Asset Exchange Agreement Between Npc, Phi And Phsd

ASSET EXCHANGE AGREEMENT


BY AND AMONG


NATIONAL PIZZA COMPANY,


PIZZA HUT, INC.


AND


PIZZA HUT OF SAN DIEGO, INC.


DATED JUNE 7, 1994
TABLE OF CONTENTS


ARTICLE I EXCHANGE OF ASSETS 2


Section 1.1 Execution and Transfer of
Franchise Agreements 2
Section 1.2 Transfer by NPC 2
Section 1.3 NPC Assets 3
Section 1.4 Transfer of O'Donnell Assets 4
Section 1.5 O'Donnell Assets 5
Section 1.6 Transfer by PH 6
Section 1.7 PH Assets 6
Section 1.8 Escrow 8
Section 1.9 Closings 8
Section 1.10 Risk of Loss 8
Section 1.11 POS Systems 9


ARTICLE II ADDITIONAL AGREEMENT 10


ARTICLE III VALUATIONS, CONSIDERATION AND ADDITIONAL
TRANSFERS 10
Section 3.1 Valuation of Sites 10
Section 3.2 Payment Adjustments 10
Section 3.3 Additional Consideration to be
paid by PHSD 11
Section 3.4 Payment 11
Section 3.5 Allocation 11
Section 3.6 Method of Payment 11


ARTICLE IV NON-ASSUMPTION OF EXISTING LIABILITIES 11


Section 4.1 NPC 11
Section 4.2 PH and PHSD 12
Section 4.3 Apportionments and Inventory 12
Section 4.4 Other Liabilities 13


ARTICLE V REPRESENTATIONS AND WARRANTIES OF NPC 13


Section 5.1 Organization 13
Section 5.2 Authorization and Enforceability 13
Section 5.3 Absence of Conflict 14
Section 5.4 Title to NPC Personal Property 14
Section 5.5 Title to Real Property 15
Section 5.6 Absence of Other Assets 16
Section 5.7 Leases 17
Section 5.8 Documents Sufficient 17
Section 5.9 Litigation 17
Section 5.10 Governmental Licenses 18
Section 5.11 Compliance with Laws 18
Section 5.12 Assigned Contracts. 19
Section 5.13 Employees 20
Section 5.14 Environmental Matters 20
Section 5.15 Payment of Taxes 22
Section 5.16 No Finder's or Broker's Fee 23
Section 5.17 Disclosure 23
Section 5.18 Representations and Warranties True 24


ARTICLE VI REPRESENTATIONS AND WARRANTIES OF
PHI AND PHSD 25


Section 6.1 Organization 25
Section 6.2 Authorization and Enforceability 25
Section 6.3 Absence of Conflict 25
Section 6.4 Title to PH Personal Property 26
Section 6.5 Title to PH Real Property 26
Section 6.6 Absence of Other Assets 28
Section 6.7 Leases 28
Section 6.8 Documents Sufficient 28
Section 6.9 Litigation 28
Section 6.10 Governmental Licenses 29
Section 6.11 Compliance with Laws 29
Section 6.12 PH Assigned Contracts. 30
Section 6.13 Employees 30
Section 6.14 Environmental Matters 31
Section 6.15 Payment of Taxes 32
Section 6.16 No Finder's or Broker's Fee 33
Section 6.17 Disclosure 33
Section 6.18 Representations and Warranties True 33


ARTICLE VII TRANSFER OF THE O'DONNELL ASSETS 33


Section 7.1 Representations and Warranties 33
Section 7.2 Assignment 34
Section 7.3 Acceptance 34


ARTICLE VIII COVENANTS OF NPC 34


Section 8.1 Management of the NPC Sites
Pending Closing 34
Section 8.2 Transfer of Licenses and Permits 35
Section 8.3 Accuracy of Representations and
Warranties 35
Section 8.4 Access to Information and Facilities 36
Section 8.5 Taxes 36
Section 8.6 Further Assurances 36
Section 8.7 Exchange Sales Tax 37
Section 8.8 Notification 37
Section 8.9 O'Donnell Agreement 37


