SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported MARCH 6, 1996
CARROLS CORPORATION
(Exact Name of Registrant as Specified in Charter)
DELAWARE 1-6553 16-0958146
(State or Other Jurisdiction (Commission (Employer
of Incorporation) File Number) Identification No.)
968 JAMES STREET, SYRACUSE, NY 13203
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (315) 424-0513
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS
On March 6, 1996, Atlantic Restaurants, Inc. (the "Buyer"), Carrols
Holdings Corporation ("Holdings"), Carrols Corporation (the "Registrant")
and Certain Selling Shareholders of Holdings (the "Selling Shareholders")
entered into a Securities Purchase Agreement (the "Agreement"). Pursuant
to the Agreement, Buyer will acquire between 95% and 100% of the
outstanding shares of common stock, including securities that are
convertible, exercisable or exchangeable into shares of common stock, of
Holdings (the "Securities"). Holdings is the owner of all of the issued
and outstanding capital stock of the Registrant.
Assuming all of the Securities are acquired by the Buyer, the
aggregate purchase price will be approximately $86,500,000 (the "Purchase
Price"). In accordance with the Agreement, the Purchase Price is subject
to adjustment in the event (i) certain liabilities of the Registrant as of
March 31, 1996 exceed specified targeted levels or (ii) of a delay in the
Closing. The Purchase Price shall be paid in cash.
It is anticipated, at the closing of the transaction (the "Closing"),
the Buyer will elect a new board of directors of Holdings and Holdings will
elect a new board of directors of the Registrant.
The parties anticipate the Closing will occur in April, 1996 if all of
the conditions precedent to the Closing, which are currently anticipated to
be met, will have occurred by such time, including (i) the termination or
expiration of the applicable Hart-Scott-Rodino waiting period; (ii)
obtaining the consent of Burger King Corporation and (iii) additional
conditions to Closing set forth in the Agreement. The purchase and sale of
certain outstanding options, representing 3.2% of the Securities on a
fully-diluted basis, will be consummated on or about January 6, 1997.
The consummation of the transactions contemplated by the Agreement
will constitute a "change of control" under the Indenture, dated as of
August 17, 1993 (the "Indenture"), among the Registrant, Holdings and
Marine Midland Bank, N.A., as trustee, governing the Registrant's $110
million aggregate principal amount of 11 1/2% Senior Notes Due 2003 (the
"Notes"). In accordance with the terms and conditions of the Indenture,
upon a "change of control", each holder of the Notes will have the right to
require the Registrant to repurchase all or any part of such holder's Notes
at a repurchase price in cash equal to 101% of the principal amount of the
Notes being repurchased (plus accrued and unpaid interest, if any).
<PAGE>
ITEM 7(C). EXHIBITS
2.1 Securities Purchase Agreement dated March 6, 1996,
among Atlantic Restaurants, Inc., Carrols Holdings
Corporation, Carrols Corporation and Certain Selling
Shareholders, excluding exhibits and schedules.
2.2 Deferred Securities Purchase Agreement dated March
6, 1996 among Atlantic Restaurants, Inc., Alan
Vituli and Pryor, Cashman, Sherman & Flynn.
2.3 Escrow Agreement dated March 6, 1996, by and among
Atlantic Restaurants, Inc., Bahrain International
Bank (E.C.), Carrols Holdings Corporation, Carrols
Corporation, certain selling shareholders and Baer
Marks and Upham.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized in the City
of Syracuse, State of New York on the 21st day of March, 1996.
CARROLS CORPORATION
By:/s/ Alan Vituli
Alan Vituli, Chairman and
Chief Executive Officer
SECURITIES PURCHASE AGREEMENT
DATED AS OF MARCH 6, 1996
AMONG
ATLANTIC RESTAURANTS, INC.,
CARROLS HOLDINGS CORPORATION,
CARROLS CORPORATION
AND
THE SELLING SHAREHOLDERS
LISTED ON SCHEDULE I
ATTACHED HERETO
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the "Agreement") made and entered
into as of the 6th day of March, 1996, by and among Atlantic Restaurants,
Inc., a Delaware corporation ("Buyer"), Carrols Holdings Corporation, a
Delaware corporation ("Holdings"), Carrols Corporation, a Delaware
corporation (the "Company"), and the Selling Shareholders listed on
Schedule I hereto (collectively, the "Selling Shareholders"). In certain
cases, as indicated below, the Selling Shareholders as a group shall be
represented by Alan Vituli (the "Selling Shareholders Representative"). In
addition, certain representations and warranties contained herein shall be
made only by those Selling Shareholders listed on Schedule II hereto
(collectively, the "Principal Managers").
W I T N E S S E T H
WHEREAS, the Selling Shareholders collectively own a significant part
of the issued and outstanding shares of common stock, including a
significant part of the securities that are convertible into or exercisable
or exchangeable for shares of common stock (collectively, the
"Securities"), of Holdings;
WHEREAS, Holdings is the owner of all of the issued and outstanding
capital stock of the Company;
WHEREAS, the Company is, among other things, the owner and operator of
approximately 220 Burger King restaurants (each, together with any interest
in any owned and/or leased real property used in connection with such
Burger King restaurant and any improvements located thereon, a "Restaurant"
and collectively, the "Restaurants"); and
WHEREAS, Buyer wishes to purchase all of the Securities from the
Selling Shareholders and the Selling Shareholders wish to sell all of the
Securities to Buyer, upon the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the aforesaid and the respective
warranties, representations, covenants and agreements hereinafter set
forth, the parties, intending to be legally bound, agree as follows:
I. PURCHASE AND SALE OF THE SECURITIES
1.01 PURCHASE AND SALE OF THE SECURITIES. Upon the terms and subject
to the conditions contained in this Agreement, at the closing provided for
in Section 1.03 hereof (the "Closing"), Buyer shall purchase and acquire
from the Selling Shareholders, and the Selling Shareholders shall sell,
transfer, assign, convey and deliver to Buyer, the Securities set forth
opposite the name of each Selling Shareholder on Schedule I hereto, free
and clear of all liens, pledges, security interests, charges, claims or
encumbrances of any nature whatsoever.
1.02 PURCHASE PRICE. The aggregate purchase price for the Securities
shall be equal to $81,693,060 (the "Purchase Price"), and subject to
increase up to $84,185,216 based upon the extent to which the individuals
or entities listed on Schedule III hereto agree on or prior to the Closing
Date to sell to Buyer (and do actually sell to Buyer at Closing) the
securities set forth opposite their respective names on Schedule III hereto
for the purchase prices set forth opposite their respective names on
Schedule III hereto (it being understood that the defined term "Selling
Shareholders" as used herein shall hereinafter include any individuals or
entities listed on Schedule III hereto who agree in writing on or prior to
the Closing Date to sell to Buyer (and do actually sell to Buyer at
Closing) the securities set forth opposite their respective names on
Schedule III hereto for the purchase prices set forth opposite their
respective names on Schedule III hereto, and the defined term "Securities"
as used herein shall hereinafter include any such securities sold to
Buyer), subject to adjustment pursuant to Section 1.04 hereof and subject
to Section 2.02 hereof. The Purchase Price shall be payable in cash by
wire transfer of immediately available funds to such bank account or bank
accounts (up to a maximum of three) as shall be designated by the Selling
Shareholders Representative in writing prior to the Closing Date (as
defined in Section 1.03 hereof). The Purchase Price shall be allocated
among the Selling Shareholders by the Selling Shareholders Representative
in accordance with Schedule I and, to the extent applicable, Schedule III
hereto.
1.03 CLOSING. The closing of the transactions contemplated by this
Agreement shall take place on the later of the fifth business day following
the satisfaction or waiver of all of the conditions to Closing set forth in
Article III hereof or the sixth business day following receipt of the draft
Liabilities Schedule (as hereinafter defined) pursuant to Section 1.04(a)
below, at 10:00 a.m., local time, at the offices of Pryor, Cashman, Sherman
& Flynn, 410 Park Avenue, New York, New York 10022, or on such other date
and at such other time or place as the parties may mutually agree. The
actual date of the Closing is sometimes referred to herein as the "Closing
Date".
1.04 PURCHASE PRICE ADJUSTMENTS.
(a) As soon as practicable after March 31, 1996, but in no event
later than April 5, 1996, the Company shall cause its independent certified
public accountants, Coopers & Lybrand L.L.P. (the "Auditor"), to complete
and deliver to Buyer and the Selling Shareholders Representative a
schedule, substantially in the form of Exhibit A hereto (the "Liabilities
Schedule"), setting forth the book value of the following items as of March
31, 1996: (i) aggregate principal amount outstanding of the 11 1/2 %
Senior Notes Due 2003 of the Company (the "Senior Notes"), (ii) accrued but
unpaid interest on the Senior Notes, (iii) outstanding borrowings under the
Company's Third Amended and Restated Loan and Security Agreement with
Heller Financial, Inc., as amended, including accrued but unpaid interest
thereon (iv) Capitalized Lease Obligations (as defined below), (v) Funded
Indebtedness (as defined below), other than Funded Indebtedness described
in clauses (i), (iii) and (iv) above, (vi) aggregate liquidation preference
of the outstanding shares of Class A, 10% cumulative redeemable, par value
$.01 per share, Preferred Stock of Holdings (the "Class A Preferred
Stock"), together with accrued but unpaid dividends on the Preferred Stock
(as hereinafter defined), (vii) cash and cash equivalents as set forth on
Schedule 1.04(a)(i) hereto, (viii) assets held for disposition as
identified on Schedule 1.04(a)(ii) hereto, (ix) Permitted Expenditures (as
defined below) incurred by Holdings, the Company and its Subsidiaries
during the period from January 1, 1996 through March 31, 1996 and (x) any
consideration paid by the Company (including acquisition-related expenses)
during the period from January 1, 1996 through March 31, 1996 in connection
with any of the proposed acquisitions set forth on Schedule 1.04(a)(iii)
hereto. The Liabilities Schedule shall be prepared in accordance with GAAP
(as hereinafter defined) and shall be consistent with the preparation of
Holdings' December 31, 1994 and 1995 audited financial statements. The
expenses of the Auditor shall be borne by the Company.
(b) For purposes of this Section 1.04:
(i) "Capital Assets" shall mean any asset of Holdings, the
Company or any Subsidiary that is intended by Holdings, the Company or any
Subsidiary to be used or usable in subsequent fiscal years and is properly
classifiable as property, plant or equipment, and all renewals,
improvements and replacements thereto the cost of which may not be deducted
in its entirety from income in the year of acquisition, in accordance with
generally accepted accounting principles ("GAAP").
(ii) "Capital Expenditures" shall mean, for any period for
which the same is to be determined, the aggregate amount of any
expenditures incurred, paid or accrued by Holdings, the Company or any
Subsidiary for Capital Assets, plus the aggregate amount of Capitalized
Lease Obligations first incurred for such period, determined in accordance
with GAAP.
(iii) "Capitalized Lease" shall mean a lease of, or other
agreement conveying the right to use, real or personal property, or both,
which obligation is, or in accordance with GAAP (including, without
limitation, Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board) is, classified and accounted for as a
capital lease (including the financing method of accounting for leases) on
the consolidated balance sheet of Holdings.
(iv) "Capitalized Lease Obligations" shall mean the
obligations of the Company or any Subsidiary, as lessee, to pay rent or
other amounts under all Capitalized Leases and, for purpose of this
Agreement, the amount of such obligations shall be the aggregate
capitalized amount thereof determined in accordance with GAAP (including,
without limitation, Statement of Financial Accounting Standards No. 13 of
the Financial Accounting Standards Board). Notwithstanding the foregoing,
Capitalized Lease Obligations shall not include the subsequent
reclassification, to the extent mandated by GAAP, of any lease entered into
prior to the date of this Agreement.
(v) "Funded Indebtedness" shall mean, (a) all consolidated
indebtedness of Holdings for borrowed money, whether or not evidenced by
bonds, debentures, notes or similar instruments), (b) all Capitalized Lease
Obligations, (c) all obligations of Holdings, the Company or any Subsidiary
to pay the deferred purchase price of property or services (other than
those referred to in clause (x) of Section 1.04(a) above) and (d) all
liabilities secured by a mortgage, pledge or lien existing on property
owned or acquired subject to such mortgage, pledge or lien, whether or not
the liability secured thereby shall have been assumed. Notwithstanding the
foregoing, "Funded Indebtedness" shall not include current trade accounts
payable or accrued expenses, operating lease obligations, customer deposits
and deferred liabilities other than for borrowed money, all incurred and
continuing in the ordinary course of business, and shall not include the
liability for future retiree health benefits as reflected in Holdings'
consolidated financial statements and recorded under Statement of Financial
Accounting Standards No. 106 of the Financial Accounting Standards Board.
(vi) "Permitted Expenditures" shall mean (a) non-
maintenance Capital Expenditures, (b) Capital Expenditures relating to (I)
newly-constructed Restaurants including construction in progress and land
costs and (II) remodeling costs of Restaurants required for the receipt of
franchise agreement renewals, (c) franchise fee expenditures and (d)
Capital Expenditures relating to new Burger King breakfast equipment for
the sale of Burger King's new biscuit product and the installation thereof.
(c) After receipt of the draft Liabilities Schedule, Buyer and
the Selling Shareholders Representative shall have five (5) business days
in which to review the draft Liabilities Schedule. Buyer and the Selling
Shareholders Representative shall have full access to the financial records
and other information used in the preparation of the Liabilities Schedule,
including access to the pertinent draft audit working papers of the
Auditor. If either Buyer or the Selling Shareholders Representative has
any objection to the Liabilities Schedule, within such five-business day
period, it shall deliver written notice thereof to the Auditor and the
other party setting forth, with reasonable specificity, the nature of the
objection, the amount thereof and the basis therefor. Within five (5)
business days after the end of such five (5) business day period, the
Auditor shall deliver to Buyer and the Selling Shareholders Representative
the revised draft Liabilities Schedule, along with the Auditor's report
that the revised draft Liabilities Schedule has been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
and in accordance with this Section 1.04. In the event that Arthur
Anderson LLP, Buyer's independent certified public accountants ("Buyer's
Accountants"), and the Auditor cannot agree upon the revised draft Final
Liabilities Schedule, they shall within five (5) business days after
delivery thereof to Buyer and the Selling Shareholders Representative
mutually engage Price Waterhouse LLP (the "Third Accounting Firm") to
review the Auditor's revised draft Liabilities Schedule and to, within
thirty (30) business days, make a final determination as to the matters in
dispute between the parties. Any such final determination by the Third
Accounting Firm shall be final and binding upon the parties hereto absent
manifest error. The costs of the Third Accounting Firm shall be borne
equally by Buyer and the Company. The parties agree to use reasonable
efforts to cause the Liabilities Schedule to be finally determined in
accordance with the provisions of this Section 1.04(c) prior to the Closing
Date; provided, however, that the failure to have such schedule so finally
determined shall not in and of itself be a ground for postponing the
Closing Date and the Purchase Price payable in respect of any disputed
amounts (which shall include any amounts covered by any claim notice
delivered by Buyer to the escrow agent under the Escrow Agreement on or
prior to the Closing Date) shall continue to be held pursuant to the terms
of the Escrow Agreement (provided that, and only to the extent that, such
dispute, if determined favorably for Buyer, would cause the Actual Net
Liability Amount to exceed the Target Net Liability Amount by greater than
$500,000, less the aggregate amount of any quantifiable breaches of any of
the representations and warranties made by the Principal Managers in
Section 4.01(g) through (nn) hereof that are discovered prior to Closing,
and then only to the extent of such excess) until such dispute shall have
been finally determined in accordance with the provisions of this Section
1.04(c).
(d) In the event that, as reflected in the final Liabilities
Schedule, the sum of (A) the items referred to in clauses (i) through (vi)
of subsection (a) above and (B) $100,000 (representing the estimated
transfer taxes due as a result of the transactions contemplated by this
Agreement), less the sum of (1) the items referred to in clauses (vii)
through (ix) of subsection (a) above, up to a maximum amount of $7.0
million, (2) the item referred to in clause (x) of subsection (a) above and
(3) $4,400,000 (representing the tax refund expected to be received by the
Company in calendar year 1996) (collectively, the "Actual Net Liability
Amount"), exceeds $126,000,000 (the "Target Net Liability Amount"), plus
$500,000, less the aggregate amount of any quantifiable breaches of any of
the representations and warranties made by the Principal Managers in
Section 4.01(g) through (nn) hereof that are discovered prior to the date
such determination is completed (collectively, the "Adjusted Target Net
Liability Amount") (I) if such determination is completed prior to the
Closing Date, the Purchase Price shall be reduced by the difference between
the Actual Net Liability Amount and the Adjusted Target Net Liability
Amount or (II) if such determination is completed following the Closing
Date, the Escrow Agent (as defined in Section 2.02 hereof) shall disburse
to Buyer out of the Escrow Deposit (as defined in Section 2.02 hereof) the
difference between the Actual Net Liability Amount and the Adjusted Target
Net Liability Amount. If such difference exceeds the amount of the Escrow
Deposit, the Selling Shareholders agree, severally but not jointly, to
promptly pay to Buyer the amount of such excess. The foregoing
notwithstanding, any amounts payable to Buyer pursuant to this subsection
(d) shall be net of any amounts payable by Buyer pursuant to subsection (e)
below.
(e) In the event that the Closing occurs after April 30, 1996
but on or before June 2, 1996, the Purchase Price shall be increased or
decreased, as the case may be, by the amount of Net Cash Flow (as defined
below) generated by the Company and its Subsidiaries, on a consolidated
basis, from April 1, 1996 through and including the Closing Date. In the
event that the Closing occurs after June 2, 1996, the Purchase Price shall
be (A) increased by the sum of (i) amount of positive Net Cash Flow
generated by the Company and its Subsidiaries, on a consolidated basis,
from April 1, 1996 through June 2, 1996 and (ii) two (2) times the amount
of positive Net Cash Flow generated by the Company and its Subsidiaries, on
a consolidated basis, from June 3, 1996 through and including the Closing
Date and (B) decreased by the sum of (i) the amount of negative Net Cash
Flow generated by the Company and its Subsidiaries, on a consolidated
basis, from April 1, 1996 through June 2, 1996 and (ii) the amount of
negative Net Cash Flow generated by the Company and its Subsidiaries, on a
consolidated basis, from June 3, 1996 through and including the Closing
Date. The period from April 1, 1996 through and including the Closing Date
is hereinafter referred to as the "Purchase Price Adjustment Period".
(f) As soon as practicable after the Closing Date (assuming it
occurs after April 30, 1996), the Selling Shareholders Representative shall
cause the Auditor to complete and deliver to Buyer and the Selling
Shareholders Representative a computation of "Net Cash Flow" (the "Net Cash
Flow Statement") which shall be prepared in accordance with (i) the
provisions of this Section 1.04(f), (ii) GAAP (consistent with prior
practice) and (iii) Holdings's consolidated books and records. After
receipt of the draft Net Cash Flow Statement, Buyer and the Selling
Shareholders Representative shall have five (5) business days in which to
review it. Buyer and the Selling Shareholders Representative shall have
full access to the financial records and other information used in the
preparation of the Net Cash Flow Statement including access to the
pertinent draft working papers of the Auditor. During such five-day
business period, Buyer and the Selling Shareholders Representative may
provide written notice to the Auditor of any objections either may have to
the Net Cash Flow Statement, which written notice shall set forth, with
reasonable specificity, the nature of the objection, the amount thereof and
the basis therefor. Within five business days after the end of such five-
day business day period, the Auditor shall deliver to Buyer and the Selling
Shareholders Representative a revised draft of the Net Cash Flow Statement,
along with the Auditors report that the revised Net Cash Flow Statement has
been prepared in accordance with GAAP and this Section 1.04(f). In the
event that Buyer's Accountants and the Auditor cannot agree upon the
revised draft Net Cash Flow Statement, they shall within five business
days after the delivery thereof to Buyer and Selling Shareholders
Representative mutually retain the Third Accounting Firm to review the
Auditors' revised draft Net Cash Flow Statement and who shall within ten
business days make a final determination as to the matters in dispute
between the parties. Any such final determination by the Third Accounting
Firm shall be final and binding upon the parties hereto absent manifest
error. The costs of the Third Accounting Firm shall be borne equally by
Buyer and the Company. Within two business days after the Net Cash Flow
adjustment has been finally determined in accordance with this Section
1.04(f), if the Purchase Price is increased as a result thereof, Buyer
shall pay such increase in cash by wire transfer of immediately available
funds to one or more bank accounts(up to a maximum of three) as shall be
designated by the Selling Shareholders Representative in writing. If such
computation requires a downward adjustment in the Purchase Price, the
Selling Shareholders agree on a pro-rata basis to promptly pay to Buyer the
amount of such reduction (but only to the extent that such reduction
exceeds the Adjusted Basket Amount (as defined in Section 6.03(a) hereof),
less the aggregate amount of any quantifiable breaches of any of the
representations and warranties made by the Principal Managers in Section
1.04(g) through (nn) hereof that are discovered prior to the date of such
determination).
(g) For purposes of this Section 1.04, "Net Cash Flow" shall
mean earnings before income taxes, depreciation and amortization, less
Capital Expenditures on Restaurants in existence as of the date hereof
(other than Permitted Expenditures).
(h) The foregoing notwithstanding, no party shall benefit from
the Purchase Price adjustment set forth in subsection (e) above if the
Closing was delayed past April 30, 1996 as a result of the negligent,
intentional or willful breach, violation or non-compliance by such party of
any covenant, agreement, obligation, representation or warranty continued
in this Agreement or any other agreement referred to herein.
(i) Anything contained in this Section 1.04 to the contrary
notwithstanding, any Purchase Price adjustment that results from this
Section 1.04 shall be allocated among the Selling Shareholders based upon
the percentages set forth opposite the respective names of the Selling
Shareholders on Schedule I hereto. For purposes of this Agreement, the
defined term "Purchase Price" shall mean, following completion of the
Purchase Price adjustment mechanism set forth in this Section 1.04, the
Purchase Price, as adjusted pursuant to this Section 1.04 hereof.
II. RELATED MATTERS
2.01 AMENDED AND RESTATED EMPLOYMENT AGREEMENTS. On or prior to the
Closing Date, Alan Vituli and Daniel T. Accordino shall each enter into an
Amended and Restated Employment Agreement with the Company, which Amended
and Restated Employment Agreements shall be substantially in the form of
Exhibits B-1 and B-2 hereto (collectively, the "Amended and Restated
Employment Agreements").
