced (as applicable) pursuant to the provisions of Section 2.2 and Section 9.3(b) below.

 

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Section 1.2 Closing.

The delivery of the Shares and payment therefore (the “Closing”) will take place at the offices of Brown Rudnick Berlack Israels LLP, One Financial Center, Boston, MA, 02111 at 10:00 a.m. local time, on September 25, 2006, or at such other time and place as the parties hereto may mutually agree, provided however , that if: (1) on the Closing Date (as defined below) the Shares are in the possession of Wells Fargo Foothill, Inc. (the “WFF”) pursuant to that certain Credit Agreement, dated as of November 15, 2004, by and among the Seller and each of its subsidiaries that are signatories thereto, the Lenders that are signatories thereto, and WFF, as the Arranger and the Administrative Agent, as amended (the “BUCA Credit Agreement”); and (2) WFF has agreed in writing to deliver the certificate(s) evidencing the Shares and all stock powers that it has possession of relating to such Shares to the Buyer within three Business Days (as defined in the BUCA Credit Agreement) of the Buyer’s delivery of the Cash Payment to the Seller, then the certificates evidencing the Shares may be delivered to the Buyer promptly after the Closing. The date on which the Closing occurs is called the “Closing Date.”

Section 1.3 Closing Obligations.

At the Closing:

(a) Seller will deliver to Buyer (i) certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers), for transfer to Buyer (except as provided in Section 1.2 above), and (ii) such other documents as may be required to effect a valid transfer of the Shares by Seller, free and clear of any and all Encumbrances (except as set forth on Exhibit B attached hereto) including, without limitation, those arising under Article 8 of the Uniform Commercial Code of the State of Minnesota. Such documents shall be in form and substance satisfactory to counsel for Buyer.

(b) Each of Seller and Company will deliver to Buyer an officer’s certificate in form and substance reasonably satisfactory to Buyer which certificates certify that: (i) each of the representations and warranties of Seller or Company, as applicable, contained in this Agreement are true and correct in all respects as of the Closing Date; (ii) each of the covenants and agreements of Seller or Company, as applicable, in the Agreement to be performed on or prior to the Closing Date have been duly performed in all respects or waived by Buyer or Parent.

(c) Each of Seller and Company will deliver to Buyer duly executed certificates of their respective Secretaries in form and substance reasonably satisfactory to Buyer certifying (A) resolutions of their respective directors approving this Agreement, the Ancillary Agreements (as defined below) to which they are a party and the transactions contemplated hereby and thereby (together with incumbency and signature certificates regarding the officers signing on behalf of Seller and the Company) and (B) the articles of incorporation and by-laws of Seller and the Company.

 

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(d) Seller will deliver to Buyer evidence in form and substance reasonably satisfactory to Buyer of the release of all Encumbrances (except as set forth on Exhibit B attached hereto): (i) on the Shares (other than federal and state securities law restrictions); and (ii) on all of the owned assets and properties of the Company, all effective on or before the Closing Date.

(e) Seller will deliver to Buyer: (i) copies of all consents, approvals and estoppel certificates set forth on Schedule 1.3(e)(i) of the Disclosure Schedules; and (ii) all documentation requested by Buyer transferring to Buyer the Governmental Authorizations issued by Governmental Entities in connection with the Business set forth on Schedule 1.3(e)(ii) of the Disclosure Schedules.

(f) Seller will deliver to Buyer documents evidencing termination of all agreements between Seller and the Company, except for the Transition Services Agreement (as defined below).

(g) The Company will deliver to Buyer resignations of all officers and directors of the Company, effective as of the Closing Date.

(h) The Company will deliver to Buyer general releases in the forms attached hereto as Exhibit C (the “Company Releases”) from Seller and all officers, directors and stockholders of the Company of any liability of the Company to them, or any claim which they may have against the Company.

(i) The Company will deliver to Buyer a certificate or certificates representing all shares of capital stock of Dedham K&L, Inc., a Massachusetts corporation (“Dedham K&L”), owned of record or beneficially by the Company.

(j) The Company will deliver to Buyer resignations of Richard Erstad from the board of directors of Dedham K&L and Richard Erstad as Treasurer of Dedham K&L, all effective as of the Closing Date.

(k) Buyer will pay to Seller the Cash Payment as required by Section 1.1(b)(i).

(l) Buyer will deliver to Seller the duly executed Promissory Note.

(m) Parent will deliver to Seller a Guaranty of Buyer’s payments under the Promissory Note, and Buyer’s other obligations under this Agreement, in the form attached hereto as Exhibit D (the “Guaranty”).

(n) Each of Buyer and Parent will deliver to Seller an officer’s certificate in form and substance reasonably satisfactory to Seller which certificates certify that: (i) each of the representations and warranties of Buyer or Parent, as applicable, contained in this Agreement are true and correct in all respects as of the Closing Date; (ii) each of the covenants and agreements of Buyer or Parent, as applicable, in the Agreement to be performed on or prior to the Closing Date have been duly performed in all respects or waived by Seller.

 

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(o) Each of Buyer and Parent will deliver to Seller duly executed certificates of their respective Secretaries or Assistant Secretaries in form and substance reasonably satisfactory to Seller certifying (A) resolutions of their respective directors approving this Agreement, the Ancillary Agreements (as defined below) to which they are a party and the transactions contemplated hereby and thereby (together with incumbency and signature certificates regarding the officers signing on behalf of Buyer and Parent), and (B) the certificates of incorporation and by-laws of Buyer and Parent.