ARTICLE IX COVENANTS OF PHI AND PHSD 37


Section 9.1 Management of the PH Sites
Pending Closing 37
Section 9.2 Transfer of License and Permits 38
Section 9.3 Accuracy of Representations and
Warranties 38
Section 9.4 Access to Information and Facilities 39
Section 9.5 Taxes 39
Section 9.6 Further Assurances 39
Section 9.7 Exchange Sales Tax 40
Section 9.8 Notification 40


ARTICLE X CONDITIONS TO OBLIGATION OF NPC AT
EACH CLOSING 40


Section 10.1 Representations and Warranties
True and Correct 41
Section 10.2 Performance 41
Section 10.3 Consents 41
Section 10.4 Hart-Scott-Rodino 41
Section 10.5 No Litigation 41
Section 10.6 No Adverse Developments 41
Section 10.7 Investigation 42
Section 10.8 Other Actions 42


ARTICLE XI CONDITIONS TO OBLIGATION OF PHI AND
PHSD AT EACH CLOSING 42


Section 11.1 Representations and Warranties
True and Correct 42
Section 11.2 Performance 42
Section 11.3 Consents 42
Section 11.4 Hart-Scott-Rodino 43
Section 11.5 No Litigation 43
Section 11.6 No Adverse Developments 43
Section 11.7 Investigation 43
Section 11.8 Other Actions 43
Section 11.9 O'Donnell Assets 43
Section 11.10 O'Donnell Agreement 44


ARTICLE XII DOCUMENTS TO BE DELIVERED ON EACH CLOSING
DATE 44


Section 12.1 Condition Precedent 44
Section 12.2 Documents to be Delivered by NPC 44
Section 12.3 Documents to be Delivered by PHI
and PHSD 46


ARTICLE XIII EMPLOYEES 47


Section 13.1 Definitions 47
Section 13.2 Transfer of Employees 47
Section 13.3 Responsibility of Former Employer 48
Section 13.4 Responsibility of New Employer 48
Section 13.5 Claims 48
Section 13.6 Benefit Plans 48
Section 13.7 Benefits to be Provided 49
Section 13.8 Future Employment 49
Section 13.9 Agreement Not to Recruit 49
Section 13.10 Certain Employees 49


ARTICLE XIV EMPLOYEE BENEFITS AND ERISA 50


Section 14.1 Treatment of PH Employee Plans 50
Section 14.2 Treatment of NPC Employee Plans 51
Section 14.3 Definitions 52


ARTICLE XV BULK TRANSFER; TAX CERTIFICATES 54


ARTICLE XVI INDEMNIFICATION AND MEDIATION 54


Section 16.1 Survival 54
Section 16.2 Indemnification of PHI and PHSD by NPC 54
Section 16.3 Indemnification of NPC by PHI and PHSD 56
Section 16.4 Indemnification Procedure 58
Section 16.5 Effect of Insurance Payments 59
Section 16.6 Limitations on Indemnification 59
Section 16.7 Other Remedies 59
Section 16.8 Mediation 59


ARTICLE XVII TERMINATION 60


Section 17.1 Termination by Either Party 60
Section 17.2 Delay 61


ARTICLE XVIII MISCELLANEOUS 63


Section 18.1 Notices 63
Section 18.2 Expenses 63
Section 18.3 Public Announcement 64
Section 18.4 Assignment 64
Section 18.5 Governing Law 64
Section 18.6 Waiver and Amendment 64
Section 18.7 Entire Agreement 64
Section 18.8 Binding Agreement 64
Section 18.9 Agreement Negotiated 65
Section 18.10 Confidentiality 65
Section 18.11 Attorneys' Fees 65
Section 18.12 Remedies Not Exclusive 65
Section 18.13 No Third-Party Beneficiaries 65
Section 18.14 Headings 65
Section 18.15 Severability 66
Section 18.16 Counterparts 66
Section 18.17 Nontraditional 66


