UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Check One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] ---
For The Fiscal Year Ended June 29, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___ to ___
Commission File Number: 0-17229
DAKA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3024178
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Corporate Place, 55 Ferncroft Road, Danvers, MA 01923
(Address of principal executive offices) (Zip Code)
508-774-9115
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. YES X NO
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing price of the Common Stock of the registrant as
quoted on the National Association of Securities Dealers Automated Quotation
System on September 26, 1996 was $97,927,141 (for purposes of calculating this
amount only, directors, officers and beneficial owners of 10% or more of the
Common Stock of the registrant may be deemed affiliates).
Number of shares of Common Stock, $.01 par value, outstanding at September 26,
1996: 11,129,059.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The sections of the Company's definitive Proxy Statement, listed below, which
have been or will be filed by the Company with the Securities and Exchange
Commission, are incorporated in this Annual Report by reference and shall be
deemed to be a part hereof:
The Company's definitive Proxy Statement mailed in connection with its
Annual Meeting of Stockholders to be held on December 4, 1996 pursuant
to regulation 14A, which involves the election of directors.
Cross Reference Sheet between Items of
Registrant's Proxy Statement and Form 10-K
FORM 10-K
Item No. Item in Form 10-K Item in Proxy Statement
PART III
10 Directors and Executive Election of Directors and
Officers of the Registrant Directors and Committees in
the Company's Proxy Statement
relating to its Annual Meeting
of Stockholders to be held on
December 4, 1996.
11 Executive Compensation Executive Compensation in the
Company's Proxy Statement
relating to its Annual Meeting
of Stockholders to be held on
December 4, 1996.
12 Security Ownership of Certain Principal Stockholders in the
Beneficial Owners and Management Company's Proxy Statement
relating to its Annual Meeting
of Stockholders to be held
on December 4, 1996.
Copies of all documents incorporated by reference other than exhibits to such
documents will be provided without charge to each person who receives a copy of
this Annual Report upon written request addressed to Stockholder Relations, DAKA
International, Inc., One Corporate Place, 55 Ferncroft Road, Danvers,
Massachusetts 01923.
<PAGE>
FORM 10-K INDEX
PART I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5 Market for the Registrant's Common Stock and Related Stockholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Results of Operations and
Financial Condition
Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
PART III
Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management
Item 13 Certain Relationships and Related Transactions
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K
<PAGE>
THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE SET
FORTH IN THE FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT MIGHT CAUSE SUCH A
DIFFERENCE ARE DISCUSSED IN THE SECTION ENTITLED "CERTAIN FACTORS AFFECTING
FUTURE OPERATING RESULTS" OF THIS FORM 10-K.
PART I
Item 1. Business.
Overview
DAKA International, Inc. (the "Company"), formed in 1988 in connection with the
merger of Daka, Inc. ("Daka") and Fuddruckers, Inc. ("Fuddruckers"), is a
diversified foodservice and restaurant company operating in the contract
foodservice management industry and in the restaurant industry. Daka provides
restaurant-style contract foodservice management at a variety of schools and
colleges, corporate offices, factories, healthcare facilities, museums and
government offices. Fuddruckers owns, operates and franchises Fuddruckers
restaurants, which specialize in moderately-priced, casual dining for families
and adults.
In fiscal 1994, the Company acquired a 57% voting interest in Americana Dining
Corporation ("ADC"), a newly formed company which acquired two restaurants
operated under the name "Champps Sports Cafe," pursuant to a license from
Champps Entertainment, Inc. ("Champps"). Champps owns, licenses and franchises
Champps Americana restaurants, which specialize in providing an energetic,
upper-scale, casual theme dining experience to a broad customer base, including
business professionals, families and adults. In fiscal 1996, the Company
acquired Champps and the remaining 43% voting interest in ADC.
In fiscal 1996, Daka also acquired The Great Bagel and Coffee Company ("Great
Bagel and Coffee"). Great Bagel and Coffee owns, operates and franchises its
concept, featuring a full line of fresh-baked bagels and distinctive cream
cheeses, gourmet coffees, and sandwiches in a cafe setting. Great Bagel and
Coffee's operating results are included within the Company's reported
foodservice financial information.
The Champps and Great Bagel and Coffee transactions have each been accounted for
as pooling-of-interests and, accordingly, the Company has restated its
consolidated financial statements to include the accounts of Champps and Great
Bagel and Coffee.
Founded in 1973, Daka is one of the 10 largest contract foodservice management
companies in the United States. Operating under the name "Daka Restaurants,"
Daka seeks to provide a retail restaurant atmosphere for its guests by
operating, among other things, a variety of branded concepts such as Taco Bell,
Burger King, Pizza Hut and Dunkin Donuts pursuant to licensing arrangements, as
well as its own signature concepts within its foodservice operations. At the end
of fiscal 1993, the Company announced Daka's aggressive three-year growth plan
to double the size of its existing foodservice business by the end of fiscal
1996. At the beginning of fiscal 1994, Daka acquired the majority of the assets
and foodservice contracts comprising Service America Corporation's educational
foodservice business. The acquired business provides contract foodservice to a
variety of colleges and universities, and to public and private elementary and
secondary schools, many of which are located in geographic areas where Daka had
a significant presence. In February 1995, Daka, through a newly formed 80% owned
limited partnership, Daka Restaurants, L.P., acquired certain educational
foodservice and corporate dining contracts from ServiceMaster Management
Services L.P. The acquired contracts expanded Daka's geographic presence into
the western United States and strengthened its existing presence in the Midwest.
As a result of these two acquisitions, Daka achieved its three-year growth
objective in just nineteen months. Daka believes that, as a result of current
and anticipated cost containment policies, more public and private educational
and healthcare facilities will seek to manage their foodservice costs by
replacing self-operated foodservice operations with contract foodservice
management. Daka intends to pursue these expanding markets through its internal
sales force and by considering the acquisition of other contract foodservice
management companies.
Fuddruckers restaurants, with an average check of $6.15 and a "Kids Eat Free"
program after 4 PM on Monday through Thursday, are designed to appeal to both
families and adults seeking value in a casual dining atmosphere. The menu
prominently features Fuddruckers' signature hamburgers, which are cooked to
order and served on buns baked daily "from scratch" at each restaurant. The
Fuddruckers restaurant decor features an open grill area, a glassed-in butcher
shop and meat display case, an open bakery and a colorful display island of
fresh produce and a variety of condiments, sauces and melted cheeses from which
guests may garnish their own meals. In fiscal 1996, the Company acquired a 16.7%
equity interest in La Salsa Holding Co. ("La Salsa Holding"), the franchisor
and operator of La Salsa Mexican restaurants, and entered into a license
agreement with La Salsa Holding to utilize the "La Salsa Fresh Mexican Grill"
concept within Fuddruckers restaurants. The La Salsa concept complements
Fuddruckers' existing menu by featuring fresh, healthy, authentic Mexican
foods. Fuddruckers opened its first restaurant in 1980 in San Antonio, Texas
and as of July 1, 1995, has expanded its operations to include 121
Fuddruckers-owned and 76 franchised restaurants located throughout the
United States and in Canada, Mexico, the Middle East and Australia.
In fiscal 1996, Fuddruckers opened 26 Fuddruckers-owned restaurants,
13 franchised restaurants and introduced "La Salsa Fresh Mexican Grill" in
10 Fuddruckers restaurants in the Los Angeles, San Antonio, Chicago,
and Milwaukee markets. In fiscal 1997, Fuddruckers plans to open 7
domestic Fuddruckers-owned, up to 10 domestic franchised restaurants,
with continued development and expansion in foreign countries.
The Champps Americana concept is based upon providing the best possible food,
value and service to customers. The restaurant's diverse menu has over 120 items
including burgers, pastas, salads, sandwiches, ribs, pizzas, seafood, chicken
and a variety of other dishes all served in generous portions and prepared from
scratch using high quality ingredients. Customer service is based on a team
approach so that each patron is continually attended to, and employees go
through extensive on-going training to ensure consistent service. The goal of
Champps is to promote an entertaining and energetic atmosphere. In the typical
Champps restaurant, customers are provided a choice of seating in the main
dining area, at the diner-type counter, in the bar areas, or, in some locations,
outside on the patio. Champps restaurants generally have multiple levels and
open sight lines so that all areas, including the bar and kitchen, are visible
and allow customers to feel a part of all the varied activities in the
restaurant. These activities include watching sporting events on multiple
television screens, listening to music that is selected by a disc jockey based
upon the time of day or season, watching the cooks prepare meals, playing arcade
games in the discreetly located game room, or visiting the Champps gift shop. In
addition, the bar provides a staging area for on-going promotional events that
add to the restaurant's excitement. The Champps restaurant concept has been
developed and refined since the first Champps restaurant was opened in St. Paul,
Minnesota in 1984. As of June 29, 1996, operations have been expanded to include
10 Champps-owned and 10 franchised restaurants located throughout the United
States. Six Champps-owned restaurants were opened in fiscal 1996 with plans to
open 9 domestic Champps-owned restaurants in fiscal 1997. One Champps-owned
restaurant was sold in fiscal 1996.
See Note 13 to the Notes to Consolidated Financial Statements for financial
information related to Daka, Fuddruckers and Champps.
<PAGE>
Daka Restaurants
Operations
Daka, one of the 10 largest contract foodservice management companies in the
United States, provides personalized, high-quality, restaurant-style contract
foodservice management and vending operations at approximately 710 locations.
The following is a breakdown of Daka's managed volume, as defined below,
for the year ended June 29, 1996, from the various industry segments in which
it operates: colleges and universities - 49%; business and industry - 25%;
public and private elementary and secondary schools - 20%; museums - 4%;
and healthcare & other - 2%. Approximately 96% of fiscal 1996 managed
volume was derived from manual foodservice operations and approximately 4%
from vending operations.
Foodservice contracts are typically exclusive, range in duration from one to ten
years and can usually be terminated by either party upon 30 to 90 days notice.
Daka conducts its operations on the basis of two types of contracts with its
clients. The first type is a management fee contract pursuant to which a client
reimburses Daka for all costs incurred in providing foodservice as well as a
negotiated fee for overseeing and administering its foodservice operation.
Management fee contracts are prevalent where companies subsidize food service as
a benefit provided to employees and in elementary and secondary schools. The
second type of contract is a profit and loss contract whereby Daka assumes the
risk of profit or loss from the foodservice operation. Daka seeks to enter into
profit and loss contracts whenever appropriate because it believes it can
achieve a greater level of profitability as a result of the flexibility it has
in establishing menu mix and pricing in such contracts. While Daka manages the
total sales volume attributable to both contract types, generally accepted
accounting principles require that Daka recognize sales and expenses from profit
and loss contracts, but only the management fee amount derived from management
fee contracts. Consequently, Daka does not recognize sales and expenses with
respect to management fee contracts. As a result, Daka's managed volume, which
represents both sales made pursuant to profit and loss contracts and sales to
guests of foodservice clients pursuant to management fee contracts for any given
year, is considerably greater than the revenues it recognizes for such year.
Daka seeks to differentiate itself from its competition by offering its clients
a number of foodservice alternatives that include specific plans to meet each
client's needs and budget. Emphasis is placed on nutritious, high-quality food;
trained, professional personnel; and innovative foodservice programs served in a
retail restaurant atmosphere. To help create a retail restaurant atmosphere for
its foodservice guests, Daka has developed 250 to 500 square foot "signature
restaurants," each with its own unique name, identity and menu, serving
high-quality, made-to-order specialty foods. Designed to use existing common
area seating, such as a cafeteria or food court, the "signature restaurants" are
portable, modular and capable of being installed in most foodservice locations.
Daka believes that the development of its "signature restaurants" is an
innovative approach to serving guests in the foodservice industry. In addition,
Daka offers its clients a variety of branded concepts, such as Taco Bell, Pizza
Hut, Dunkin Donuts and Burger King, which Daka operates pursuant to licensing
arrangements.
Daka's educational foodservice business, which represents 69% of Daka's total
managed volume, is comprised of two distinct segments: colleges and universities
and elementary and secondary schools.
Foodservice operations at colleges and universities, which comprise 49% of
Daka's managed volume, generally consist of multiple operating locations at any
one campus, each of which is a self-contained foodservice unit such as a dining
hall, cafeteria or snack bar. Revenues from foodservice operations at colleges
and universities are derived from prepaid student board plans, concessions at
sporting events, rathskellers and from cash sales to students, school
administrators, faculty and off-campus groups. In addition, Daka provides
catering services to all departments of the college or university as well as to
private organizations using campus facilities. Foodservice operations at
colleges and universities are typically operated pursuant to profit and loss
contracts.
<PAGE>
Foodservice operations at elementary and secondary schools, which represent 20%
of Daka's managed volume, are typically operated pursuant to management fee
contracts since such foodservice operations are subsidized under Federal and
State School Lunch Programs, and generally consist of multiple operating
locations within a school district.
Historically, foodservice operations at corporate offices and factories, which
currently represent 25% of Daka's managed volume, were operated pursuant to
management fee contracts and were subsidized by companies as part of the
benefits provided to their employees. However, with the trend to contain costs
in recent years, many companies have elected to convert their subsidized
foodservice operations from management fee to profit and loss contracts, whereby
Daka is given greater control over pricing and menu options in exchange for
assuming the risks and rewards inherent in profit and loss contracts.
Daka also provides full service dietary management to hospitals, continuing care
communities and other healthcare facilities, which currently comprises less than
2% of Daka's managed volume. Foodservice in this segment is typically provided
through a team of professionals, the composition of which varies depending on
the size of the operation, the type of healthcare facility and the special
dietary needs of the patients. In addition to providing meals for patients,
employees of the facility are also typically provided daily meals.
Daka's ability to increase its prices to cover its cost increases is an
important factor in maintaining satisfactory profit levels. Daka's ability to
increase prices is materially affected by competitive factors, resistance from
guests, and resistance from clients, whose prior approval is required in many
instances.
Vending operations, which comprise approximately 4% of Daka's managed volume,
generally involve 24-hour delivery of sandwiches, hot and cold beverages,
desserts, and snacks through coin-operated machines installed at private and
public locations. Vending operations are either route operations or supplements
to manual foodservice operations. Vending machines are used to augment the
foodservice operations either at sites remote from the central cafeteria or to
service clients' guests during off-peak periods such as second or third shift
operations. The vending machines located at client locations that do not have
foodservice operations are usually serviced by route drivers from a central
commissary. Vending contracts generally provide for payment to the client of a
commission based on machine revenues, although certain clients forego the
commission and subsidize the foodservice operation in order to maintain special
services and lower selling prices as an employee benefit.