(p) Seller and the Company will deliver to each other a duly executed transition services agreement in the form attached hereto as Exhibit E (the “Transition Services Agreement”).

(q) Faegre & Benson LLP, counsel to Seller and the Company, will deliver an opinion to Buyer and Parent, dated as of the Closing Date, in the form attached hereto as Exhibit F .

(r) Brown Rudnick Berlack Israels LLP, counsel to Buyer and Parent, will deliver an opinion to Seller, dated as of the Closing Date, in the form attached hereto as Exhibit G .

ARTICLE II

Post-Closing Purchase Price Adjustment

Section 2.1 Working Capital Adjustment

(a) Seller and Buyer acknowledge and agree that the consideration to be paid by Buyer hereunder is to be established in part by reference to:

(i) the non-cash current assets of the Company, equal to the current assets of the Company minus the cash of the Company, each determined in accordance with GAAP (the “Non-Cash Current Assets”), existing at the close of business on the Closing Date; and

(ii) the current liabilities of the Company, determined in accordance with GAAP (“Current Liabilities”), existing at the close of business on the Closing Date.

(b) Within 90 days after the Closing Date, Buyer will furnish to Seller: (i) a report (the “Preliminary Report”) stating the Non-Cash Current Assets and the Current Liabilities as of the Closing Date; and (ii) applicable supporting documentation for the Preliminary Report. Unless Seller gives written notice to Buyer of a good faith objection to a material aspect of the Preliminary Report before the close of business on the 30 ^th day after Seller’s receipt thereof, the Preliminary Report will then become binding upon Seller and Buyer and will be the “Final Report” and such

 

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30th day will be the “Final Report Date.” If Seller (by written notice to Buyer and Parent before the close of business on such 30th day) objects in good faith to any material aspect of the Preliminary Report, then only those aspects as to which the good faith objection was made will not become binding. Seller and Buyer will discuss any such objection(s) and, if they reach written agreement amending the Preliminary Report, then the Preliminary Report, as amended by such written agreement, will become binding and will become the Final Report and the date of such written agreement will be the Final Report Date. If Seller and Buyer do not reach written agreement within 30 days after Seller gives such notice of objection(s), then the matter(s) objected to (and only such matter(s)) will be submitted to PricewaterhouseCoopers, LLP (the “CPA”), certified public accountants (whose fees will be divided equally between Seller and Buyer), who will resolve the dispute by delivery of a written statement of such resolution to Buyer and Seller within 60 days after submission of the dispute to the CPA, which statement, when delivered to Seller and Buyer, will become binding on Seller and Buyer. Such statement (combined with those aspects of the Preliminary Report as to which Seller did not provide notice of objection) will be the Final Report and the date on which the CPA submits such statement to Seller and Buyer will be the Final Report Date.

Section 2.2 Adjustment Payment

(a) The amount equal to the Non-Cash Current Assets minus the Current Liabilities (each as of the Closing Date and as stated in the Final Report) is hereby defined as “Net Working Capital.” If Net Working Capital is more than $(1,074,400), (the “Maximum Net Working Capital”), then the principal amount due under the Promissory Note shall be increased by Net Working Capital minus the Maximum Net Working Capital. If Net Working Capital is less than $(1,174,400), (the “Minimum Net Working Capital”), then the principal amount due under the Promissory Note shall be reduced by the Minimum Net Working Capital minus Net Working Capital.

(b) In the event of a required increase in the principal amount of the Promissory Note under Section 2.2(a), Buyer and Seller covenant and agree to execute an amendment to the Promissory Note within 10 days following the Final Report Date which effectuates such required increase, with interest accruing on the amount of such increase in the principal amount of the Promissory Note from the Closing Date, and such amendment to be reasonably satisfactory in form and substance to the Buyer and the Seller. In the event of a required decrease in the principal amount of the Promissory Note under Section 2.2(a), Buyer and Seller covenant and agree to execute an amendment to the Promissory Note within 10 days following the Final Report Date which effectuates such required decrease, such amendment to reflect that no interest shall accrue (or shall have ever accrued) on the amount obtained by subtracting the Net Working Capital from the Minimum Net Working Capital, and such amendment to be reasonably satisfactory in form and substance to Buyer and the Seller.

 

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ARTICLE III

Representations and Warranties of the Company and Seller

Except as otherwise set forth in the disclosure schedules attached hereto (the “Disclosure Schedules”), the Company (except with respect to Section 3.1) and Seller, jointly and severally, represent and warrant to Buyer and Parent as follows:

Section 3.1 Organization and Authority of Seller; No Conflicts.

Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota, has all requisite corporate power and authority to own, operate and lease its properties and to conduct its business in the manner and in the places where such properties are owned or leased or such business is conducted by it. Seller has taken all corporate action necessary in order to execute, deliver and perform its obligations under this Agreement and the certificates, documents and agreements contemplated by this Agreement (the “Ancillary Agreements”) to which it is a party. This Agreement and the Ancillary Agreements to which it is a party are legal, valid and binding obligations of Seller, enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles (the “Enforcement Exceptions”). The execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party by Seller do not, and the consummation by Seller of the transactions contemplated hereby and thereby will not, constitute or result in: (a) a breach or violation of, or a default or required notice under, the articles of incorporation or by-laws of Seller, (b) a breach or violation of, or a default under, the acceleration of any obligations, termination, cancellation, or the creation of an Encumbrance on the assets of Seller (with or without notice, lapse of time or both) or required notice pursuant to any agreement (whether written or oral), understanding, commitment, lease, contract, note, mortgage, indenture, arrangement or other obligation (“Contracts”) binding upon Seller, (c) a violation of any foreign, federal, state or local law, rule, regulation, Court Order or other restriction of any court or Governmental Entity (“Law”) or any Governmental Authorization or non-governmental permit or license to which Seller is subject, (d) any change in the rights or obligations of any party under any of the Contracts to which the Seller is a party, or (e) result in the creation or imposition of any Encumbrance upon any of the assets of the Seller or upon the Shares (except as set forth on Exhibit B attached hereto).