INDEX OF EXHIBITS AND SCHEDULES


Exhibits


Exhibit A PH Sites Exhibit B NPC Sites Exhibit C O'Donnell Sites Exhibit D Form of New Agreements Exhibit E Form of Blanket Amendment Exhibit F Schedule of Closings Exhibit G Liquor License Escrow Agreement Exhibit H Valued NPC Sites Exhibit I Valuation Methodology Exhibit J Opinion of NPC Counsel Exhibit K Form CSC Management Agreement Exhibit L Opinion of PHI and PHSD Counsel Exhibit M Form of O'Donnell Agreement Exhibit N Mutual Release


Schedules


Schedule 1.3(a)(i) NPC Real Property Schedule 1.3(a)(ii) NPC Assigned Leases Schedule 1.3(a)(iv) NPC Assigned Contracts Schedule 1.3(a)(v) NPC Equipment Schedule 1.3(a)(vii) NPC Prepaid Items Schedule 1.5(a)(i) O'Donnell Real Property Schedule 1.5(a)(ii) O'Donnell Assigned Leases Schedule 1.5(a)(iii) O'Donnell Assigned Contracts Schedule 1.5(a)(iv) O'Donnell Equipment Schedule 1.5(a)(vi) O'Donnell Prepaid Items Schedule 1.7(a)(i) PH Real Property Schedule 1.7(a)(ii) PH Assigned Leases Schedule 1.7(a)(iv) PH Assigned Contracts Schedule 1.7(a)(v) PH Equipment Schedule 1.7(a)(vii) PH Prepaid Items Schedule 5.4 Title to NPC Personal Property Schedule 5.5(a) Title to NPC Real Property Schedule 5.7 NPC Lease Prepayments Schedule 5.9 NPC Litigation Schedule 5.10(a) NPC Licenses Schedule 5.10(b) O'Donnell Licenses Schedule 5.11(c) NPC Necessary Consents Schedule 5.14(b) NPC Environmental Matters Schedule 6.4 Title to PH Personal Property Schedule 6.5(a) Title to PH Real Property Schedule 6.5(c) PH Condemnation Schedule 6.7 PH Lease Prepayments Schedule 6.9 PH Litigation Schedule 6.10 PH Governmental Licenses Schedule 6.11(c) PH Necessary Consents Schedule 6.13(e) PH Severance Pay Policy Schedule 6.14(a) PH Environmental Matters Schedule 13.10 Certain Employees Schedule 17.2 Cash Flow Values Schedule 18.17(a) NPC Nontraditional Sites Schedule 18.17(b) PH Nontraditional Sites Schedule 18.17(c) Proposed Nontraditional Sites
ASSET EXCHANGE AGREEMENT


THIS ASSET EXCHANGE AGREEMENT is made and entered into as of the 7th day of June, 1994, by and among NATIONAL PIZZA COMPANY, a Kansas corporation with its principal office located at 720 West 20th Street, Pittsburg, Kansas 66762 ("NPC"), PIZZA HUT, INC., a Delaware corporation with its principal office located at 9111 E. Douglas, Wichita, Kansas 67201 ("PHI") and PIZZA HUT OF SAN DIEGO, INC., a California corporation with its principal place of business at 9111 East Douglas, Wichita, Kansas 67201 ("PHSD"). This Asset Exchange Agreement, including all exhibits and schedules attached hereto, shall be referred to herein as the "Agreement."


W I T N E S E T H:


WHEREAS, various affiliates of PHSD operate the Pizza Hut restaurants set forth on Exhibit A hereto, which it wishes to transfer to NPC (the "PH Sites"); and


WHEREAS, NPC is the franchisee and NPC and various subsidiaries and affiliates of NPC operate the Pizza Hut restaurants set forth on Exhibit B hereto, (the "NPC Sites"); and


WHEREAS, NPC is in the process of negotiating an agreement with the present franchisees and operators of the Pizza Hut restaurants set forth on Exhibit C hereto (the "O'Donnell Sites") pursuant to which NPC intends to purchase the O'Donnell Sites; and


WHEREAS, NPC has agreed to transfer the O'Donnell Sites and the NPC Sites to PHSD as part of the exchange contemplated hereby; and


WHEREAS, PHSD has agreed to transfer the PH Sites to NPC as part of the exchange, upon the terms and subject to the conditions set forth herein; and


WHEREAS, in addition, as part of such exchange, NPC will enter into or otherwise receive franchise agreements and the development schedules (collectively, the "New Agreements") substantially in the form attached hereto as Exhibit D and a blanket amendment in the form of Exhibit E hereto (the "Blanket Amendment");


NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:


I EXCHANGE OF ASSETS


.1 Execution and Transfer of Franchise Agreements.