Daka also includes the operations of Great Bagel and Coffee which owns and
operates 3 company stores in the Phoenix area, including one Great Bagel
Cafe restaurant. In addition, there are approximately 15 existing
franchised units open in Arizona, and up to 100 additional franchised units
are expected to be opened in fiscal 1997 and fiscal 1998 in 11 western states.
Among its present franchisees, Great Bagel and Coffee has an exclusive
arrangement with Texaco Refining and Marketing, Inc. to open both company-owned
and franchised in-store bagel bakeries. The Great Bagel and Coffee concept
features an entire line of fresh-baked bagels and distinctive cream cheeses,
together with gourmet coffees and a sandwich menu. Its newest concept,
the Great Bagel Cafe, features gourmet pizzas, beer and wine in a cafe
setting, in addition to its standard menu of bagels and sandwiches.
The current standard franchise agreement provides for the payment of a
refundable franchise fee of between $9,500 and $14,500 per store and
ongoing royalties of 6% of gross sales of each store.
Management
The foodservice operations of Daka are currently divided into five geographic
regions, each of which is supervised by a Regional Vice President reporting to
the President of Foodservice Operations. The five regions are divided into
districts supervised by District Managers reporting to their respective Regional
Vice President. Each District Manager oversees an average of 14 General Managers
or Chef Managers, with some overseeing as few as one and others as many as 21
locations, depending on the size and complexity of the operations. The General
Managers or Chef Managers are responsible for the day-to-day operations of their
locations. The marketing, human resources, and training functions are
decentralized, reporting to the President of Foodservice Operations.
Marketing
Daka has created a marketing catalogue that gives General Managers the
opportunity to customize their promotional programs. Topics include special
sections on celebrated foods, city celebrations, international food festivals,
and classic events. As part of its "Be Our Guest" program, Daka has redesigned
its uniforms, upgraded the quality of the china, silverware and glassware,
installed signage and serving systems and created a new logo featuring the brand
name "Daka Restaurants."
<PAGE>
Growth Strategy
Daka intends to increase its market share by adding new clients that previously
were either self-operated or serviced by another contract foodservice provider.
Industry sources estimate that the educational and healthcare foodservice
segments remain substantially self-operated and that only the business and
industry foodservice segment has achieved a high level of contract foodservice
penetration. Daka believes that, as a result of current and anticipated cost
containment policies, many public and private educational institutions and
healthcare facilities will seek to manage their foodservice costs by replacing
their own self-operated foodservice operations with contract foodservice
management. Approximately 69% of Daka's managed volume is concentrated in
educational institutions, a traditionally self-operated market. The Company
believes that its experience is a competitive advantage in obtaining additional
educational institutions as contract foodservice clients. The healthcare market
is expanding rapidly, although it is not yet a substantial portion of Daka's
business. Daka's experience in converting self-operated foodservice operations
for educational institutions to contract foodservice should enable it to
participate competitively in the healthcare market.
The Company believes it has made sufficient recent investment in Daka's
corporate infrastructure and operational systems to support significant
future growth in existing and new markets. Great Bagel and Coffee will focus
growth efforts through new and existing franchised units.
Fuddruckers
Operations
Fuddruckers restaurants, with an average check of $6.15 and a "Kids Eat Free"
program after 4 PM on Monday through Thursday, are designed to appeal to both
families and adults seeking value in a casual dining atmosphere. The restaurants
offer a distinctive atmosphere created by an open grill area, a glassed-in
butcher shop, a display case featuring choice steaks and hamburgers that have
been freshly-cut or ground and an open bakery for hamburger buns, brownies and
cookies. Each restaurant offers a substantially similar menu that prominently
features Fuddruckers' signature hamburger in one-third pound and one-half pound
sizes. Hamburgers are made from fresh beef, cut and ground daily at each
restaurant and served on buns baked daily "from scratch" at each restaurant. The
hamburgers are available with optional specialty toppings from the grill. While
the menu is focused on Fuddruckers' signature hamburger, which accounts for
approximately 65% of sales, it also includes fresh-cut, ribeye steak sandwiches,
various grilled chicken breast sandwiches, hot dogs, a variety of tossed and
specially prepared salads and soups, fish sandwiches, french fries, onion rings,
soft drinks, hand-dipped milkshakes, and bakery items. Beer and wine are served
and, generally, account for approximately 3% of restaurant sales. The
restaurants permit guests to participate in the preparation of their meals by
allowing them to garnish their own entrees from a bountiful array of fresh
lettuce, tomatoes, onions, pickles, relish and a variety of condiments, sauces
and melted cheeses at the "fixin's bar." Guests generally place their own orders
and serve themselves, thereby minimizing waiting time.
Each restaurant contains a principal dining area from which guests may observe
the preparation of their meals, and in some restaurants an additional dining
area with a patio motif. Decor of the principal dining area of a Fuddruckers
restaurant generally includes neon beverage signs, wood tables and chairs and,
in some instances, original shipping containers from certain foods sold by the
restaurant. The open grill area enables guests to view the preparation of their
meals, all of which are cooked to order. The additional dining area has colorful
yellow awnings and patio-style tables and chairs and, in some restaurants, a
wall of doors which may be opened, weather permitting.
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The typical Fuddruckers restaurant is located in a suburban area in a
free-standing building or in a shopping center. The area within a five-mile
radius of the restaurant is usually zoned for retail, office and residential
uses. Fuddruckers' guests have an average household income of approximately
$50,000. Fuddruckers' restaurants typically range in size from 6,000 to 8,000
square feet with 200 to 300 seats and parking for between 100 and 200 vehicles.
Restaurants built in fiscal 1996 and those planned for fiscal 1997 are typically
between 4,800 and 6,000 square feet with 160 to 220 seats.
The restaurants are open seven days a week, generally from 11:00 a.m. to 11:00
p.m., for lunch, dinner and late night meals. Certain restaurants are open
earlier to accommodate the sale of freshly-baked goods. Restaurants are designed
to enable guests to complete their visit within a convenient 40-minute period,
which attracts the business person on a limited luncheon schedule. This
contributes to Fuddruckers' higher percentage of lunch (45%) versus dinner (55%)
sales than the industry average for casual dining restaurants.
All restaurants are operated in accordance with strict standards and
specifications for the quality of ingredients, preparation of food, maintenance
of premises and associates conduct, as set forth in Fuddruckers' policy and
procedures manuals. At each restaurant, Fuddruckers emphasizes uniform standards
for product quality, portion control, courteous service and cleanliness.
Fuddruckers establishes specifications and approves purchasing arrangements for
basic menu ingredients and supplies for all its restaurants in order to obtain
favorable prices and ensure consistent levels of quality and freshness. Food
products in Fuddruckers-owned and franchised restaurants are regularly and
systematically tested for quality and compliance with Fuddruckers' standards.
Fuddruckers emphasizes simplicity in its operations. Its restaurants generally
have a total staff of one General Manager, two or three Assistant Managers, and
25 to 45 other associates, including full-time and part-time associates working
in overlapping shifts. Since Fuddruckers generally utilizes a self-service
concept, it typically does not employ waiters or waitresses.
During fiscal 1996, Fuddruckers complemented its existing menu by introducing
"La Salsa Fresh Mexican Grill" in 10 Fuddruckers restaurants in the Los
Angeles,San Antonio, Chicago and Milwaukee markets. The La Salsa concept
features fresh, healthy, authentic Mexican foods prepared in a stand-alone
"outlet" inside the restaurant. Under the terms of a 10-year license
agreement with La Salsa Holding,Fuddruckers will pay a franchise fee,
royalty payments equal to 5% of gross sales, certain training costs and
marketing fund fees for each outlet opened. Ten outlets were opened in
fiscal 1996.
Management
Fuddruckers restaurant operations are currently divided into two regions, each
supervised by a Senior Vice President of Operations. The two regions are
divided into a total of thirteen districts, supervised by a Director of
Operations. On average, each Director of Operations supervises nine
restaurants and reports to a Senior Vice President of Operations.
Marketing
Fuddruckers uses television, radio and print media to promote its various themes
in markets with a high concentration of Fuddruckers-owned restaurants. These
themes emphasize Fuddruckers' unique name and fresh baked buns which are unique
characteristics and help differentiate Fuddruckers from other restaurant
concepts.
Marketing research conducted by Fuddruckers indicates a strong consumer desire
for fresh, high-quality food. Fuddruckers restaurants which feature fresh
produce available at the "fixin's bar," fresh beef ground daily and fresh buns
baked daily, address these consumer desires.
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One of Fuddruckers' most successful marketing programs is the "Kids Eat Free"
program. This program is designed to increase guest traffic during traditionally
slow days by allowing a child under 12 to eat free Monday through Thursday when
an accompanying adult purchases a meal. Since implementing this promotion in
1990, Fuddruckers has experienced increased guest traffic while significantly
increasing the number of kids meals served, and still improving its operating
margins.
Fuddruckers has developed local store marketing manuals to assist its managers
and franchisees in the development of a marketing and public relations strategy
for their geographic area. Workshops, seminars and marketing manuals are made
available to all franchisees. In addition, Fuddruckers allows its franchisees to
use its various television, radio and print advertising materials in the
franchisees' markets for a nominal fee intended to cover Fuddruckers' cost.
Site Selection
Fuddruckers uses its own personnel to analyze markets and sites for new
restaurants, obtain the required zoning and other permits, negotiate the leasing
or real estate purchase and oversee all aspects of the construction process.
Fuddruckers believes that location is a key factor in a restaurant's ability to
operate a profitable lunch and dinner business and considers several demographic
factors in selecting sites, including the average income of the neighboring
residential population, the proximity of retail, office and entertainment
facilities, traffic patterns and the visibility of the location.
The average total cost to construct a typical Fuddruckers restaurant, where
Fuddruckers purchases real estate, depending upon its location, is approximately
$1.45 million, which includes $255,000 for furniture, fixtures and
equipment, $480,000 for building and improvements, and $665,000 for land and
site work, and $50,000 related to pre-opening costs of the restaurant. In
1995 Fuddruckers arranged for sale-leaseback financing whereby Fuddruckers
acquires real estate, constructs a new restaurant and then sells and
leases back the property. This has enabled Fuddruckers to open new restaurants,
on sites where a leasing arrangement was not available, with a minimal capital
investment. During fiscal 1996, Fuddruckers opened 14 new restaurants pursuant
to such sale-leaseback arrangement.
The average total cost to construct a new Fuddruckers restaurant where
Fuddruckers enters into a leasing arrangement is approximately $785,000 which is
comprised of $255,000 for furniture, fixtures and equipment, $480,000 for
leasehold improvements, and $50,000 related to pre-opening costs associated
with the restaurant. Fuddruckers typically receives a contribution of between
$300,000 and $400,000 toward the construction and renovation costs from
landlords and believes that its growth enhances its ability to obtain attractive
leasing terms. Despite this favorable condition, there remains considerable
competition among restaurant businesses for desirable sites.
Future development of Fuddruckers restaurants will be accomplished through the
sale of franchises and the development of Fuddruckers-owned restaurants. The
development of additional restaurants is contingent upon locating satisfactory
sites, financing, negotiating satisfactory leases or, alternatively, leasing and
converting existing restaurant sites into Fuddruckers restaurants. It is also
dependent upon securing appropriate governmental permits and obtaining beer and
wine licenses.
Franchising
Fuddruckers offers franchises in markets where it deems expansion to be
advantageous to the development of the Fuddruckers' concept and system of
restaurants. Franchise agreements typically grant franchisees an exclusive
territorial license to operate a single restaurant within a specified area,
usually a four-mile radius surrounding the franchised restaurant. Fuddruckers
has a close relationship with its franchisees and seeks to identify potential
franchisees with the capability and financial resources to operate multiple
restaurants. Of the 37 Fuddruckers franchisees, 15 operate multiple restaurants,
and 22 have operated Fuddruckers restaurants for more than 5 years.
<PAGE>
Franchisees bear all direct costs involved in the development, construction and
operation of their restaurants. In exchange for a franchise fee, Fuddruckers
provides its franchisees assistance in the following areas: site selection,
prototypical architectural plans, interior and exterior design and layout,
training, marketing and sales techniques, assistance by a Fuddruckers "opening
team" at the time a franchised restaurant opens, and operations and accounting
guidelines set forth in various policies and procedures manuals.
All franchisees are required to operate their restaurants in accordance with
Fuddruckers' standards and specifications, including controls over menu items,
food quality and preparation. Fuddruckers requires the successful completion of
its training program by a minimum of three managers for each franchised
restaurant. In addition, franchised restaurants are evaluated regularly by
Fuddruckers for compliance with franchise agreements, including standards and
specifications through the use of periodic, unannounced, on-site inspections and
standards evaluation reports.
Fuddruckers has license agreements for the development of restaurants in Asia,
Australia, the Middle East, and Europe with various entities or individuals
having substantial financial resources. It is anticipated that these licensees
will open up to nine restaurants pursuant to such agreements during the next
twelve months.
The current standard franchise agreement provides for the payment to Fuddruckers
of a non-refundable franchise fee of between $25,000 and $50,000 per restaurant
and ongoing royalties of 5% of gross sales of each restaurant. Certain
multi-unit franchisees have entered into royalty buy-down agreements with
Fuddruckers, which reduce royalty payments required under the respective
franchise agreements. The royalty buy-down agreements generally provide for a
one-time payment to Fuddruckers covering a period of twelve to fourteen months,
and an amendment of the underlying franchise agreement to reduce the royalty to
3% of gross sales. Once a franchisee executes a buy-down agreement, the royalty
on any subsequent franchise agreement will be reduced to 3%. As of June 29,
1996, royalty buy-down agreements have been executed with 7 multi-unit
franchisees.