Section 3.2 Organization, Authority and Qualification of the Company; No Conflicts.

The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota, has the corporate power and authority to own, operate and lease its assets and to carry on its business substantially as it is now being conducted, and is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the ownership or operation of its properties and assets or the conduct of its

 

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business requires such qualification, except where the failure to be so qualified (in the aggregate) would not have a Material Adverse Effect, and has all requisite corporate power and authority, and has taken all corporate action necessary in order, to execute, deliver and perform its obligations under this Agreement and the Ancillary Agreements to which it is a party. This Agreement and the Ancillary Agreements to which it is a party are legal, valid and binding obligations of the Company, enforceable in accordance with its terms, subject to the Enforcement Exceptions. The execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party by the Company do not, and the consummation by the Company of the transactions contemplated hereby and thereby will not, constitute or result in: (a) a breach or violation of, or a default or required notice under, the articles of incorporation or by-laws of the Company, (b) a breach or violation of, or a default under, the acceleration of any obligations, termination, cancellation, or the creation of an Encumbrance on the assets of the Business (with or without notice, lapse of time or both), or required notice pursuant to any Contracts binding upon the Company, (c) a violation of any Law or Governmental Authorization or non-governmental permit or license to which the Company is subject, (d) any change in the rights or obligations of any party under any of the Contracts to which the Company is a party, or (e) result in the creation or imposition of any Encumbrance upon any of the Company’s assets or the Shares (except as set forth on Exhibit B attached hereto).

Section 3.3 Capitalization of the Company.

The authorized capital stock of the Company consists of 1,000 shares of common stock, $.01 par value per share, of which 100 shares (constituting the Shares) are issued and outstanding. The Shares have been duly authorized and validly issued, are fully paid and nonassessable and are owned of record and beneficially solely by Seller free and clear of any lien, pledge, security interest, claim or other encumbrances (collectively, “Encumbrances”), under Article 8 of the Uniform Commercial Code of the State of Minnesota or otherwise, other than restrictions under federal and state securities laws. The Shares were issued in compliance with applicable federal and state securities laws, and were not issued in violation of any Person’s preemptive rights. There are no shares of the Company’s capital stock reserved for any purpose. There are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, “phantom” stock, redemption rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other securities of the Company or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of the Company, and no securities or obligations evidencing such rights are authorized, issued or outstanding. The Company does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) on any matter. There are no agreements relating to the voting of the Company’s capital stock, or restrictions on the transferability of the Company’s capital stock (by agreement, certificate of incorporation, bylaws, statute or otherwise), except pursuant to federal and state securities laws. There are no agreements among the Company, Seller and/or any other Person relating to the Company’s capital stock. When the Shares are delivered to Buyer at the Closing pursuant to this Agreement, the Shares will be duly authorized, validly issued, fully paid and nonassessable, and

 

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will be free and clear of all Encumbrances, under Article 8 of the Uniform Commercial Code of the State of Minnesota or otherwise, other than restrictions on transfer pursuant to federal and state securities laws.

Section 3.4 Stock Ownership.

Except for owning a 25% equity interest in Dedham K&L (represented by 2,500 shares of Common Stock, no par value) (the “Dedham Shares”), the Company does not own, directly or indirectly, an equity or other ownership interest in any Person. To the Knowledge of the Company and the Seller, Schedule 3.4 of the Disclosure Schedules sets forth all of the record owners of Dedham K&L securities and the number and nature of the Dedham K&L securities that they own. To the Knowledge of the Company and the Seller, the Dedham Shares have been duly authorized and validly issued, are fully paid and nonassessable and are owned of record and beneficially solely by the Company free and clear of any Encumbrances, under Article 8 of the Uniform Commercial Code of the Commonwealth of Massachusetts or otherwise, other than restrictions under federal and state securities laws. To the Knowledge of the Company and the Seller, the Dedham Shares were issued in compliance with applicable federal and state securities laws, and were not issued in violation of any Person’s preemptive rights. To the Knowledge of the Company and the Seller, neither Dedham K&L nor any of its officers, directors, stockholders, employees or representatives have any claims of any nature against Dedham K&L, any of the officers of Dedham K&L, any of the directors of Dedham K&L, any of the stockholders of Dedham K&L, the Company, the Seller or the officers, directors, employees or representatives of the Seller or the Company. To the Knowledge of the Company and the Seller, there are no shares of Dedham K&L’s capital stock reserved for any purpose. To the Knowledge of the Company and the Seller, there are no preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, “phantom” stock, redemption rights, agreements, arrangements or commitments to issue or sell any shares of capital stock or other securities of Dedham K&L or any securities or obligations convertible or exchangeable into or exercisable for, or giving any Person a right to subscribe for or acquire, any securities of Dedham K&L, and no securities or obligations evidencing such rights are authorized, issued or outstanding. Except as set forth on Schedule 3.4 of the Disclosure Schedules, to the Knowledge of the Company and the Seller, there are no agreements relating to the voting of Dedham K&L’s capital stock, or restrictions on the transferability of Dedham K&L’s capital stock (by agreement, certificate of incorporation, bylaws, statute or otherwise), except pursuant to federal and state securities laws. There are no agreements between the Company and any other Person relating to Dedham K&L’s capital stock. Other than that certain Innholder License to Expose, Keep for Sale and to Sell All Kinds of Alcoholic Beverages to be Drunk on the Premises (License #134) issued by The Licensing Board of the Town of Dedham to Dedham K&L, that certain Beverage Concession Agreement dated January 14, 2002 by and between Dedham K&L and the Company, and that certain Stockholders Agreement dated as of January 14, 2002 by and among Dedham K&L and the Stockholders (as defined therein), Dedham K&L does not own any other asset or property used or necessary for the operation of the Business.