(a) Upon the terms and subject to the conditions set
forth herein, and in reliance upon the representations,
warranties, covenants and agreements made herein:


(i) PHI agrees to issue New Agreements to NPC in the
completed form of Exhibit D hereto, with respect to the
territories specified in the existing Pizza Hut franchise
agreements currently in effect between PHI and NPC, including
those NPC Sites (as hereinafter defined) not transferred to
PHSD at the first Closing, unless the issuance of such New
Agreements is, in PHI's reasonable opinion, prohibited by state
law, and


(ii) PHSD agrees to transfer New Agreements to NPC in the
completed form of Exhibit D hereto with respect to the PH
Sites.


(b) The parties agree that, if the first Closing (as
defined below) takes place on or before June 8, 1994, each New
Agreement (other than those applicable to the PH Sites) shall
be deemed to take effect as of March 30, 1994, regardless of
the actual date of execution. In the event the first Closing
Date does not take place on or before June 8, 1994, each New
Agreement shall be effective the date of its actual issuance or
transfer to NPC. All New Agreements will be issued or
transferred to NPC at the first Closing, except only for those
New Agreements applicable to PH Sites to be transferred to NPC
at subsequent Closings hereunder (each, a "Subsequent New
Agreement"), which Subsequent New Agreements will be
transferred to NPC as part of the Closing at which such PH
Sites are, in fact, transferred to NPC. PHI agrees to consent
to all such transfers of the New Agreements and PH Sites and to
execute any documents reasonably requested by NPC to evidence
that consent. Each New Agreement transferred to NPC in respect
to PH Sites will be effective the date of such transfer.


.2 Transfer by NPC. Upon the terms and subject to the conditions set forth herein, and in reliance upon, in consideration of, and in exchange for the representations, warranties, covenants, agreements and transfers made by PHI and PHSD herein, NPC agrees to convey, assign, transfer and deliver to PHSD, in accordance with the Schedule of Closings attached hereto as Exhibit F, and PHSD agrees to acquire and accept from NPC, good and marketable title to the NPC Assets (as defined below).


.3 NPC Assets. For purposes of this Agreement, the term "NPC Assets" shall mean:


(a) The following assets located at the NPC Sites:


(i) Good, valid and marketable fee simple title to the real
property described on Schedule 1.3(a)(i) hereto, including all
land, land improvements, buildings, fixtures and other
appurtenances thereto (the "NPC Real Property");


(ii) Good, valid and marketable right, title and interest as
lessee in and to the leases which are set forth on
Schedule 1.3(a)(ii) hereto (the "NPC Assigned Leases"),
including all interest thereunder in the buildings, fixtures,
signs, parking facilities, trash facilities, fences, easements,
rights of way, or other leasehold improvements subject to such
NPC Assigned Leases;


(iii) Good, valid and marketable right, title and
interest in and to the buildings, fixtures, signs, parking
facilities, trash facilities, fences, easements, rights of way,
or other improvements owned by NPC or its affiliates on each
NPC Site;


(iv) All of NPC's right, title and interest in and to the
personal property leases and contracts specifically described
on Schedule 1.3(a)(iv) hereto related to and used in the normal
and customary operations of the NPC Sites (the "NPC Assigned
Contracts");


(v) Except for all items described in Sections 1.3(a)(i)
through 1.3(a)(iv) above, all right, title and interest in and
to the equipment used by NPC or its affiliates in the normal
and customary operations of the NPC Sites, including but not
limited to the telephone equipment, furniture, machinery,
equipment, tables, chairs, ovens, refrigerators, display cases,
shelves, utensils, tools, pans, salad bars, sneeze guards,
lights, uniforms, curtains, signs, menus, tablecloths, glasses,
plates, dishes, silverware, pitchers, books, cabinets, racks,
towels, ornaments, bars and bar equipment (the "NPC Equipment")
set forth on Schedule 1.3(a)(v) hereto, provided, however, that
the NPC Equipment shall not include any point of sale, register
or back office ("POS") system located at any of the NPC Sites;