2.02 BIB GUARANTEE; ESCROW DEPOSIT. Bahrain International Bank
(E.C.), a Bahrain exempt joint stock company and the ultimate parent
company of Buyer ("BIB"), hereby guarantees (subject to all of the terms
and conditions of this Agreement and to all of Buyer's rights to assert any
defense, set-off, counterclaim or cross-claim of any nature whatsoever
pursuant to this Agreement or otherwise) the full and timely performance of
Buyer's obligation to purchase and pay for the Securities pursuant to this
Agreement (the "Guaranteed Obligations"). BIB hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and any requirement that any Selling Shareholder
exhaust any right or take any action against Buyer. No amendment or a
waiver of any provision of this Section 2.02 nor consent to any departure
by BIB therefrom shall in any event be effective unless the same shall be
in writing and signed by the Selling Shareholders Representative and then
such a waiver or consent shall be effective only in that specific instance
and for the specific purpose for which given. On the date hereof, Buyer
has delivered to the Selling Shareholders Representative an opinion of
counsel to BIB as to the validity and enforceability of such guarantee,
which opinion of counsel is in form and substance reasonably satisfactory
to the Selling Shareholders Representative. To further secure Buyer's
obligation to purchase and pay for the Securities pursuant to this
Agreement, upon execution hereof, BIB shall deposit $7,500,000 (the "Escrow
Deposit") with Baer Marks & Upham LLP, as escrow agent (the "Escrow
Agent"), which amount shall be held and ultimately distributed by the
Escrow Agent pursuant to the terms of an Escrow Agreement among BIB, the
Selling Shareholders and the Escrow Agent, in the form of Exhibit C hereto
(the "Escrow Agreement").
2.03 DEFERRED SECURITIES PURCHASE AGREEMENT. Concurrently herewith,
Alan Vituli, Pryor, Cashman, Sherman & Flynn and Buyer shall enter into a
Deferred Securities Purchase Agreement, substantially in the form of
Exhibit D hereto (the "Deferred Securities Purchase Agreement"), pursuant
to which Buyer shall acquire an aggregate of 120,000 options to purchase
shares of common stock of Holdings for an aggregate purchase price of
$2,314,784, subject to adjustment pursuant to the terms thereof, effective
as of January 5, 1997.
2.04 NONCOMPETITION.
(a) As additional consideration for Buyer's agreement to
purchase the Securities and pay the Selling Shareholders the Purchase
Price, Messrs. Vituli and Accordino have agreed, severally but not jointly,
to the noncompetition provisions (the "Restrictive Covenants") contained in
paragraph 11 of their respective Amended and Restated Employment
Agreements, which noncompetition provisions are incorporated herein by
reference and made a part hereof as if restated herein.
(b) It is agreed and understood by and among the parties to this
Agreement that the Restrictive Covenants incorporated by reference in
subsection (a) above are each individually essential elements of this
Agreement and that, but for the agreement of Messrs. Vituli and Accordino
to comply with such Restrictive Covenants, Buyer would not have agreed to
enter into this Agreement. Further, each of Messrs. Vituli and Accordino
expressly acknowledges that the restrictions incorporated by reference into
subsection (a) of this Section 2.04 are reasonable and necessary to
accomplish the mutual objectives of the parties and to protect Buyer's
legitimate interests in its business and business relationships. Each of
Messrs. Vituli and Accordino further acknowledges that enforcement of such
restrictions will not deprive him of the ability to earn a reasonable
living and that any violation of such restrictions will cause irreparable
injury to Buyer. Such Restrictive Covenants of Messrs. Vituli and
Accordino shall be construed as agreements independent of any other
provision of this Agreement and of each other.
(c) Messrs. Vituli and Accordino hereby agree that damages at
law, including, but not limited to, monetary damages, will be an
insufficient remedy to Buyer in the event that the Restrictive Covenants
incorporated by reference into subsection (a) of this Section 2.04 are
violated and that, in addition to any remedies or rights that may be
available to Buyer, all of which other remedies or rights shall be deemed
to be cumulative, retained by Buyer and not waived by the enforcement of
any remedy available hereunder, including, but not limited to, the right to
sue for monetary damages, Buyer shall also be entitled, upon application to
a court of competent jurisdiction, to obtain injunctive relief, including,
but not limited to, a temporary restraining order or temporary, preliminary
or permanent injunction, to enforce the provisions incorporated by
reference into subsection (a) of this Section 2.04, all of which shall
constitute rights and remedies to which Buyer may be entitled.
(d) If any court determines that the covenant not to compete
incorporated by reference into subsection (a) of this Section 2.04, or any
part hereof, is unenforceable because of the duration or geographic scope
of such provision, such court shall reduce the duration or scope of such
provision (to the maximum duration or scope permitted by law), as the case
may be, and such provision in its reduced form shall then be enforceable.
(e) Notwithstanding anything to the contrary contained in the
foregoing provisions of this Section 2.04, any other provisions of this
Agreement or their respective Employment Agreement Amendments, each of
Messrs. Vituli and Accordino shall have liability only for his own breach
of a Restrictive Covenant.
III. CONDITIONS TO CLOSING
3.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
purchase and pay for the Securities is subject to the satisfaction at the
time of the Closing referred to in Section 1.03 hereof of the following
conditions (any or all of which may be waived by Buyer in Buyer's sole
discretion):
(a) No preliminary or permanent injunction or other order of any
court of competent jurisdiction preventing the purchase by Buyer of the
Securities shall be in effect.
(b) Subject to Section 7.01(b) hereof, the representations and
warranties of the Selling Shareholders and the Principal Managers made in
this Agreement shall be true and correct as of the date of this Agreement
and as of the time of Closing as though made as of such time; PROVIDED,
HOWEVER, that breaches of the representations and warranties of the
Principal Managers contained in Section 4.01(g) through (nn) shall not
cause the condition to closing set forth in this Section 3.01(b) to be
deemed unsatisfied unless and until the aggregate amount of such breaches,
to the extent quantifiable, exceed the Adjusted Basket Amount. Holdings,
the Company and the Selling Shareholders shall have performed in all
material respects each and every covenant contained in this Agreement
required to be performed by them by the time of the Closing. The Selling
Shareholders Representative shall have delivered to Buyer a certificate
dated the Closing Date confirming, to the best of his knowledge, the
foregoing (but only with respect to (i) those portions of subsections (b),
(c) and (d) of Section 4.01 hereof that relate directly to the Selling
Shareholders, (ii) subsections (e) and (gg)(i) of Section 4.01 hereof and
(iii) those covenants to be performed by one or more of the Selling
Shareholders). The Selling Shareholders Representative shall have also
delivered to Buyer a certificate dated the Closing Date and signed by each
of the chief executive officer, president and chief financial officer of
the Company confirming the foregoing (but only with respect to (i)
subsection (a) of Section 4.01 hereof, (ii) the remaining portions of
subsections (b), (c) and (d) of Section 4.01 hereof, (iii) subsections (f)
through (nn) of Section 4.01 hereof (other than Section 4.01(gg)(i) hereof)
and (iv) those covenants to be performed by Holdings, the Company and/or
any of its Subsidiaries.
(c) Buyer shall have received from each of Messrs. Vituli and
Accordino a duly executed counterpart of his respective Amended and
Restated Employment Agreement, dated as of the Closing Date, substantially
in the form of Exhibits B-1 and B-2, respectively, hereto (PROVIDED,
HOWEVER, that the Condition to Closing set forth in this Section 3.01(c)
shall not be deemed unsatisfied if either Mr. Vituli or Mr. Accordino, but
not both, is unable to enter into his respective Amended and Restated
Employment Agreement due to death or disability).
(d) Burger King Corporation shall have consented in writing to
this Agreement and the Deferred Securities Purchase Agreement, and to the
transactions contemplated hereby and thereby, which consent shall be in
form and substance satisfactory to Buyer.
(e) Subject to Section 7.01(b) hereof, the Company shall not
have suffered any material adverse change in its business, assets,
condition (financial or otherwise), results of operations, prospects or
earnings since September 30, 1995.
(f) Buyer shall have received an opinion, dated the Closing Date
and addressed to Buyer, of Baer Marks & Upham LLP, counsel to Holdings, the
Company and the Selling Shareholders, substantially in the form of Exhibit
E hereto.
(g) Any waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") applicable to the purchase by
Buyer, and the sale by the Selling Shareholders, of the Shares shall have
expired or been terminated.
(h) The Company shall have received any and all consents,
approvals, authorizations, exemptions or waivers set forth on Schedule
4.01(d) hereto (except as specifically indicated otherwise on Schedule
4.01(d) hereto), in each case pursuant to instruments in form and substance
reasonably satisfactory to Buyer, except for such consents, approvals,
authorizations, exemptions or waivers (relating directly to the operations
of the Company and its Subsidiaries) the failure of which to obtain would
not have a Material Adverse Effect.
(i) With respect to those Restaurants that are leased or
subleased facilities and therefore subject to leases or subleases
(collectively, the "Leases"), the Company shall have received estoppel
certificates from the lesser of at least 50% of all lessors and sublessors,
as the case may be (i) of the Leases or (ii) of the Leases that are
required by the terms of their respective Leases to provide the Company
with estoppel certificates, in each case in form and substance reasonably
satisfactory to Buyer. With respect to those Restaurants that are owned
facilities, Buyer shall have received estoppel certificates from any fee
mortgagees, in form and substance reasonably satisfactory to Buyer.
(j) The Company shall have filed with the Securities and
Exchange Commission its Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 Form 10-K").
(k) The Securities available for purchase by Buyer pursuant to
this Agreement, together with those securities of Holdings covered by the
Deferred Securities Purchase Agreement, shall represent at least 95% of the
total number of issued and outstanding shares of common stock of Holdings
on a fully diluted basis, excluding the Deemer Warrants (as hereinafter
defined).
(l) Holdings and the Company shall have each delivered to Buyer
(i) a certificate of its corporate secretary or assistant secretary as to
(I) resolutions of its Board of Directors or shareholders action, as
required, approving and authorizing the execution, delivery and performance
of this Agreement and each of the Related Documents, to the extent a party
thereto, and (II) its Certificate of Incorporation and By-laws and all
amendments to date as being in full force and effect, with true, correct
and complete copies of such resolutions, Certificates of Incorporation and
By-laws attached thereto, (ii) an incumbency certificate of its officers
executing this Agreement and the Related Documents to which it is a party
and (iii) a certificate of subsistence and/or good standing of Holdings,
the Company and each Subsidiary, dated as of a recent date prior to the
Closing, issued by the Secretary of State of Delaware and of each other
state in which Holdings, the Company and such Subsidiary is incorporated or
qualified to do business.
(m) Mr. Vituli shall have made the Option Escrow Deposit (as
defined in the Deferred Securities Purchase Agreement) pursuant to the
terms of the Deferred Securities Purchase Agreement.
(n) Holdings, the Company and the Selling Shareholders shall
have executed and delivered such other information and documentation as
Buyer and its counsel shall reasonably request, in form and substance
reasonably satisfactory to Buyer and its counsel.
3.02 CONDITIONS TO SELLING SHAREHOLDERS' OBLIGATIONS. The obligation
of the Selling Shareholders to sell and deliver to Buyer the Securities is
subject to the satisfaction at the time of the Closing of the following
conditions (any or all of which may be waived by the Selling Shareholders
Representative in his sole discretion):
(a) No preliminary or permanent injunction or other order of any
court of competent jurisdiction preventing the sale by the Selling
Shareholders to Buyer of the Securities shall be in effect.
(b) The representations and warranties of Buyer made in this
Agreement shall be true and correct as of the date of this Agreement and as
of the time of Closing as though made as of such time. Buyer shall have
performed in all material respects each and every covenant contained in
this Agreement required to be performed by Buyer by the time of the
Closing. Buyer shall have delivered to the Selling Shareholders a
certificate dated the Closing Date and signed by an authorized
representative of Buyer confirming the foregoing.
(c) Each of Messrs. Vituli and Accordino shall have received
from Buyer a duly executed counterpart of his respective Amended and
Restated Employment Agreement, dated as of the Closing Date, substantially
in the form of Exhibits B-1 and B-2, respectively, hereto (PROVIDED,
HOWEVER, that the Condition to Closing set forth in this Section 3.02(c)
shall not be deemed unsatisfied if either Mr. Vituli or Mr. Accordino, but
not both, is unable to enter into his respective Amended and Restated
Employment Agreement due to death or disability).
(d) Burger King Corporation shall have consented in writing to
this Agreement and the Deferred Securities Purchase Agreement, and to the
transactions contemplated hereby and thereby, which consent shall be in
form and substance satisfactory to Buyer.
(e) Any waiting period under the HSR Act applicable to the
purchase by Buyer, and the sale by the Selling Shareholders of the Shares,
shall have expired or been terminated.
(f) The Selling Shareholders Representative shall have received
an opinion, dated the Closing Date and addressed to Holdings, the Company
and the Selling Shareholders, of Pryor, Cashman, Sherman & Flynn, counsel
to Buyer, substantially in the form of Exhibit G hereto.
(g) BIB shall have delivered to the Selling Shareholders
Representative a certificate of its corporate secretary or assistant
secretary as to resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement and
the Escrow Agreement.
(h) Buyer shall have made the Purchase Price Escrow Deposit (as
defined in the Deferred Securities Purchase Agreement), pursuant to the
terms of the Deferred Securities Purchase Agreement.
(i) Buyer shall have executed and delivered such other
information and documentation as the Selling Shareholders Representative
and its counsel shall reasonably request in form and substance reasonably
satisfactory to the Selling Shareholders Representative and its counsel.
3.03 FRUSTRATION OF CONDITIONS. No party may rely upon the failure
of any condition set forth in this Article III to be satisfied if such
failure was caused by such party's failure to act in good faith or to use
its best efforts to cause the Closing to occur.
IV. REPRESENTATIONS AND WARRANTIES
4.01 REPRESENTATIONS AND WARRANTIES OF THE SELLING
SHAREHOLDERS. The Selling Shareholders, severally but not jointly, hereby
represent and warrant to Buyer (with respect to those portions of
subsections (b), (c) and (d) below that relate directly to the Selling
Shareholders and with respect to subsections (e) and (gg)(i) below) and the
Principal Managers, jointly and severally, hereby represent and warrant to
Buyer (with respect to subsection (a), the remaining portions of
subsections (b), (c) and (d) and subsections (f) through (nn) below other
than (subsection (gg)(i) below)), as follows:
(a) ORGANIZATION. Each of Holdings and the Company is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware. Each Subsidiary (as defined below) is duly
organized and validly existing under the laws of the state or other
jurisdiction of its organization (which state or other jurisdiction is set
forth on Schedule 4.01(a) hereto). Each of Holdings, the Company and the
Subsidiaries has all requisite power and authority to enable it to own,
lease or otherwise hold its properties and assets and to carry on its
business as presently conducted. Each of Holdings, the Company and the
Subsidiaries is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership, leasing
or holding of its properties makes such qualification necessary, except
where the absence of such qualifications, individually or in the aggregate,
would not have a material adverse effect on the business, assets, condition
(financial or otherwise), prospects or results of operations of Holdings,
the Company and the Subsidiaries, taken as a whole (a "Material Adverse
Effect"). A list of the jurisdictions in which Holdings, the Company and
the Subsidiaries are so qualified is set forth on Schedule 4.01(a) hereto.
The Company has previously delivered (or made available, with respect to
the organizational documents of the Subsidiaries) to Buyer true and
complete copies of the Certificate of Incorporation, as amended to date,
and By-laws, as amended to date, or comparable organizational documents, as
in effect on the date hereof, of Holdings, the Company and each Subsidiary.
The stock certificate and transfer books of Holdings, the Company and each
Subsidiary (all of which have been made available for inspection by Buyer)
are true and complete. The minute books of Holdings, the Company and each
Subsidiary (all of which have been made available for inspection by Buyer)
are true and complete in all material respects (it being understood that
such materiality limitation shall not apply to items relating to
capitalization which are covered by subsection (f) below). Since its
formation, Holdings has not conducted any business or owned any assets
other than the outstanding capital stock of the Company. The term
"Subsidiary" means each entity of which a majority of the voting power of
the voting equity securities or equity interest is owned, directly or
indirectly, by the Company.
(b) AUTHORIZATION. Each of Holdings, the Company and the
Selling Shareholders has all requisite power and authority to enter into
this Agreement and the other agreements, instruments, documents and
certificates to be executed and delivered by such party pursuant hereto
(collectively, the "Related Documents"), and to consummate the transactions
contemplated hereby and thereby. All acts and other proceedings required
to be taken by Holdings, the Company, the Subsidiaries and/or any of the
Selling Shareholders to authorize the execution, delivery and performance
of this Agreement and the Related Documents of which they are a party, and
the consummation of the transactions contemplated hereby and thereby have
been duly and properly taken.
(c) VALID AND BINDING AGREEMENT. This Agreement and the Related
Documents, to the extent that Holdings, the Company and/or the Selling
Shareholders is a party thereto, constitute valid and binding obligations
of Holdings, the Company and each of the Selling Shareholders, enforceable
against each of them in accordance with their terms, except that (i) such
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or limiting creditors' rights generally and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
(d) NO VIOLATION. The execution and delivery of this Agreement
and the Related Documents by the signatories thereto does not, and the
consummation of the transactions contemplated hereby and thereby and
compliance with the terms hereof and thereof will not (subject to obtaining
any required consents, approvals, authorizations, exemptions or waivers
set forth on Schedule 4.01(d) hereto), conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under or result in the
creation of any lien, claim, encumbrance, security interest, option, charge
or restriction of any kind upon any of the properties or assets of
Holdings, the Company, any Subsidiary or any Selling Shareholder under, any
provision of (i) the Certificate of Incorporation or By-laws or comparable
governing instruments of Holdings, the Company, any Subsidiary or any
Selling Shareholder, (ii) any note, bond, mortgage, indenture, deed of
trust, license, lease, contract, commitment or agreement to which Holdings,
the Company, any Subsidiary or any Selling Shareholder is a party or by
which any of their respective properties or assets are bound, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Holdings, the Company, any Subsidiary or any Selling
Shareholder or the property or assets of any of them, excluding from the
foregoing clauses (ii) and (iii) with respect to Holdings, the Company and
the Subsidiaries such conflicts, violations, defaults, rights or
restrictions which would not, individually or in the aggregate, have a
Material Adverse Effect. No consent, approval, license, permit, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, or any other third party is required
to be obtained or made by or with respect to Holdings, the Company, any
Subsidiary or any Selling Shareholder or any of their respective affiliates
in connection with the execution and delivery of this Agreement or any of
the Related Documents or the consummation of the transactions contemplated
hereby or thereby, other than the filing of a Current Report on Form 8-K as
required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the HSR Act and other than as set forth on Schedule
4.01(d) hereto and such consents, approvals, licenses, permits, orders,
authorizations, registrations, declarations or filings (relating directly
to the operations of the Company and its Subsidiaries) the failure of which
to obtain would not have a Material Adverse Effect.
(e) THE SECURITIES. Upon delivery to Buyer at the Closing of
certificates representing the Securities and upon receipt by the Selling
Shareholders of the Purchase Price for the Securities, good and valid title
to the Securities will pass to Buyer, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any
kind.
(f) CAPITAL STOCK OF HOLDINGS AND THE COMPANY. (i) The
authorized capital stock of Holdings consists of (A) 6,000,000 shares of
voting common stock, par value $.01 per share (the "Common Stock"), of
which 2,263,757 shares are issued and outstanding, no shares are held in
Holdings' treasury and no shares are held by the Company or any of the
Subsidiaries, (B) 882,353 shares of non-voting common stock, par value $.01
per share (the "Non-Voting Common Stock"), of which none are issued and
outstanding, (C) 7,250 shares of Class A Preferred Stock, par value $.01
per share, all of which are issued and outstanding, (D) 750 shares of Class
B Preferred Stock, Series I, par value $.01 per share, all of which are
issued and outstanding (the "Series I Class B Preferred Stock") and (E) 750
shares of Class B Preferred Stock, Series II, par value $.01 per share,
none of which are issued and outstanding. As of the date hereof, there are
(I) outstanding options (the "Options") to purchase 330,800 shares of
Common Stock and (II) outstanding warrants (the "Warrants") to purchase
745,143 shares of Common Stock. All Holdings' classes of preferred stock
shall be referred to herein collectively as the "Preferred Stock". All
issued and outstanding shares of capital stock of Holdings have been duly
authorized and validly issued and are fully paid and nonassessable. No
shares of capital stock of Holdings, the Company or of any Subsidiary have
been issued in violation of any preemptive or subscription rights and no
such shares are subject to any preemptive or subscription rights. The
Company's option expiring November 2, 2000 to purchase 488,111 warrants
(the "Deemer Warrants") to purchase shares of common stock of Holdings from
Deemer, Inc. is a valid and binding option enforceable against Deemer, Inc.
in accordance with its terms, except that (i) such enforcement may be
limited by or subject to any bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to or
limiting creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief are subject
to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought. Upon payment of the exercise
price set forth in paragraph 5 of that certain Loan Agreement dated
November 2, 1995 between the Company and Deemer, Inc., the Company will
receive good and valid title to the Deemer Warrants and/or the shares of
common stock of Holdings issuable upon exercise of the Deemer Warrants,
free and clear of any liens, claims, encumbrances, security interests,
options, charges or restrictions of any kind.
(ii) Except as set forth in this Section 4.01(f), there are
no shares of capital stock or other equity securities of Holdings
outstanding and there are no outstanding warrants, options, agreements,
convertible or exchangeable securities or other commitments pursuant to
which Holdings, the Company or any Subsidiary is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or
other securities of Holdings, the Company or any Subsidiary. There are no
equity securities of Holdings, the Company or any Subsidiary reserved for
issuance for any purpose, except for 330,800 shares of Common Stock
reserved for issuance upon exercise of the outstanding Options, 745,143
shares of Common Stock reserved for issuance upon exercise of the Warrants,
882,353 shares of Non-Voting Common Stock reserved for issuance upon
conversion of the Series I Class B Preferred Stock, 882,353 shares of
Common Stock reserved for issuance upon conversion of the Non-Voting Common
Stock and 750 Shares of Class B Preferred Stock, Series II, par value $.01
per share, reserved for issuance upon conversion of the Series I Class B
Preferred Stock for accrued and unpaid dividends.
(iii) The authorized capital stock of the Company consists
of 1,000 shares of common stock, par value $1.00 per share. All of the
issued and outstanding shares of capital stock of the Company are held by
Holdings.
(iv) Except as disclosed on Schedule 4.01(f)(iv) hereto,
Holdings, directly or through one or more wholly owned subsidiaries, has
good and valid title to all the outstanding shares of capital stock of the
Company and each Subsidiary, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions
whatsoever, and all such shares have been duly authorized and validly
issued and are fully paid and nonassessable.
(v) On or prior to the Closing Date, other than with
respect to the Options and the Warrants, all outstanding securities
convertible into or exercisable or exchangeable for shares of common stock
of Holdings shall have been converted into or exercised or exchanged for
shares of common stock of Holdings.
(vi) There are no rights of first refusal, tag-along rights
or similar rights (including without limitation, those rights of first
refusal, tag-along rights or similar rights granted to certain stockholders
of Holdings pursuant to that certain Stockholders Agreement, dated as of
December 26, 1986, among Holdings and its stockholders) triggered by the
execution and delivery of this Agreement or any of the Related Documents or
the consummation of the transactions contemplated hereby or thereby which
have not been expressly waived by the party or parties possessing such
rights, and true, correct and complete copies of such waivers have
previously been delivered to Buyer.