 

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Section 3.5 Financial Statements.

Attached hereto as Schedule 3.5 of the Disclosure Schedules are copies of: (a) the Company’s income statements for each of the fiscal years ended December 26, 2004 and December 25, 2005, excluding however , allocations of expenses incurred by Seller attributable to Company and corporate overhead recorded on the financial statements of Seller for the applicable periods (collectively, the “2004/2005 Statements”); (b) the Company’s income statement for the period of December 26, 2005 through August 20, 2006, excluding however , allocations of expenses incurred by Seller attributable to Company and corporate overhead recorded on the financial statements of Seller for the applicable period (the “2006 Statement”); and (c) the Company’s balance sheet as August 20, 2006 (the “Balance Sheet” and together with the 2004/2005 Statements and the 2006 Statement, the “Financial Statements”). August 20, 2006 is referred to herein as the “Balance Sheet Date”. The Financial Statements have been prepared on a consistent basis throughout the periods involved and prior periods (except that the 2006 Statement is subject to ordinary year-end adjustments), are complete and correct in all material respects and present fairly, in all material respects, the assets, liabilities and financial position of the Company and the results of operations of the Company for the periods covered by such Financial Statements. The Balance Sheet has been prepared in accordance with GAAP (except that it lacks the footnotes required by GAAP and is subject to ordinary year-end adjustments), is complete and correct in all material respects and presents fairly, in all material respects, the assets, liabilities and financial position of the Company as of the Balance Sheet Date. The Financial Statements are consistent with the books and records of the Company (which, in turn, are accurate and complete in all material respects).

Section 3.6 Absence of Undisclosed Liabilities; Absence of Certain Changes or Events.

(a) There are no material Liabilities of any nature, known or unknown, with respect to the Company or the Business, whether accrued, absolute, contingent or otherwise (including, without limitation, liabilities as guarantor or otherwise with respect to obligations of others, or liabilities for Taxes due or then accrued or to become due), except: (i) liabilities stated or adequately reserved against on the Balance Sheet; (ii) liabilities, not in excess of $50,000.00, incurred since the Balance Sheet Date in the ordinary course of business consistent with past practices (none of which is a claim for breach of contract, breach of duty, breach of warranty, tort, or infringement of an intellectual property right); (iii) liabilities disclosed on Schedule 3.6 of the Disclosure Schedules; and (iv) contractual obligations disclosed on Schedule 3.10 of the Disclosure Schedules for which the Company is not in material breach.

(b) Except as set forth on Schedule 3.6 of the Disclosure Schedules, since the Balance Sheet Date, the Company has conducted its business only in, and has not engaged in any material transaction other than according to, the ordinary and usual course of such business consistent with past practice and there has not been: (i) any material damage, destruction or other casualty loss with respect to any material asset or property owned, leased or otherwise used by the Company not covered by insurance; (ii) any declaration, setting aside or payment of any dividend or other distribution in respect of the capital stock of the Company; or (iii) any labor dispute, other than routine matters which have not had a Material Adverse Effect.

 

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Section 3.7 Title to Assets; Real Properties; Leases; Absence of Liens and Encumbrances; Etc.

(a) The Company has good and marketable title to all of the assets reflected in the Balance Sheet as owned by the Company or acquired thereafter, free and clear of all Encumbrances, except as set forth on Schedule 3.7 of the Disclosure Schedules, and such assets, together with any assets leased by the Company, constitute all of the assets used or necessary to conduct the Business. All of the tangible assets necessary for the conduct of the Business have been maintained in accordance with normal industry practice, and are in good operating condition and repair (subject to normal wear and tear).