(vi) All right, title and interest in and to the inventories
of foodstuffs, paper products, and other supplies (the "NPC
Inventory") which are at the NPC Sites on the relevant Closing
Date. (NPC Inventory at each NPC Site shall be not less than
or greater than the normal amount of inventory for an average
Pizza Hut outlet operated by NPC, and all of such NPC Inventory
shall be in good condition, and shall be useable and saleable
in the normal and ordinary course of business);


(vii) The prepaid items set forth on Schedule 1.3(a)(vii)
hereto (the "NPC Prepaid Items"); and


(viii) All other rights and property interests of any
nature which are customarily used by NPC or its affiliates in
or are useful to NPC or its affiliates in the operation of the
NPC Sites, including, but not limited to, liquor licenses (to
the extent transferable), rights to the use of existing NPC
Site telephone numbers, rights arising under equipment
warranties, and all change funds at each NPC Site. (The amount
of change funds at each NPC Site shall be not less than or
greater than the normal amount of change funds for an average
Pizza Hut outlet operated by NPC).


(b) All of the franchise rights related to the NPC Sites.


.4 Transfer of O'Donnell Assets.


(a) Upon the terms and subject to the conditions set
forth herein, and in reliance upon, in consideration of, and in
exchange for the representations, warranties, covenants,
agreements and transfers made by PHI and PHSD herein, NPC
agrees to convey, assign, transfer and deliver to PHSD, in
accordance with the Schedule of Closings attached hereto as
Exhibit F, and PHSD agrees to acquire and accept from NPC,
title to the O'Donnell Assets (as defined below), to be
acquired by NPC pursuant to that certain Asset Purchase
Agreement between NPC and the sellers identified therein
(collectively referred to herein as "O'Donnell") in
substantially the form attached hereto as Exhibit M (the
"O'Donnell Agreement").


(b) Recognizing that NPC does not presently own, and has
never operated, the O'Donnell Assets, NPC and PHSD recognize
and agree that NPC cannot assure the delivery to PHSD of good,
valid and marketable title to the O'Donnell Assets and,
therefore, the parties agree that NPC shall not be deemed to be
in breach of any obligation, representation or warranty
hereunder if, through no fault of NPC's, NPC is unable to
tender good, valid and marketable title to the O'Donnell Assets
to PHSD at the applicable Closing. However, it is the
intention and expectation of the parties that PHSD shall
receive good, valid and marketable title to the O'Donnell
Assets and, therefore, PHSD shall not be obligated to accept
the O'Donnell Assets to which inferior title is tendered at the
applicable Closing if, in PHSD's reasonable opinion, inferior
title is tendered.


.5 O'Donnell Assets. For purposes of this Agreement, the term "O'Donnell Assets" shall mean:


(a) The following assets located at the O'Donnell Sites:


(i) Good, valid and marketable fee simple title to the real
property described on Schedule 1.5(a)(i) hereto, including all
land, land improvements, buildings, fixtures and other
appurtenances thereto (the "O'Donnell Real Property");


(ii) Good, valid and marketable right, title and interest as
lessee in and to the leases which are set forth on
Schedule 1.5(a)(ii) hereto (the "O'Donnell Assigned Leases"),
including all interest thereunder in the buildings, fixtures,
signs, parking facilities, trash facilities, fences, easements,
rights of way, or other leasehold improvements subject to such
O'Donnell Assigned Leases;


(iii) Good, valid and marketable right, title and
interest in and to the personal property leases and contracts
with a remaining term not exceeding one year and which are
transferrable, specifically described on Schedule 1.5(a)(iii)
hereto related to and used in the normal and customary
operations of the O'Donnell Sites (the "O'Donnell Assigned
Contracts");


(iv) Except for all items described in Sections 1.5(a)(i)
through 1.5(a)(iii) above, right, title and interest in and to
the equipment and leasehold improvements used in the normal and
customary operations of the O'Donnell Sites, including but not
limited to the telephone equipment, furniture, machinery,
equipment, tables, ...