<PAGE>
Fuddruckers Locations - Company Owned
The following table sets forth the locations of restaurants owned and operated
by Fuddruckers as of June 29, 1996:
Domestic - Total 118 Domestic (Cont'd) Domestic (Cont'd)
IOWA UTAH
ALABAMA Waterloo Layton
Birmingham KENTUCKY Orem
ARIZONA Florence Salt Lake City
Flagstaff MARYLAND VIRGINIA
Glendale Annapolis Alexandria
Mesa (2) Baltimore Annandale
Phoenix Gaithersburg Chesapeake (2)
Scottsdale Pikesville Colonial Heights
Tempe Rockville Fairfax
Tucson MASSACHUSETTS Falls Church
CALIFORNIA Boston Fredericksburg
Burbank North Andover Herndon
Chula Vista Saugus Midlothian
La Mesa MICHIGAN Newport News
Lake Forest Kentwood Richmond
Lakewood MINNESOTA Vienna
Mira Mesa Bloomington Virginia Beach
Pasadena Brooklyn Center Woodbridge
Torrance Burnsville WISCONSIN
COLORADO Coon Rapids Brookfield
Aurora (2) Eden Prairie
Lakewood Maple Grove
Littleton Roseville
GEORGIA St. Louis Park International - Total 3
Alpharetta MISSOURI CANADA
Athens Columbia Calgary
Atlanta (2) Maryland Heights Edmonton
Duluth St. Louis (2) Regina
Kennesaw OHIO
Marietta Cincinnati (2)
Norcross Columbus (3)
Peachtree City Forest Park
Snellville Hilliard
Tucker Mason
ILLINOIS Norwood
Addison TEXAS
Aurora Austin (2)
Calumet City Clearlake
Downers Grove N Dallas
Downers Grove S Houston (11)
Highland Park Irving
Matteson Kingwood
Orland Park Plano
Palatine San Antonio (4)
Schaumburg (2) Woodlands
INDIANA
Merrillville
<PAGE>
Fuddruckers Restaurants - Franchised Locations
The following table sets forth the locations of restaurants operated by
Fuddruckers franchisees as of June 29, 1996:
Domestic - Total 69 Domestic (Cont'd) International - Total 7
NORTH DAKOTA
CALIFORNIA Fargo AUSTRALIA
Buena Park OHIO Brisbane
Citrus Heights Akron Sydney
Concord Canton BAHRAIN
FLORIDA Cleveland Manama
Altamonte Springs South Euclid CANADA
Clearwater OREGON Saskatoon
Coconut Grove Lake Oswego KUWAIT
Coral Springs Portland Kuwait City
Ft. Lauderdale PENNSYLVANIA SAUDI ARABIA
Miami (2) Greensburg Al Khobar
Plantation Hamarville Jeddah
Tallahassee Philadelphia
Tampa Fairless Hill
KANSAS SOUTH CAROLINA
Overland Park Columbia
MARYLAND Greenville (2)
Owings Mills Hilton Head
MICHIGAN Myrtle Beach
Flint North Myrtle Beach
Novi Spartanburg
Sterling Heights SOUTH DAKOTA
MISSOURI Rapids City
Independence Sioux Falls
MONTANA TENNESSEE
Billings Kingsport
Missoula Nashville
NEBRASKA TEXAS
Omaha College Station
NEW JERSEY Laredo
New Brunswick Lubbock
Paramus McAllen
Parsippany Midland
Tom's River San Antonio (2)
Turnersville Temple
Union Waco
Voorhees PUERTO RICO
Wayne Caugus
NEW YORK
Amherst
Howard Beach
Westbury
NORTH CAROLINA
Asheville
Charlotte
Matthews
Wilmington
<PAGE>
Champps
Operations
The Champps Americana concept is based upon providing the best possible food,
value and service to its customers. Although food and service are the most
important parts of the Champps Americana concept, an atmosphere that is
entertaining and energetic, yet comfortable, is also critical. The food
offerings at Champps' restaurants combine a wide selection of appetizers, soups,
salads, innovative sandwiches, pizza, burgers, and entrees including chicken,
beef, fish, pasta and desserts. Selections reflect a variety of ethnic and
regional cuisines and traditional favorites. Because Champps' menu is not tied
to any particular type of food, Champps can introduce and eliminate items based
on current consumer trends without altering its theme. Portion sizes are
generous and each dish is attractively presented. Champps believes that these
qualities give customers a sense of value. Entree prices currently range from
$4.50 to $14.25. Champps emphasizes freshness and quality in its food
preparation. Fresh sauces, dressings, batters and mixes are prepared daily on
the premises, generally from original ingredients with fresh produce. Champps
invests substantial time in training and testing kitchen employees to maintain
consistent food preparation. Strict food standards at Champps-owned restaurants
have also been established to maintain quality.
The customer's experience is enhanced by the attitude and attention of
restaurant personnel. Accordingly, Champps emphasizes prompt greeting of
arrivals, frequent visits to customer tables to monitor customer satisfaction
and service, and friendly treatment of its customers. Service is based upon a
team concept so that customers are made to feel that any employee can help them,
and they are never left unattended. Success of the Champps restaurants depends
upon employee adherence to these standards. To maintain these standards, Champps
seeks to hire and train personnel who will work in accordance with Champps'
philosophy and frequently rewards individual and restaurant achievement
through several recognition programs intended to build and maintain employee
morale. All of the service personnel at each Champps restaurant meet with
the managers at two daily pre-shift motivational meetings. Restaurant
promotions, specials and quality control are all discussed and explained
during these meetings. Also, employee enthusiasm is raised so that the
employees can help increase the energy level and excitement of the restaurant.
Champps-owned, franchised and licensed restaurants are designed and decorated in
a casual theme, although they differ somewhat from each other. Existing Champps
restaurants range in size from 7,000 to 12,000 square feet while the new Champps
restaurant prototype is approximately 8,700 square feet. Champps' standard
restaurant features a bar, open kitchen and dining on multiple levels including
a diner-type counter. Customers can also dine at the bar or outside on the
patio, where available. The spacious design facilitates efficient service,
encourages customer participation in entertainment and promotional events and
allows customers to view the kitchen, dining area, and bar. Strategically placed
television screens stimulate customer perception of activity and contribute to
the total entertainment experience and excitement of the restaurant.
<PAGE>
An important part of the Champps Americana dining experience is the
entertainment. Patrons may watch one of several sporting events that are being
broadcast, or listen to a variety of music played by the disc jockey, which
music is changed for the time of day and season of the year. The exposed kitchen
offers customers the opportunity to observe the cooks, and in certain locations
a discretely located game room is provided for arcade games. The entertainment
aspects of the Champps restaurants are designed to encourage repeat visits,
increase the length of a customer's stay and attract customers outside of normal
peak hours. In addition, a variety of creative promotions and activities are
conducted such as "Family Bingo," "Spring Time Big Bike Give-Away," and Karaoke.
These promotions and activities allow for customer participation and are
continually changing. Change of the ambiance is also experienced in each
restaurant when the restaurants are decorated for the holidays and when the
dress of the restaurant staff is changed for the seasons. The different looks
and activities of the restaurant provide customers a different feel each time
they visit, thus encouraging repeat business. Champps sells merchandise such as
T-shirts, hats and sweatshirts bearing the Champps Americana name. Although not
currently a significant source of revenue, the sale of its merchandise is
believed to be an effective means of promoting the Champps name.
Champps restaurants are generally open from 11:00 a.m. to 1:00 a.m. seven days a
week serving lunch, dinner and late night appetizers. Closing times of Champps
restaurants will vary based upon state laws concerning operating hours. Sunday
brunch is served beginning at 10:00 a.m. Each Champps restaurant maintains
standardized food preparation and service manuals which are designed to enhance
consistency of operations among the restaurants. Although Champps restaurants
differ in some respects, Champps attempts to have each Champps-owned and
franchised restaurant operate under uniform standards and specifications.
Management
The management staff of a Champps restaurant is divided into three areas, the
General Manager, Front-of-House Managers and Back-of-House Managers. The General
Manager has responsibility for the entire restaurant. Front-of-House management
consists of an associate manager, two floor managers and a bar manager.
Back-of-House management consists of a kitchen manager, two to three assistant
kitchen managers and a daily specials chef. All General Managers report directly
to the Chief Operating Officer. Managers are compensated based on salary plus
monthly bonus. The bonus is determined by means of monthly restaurant sales and
profit goals.
Marketing
Champps has achieved its historical success while expending minimal amounts on
advertising and marketing. Champps restaurants have relied on location and
customer word-of-mouth. However, Champps-owned restaurants expend a different
amount of resources on in-restaurant marketing and promotions.
Site Selection
Champps uses its own personnel to analyze markets and sites for new restaurants,
obtain the required zoning and other permits, negotiate the leasing or real
estate purchase and oversee all aspects of the construction process. Champps
believes that location is a key factor in a restaurant's ability to operate a
profitable lunch and dinner business and considers several demographic factors
in selecting sites, including the average income of the neighboring residential
population, the proximity of retail, office and entertainment facilities,
traffic patterns and the visibility of the location.
The average total cost to construct a typical Champps restaurant, where Champps
purchases real estate, depending upon its location, is approximately $4.5
million, which includes approximately $900,000 for furniture, fixtures and
equipment, $2.0 million for building and improvements, $1,200,000 for land and
site work, and $400,000 related to pre-opening costs of the restaurant. In
fiscal 1996, Champps arranged for sale-leaseback financing whereby
Champps would acquire real estate, construct a new restaurant and then sell
and lease back the property. This has enabled Champps to open new
restaurants on sites where a leasing arrangement was not available,
with a minimal capital investment. Champps has not yet sold a
restaurant pursuant to such sale-leaseback arrangement.
The average total cost to construct a new Champps restaurant where Champps
enters into a leasing arrangement is approximately $3.3 million which is
comprised of approximately $900,000 for furniture, fixtures and equipment,
$2.0 million for leasehold improvements, and $400,000 related to pre-opening
costs of the restaurant.
<PAGE>
Future development of Champps restaurants will be accomplished primarily through
the development of Champps-owned restaurants. The development of additional
restaurants is contingent upon locating satisfactory sites, financing,
negotiating satisfactory leases or, alternatively, leasing and converting
existing restaurant sites into Champps restaurants. It is also dependent upon
securing appropriate governmental permits and obtaining liquor licenses.
Franchising
Champps offers franchises in markets where it deems expansion to be advantageous
to the development of the Champps concept and a system of restaurants. Franchise
agreements grant franchisees an exclusive territorial license to operate a
single restaurant within a specified area. Currently, there are no franchisees
operating multiple restaurants.
A typical franchisee pays an initial fee of $75,000 per restaurant, of which a
part may be associated with a development fee, a continuing royalty fee of
3-1/4% of gross sales, and a regional and/or national advertising fee of 1/2% of
gross sales at such time as Champps establishes a regional/national advertising
program. Among the services and materials that Champps provides to franchisees
are site selection assistance, assistance in design development, an operating
manual that includes quality control and service procedures, training, on-site
pre-opening supervision and consultation relating to the operation of the
franchised restaurants. Champps grants both single and multi-restaurant
development rights depending upon market factors and franchisee capabilities.
With respect to multi-restaurant agreements, the franchisee's continuing right
to obtain franchises is contingent upon the franchisee's continuing compliance
with the restaurant development schedule.
All franchisees are required to operate their restaurants in accordance with
Champps' standards and specifications, including controls over menu selection
and food quality and preparation. Champps approves all restaurant site
selections and applies the same criteria used for its own restaurant sites.
Champps requires all new franchisees to provide at least annual financial
statements reviewed by an independent certified public accountant and conducts
its own audit of the franchisee's books and records. Periodic on-site
inspections are conducted to assure compliance with Champps standards and to
assist franchisees with operational issues. Franchisees bear all direct costs
involved in the development, construction and operation of their restaurants.
<PAGE>
Restaurant Locations
The following table sets forth the locations of restaurants operated by Champps
and its franchisees as of June 29, 1996:
Owned Restaurant Locations Franchised Restaurant Locations
Domestic - Total 10 Domestic - Total 10
CALIFORNIA MINNESOTA
Irvine Burnsville
INDIANA Maple Grove
Indianapolis Maplewood
OHIO Minneapolis
Columbus New Brighton
Lyndhurst St. Paul
MINNESOTA NEBRASKA
Minnetonka Omaha
Richfield NORTH CAROLINA
NEW JERSEY Charlotte
Edison SOUTH DAKOTA
Marlton Sioux Falls
TEXAS WISCONSIN
Addison Greenfield
VIRGINIA
Reston
<PAGE>
Expansion Strategy
The Company's long-term objective is to expand the Champps Americana restaurant
concept nationally by opening additional Champps-owned and operated restaurants.
Champps does not anticipate significant expansion through new franchise
agreements, but expects that new franchise locations will open pursuant to
existing franchise development and licensing agreements. Development of
Champps-owned restaurants will be concentrated in selected markets with
population density levels sufficient to support the restaurants. Champps
believes its concept can be adapted to a variety of locations, both in terms of
market demographics and configuration of the restaurant. The locations of
Champps restaurants are very important. Potential sites are reviewed for a
variety of factors, including trading-area demographics, such as target
population density and household income levels; an evaluation of site
characteristics, including visibility, accessibility, traffic volume and
available parking; proximity to activity centers, such as shopping malls and
offices; and an analysis of potential competition.
Centralized Functions
The Company provides Daka, Fuddruckers and Champps with centralized purchasing,
accounting and management information services.
Purchasing
The Company capitalizes on the combination of its foodservice and restaurant
businesses through a centralized and coordinated purchasing program and food
distribution network. On December 1, 1992, the Company entered into a five-year
agreement with Kraft Foodservice, Inc. ("Kraft") pursuant to which Kraft will
distribute approximately 80% of food and food-related purchases of Daka,
Fuddruckers and Champps. The agreement with Kraft is cancelable by either party
upon 90 days notice. Fuddruckers and Champps franchisees also have the option of
purchasing from Kraft. The Company believes that this agreement is unique in the
foodservice industry because it provides for a sharing between Kraft and the
Company of the savings that may be obtainable through purchasing from selected
vendors. In addition, under the agreement, Kraft is furnishing to the Company
"Kraft-Link," Kraft's on-line product-ordering software which is installed in
major Daka locations and all Fuddruckers-owned and Champps-owned restaurants.
The Company's purchasing programs have enabled Fuddruckers to maintain the same
menu prices for its signature hamburgers since December 1990, further enhancing
the Company's philosophy of providing high-quality products at moderate prices.
The Company also acts as a restaurant equipment dealer, enabling it to take
advantage of dealer pricing, manufacturer discounts and rebates. The Company has
not experienced any difficulty in obtaining an adequate supply of quality food
products at acceptable prices from its suppliers.
<PAGE>
Accounting and Management Information Systems
The Company provides Daka, Fuddruckers and Champps with centralized financial
and management controls through the use of an automated data processing system
and prescribed reporting procedures. The Company continues to upgrade its
computer hardware and financial software and has recently implemented a new
point of sale system for its Fuddruckers restaurants. The foodservice locations
and restaurants forward weekly sales reports, vendor invoices, payroll
information and other operating information to the Company's corporate
headquarters. The Company utilizes this data to centrally monitor sales,
product, labor and other costs and to prepare periodic financial and management
reports. The Company believes that its centralized accounting, payroll, cash
management, and information systems improve its ability to control and manage
its operations efficiently.