(b) The Company does not own any real property. Schedule 3.7 of the Disclosure Schedules hereto identifies all leases and subleases of real property to which the Company is a party (the “Real Property Leases”), the street address of the premises covered by each of the Real Property Leases, and the identity of the lessor (collectively, the “Leased Real Property”). Each of the Real Property Leases is valid, binding and enforceable against the Company and, to the Knowledge of the Seller and the Company, the other parties thereto, subject in each case to the Enforcement Exceptions. True, correct and complete copies of each of the Real Property Leases have been delivered to Buyer (including all amendments, extensions, and renewals, and all guaranties and other agreements with respect thereto). Except as set forth on Schedule 3.7 of the Disclosure Schedules, the Company has marketable, valid, binding and enforceable (subject to the Enforcement Exceptions) leasehold interests in all of the Leased Real Property free and clear of any Encumbrances, except for: (i) any Encumbrances for real estate taxes, assessments and other governmental charges with respect to such Leased Real Property not yet due and payable or due but not delinquent or being contested in good faith by appropriate proceedings and as to which accruals are reflected in the Balance Sheet in accordance with GAAP; (ii) any statutory mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like Encumbrances with respect to such Leased Real Property imposed by operation of law arising in the ordinary and usual course of business consistent with past practice for amounts which are not delinquent or in default or are being contested in good faith by appropriate proceedings, and which would not, individually or in the aggregate, have a Material Adverse Effect; (iii) easements, rights of way or other similar matters of record title to real property that do not materially affect the title to, or the use or value to the Company of, such real property; and (iv) any Encumbrances on the fee title, the payment or performance of which are not the responsibility of the Company as tenant under the applicable Real Property Lease, provided such Encumbrance does not materially impair the use, occupancy or value of the property subject thereto. The Company has actual possession of the premises at the Leased Real Property, and each such Leased Real Property is used in the Business.

(c) Except as set forth on Schedule 3.7(c) of the Disclosure Schedules, there are no obligations of the Company or its subsidiaries related to leasing commissions and other similar

 

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fees related to any Leased Real Property. Except as set forth on Schedule 3.7(c) of the Disclosure Schedules, with respect to each of the Real Property Leases: (i) such Real Property Lease is in full force and effect; (ii) the transactions contemplated hereby do not require the consent of any other party to such Real Property Lease, will not result in a breach of or default under such Real Property Lease, or otherwise cause such Real Property Lease to cease to be in full force and effect on identical terms following the Closing; (iii) neither the Company nor, to the Company’s and Seller’s Knowledge, any other party to a Real Property Lease is in material breach or default under such Real Property Lease, and, to the Company’s and Seller’s Knowledge, no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a material breach or default or permit the termination, modification or acceleration of rent under such Real Property Lease; (iv) to the Company’s and Seller’s Knowledge, there are no material disputes with respect to any Real Property Lease; (v) to the Company’s and Seller’s Knowledge, no security deposit or portion thereof deposited with respect to any Real Property Lease has been applied in respect of a breach or default under such Real Property Lease which has not been redeposited in full; (vi) there are no forbearance programs in effect with respect to any Real Property Lease; (vii) the Company has not assigned, subleased, mortgaged, deeded in trust or otherwise transferred or encumbered any Real Property Lease or any interest therein; (viii) to the Company’s and Seller’s Knowledge, all buildings, improvements and other property on the Leased Real Property have received all approvals of Governmental Entities (including, without limitation, certificates of occupancy, permits and licenses) required in connection with the ownership or operation thereof and, to the Company’s and Seller’s Knowledge, have been operated and maintained in all material respects in accordance with applicable legal requirements and, to the Company’s and Seller’s Knowledge, are not in violation of any applicable material Law or restrictions or covenants of record and such buildings and improvements are in satisfactory condition and repair for continued use in the ordinary course of business consistent with past custom and practice, and neither the Company nor any of its subsidiaries has received any written notice from any Governmental Entity (A) requiring the Company or its subsidiaries to correct any condition with respect to the Leased Real Property by reason of a violation of any Law or (B) threatening or contemplating modification, cancellation or non-renewal of any such approvals, certificates of occupancy, permits and licenses; (ix) to the Company’s and Seller’s Knowledge, all facilities located on the parcel of real property underlying each Real Property Lease are supplied with utilities and other services necessary for the operation of such facilities; (x) the Company and its subsidiaries have performed all obligations required to be performed by them under any Real Property Lease of the Leased Real Property the failure to perform which would constitute a material breach or default under the applicable Real Property Lease; (xi) to the Company’s and Seller’s Knowledge, no part of any improvement located on the Leased Real Property that is material to its operation is dependent for its access, operation or utility on any land, building or other improvements not included in the Leased Real Property or as to which the Company or its subsidiaries do not have rights for such access, operation or utility, and all of the Leased Real Property has sufficient access to public roads; (xii) to the Company’s and Seller’s Knowledge, there does not exist any actual or, threatened or contemplated condemnation or eminent domain proceedings or similar event that affects any Leased Real Property or any material part thereof; (xiii) none of the Company or its subsidiaries holds a contractual right or obligation to purchase or acquire any

 

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material real estate interest in any Leased Real Property or any portion thereof or interest therein; and (xiv) the Leased Real Property constitutes the only real property used in or related to the Business of the Company.

Section 3.8 Litigation.

(a) Except as set forth on Schedule 3.8 of the Disclosure Schedules, there are no claims, actions, suits, proceedings or investigations pending or, to the Knowledge of Seller or the Company, threatened against the Company or any of the assets of the Company or the Business, or to which the Company or the assets of the Company or the Business may be bound or affected, at law, in equity or otherwise, in, before, or by, any court or Governmental Entity or authority which, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect, and to the Knowledge of Seller or the Company, there is no basis for any of the foregoing. None of the Company or its assets or properties is subject to any Court Order that would have a Material Adverse Effect. The Company is not engaged in any pending legal action to recover monies due it or for damages sustained by it.

(b) Except as set forth on Schedule 3.8 of the Disclosure Schedules, since January 1, 2005 neither the Company nor the Seller has instituted, or threatened to institute, any material claims, actions, suits, proceedings or investigations against any other party relating to the Business of the Company or the assets of the Company or the Business.