(g) EQUITY INTERESTS. Except for the Subsidiaries and as
disclosed on Schedule 4.01(g) hereto, the Company does not directly or
indirectly own any capital stock of or other equity interests in any
corporation, partnership or other entity or have any direct or indirect
equity interest in any business.
(h) SEC REPORTS; FINANCIAL STATEMENTS. (i) The Company has
furnished to Buyer true, correct and complete copies of its Annual Report
on Form 10-K for the fiscal years ended December 31, 1993 and 1994 (and
will furnish to Buyer prior to the Closing a true, correct and complete
copy of the 1995 Form 10-K and true, correct and complete copies of all
other filings made by the Company with the Securities and Exchange
Commission (the "SEC") after the date hereof through and including the
Closing Date (collectively, together with the 1995 Form 10-K, the
"Subsequent SEC Filings")) and its Quarterly Report on Form l0-Q for the
quarters ended March 31, 1995, June 30, 1995 and September 30, 1995 (all
such documents, including the Subsequent SEC Filings, being collectively
called the "SEC Documents"), each as filed or to be filed with the SEC.
The SEC Documents include all of the documents that the Company was
required to file with the SEC since December 31, 1994 through the date
hereof and the Subsequent SEC Filings will include all of the documents
that the Company is required to file with the SEC from the date hereof
through and including the Closing Date. Each of the SEC Documents has been
duly filed (other than the Subsequent SEC Filings which will be duly filed)
and when filed was or will be, in the case of the Subsequent SEC Filings,
in compliance in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC thereunder applicable
to such SEC Document. Each of the SEC Documents (including the financial
statements included therein) was or will be, in the case of the Subsequent
SEC Filings, complete and correct in all material respects as of its date
and, as of its date, did not or will not, in the case of the Subsequent SEC
Filings, contain any untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements included within the
SEC Documents have been or will be, in the case of the Subsequent SEC
Filings, prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and present fairly or
will present fairly, in the case of the Subsequent SEC Filings, (subject,
in the case of the unaudited statements, to normal year-end audit
adjustments) the consolidated financial position of the Company and the
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Except as set forth
in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, there are no ongoing transactions between Holdings, the
Company or any Subsidiary, on the one hand, and any affiliate of any of the
foregoing or any Selling Shareholders, on the other hand. No
reclassification of a lease after the date hereof, to the extent mandated
by GAAP, will constitute a breach of any representation or warranty made by
Holdings, the Company or a Principal Manager under this Agreement.
(ii) Holdings has furnished Buyer with true, correct and
complete copies of the audited consolidated financial statements of
Holdings for the years ended December 31, 1990, 1991, 1992, 1993 and 1994
(collectively, the "Financial Statements"). The Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and present fairly the consolidated
financial position of Holdings, the Company and the Subsidiaries as at the
dates thereof and the consolidated results of their operations and cash
flows for the periods then ended.
(iii) The Company has previously delivered or made
available to Buyer monthly profit and loss statements for each Restaurant
for each fiscal month during 1993, 1994 and 1995, which monthly profit and
loss statements include year-to-date information for each fiscal month for
each Restaurant and comparative information for each fiscal month for each
Restaurant which compares the current monthly results of operations to the
prior year's monthly results of operations (same fiscal month) and to
budgeted monthly results of operation for such fiscal month. The Company
has also previously delivered or made available to Buyer rolling 12-month
cash flow statements for each Restaurant for each fiscal month during 1993,
1994 and 1995.
(iv) The Company has also previously delivered to Buyer a
true, correct and complete copy of its 1996 budget entitled "Profit Plan"
(the "Budget"). The Budget sets forth aggregate remodelling expenditures
anticipated during fiscal year 1996. The Budget is current and has not
been amended or modified in any respect.
(i) UNDISCLOSED LIABILITIES. None of Holdings, the Company or
any of the Subsidiaries have any liabilities or obligations of any nature
(whether accrued, absolute, contingent, unasserted or otherwise), except
(i) as disclosed in the Financial Statements, (ii) for liabilities or
obligations disclosed on Schedule 4.01(i) hereto or (iii) for liabilities
and obligations incurred in the ordinary course of business consistent with
past practice since September 30, 1995, and not in violation of this
Agreement.
(j) TAXES. (i) For purposes of this Agreement,
(A) "Tax" or "Taxes" shall mean all Federal, state, county,
local, foreign and other taxes, assessments, duties or
similar governmental charges of any kind whatsoever, including, without
limitation, corporate franchise, income, sales, use, ad valorem, gross
receipts, value added, profits, license, withholding, payroll, employment,
excise, property, customs and occupation taxes and including, without
limitation, any interest, penalties and additions imposed with respect to
such amounts and (B) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(ii) Except as set forth on Schedule 4.01(j) hereto:
(A) Since January 1, 1988, each of Holdings, the
Company and each Subsidiary, each predecessor of Holdings, the Company or
any Subsidiary, and each consolidated, affiliated, combined, unitary or
aggregate group of which Holdings, the Company, any of the Subsidiaries or
any such predecessor is or has been a member, has timely filed with the
appropriate Tax authorities all Tax returns, reports, estimates,
information returns and statements, including any related or supporting
information, ("Tax Returns"), required to be filed through December 31,
1995 and has paid all Taxes shown to be due with respect to the taxable
periods covered by such Tax Returns. All such Tax Returns are true,
complete and correct in all material respects. All other Taxes of
Holdings, the Company or any of the Subsidiaries, or for which Holdings,
the Company or any Subsidiary is or shall otherwise be directly or
indirectly liable (including amounts attributable to wage withholding),
have either been timely paid or are reflected as a liability on the Balance
Sheet (as defined in Section 4.01(k) hereof). No statute of limitations
has been waived, nor any extension of time agreed to, with respect to the
assessment of any Tax of Holdings, the Company or any of the Subsidiaries,
or for which Holdings, the Company or any of the Subsidiaries is or may
otherwise be directly or indirectly liable.
(B) Except as set forth on Schedule 4.01(j) hereto,
there are no pending audits with respect to the Tax Returns of Holdings,
the Company or any of the Subsidiaries and any deficiencies resulting from
any past audits have been paid and no material issues were raised in
writing by the relevant Tax authority during any past audits that may apply
to taxable periods after the taxable period to which such audit related.
No action or proceeding has been brought or has been threatened to be
brought by any Tax authority, nor has any claim been asserted or threatened
to be asserted by any Tax authority, with respect to any Taxes of Holdings,
the Company or any of the Subsidiaries, or for which Holdings, the Company
or any of the Subsidiaries is or may otherwise be directly or indirectly
liable which could have a Material Adverse Effect.
(C) No Tax liens have been filed by any Tax authority
against any property or assets of Holdings, the Company or any Subsidiary,
except for liens that have been satisfied or statutory liens for current
Taxes not yet delinquent.
(D) There are no Tax sharing or Tax indemnity
agreements to which Holdings, the Company or any Subsidiary is a party.
(k) ASSETS OTHER THAN REAL PROPERTY INTERESTS. (i) The
Company or a Subsidiary has good and valid title to all assets reflected on
the consolidated balance sheet of the Company and the Subsidiaries as of
September 30, 1995, included in the Company's Form 10-Q for the quarter
ended September 30, 1995 (the "Balance Sheet"), or thereafter acquired,
except those since sold or otherwise disposed of in the ordinary course of
business consistent with past practice and not in violation of this
Agreement, in each case free and clear of all liens, security interests,
pledges, charges, encumbrances or restrictions of any nature whatsoever,
except:
(A) all such as are disclosed on Schedule 4.01(k)
hereto;
(B) mechanics', carriers', workmen's, repairmen's or
other like liens arising or incurred in the ordinary course of business,
liens arising under original purchase price conditional sales contracts
and equipment leases with third parties entered into in the ordinary
course of business and statutory liens for current Taxes which are not yet
delinquent;
(C) liens, security interests, pledges, charges,
encumbrances and restrictions which secure debt that is reflected as a
liability on the Balance Sheet and the existence of which is indicated in
the notes thereto; and
(D) other encumbrances, restrictions or
imperfections of title, if any, which other encumbrances, restrictions or
imperfections of title do not, individually or in the aggregate,
materially impair the continued use and operation of the assets to which
they relate in the business of the Company and the Subsidiaries as
presently conducted (the liens, security interests, pledges, charges,
encumbrances, restrictions and other imperfections of title described in
clauses (A), (B), (C) and (D) above are hereinafter referred to
collectively as "Permitted Liens").
(ii) All leased personal property of the Company and the
Subsidiaries is in the condition required of such property by the terms of
the lease applicable thereto during the term of the lease and upon the
expiration thereof. This Section 4.01(k) does not relate to real property
or interests in real property.
(l) LEASES. Each of the Leases, together with the leases for
any parking facilities (the "Parking Leases"), and all amendments,
modifications and/or extensions thereto or thereof (other than such
amendments, modifications and/or extensions which would not have a
Material Adverse Impact (as hereinafter defined) are listed on Schedule
4.01(l) hereto. Schedule 4.01(l) hereto also lists, with respect to each
Lease and Parking Lease, the name of the tenant(s), landlord(s) and
whether the Lease or Parking Lease is a lease or a sublease. To the best
knowledge of Holdings, the Company and the Principal Managers (with
respect only to clauses (ii) through (viii) below), other than with
respect to those items that would not result in a Material Adverse Impact,
(i) the Leases and the Parking Leases are in full force and effect, are
unmodified (other than as listed on Schedule 4.01(l) hereto) and are
binding and enforceable in accordance with their terms; (ii) all rental
and other charges payable pursuant to the terms and conditions of the
Leases and the Parking Leases have been paid and no rent has been paid in
advance more than 30 days; (iii) there are no charges, offsets or defenses
against the enforcement by the lessors thereunder of any agreement,
covenant or condition on the part of the Company or any Subsidiary to be
performed or observed pursuant to the terms of the Leases or the Parking
Leases; (iv) there are no defaults by the Company or any Subsidiary of any
agreement, covenant or condition on the part of the Company to be
performed or observed pursuant to the terms of the Leases or the Parking
Leases; (v) there are no actions or proceedings pending or threatened by
any lessor under the Leases or the Parking Leases; neither the Company nor
any Subsidiary is entitled to any free rent, abatement of rent or similar
concession under any Lease or Parking Lease; (vi) except for the security
deposits identified on Schedule 4.01(l) hereto, no lessor holds any
deposits for the Company's or any Subsidiary's account on any Lease or
Parking Lease; except as set forth on Schedule 4.01(l) hereto, the sale of
the Shares will not constitute a prohibited transfer of assignment under
any of the Leases or any of the Parking Leases; (vii) there are no
defaults by any of the respective lessors of any agreement, covenant or
condition on the part of the lessor to be performed or observed pursuant
to the terms of the Leases or the Parking Leases; and (viii) all
reciprocal servitude or similar agreements benefitting any or by which any
real property leased by the Company or any Subsidiary ("Leased Property")
or any real property owned by the Company or any Subsidiary ("Real
Property") is bound are in full force and effect and there is no default
by any party thereunder of its obligations. The current expiration dates
and remaining options to extend the Leases and the Parking Leases are as
set forth on Schedule 4.01(l) hereto. Minimum monthly rent and additional
rent under the Leases and the Parking Leases are set forth on Schedule
4.01(l) hereto. As used herein, the term "Material Adverse Impact" shall
mean those circumstances or conditions which would in the aggregate have a
material adverse impact on the financial condition of at least 10
Restaurants.
(m) SENIOR LEASE. With respect to each Lease that is
subordinate to any senior lease, none of Holdings, the Company or any
Subsidiary has received any written notice (and no regional director or
executive officer of the Company has received any oral notice) of a
default under such senior lease.
(n) [Intentionally Deleted]
(o) TITLE TO LEASED PROPERTY AND REAL PROPERTY. Holdings, the
Company, the Subsidiaries and certain officers of the Company (including
the Principal Managers and the Company's general counsel, Joseph Zirkman,
Esq.) will deliver at Closing all title affidavits reasonably requested by
Buyer, including without limitation, such affidavits, substantially in the
form of Exhibit H hereto, to enable Buyer to obtain "non-imputation" title
endorsements.
(p) ZONING AND LAND USE MATTERS. To the best knowledge of
Holdings, the Company and the Principal Managers, (i) all required
licenses, permits, certificates and approvals, including building and use
permits (collectively, the "Real Property Permits"), were obtained and
remain valid for the construction, use and occupancy and operation of the
Leased Property and the Real Property and the Restaurants located thereon,
including Restaurants currently under construction, and to ensure adequate
vehicular and pedestrian ingress and egress from the Leased Property and
the Real Property and the Restaurants located thereon, including
Restaurants currently under construction; (ii) the Leased Property and the
Real Property and all improvements located thereon are zoned or have a
variance or conditional use permit for the intended use by the zoning
jurisdictions in which it is located; and (iii) the Leased Property and
the Real Property are in full compliance with all conditions and
requirements of any building permit, use permits, conditional use permits
or zoning classifications, subdivision approvals, zoning restrictions,
building codes, environmental zoning and land-use laws, and other
applicable local, state and federal laws and regulations and comply with
the requirements of all conditions, covenants and restrictions applicable
to the Leased Property and the Real Property, except where a breach of
(i), (ii) or (iii) above would not have a Material Adverse Impact. There
are no pending or, to the best knowledge of Holdings, the Company and the
Principal Managers, threatened actions or proceedings that might prohibit,
restrict or impair the use and occupancy of the Leased Property or the
Real Property or the Restaurants located thereon, including Restaurants
currently under construction, or result in the suspension, revocation,
impairment, forfeiture or non-renewal of any of the Real Property Permits,
other than such prohibitions, restrictions, suspensions, revocations,
impairments, forfeitures and non-renewals that would not result in a
Material Adverse Impact. Set forth on Schedule 4.01(p) hereto is a true
and complete schedule of each certificate of occupancy ("C/O") in the
possession of the Company or any of its Subsidiaries copies of which C/O's
and all amendments thereto to date have heretofore been delivered to Buyer
and which copies are true, complete and correct.
(q) NORMAL USE. Except for those items that would not result
in a Material Adverse Impact, none of Holdings, the Company, any
Subsidiary or any Principal Manager knows of any facts nor have any of
Holdings, the Company, any Subsidiary or any Principal Manager failed to
disclose any fact which would prevent the Leased Property or the Real
Property from being used and operated after the Closing as Burger King
Restaurants in accordance in all material respects with the operational
terms of the franchise agreements with Burger King Corporation.
(r) CONDEMNATION. None of Holdings, the Company, any
Subsidiary or any Principal Manager has received any written notice and no
regional director or executive officer of the Company has received any
oral notice of any threatened or pending exercise of eminent domain,
condemnation, environmental, zoning, other land-use regulations
proceedings or any other similar action which would have a Material
Adverse Impact and none of Holdings, the Company, any Subsidiary or any
Principal Manager has received any written notice of any Federal, state,
county, municipal or other governmental plans to restrict or change
access from any highway or road bounding any of the Leased Property or the
Real Property, which restrictions or changes would have a Material Adverse
Impact.
(s) IMPROVEMENTS AND STRUCTURAL DEFECTS. The structural
portions of the Restaurants and the plumbing, heating, air conditioning,
electrical, mechanical, life safety and other systems therein are in
sufficient operating condition and repair to allow them to operate as
"turn-key" Burger King restaurants, except for such structural defects the
repair of which would not result in expenditures in excess of $500,000 in
the aggregate. There are no outstanding correcting work orders from
Federal, state, county, municipal or local government or the owner of the
Leased Property or any insurance company with respect to any of the Leased
Property which would result in expenditures in excess of $500,000 in the
aggregate.
(t) REPORTS REGARDING WORK AND REPAIRS. None of Holdings, the
Company, any Subsidiary or any Principal Manager has received any written
notice and no regional director or executive officer of the Company has
received any oral notice of any outstanding written requirements by any
insurance company that issued a policy with respect to any of the Leased
Property or the Real Property, or by any board of fire underwriters or
other body exercising similar functions requiring any repairs or work to
be done at the Leased Property or the Real Property which would result in
expenditures in excess of $500,000 in the aggregate.
(u) [Intentionally Deleted].
(v) COPIES. All Leases (including those for closed
Restaurants), Parking Leases, senior leases, nondisturbance agreements,
landlord estoppel certificates, certificates of occupancy, sale/leaseback
agreements, leasehold mortgages and leases in which the Company or a
Subsidiary is the lessor or sublessor and which have been delivered or
made available to Buyer pursuant to this Agreement or otherwise, in
connection with the execution hereof or in connection with Buyer's due
diligence review of Holdings, the Company and the Subsidiaries, are true,
complete and correct copies of the originals of the same documents in the
Company's possession, and same have not been modified or amended, except
pursuant to documents copies of which have been delivered to Buyer or
documents which would not be expected to have a Material Adverse Impact.
(w) PARKING, EASEMENTS AND RELATED AGREEMENTS. Except as set
forth in the Leases and the Parking Leases and except for those items
which would not have a Material Adverse Impact, there are no written or
oral parking leases, easements, agreements, grants, licenses, options or
any other agreement pursuant to which the Company is granted, for use in
connection with the Restaurants, parking privileges or rights, current or
perspective, and/or rights of access of any kind or nature in and to the
Leased Property or the Real Property.
(x) WATER, SEWER, GAS, ETC. All water, sewer, gas, electric,
telephone and drainage facilities, and all other utilities required by
applicable law or necessary for the normal use and operation of the Leased
Property and the Real Property and the Restaurants located thereon or by
Burger King Corporation standards are available and are adequate to
service the Leased Property and the Real Property and the Restaurants
located thereon.
(y) VIOLATIONS. All notes or notices of violations of law or
municipal ordinances, orders or requirements noted in or issued by the
Department of Housing and Building, Fire, Labor, Health or other State or
municipal department having jurisdiction over the Leased Property and the
Real Property, against or affecting the Leased Property and the Real
Property up until the date of the Closing, shall be complied with by the
Company and its Subsidiaries and the Leased Property and the Real Property
shall be free of the same, except for such violations or noncompliance
which would not have a Material Adverse Impact.
(z) NON-BKC PROPERTIES. Schedule 4.01(z) hereto sets forth a
description of each of the properties owned or leased by the Company or
any Subsidiary and not used for a Burger King restaurant. Except as set
forth on Schedule 4.01(z) hereto or for such items which would not have a
Material Adverse Impact, there are no leases, tenancies, rental
agreements, occupancy rights or possessory rights affecting any portion of
any of such properties.
(aa) INTELLECTUAL PROPERTY. Schedule 4.01(aa) sets forth a
true and complete list of all material patents, trademarks (registered or
unregistered), trade names, service marks, registered copyrights and
applications therefor and other material intellectual property rights,
whether or not subject to statutory registration or protection
("Intellectual Property Rights") owned, used or filed by or licensed to
the Company and/or the Subsidiaries. Schedule 4.01(aa) hereto specifies
for each Intellectual Property Right listed thereon whether such right is
owned or licensed and, in the case of licensed rights, lists the relevant
license agreement. With respect to registered trademarks, Schedule
4.01(aa) hereto specifies all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers.
Except as disclosed on Schedule 4.01(aa) hereto, the Company or a
Subsidiary owns, free and clear of all liens, security interests or
encumbrances whatsoever, all Intellectual Property Rights listed on
Schedule 4.01(aa) hereto as owned by the Company or any Subsidiary and, to
the best knowledge of Holdings, the Company and the Principal Managers,
has the right to use, without payment to any other party, all other
Intellectual Property Rights required to be listed on Schedule 4.01(aa)
hereto, and the consummation of the transactions contemplated hereby will
not alter or impair any such rights. Except as disclosed on Schedule
4.01(aa) hereto, no claims are pending or, to the best knowledge of
Holdings, the Company and the Principal Managers, threatened by any person
against the Company or any Subsidiary with respect to the ownership,
validity, enforceability or use of any Intellectual Property Rights or, to
the best knowledge of Holdings, the Company and the Principal Managers,
otherwise challenging or questioning the validity or effectiveness of any
of such rights.
(bb) INSURANCE. The Company and the Subsidiaries maintain
policies of fire and casualty, liability and other forms of insurance in
such amounts, with such deductibles and against such risks and losses, as
are in the Company's reasonable judgment reasonable for the business and
assets of the Company and the Subsidiaries and will continue such
insurance in effect after the Closing. The insurance policies currently
maintained with respect to the Company and the Subsidiaries and their
respective assets and properties are listed on Schedule 4.01(bb) hereto.
All such policies are in full force and effect, all premiums due and
payable thereon have been paid and no written or oral (with respect to the
regional directors and executive officers of the Company and its
Subsidiaries) notice of cancellation or termination has been received with
respect to any such policy which was not replaced on substantially similar
terms prior to the date of such cancellation.
(cc) ABSENCE OF CHANGES OR EVENTS. Except as disclosed on
Schedule 4.01(cc) hereto, since September 30, 1995, there has not been any
material adverse change in the business, assets, condition (financial or
otherwise), prospects or results of operations of the Company and
Subsidiaries. Except as disclosed on Schedule 4.01(cc) hereto, since
September 30, 1995, (i) the business of the Company and its Subsidiaries
has been conducted in the ordinary course and in substantially the same
manner as previously conducted and (ii) neither the Company nor any
Subsidiary has taken any action that, if taken after the date hereof,
would constitute a breach of any of the covenants set forth in Section
5.01(b) hereof.
(dd) EMPLOYEE AND LABOR RELATIONS. Except as set forth on
Schedule 4.01(dd) hereto, (i) there is no labor strike or work stoppage or
lockout actually pending or, to the best knowledge of Holdings, the
Company and the Principal Managers, threatened against or materially
affecting the Company or any Subsidiary; during the past three years there
has not been any such action actually pending against the Company or any
Subsidiary; and, to the best knowledge of Holdings, the Company and the
Principal Managers, since September 30, 1995, there has not been any such
action threatened against or materially affecting the Company or any
Subsidiary; (ii) to the best knowledge of Holdings, the Company and the
Principal Managers, none of the employees of the Company and its
Subsidiaries are represented by a union or subject to a collective
bargaining agreement and no union organizational campaign is in progress
with respect to the employees of the Company or any Subsidiary and no
question concerning representation exists respecting such employees; (iii)
except for such circumstances that would not constitute a Material Adverse
Effect, the Company and the Subsidiaries are in compliance in all material
respects with all applicable laws respecting employment and employment
practices terms and conditions of employment and wages and hours and, to
the best knowledge of Holdings, the Company and the Principal Managers,
are not engaged in any unfair labor practice; (iv) there is no unfair
labor practices charge or complaint against the Company or any Subsidiary
pending or, to the best knowledge of Holdings, the Company and the
Principal Managers, threatened before the National Labor Relations Board;
(v) there is not pending or, to the best knowledge of Holdings, the
Company and the Principal Managers, threatened written grievance that, if
adversely decided, would, individually or in the aggregate, have a
Material Adverse Effect; (vi) (A) no charges with respect to or relating
to the Company or any Subsidiary are pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible
for the prevention of unlawful employment practices that, if adversely
decided, would, individually or in the aggregate, have a Material Adverse
Effect and (B) neither the Company nor any Subsidiary has received written
notice of the intent of any Federal, state or local or foreign agency
responsible for the enforcement of labor or employment laws to conduct an
investigation with respect or relating to the Company or any Subsidiary
and, to the best knowledge of Holdings, the Company and the Principal
Managers, no such investigation is pending or threatened and (vii) except
for the employment agreements of Messrs. Vituli and Accordino, none of
such employees are subject to any employment agreements or arrangements of
any kind. Except as disclosed on Schedule 4.01(dd) hereto, there are no
agreements or arrangements between Holdings, the Company or any Subsidiary
and an individual consultant, former consultant, employee or former
employee involving the obligation to make a payment to any such individual
of more than $25,000 over the remaining life of such agreement or
arrangement.