Competition
In the contract foodservice segment, Daka competes with large national and
multi-national companies as well as local and regional competitors. Some of the
major national and international companies include ARAMARK, Canteen Corporation,
Sodexho, Gardner Merchant, Compass, Marriott Corporation and Service America.
The contract foodservice management business is highly competitive. Daka
believes that competition is based on pricing, quality of service and
reputation. Additionally, the ability of the foodservice contractor to make
significant capital investments in the client's operation is a key factor in the
competition for large new contracts.
The restaurant industry is highly competitive. Fuddruckers and Champps compete
with other national and international restaurant chains as well as local and
regional operations. Competition within the industry is based principally on the
quality, variety and price of food products served. Site location, quality of
service and attractiveness of facilities are also important factors for a
successful restaurant. The restaurant industry is affected by general economic
conditions, changing tastes, population, traffic patterns and spending habits of
guests. Fuddruckers believes that their competitive position is enhanced by
providing guests with moderately-priced quality food in a comfortable
atmosphere.
The Company believes that the businesses of Daka, Fuddruckers and Champps share
important characteristics in their desire to provide guests with discernible
value and the highest quality of customer service and dining atmosphere. While
the restaurant industry has experienced intense competition for many years,
contract foodservice providers can no longer rely upon the luxury of "captive
customers," such as employees of corporate foodservice clients or students, who
spend a majority of their time in the same facility in which a foodservice
operation is conducted. Today, guests who do not find menu offerings acceptable
will simply eat elsewhere. This places contract foodservice providers in direct
competition with local restaurants and fast food outlets for each guest's food
dollar. In addition, factors such as service, cleanliness and atmosphere are as
important in a guest's dining decision as menu and food quality.
In response to this trend, the Company launched an internal program called "Be
Our Guest" in its Daka operations. This program's goal is to emphasize
Fuddruckers' guest focus and to effect a transition in the Daka organization to
a similar guest-driven orientation, rather than a traditional
"back-of-the-house" foodservice mentality. The Company has provided training,
education and motivational programs for its associates to focus on providing
quality service and to sustain a sensitivity to guest needs. The Company
believes that by operating in a professional, restaurant-style manner where each
of its associates place the guest first, Daka, Fuddruckers, and Champps can win
guest loyalty.
<PAGE>
Government Regulation
The Company is subject to various federal, state and local laws affecting its
business. Its operations are subject to various health, sanitation and safety
standards, federal and state labor laws, zoning restrictions, and state and
local licensing. Federal and state environmental regulations have not had a
material effect on the Company's operations to date. Fuddruckers and Champps are
also subject to federal and state laws regulating franchise operations and
sales. Such laws impose registration and disclosure requirements on franchisors
in the offer and sale of franchises, or impose substantive standards on the
relationship between franchisor and franchisee.
Fuddruckers and Champps restaurants are subject to state and local licensing and
regulation with respect to selling and serving alcoholic beverages. The sale of
alcoholic beverages accounted for approximately 3% of Fuddruckers' and 35% of
Champps' total restaurants sales during fiscal 1996. The failure to receive or
retain, or a delay in obtaining, a liquor license in a particular location could
adversely affect Fuddruckers', Champps' or a franchisee's operation in that
location and could impair Fuddruckers', Champps' or such franchisee's ability to
obtain licenses elsewhere. Typically licenses must be renewed annually and may
be revoked or suspended for cause.
Fuddruckers and Champps restaurants are subject to "dram shop" statutes in
certain states. These statutes generally give a person injured by an intoxicated
person the right to recover damages from the establishment that has wrongfully
served alcoholic beverages to the intoxicated person. Fuddruckers and Champps
each carry liquor liability coverage in the amount of $1 million. However, a
judgment against Fuddruckers or Champps under a "dram shop" statute in excess
of Fuddruckers' or Champps' liability coverage, or any inability to continue to
obtain such insurance coverage at reasonable costs, could have a material
adverse effect on the Company, Fuddruckers or Champps.
Research and Development
The Company is engaged in research activities relating to the development or
improvement of new and existing products or services. Daka, Fuddruckers, and
Champps together with their franchisees, utilize test kitchen facilities to
develop recipes, test food products and equipment and set nutritional and
quality standards. Fuddruckers, Champps, and their franchisees test additional
menu items in various markets on an on-going basis. These tests are coordinated
through the corporate headquarters. Furthermore, the Company employs a
professional support staff to establish, maintain and enforce high standards of
sanitation and safety in all phases of food preparation and service. The cost of
research and development currently is not material to the Company's cost of
operations.
Service Marks
Daka has registered certain trademarks and service marks with the United States
Patent and Trademark Office and with certain states, including "Daka" and "Daka
Restaurants." In addition, the Company is in the process of registering certain
trademarks with respect to its signature concepts including, among others,
French Quarter Coffee Company. Fuddruckers has registered various service marks
with the United States Patent and Trademark Office, including the trade names
"Fuddruckers" and "Daiquiritas" and the "Fuddruckers - World's Greatest
Hamburgers" logo. Champps owns the names and marks "Champ's", "Champps",
"Champps American Sports Cafe" and "Champps Entertainment" (collectively, the
"Marks") in connection with providing bar and restaurant services, and in
connection with the sale of related food products.
Pursuant to a Master Agreement dated February 1, 1994, whereby Champps acquired
certain "Champ's" and "Champps" service marks, trademarks and trade names from
Champs Restaurants, Inc. ("CRI"), Champs pays CRI an annual fee equal to the
lesser of approximately $260,000 or one-quarter percent (1/4%) of the gross
sales of Champps restaurants, but in no event less than $40,000. The maximum fee
payable by Champps is increased annually by the lesser of the increase in the
Consumer Price Index or 4%.
All of the service marks, trade names and trademarks are of significant
importance to the business of Fuddruckers and Champps. Fuddruckers and Champps
have also registered various service marks in several foreign countries. The
Company and its subsidiaries intend to protect their service marks through
registration with appropriate governmental authorities.
<PAGE>
Seasonality
As a result of the strong presence in the school and college sector, the
contract foodservice and vending operations of Daka are subject to seasonal
patterns. Revenues tend to be lower in June, July, August, December and January
when school enrollment is reduced. Adding to the seasonal decline is a reduction
in guests at corporate clients, whose employees take vacations during the
summer.
Fuddruckers and Champps sales are historically higher in the spring and
summer-time months, due primarily to dining habits of its guests and eating out
trends of the general public.
Corporate Offices and Associates
DAKA International, Inc. is incorporated under the laws of the State of Delaware
and employs approximately 120 associates on a full-time basis, four of whom are
executive officers.
Daka, Inc. is incorporated under the laws of the Commonwealth of Massachusetts
and employs approximately 13,675 associates on a full-time and part-time basis.
Less than 10% of Daka's associates are represented for collective bargaining
purposes by unions. No single union contract covers a significant number of any
one associate group.
Fuddruckers is incorporated under the laws of the State of Texas and employs
approximately 9,900 associates on a full-time and part-time basis.
Champps Entertainment, Inc. is incorporated under the laws of the State of
Minnesota and employs approximately 1,500 associates on a full-time and
part-time basis, two of whom are executive officers of the Company.
Substantially all restaurant associates, other than restaurant management, are
compensated on an hourly basis. None of Champps' associates are covered by a
collective bargaining agreement.
The Company considers its relations with its associates to be good.
DAKA International, Inc., Daka, Fuddruckers and ADC maintain their principal
executive offices at One Corporate Place, 55 Ferncroft Road, Danvers,
Massachusetts 01923. The telephone number for the Company is (508) 774-9115.
Champps Entertainment, Inc. maintains its principal executive offices at 153
East Lake Street, Wayzata, Minnesota, 55391. The telephone number for Champps is
(602) 449-4841.
<PAGE>
Item 2. Properties.
As of June 29, 1996, the Company leased approximately 40,000 square feet of
office space at its corporate headquarters in Danvers, Massachusetts, at an
average annual rental of $610,000 through November 30, 2001.
Fuddruckers owns the land and related improvements at 11 of the 121
Fuddruckers-owned restaurants with the balance of the restaurants operated
pursuant to long-term leases. The location and general character of the
properties of the Company are described in Item 1 of this Report.
Champps leases approximately 4,000 square feet for its corporate office, located
in Wayzata, Minnesota, pursuant to a five-year lease at an average annual rental
of $70,800. Champps also leases approximately 1,200 square feet adjacent to the
Minnetonka restaurant, pursuant to a lease expiring in 2000. This space is used
by Champps' management and support staff.
Item 3. Legal Proceedings.
The Company and/or its subsidiaries are parties to various lawsuits. However, in
the opinion of management and legal counsel, none of these legal proceedings
would result in final judgments which would have a material adverse effect on
the Company's financial position, results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted by the Company to a vote of Stockholders,
through the solicitation of proxies or otherwise, during the fourth quarter of
the fiscal year for which this report is filed.
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
The Common Stock of the Company is traded over-the-counter and is quoted on the
Nasdaq Stock Market National Market under the symbol "DKAI." The following table
sets forth the high and low bid prices of the Company's Common Stock during each
quarter of the fiscal years ended June 29, 1996 and July 1, 1995.
1996 1995
High Low High Low
1st Fiscal Quarter $ 33.75 $ 23.00 $ 15.50 $ 13.50
2nd Fiscal Quarter 33.63 22.75 16.25 12.88
3rd Fiscal Quarter 27.50 19.88 18.00 14.50
4th Fiscal Quarter 33.00 22.75 23.88 17.00
The Company has never paid cash dividends on shares of its Common Stock and does
not expect to pay dividends in the foreseeable future. The Company intends to
retain all of its available funds for the operation and expansion of its
business. In addition, the terms of the Company's line-of-credit agreement
prohibit the payment of dividends on the Company's Common Stock. As of September
26, 1996, the approximate number of record holders of the Company's Common Stock
was 3,751.
<PAGE>
Item 6. Selected Financial Data.
In fiscal 1996, the Company merged with Champps Entertainment, Inc. ("Champps")
whereupon Champps became a wholly-owned subsidiary of DAKA. In 1996, DAKA also
merged with The Great Bagel and Coffee Company ("Great Bagel and Coffee")
whereupon Great Bagel and Coffee became a wholly-owned subsidiary of DAKA. Both
transactions have been accounted for as pooling-of-interests, and accordingly
the Company's consolidated financial statements have each been restated to
include the accounts of Champps and Great Bagel and Coffee (collectively the
"1996 Poolings-of-Interests").
The following selected financial information for 1996, 1995 and 1994 (except for
1994 Balance Sheet Data) has been derived from the audited consolidated
financial statements of the Company included elsewhere in this Report.
The selected 1994 Balance Sheet Data and the selected financial information
for 1993 and 1992 have been derived from: (i) the audited consolidated
financial statements of DAKA; (ii) the audited financial statements of
Champps Entertainment, Inc.; (iii) the unaudited consolidated financial
statements of The Great Bagel and Coffee Company as of and for the fiscal
years ended July 2, 1994, June 26, 1993, and June 27, 1992. Such unaudited
consolidated financial statements of the Great Bagel and Coffee Company, in the
opinion of management,contain all adjustments, consisting of normal
recurring adjustments, necessary for the fair presentation of the
financial position and results of operations for these periods. The
following selected financial information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the audited consolidated financial statements
and the notes thereto included elsewhere in this Report.
<TABLE>
<CAPTION>
June 29, July 1, July 2, June 26, June 27,
1996 1995 1994 1993 1992
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Total revenues ..................................$ 404,824 $ 334,837 $ 257,146 $ 189,201 $ 171,175
Income from continuing
operations before income taxes
and minority interests ....... ................ 203 14,892 11,382 7,558 5,774
Income from continuing operations ............... 905 9,583 7,586 5,145 4,333
Gain on extinguishment of debt, net ............. -- -- -- 462 --
Net income ...................................... 905 9,583 7,586 5,607 4,333
Income available for
common stockholders ........................... 905 9,183 6,786 5,607 4,333
Earnings per share:
Primary:
Income from continuing operations .............. 0.09 1.35 0.94 1.01 0.85
Income available for
common stockholders ........................... 0.09 1.35 0.94 1.10 0.85
Fully diluted:
Income from continuing operations .............. 0.09 0.96 0.83 0.69 0.71
Income available for
common stockholders ........................... 0.09 0.96 0.83 0.75 0.71
Weighted average number of shares:
Primary ........................................ 9,971 6,791 6,082 5,101 5,089
Fully diluted .................................. 10,535 11,228 10,728 7,989 6,085
Balance Sheet Data:
Total assets ....................................$ 231,557 $ 180,853 $ 128,979 $ 90,711 $ 76,976
Long-term debt .................................. 99,862 71,029 48,535 32,636 28,738
Stockholders' equity ............................ 82,867 59,054 41,172 26,422 15,934
</TABLE>
<PAGE>
Item 7 Management's Discussion and Analysis of Results of Operations and
Financial Condition
Certain Factors Affecting Future Operating Results
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors which may cause such a
difference include among the following: the impact of increased competition in
the bidding process for foodservice contracts against competitors with
significant financial resources and market share; the exercise by foodservice
clients of their right to terminate contracts which typically provide for
termination upon 30 to 60 days notice; the impact of increasing competition in
the casual and upscale casual dining segment of the restaurant industry;
changes in general economic conditions which impact consumer spending for
restaurant occasions; adverse weather conditions, competition among
restaurant companies for attractive sites and unforeseen events which
increase the cost to develop and/or delay the development and opening of
new restaurants; increases in the cost of product, labor, and other
resources necessary to operate both the restaurants and the
foodservice facilities; unforeseen difficulties in integrating acquired
businesses; the amount and rate of growth of general and administrative expenses
associated with building a strengthened corporate infrastructure to support
operations; the availability and terms of financing for the Company and any
changes to that financing; the revaluation of any of the Company's assets (and
related expenses); and the amount of, and any changes to, tax rates.