Section 3.9 Compliance with Law/Government Authorizations.

(a) Schedule 3.9(a) of the Disclosure Schedules contains a complete and accurate list of each Government Authorization that is held by the Company or the Seller that relates to the Business or the assets of the Company. Each Government Authorization listed or required to be listed on Schedule 3.9(a) of the Disclosure Schedule is valid and in full force and effect. The Government Authorizations listed on Schedule 3.9(a) of the Disclosure Schedules collectively constitute all of the Government Authorizations necessary to permit the Company to lawfully conduct and operate the Business in the manner currently conducted and to permit the Company to own and use its assets in the manner in which it currently owns and uses such assets, unless the failure to have any Governmental Authorizations, individually or in the aggregate, does not and would not reasonably be likely to have a Material Adverse Effect. Except as described on Schedule 3.9(a) of the Disclosure Schedules, the Buyer shall have full benefit of the same. No proceeding is pending or, to the Knowledge of the Seller or the Company, threatened seeking the revocation, suspension or limitation of any Government Authorization.

(b) The Company and, to the Knowledge of the Company and the Seller, Dedham K&L are in compliance in all material respects with all applicable Laws, Court Orders and Governmental Authorizations affecting the assets or properties owned or used by each of them, the Business or the business or operations of each of the Company and Dedham K&L, including, but not limited to, the laws and regulations of the United States Food and Drug Administration, the Federal Trade Commission, state and local alcohol beverage control laws and regulations, and state and local health and safety laws and regulations except for any noncompliance which,

 

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individually or in the aggregate, does not and would not be reasonably likely to have a Material Adverse Effect. Since January 1, 2005, neither the Company nor, to the Knowledge of the Company and the Seller, Dedham K&L has received notice of, has been charged with violating, or been notified of any liability or potential responsibility under, or threatened with a charge of violating, or liability or potential responsibility, or, to the Knowledge of the Company and the Seller, are either of the Company or Dedham K&L under investigation with respect to a possible violation of, or liability or potential responsibility, under any such applicable Law, Court Order or Governmental Authorization relating to any of its or their assets or properties or any aspect of its or their business, except, in each case for such matters which, individually and in the aggregate, do not, and would not be reasonably likely to, have a Material Adverse Effect.

Section 3.10 Contracts.

(a) Schedule 3.10(a) of the Disclosure Schedules lists the following Contracts to which the Company or the Seller (only with respect those Contracts of Seller that are material to the Business) is a party on the date hereof:

 

(i)

Contracts with Seller, any Affiliate of Seller or the Company, or director or officer of the Company, Seller, or any Affiliate of Seller;

 

(ii)

Contracts for the future purchase of, or payment for, supplies, products or assets, or for the performance of services by a third party, in excess of $50,000 in any individual case;

 

(iii)

Contracts to sell or supply, or pay for, supplies, products or assets or to perform, or pay for, services to or for third parties, in excess of $50,000 in any individual case;

 

(iv)

Contracts providing for the purchase of all or substantially all of the Business’s requirements of a particular product from a supplier;

 

(v)

Contracts material to the assets of the Company or the Business containing a change of control provision applicable to the transactions contemplated by this Agreement, including, without limitation, any stock option plan, stock appreciation right plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement;

 

(vi)

Contracts which are material to the assets or Business of the Company;

 

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(vii)

Contracts affecting any leasehold or other interest in any real property or personal property requiring payments in excess of $50,000 to which the Company is a party;

 

(viii)

Contracts for capital expenditures by the Company or the Business in excess of $50,000;

 

(ix)

notes, debentures, bonds, conditional sale agreements, equipment trust agreements, letter of credit agreements, reimbursement agreements, loan agreements or other Contracts for the borrowing or lending of money, agreements or arrangements for a line of credit or guarantee, pledge or undertaking in any manner (including guarantees of lease obligations) whatsoever of the indebtedness of any other Person;

 

(x)

Contracts limiting or restraining the Company from engaging or competing, or from soliciting any Person, in any line of business or any geographical area or with any Person;

 

(xi)

Contracts relating to any Intellectual Property license or transfer of (A) Intellectual Property of the Company or the Business, or (B) the Intellectual Property of any other party, which is either exclusive or requires future payments of more than $50,000 per year, other than the purchase of so-called “off-the-shelf” computer software;

 

(xii)

Collective bargaining agreements or other Contracts with labor unions;

 

(xiii)

Contracts relating to employment, bonus, severance arrangements, retirement benefits, deferred compensation or termination of employment;

 

(xiv)

Contracts not made in the ordinary course of business that individually involve the payment or receipt of more than $25,000;

 

(xv)

each joint venture, partnership, and other Contract (however named) involving a sharing of profits, losses, costs, or liabilities by the Company with any other Person;

 

(xvi)

each power of attorney that is currently effective and outstanding;

 

(xvii)

any Contracts relating to any liquor licenses;

 

(xviii)

Contracts to purchase, sell or dispose of any restaurant leased or operated by the Company under which (x) the obligations therein have not yet been fully satisfied, or (y) there are any outstanding Liabilities;

 

(xix)

Contracts with current or former employees, agents, consultants or other Persons which limit or restrain such employees, consultants or other Persons from competing with the Business or the Company or from soliciting any of its current or former employees, agents or consultants;

 

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(xx)

Contracts for a license or franchise, whether the Company or the Seller is the licensor, franchisor, licensee or franchisee; or

 

(xxi)

Contracts with any Governmental Entity.