(ee) INVENTORY. The inventories of the Company and the
Subsidiaries, whether reflected on the Balance Sheet or subsequently
acquired, are generally of a quality and quantity usable and saleable at
customary gross margins and with customary markdowns consistent with past
practice in the ordinary course of business. The inventories of the
Company and the Subsidiaries are reflected on the Balance Sheet and in
their respective books and records in accordance with generally accepted
accounting principles applied on a basis consistent with past practice.
Except as set forth on Schedule 4.01(ee) hereto, since September 30, 1995,
there has not been any write-down of the value of, or establishment of any
reserves against, any inventory, except for write-downs and reserves in
the ordinary course of business and consistent with past practice. The
present quality and quantities of all inventory of the Company are, and
the qualities and quantities of all inventory outstanding at the Closing
will be, reasonable in accordance with the current specifications of
Burger King Corporation. At Closing, the inventory at each Restaurant
shall be sufficient for the ordinary course of operation of such
Restaurant, and in no event will there be excess inventory in a material
amount in relation to normal usage.
(ff) LICENSES; PERMITS. All licenses, permits and
authorizations issued or granted by Federal, state, local or foreign
government authorities or agencies which are necessary or desirable for
the conduct of the Company's and the Subsidiaries' business are validly
held by the Company or a Subsidiary, except for such licenses, permits and
authorizations the failure of which to hold would not have a Material
Adverse Effect. The Company or such Subsidiary has complied in all
material respects with all requirements in connection therewith and the
same will not be subject to suspension, modification or revocation as a
result of this Agreement or the consummation of the transactions
contemplated hereby; except where any noncompliance, suspension,
modification or revocation would not have a Material Adverse Effect.
(gg) LITIGATION. (i) Except as set forth on Schedule
4.01(gg)(i) hereto, there is no legal proceeding, claim, or action of any
nature pending or, to the best knowledge of Holdings, the Company and the
Selling Shareholders, threatened, or, to the best knowledge of Holdings,
the Company and the Selling Shareholders, any basis of any such
proceeding, claim or action, which questions or challenges the validity of
this Agreement with respect to the Selling Shareholders or any action
taken or to be taken by any Selling Shareholder pursuant to this Agreement
or in connection with the transactions contemplated hereby.
(ii) Except as set forth on Schedule 4.01(gg)(ii) hereto,
there is no legal proceeding, claim, or action of any nature pending or,
to the best knowledge of Holdings, the Company and the Principal Managers,
threatened, or, to the best knowledge of Holdings, the Company and the
Principal Managers, any basis of any such proceeding, claim or action,
which could have a Material Adverse Effect or which questions or
challenges the validity of this Agreement with respect to Holdings and the
Company or any action taken or to be taken by Holdings, the Company or any
Subsidiary pursuant to this Agreement or in connection with the
transactions contemplated hereby. With respect to the Restaurants, none
of Holdings, the Company or any Subsidiary is charged with or, to the best
knowledge of Holdings, the Company and the Principal Managers, threatened
with a charge or violation of and, to the best knowledge of Holdings, the
Company and the Principal Managers, is not under investigation with
respect to any possible violation of, any provision of any Federal, state
or local law or administrative ruling or regulation or executive order
relating to the Restaurants, which violation could have a Material Adverse
Effect and, to the best knowledge of Holdings, the Company and the
Principal Managers, there is no material basis for any such charge or
investigation.
(hh) COMPLIANCE WITH LAW. The operations of the Company and
its Subsidiaries are in compliance with all applicable laws, regulations,
permits, authorizations and other governmental orders including, without
limitation, applicable safety (including OSHA), environmental (including
wetlands), antipollution, building, zoning or health laws, ordinances and
regulations, except where the failure to so comply would not be expected
to have a Material Adverse Effect.
(ii) CONTRACTS. Except as set forth on Schedule 4.01 (ii)
hereto, none of Holdings, the Company or any of the Subsidiaries is a
party to any contract, commitment, arrangement or understanding involving
payments to or from Holdings, the Company and/or any of the Subsidiaries
which exceed $75,000 over the remaining life of such contract and which
are not cancelable without penalty or premium by Holdings, the Company
and/or any of the Subsidiaries on 60 days notice or less. All of the
contracts, commitments, arrangements and understandings listed on Schedule
4.01 (ii) hereto (collectively, the "Contracts") are in full force and
effect with no material defaults by any party thereto and there are no
oral or collateral agreements modifying any of the Contracts. Except as
set forth on Schedule 4.01(ii) hereto, all of the Contracts are arms-
length transactions between unrelated parties entered into in the ordinary
course of business.
(jj) EMPLOYEE BENEFIT PLANS; ERISA.
(i) Schedule 4.01(jj) hereto contains an accurate and
complete description of, and sets forth the annual expense based on the
accrual method for the fiscal years ended December 31, 1993, 1994 and 1995
under, each employment, consulting, bonus, deferred compensation,
incentive compensation, severance or termination pay, disability
hospitalization or other medical, dental, vision, life or other insurance,
stock purchase, stock option, stock appreciation, stock award, pension,
profit sharing, 401(k) or retirement plan, agreement or arrangement, and
each other employee benefit plan or arrangement, whether formal or
informal, written or oral, tax-qualified under the Code or non-qualified,
whether covered by the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or not, maintained or contributed to by Holdings and/or
the Company covering its employees, former employees, retirees or sales
personnel (collectively, "Plans"). In addition, Schedule 4.01(jj) hereto
contains an accurate and complete description of any amounts payable, or
which will become payable, under any former pension, profit sharing,
401(k) or retirement plan, agreement or arrangement, to any participant,
beneficiary or any other third party. Any Plan maintained by Holdings
and/or the Company that has subsequently been terminated, was terminated
in compliance with the requirements of the Code and ERISA and the
liabilities under such plan were fully satisfied. Neither Holdings nor
the Company has any formal plan or commitment, whether covered by ERISA or
not, to create any additional plan, agreement or arrangement or to modify
or change any existing Plan that would affect any of its employees, former
employees, retirees or sales personnel. The Company has heretofore
delivered to Buyer true and complete copies of the Plans, the trusts and
other contracts (including any amendments to any of the foregoing)
relating to the Plans and all other relevant documents governing or
relating to the Plans in effect on the date hereof (including without
limitation, the latest summary plan description, the latest annual report
(and all attachments) filed with the Internal Revenue Service ("IRS") with
respect to each of the Plans, and the latest favorable determination
letter issued by the IRS for each of the Plans as applicable).
(ii) Except as set forth on Schedule 4.01(jj) hereto, the
Company does not maintain, nor has it maintained since 1987, any "employee
pension benefit plan", as such term is defined in Section 3(2) of the
ERISA, and the rules and regulations promulgated thereunder, covering its
employees, former employees or retirees, including but not limited to, any
non-qualified retirement or deferred compensation plan. The Company does
not maintain, nor has it maintained or contributed to, a "multiemployer
plan", as that term is defined in Section 3(37) of ERISA, since 1991. The
Company is not currently responsible for any "withdrawal liability" as
that term is defined in Section 4201 of ERISA with respect to any multi-
employer plan. None of Holdings, the Company, any of the Plans, any trust
created thereunder, or any trustee or administrator thereof has engaged in
a transaction involving any of the Plans in connection with which
Holdings, the Company, any Subsidiary or any of the Plans, any such trust,
or any trustee or administrator thereof, or any other party dealing with
the Plans or any such trust, could be subject to either a civil penalty
assessed pursuant to Section 502(i) of ERISA, or a tax imposed by Section
4975 of the Code.
(iii) Full payment has been made of all amounts which the
Company is required to pay under the terms of the Plans as a contribution
to such Plans as of the last day of the most recent fiscal year of each of
the Plans ended prior to the date of this Agreement.
(iv) Each of the Plans is and has been operated and
administered in all material respects in accordance with applicable laws,
including but not limited to, ERISA and the Code. Except as set forth on
Schedule 4.01(jj) hereto, each Plan subject to Section 401(a) of the Code
has received a favorable determination from the IRS that the Plan
satisfies the requirements of Section 401(a) of the Code for the Plan to
be tax-qualified, and no facts exist which could reasonably be expected to
adversely affect the tax-qualified status of any such Plan.
(v) There are no pending, or to the best knowledge of
Holdings, the Company and the Principal Managers, threatened or
anticipated claims, litigation, administrative actions or proceedings
against or otherwise involving any of the Plans or related trusts, or any
fiduciary thereof, by or on behalf of the Plans by any employee or
beneficiary covered under the Plans, or otherwise involving the Plans
(other than routine claims for benefits). There is no judgment, decree,
injunction, rule or order of any court, governmental body, commission,
agency or arbitrator outstanding against or in favor of any Plan or any
fiduciary thereof in that capacity. The assets of the Company and its
Subsidiaries are not, and will not, either as a result of any
circumstances existing prior to the Closing Date or as a result of the
consummation of the transactions contemplated by this Agreement, be
subject to any claims under any Plan maintained by Holdings, the Company
or any Subsidiary or in which employees, former employees or retirees of
Holdings, the Company or any Subsidiary participate.
(vi) Except as set forth in Schedule 4.01(jj) hereto,
each Plan that is an employee welfare benefit plan providing health
benefits to retirees may be terminated at any time after the Closing Date
without liability to the Company or its Subsidiaries other than
liabilities relating to claims incurred prior to the effective date of the
termination of such Plan.
(vii) Neither Holdings nor the Company has engaged in any
transaction, failed to make any required contribution, committed any act
or omission or otherwise incurred any liability for any excise tax under
Sections 4971 through 4980B of the Code, inclusive.
(kk) ENVIRONMENTAL PROTECTION.
(i) For purposes of this Section 4.01(kk), the following
definitions shall apply:
(A) "Environmental Laws" shall mean all federal,
state, local and foreign laws imposing liability or establishing standards
of conduct for the protection of the environment and human health.
(B) "Environmental Claim" shall mean any complaint,
summons, citation, notice, directive, order, claim, litigation,
investigation, judicial or administrative proceeding, judgment, letter or
other communication from any governmental agency, department, bureau,
office or other authority having jurisdiction, or any third party,
involving violations of Environmental Laws or Releases of Hazardous
Materials.
(C) "Environmental Liabilities" shall mean any
monetary obligations, losses, damages, liabilities (including strict
liability), punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable out-of-pocket fees, disbursements
and expenses of counsel, out-of-pocket expert and consulting fees and out-
of-pocket costs for environmental site assessments, remedial investigation
and feasibility studies), fines, penalties, sanctions and interest
incurred as a result of any Environmental Claim filed by any governmental
authority or any third party which relate to any violations of
Environmental Laws, or Release or threatened Release of Hazardous
Materials from or onto (I) any property presently or formerly owned by the
Company or a predecessor in interest, or (II) any facility which received
Hazardous Materials generated by the Company or a predecessor in interest.
(D) "Hazardous Materials" shall mean (A) any element,
compound, or chemical that is defined, listed or otherwise classified as a
contaminant, pollutant, toxic pollutant, toxic or hazardous substance,
extremely hazardous substance or chemical, hazardous waste, medical waste,
biohazardous or infectious waste, special waste, or solid waste under
Environmental Laws; (B) petroleum and its refined products; (C)
polychlorinated biphenyls; (D) any substance exhibiting a hazardous waste
characteristic (as defined under Environmental Laws), including but not
limited to, corrosivity, ignitability, toxicity or reactivity as well as
any radioactive or explosive materials; and (E) asbestos-containing
materials.
(E) "Release" shall mean any spilling, leaking,
pumping, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of Hazardous Materials (including the abandonment or
discarding of barrels, containers or other closed receptacles containing
Hazardous Materials) into the environment.
(ii) The Company has obtained all permits, licenses or
authorizations required by Environmental Laws, except where the failure to
obtain any such permit, license or authorization would not constitute a
Material Adverse Effect, and all such permits, licenses or authorizations
are in full force and effect, except for such permits, licenses or
authorizations which, if not in full force and effect, would not
constitute a Material Adverse Effect.
(iii) To the best knowledge of Holdings, the Company and
the Principal Managers, the operations of the Company are in full
compliance with all Environmental Laws, except where such non-compliance
would not constitute a Material Adverse Effect.
(iv) To the best knowledge of Holdings, the Company and
the Principal Managers, there has been no Release at any of the properties
owned or operated by the Company or any of its Subsidiaries or any
predecessor in interest thereto, at any disposal or treatment facility
which received Hazardous Materials generated by the Company or any of its
Subsidiaries or any predecessor in interest thereto which is reasonably
likely to result in Environmental Liabilities that have a Material Adverse
Effect.
(v) (A) Over the past ten years, none of the Company, any
Subsidiary or any predecessor in interest thereto has spent more than
$75,000 with respect to any one site or $250,000 in the aggregate for all
sites in connection with the remediation or correction of any
Environmental Claim. (B) Except as set forth on Schedule 4.01(kk) hereto,
there are no material Environmental Claims outstanding.
(vi) All of the due diligence materials previously
delivered to Buyer or its representatives in connection with Buyer's
environmental due diligence review of the Company and its Subsidiaries are
true and complete in all material respects and constitute all of the
relevant due diligence materials in the Company's or its Subsidiaries'
possession.
(vii) Schedule 4.01(kk) hereto sets forth a true and
complete list of all real property previously owned and sold by Holdings,
the Company or any Subsidiary within the past ten years.
(ll) FRANCHISE AGREEMENTS. The Company has previously delivered
or made available to Buyer true, complete and correct copies of all
franchise agreements and other agreements between Burger King Corporation
and any of Holdings, the Company and/or any of the Subsidiaries
(collectively, the "Franchise Agreements"). Set forth on Schedule
4.01(ll) hereto is a list of all of the Franchise Agreements, including
the franchise agreement number, location and date of termination of each
Franchise Agreement. Set forth on Schedule 4.01(ll) hereto is also a list
of locations where the Company or any Subsidiary has submitted a letter
to Burger King Corporation for consideration of such site for a multiple
franchise agreement. During the past three years, neither the Company nor
any Subsidiary has been denied an application by Burger King Corporation,
other than because the proposed location encroached upon the operating
territory of another Burger King franchisee. The Company and its
Subsidiaries have received no written notice (and none of the regional
directors or executive officers of the Company has received any oral
notice) of a material violation with respect to the Franchise Agreements
and do not know of any event which would give rise to a material violation
or default under the Franchise Agreements. All renewal notices, to the
extent required by the Franchise Agreements, have been delivered by the
Company to Burger King Corporation on a timely basis. All of the
Franchise Agreements require the Company to pay to Burger King Corporation
a monthly royalty of 3 1/2 % of gross revenues and a monthly advertising
contribution of 4% of gross revenues.
(mm) RESTAURANTS. Set forth on Schedule 4.01(mm)(i) hereto is a
list of all Restaurants previously owned and/or operated by the Company
during the past three years but subsequently closed. The Company has no
present plans to close any additional Restaurants. Schedule 4.01(mm)(ii)
hereto sets forth a list of those Restaurants that the Company would
consider closing within the next 12 months based upon the economic
performance of such Restaurants. Schedule 4.01(mm)(iii) hereto sets forth
a list of estimated capital expenditures for the Company that are required
to be completed by December 31, 1997 in order to meet the criteria for
renewal of any Franchise Agreements which expire on or before December 31,
1997 and such capital expenditures are sufficient for the on-going
operational needs of the Restaurants. Each Restaurant, together with its
related assets and Leased Property or Real Property, constitutes a fully
operable "turn-key" Burger King restaurant sufficient to permit the
Company or a Subsidiary to operate the business at such Restaurant as
presently being conducted therein.
(nn) DISCLOSURE. No representation or warranty expressly made
by the Selling Shareholders or the Principal Managers contained in this
Agreement, and no statement contained in any document, certificate or
Schedule furnished or to be furnished by or on behalf of Holdings, the
Company, any Subsidiary or any of the Selling Shareholders or Principal
Managers to Buyer or any of its representatives pursuant to this Agreement
contains or will contain any untrue statement of a material fact or omits
or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully
and fairly provide the information required to be provided in any such
document, certificate or Schedule.
4.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to the Selling Shareholders as follows:
(a) ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to enter into this
Agreement and the Related Documents, to the extent a party thereto, and to
carry out the transactions contemplated hereby and thereby. Prior to the
date hereof, Buyer has conducted no business other than in connection with
the negotiation and execution of this Agreement and the Related Documents
to which it is a party.
(b) AUTHORIZATION. The Board of Directors of Buyer have duly
authorized the execution and delivery of this Agreement and the Related
Documents, to the extent a party thereto, and the consummation by Buyer of
the transactions contemplated hereby and thereby. No other corporate or
other proceedings on the part of Buyer are necessary to authorize this
Agreement or any of the Related Documents or the transactions contemplated
hereby or thereby.
(c) VALID AND BINDING AGREEMENT. This Agreement and each of
the Related Documents, to the extent a party thereto, constitutes a valid
and binding agreement of Buyer, enforceable against Buyer in accordance
with its terms, except that (i) such enforcement may be limited by or
subject to any bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or limiting creditors'
rights generally and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(d) NO VIOLATION. Neither the execution and delivery of this
Agreement or any of the Related Documents, to the extent a party thereto,
nor the consummation by Buyer of the transactions contemplated hereby or
thereby (a) will violate or conflict with any statute, law, ordinance,
rule, regulation, order, judgment or decree affecting Buyer, or (b) will
violate or conflict with or constitute a default (or an event which, with
notice or lapse of time, or both, would constitute a default) under, or
will result in the termination of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon Buyer or any of its assets under, any term or provision
of (i) the Certificate of Incorporation or By-Laws (or equivalent
organizational documents) of Buyer or (ii) any contract, commitment,
understanding, arrangement, agreement or restriction of any kind or
character to which Buyer is a party or by which Buyer may be bound or
affected, or to which Buyer or its respective assets are subject, or (c)
will cause, or give any person grounds to cause (with or without notice,
the passage of time, or both), the maturity of any debt, liability or
obligation of Buyer to be accelerated, or will increase any such liability
or obligation, excluding from the foregoing (other than clause (b)(i)
above) those violations, conflicts, defaults, rights or terminations which
would not, individually or in the aggregate, be expected to have a
material adverse effect on the business, assets, condition (financial or
otherwise), results of operations or prospects of Buyer. Except as
required under the HSR Act, no consent, approval, authorization or action
by any governmental agency is required in connection with the execution
and delivery by Buyer of this Agreement or any of the Related Documents or
the consummation by Buyer of the transactions contemplated hereby or
thereby.
(e) FINANCING. Buyer has, or will have on or prior to the
Closing Date, sufficient sources of financing to enable it to purchase the
Securities and pay the Purchase Price to the Selling Shareholders.
(f) INVESTMENT. The Securities are being acquired by Buyer for
its own account solely for the purpose of investment without a view to any
resale or distribution thereof in violation of federal securities laws and
with no present intention of distributing or reselling any part thereof.
4.03 REPRESENTATIONS AND WARRANTIES OF BIB. BIB hereby represents
and warrants to the Selling Shareholders as follows:
(a) ORGANIZATION. BIB is a corporation duly organized, validly
existing and in good standing under the laws of Bahrain and has the
corporate power and authority to enter into this Agreement and the Escrow
Agreement and to carry out the transactions contemplated hereby and
thereby.
(b) AUTHORIZATION. The Board of Directors of BIB have duly
authorized the execution and delivery of this Agreement and the Escrow
Agreement and the consummation by BIB of the transactions contemplated
hereby and thereby. No other corporate or other proceedings on the part
of BIB are necessary to authorize this Agreement or the Escrow Agreement
or the transactions contemplated hereby or thereby.
(c) VALID AND BINDING AGREEMENT. This Agreement and the Escrow
Agreement, to the extent such agreements are valid and binding under
United States Federal or state laws and regulations or other applicable
laws, constitute valid and binding agreements of BIB, enforceable against
BIB in accordance with their respective terms, except that (i) such
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or limiting creditors' rights generally and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief
are subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(d) NO VIOLATION. Neither the execution and delivery of this
Agreement or the Escrow Agreement, nor the consummation by BIB of the
transactions contemplated hereby or thereby (a) will violate or conflict
with any statute, law, ordinance, rule, regulation, order, judgment or
decree affecting BIB, or (b) will violate or conflict with or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or
accelerate the performance required by, or result in the creation of any
lien, security interest, charge or encumbrance upon BIB or any of its
assets under, any term or provision of (i) the Certificate of
Incorporation or By-Laws (or equivalent organizational documents) of BIB
or (ii) any contract, commitment, understanding, arrangement, agreement or
restriction of any kind or character to which BIB is a party or by which
BIB may be bound or affected, or to which BIB or its assets are subject,
or (c) will cause, or give any person grounds to cause (with or without
notice, the passage of time, or both), the maturity of any debt, liability
or obligation of BIB to be accelerated, or will increase any such
liability or obligation, excluding from the foregoing (other than clause
(b)(i) above) those violations, conflicts, defaults, rights or
terminations which would not, individually or in the aggregate, be
expected to have a material adverse effect on the business, assets,
condition (financial or otherwise), results of operations or prospects of
BIB. Except as set forth on Schedule 4.03(d) hereto, no consent,
approval, authorization or action by any governmental agency is required
in connection with the execution and delivery by BIB of this Agreement or
the Escrow Agreement or the consummation by BIB of the transactions
contemplated hereby or thereby.
V. COVENANTS OF HOLDINGS, THE COMPANY AND THE SELLING SHAREHOLDERS
5.01 COVENANTS OF HOLDINGS, THE COMPANY AND THE SELLING SHAREHOLDERS.
Holdings, the Company and the Selling Shareholders hereby covenant and
agree with Buyer as follows:
(a) ACCESS. Prior to the Closing, Holdings and the Company
will, and will cause each Subsidiary to, upon reasonable notice, give
Buyer and its representatives, employees, counsel and accountants
reasonable access to the personnel (including directors, officers,
employees and independent accountants), properties, Restaurants, books and
records of Holdings, the Company and each Subsidiary.