RESULTS OF OPERATIONS
Summary
In February 1996, CEI Acquisition Corp., a wholly-owned subsidiary of DAKA,
merged with Champps Entertainment, Inc. ("Champps") whereupon Champps
became a wholly-owned subsidiary of DAKA. In April, DAKA also merged with The
Great Bagel and Coffee Company ("Great Bagel and Coffee") whereupon Great
Bagel and Coffee became a wholly-owned subsidiary of DAKA. Both transactions
have been accounted for as poolings-of-interests, and accordingly, the
consolidated financial statements and Management's Discussion and Analysis
have been restated to include the accounts of Champps and Great Bagel and
Coffee.
The Company recorded significantly lower earnings in 1996 as income before
income taxes and minority interests decreased 99% to $0.2 million as
compared to $14.9 million in 1995 and $11.4 million in 1994. Earnings
in 1996 were impacted by non-recurring charges relating to merger costs
and the adoption of a new accounting standard, along with poor operating
performance in the Fuddruckers' segment and increased corporate selling,
general and administrative expenses. Income after income taxes
and minority interests decreased 91% to $0.9 million in 1996 as compared to
$9.6 million in 1995 and $7.6 million in 1994 while fully diluted earnings
per share decreased to $0.09 in 1996, a decrease of 91% as compared to
$0.96 in 1995 which was 16% higher than the $0.83 earned on a fully diluted
basis in 1994. The 91% decrease in fully diluted earnings per share during
1996 results from lower earnings offset,in part, by a 6% decrease in the
weighted average number of outstanding shares. The 16% increase in fully
diluted earnings per share during 1995 as compared to 1994 came despite a 5%
increase in the weighted average number of outstanding shares as a result
of the Common Stock and 7% Convertible Subordinated Notes
(the "Notes") sold in March 1993.
<PAGE>
The Company adopted early the provisions of
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of", which
resulted in a third quarter noncash pretax charge of approximately $5.7 million.
The provision includes charges for impairments to the carrying value of certain
restaurant and foodservice contract assets, reacquired franchise rights,
investments and certain other assets. In addition, consolidated operating
results includes a non-tax deductible charge of $2.9 million relating to the
mergers with Champps and Great Bagel and Coffee. Included in these costs are
legal, investment banking and professional fees associated with the
transactions, and costs associated with combining the operations of previously
separate companies and instituting certain operating efficiencies.
At June 29, 1996, the Company was not in compliance with its debt service
coverage, minimum tangible net worth and fixed charge coverage covenants. On
October 15, 1996, the Company obtained a waiver of noncompliance related to
such covenants from its lender, and renegotiated certain terms and conditions
of its existing credit facility.
The Company expects operating results for the first quarter of fiscal 1997 to be
substantially below the first quarter results for fiscal 1996, and will most
likely result in a net loss due, in part, to Fuddruckers' operating performance
which continues to be below expectations for the first two months of the new
fiscal year.
<PAGE>
Foodservice
The following table sets forth, for the periods presented, certain financial
information of the Company's foodservice business. For further financial
information relating to the Company's foodservice business, see Note 13 to Notes
to Consolidated Financial Statements.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Managed volume:
Management fee contracts ................................................ $109,564 $107,959 $113,905
Profit and loss contracts ............................................... 218,361 193,154 150,839
------- ------- -------
Total managed volume .................................................. $327,925 $301,113 $264,744
======== ======== ========
Sales from profit and loss contracts ..................................... 100.0% 100.0% 100.0%
Operating expenses:
Labor costs ............................................................. (34.1) (33.91) (34.4)
Product costs ........................................................... (36.0) (36.2) (35.3)
Other operating expenses ................................................ (15.2) (15.8) (15.4)
Depreciation and amortization ........................................... (2.6) (2.4) (2.2)
Impairment charges and merger costs ..................................... (1.5) -- --
---- ---- ----
Income from profit and loss contracts .................................... 10.6% 11.7% 12.7%
==== ==== ====
Income from profit and loss contracts .................................... $ 22,841 $ 22,619 $ 19,154
Management and other fees ................................................ 6,148 5,715 6,132
----- ----- -----
Income from foodservice operations ...................................... $ 28,989 $ 28,334 $ 25,286
======== ======== ========
</TABLE>
<PAGE>
Daka conducts its operations on the basis of two types of foodservice contracts
with its clients. The first type is a management fee contract pursuant to which
a client pays Daka a negotiated fee for overseeing and administering its
foodservice operations and reimburses Daka for all costs incurred in providing
such service. Management fee contracts are prevalent where companies subsidize
foodservice as part of the benefits provided to employees and in elementary and
secondary schools. The second type of contract is a profit and loss contract
whereby Daka assumes the risk of profit or loss from the foodservice operations.
Daka seeks to enter into profit and loss contracts whenever parctical,
believing it can achieve a greater level of profitability as a result of the
flexibility it has in establishing menu mix and pricing in such contracts.
Managed volume in the foodservice segment increased $26.8 million or 9% to
$327.9 million in 1996 as compared to $301.1 million in 1995. The increase in
managed volume results from the full year impact of managed volume generated by
the educational and corporate foodservice contracts acquired from ServiceMaster
Management Services L.P. ("SMMSLP") on February 8, 1995, a 2% increase in same
location sales, offset, in part, by lost contracts.
During1996, Daka retained approximately 89% of its contracts, which is slightly
lower than its historical norm of 92%. Managed volume in 1995 increased $36.4
million or 14% to $301.1 million, as compared to managed volume of $264.7
million in 1994. The increase in managed volume in 1995 as compared to 1994 was
due to a combination of increased volume of existing food operations offset, in
part, by one less week of operations in 1995 compared to 1994.
Income from foodservice operations, excluding impairment charges and merger
costs, increased 15% to $32.5 million in 1996 as compared to $28.3 million in
1995, which was 12% higher than the $25.3 million in 1994. During 1996, a number
of marginally profitable or unprofitable contracts expired and, accordingly,
became subject to a competitive bidding process. Throughout this process, Daka
rebid unprofitable or marginally profitable contracts on terms that should
provide an acceptable profit. Certain of these contracts were retained, and as
anticipated, certain other contracts were not retained. Despite the loss of
these contracts, income from profit and loss contracts in Daka's base business,
excluding the educational and corporate foodservice contracts acquired in 1995
from SMMSLP and excluding 1996 impairment charges and merger costs, improved
during 1996 compared to 1995. Operating margins in the base foodservice business
remained consistent from year to year while the acquired contracts performed as
expected. The lower operating margins associated with the educational
foodservice contracts acquired is typical of the educational foodservice
industry and consistent with the operating margins in Daka's existing
educational foodservice business. Lower labor costs in 1995 reflect the impact
of the Company's ongoing safety program which resulted in lower workers'
compensation costs. Depreciation and amortization in 1996, 1995 and 1994 as a
percentage of sales from profit and loss contracts increased primarily due to
the amortization of the costs assigned to the acquired contracts.
<PAGE>
Fuddruckers
The following table sets forth, for the periods presented, certain financial
information for Fuddruckers. For further financial information related to
Fuddruckers, see Note 13 to Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Restaurant sales ..................................... $131,592 $110,703 $ 87,030
======= ======== ========
Sales from Fuddruckers-owned restaurants ............. 100.0% 100.0% 100.0%
Operating expenses:
Labor costs .......................................... (29.0) (28.8) (28.8)
Product costs ........................................ (28.2) (27.8) (27.8)
Other operating expenses ............................. (27.0) (25.7) (25.7)
Depreciation and amortization ........................ (6.1) (4.8) (4.6)
Impairment charges ................................... (1.9) -- --
------- ------- -------
Income from restaurant operations .................... 7.8% 12.9% 13.1%
======= ======= =======
Income from restaurant operations .................... $ 10,324 $ 14,252 $ 11,400
Franchising income ................................... 6,575 5,372 4,318
------- ------- -------
Income from restaurant and franchising operations .... $ 16,899 $ 19,624 $ 15,718
======= ======= =======
Number of restaurants (end of period):
Fuddruckers-owned ................................... 121 98 75
Franchised .......................................... 76 70 75
------- ------- -------
Total restaurants .................................. 197 168 150
======= ======= =======
</TABLE>
Total revenues from restaurant and franchising operations in 1996 increased
$22.1 million or 19% to $138.2 million whereas revenues from restaurant and
franchising operations in 1995 increased $24.8 million or 27% to $116.1 million,
as compared to total revenues of $91.3 million in 1994.
Sales in Fuddruckers-owned restaurants increased $20.9 million or 19% to $131.6
million in 1996 as compared to $110.7 million in 1995. This increase is due to
$3.3 million of incremental sales for a full year from five restaurants acquired
from franchisees during 1995 and $30.3 million of sales at restaurants during
their first year of operation, including 26 new restaurants opened in 1996
offset, in part, by a 4.9% decrease in comparable restaurant sales and a $4.4
million decrease in sales due to the closing and/or sale of three restaurants.
Comparable restaurant sales decreased primarily as a result of inclement weather
in many Fuddruckers major markets throughout the third quarter. Sales at
Fuddruckers-owned restaurants increased $23.7 million or 27% to $110.7 million
in 1995 as compared to $87.0 million in 1994. This increase is due to a
combination of $12.7 million of sales at 17 restaurants acquired from
franchisees during the second half of 1994 and in 1995, $14.6 million of sales
at restaurants during their first year of operation, including 22 new
restaurants opened in 1995 and a 0.8% increase in comparable restaurant sales
offset, in part, by a $1.5 million decrease in sales resulting from the closing
and/or sale of five restaurants and the effect of 52 weeks of sales in 1995
whereas 1994 had 53 weeks.
Franchise income increased $1.2 million in 1996 as compared to 1995, primarily
due to revenue generated from continued sales of multi-unit development
agreements in both the United States and internationally. The remaining increase
represents additional royalty income relating to 13 new franchised restaurants
opened offset, in part, by the closing of 7 franchised restaurants during 1996.
In 1995, franchise income increased $1.1 million compared to 1994 due to
revenues generated from the sale of multi-unit development agreements in both
the United States and internationally, offset by the reduction of royalty
income associated with the acquisition of 5 franchised restaurants in 1995.
<PAGE>
Income from restaurant operations, excluding impairment charges, decreased $1.5
million or 10% to $12.8 million in 1996 compared to $14.3 million in 1995 while
margins as a percentage of sales decreased from 12.9% in 1995 to 9.7% in 1996
exclusive of impairment charges of 1.9%. Higher costs as a percentage of sales
in all cost components reflect the large numbers of new restaurants, lower
than anticipated sales levels and start-up costs associated with
new concepts. Operating margins decreased by 3.2% in 1996 principally due to
weather-related expenses. Income from restaurant operations, increased $2.9
million or 25% to $14.3 million in 1995 as compared to $11.4 million in 1994.
The improvement in operating margins can be attributed to lower operating
expenses associated with the acquired Atlanta restaurants, strong operating
results at the new restaurants opened, the closing of marginally profitable
restaurants, and improved product costs through national purchasing programs.
Depreciation and amortization in 1996 increased significantly as a percentage of
sales compared to 1995 and 1994 due primarily to increased pre-opening costs
associated with new restaurants, pre-opening costs related to the
"La Salsa Fresh Mexican Grill" concept in 10 restaurants, and continued
installation of new point of sale equipment.
Champps
The following table sets forth certain financial information for Champps
restaurants. For further information related to Champps, see Note 13 to
Notes to the Consolidated Financial Statements.
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Restaurant sales ..................................... $ 41,593 $ 19,257 $ 8,273
======== ======== ========
Sales from Champps restaurants ....................... 100.0% 100.0% 100.0%
Operating expenses:
Labor costs .......................................... (33.2) (31.0) (31.4)
Product costs ........................................ (28.8) (29.0) (28.0)
Other operating expenses ............................. (22.6) (20.5) (20.2)
Depreciation and amortization ........................ (8.7) (5.5) (3.4)
Impairment charges and merger costs .................. (6.3) -- --
-------- -------- --------
Income from restaurant operations .................... 0.4% 14.0% 17.0%
======== ======== ========
Income from restaurant operations .................... $ 150 $ 2,689 $ 1,409
Franchising income ................................... 555 636 554
-------- -------- --------
Income from restaurant and franchising operations .... $ 705 $ 3,325 $ 1,963
======== ======== ========
Number of restaurants (end of period)
Champps-owned ........................................ 10 5 3
Franchised ........................................... 10 10 8
-------- -------- --------
Total restaurants .................................... 20 15 11
======== ======== ========
</TABLE>
Total revenues from restaurants and franchising operations in 1996 increased
$22.3 million or 112% to $42.1 million whereas revenues from restaurant and
franchising operations in 1995 increased $11.1 million or 126% to $19.9 million,
as compared to total revenues of $8.8 million in 1994. Franchise income has
remained relatively consistent in 1996, 1995 and 1994.
Sales in Champps-owned restaurants increased $22.3 million or 116% to $41.6
million in 1996 as compared to $19.3 million in 1995 primarily due to the
opening of 6 new restaurants, offset by the sale of one restaurant in the last
quarter of 1996. Sales at Champps-owned restaurants increased $11.0 million or
133% to $19.3 million in 1995 as compared to $8.3 million in 1994, due to the
opening of two new restaurants.
<PAGE>
Income from restaurant operations, before impairment charges and merger costs,
increased 4% to $2.8 million in 1996 as compared to $2.7 million in 1995. This
increase is due to a combination of increased revenues derived from new
restaurant openings offset by increased labor, overhead, depreciation and
amortization expenses associated with these restaurant openings. In addition,
one restaurant was sold in the last quarter of 1996. Income from restaurant
operations increased 93% to $2.7 million in 1995 as compared to $1.4 million in
1994 primarily due to revenues derived from new restaurant openings.
Selling, General and Administrative Expenses
Selling, general and administrative expenses including depreciation and
amortization related to corporate assets amounted to $40.8 million, $32.9
million and $29.0 million in 1996, 1995 and 1994, respectively. Selling, general
and administrative expenses as a percentage of total managed volume of $501
million, $431 million and $360 million in 1996, 1995 and 1994, respectively,
which includes foodservice managed volume, restaurant sales at Fuddruckers-owned
and Champps-owned restaurants, aggregated 8.1%, 7.6% and 8.1%, respectively.
The $7.9 million increase in selling, general and administrative expenses in
1996, compared to 1995 was primarily due to additional corporate staff hired to
support Champps' aggressive expansion plans, ongoing investment in information
systems and divisional infrastructures, pursuit of nontraditional foodservice
venues and expenses related to the negotiations and due diligence associated
with a proposed joint venture and a foodservice acquisition. The $3.9 million
increase in selling, general and administrative expenses in 1995, compared to
1994, was primarily due to overhead related to acquired foodservice
contracts, increased Fuddruckers' and Champps' marketing expenses and
higher Champps' overhead costs.