(b) The Contracts set forth on Schedule 3.10(b) of the Disclosure Schedules were entered into for the benefit of the Company even though they were signed in the names of entities that are no longer in existence or have not been officially incorporated or otherwise formed (the “D/B/A Contracts”) and the Company has the right to enforce the D/B/A Contracts against the other parties thereto as if it were an original signatory thereon.

(c) Seller has delivered or made available to Buyer a correct and complete copy of each Contract listed on Schedule 3.10(a) and Schedule 3.10(b) of the Disclosure Schedules, together with any and all amendments or modifications thereto. Subject to such exceptions that, individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect, each Contract listed on Schedule 3.10(a) and Schedule 3.10(b) of the Disclosure Schedules is valid, binding, enforceable (subject to the Enforcement Exception), and in full force and effect, the Company and/or the Seller (as applicable) is not, and to the Knowledge of Seller and the Company, the other party/parties to any such Contract is/are not, in breach or default under any such Contract and 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, under such Contract. Since January 1, 2005, neither the Company nor the Seller has given or received written notice, or to the Company’s or the Seller’s Knowledge, oral notice, of any alleged breach or default that is continuing under any such Contract. Except as set forth on Schedule 3.10(c) of the Disclosure Schedules, neither the execution and delivery of this Agreement or the Ancillary Agreements by the Seller or the Company nor the consummation or performance by the Seller and the Company of the transactions contemplated hereby and thereby will, directly or indirectly, with or without notice or lapse of time or both, give rise to a right of termination, modification or acceleration under any such Contract. The Company and/or the Seller (as applicable) has performed in all material respects all of its obligations required to be performed by it under such Contracts.

(d) Except as set forth on Schedule 3.10(d) of the Disclosure Schedules, Seller is not a party to any Contract relating to the Business.

Section 3.11 Consents and Approvals.

Except as set forth on Schedule 3.11 of the Disclosure Schedules, other than the filings, notices, reports, consents, registrations, approvals, permits and authorizations set forth on Schedule 3.7(c) and Schedule 3.11 of the Disclosure Schedules, no notices, reports or other filings are required to be made by Seller or the Company with, nor are any consents, registrations, approvals, permits or authorizations required to be obtained by Seller or the

 

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Company from any Person in connection with the execution and delivery of this Agreement and the Ancillary Agreements by Seller and the Company and the consummation by Seller and the Company of the transactions contemplated hereby and thereby except those that the failure to make or obtain are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect or prevent, delay or impair the ability of Seller to consummate the transactions contemplated by this Agreement.

Section 3.12 Tax Matters.

Except as set forth on Schedule 3.12 of the Disclosure Schedules: (a) all Tax Returns that are required to be filed by or with respect to Seller’s Group and/or the Company have been duly and timely filed, or, where not so filed, are covered under an extension that has been obtained therefore, (b) Seller or the Company has delivered or made available to Buyer correct and complete copies of all federal and state income Tax Returns filed with respect to the Company for taxable periods ended on or after December 28, 2003, (c) all Tax Returns filed by or with respect to Seller’s Group and/or the Company are true, accurate and complete, and have been prepared in compliance in all material respects with all applicable Laws, (d) all Taxes due and payable by Seller’s Group and/or the Company have been paid in full on a timely basis, except when the amount thereof was being contested in good faith by appropriate proceedings and adequate reserves therefor were set aside on the books of the Company, (e) none of the Tax Returns referred to in this Section 3.12 has been examined by the IRS or the appropriate state, local or foreign taxing authority, no deficiencies or claims for Taxes (or adjustments relating to Taxes) have been claimed, proposed or assessed in writing or otherwise by any Governmental Entity and there are no pending or, to the Seller’s and Company’s Knowledge, threatened audits, reviews, investigations or claims for or relating to any liability in respect of Taxes of the Company for any taxable period, (f) no waivers of statutes of limitation have been given by or requested with respect to any Taxes of Seller’s Group or the Company, (g) the Company has withheld and timely paid to the appropriate taxing authority the required amounts in material compliance with all tax withholding provisions of applicable federal, state, local and foreign Laws (including, without limitation, income, social security and employment tax withholding), (h) there are no Encumbrances for Taxes upon the assets or properties of the Company other than for Taxes not yet due and payable and for which adequate reserves are reflected on the Balance Sheet; (i) the Company has not made any payments, is not obligated to make any payments, and is not a party to any agreement that could obligate it to make any payments that would not be deductible, in whole or in part, under Section 280G or Section 162(m) of the Code (or any corresponding provision of state, local or foreign Tax law), (j) neither Seller nor the Company is a foreign person subject to withholding under Section 1445 of the Code, (k) the Company neither is nor ever was part of an affiliated group (within the meaning Section 1504(a) of the Code) other than one in which Seller is the common parent; (l) the Company has not failed to comply in any material respect with Section 409A of the Code, (m) neither Seller nor the Company has consented to extend the time in which any Taxes of the Company may be assessed or collected by any Governmental Entity, which Taxes have not since been paid, or has requested or been granted an extension of the time for filing any Tax Returns to a date later than the Closing Date, which Tax Returns have not since been filed; (n) the unpaid Taxes of the Company (i) did not, as

 

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of the Balance Sheet Date, exceed the reserve for Tax liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Balance Sheet (and not in any notes thereto), and (ii) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company in filing Tax Returns; (o) other than the affiliated group of which Seller is the common parent, the Company does not have any liability for the Taxes of another person under Treas. Reg. § 1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise; (p) Seller and the Company have disclosed on their Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662 of the Code; and (q) the Company’s taxable income for any period after the Closing Date will not be affected by any closing agreement under Code Section 7121 (or similar agreement), change in accounting method, intercompany transaction, excess loss account, installment sale, open transaction disposition, Code Section 355 distribution, or prepayment made prior to the Closing Date.