(b) ORDINARY CONDUCT. Except as expressly permitted by the
terms of this Agreement or as set forth on Schedule 5.01(b) hereof, from
the date hereof until the Closing, each of Holdings and the Company will
conduct its business, and will cause the business of the Subsidiaries to
be conducted, in the ordinary course in substantially the same manner as
presently conducted and will make all reasonable efforts consistent with
past practice to preserve existing relationships with customers and
suppliers and with others that the Company or any Subsidiary has a
material business relationship. In addition, except as expressly
permitted by the terms of this Agreement or as set forth on Schedule
5.01(b) hereto, Holdings and the Company will not, and will not permit any
Subsidiary to, do any of the following prior to the Closing without the
prior written consent of Buyer:
(i) amend its Certificate of Incorporation or By-laws or
other comparable governing instruments;
(ii) declare or pay any dividend or make any other
distribution to its stockholders, whether or not upon or in respect or any
shares of its capital stock; PROVIDED, HOWEVER, that dividends may
continue to be paid, and distributions may continue to be made, by the
Subsidiaries to the Company and by the Company to Holdings to the extent
permitted by the terms of (A) the Company's Third Amended and Restated
Loan and Security Agreement with Heller Financial, Inc., as amended, and
(B) the 11 1/2 % Senior Note Indenture among Holdings, the Company and
Marine Midland Bank, N.A., as Trustee for regularly scheduled dividend
payments, or the payment of dividends in arrears, to the holders of
Preferred Stock;
(iii) grant to any officer or employee any increase in
compensation or benefits, except in the ordinary course of business
consistent with past practice or as may be required under existing
agreements;
(iv) cancel any material indebtedness (individually or in
the aggregate), waive any claims or rights of substantial value or amend
any material term of any of its outstanding securities;
(v) make any change in any method of accounting or
accounting practice or policy other than those required by generally
accepted accounting principles;
(vi) other than pursuant to agreements in effect on the
date hereof and set forth on Schedule 5.01(b) hereto, acquire by merging
or consolidating with, by purchasing a substantial portion of the assets
of, or in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire any assets (other than inventory and as disclosed in
Schedule 1.04(a)(iii) hereto), except in the ordinary course of business
consistent with past practice;
(vii) other than pursuant to agreements in effect on the
date hereof sell, lease or otherwise dispose of any of its assets, except
in the ordinary course of business consistent with past practice;
(viii) amend, modify, terminate, extend, renew or restate
any Lease, Franchise Agreement or any other material Contract, other than
in the ordinary course of business consistent with past practice;
(ix) (A) pay or agree to pay any pension, retirement
allowance or other employee benefit not required or permitted by any Plan,
whether past or present; or (B) commit itself in relation to the
Restaurants, the employees at the Restaurants or the Real Property, to any
new or renewed Plan with or for the benefit of any person, or to amend any
of such Plans or any of such agreements in existence on the date hereof;
(x) permit any of its insurance policies to be cancelled
or terminated or any of the coverage thereunder to lapse, unless
simultaneously with such termination, cancellation or lapse, replacement
policies are in full force and effect providing coverage, in form,
substance and amount equal to or greater than the coverage under those
canceled, terminated or lapsed for substantially similar premiums;
(xi) operate the Restaurants in such a manner or otherwise
engage in any practices which would materially adversely affect sales at
the Restaurants; or
(xii) agree, whether in writing or otherwise, to do any of
the foregoing.
Except as specifically permitted hereby, Holdings, the Company
and the Selling Shareholders shall not, and shall not permit any
Subsidiary to, take any action prior to the Closing that would, or that
would reasonably be expected to, result in (A) any of the representations
and warranties of the Selling Shareholders set forth in this Agreement
becoming untrue, or (B) any of the conditions of the purchase and sale of
the Securities set forth in Article III hereof not being satisfied.
(c) OTHER TRANSACTIONS. Each of Holdings, the Company and the
Selling Shareholders agrees that prior to the Closing, it will not, and
will cause its directors, officers, representatives and agents not to,
directly or indirectly, take any action to solicit, encourage, initiate or
facilitate (including by way of making available or furnishing
information) any inquiries, proposals or offers with respect to any merger
or consolidation involving the Company, the acquisition of any shares of
Common Stock or warrants to purchase Common Stock or the acquisition of
all or substantially all the assets of Holdings or the Company by any
person other than Buyer or its permitted assignees. The Company agrees to
notify (and to provide all material details) promptly if Holdings, the
Company or any Selling Shareholder shall be approached, directly or
indirectly, by any person with respect to any such inquiries, proposals or
offers, or if Holdings, the Company or any Selling Shareholder shall
otherwise notice that any other person shall have made any such inquiries,
proposals or offers.
(d) FINANCIAL STATEMENTS. Promptly after their preparation,
the Company will furnish or make available to Buyer copies of (i) such
monthly financial statements relating to each Restaurant as have
historically been prepared by the Company, (ii) any monthly and quarterly
unaudited interim consolidated financial statements of the Company and its
Subsidiaries as of the end of each quarter or month between the date
hereof and the Closing Date and (iii) the final draft audited annual
consolidated financial statements as of December 31, 1995.
(e) NOTICES OF CERTAIN EVENTS. The Company shall promptly
notify Buyer of:
(i) any notice or other communication from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental entity in connection with the transactions contemplated by
this Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened, relating to or
involving or otherwise affecting the Company or any Subsidiary that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 4.01(gg) or that relate to the
consummation of the transactions contemplated by this Agreement;
(iv) the occurrence, or failure to occur, of any
condition, event or development that (A) causes any representation or
warranty of the Selling Shareholders contained in this Agreement and
qualified as to materiality to be untrue or inaccurate, or causes any
representation or warranty contained in this Agreement and not so
qualified to be untrue or inaccurate in any material respect, at any time
from the date hereof to the Closing Date or (B) would have been required
to be set forth or described in the Schedules hereto if existing or known
at the date of this Agreement; and
(v) any failure on the part of Holdings, the Company or
any Selling Shareholder to comply with or perform in any material respect
any agreement or covenant to be complied with or performed by it
hereunder; PROVIDED that the delivery of any notice pursuant to this
Section 5.01(e) shall not limit or otherwise affect the remedies available
hereunder to Buyer.
(f) MAINTENANCE. The Company shall maintain the Leased
Property, the Real Property and the Restaurants in a manner sufficient to
permit the Company or a Subsidiary to operate the business at such
Restaurant as presently being conducted therein.
(g) REAL PROPERTY TRANSFER TAXES
(i) Each of Buyer and the Selling Shareholders
Representative agrees to comply timely with the requirements of Article 31
and Article 31-B of the New York Tax Law and all regulations of the New
York Department of Taxation and Finance ("State Tax Commission")
applicable thereto (referred to herein individually as the "New York
Transfer Tax" and the "Gains Tax", respectively) in good faith and in such
manner as to avoid any postponement of the Closing.
(ii) Buyer agrees to execute and deliver to the Selling
Shareholders Representative, within ten (10) business days after the date
of this Agreement, a duly executed Transferee Questionnaire showing the
full consideration to be paid to the Selling Shareholders by Buyer,
provided that Buyer and Selling Shareholders Representative reach
agreement as to the allocation of consideration among the Company's
assets. The Selling Shareholders Representative agrees to execute and
deliver to Buyer within ten (10) business days after execution of this
Agreement a duly executed Transferor Questionnaire showing the full
consideration to be paid to the Selling Shareholders and a computation of
the anticipated tax due.
(iii) At the time of the Closing or as soon as practicable
thereafter, the Company shall deliver to the State Tax Commission or its
agent a certified check payable to the order of the State Tax Commission
in an amount representing the full tax payment due from the Company as set
forth in the official Tentative Assessment and Return thereof duly
executed by the Selling Shareholders Representative, or an official
Statement of No Tax Due applicable to the sale of the Securities by the
Selling Shareholders to Buyer. In addition, Buyer and the Selling
Shareholders Representative shall execute and deliver a New York Real
Property Transfer Tax Return (Form TP584) and the Company shall promptly
deliver to the State Tax Commission or its agent a certified check payable
to the order of the State Tax Commission in an amount representing the
full tax payment due from the Company for the New York Transfer Tax as set
forth in such return.
(iv) The Company agrees to comply timely with the
requirements, if any, of any other transfer tax or gains tax, or similar
taxes imposed by any other states in which the Company or any Subsidiary
does business as a result of the transfer of the Securities by the Selling
Shareholders to Buyer, and the Company shall deliver at the Closing to
Buyer any returns or other instruments required thereunder together with
check(s) made payable to the appropriate taxing authorities representing
full payment of any such taxes (collectively, "State Transfer Taxes").
(h) ESTOPPEL CERTIFICATES.
(i) By no later than five (5) business days following the
date hereof, the Company shall send out for execution estoppel
certificates, in the form of Exhibit H hereto, to each of its and/or its
Subsidiaries' lessors or sublessors, as the case may be.
(ii) The Company agrees to use reasonable commercial
efforts, without incurring any additional expense to any lessor or
sublessor unless such expenditure is required by the terms of a particular
lease, to obtain the maximum number of executed estoppel certificates
prior to the Closing Date.
(iii) The Company agrees to promptly deliver to Buyer
copies of executed estoppel certificates as they are received by the
Company prior to and on the Closing Date.
(i) LEASE MEMORANDUM. The Company shall use reasonable
commercial efforts to obtain and deliver to Buyer for recordation Closing
lease memoranda for all of the Leases where no memoranda is currently
recorded. In addition, the Company shall use reasonable commercial
efforts to cooperate fully with Buyer on all other title and lease related
matters.
5.02 COVENANTS OF BUYER. (a) Buyer hereby covenants and agrees that
for a period of two (2) years following the Closing Date, it will not,
except with the written consent of the Selling Shareholders Representative
(i) sell a material portion of the assets of the Company to, (ii) sell a
controlling interest in the common stock of Holdings or the Company to,
(iii) merge or consolidate Holdings or the Company with and into or (iv)
enter into any management agreement with, in the case of (i) through (iv)
above, Sydran Food Services II, L.P. or any successor thereto or (v)
except in the normal course of business, generally take or permit to be
taken any action the effect of which would be to reduce significantly the
home office operations of the Company in Syracuse, New York or the
personnel employed there.
(b) For as long as either Mr. Vituli or Mr. Accordino remains
employed by the Company or any of its affiliates and for a period of
twelve (12) months thereafter, Buyer agrees that it will not permit either
Holdings or the Company to amend Article Ninth of their respective
Certificates of Incorporation without the consent of the Selling
Shareholders Representative.
(c) Buyer shall promptly notify the Selling Shareholders
Representative of:
(i) any notice of other communication from any person
alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental entity in connection with the transactions contemplated by
this Agreement;
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened, relating to or
involving or otherwise affecting Buyer or BIB that relate to the
consummation of the transactions contemplated by this Agreement;
(iv) the occurrence, or failure to occur, of any
condition, event or development that (A) causes any representation or
warranty of Buyer or BIB contained in this Agreement and qualified as to
materiality to be untrue or inaccurate, or causes any representation or
warranty contained in this Agreement and not so qualified to be untrue or
inaccurate in any material respect, at any time from the date hereof to
the Closing Date or (B) would have been required to be set forth or
described in the Schedules hereto if existing or known at the date of this
Agreement; and
(v) any failure on the part of Buyer or BIB to comply with
or perform in any material respect any agreement or covenant to be
complied with or performed by it hereunder; PROVIDED that the delivery of
any notice pursuant to this Section 5.02(b) shall not limit or otherwise
affect the remedies available hereunder to the Selling Shareholders.
(d) Neither Buyer nor BIB shall take any action prior to the
Closing that would, or that would reasonably be expected to, result in (A)
any of the representations or warranties of Buyer or BIB set forth in this
Agreement becoming untrue, or (B) any of the conditions of the purchase
and sale of the Securities set forth in Article III hereof not being
satisfied.
5.03 MUTUAL COVENANTS. Each of the parties hereto hereby covenants
and agrees as follows:
(a) HSR COMPLIANCE. Holdings and Buyer agree, promptly after
the execution and delivery of this Agreement, to file or supply, or cause
to be filed or supplied, all notifications, reports and other information
required to be filed or supplied pursuant to the HSR Act in connection
with the transactions contemplated hereby. Holdings and Buyer shall
cooperate with each other in connection with such filing and furnish each
other with copies of such filings and any correspondence received from any
governmental agency in connection therewith.
(b) PUBLICITY. From the date hereof through the Closing Date,
no public release or announcement concerning the transactions contemplated
hereby shall be issued by any party without the prior consent or the other
parties, except as such release or announcement be required by law, in
which case the party required to make the release or announcement shall
allow the other parties reasonable time to comment on such release or
announcement in advance of such issuance.
(c) REASONABLE COMMERCIAL EFFORTS. Subject to the terms and
conditions of this Agreement, each party will use reasonable commercial
efforts to cause the conditions set forth in Article III of this Agreement
to be satisfied and the Closing to occur. The foregoing notwithstanding,
Holdings, the Company and the Principal Managers agree to use their
respective best efforts to obtain the consent referred to in Section
3.01(d) hereof (it being understood that such best efforts shall not
include any unusual or unreasonable material expenditures on the part of
Holdings, the Company or the Principal Managers to obtain such consent).
VI. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
6.01 SURVIVAL OF REPRESENTATIONS. None of the representations and
warranties made by any party in this Agreement shall survive the Closing,
except for (i) the representations and warranties of the Selling
Shareholders and the Principal Managers set forth in subsections (a)
through (f) of Section 4.01 hereof, the representations and warranties of
Buyer set forth in Section 4.02 hereof and the representations and
warranties of BIB set forth in Section 4.03 hereof, which shall survive
any investigation at any time made by or on behalf of any party for the
applicable statute of limitations period and (ii) the representations and
warranties of the Principal Managers set forth in Section 4.01(h)(i)
hereof, which shall survive any investigation at any time made by or on
behalf of Buyer for a period of 18 months following the Closing Date.
6.02 AGREEMENT OF SELLING SHAREHOLDERS TO INDEMNIFY. The Selling
Shareholders shall, severally but not jointly, indemnify Buyer and each of
its officers, directors, employees, representatives, agents, shareholders,
partners and affiliates (and their respective officers, directors,
employees, representatives, agents, shareholders, partners and affiliates)
and hold each of them harmless from and against any reasonably incurred
loss, liability, claim, cost, damage or expense (including, but not
limited to, any and all expenses reasonably incurred in investigating,
preparing or defending any litigation or proceeding, commenced or
threatened, or any claim whatsoever) (collectively, "Losses") suffered or
incurred by any such indemnified party to the extent arising from (i) any
breach of any representation or warranty of such Selling Shareholder
contained in this Agreement or in any Schedule, certificate, instrument or
other document delivered pursuant hereto or (ii) any breach of any
covenant or agreement of such Selling Shareholder contained in this
Agreement. Payments in respect of the indemnification provided in this
Section 6.02 shall be made promptly (and currently) as Losses shall be
incurred.
6.03 AGREEMENT OF PRINCIPAL MANAGERS TO INDEMNIFY. (a) The Principal
Managers shall, jointly and severally, indemnify Buyer and each of its
officers, directors, employees, representatives, agents, shareholders,
partners and affiliates (and their respective officers, directors,
employees, representatives, agents, shareholders, partners and affiliates)
and hold each of them harmless from and against any reasonably incurred
Losses suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any representation or warranty of the
Principal Managers contained in this Agreement or in any Schedule,
certificate, instrument or other document delivered pursuant hereto
(including, without limitation, any breaches that were discovered prior to
Closing) or (ii) any breach of any covenant or agreement of Holdings, the
Company or any Principal Manager contained in this Agreement; PROVIDED,
HOWEVER, that the Principal Managers shall not have any liability under
this Section 6.03 (with respect to any breach of the representations and
warranties contained in Section 4.01(h)(i) hereof) unless and until the
aggregate of all Losses for which the Principal Managers would be liable
(together with all Losses (as defined in the Deferred Securities Purchase
Agreements) for which any of the Principal Managers would be liable under
the Deferred Securities Purchase Agreement) exceeds $500,000, (I) plus an
amount equal to the amount by which the Target Net Liability Amount
exceeds the Actual Net Liability Amount, or minus an amount equal to the
amount by which the Actual Net Liability Amount exceeds the Target Net
Liability Amount (up to a maximum of $500,000), as the case may be, and
(II) minus the amount of any downward adjustment in the Purchase Price
that resulted from the computation set forth in Section 1.04(e) hereof but
with respect to which no amount was paid by the Selling Shareholders to
Buyer (collectively, the "Adjusted Basket Amount"), on a cumulative basis,
and then only to the extent of such excess; PROVIDED, FURTHER, HOWEVER,
that the amount for which the Principal Managers shall be liable to Buyer
pursuant to this Section 6.03 (with respect to any breach of the
representations and warranties contained in Section 4.01(h)(i) hereof)
shall not exceed on a cumulative basis (together with all Losses (as
defined in the Deferred Securities Purchase Agreements) for which any of
the Principal Managers would be liable under the Deferred Securities
Purchase Agreement) the sum of the amounts set forth opposite the
respective names of the Principal Managers on Schedule II hereto.
Payments in respect of the indemnification provided in this Section 6.03
shall be made promptly (and currently) as Losses shall be incurred.
(b) The foregoing notwithstanding, the maximum amount for which
any Selling Shareholder (other than the Principal Managers) may be liable
pursuant to Section 6.02 hereof shall be equal to that portion of the
Purchase Price allocated to such Selling Shareholder pursuant to Schedule
I or, to the extent applicable, Schedule III hereto. The maximum amount
for which any Selling Shareholder who is a Principal Manager may be liable
pursuant to Section 6.03 hereof shall be equal to the amount set forth
opposite his respective name on Schedule II hereto.
6.04 AGREEMENT OF BUYER TO INDEMNIFY. Buyer shall indemnify the
Selling Shareholders and their respective representatives, agents,
employees, partners and affiliates and hold each of them harmless from and
against any Loss suffered or incurred by any such indemnified party to the
extent arising from (i) any breach of any representation or warranty of
Buyer contained in this Agreement or in any schedule, certificate,
instrument or other documents delivered hereto or (ii) any breach of any
covenants or agreement of Buyer contained in this Agreement or in any
schedule, certificate, instrument or other documents delivered hereto.
Payments in respect of the indemnification provided in this Section 6.04
shall be made promptly (and currently) as Losses shall be incurred.
6.05 CONDITIONS OF INDEMNIFICATION. Each party indemnified pursuant
to Sections 6.02, 6.03 or 6.04 hereof (an "indemnified party") agrees to
give prompt notice to the party required to indemnify such indemnified
party (an "indemnifying party") of the assertion of any claim, or the
commencement of any suit, action or proceeding, whether brought against
such indemnified party or brought by such indemnified party against the
indemnifying party (each a "Claim"), in respect of which indemnity may be
sought by such indemnified party under Section 6.02, 6.03 or 6.04 hereof
or in respect of which such indemnified party may seek any other remedy
against the indemnifying party under this Agreement; PROVIDED, HOWEVER,
that the omission so to promptly notify the indemnifying party with
respect to a Claim brought against such indemnified party will not relieve
the indemnifying party from any liability which it may have to such
indemnified party under Section 6.02, 6.03 or 6.04 hereof unless such
failure materially prejudices the indemnifying party with respect to the
defense of such Claim. If any indemnified party shall seek indemnity
under Section 6.02, 6.03 or 6.04 hereof, the indemnifying party, in the
case of a Claim brought against such indemnified party, shall be entitled
to participate therein and, to the extent that it wishes, to assume and
direct the defense and settlement thereof with counsel reasonably
satisfactory to such indemnified party. After notice from the
indemnifying party to an indemnified party of its election to assume and
direct the defense and settlement of a Claim brought against such
indemnified party, the indemnifying party shall not be liable to such
indemnified party (or any of its affiliates) under Section 6.02, 6.03 or
6.04 hereof for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation undertaken at the request of the
indemnifying party; except that such indemnified party shall have the
right to employ counsel to represent such party if, in the reasonable
judgment of such party, it is advisable for such party to be represented
by separate counsel, and in that event the fees and expenses of such
separate counsel shall be paid by such indemnified party. Notwithstanding
the foregoing provisions of this Section 6.05, the indemnifying party
shall not, without the prior written consent of an indemnified party
(which consent shall not be unreasonably withheld or delayed), effect any
settlement of any pending or threatened proceeding in respect of which
such indemnified party is, or with reasonable foreseeability, could have
been a party and indemnity could have been sought hereunder by such
indemnified party for a Claim brought against such indemnified party,
unless such settlement includes an unconditional release of such
indemnified party from all liability arising out of such proceeding
(PROVIDED that, whether or not such a release is required to be obtained,
the indemnifying party shall remain liable to such indemnified party in
accordance with Section 6.02, 6.03 or 6.04 hereof, as applicable, in the
event that a Claim is subsequently brought against such indemnified
party).
6.06 REMEDIES CUMULATIVE. Except as otherwise provided herein, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any
other remedies against the other party hereto.
6.07 TAX BENEFITS; INSURANCE. In calculating the amount of any
Losses for which an indemnified party is entitled to indemnification under
this Article VI, any Tax Benefit (as hereinafter defined) received by such
indemnified party shall be applied against the amount of the Loss to
reduce the amount payable by the indemnifying party. "Tax Benefit" shall
mean any tax savings to the indemnified party (computed at the combined
Federal, state and local tax rate applied to the indemnified party in the
immediately preceding taxable year) resulting from any net increase in
deductions, losses or credits or any net decrease in income, gains or
recapture of credits attributable to inclusion of the claims or related
indemnification payment, as the case may be, in any tax return of the
indemnified party plus any interest attributable to such inclusion. In
addition, in calculating the amount of any Losses for which an indemnified
party is entitled to indemnification under this Article VI, the amount of
any insurance proceeds received by the indemnified party relating to or in
connection with such Loss shall reduce the amount of any claim.
VII. TERMINATION; AMENDMENT AND WAIVER
7.01 TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(a) By mutual written agreement of the parties hereto; or
(b) By Buyer, on the one hand, or Holdings, the Company and the
Selling Shareholders Representative, on the other hand, if the Closing
shall not have occurred on or before June 1, 1996; PROVIDED, HOWEVER, that
Buyer may, in its sole discretion, extend the Closing Date for up to an
additional thirty (30) days (it being understood that in such event, the
conditions to closing set forth in Sections 3.01(b) (except with respect
to (i) those portion of subsections (b), (c) and (d) of Section 4.01
hereof that relate directly to the Selling Shareholders and (ii)
subsections (e) and(gg)(i) of Section 4.01 hereof) and Section 3.01(e)
hereof shall be deemed satisfied as of the Closing Date if they were
satisfied as of June 1, 1996).