Interest Expense
Interest expense amounted to $5.9 million, $4.3 million and $2.9 million in
1996, 1995 and 1994, respectively. In 1996 and 1995, interest expense increased
$1.6 million and $1.4 million or 37% and 48%, respectively, due to increased
borrowings under the Company's line-of-credit used to finance acquisitions,
capital expenditures for new Fuddruckers and Champps restaurants, and capital
expenditures at client facilities. Interest expense associated with the higher
level of debt in 1996 and 1995 was offset, in part, by a combination of lower
interest rates and lower interest costs associated with the Convertible
Subordinated Notes. Approximately $8.2 million of Convertible Subordinated Notes
were converted in the second half of 1995 while the remaining $20.5 million
outstanding Convertible Subordinated Notes were converted in the first three
quarters of 1996.
<PAGE>
Income Taxes
The Company files consolidated income tax returns for federal income tax
purposes. As of June 29, 1996 the Company had net operating loss carryforwards
of approximately $9.3 million. The carryforwards expire at various dates through
2011 and a portion of such carryforwards can only be applied against the
taxable income of Fuddruckers and a portion against the earnings of the
Company's 63% owned subsidiary, Atlantic Restaurant Ventures, Inc. The
Company's effective tax rate on income was 12.5%, 35.7%, and 32.8% in 1996,
1995 and 1994, respectively. In 1996, the Company recorded a net tax benefit
of $1.6 million related to changes in management's estimate of the
valuation allowance associated with its net operating loss carryforwards.
Approximately $1.0 million of this benefit was offset by the impact of
non-deductible merger costs. In 1995 and 1994, the targeted jobs credit
was a significant factor in lowering the Company's effective tax rate.
Earnings Per Share
Primary earnings per share in 1996 decreased 93% due primarily to significantly
lower earnings and a 47% increase in the weighted average number of outstanding
shares resulting from additional shares issued in connection with the
conversion of Preferred Stock and Notes. Primary earnings per share in 1995
increased 21% as compared to 1994 due principally to increased earnings and
lower Preferred Stock dividends despite additional shares issued in
connection with the conversion of outstanding Notes.
Fully diluted earnings per share in 1996 decreased 91% due to significantly
lower earnings offset, in part, by a decrease in the weighted average number of
outstanding shares principally related to the anti-dilutive effect of shares
issued upon conversion of the Notes. Fully diluted earnings per share in 1995
increased 16% due to increased earnings, offset partially by an increase in the
weighted average number of outstanding shares principally due to the granting
of employee stock options. Lower fully diluted earnings per share, as
compared to primary earnings per share, is due to the inclusion, in the
computation of fully diluted earnings per share, the weighted average number of
shares issuable upon conversion of the Preferred Stock and Notes. As such, there
is no impact on fully diluted earnings per share upon conversion of Notes or
Preferred Stock. Shares issuable upon conversion of the Notes or Preferred
Stock are not included in the computation of primary earnings per
share since such securities were not considered common stock equivalents at the
time of issuance.
Seasonality
As a result of the Company's strong presence in the educational foodservice
segment, the contract foodservice and vending operations of Daka are subject to
seasonal patterns. Revenues tend to be lower in June, July, August, December and
January when school enrollment is reduced. The seasonal decline is further
accentuated by corporate clients, whose employees take vacations during the
summer.
Fuddruckers' and Champps' sales have historically been higher in March, June,
July and August, and lower in January, February, September and October, due
primarily to dining habits of its guests and eating out trends of the general
public.
<PAGE>
Accounting Pronouncement Not Yet Adopted
In October 1995 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 - "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 establishes accounting and disclosure
requirements using a fair value-based method of accounting for stock-based
employee compensation plans. Under the provisions of SFAS 123, effective for the
fiscal year beginning June 30, 1996, the Company may either adopt the new fair
value-based accounting method or continue the intrinsic value-based method for
employee stock-based compensation and provide pro forma disclosures of net
income and earnings per share as if the accounting provisions of SFAS 123 had
been adopted. The Company plans to adopt only the disclosure requirements of
SFAS 123. The Company generally does not grant options to outsiders,
accordingly, the adoption of SFAS 123 is not expected to have a material effect
on the Company's consolidated net earnings or cash flows.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Working capital amounted to $28.6 million at June 29, 1996, an increase of $16.0
million, as compared to working capital of $12.6 million at July 1, 1995. Cash
and cash equivalents at June 29, 1996 aggregated $11.7 million, an increase of
$1.2 million as compared to cash and cash equivalents of $10.5 million at
July 1, 1995.
During June 1996, the Company amended its revolving line-of-credit agreement
principally to increase the Company's borrowing capacity from $100 million to
$150 million and extend the maturity date to June 30, 1999 (the "June
Agreement"). At June 29, 1996, the Company was not in compliance with the debt
service coverage, minimum tangible net worth and fixed charge coverage covenants
contained in the June Agreement. On October 15, 1996, the Company obtained a
waiver of noncompliance related to such covenants from its lenders and
renegotiated certain terms and conditions of the June Agreement (the "October
Agreement"), including (i) decreasing the Company's borrowing limit from
$150 million to $125 million; (ii) changing the maturity date to October 1,
1997; (iii) increasing the interest rate on borrowings; (iv) restricting
capital expenditures during the remaining term of the October Agreement; and
(v) the addition of financial covenants which are restrictive to the Company's
business activities (see Note 5 to the Consolidated Financial Statements). At
June 29, 1996, the Company had available borrowing capacity of approximately
$22 million under the October Agreement. The Company expects to incur
approximately $450,000 of expenses associated with obtaining and negotiating
the October Agreement.
In 1996, the Company also obtained $40 million of sale-leaseback financing for
the contruction of up to 10 new Champps restaurants. At June 29, 1996, the
entire $40 million sale-leaseback financing was available for use. Any unused
commitment expires in December 1997. In 1995, the Company obtained $25 million
of sale-leaseback financing for the construction of up to 20 new Fuddruckers
restaurants. At June 29, 1996, approximately $11.8 million of the sale-leaseback
financing was available for use. The Company does not expect to use the entire
commitment provided under the sale-leaseback facilities.
Cash use for capital expenditures aggregated $65.6 million during 1996 and
included leaseholds and equipment for the 26 new Fuddruckers and 6 new Champps
restaurants opened in 1996, leaseholds and equipment for Fuddruckers and Champps
restaurants currently under construction and scheduled to open during the first
half of fiscal 1997, upgrades at existing at Fuddruckers and Champps
restaurants, continued upgrading of data processing systems, and improvements
made to facilities of foodservice clients.
The Company has kept its restaurants and foodservice locations in good condition
and does not believe that significant capital expenditures will be required in
the near future to maintain these properties.
During 1996, approximately $20.5 million of Notes were converted into Common
Stock. All Notes have been converted as of June 29,1996.
The Company plans to open 7 new Fuddruckers and 9 new Champps restaurants in
1997, continue to the extent permitted by the October Agreement to make
improvements at facilities of its foodservice clients and invest in improved
data processing systems pursuant to the terms and conditions of its new
credit agreement. Management believes that cash flows from operations,
existing cash, sale-leaseback financing and available borrowings under its
line-of-credit will provide sufficient liquidity to pay its liabilities in the
normal course of business, fund capital expenditures and service debt
requirements for the foreseeable future.
Subsequent to June 29, 1996, SMMSLP exercised its Put right pursuant to the
provisions of the Put/Call Agreement entered into by SMMSLP and the Company on
February 8, 1995 (see Notes 3 and 10 to the Consolidated Financial Statements).
Accordingly, the Company is required to pay SMMSLP, for its 19.99% limited
partnership interest in DRLP, a purchase price equal to $2.6 million plus
SMMSLP's portion of any net undistributed earnings of DRLP.
Item 8. Financial Statements and Supplementary Data.
The information required under this Item 8 is set forth on pages F-1
through F-24 of this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors of the Registrant
There is incorporated in this Item 10 by reference that portion of the Company's
definitive Proxy Statement relating to its Annual Meeting to be held on December
4, 1996, appearing therein under the captions "Election of Directors" and
"Directors and Committees."
Executive Officers of the Registrant
Certain information is set forth below concerning the executive officers of the
Company, each of whom has been elected to serve until the regular meeting of the
Board of Directors and until his successor is duly elected and qualified. The
executive officers of the Company are as follows:
Name Age Position
William H. Baumhauer 48 Chairman of the Board and
Chief Executive Officer
Allen R. Maxwell 57 Director, President and
Chief Operating Officer
Earl T. Benson 49 Executive Vice President,
Chief Financial Officer and
Treasurer
Charles W. Redepenning, Jr 40 Senior Vice President, General
Counsel and Secretary
William H. Baumhauer has served as Chairman of the Board and Chief Executive
Officer of the Company since November 1990 and as a Director since September
1988. He served in the capacity of President and Chief Operating Officer of the
Company from September 1988 to November 1990. Mr. Baumhauer also serves
Fuddruckers as Chairman of the Board and President since 1985 and previously in
other executive officer capacities since joining Fuddruckers in 1983.
Allen R. Maxwell has served as President and Chief Operating Officer of the
Company since November 1990 and as a Director and President of Daka, Inc. since
September 1988. He served as the Executive Vice President of the Company from
September 1988 to November 1990. Previously he served as the Executive Vice
President of Administration of Daka, Inc. and in other executive capacities
since the formation of Daka, Inc. in 1973.
Earl T. Benson has served as Executive Vice President and Chief Financial
Officer and Treasurer of the Company since April 1996. From June, 1988 to April,
1996 he served as Senior Vice President and Chief Financial Officer of Ross
Stores, Inc., a national off-price apparel retailer. He also served as
Controller and Treasurer upon joining Ross Stores, Inc. in 1984.
Charles W. Redepenning, Jr. has served as Senior Vice President of the Company
since January 1991 and as General Counsel and Secretary of the Company since
November 1988. He also served as Vice President, General Counsel and Secretary
of Fuddruckers in July 1987.
<PAGE>
Item 11. Executive Compensation.
There are incorporated in this Item 11 by reference those portions of the
Company's definitive Proxy Statement relating to its Annual Meeting to be held
on December 4, 1996, appearing therein under the caption "Executive
Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management.
There is incorporated in this Item 12 by reference that portion of the Company's
definitive Proxy Statement relating to its Annual Meeting to be held on December
4, 1996, appearing therein under the caption "Principle Stockholders."
Item 13. Certain Relationships And Related Transactions.
There are no items that are required to be disclosed pursuant to this item.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
The following are being filed as part of this Annual Report on Form 10-K.
A. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets - June 29, 1996 and July 1, 1995.
Consolidated Statements of Income - Years ended June 29, 1996, July 1, 1995
and July 2, 1994.
Consolidated Statements of Cash Flows - Years ended June 29, 1996, July 1,
1995, and July 2, 1994.
Consolidated Statements of Stockholders' Equity - Years ended June 29,
1996, July 1, 1995, and July 2, 1994.
Notes to Consolidated Financial Statements - Years ended June 29, 1996,
July 1, 1995, and July 2, 1994.
B. Financial Statement Schedules:
There are no Financial Statement Schedules required to be filed.
Information required by Article 12 of Regulation S-X with respect to
Valuation and Qualifying Accounts has been included in the Notes to the
Consolidated Financial Statements.
C. Exhibits:
2.1 Agreement and Plan of Merger among Champps Entertainment, Inc.
("Champps"), DAKA International, Inc. ("DAKA" or the "Company") and
CEI Acquisition Corp., dated as of October 10, 1995, incorporated
herein by reference to the Company's Registration Statement on Form
S-4 (File No. 33-65425) ("1996 DAKA Form S-4").
2.2 Series D Convertible Preferred Stock and Warrant Purchase Agreement,
dated as of January 12, 1996, by and among La Salsa Holding Co. and
Casual Dining Ventures, Inc. Pursuant to Item 601(b)(2) of Regulation
S-K, the Schedules to the Series D Convertible Preferred Stock and
Warrant Purchase Agreement are omitted. The Company hereby undertakes
to furnish supplementally a copy of any omitted Schedule to the
Commission upon request.
2.3 Stock Purchase Agreement, dated as of March 18, 1996, by and among
Casual Dining Ventures, Inc., the Company, Champps Development Group,
Inc., Steven J. Wagenheim, Arthur E. Pew, III, PDS Financial
Corporation, Douglas B. Tenpas and certain other stockholders of
Americana Dining Corp. Pursuant to Item 601(b)(2) of Regulation S-K,
the Schedules to the Stock Purchase Agreement are omitted. The Company
hereby undertakes to furnish supplementally a copy of any omitted
Schedule to the Commission upon request.
2.4 Asset Purchase Agreement, dated March 18, 1996, between Americana
Dining Corp., as Seller, and New Brighton Ventures, Inc., as Buyer.
Pursuant to Item 601(b)(2) of Regulation S-K, the Schedules to the
Asset Purchase Agreement are omitted. The Company hereby undertakes to
furnish supplementally a copy of any omitted Schedule to the
Commission upon request.
2.5 Stock Purchase Agreement, dated as of March 29, 1996, by and among the
Company, The Great Bagel and Coffee Franchising Corp., GBC Credit
Company, Gemini Production Facility, Inc., The Great Bagel and Coffee
Company, Mark C. Gordon, Brian H. Loeb, Jason R. Olivier, Michael F.
Zerbib, Nicholas D. Zerbib, and Thierry E. Zerbib. Pursuant to Item
601(b)(2) of Regulation S-K, the Schedules to the Stock Purchase
Agreement are omitted. The Company hereby undertakes to furnish
supplementally a copy of any omitted Schedule to the Commission upon
request.
2.6 Stock Purchase Agreement, dated as of March 31, 1996, by and among
Casual Dining Ventures, Inc., the Company and Edgebrook, Inc. Pursuant
to Item 601(b)(2) of Regulation S-K, the Schedules to the Stock
Purchase Agreement are omitted. The Company hereby undertakes to
furnish supplementally a copy of any omitted Schedule to the
Commission upon request.
3.1 Certificate of Incorporation of the Company.
3.2 By-laws of the Company, incorporated herein by reference to the
Company's Registration Statement on Form S-4 (File No. 33-24819) (the
"1988 DAKA Form S-4")
4.1 Certificate of Designation, Preferences and Rights of Preferred Stock
by Resolution of the Board of Directors Providing for the Issue of
100,000 Shares of Preferred Stock Designated the Series A Preferred
Stock, incorporated herein by reference to the Company's Registration
Statement on Form S-2 (No. 33-57554) (the "DAKA Form S-2").