Section 3.13 Intellectual Property.

(a) Set forth on Schedule 3.13(a) of the Disclosure Schedules is a true and complete list of: (i) all registered ownership of Intellectual Property, (ii) all pending applications to register ownership of Intellectual Property, (iii) all material unregistered trademarks, (iv) all material licenses to use Intellectual Property, and (v) all significant recipes, in each case held by the Company or the Seller relating to the Business. Assuming the validity of ownership of Intellectual Property by all parties from which the Company licenses Intellectual Property, there are no Intellectual Property rights, other than those which the Company owns, licenses or has rights to, necessary to or regularly used in the conduct of the Business as presently conducted and there are no restrictions that would materially impair the use of such Intellectual Property. Assuming the validity of ownership of Intellectual Property by all parties from which the Company licenses Intellectual Property, all licenses and other agreements pursuant to which any Intellectual Property rights, including any computer software, are licensed to or used by the Company are valid, binding and enforceable (subject to the Enforcement Exceptions), and there does not exist under any such license or agreement a default or event or condition which, after notice or lapse of time or both, would constitute a default by any party thereto.

(b) To the Knowledge of Seller and the Company, (i) with respect to the trademarks listed on Schedule 3.13(a) of the Disclosure Schedules (the “Major Marks”), there are no restrictions that would materially impair the use of the Major Marks in connection with the Business and the Company’s use of the Major Marks do not infringe upon or otherwise violate the valid and registered trademarks of any other Person, and (ii) no Person is challenging, infringing or otherwise violating the Intellectual Property owned by the Company, except in each case for challenges, infringements or violations, which individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect on the assets of the Company or the Business.

 

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(c) Except as set forth on Schedule 3.13(c) of the Disclosure Schedules, all statutory Intellectual Property rights required to be listed on Schedule 3.13(a) of the Disclosure Schedules:

 

(i)

have been duly registered, filed in, or issued by, the United States Patent and Trademark Office, United States Register of Copyrights, or the corresponding offices of other countries identified on said Schedule;

 

(ii)

have been properly maintained and renewed in accordance with all applicable Laws in the United States and such foreign countries; and

 

(iii)

are freely transferable (except as otherwise required by Law).

(d) Except as set forth on Schedule 3.13(d) of the Disclosure Schedules, all Intellectual Property rights required to be listed on Schedule 3.13(a) of the Disclosure Schedules, whether or not statutorily created:

 

(i)

are owned exclusively by the Company, free and clear of any licenses, sub-licenses or Encumbrances, such that no other person has any right or interest in or license to use or right to license others to use any of the Intellectual Property rights; and

 

(ii)

are not subject to any outstanding Court Order.

(e) Neither the Business nor the Company is, to the Seller’s or the Company’s Knowledge, infringing any Intellectual Property rights of any other person and has not been accused in writing or otherwise of infringing the Intellectual Property rights of any other person. The Company has adopted measures it deems commercially reasonable to protect its Intellectual Property. Copies of all forms of non-disclosure or confidentiality agreements utilized by the Company to protect trade secrets have been made available to Buyer. The Company has the right to use, free and clear of claims or rights of others, all trade secrets, customer lists and manufacturing processes required for or incident to its products and services, and it is not using any confidential information or trade secrets of any former employer of any of its past or present employees.

(f) The Company and Seller believe that the Company’s information technology systems (including all applicable software and hardware) are adequate for the Company’s current management and record keeping purposes.

Section 3.14 Conduct of Business; Absence of Certain Changes.

Since the Balance Sheet Date, the Company and the Seller have conducted the Business only in the ordinary course, consistent with prior practices and, whether or not in the ordinary course of business, there has not been any change in the financial condition (including working capital, earnings, reserves, properties, assets, liabilities, business or operations) or otherwise, of

 

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the Business or the Company which change, by itself or in conjunction with all other such changes, whether or not arising in the ordinary course of business, has had a Material Adverse Effect on the Business or the Company. Without limiting the generality of the foregoing, subject in each case to the foregoing limitation with regard to Material Adverse Effect, and except as disclosed on Schedule 3.14 of the Disclosure Schedules, since the Balance Sheet Date there has not been:

 

(a)

any amendment or other modification to the articles of incorporation or by-laws of the Company or any of its subsidiary’s organizational documents (i.e. certificate of incorporation, articles of incorporation, by-laws);

 

(b)

any contingent liability incurred by the Company or the Seller (with respect to the Business) as guarantor or otherwise, with respect to the obligations of others;

 

(c)

any sale, lease or other disposition, or any agreement or other arrangement for the sale, lease or other disposition, of any asset or property of the Business other than in the ordinary course of business consistent with past practice;

 

(d)

any Encumbrance placed on any of the assets of the Business which remains in existence on the date hereof;

 

(e)

any obligation or liability incurred by the Company or the Seller (with respect to the Business), other than oblig