7.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto (or any of
their respective officers or directors), except (i) based upon obligations
set forth in Sections 8.01 and 8.02 hereof and (ii) to the extent that
failure to satisfy the conditions of Article III hereof results from the
negligent, intentional or willful breach, violation or non-compliance by
any party hereto of any covenant, agreement, obligation, representation or
warranty contained in this Agreement or any other agreement referred to
herein.
7.03 AMENDMENT, EXTENSION AND WAIVER. The parties may amend this
Agreement at any time by an instrument in writing signed by Buyer,
Holdings, the Company and the Selling Shareholders Representative. Any
agreement on the part of a party hereto to any waiver of compliance with
any of the agreements or conditions contained herein shall be valid only
if set forth in an instrument in writing signed on behalf of such party
(or in the case of the Selling Shareholders, by the Selling Shareholders
Representative).
VIII. MISCELLANEOUS
8.01 NO FINDERS. Each of the parties hereto represents and warrants
to the other that there are no claims for brokerage commissions or
finder's fees in connection with the transactions contemplated by this
Agreement. Buyer, on the one hand, and Holdings, the Company and the
Selling Shareholders, on the other hand, will pay or discharge, and will
indemnify and hold the others harmless from and against any and all claims
or liabilities for brokerage commissions or finder's fees incurred by
reason of a breach of this representation.
8.02 EXPENSES; TAXES. Buyer and the Selling Shareholders will each
pay the fees and expenses incurred by it in connection with this
Agreement; PROVIDED, HOWEVER, that (i) Buyer and the Company agree that
they will each pay one-half (1/2) of any filing fee charged in connection
with any filing under the HSR Act (ii) the Company shall pay the
reasonable fees and expenses of the Auditor, Baer Marks & Upham LLP, and
other legal counsel to Holdings, the Company and the Selling Shareholders,
up to an aggregate maximum amount of $450,000, and (iii) the Selling
Shareholders shall contribute, on a pro-rata basis consistent with the
percentages set forth opposite their respective names on Schedule I
hereto, to the Company and the Company shall pay at Closing the reasonable
fees and expenses incurred by Buyer in connection with the negotiation and
execution of this Agreement and the Related Documents and the consummation
of the transactions contemplated hereby and thereby, including the
reasonable fees and expenses of Pryor, Cashman, Sherman & Flynn, (ii)
Special Counsel, (iii) Arthur Andersen LLP, (iv) Title insurance companies
and (v) search firms and Buyer's share of H-S-R Act filings fees, up to an
aggregate maximum amount of $1,451,794 (collectively, the "Buyer's Fees
and Expenses"); PROVIDED, FURTHER, HOWEVER, that if any legal action is
brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other
costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled. In the event that either
party obtains a judgment in connection with the enforcement or
interpretation of this Agreement, such party shall be entitled to recover
from the other all costs and expenses incurred in connection with the
enforcement of such judgment, including, without limitation, reasonable
attorneys' fees, whether incurred prior to or after the entry of the
judgment. All sales and transfer taxes and fees incurred in connection
with this Agreement and the transactions contemplated hereby shall be
borne by the Company. The foregoing notwithstanding, if the Closing does
not occur and either (i) Burger King Corporation has exercised a right of
first refusal to purchase the Securities for the Purchase Price or (ii)
Holdings, the Company and/or the Principal Managers have failed to comply
with the covenant set forth in the last sentence of Section 5.03(c) hereof
and such failure was the primary reason why the Closing did not occur, the
Company agrees to reimburse Buyer for the Buyer's Fees and Expenses. Such
reimbursement obligation shall not in any way limit any other rights or
remedies of Buyer under this Agreement, at law or in equity.
8.03 FURTHER ASSURANCES. From time to time, at the request of any
party hereto and without further consideration, the other party or parties
will execute and deliver to such requesting party such documents and take
such other action as such requesting party may reasonably request in order
to consummate more effectively the transactions contemplated hereby.
Without in any way limiting the generality of the foregoing, Holdings, the
Company and the Selling Shareholders agree, without incurring any
additional significant expense, to cooperate fully with Buyer's efforts to
establish a successful borrower/lender relationship with Heller Financial,
Inc.
8.04 PARTIES IN INTEREST. This Agreement will be binding upon, inure
to the benefit of, and be enforceable by the respective successors and
assigns of the parties hereto. This Agreement may not be assigned by
Buyer, other than to a subsidiary or corporate affiliate of Buyer, or
assigned by the Selling Shareholders, without the prior written consent of
the other party, except that no such consent shall be required for an
assignment of Buyer's rights under this Agreement as security for any
acquisition financing and except that no such assignment shall relieve
Buyer or BIB of its obligations hereunder. Nothing in this Agreement,
express or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
8.05 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits
hereto and the other agreements, instruments and writings referred to
herein or delivered pursuant hereto contain the entire understanding of
the parties with respect to its subject matter. This Agreement supersedes
all prior agreements and understandings between the parties with respect
to its subject matter.
8.06 HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement.
8.07 NOTICES. All notices, claims, certificates, requests, demands
and other communications hereunder will be in writing and will be deemed
to have been duly given if delivered personally or mailed (registered or
certified mail, postage prepaid, return receipt requested) or via
facsimile or overnight courier delivery as follows:
(a) If to Holdings, the Company or the Selling Shareholders:
c/o Carrols Corporation
968 James Street
Syracuse, New York 13203
ATTENTION: Mr. Alan Vituli
Joseph Zirkman, Esq.
With a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
ATTENTION: Joel M. Handel, Esq.
(b) If to Buyer or BIB:
c\o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, Connecticut 06902
ATTENTION: Mr. Paul Durrant
With a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
ATTENTION: Selig D. Sacks, Esq.
or to such other address as the person to whom notice is to be given may
have previously furnished to the other in writing in the manner set forth
above.
8.08 GOVERNING LAW. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of New
York, without regard to conflicts of law principles thereof.
8.09 COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8.10 CONSENT TO JURISDICTION. Any legal action, suit or proceeding
arising out of or relating to this Agreement or the consummation of the
transactions contemplated hereby may only be instituted in any federal
court of the Southern District of New York or any state court located in
New York County, State of New York, and each party (including BIB) agrees
not to assert, by way of motion, as a defense or otherwise, in any such
action, suit or proceeding, any claim that it is not subject personally to
the jurisdiction of such courts, that the action, suit or proceeding if
brought in such courts, would be in an inconvenient forum, that the venue
of the action, suit or proceeding, if brought in any of such courts, is
improper or that this Agreement or the subject matter hereof may not be
enforced in or by such courts on jurisdictional grounds. BIB hereby
designates and appoints Pryor, Cashman, Sherman & Flynn (the "Authorized
Agent") as its agent to accept and acknowledge on its behalf service of
any process which may be served in any suit, action or proceeding and
agrees that service upon such Authorized Agent shall be deemed in every
respect service of process on BIB and, to the extent permitted by
applicable law, shall be taken and held to be valid and personal service
and shall constitute an appearance by BIB for all purposes in any such
suit, action or proceeding. BIB represents and warrants to the Selling
Shareholders that the Authorized Agent has agreed to act as such agent for
service of process.
8.11 EXHIBITS. All exhibits and schedules attached hereto are hereby
incorporated by reference into, and made a part of, this Agreement.
[NEWCO7.SPA]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto as of the date first above written.
ATLANTIC RESTAURANTS, INC.
By:
Name:
Title:
BAHRAIN INTERNATIONAL BANK (E.C.),
but solely for purposes of
Sections 2.02, 4.03, 8.08 and 8.10
hereof.
By:
Name:
Title:
CARROLS HOLDINGS CORPORATION
By:
Name:
Title:
CARROLS CORPORATION
By:
Name:
Title:
Alan Vituli, as
Selling Shareholders Representative
and Principal Manager
Daniel T. Accordino
Principal Manager
Richard V. Cross
Principal Manager
[NEWCO7.SPA]
DEFERRED SECURITIES PURCHASE AGREEMENT
DATED AS OF MARCH 6, 1996
AMONG
ATLANTIC RESTAURANTS, INC.,
ALAN VITULI,
AND
PRYOR, CASHMAN, SHERMAN & FLYNN
(AS ESCROW AGENT)
[DSPA3.DOC]
<PAGE>
DEFERRED SECURITIES PURCHASE AGREEMENT
This DEFERRED SECURITIES PURCHASE AGREEMENT (the "AGREEMENT") made and
entered into as of the 6th day of March, 1996, by and among Atlantic
Restaurants, Inc., a Delaware corporation ("BUYER"), Alan Vituli (the
"SELLING OPTIONHOLDER") and Pryor, Cashman, Sherman & Flynn, as escrow
agent (the "ESCROW AGENT"):
W I T N E S S E T H:
WHEREAS, the Selling Optionholder owns (i) an option to purchase
100,000 shares of common stock, par value $.01 per share, of Carrols
Holdings Corporation ("HOLDINGS") at an exercise price of $4 per share and
(ii) an option to purchase 20,000 shares of common stock of Holdings at an
exercise price of $6.12 per share (the foregoing options are referred to
herein, collectively, as the "OPTIONS");
WHEREAS, Holdings is the owner of all of the issued and outstanding
capital stock of Carrols Corporation, a Delaware corporation (the
"COMPANY");
WHEREAS, concurrently with the execution and delivery of this
Agreement, Buyer, Holdings, the Company and certain selling shareholders,
including the Selling Optionholder, are entering into a Securities Purchase
Agreement, dated as of the date hereof (the "SECURITIES PURCHASE
AGREEMENT"), providing for the sale by such selling shareholders to Buyer
of a significant part of all of the issued and outstanding shares of common
stock, including securities that are convertible into or exercisable or
exchangeable for shares of common stock, of Holdings;
WHEREAS, the Options were granted to the Optionholder pursuant to the
terms of certain Award Agreements (the "AWARD AGREEMENTS");
WHEREAS, Buyer has requested the Selling Optionholder not to exercise
any of his Options at this time and to defer the exercise thereof;
WHEREAS, Buyer wishes to purchase all of the Options from the Selling
Optionholder and the Selling Optionholder wishes to sell such Options to
Buyer at the time such Options become exercisable and transferable pursuant
to the terms of the Award Agreements, upon the terms and conditions set
forth below; and
WHEREAS, the parties desire that Escrow Agent shall hold, and Escrow
Agent has agreed to hold, certain amounts to be deposited with Escrow Agent
hereunder in escrow on the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of the aforesaid and the respective
warranties, representations, covenants and agreements hereinafter set
forth, the parties, intending to be legally bound, agree as follows:
1. PURCHASE AND SALE OF OPTIONS; ESCROW ACCOUNT
1.01 PURCHASE AND SALE OF OPTIONS. Upon the terms and subject to
the conditions contained in this Agreement, as provided for in Section 1.04
hereof, Buyer shall purchase and acquire from the Selling Optionholder, and
the Selling Optionholder shall sell, transfer, assign, convey and deliver
to Buyer, all of the Options, free and clear of all liens, pledges,
security interests, charges, claims or encumbrances of any nature
whatsoever at the time such Options become exercisable and transferable by
the Optionholder pursuant to the terms of the Award Agreements.
1.02 PURCHASE PRICE. (a) The aggregate purchase price for the
Options shall be $2,314,784, as the same may be adjusted in accordance with
the provisions of Section 1.04 of the Securities Purchase Agreement, (as so
adjusted, the "PURCHASE PRICE"), payable in cash by wire transfer in
immediately available funds by the Buyer to the Selling Optionholder at the
Closing Date (as defined below) against the transfer of the Options to
Buyer.
(b) Ninety percent of the Purchase Price shall be deposited
(the "PURCHASE PRICE ESCROW DEPOSIT") at the Deposit Date (as defined
below) in cash by wire transfer of immediately available funds to such
escrow account (the "PURCHASE PRICE ESCROW ACCOUNT") as designated in
writing by Escrow Agent as provided for in Section 1.04(b).
1.03 CLOSING. The closing of the transactions contemplated by
this Agreement shall take place on January 5, 1997, at 10:00 a.m., local
time, at the offices of Pryor, Cashman, Sherman & Flynn, 410 Park Avenue,
New York, New York 10022, on such date and at such other time or place as
the parties may mutually agree. The actual date of the Closing is
sometimes referred to herein as the "CLOSING DATE". Time shall be of the
essence with respect to Buyer's obligations hereunder.
1.04 ESCROW DEPOSITS. (a) The Purchase Price Escrow Deposit
contemplated by this Agreement shall take place concurrently with the
Closing set forth in Section 1.03 of the Securities Purchase Agreement, and
such date is sometimes referred to herein as the "DEPOSIT DATE".
(b) On the Deposit Date (i) the Selling Optionholder shall
deliver two (2) instruments of assignment ("OPTION ASSIGNMENT
INSTRUMENTS"), in form and substance satisfactory to Buyer, providing for
the sale, transfer and assignment of Options to Buyer, left undated and
with the number of Options not filled in, but made out to Buyer, to Escrow
Agent (the "OPTION ESCROW DEPOSIT"), to be held in a separate escrow
account (the "OPTION ESCROW ACCOUNT" and (ii) Buyer shall deposit the
Purchase Price Escrow Deposit with Escrow Agent to be held and invested in
accordance with the provisions of Section 1.04(c) hereof.
(c) Escrow Agent shall cause the Purchase Price Escrow
Deposit to be invested in direct obligations of the United States of
America, obligations for which the full faith and credit of the United
States of America is pledged to provide for the payment of principal and
interest, commercial paper rated of the highest quality by Moody's
Investors Services, Inc. or Standard & Poor's Corporation or 30-day
certificates of deposit issued by, or other 30-day deposit accounts of, and
30-day bankers acceptance issued by, one or more commercial banks having at
least $500,000,000 in capital and surplus. All interest or other income
accrued on the Purchase Price Escrow Deposit is referred to herein as the
"ESCROW INTEREST". Notwithstanding the foregoing provisions of this
Section 1.04(c), any investment of the Purchase Price Escow Deposit shall
be at the sole risk of Buyer, and the Selling Optionholder shall have no
liability, responsibilities or obligation with respect thereto; and no loss
on any investment shall relieve Buyer of its obligation to pay the Purchase
Price.
(d) At least two (2) business days prior to the scheduled
Closing Date, the Buyer shall deposit into the Purchase Price Escrow
Account, in cash by wire transfer of immediately available funds, an amount
equal to the Balance of the Purchase Price. From and after such date, all
references herein to the "Purchase Price Escrow Deposit" shall be deemed to
include such additional deposit.
1.05 DISPOSITION OF ESCROW DEPOSIT. Escrow Agent shall hold the
Purchase Price Escrow Deposit and the Option Escrow Deposit (collectively,
the "ESCROW DEPOSIT") in its possession pursuant to the terms and
provisions of this Agreement and shall distribute the Escrow Deposit to the
respective parties as set forth below:
(a) On the Closing Date, the Escrow Agent shall distribute:
(i) the Purchase Price Escrow Deposit to the Selling Optionholder and (ii)
the Option Assignment Instruments covering all the Options to Buyer;
PROVIDED, HOWEVER, that, upon receipt of a notice of any claim (a "NOTICE
OF CLAIM") by the Selling Optionholder or Buyer for amounts owed to it
pursuant to the indemnification provisions contained in Section 5.02 and
5.03 hereof or otherwise pursuant to this Agreement, as more fully set
forth herein (each, a "CLAIM"), Escrow Agent shall distribute the Escrow
Deposit on or after January 5, 1997 in accordance with 1.05(b) below.
(b) Promptly upon receipt of any Notice of Claim, Escrow
Agent shall mail a copy of such notice to the other parties, specifying the
date on which Escrow Agent received such Notice of Claim. Escrow Agent
shall retain in the Purchase Price Escrow Account an amount equal to the
amount set forth in the Notice of Claim (the "DISPUTED AMOUNT") and shall
retain in the Option Escrow Account such proportion of the Options (the
"DISPUTED OPTIONS") that is equal to the proportion that the Disputed
Amount bears to the Purchase Price. Thereafter, Escrow Agent shall
distribute any undisputed amounts in the Escrow Account to the Selling
Optionholder and any undisputed portion of the Options to Buyer.
(c) Escrow Agent shall continue to hold any undistributed
portions of the Escrow Deposit in escrow and shall only distribute same
upon delivery of and in accordance with (i) joint written instructions of
Buyer and the Selling Optionholder or (ii) written instructions of Buyer or
the Selling Optionholder certifying that the dispute with respect to the
Claim has been determined and resolved by entry of a final order, decree or
judgment by a court of competent jurisdiction in the United States (the
time for appeal therefrom having expired and no appeal having been
perfected), or consent to entry of any judgment concerning the Claim, which
instructions shall be accompanied by a copy of any such order, decree or
judgment certified by the clerk of such court.
(d) For purposes of enabling Escrow Agent to distribute
Options to Buyer strictly in accordance with the provisions of this
Agreement, Selling Optionholder hereby authorizes Escrow Agent to insert
the date, and fill in the appropriate number of Options, into one or more
of the blank Option Assignment Instruments.
(e) At the Closing or as provided in Section 6.02 hereof,
Escrow Agent shall distribute to Buyer the Escrow Interest earned on the
Purchase Price Escrow Deposit from the date of establishment of the
Purchase Price Escrow Account through the date of such distribution. In
the event that any amounts are held as disputed funds under Section 1.05(b)
or (c) above on the Closing Date, the Escrow Interest earned after the
Closing Date attributable thereto shall be retained by Escrow Agent in the
Purchase Price Escrow Account and shall be distributed by Escrow Agent to
the party which ultimately prevails on the related Claim or, if both
parties ultimately prevail, in accordance with their respective interests
therein.
(f) Each party shall be responsible for all taxes payable
on any Escrow Interest distributed to it. Any taxes which become due with
respect to accrued interest on any disputed funds held by Escrow Agent
pursuant to Section 1.05(b) or (c) hereof shall be paid by Escrow Agent out
of such disputed funds.
1.06 DUTIES OF THE ESCROW AGENT. (a) Escrow Agent undertakes to
perform only such duties as are specifically set forth herein. Anything
herein to the contrary notwithstanding, Escrow Agent's sole duties under
this Agreement shall be to hold the Escrow Deposit in each of the two
Escrow Accounts (collectively, the "ESCROW ACCOUNTS") in accordance with
the terms hereof and to follow the instructions regarding the disposition
of the Escrow Deposit and Escrow Interest as set forth in Sections 1.04 and
1.05 hereof.
(b) Escrow Agent, after having fully delivered the Escrow
Deposit and Escrow Interest, if any, pursuant hereto, shall be discharged
from any further obligations hereunder. Buyer and the Selling Optionholder
hereby jointly and severally agree to indemnify Escrow Agent and hold it
harmless against any and all expenses, including reasonable counsel fees
and disbursements, or losses suffered by Escrow Agent in connection with
any action, suit or other proceeding involving any claim, or in connection
with any claim or demand, which in any way, directly or indirectly, arises
out of or relates to this Agreement, the service of Escrow Agent hereunder,
the monies or Options held by it hereunder or PROVIDED, HOWEVER, that this
indemnity shall not apply to any such expense or loss that is the direct
result of Escrow Agent's gross negligence or willful misconduct. Promptly
after the receipt by Escrow Agent of notice of any demand or claim or the
commencement of any action, suit or proceeding, Escrow Agent shall, if a
claim in respect thereof is to be made against any of the other parties
hereto, notify such other parties thereof in writing; but the failure by
Escrow Agent to give such notice shall not relieve any party from any
liability which such party may have to Escrow Agent hereunder. The
indemnities in this Section 1.06(b) shall survive the resignation of Escrow
Agent and the termination of this Agreement.
(c) Escrow Agent shall have no responsibility for the
genuineness or validity of any document or other item deposited with it,
and it shall be fully protected in acting in accordance with any written
instructions given to it hereunder and reasonably believed by it to have
been signed by the parties hereto or proper officers or other
representatives of the parties hereto. Escrow Agent may consult with
counsel and shall be fully protected in any action taken in good faith in
accordance with such advice. From time to time on and after the date
hereof, the other parties hereto shall deliver or cause to be delivered to
Escrow Agent such further documents and instruments and shall do and cause
to be done such further acts as Escrow Agent shall reasonably request (it
being understood that Escrow Agent shall have no obligation to make any
such request) to carry out more effectively the provisions and purposes of
this Agreement, to evidence compliance herewith or to assure itself that it
is protected in acting hereunder.
(d) It is understood and agreed that should any dispute
arise with respect to the payment and/or ownership or right of possession
of the Escrow Deposit or the Escrow Interest, Escrow Agent shall have the
right to (but shall not be obligated to) retain in its possession, without
liability to any one, all or any part of such Escrow Deposit or the Escrow
Interest until such dispute shall have been settled either by mutual
agreement by the parties concerned or by the final order, decree or
judgment of a court or other tribunal of competent jurisdiction in the
United States and time for appeal has expired and no appeal has been
perfected, but Escow Agent shall be under no duty whatsoever to institute
or defend any such proceedings.
(e) Escrow Agent shall be reimbursed for all reasonable
fees, expenses, disbursements and advances (including reasonable attorneys'
fees and expenses if actually incurred by Escrow Agent in connection with
the use of outside attorneys) incurred or made by it in performance of its
duties hereunder. Such reasonable fees, expenses, disbursements and
advances shall be shared by Buyer and the Selling Optionholder upon request
by Escrow Agent (which shall not be made more than once during any one
month period commencing with the one-month period beginning on the date
hereof and, in the case of any such reimbursement, upon submission to Buyer
and the Selling Optionholder of a reasonably detailed itemized statement
relating to the amounts to be reimbursed.
(f) No party shall have the right to withdraw or receive
any of the amounts held in the Escrow Deposit or the Escrow Interest except
as provided herein.
(g) Escrow Agent shall not be entitled to proceed against
the Escrow Account, nor shall Escrow Agent be entitled to any offset
against the Escrow Account, including any proceeding or offset for any
reimbursement of fees, disbursements or expenses (including counsel fees
and disbursements, if any) or losses suffered by Escrow Agent in connection
with any action, suit, proceeding, claim or demand arising out of or
relating to this Agreement.
(h) Escrow Agent may resign as Escrow Agent under this
Agreement by giving notice of such resignation in writing addressed to
Buyer and the Selling Optionholder, which writing shall specify a date not
less than thirty days following the date of such notice when such
resignation shall take effect. Escrow Agent may be removed at any time
with or without cause by an instrument in writing duly executed by Buyer
and the Selling Optionholder. If Escrow Agent shall resign or be removed as
Escrow Agent hereunder, Buyer shall appoint a successor escrow agent
reasonably acceptable to the Selling Optionholder by an instrument of
substitution complying with any applicable requirements of law and, in the
absence of any such requirement, without formality other than appointment
and designation in writing. Such appointment and designation shall be full
evidence of Buyer's right and authority to make such appointment and
designation, and of all facts therein recited. Upon the effective date of
Escrow Agent's removal as escrow agent hereunder, such successor escrow
agent shall become Escrow Agent hereunder and shall have all of the rights,
powers, privileges, immunities and duties hereby conferred upon Escrow
Agent. All references herein to Escrow Agent shall be deemed to refer to
the party from time to time acting hereunder as escrow agent. Upon
replacement of Escrow Agent as escrow agent hereunder, Escrow Agent shall
deliver the entire Escrow Deposit to its successor as escrow agent
hereunder in accordance with the written instructions of Buyer.