4.2 Specimen Certificate for DAKA Common Stock, incorporated herein by
reference to the 1988 DAKA Form S-4.
10.1 Employment Agreement dated January 1, 1992 between DAKA and William H.
Baumhauer, incorporated herein by reference to the DAKA Form S-2.
10.2 Employment Agreement dated January 1, 1992 between DAKA and Allen R.
Maxwell, incorporated herein by reference to the DAKA Form S-2.
10.3 Employment Agreement dated October 10, 1995 by and among DAKA, Dean P.
Vlahos and Champps, incorporated herein by reference to the Company's
Current Report on Form 8-K, dated October 13, 1995.
10.4 Amended and Restated Trust Agreement dated as of October 1, 1984 and
the Second through Seventh Amendments thereto most recently dated
September 15, 1990, relating to the Daka Thrift Plan, incorporated
herein by reference to the Registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1990.
10.5 Incentive Stock Option Plan of DAKA, incorporated herein by reference
to the 1988 DAKA Form S-4.
10.6 Non-Qualified Stock Option Plan of DAKA, incorporated herein by
reference to the 1988 DAKA Form S-4.
10.7 Senior Executive Stock Option Plan of DAKA, incorporated herein by
reference to the DAKA Form S-2.
10.8 Primary Distribution Agreement effective December 1, 1992 between the
Registrant and Kraft Foodservice, Inc., incorporated herein by
reference to the DAKA Form S-2.
10.9 Preferred Stock Purchase Agreement dated as of October 23, 1991 and
amended by Amendment No. 1 dated as of December 19, 1991, among the
Registrant, First Capital Corporation of Chicago and Cross Creek
Partners I, incorporated herein by reference to the Company's Current
Report on Form 8-K dated January 17, 1992.
10.10Registration Agreement dated January 17, 1992, among the Registrant,
First Capital Corporation of Chicago and Cross Creek Partners I,
incorporated herein by reference to the DAKA Form S-2.
10.11Amended and Restated Credit Agreement dated April 29, 1994 between the
Registrant and the Chase Manhattan Bank, N.A., as agent, and related
notes and security agreements incorporated herein by reference to the
DAKA Form S-2.
10.12Americana Dining Corp. Stock Purchase Agreement (formerly Champps
Development Corporation) dated March 3, 1994, incorporated herein by
reference to the Company's Annual Report on Form 10-K for the fiscal
year ended July 2, 1994.
10.13Financing Commitment from Casual Dining Ventures, Inc., a wholly
owned subsidiary of the Company, to Americana Dining Corp. (formerly
Champps Development Corporation), incorporated herein by reference to
the Company's Annual Report on Form 10-K for the fiscal year ended
July 2, 1994.
10.14First Amendment Agreement dated as of December 30, 1994 among the
Company and the Chase Manhattan Bank, N.A., incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994.
10.15Business Transfer Agreement by and between Daka Restaurants, L.P. as
Transferee and ServiceMaster Management Services L.P. as Transferor as
of February 8, 1995, incorporated herein by reference to the Company's
Current Report on Form 8-K dated February 23, 1995.
10.16Limited Partnership Agreement of Daka Restaurants, L.P. as of
February 8, 1995, incorporated herein by reference to the Company's
Current Report on Form 8-K dated February 23, 1995.
10.17Put and Call Agreement by and between the Company and ServiceMaster
Management Services L.P. as of February 8, 1995, incorporated herein
by reference to the Company's Current Report on Form 8-K dated
February 23, 1995.
10.18Second Amendment Agreement dated as of March 21, 1995 among the
Company and the Chase Manhattan Bank, N.A., incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 1, 1995.
10.19Asset Purchase Agreement between Discus Corporation and certain of
its subsidiaries as sellers and Fuddruckers, Inc. as buyer dated April
15, 1994, incorporated herein by reference to Company's Annual Report
on Form 10-K for the fiscal year ended July 2, 1994.
<PAGE>
10.20Third Amended and Restated Registration Rights Agreement, dated as of
January 12, 1996, by and among La Salsa Holding Co., FMA High Yield
Income L.P., WSIS Flexible Income Partners L.P., WSIS High Income
L.P., Howdy S. Kabrins, La Salsa, Inc., Crown Associates III, L.P.,
Crown-Glynn Associates, L.P., Nueberger & Berman as Trustee for the
Crown Trust, Theodore H. Ashford, Noro-Moseley Partners II, L.P.,
Seidler Salsa, L.P., Bankers Trust Company as Master Trustee for
Hughes Aircraft Retirement Plans, Charles A. Lynch, Sienna Limited
Partnership I, Sienna Limited Partnership II, Sienna Holdings, Inc.,
as Nominee, InterWest Partners IV, Donald Benjamin, Vicki Tanner,
Ronald D. Weinstock, Inc., Frank Holdraker, and Casual Dining
Ventures, Inc.
10.21Fourth Amended and Restated Restricted Stock Agreement, dated as of
January 12, 1996, by and among La Salsa Holding Co., Howdy S. Kabrins,
La Salsa, Inc., InterWest Partners IV, Sienna Holding, Inc., Sienna
Limited Partnership I, Charles A. Lynch, Theodore H. Ashford, Crown
Associates III, L.P., Crown-Glynn Associates, L.P., Nueberger & Berman
as Trustee for The Crown Trust, Noro-Moseley Partners II, L.P.,
Seidler Salsa, L.P., Bankers Trust Company, as Master Trustee, for
Hughes Aircraft Retirement Plans, FMA High Yield Income L.P., WSIS
Flexible Income Partners L.P., WSIS High Yield Income L.P., Sienna
Limited Partnership II, Donald Benjamin, Vicki Tanner, Ronald D.
Weinstock, Inc., Frank Holdraker, and Casual Dining Ventures, Inc.
10.22LaSalsa Holding Co. Warrant to Purchase Shares of Series D
Convertible Preferred Stock, dated as of January 12, 1996, issued to
Casual Dining Ventures, Inc. by La Salsa Holding Co.
10.23Second Amended and Restated Credit Agreement, dated as of June 25,
1996, by and among the Company, Fuddruckers, Inc., Daka, Inc., Casual
Dining Ventures, Inc., Atlantic Restaurant Ventures, Inc., Daka
Restaurants, L.P., French Quarter Coffee Company, Americana Dining
Corp., Champps Entertainment of Edison, Inc., Champps Entertainment of
Texas, Inc., Champps Entertainment of Wayzata, Inc., Champps
Entertainment, Inc., Specialty Concepts, Inc., The Chase Manhattan
Bank, N.A., Fleet National Bank, Mellon Bank, N.A. and The First
National Bank of Boston.
10.24Severance, Non-Competition and Confidentiality Agreement, dated as of
March 18, 1996, between Steven J. Wagenheim and Americana Dining Corp.
10.25LaSalsa License Agreement, dated as of February 14, 1996, by and
between La Salsa Franchise, Inc. and La Salsa Holding Co.
11.1 Statement regarding computation of earnings per share for the Company.
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP
24.1 Powers of Attorney.
D. Reports on Form 8-K
On March 6, 1996, the Company filed a Current Report on Form 8-K. The
Company reported in Item 2 of the Form 8-K, the acquisition by subsidiary
merger of Champps Entertainment, Inc. ("Champps") and included, pursuant to
Item 7 of the Form 8-K, audited consolidated financial statements of
Champps and unaudited pro forma condensed consolidated financial statements
of the Company and Champps.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DAKA INTERNATIONAL, INC.
(Registrant)
By: /s/Earl T. Benson
----------------------
Earl T. Benson
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and Principal
Accounting Officer)
Date: October 15, 1996
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant, and
in the capacities and on the date indicated.
Signature Title
/s/William H. Baumhauer Chairman of the Board and
- ----------------------- Chief Executive Officer (Principal
William H. Baumhauer Executive Officer)
Allen R. Maxwell* Director, President and
Chief Operating Officer
E. L. Cox* Director
Dean P. Vlahos* Director
Joseph W. O'Donnell* Director
Erline Belton* Director
Alan D. Schwartz* Director
/s/Earl T. Benson Executive Vice President,
- ------------------------ Chief Financial Officer
Earl T. Benson and Treasurer
(Principal Financial and Principal
Accounting Officer)
*By: /s/William H. Baumhauer Date: October 15, 1996
- ----------------------------
William H. Baumhauer
Attorney-In-Fact
<PAGE>
INDEPENDENT AUDITORS' REPORT
DAKA International, Inc.:
We have audited the accompanying consolidated balance sheets of DAKA
International, Inc. and its subsidiaries as of June 29, 1996 and July 1, 1995
and the related consolidated statements of income, cash flows and stockholders'
equity for each of the three years in the period ended June 29, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to the
merger of the Company with Champps Entertainment, Inc. and the merger of the
Company with The Great Bagel and Coffee Company which have each been accounted
for as a pooling-of-interests as described in Note 2 to the consolidated
financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of DAKA International, Inc. and its
subsidiaries as of June 29, 1996 and July 1, 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
June 29, 1996, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
/s/Deloitte & Touche LLP
Boston, Massachusetts
September 6, 1996 (except for Note 5 as to which the date is October 15, 1996)
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
June 29, July 1,
1996 1995
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents ......................... $ 11,708 $ 10,538
Accounts receivable, net .......................... 36,699 30,039
Inventories ....................................... 10,119 9,460
Prepaid expenses and other current assets ......... 5,265 2,240
----- -----
Total current assets ............................. 63,791 52,277
------ ------
Property and equipment:
Land .............................................. $ 10,587 $ 8,751
Buildings and leasehold improvements .............. 96,219 79,521
Equipment ......................................... 56,347 36,231
------ ------
163,153 124,503
Accumulated depreciation and amortization ......... (38,590) (30,207)
------ ------
Property and equipment, net ...................... 124,563 94,296
------- ------
Investments in, and advances to, affiliates ........ 5,000 511
Other assets, net .................................. 32,717 31,442
Deferred tax assets ................................ 5,486 2,327
----- -----
$231,557 $180,853
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable .................................. $ 17,772 20,407
Accrued expenses .................................. 15,110 18,203
Current portion of long-term debt ................. 1,507 851
Deferred tax liabilities .......................... 787 236
------ ------
Total current liabilities ........................ 35,176 39,697
------ ------
Long-term debt ..................................... 98,355 70,178
Other long-term liabilities ........................ 12,978 8,912
Minority interests ................................. 2,181 3,012
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred Stock, $.01 par value;
$100 liquidation preference; 1,000,000
shares authorized; 11,912 and 100,000
shares issued and outstanding at June 29,
1996 and July 1, 1995, respectively .............. -- 1
Common Stock, $.01 par value; 30,000,000
shares authorized; 11,120,900 and 6,995,429
issued and outstanding at June 29, 1996
and July 1, 1995, respectively ................... 111 70
Capital in excess of par value .................... 71,907 49,039
Retained earnings ................................. 10,849 9,944
------ ------
Total stockholders' equity ...................... 82,867 59,054
------ ------
$231,557 $180,853
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
Fiscal Years Ended June 29, 1996, July 1, 1995 and July 2, 1994
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales ....................................... $ 391,546 $ 323,114 $ 246,142
Management and other fees.................... 13,278 11,723 11,004
--------- --------- ---------
Total....................................... 404,824 334,837 257,146
--------- --------- ----------
Costs and expenses:
Cost of sales and operating expenses ......... 332,406 272,716 206,475
Selling, general and administrative
expenses .................................... 39,570 32,054 28,264
Depreciation and amortization ................ 18,492 11,690 8,473
Impairment charges ........................... 5,711 -- --
Merger costs ................................. 2,900 -- --
Interest expense ............................. 5,894 4,344 2,883
Interest income .............................. (352) (859) (331)
--------- --------- ---------
Total....................................... 404,621 319,945 245,764
Income before income taxes
and minority interests ....................... 203 14,892 11,382
Income tax expense ............................ 129 5,317 3,697
Minority interests ............................ (831) (8) 99
--------- --------- ---------
Net income .................................... 905 9,583 7,586
Preferred Stock dividends ..................... -- 400 800
--------- --------- ---------
Income available for common stockholders ...... $ 905 $ 9,183 $ 6,786
========= ========= =========
Earnings per share:
Primary:
Income available for common stockholders ..... $ 0.09 $ 1.35 $ 0.94
Fully diluted:
Income available for common stockholders ..... $ 0.09 $ 0.96 $ 0.83
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Years Ended June 29, 1996, July 1, 1995 and July 2, 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................................. $ 905 $ 9,583 $ 7,586
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ............................................. 18,492 11,690 8,473
Impairment charges ....................................................... 5,711 -- --
Deferred income taxes ..................................................... (2,608) (1,954) 358
Minority interests ........................................................ (831) (8) 99
Change in assets and liabilities, net of acquisitions:
Accounts receivable ....................................................... (5,724) 4,046 (9,412)
Inventories ............................................................... (679) (161) (632)
Other assets .............................................................. (10,786) (5,037) 1,060
Accounts payable and accrued expenses ..................................... (5,476) 1,165 2,244
Other long-term liabilities ............................................... 4,066 5,697 968
-------- -------- --------
Net cash provided by operating activities ............................... 3,090 25,021 10,744
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment .......................................... (64,512) (41,085) (15,233)
Proceeds from sale of property and equipment ................................ 434 1,227 477
Investment in, and advances to affiliates ................................... (5,000) (120) (79)
Cash paid for acquisitions, net of cash acquired
of $0, $175 and $163, respectively ......................................... -- (11,954) (19,259)
-------- -------- --------
Net cash used in investing activities .................................... (69,078) (51,932) (34,094)
-------- -------- --------
Cash flows from financing activities:
Borrowing under line-of-credit agreement .................................... 47,000 30,300 15,669
Repayments of long-term debt and deferred purchase price .................... (1,354) (12,077) (2,575)
Proceeds from sale-leaseback facility ....................................... 18,651 5,742 --
Cash proceeds from common stock issuances ................................... -- -- 8,788
Sale of Preferred Stock by subsidiary ....................................... -- -- 1,103
Payment of Preferred Stock dividends ........................................ -- (400) (800)
Payment of cash dividends ................................................... -- -- (738)
Proceeds from exercise of stock options ..................................... 2,100 801 247
Proceeds from exercise of warrants .......................................... 781 -- --
-------- -------- --------
Net cash provided by financing activities ................................. 67,178 24,366 21,694
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ........................ 1,170 (2,545) (1,656)
Cash and cash equivalents, beginning of year ................................ 10,538 13,083 14,739
-------- -------- --------
Cash and cash equivalents, end of year ...................................... $ 11,708 $ 10,538 $ 13,083
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Fiscal Years Ended June 29, 1996, July 1, 1995 and July 2, 1994
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Capital Total
Outstanding Par Outstanding Par In Excess Retained Stockholders'
Shares Value Shares Value of Par Earnings Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 26, 1993
(restated) 100,000 $ 1 3,730,395 $ 37 $30,443 $ (3,977) $ 26,504
Effect of Mergers - - 1,678,000 17 878 (976) (81)
------- --- ---------- ---- ------- -------- --------
Balance, June 26, 1993
(as reported) 100,000 1 5,408,395 54 31,321 (4,953) 26,423
Employee stock options
exercised - - 43,108 - 173 - 173
Exercise of warrants - - - - 74 - 74
Sale of Common Stock - - 822,236 8 8,780 - 8,788
Common Stock dividends - - - - - (1,072) (1,072)
Preferred Stock dividends - - - - - (800) (800)
Net income - - - - - 7,586 7,586
------- --- ---------- ---- ------- -------- --------
Balance, July 2, 1994 100,000 1 6,273,739 62 40,348 761 41,172
Employee stock options
exercised - - 37,360 - 339 - 339
Exercise of warrants - - - 1 459 - 460
Shares issued upon conversion of
certain Convertible
Subordinated Notes, net - - 684,330 7 7,893 - 7,900
Preferred Stock dividends - - - - - (400) (400)
Net income - - - - - 9,583 9,583
------- --- ---------- ---- ------- ------- -------
Balance, July 1, 1995 100,000 1 6,995,429 70 49,039 9,944 59,054
Employee stock options
exercised - - 201,920 2 2,098 - 2,100
Exercise of warrants - - - 1 780 - 781
Tax benefits on exercise of
stock options - - - - 156 - 156
Shares issued upon conversion
of certain Convertible
Subordinated Notes, net - - 1,711,482 17 19,834 - 19,851
Shares issued upon conversion
of certain Preferred Stock (88,088) (1) 1,957,521 19 - - 18
Shares issued upon repurchase of
ADC stock - - 254,548 2 - - 2
Net income - - - - - 905 905
------- --- ---------- ---- ------- ------- -------
Balance, June 29, 1996 11,912 $ - 11,120,900 $111 $71,907 $10,489 $82,867
======= === ========== ==== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
DAKA INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years Ended June 29, 1996, July 1, 1995 and July 2, 1994
(Dollars in thousands, except per share amounts)
1. Summary of Significant Accounting Policies
Basis of Presentation and Business
The accompanying consolidated financial statements include the accounts of DAKA
International, Inc. and its majority-controlled subsidiaries ("DAKA" or the
"Company") including Daka, Inc. ("Daka"), Fuddruckers, Inc. ("Fuddruckers"),
Champps Entertainment, Inc. ("CEI" or "Champps"), The Great Bagel and Coffee
Company ("Great Bagel and Coffee") and Americana Dining Corp. ("ADC"). The
accompanying consolidated financial statements have also been restated to
reflect the business combinations accounted for as poolings-of-interest more
fully described in Note 2. Significant intercompany balances and transactions
have been eliminated in consolidation.