(i) Each of the parties hereto acknowledge that Pryor,
Cashman, Sherman & Flynn has in the past represented Buyer as legal
counsel, and is currently representing Buyer as legal counsel in connection
with the transactions contemplated by this Agreement, the Securities
Purchase Agreement and other related documents. In addition, the parties
hereto acknowledge and agree that neither the agreement by the parties
hereto that Pryor, Cashman, Sherman & Flynn shall act as Escrow Agent, nor
any other term of this Agreement, nor any other agreement or understanding
between or among the parties hereto shall prevent or inhibit, or be
construed or interpreted so as to prevent or inhibit, Pryor, Cashman,
Sherman & Flynn from serving at any time as legal counsel to Buyer or any
parent, subsidiary, shareholder, director, officer, agent or affiliate of
Buyer, whether in connection with this Agreement or otherwise. The
foregoing notwithstanding, it shall be a condition precedent to Pryor,
Cashman, Sherman & Flynn's ability to serve as legal counsel to Buyer in
connection with any dispute under this Agreement that Pryor, Cashman,
Sherman & Flynn deposit any portion of the Escrow Deposit or Options that
are subject to a dispute with a court of competent jurisdiction (subject to
Section 7.09 hereof) or with an unrelated third party successor Escrow
Agent mutually acceptable to Buyer and the Selling Optionholder.
2. CONDITIONS TO CLOSING
2.01 CONDITIONS TO BUYER'S OBLIGATIONS. (a) The obligation of
Buyer to deposit the Purchase Price Escrow Deposit with Escrow Agent is
subject to the satisfaction at the time of the Deposit Date of the
following conditions (any or all of which may be waived by Buyer in Buyer's
sole discretion):
(i) The closing of the transactions contemplated by the
Securities Purchase Agreement;
(ii) No preliminary or permanent injunction or other order
of any court of competent jurisdiction preventing the purchase by Buyer of
the Options shall be in effect; and
(iii) The representations and warranties of the Selling
Optionholder made in Section 3.01(a) through (e) hereof shall be true and
correct as of the Deposit Date as though made as of such time. The Selling
Optionholder shall have performed in all material respects each and every
covenant contained in this Agreement required to be performed by him by the
time of the Deposit Date. The Selling Optionholder shall have delivered to
Buyer a certificate dated the Deposit Date confirming the foregoing.
(b) The obligation of Buyer to pay the Purchase Price is subject
to the satisfaction on the Closing Date of the following conditions (any or
all of which may be waived by Buyer in Buyer's sole discretion);
(i) No preliminary or permanent injunction or other order
of any court of competent jurisdiction preventing the purchase by Buyer of
the Options shall be effect; and
(ii) The representations and warranties of the Selling
Optionholder made in Section 3.01(a) through (d) hereof and the
representations and warranties of Selling Optionholder contained in Section
4.01(h)(i) of the Securities Purchase Agreement shall be true and correct
as of the Closing Date as though made as of such time. The Selling
Optionholder shall have performed in all material respects each and every
covenant contained in this Agreement required to be performed by him by the
time of the Closing Date.
2.02 CONDITIONS TO SELLING OPTIONHOLDER'S OBLIGATIONS. (a) The
obligation of the Selling Optionholder to deliver the Option Assignment
Instruments to Escrow Agent is subject to the satisfaction at the time of
the Deposit Date of the following conditions (any or all of which may be
waived by the Selling Optionholder in the Selling Optionholder' sole
discretion):
(i) The closing of the transactions contemplated by the
Securities Purchase Agreement.
(ii) No preliminary or permanent injunction or other order
of any court of competent jurisdiction preventing the sale by the Selling
Optionholder of the Securities shall be in effect;
(iii) The representations and warranties of Buyer made
in this Agreement shall be true and correct as of the Deposit Date as
though made as of such time. Buyer shall have performed in all material
respects each and every covenant contained in this Agreement required to be
performed by it by the time of the Deposit Date. Buyer shall have
delivered to the Selling Optionholder a certificate dated the Deposit Date
and signed by an authorized representative of Buyer confirming the
foregoing.
(b) The obligation of the Selling Optionholder to Deliver the
Option Assignment Instruments is subject to the satisfaction at the time of
the Closing Date of the following conditions (any or all of which may be
waived by the Selling Optionholder, in the Selling Optionholder's sole
discretion):
(i) No preliminary or permanent injunction or any order of
any court of competent jurisdiction preventing the sale by the Selling
Optionholder of the Securities shall be in effect; and
(ii) The representation and warranties of Buyer made in this
Agreement shall be true and correct as of the Closing Date as though made
as of such time. Buyer shall have performed in all material respects each
and every covenant contained in this Agreement required to be performed by
it by the time of the Closing.
3. REPRESENTATIONS AND WARRANTIES
3.01 REPRESENTATIONS AND WARRANTIES OF THE SELLING OPTIONHOLDER.
The Selling Optionholder hereby represents and warrants to Buyer as
follows:
(a) The Selling Optionholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby and all acts and other proceedings required to be taken
by any of the Selling Optionholder to authorize the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and properly taken.
(b) This Agreement constitutes a valid and binding
obligation of the Selling Optionholder, enforceable against him in
accordance with its terms, except that (i) such enforcement may be limited
by or subject to any bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to or limiting creditors'
rights generally and (ii) the remedy of specific performance and injunctive
and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought.
(c) The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby and compliance
with the terms hereof will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under or result in the creation
of any lien, claim, encumbrance, security interest, option, charge or
restriction of any kind upon any of the Options, or with respect to the
Options, under any provision of (i) the Certificate of Incorporation or By-
laws of Holdings, (ii) any note, bond, mortgage, indenture, deed of trust,
license, lease, contract, commitment or agreement to which Selling
Optionholder is a party or by which his assets are bound, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Selling Optionholder or his assets. No consent, approval,
license, permit, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, or any
other third party is required to be obtained or made by or with respect to
the Selling Optionholder or his affiliates in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, other than the filing required under the HSR Act and
other than as set forth on Schedule 4.01(d) of the Securities Purchase
Agreement.
(d) The Selling Optionholder has good and valid title to
the Options free and clear of any liens, claims, encumbrances, security
interests, options, charges and restrictions whatsoever, and all such
Options have been duly authorized and validly issued. Upon delivery to
Buyer of an Option Assignment Instrument and upon receipt by the Selling
Optionholder of the Purchase Price for the Options as provided for in
Sections 1.02 and 1.05 hereof, and upon the effectiveness of the amendment
to the Award Agreements in accordance with its terms, good and valid title
to the Options will pass to Buyer, free and clear of any liens, claims,
encumbrances, security interests, options, charges and restrictions of any
kind.
(e) The representations and warranties of the Selling
Optionholder set forth in Section 4.01(f) through (nn) of the Securities
Purchase Agreement are incorporated by reference herein and made a part
hereof as if restated in their entirety herein.
3.02 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to the Selling Optionholder as follows:
(a) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power and authority to enter into this Agreement and to carry out
the transactions contemplated hereby.
(b) The Board of Directors of Buyer have duly authorized
the execution and delivery of this Agreement and the consummation by Buyer
of the transactions contemplated hereby. No other corporate or other
proceedings on the part of Buyer are necessary to authorize this Agreement
or the transactions contemplated hereby.
(c) This Agreement constitutes a valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except that (i) such enforcement may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or limiting creditors' rights generally and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
(d) Neither the execution and delivery of this Agreement
nor the consummation by Buyer of the transactions contemplated hereby (i)
will violate or conflict with any statute, law, ordinance, rule,
regulation, order, judgment or decree affecting Buyer, or (ii) will violate
or conflict with or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or will result
in the termination of, or accelerate the performance required by, or result
in the creation of any lien, security interest, charge or encumbrance upon
Buyer or any of its assets under, any term or provision of (A) the
Certificate of Incorporation or By-Laws (or equivalent organizational
documents) of Buyer or (B) any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character which Buyer
is a party or by which Buyer may be bound or affected, or to which Buyer or
its respective assets are subject, or (iii) will cause, or give any person
grounds to cause (with or without notice, the passage of time, or both),
the maturity of any debt, liability or obligation of Buyer to be
accelerated, or will increase any such liability or obligation. Except for
the required filing under the HSR Act, no consent, approval, license,
permit, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, or any other third party
is required to be obtained or made by or with respect to Buyer or any of
its affiliates in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(e) Buyer has, or will have on or prior to the Closing
Date, sufficient sources of financing to enable it to purchase the Options
and pay the Purchase Price to the Selling Optionholder.
4. COVENANTS
4.01 COVENANTS OF THE SELLING OPTIONHOLDER. The Selling
Optionholder covenants and agrees with Buyer as follows:
(a) The Selling Optionholder shall not take any action
prior to the Closing Date that would, or that would reasonably be expected
to, result in any of the representations and warranties of the Selling
Optionholder set forth in this Agreement becoming untrue or any of the
conditions set forth in Article II hereof not being satisfied.
(b) For so long as this Agreement is in effect, Selling
Optionholder will not exercise any Options.
(c) The Selling Optionholder shall promptly notify Buyer
of:
(i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental entity in connection with the transactions contemplated by
this Agreement;
(iii) the occurrence, or failure to occur, of any
condition, event or development that (A) causes any representation or
warranty of the Selling Optionholder contained in this Agreement and
qualified as to materiality to be untrue or inaccurate, or causes any
representation or warranty contained in this Agreement and not so qualified
to be untrue or inaccurate in any material respect, at any time from the
date hereof to the Closing Date or (B) would have been required to be set
forth or described under this Agreement if existing or known at the date of
this Agreement; and
(iv) any failure on the part of the Selling
Optionholder to comply with or perform in any material respect any
agreement or covenant to be complied with or performed by it hereunder;
PROVIDED that the delivery of any notice pursuant to this Section 4.01(b)
shall not limit or otherwise affect the remedies available hereunder to
Buyer.
4.02 COVENANTS OF BUYER. The Buyer covenants and agrees with
Selling Optionholder as follows:
(a) The Buyer shall not take any action prior to the
Closing Date that would, or that would reasonably be expected to, result in
any of the representations and warranties of the Buyer or the Selling
Optionholder set forth in this Agreement becoming untrue or any of the
conditions set forth in Article II hereof not being satisfied.
(b) The Buyer shall promptly notify Selling Optionholder
of:
(i) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
governmental entity in connection with the transactions contemplated by
this Agreement;
(iii) the occurrence, or failure to occur, of any
condition, event or development that (A) causes any representation or
warranty of the Buyer contained in this Agreement and qualified as to
materiality to be untrue or inaccurate, or causes any representation or
warranty contained in this Agreement and not so qualified to be untrue or
inaccurate in any material respect, at any time from the date hereof to the
Closing Date or (B) would have been required to be set forth or described
under this Agreement if existing or known at the date of this Agreement;
and
(iv) any failure on the part of the Buyer to
comply with or perform in any material respect any agreement or covenant to
be complied with or performed by it hereunder; PROVIDED that the delivery
of any notice pursuant to this Section 4.02(b) shall not limit or otherwise
affect the remedies available hereunder to Selling Optionholder.
(c) Buyer, when and if it becomes the controlling
shareholder of Holdings, hereby covenants and agrees that, until the
Closing Date, it will not take any action to cause Holdings to engage in
any merger, consolidation, liquidation, recapitalization or any other
transaction that would result in a cash-out, termination or modification of
the Options prior to the Closing Date.
5. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
5.01 SURVIVAL OF REPRESENTATIONS. None of the representations
and warranties made by any party in this Agreement shall survive the
Closing; except for (i) the representations and warranties of the Selling
Optionholder set forth in subsections (a) through (d) of Section 3.01
hereof and the representations and warranties of Buyer set forth in Section
3.02 hereof, which shall survive any investigation at any time made by or
on behalf of any party for the applicable statute of limitations period set
forth in the Securities Purchase Agreement and (ii) the representations
and warranties of the Selling Optionholder set forth in Section 4.01(h)(i)
of the Securities Purchase Agreement, which shall survive any investigation
at any time made by or on behalf of Buyer for the period therein set forth.
5.02 AGREEMENT OF SELLING OPITIONHOLDER TO INDEMNIFY. The
Selling Optionholder shall indemnify Buyer and each of its officers,
directors, employees, representatives, agents, shareholders, partners and
affiliates (and their respective officers, directors, employees,
representatives, agents, shareholders, partners and affiliates) and hold
each of them harmless from and against any reasonably incurred loss,
liability, claim, cost, damage or expense (including, but not limited to,
any and all expenses reasonably incurred in investigating, preparing or
defending ally litigation or proceeding, commenced or threatened, or any
claim whatsoever) (collectively, "LOSSES") suffered or incurred by any such
indemnified party to the extent arising from (i) any breach of any
representation or warranty of the Selling Optionholder contained in this
Agreement or in any schedule, certificate, instrument or to other document
delivered pursuant hereto or (ii) any breach of any covenant or agreement
of the Selling Optionholder contained in this Agreement; PROVIDED, however,
that the Selling Optionholder's indemnification obligations under this
Section 5.02 (with respect to any breach of the representations and
warranties set forth in Section 3.01(e) hereto) shall be subject to the
basket and cap limitations on indemnification set forth in Section 6.03 of
the Securities Purchase Agreement, including any additional limitations
contained therein, and any Loss suffered by Buyer under this Agreement
shall be added to any Losses (as defined in Section 6.02 of the Securities
Purchase Agreement) suffered by Buyer under the Securities Purchase
Agreement in determining the applicability of such basket and cap.
Payments in respect of the indemnification provided in this Section 5.02
shall be made promptly (and currently) as Losses shall be incurred.
5.03 AGREEMENT OF BUYER TO INDEMNIFY. Buyer shall indemnify the
Selling Optionholder and his respective representatives, agents, employees,
partners and affiliates and hold each of them harmless from and against any
Loss suffered or incurred by any such indemnified party to the extent
arising from (i) any breach of any representation or warranty of Buyer
contained in this Agreement or in any schedule, certificate, instrument or
other documents delivered hereto or (ii) any breach of any covenant or
agreement of Buyer contained in this Agreement or in any schedule,
certificate, instrument or other documents delivered hereto. Payments in
respect of the indemnification provided in this Section 5.03 shall be made
promptly (and currently) as Losses shall be incurred.
5.04 CONDITIONS OF INDEMNIFICATION. Each party indemnified
pursuant to Section 5.02 or 5.03 hereof (an "INDEMNIFIED PARTY") agrees to
give prompt notice to the party required to indemnify such indemnified
party (an "INDEMNIFYING PARTY") of the assertion of any claim, or the
commencement of any suit, action or proceeding, whether brought against
such indemnified party or brought by such indemnified party against the
indemnifying party (each a "CLAIM"), in respect of which indemnity may be
sought by such indemnified party under Section 5.02 or 5.03 hereof or in
respect of which such indemnified party may seek any other remedy against
the indemnifying party under this Agreement; PROVIDED, however, that the
omission so to promptly notify the indemnifying party with respect to a
Claim brought against such indemnified party will not relieve the
indemnifying party from any liability which it may have to such indemnified
party under Section 5.02 or 5.03 hereof unless such failure materially
prejudices the indemnifying party with respect to the defense of such
Claim. If any indemnified party shall seek indemnity under Section 5.02 or
5.03 hereof, the indemnifying party, in the case of a Claim brought against
such indemnified party, shall be entitled to participate therein and, to
the extent that it wishes, to assume and direct the defense and settlement
thereof with counsel reasonably satisfactory to such indemnified party.
After notice from the indemnifying party to an indemnified party of its
election to assume and direct the defense and settlement of a Claim brought
against such indemnified party, the indemnifying party shall not be liable
to such indemnified party (or any of its affiliates) under Section 5.02 or
5.03 hereof for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation undertaken at the request of the
indemnifying party; except that such indemnified party shall have the right
to employ counsel to represent such party if, in the reasonable judgment of
such party, it is advisable for such party to be represented by separate
counsel, and in that event the fees and expenses of such separate counsel
shall be paid by such indemnified party. Notwithstanding the foregoing
provisions of this Section 5.04, the indemnifying party shall not, without
the prior written consent of an indemnified party (which consent shall not
be unreasonably withheld or delayed), effect any settlement of any pending
or threatened proceeding in respect of which such indemnified party is, or
with reasonable foreseeability, could have been a party and indemnity could
have been sought hereunder by such indemnified party for a Claim brought
against such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability arising
out of such proceeding (PROVIDED that, whether or not such a release is
required to be obtained, the indemnifying party shall remain liable to such
indemnified party in accordance with Section 5.02 or 5.03 hereof, as
applicable, in the event that a Claim is subsequently brought against such
indemnified party).
5.05 REMEDIES CUMULATIVE. Except as otherwise provided herein,
the remedies provided herein shall be cumulative and shall not preclude the
assertion by any party hereto of any other rights or the seeking of any
other remedies against the other party hereto.
5.06 TAX BENEFITS, INSURANCE. In calculating the amount of any
Losses for which an indemnified party is entitled to indemnification under
this Article V, any Tax Benefit (as hereinafter defined) received by such
indemnified party shall be applied against the amount of the Loss to reduce
the amount payable by the indemnifying party. "TAX BENEFIT" shall mean any
tax savings to the indemnified party (computed at the combined Federal,
state and local tax rate applied to the indemnified party in the
immediately preceding taxable year) resulting from any net increase in
deductions, losses or credits or any net decrease in income, gains or
recapture of credits attributable to inclusion of the claims or related
indemnification payment, as the case may be, in any tax return of the
indemnified party plus any interest attributable to such inclusion. In
addition, in calculating the amount of any Losses for which an indemnified
party is entitled to indemnification under this Article V, the amount of
any insurance proceeds received by the indemnified party relating to or in
connection with such Loss shall reduce the amount of any claim.
6. TERMINATION; AMENDMENT AND WAIVER
6.01 TERMINATION OF AGREEMENT. This Agreement may be terminated
at any time prior to the Closing:
(a) By mutual written agreement of the parties hereto; or
(b) By Buyer or the Selling Optionholder, if the Securities
Purchase Agreement is terminated.
6.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, Escrow Agent shall return the Escrow Deposit
and the Escrow Interest to Buyer and the Options to the Selling
Optionholder and thereupon this Agreement shall forthwith become void and
there shall be no liability on the part of any party hereto (or any of
their respective officers or directors), except (i) based upon obligations
set forth in Section 7.01 hereof and (ii) to the extent that failure to
satisfy the conditions of Article II hereof results from the negligent,
intentional or willful breach, violation or non-compliance by any party
hereto of any covenant, agreement, obligation, representation or warranty
contained in this Agreement or any other agreement referred to herein.
6.03 AMENDMENT, EXTENSION AND WAIVER. The parties may amend this
Agreement at any time by an instrument in writing signed by Buyer, the
Selling Optionholder and Escrow Agent. Any agreement on the part of a
party hereto to any waiver of compliance with any of the agreements or
conditions contained herein shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
7. MISCELLANEOUS
7.01 EXPENSES, LEGAL COSTS. Selling Optionholder agrees, on the
Closing Date, to contribute to the Company forty cents ($.40) per Option
sold to Buyer hereunder as his pro-rata share of fees and expenses of Buyer
incurred in connection with the negotiation and execution of this
Agreement, the Securities Purchase Agreement and the Related Documents (as
defined in Section 4.01(b) of the Securities Purchase Agreement) and the
consummation of the transactions contemplated hereby and thereby. If any
legal action is brought for the enforcement of this Agreement, or because
of an alleged dispute, breach, default, or misrepresentation in connection
with any of the provisions of this Agreement, the successful or prevailing
party or parties shall be entitled to recover reasonable attorneys' fees
and other costs incurred in that action or proceeding, in addition to any
other relief to which it or they may be entitled. In the event that either
party obtains a judgment in connection with the enforcement or
interpretation of this Agreement, such party shall be entitled to recover
from the other all costs and expenses incurred in connection with the
enforcement of such judgment, including, without limitations reasonable
attorneys' fees, whether incurred prior to or after the entry of the
judgment.
7.02 FURTHER ASSURANCES. From time to time, at the request of
any party hereto and without further consideration, the other party or
parties will execute and deliver to such requesting party such documents
and take such other action as such requesting party may reasonably request
in order to consummate more effectively the transactions contemplated
hereby.
7.03 PARTIES IN INTEREST. This Agreement will be binding upon,
inure to the benefit of, and be enforceable by the respective successors
and assigns of the parties hereto. This Agreement may not be assigned by
Buyer, other than to a subsidiary or corporate affiliate of the Buyer, or
assigned by the Selling Optionholder, without the prior written consent of
the other party, except that no such consent shall be required for an
assignment of Buyer's rights under this Agreement as security for any
acquisition financing.
7.04 ENTIRE AGREEMENT. This Agreement and the Schedules and
Exhibits hereto and the other agreements, instruments and writings referred
to herein or delivered pursuant hereto contain the entire understanding of
the parties with respect to its subject matter. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
its subject matter.
7.05 HEADINGS. The Article and Section headings contained in
this Agreement are for reference purposes only and will not affect in any
way the meaning or interpretation of this Agreement.
7.06 NOTICES. All notices, claims, certificates, requests,
demands and other communications hereunder will be in writing and will be
deemed to have been duly given if delivered personally or mailed
(registered or certified mail, postage prepaid, return receipt requested)
or via facsimile or overnight courier delivery as follows:
(a) If to the Selling Optionholder:
c/o Carrols Corporation
968 James Street
Syracuse, New York 13203
Attention: Mr. Alan Vituli
With a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attention: Joel M. Handel, Esq.
(b) If to Buyer:
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, Connecticut 06902
Attention: Mr. Paul Durrant
With a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
(c) If to Escrow Agent:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
or to such other address as the person to whom notice is to be given may
have previously furnished to the other in writing in the manner set forth
above.
7.07 GOVERNING LAW. This Agreement will be governed by, and
construed and enforced in accordance with, the laws of the State of New
York, without regard to conflicts of law principles thereof.
7.08 COUNTERPARTS. This Agreement may be executed simultaneously
in counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
7.09 CONSENT TO JURISDICTION. Any legal action, suit or
proceeding arising out of or relating to this Agreement or the consummation
of the transactions contemplated hereby may only be instituted in any
federal court of the Southern District of New York or any state court
located in New York County, State of New York, and each party agrees not to
assert, by way of motion, as a defense or otherwise, in any such action,
suit or proceeding, any claim that it is not subject personally to the
jurisdiction of such courts, that the action, suit or proceeding if brought
in such courts, would be in an inconvenient forum, that the venue of the
action, suit or proceeding, if brought in any of such courts, is improper
or that this Agreement or the subject matter hereof may not be enforced in
or by such courts on jurisdictional grounds.
[DSPA3.DOC]
<PAGE>
IN WITNESS WHEREOF, this Deferred Purchase Agreement has been duly
executed and delivered by the duly authorized officers of Buyer, the
Selling Optionholder and Escrow Agent as of the date first above written.
ATLANTIC RESTAURANTS, INC.
By:
Name:
Title:
SELLING OPTIONHOLDER:
Alan Vituli
PRYOR, CASHMAN, SHERMAN & FLYNN,
as Escrow Agent
By:
Name:
Title:
[DSPA3.DOC]
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of March 6, 1996 (the
"Agreement"), by and among Atlantic Restaurants, Inc., a
Delaware corporation ("Buyer"), Bahrain International Bank
(E.C.), an exempt joint stock company organized under the laws
of Bahrain and the ultimate parent company of Buyer ("BIB"),
Carrols Holdings Corporation, a Delaware corporation
("Holdings"), Carrols Corporation, a Delaware corporation (the
"Company"), the selling shareholders (the "Selling
Shareholders") listed on Schedule I and, to the extent
applicable, Schedule III to the Securities Purchase Agreement
(as defined below), and Baer Marks & Upham LLP, as escrow
agent (or any successor escrow agent pursuant to Section 4(h)
hereof) ("Escrow Agent"). The Selling Shareholders as a group
shall be represented by Alan Vituli (the "Selling Shareholders
Representative"). Those Selling Shareholders listed on
Schedule II to the Securities Purchase Agreement are defined
therein as "Principal Managers". Capitalized terms used and
not otherwise defined herein shall have the meanings ascribed
to such terms in the Securities Purchase Agreement.
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of
this Agreement, Holdings, the Company, the Selling
Shareholders, Buyer and BIB are entering into a Securities
Purchase Agreement, dated as of the date hereof (the
"Securities Purchase Agreement"), providing for the sale by
the Selling Shareholders to Buyer of a significant part of the
issued and outstanding shares of common stock, together with a
significant part of securities that are convertible into or
exercisable or exchangeable for shares of common stock,
(collectively, the "Securities") of Holdings;
WHEREAS, pursuant to Section 2.02 of the Securities
Purchase Agreement, BIB, on behalf of Buyer, has agreed to
deposit with Escrow Agent, upon the execution of the
Securities Purchase Agreement (such date being the "Deposit
Date"), the amount of $7,500,000, which amount shall be
deposited in a separate interest bearing account pursuant to
the terms and conditions stated in this Agreement; and
WHEREAS, the parties desire that Escrow Agent shall hold,
and Escrow Agent has agreed to hold, all amounts delivered to
and deposited with Escrow Agent hereunder in escrow upon the
terms and conditions provided in this Escrow Agreement;
NOW, THEREFORE, in consideration of the execution of the
Securities Purchase Agreement and the mutual covenants and
agreements set forth herein, the parties hereto mutually agree
as follows, and, in consideration of the mutual covenants set
forth herein, Escrow Agent agrees as follows:
1. ESCROW DEPOSIT. Concurrently with the execution and
delivery of this Agreement, BIB, on behalf of Buyer and to
secure Buyer's obligation to purchase and pay for the
Securities pursuant to the terms of the Securities Purchase
Agreement, is delivering $7,500,000, by wire transfer of
immediately available funds, to Escrow Agent (such $7,500,000
shall hereinafter be referred to as the "Escrow Deposit"), to
be held by Escrow Agent in escrow upon the terms and
conditions hereinafter provided. Escrow Agent hereby
acknowledges receipt of the Escrow Deposit.
2. INVESTMENT OF ESCROW DEPOSIT. Following the delivery
of the Escrow Deposit to Escrow Agent, Escrow Agent shall
promptly cause the Escrow Deposit to be deposited in a
separate interest bearing account (the "Escrow Account"). For
the purposes of this Agreement, the Escrow Deposit means the
Escrow Deposit being delivered to Escrow Agent at the Deposit
Date, in whatever form held, but shall not include any
interest, interest earned on interest, and other income earned
thereon (the "Escrow Interest").
3. DISPOSITION OF ESCROW DEPOSIT. Escrow Agent will hold
the Escrow Deposit in its possession under the provisions of
this Agreement until authorized hereunder to deliver the
Escrow Deposit or any specified portion thereof as follows:
(a) On the Closing Date (as defined in Section 1.03 of
the Securities Purchase Agreement), Escrow Agent shall, upon
receipt of joint written instructions from Buyer and the
Selling Shareholders Representative and in accordance
therewith, disburse the Escrow Deposit held on such date to
the Selling Shareholders Representative, less the amounts, if
any, covered by the Buyer's Purchase Price Claim Notice (as
defined below) pursuant to clause (i) of this subsection (a).
Escrow Agent shall retain in the Escrow Account such amounts
and shall only release such funds in accordance with clause
(ii) of this subsection (a).
(i) If the Closing (as defined in Section 1.03 of the
Securities Purchase Agreement) occurs prior to final
determination of the Purchase Price adjustments pursuant to
Section 1.04 of the Securities Purchase Agreement (including
the dispute resolution mechanisms contained therein), Escrow
Agent shall, at Closing, disburse the Escrow Deposit held on
such date to the Selling Shareholders Representative, less any
amounts covered by any claim notice (the "Buyer's Purchase
Price Claim Notice") delivered by Buyer to the Escrow Agent on
or prior to the Closing Date (the "Disputed Purchase Price");
PROVIDED, THAT, and only to the extent that, such Disputed
Purchase Price satisfies the criteria for the holding back of
disputed amounts by Escrow Agent set forth in the last
sentence of Section 1.04 (c) of the Securities Purchase
Agreement. The Buyer's Purchase Price Claim Notice shall
include, with reasonable specificity, the basis of Buyer's
dispute and the amount thereof.
(ii)Escrow Agent shall only release and deliver the
Disputed Purchase Price upon receipt of and in accordance with
(a) joint written instructions of Buyer and the Selling
Shareholders Representative or (b) written instructions of
Buyer or the Selling Shareholders Representative certifying
that the dispute with respect to the Disputed Purchase Price
has been determined and resolved by the Third Accounting Firm
(as defined in Section 4.01(c) of the Securities Purchase
Agreement), which instructions shall be accompanied by a true
and complete copy of such determination.
(b) In the event that the Securities Purchase
Agreement is terminated as provided thereunder, the party or
parties terminating the Securities Purchase Agreement shall
within five (5) business days thereafter notify Escrow Agent
in writing of such termination (the "Notice of Termination",
and the date of receipt of such notice, the "Notice Date") and
Escrow Agent shall mail a copy of such Notice of Termination
to the non-terminating party, to the extent applicable, within
five (5) business days following the Notice Date. Following
completion of the Escrow Waiting Period (as defined below),
Escrow Agent shall deliver the Escrow Deposit (including any
accrued but undistributed Escrow Interest) by wire transfer of
immediately available funds to BIB, less the amount of any
Termination Claims (as defined below) for which written notice
was timely given by the Selling Shareholders Representative as
set forth in clause (i) of this subsection (b). Thereafter,
Escrow Agent shall retain in the Escrow Account the aggregate
amount of any Termination Claims and shall only release such
funds in accordance with clause (ii) of this subsection (b).
(i) If the Securities Purchase Agreement has
terminated and the Selling Shareholders Representative
determines that a Termination Claim is chargeable against the
Escrow Deposit, the Selling Shareholders Representative shall
notify Buyer and Escrow Agent in writing of the Termination
Claim (the "Seller's Termination Claim Notice") within ten
(10) business days (the "Escrow Waiting Period") of (A) such
termination of the Securities Purchase Agreement (if the
Securities Purchase Agreement was terminated by the Selling
Shareholders Representative (alone or with Buyer)) or (B)
receipt of the Notice of Termination from Escrow Agent (if the
Securities Purchase Agreement was terminated by Buyer),
identifying such Termination Claim with reasonable
specificity, including the amount thereof. A "Termination
Claim" shall be any claim by the Selling Shareholders
Representative pursuant to the Securities Purchase Agreement.
(ii)Unless Escrow Agent receives the Buyer's
Termination Claim Reply (as defined below) from Buyer within
ten (10) business days following the receipt by Buyer of the
Seller's Termination Claim Notice (the "Buyer's Reply
Period"), Escrow Agent will release and deliver to the Selling
Shareholders Representative free and discharged from this
Agreement, that portion of the Escrow Deposit equal to the
amount of the Termination Claim, except to the extent disputed
as provided below. Buyer shall have the right to dispute any
Termination Claim asserted by the Selling Shareholders
Representative pursuant to clause (i) of this subsection (b)
by delivering to Escrow Agent and to the Selling Shareholders
Representative, within the Buyer's Reply Period, written
notice (the "Buyer's Termination Claim Reply") that it
disputes the matters set forth in the Seller's Termination
Claim Notice. The Buyer's Termination Claim Reply shall
include, with reasonable specificity, the basis of Buyer's
dispute and the amount thereof. Upon receipt of the Buyer's
Termination Claim Reply, Escrow Agent, except as hereinafter
provided, shall retain in the Escrow Account the amount of
such disputed Termination Claim ("Disputed Funds"). Escrow
Agent shall only distribute the Disputed Funds upon receipt of
and in accordance with (i) joint written instructions of Buyer
and the Selling Shareholders Representative or (ii) written
instructions of Buyer or the Selling Shareholders
Representative certifying that the dispute with respect to any
and all such Disputed Funds has been determined and resolved
by entry of a final order, decree or judgment by a court of
competent jurisdiction in the United States (the time for
appeal therefrom having expired and no appeal having been
perfected), or consent to entry of any judgment concerning a
Termination Claim, which instructions shall be accompanied by
a true and complete copy of any such order, decree or judgment
certified by the clerk of such court.
(c) Prior to the Closing Date, Escrow Agent shall
distribute to BIB the then accrued Escrow Interest, if any, on
the last day of each calendar month following the date hereof.
Any Escrow Interest earned prior to the Closing Date, but not
distributed to BIB before such date, shall be distributed to
BIB on the Closing Date. Interest accrued on the Escrow
Deposit from and after the Closing Date shall be disbursed by
the Escrow Agent on a pro-rata basis among the parties
ultimately receiving the Escrow Deposit. In the event that
any amounts are held as Disputed Purchase Price or Disputed
Funds as provided in subsections (a) or (b) above, the Escrow
Interest attributable thereto shall be retained by Escrow
Agent in the Escrow Account and shall be delivered by Escrow
Agent to the party which ultimately receives such Disputed
Purchase Price or Disputed Funds, as the case may be, or, if
both parties ultimately prevail, in accordance with their
respective interests therein.
4. RESPONSIBILITY OF ESCROW AGENT
(a) Escrow Agent undertakes to perform only such
duties as are specifically set forth herein. Anything herein
to the contrary notwithstanding, Escrow Agent's sole duties
under this Escrow Agreement shall be (i) to hold the Escrow
Deposit in escrow in accordance with the terms hereof, (ii) to
invest the Escrow Deposit in accordance with this Agreement
and (iii) to follow the instructions regarding the disposition
of the Escrow Deposit and the Escrow Interest as set forth in
Section 3 hereof.
(b) Escrow Agent, after having fully delivered the
Escrow Deposit and Escrow Interest, if any, pursuant hereto,
shall be discharged from any further obligations hereunder.
Buyer and the Selling Shareholders jointly and severally agree
to indemnify Escrow Agent and hold it harmless against any and
all expenses, including reasonable counsel fees and
disbursements, or losses suffered by Escrow Agent in
connection with any action, suit or other proceeding involving
any claim, or in connection with any claim or demand, which in
any way, directly or indirectly, arises out of or relates to
this Agreement, the service of Escrow Agent hereunder, the
monies held by it hereunder or any income earned from
investment of such monies; PROVIDED, HOWEVER, that this
indemnity shall not apply to any such expense or loss that is
the result of Escrow Agent's gross negligence or willful
misconduct. Promptly after the receipt by Escrow Agent of
notice of any demand or claim or the commencement of any
action, suit or proceeding, Escrow Agent shall, if a claim in
respect thereof is to be made against any of the other parties
hereto, notify such other parties thereof in writing; but the
failure by Escrow Agent to give such notice shall not relieve
any party from any liability which such party may have to
Escrow Agent hereunder. The indemnities in this Section 4(b)
shall survive the resignation of Escrow Agent and the
termination of this Agreement.
(c) Escrow Agent shall have no responsibility for the
genuineness or validity of any document or other item
deposited with it, and it shall be fully protected in acting
in accordance with any written instructions given to it
hereunder and reasonably believed by it to have been signed by
the parties hereto or proper officers or other representatives
of the parties hereto. Escrow Agent may consult with counsel
and shall be fully protected in any action taken in good faith
in accordance with such advice. From time to time on and
after the date hereof, the other parties hereto shall deliver
or cause to be delivered to Escrow Agent such further
documents and instruments and shall do and cause to be done
such further acts as Escrow Agent shall reasonably request (it
being understood that Escrow Agent shall have no obligation to
make any such request) to carry out more effectively the
provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected
in acting hereunder.
(d) It is understood and agreed that should any
dispute arise with respect to the payment and/or ownership or
right of possession of the Escrow Deposit or the Escrow
Interest, Escrow Agent shall have the right to (but shall not
be obligated to) retain in its possession, without liability
to anyone, all or any part of such Escrow Deposit or the
Escrow Interest until such dispute shall have been settled
either by mutual agreement by the parties concerned or by the
final order, decree or judgment of a court or other tribunal
of competent jurisdiction in the United States and time for
appeal has expired and no appeal has been perfected, but
Escrow Agent shall be under no duty whatsoever to institute or
defend any such proceedings.
(e) Escrow Agent shall be entitled to be reimbursed
for all reasonable expenses, disbursements and advances
(including reasonable attorneys' fees and expenses if actually
incurred by Escrow Agent in connection with the use of outside
attorneys) incurred or made by it in performance of its duties
hereunder. Such reasonable disbursements, expenses and
advances shall be shared by Buyer and the Selling Shareholders
(or by Buyer and the Company if the Securities Purchase
Agreement is terminated as provided thereunder) upon request
by Escrow Agent (which shall not be made more than once during
any one-month period commencing with the one-month period
beginning on the date hereof) and, in the case of any such
reimbursement, upon submission to Buyer and the Selling
Shareholders Representative (or to Buyer and the Company if
the Securities Purchase Agreement is terminated as provided
thereunder) of a reasonably detailed itemized statement
relating to the amounts to be reimbursed.
(f) No party shall have the right to withdraw or
receive any of the amounts held in the Escrow Deposit or the
Escrow Interest except as provided herein.
(g) Escrow Agent shall not be entitled to proceed
against the Escrow Account, nor shall Escrow Agent be entitled
to any offset against the Escrow Account, including any
proceeding or offset for any reimbursable fees, disbursements
or expenses (including counsel fees and disbursements, if any)
or losses suffered by Escrow Agent in connection with any
action, suit, proceeding, claim or demand arising out of or
relating to this Agreement.
(h) Escrow Agent may resign as Escrow Agent under this
Agreement by giving notice of such resignation in writing
addressed to Buyer and the Selling Shareholders
Representative, which writing shall specify a date not less
than thirty days following the date of such notice when such
resignation shall take effect. Escrow Agent may be removed at
any time with or without cause by an instrument in writing
duly executed by Buyer and the Selling Shareholders
Representative. If Escrow Agent shall resign or be removed as
Escrow Agent hereunder, Buyer shall appoint a successor escrow
agent reasonably acceptable to Buyer and the Selling
Shareholders Representative by an instrument of substitution
complying with any applicable requirements of law and, in the
absence of any such requirement, without formality other than
appointment and designation in writing. Such appointment and
designation shall be full evidence of Buyer's right and
authority to make such appointment and designation, and of all
facts therein recited. Upon the effective date of Escrow
Agent's removal as escrow agent hereunder, such successor
escrow agent shall become Escrow Agent hereunder and shall
have all of the rights, powers, privileges, immunities and
duties hereby conferred upon Escrow Agent. All references
herein to Escrow Agent shall be deemed to refer to the party
from time to time acting hereunder as escrow agent. Upon
replacement of Escrow Agent as escrow agent hereunder, Escrow
Agent shall deliver the entire Escrow Deposit to its successor
as escrow agent hereunder in accordance with the written
instructions of Buyer.
(i) Each of the parties hereto acknowledge that Baer
Marks & Upham LLP has in the past represented Holdings, the
Company and the Selling Shareholders as legal counsel, and is
currently representing Holdings, the Company and the Selling
Shareholders as legal counsel in connection with the
transactions contemplated by this Agreement, the Securities
Purchase Agreement and such other related documents. In
addition, the parties hereto acknowledge and agree that
neither the agreement by the parties hereto that Baer Marks &
Upham LLP shall act as Escrow Agent, nor any other term of
this Agreement, nor any other agreement or understanding
between or among the parties hereto shall prevent or inhibit,
or be construed or interpreted so as to prevent or inhibit,
Baer Marks & Upham LLP from serving at any time as legal
counsel to Holdings, the Company or any Selling Shareholder or
any parent, subsidiary, shareholder, director, officer, agent
or affiliate of Holdings, the Company or any Selling
Shareholder (collectively, the "Selling Parties"), whether in
connection with this Agreement or otherwise. The foregoing
notwithstanding, it shall be a condition precedent to Baer
Marks & Upham LLP's ability to serve as legal counsel to any
of the Selling Parties in connection with any dispute under
this Agreement that Baer Marks & Upham LLP deposit any amounts
held as Disputed Purchase Price or Disputed Funds under this
Agreement with a court of competent jurisdiction (subject to
Section 5(g) hereof) or with an unrelated third party
successor escrow agent mutually acceptable to Buyer and the
Selling Shareholders Representative.
(j) Each party shall be responsible for all taxes
payable on any Escrow Interest distributed to it. Any taxes
which become due with respect to accrued interest on any
Disputed Purchase Price or Disputed Funds, shall be paid by
Escrow Agent out of the Disputed Purchase Price or Disputed
Funds, as may be applicable.
(k) Escrow Agent covenants that it will not withhold
United States withholding taxes from payments to be made to
BIB if BIB provides Escrow Agent, upon Escrow Agent's
reasonable request, with Internal Revenue Service Form W-8,
Form 4224 or other applicable form, certificate or document
prescribed by the Internal Revenue Service certifying as to
BIB's entitlement to an exemption from any such withholding
requirements.
(l) Escrow Agent covenants that it will not withhold
United States withholding taxes from payments to be made to
BIB, if any, in excess of any applicable treaty rate under an
income tax treaty, if any, between the United States and
Bahrain if BIB provides Escrow Agent, upon Escrow Agent's
reasonable request, with Internal Revenue Service Form 1001 or
other applicable form, certificate or document prescribed by
the Internal Revenue Service certifying as to BIB's
entitlement to a reduced rate of withholding under any such
withholding requirements.
5. MISCELLANEOUS
(a) NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been
duly given as of the date and time sent if such notices and
other communications are delivered by messenger, transmitted
by telex or telecopier (with receipt confirmed), or mailed by
registered or certified United States mail, postage prepaid,
as follows:
(i) If to Holdings, the Company or the Selling
Shareholders:
c/o Carrols Corporation
968 James Street
Syracuse, New York 13203
Attention: Mr. Alan Vituli
Joseph Zirkman, Esq.
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York New York 10022
Attention: Joel M. Handel, Esq.
(ii)If to Buyer or BIB:
c/o Dilmun Investments, Inc.
Metro Center
One Station Place
Stamford, Connecticut 06902
Attention: Mr. Paul Durrant
with a copy to:
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Selig D. Sacks, Esq.
(iii) If to Escrow Agent:
Baer Marks & Upham LLP
805 Third Avenue
New York New York 10022
Attention: Joel M. Handel, Esq.
or to such other address as the persons to whom notice is to
be given may have previously furnished to the others in the
manner set forth above, provided that notices of changes of
address shall be effective only upon receipt.
(b) ASSIGNMENT. This Agreement will be binding upon,
inure to the benefit of, and be enforceable by the respective
successors and assigns of the parties hereto. This Agreement
may not be assigned by BIB or Buyer, other than to a
subsidiary or corporate affiliate of BIB or Buyer, or assigned
by the Selling Shareholders without the prior written consent
of the other party, except that no such consent shall be
required for an assignment of Buyer's rights under this
Agreement as security for any acquisition financing.
(c) ENTIRE AGREEMENT, AMENDMENT. This Agreement,
together with the Securities Purchase Agreement, including the
schedules, exhibits and other agreements or writings referred
to therein or delivered pursuant thereto, contains the entire
understanding of the parties hereto with respect to its
subject matter, and this Agreement may be amended only by a
written instrument duly executed by all the parties hereto.
(d) HEADINGS. Article and section headings contained
herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
(e) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
(f) GOVERNING LAW. This Agreement shall be governed
by, and construed and enforced in accordance with the laws of
the State of New York, without regard to its conflict of laws
provisions.
(g) CONSENT TO JURISDICTION. Any legal action, suit
or proceeding arising out of or relating to this Agreement may
only be instituted in any federal court of the Southern
District of New York or any state court located in New York
County, State of New York, and each party (including BIB)
agrees not to assert, by way of motion, as a defense or
otherwise, in any such action, suit or proceeding, any claim
that it is not subject personally to the jurisdiction of such
courts, that the action, suit or proceeding if brought in such
courts would be in an inconvenient forum, that the venue of
the action, suit or proceeding, if brought in any of such
courts, is improper or that this Agreement or any of the other
agreements, documents or instruments to be executed and
delivered by BIB, Buyer, Holdings, the Company or the Selling
Shareholders pursuant hereto or the subject matter hereof or
thereof may not be enforced in or by such courts on
jurisdictional grounds.
(h) TERMINATION. This Agreement shall remain in full
force and effect until Escrow Agent has disposed of all of the
Escrow Deposit and Escrow Interest, if any, in accordance with
the terms hereof.
{[C:\WPDOCS\ESCROW5.DOC/<<Date>>]}
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by the authorized officers or representatives of
BIB, Buyer, Holdings, the Company, the Selling Shareholders
and Escrow Agent as of the date first above written.
ATLANTIC RESTAURANTS, INC.
By: _________________________
Name:
Title:
BAHRAIN INTERNATIONAL BANK (E.C.)
By: _________________________
Name:
Title:
CARROLS HOLDINGS CORPORATION
By: _________________________
Name:
Title:
CARROLS CORPORATION
By: _________________________
Name:
Title:
______________________________
Alan Vituli
Selling Shareholders Representative
______________________________
Daniel T. Accordino
Principal Manager
______________________________
Richard V. Cross
Principal Manager
BAER MARKS & UPHAM LLP,
as Escrow Agent
By: _________________________
Name:
Title:
{[C:\WPDOCS\ESCROW5.DOC/<<Date>>]}