The Company is a diversified restaurant company serving customers through a
variety of channels. The Company's Fuddruckers and Champps subsidiaries serve
customers in casual and upscale restaurant settings, respectively,
throughout the United States and in Canada, Mexico, Australia, Europe,
and the Middle East. The Company's subsidiary, Great Bagel and Coffee
serves coffee, bagels and sandwich items in a cafe setting in western
locations of the United States. Restaurant operations are conducted
through company-owned and franchised stores. The Company's subsidiary,
Daka, is a leading contract foodservice management corporation
within the United States.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to June 30th. For
purposes of these notes to the consolidated financial statements, the fiscal
years ended June 29, 1996, July 1, 1995 and July 2, 1994 are referred to as
1996, 1995 and 1994, respectively. Fiscal 1996, 1995 and 1994 contain 52, 52 and
53 weeks, respectively.
Significant Estimates
In the process of preparing its consolidated financial statements, the Company
estimates the appropriate carrying value of certain assets and liabilities which
are not readily apparent from other sources. The primary estimates underlying
the Company's financial statements include allowances for potential bad debts on
accounts and notes receivable, the useful lives of its assets and
recoverability such as property and intangibles, fair values of financial
instruments, the realizable value of its tax assets and accruals for health
insurance and other matters. Management bases its estimates on certain
assumptions, which they believe are reasonable in the circumstances, and
while actual results could differ from those estimates, management does not
believe that any change in those assumptions in the near term would have
a material effect on the Company's consolidated financial position or
the results of operation.
<PAGE>
Concentration of Credit Risk
The Company extends credit to its foodservice clients and Fuddruckers'
franchisees. The Company's foodservice clients are comprised primarily of
schools and colleges, corporate offices, factories, health care facilities and
governmental offices located in the United States.
The Company has an allowance for uncollectible accounts receivable of $465,
$1,268 and $928 at June 29, 1996, July 1, 1995 and July 2, 1994, respectively.
The Company recorded bad debt (credits) expense of $(177), $638 and $617 in
1996, 1995 and 1994, respectively, and had write-offs, net of recoveries
associated with uncollectible accounts receivable, of $626, $298 and $180
in 1996, 1995 and 1994, respectively.
Inventories
Inventories consist of food and supplies and are stated at the lower of cost,
determined using the first-in, first-out method, or market value. Inventories
also include the initial cost of smallwares with replacements charged to expense
when purchased.
The components of inventories are as follows:
1996 1995
Food and liquor $ 4,990 $ 5,042
Smallwares 3,410 2,906
Supplies 1,719 1,512
------- -------
$10,119 $ 9,460
======= =======
Property and Equipment
Property and equipment is stated at cost and includes an allocation of the
purchase price for assets acquired in connection with the purchase of certain
restaurant and foodservice businesses and the cost associated with improvements
made at facilities of its foodservice clients. The allocation of the purchase
price is generally based upon independent appraisals of the assets acquired.
Property and equipment is depreciated using the straight-line method over
the estimated useful lives of the assets. Leasehold improvements, which
include improvements made at client facilities, and assets capitalized
pursuant to capital lease obligations are amortized over the shorter of
the lease term, contract term or the estimated useful life. Useful lives
range from 20 to 30 years for buildings and leasehold improvements and three
to ten years for equipment.
Interest costs incurred during the construction of new, or the expansion and
major remodeling of existing restaurants or foodservice facilities are
capitalized as a component of the cost of the property. During 1996 and 1995,
$725 and $362 of interest costs were capitalized, respectively. There were no
interest costs capitalized during 1994.
Deferred Financing Costs
Costs associated with the sale of the 7% Convertible Subordinated Notes (the
"Notes") (see Note 5), as well as costs incurred to obtain new financing, are
included in other assets and are amortized over the lives of the related debt
instruments which range from three to ten years. A pro rata portion of the net
unamortized costs associated with the sale of the Notes is charged against
capital in excess of par value as such Notes are converted into Common Stock.
<PAGE>
Accrued Insurance Costs
The Company is self insured for workers' compensation, general liability and
various other risks up to specified limits. In addition, the Company is
self-insured up to certain limits for risks associated with the healthcare plan
provided for its employees. Expenses associated with the workers' compensation
and general liability programs are accrued based upon actuarial studies which
determine the estimated amount required to cover incurred incidents.
Other Long-Term Liabilities
Other long-term liabilities are comprised of deferred royalty buydown payments,
the liability under the long-term incentive compensation plan, deferred rent
liabilities and management's estimate of the non-current portion of the
liability related to the Company's workers' compensation and general
liability self-insurance program.
Deferred Rent Assets and Liabilities
Deferred rent assets, included in other assets, represent the difference between
the cost and the net proceeds received related to property sold pursuant to
sale-leaseback agreements and are amortized on a straight-line basis over the
initial term of the lease. For leases which contain rent escalations, the
Company records the total rent payable during the lease term on a straight-line
basis over the term of the lease. In addition, lease incentive payments received
from landlords are recorded as deferred rent liabilities and are amortized on a
straight-line basis over the lease term as a reduction of rent expense.
Interest Rate Exchange Agreements
The Company has only limited involvement with derivative financial investments
and does not use such instruments for trading purposes. Derivative financial
instruments are used only to manage well-defined interest rate risks.
The Company has entered into interest rate exchange agreements (swaps), as
a means of managing interest rate risk related to borrowings under the
Company's revolving line-of-credit and capital lease facilities. Periodic
cash payments either received or paid pursuant to interest rate swap
agreements are accrued on a settlement basis and amortized as an
adjustment to interest expense over the term of the agreement.
Revenue Recognition
In addition to recording sales, franchise and royalty fees from its restaurant
operations, the Company records revenues from foodservice operations for sales
made pursuant to profit and loss contracts (contracts where the Company assumes
the risk of loss), and management fees derived from management fee contracts
as earned. Sales and related costs of sales made to guests of foodservice
clients pursuant to management fee contracts are not reflected in the
Company's consolidated statements of income.
<PAGE>
Franchising and Royalty Income
Franchise fees for new franchises are recognized as revenue when substantially
all commitments and obligations have been fulfilled, which is generally upon
commencement of operations by the franchisee. The Company also enters into
development agreements granting franchisees the exclusive right to develop and
operate Fuddruckers restaurants in certain territories in exchange for a
development fee. Amounts received in connection with such development agreements
are recognized as franchise fee revenues when received since the Company is not
required to provide any future services and such fees are non-refundable.
Franchisees entering into development agreements are also required to execute
franchise agreements and pay the standard franchise fee which is sufficient to
cover the Company's contractual obligations to the franchisee. To the extent
that the Company provides services beyond its contractual obligation, the
Company charges the franchisee a fee for such additional services. During 1996,
1995 and 1994, the Company recognized revenues of $3,417, $2,303 and $1,281,
respectively, from development and franchise fees.
Royalty revenues from franchised restaurants are recognized as revenues when
earned in accordance with the respective franchise agreement. Advance payments
received in connection with royalty buydown agreements are deferred and
recognized at the reduced royalty rate during the royalty buydown period
specified in the agreements. The remaining balance of the advance payments is
recognized on a straight-line basis over the remaining term of the agreement.
During 1996, 1995 and 1994, the Company recognized revenues of $4,289,
$3,729 and $3,598, respectively, from royalties.
Preopening Expenses
Direct incremental preopening costs associated with the opening of new, or the
expansion and major remodeling of existing restaurants or foodservice facilities
are capitalized and amortized over twelve months. Unamortized preopening costs
included in other assets amounted to $3,310 and $1,782 in 1996 and 1995,
respectively.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the future tax
consequences attributable to differences between the carrying value for
financial reporting purposes and the tax basis of assets and liabilities in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109 -
"Accounting for Income Taxes". Deferred tax assets and liabilities
are recorded using the enacted tax rates expected to apply to taxable income in
the years in which such differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities, resulting from a change in tax
rates, is recognized as a component of income tax expense in the period that
such change occurs. Targeted jobs tax credits and foreign tax credits are
treated as a reduction of income tax expense in the year such credits are
utilized.
<PAGE>
Cash Flow Information
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid, short-term investments with original maturities
of three months or less when purchased to be cash equivalents.
Cash payments for interest aggregated $5,119, $4,963 and $2,628 in 1996,
1995 and 1994, respectively.
Cash payments for income taxes aggregated $6,025, $5,767, and $4,022 in 1996,
1995 and 1994, respectively.
Capital lease obligations of $3,718, $2,326 and $1,674 were incurred when the
Company entered into leases for new restaurant and office equipment in 1996,
1995 and 1994, respectively.
Significant other non-cash investing and financing transactions are as follows:
1996
The Company issued 254,548 shares of DAKA Common Stock in exchange for each
outstanding share of ADC common stock (see Note 3).
The Company sold a restaurant with a book value of $1,306, in exchange for a
$1,280 promissory note (see Note 3).
The Company issued common stock upon the conversion of $20,538 of Notes,
increasing Stockholders' Equity by $19,851, net of related unamortized deferred
debt issue costs (see Note 5).
The Company issued common stock upon the conversion of 88,088 shares, or
$8,809, of Preferred Stock.
1995
The Company sold three Fuddruckers restaurants, with an aggregate book value of
$1,944, in exchange for various note receivables (see Note 3).
The Company issued Common Stock upon the conversion of $8,212 of Notes,
increasing Stockholders' Equity by $7,900, net of related unamortized referred
debt issue costs.
1994
The Company acquired a Fuddruckers restaurant in exchange for the
forgiveness of a $1,005 promissory note.
The Company forgave approximately $334 of a $1,072 promissory note from
former CEI shareholders.
<PAGE>
Earnings Per Share
Primary earnings per share are computed using the weighted average number of
common and common equivalent shares (dilutive options and warrants) outstanding.
In addition to the inclusion of common and common equivalent shares, the
calculation of fully diluted earnings per share includes the shares issuable
upon conversion of the Preferred Stock which amounted to approximately 264,700
and 2,222,200 shares in 1996 and 1995, respectively, and the shares issuable
upon conversion of the Notes which amounted to approximately 1,711,500 in 1995.
All Notes were converted by the third quarter of 1996 (see Note 6). Fully
diluted earnings per share assumes that the Preferred Stock and Notes were
converted into Common Stock as of the beginning of the fiscal year unless they
are anti-dilutive and reflect the elimination of interest expense related to the
Notes, net of the related income tax effect, and the elimination of dividends
related to the Preferred Stock. The shares issuable pursuant to the contingent
warrant held by the holders of the Preferred Stock are not included in the
calculation of fully diluted earnings per share since the issuance of such
shares is contingent upon the redemption of the Preferred Stock by the Company.
During 1996 a portion of the Preferred Stock and the balance of the Notes were
converted into Common Stock by the holders of such securities. Had these
conversions taken place at the beginning of 1996, primary earnings per share for
1996 would have been $0.08.
The weighted average number of shares used in the computation of per share
amounts for 1996, 1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
Primary .......... 9,970,748 6,790,534 6,081,750
Fully diluted .... 10,534,929 11,228,339 10,728,068
Impairment of Long-Lived Assets
In March 1995, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 121 - "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of". SFAS No. 121 requires the Company to
evaluate the carrying value of long-lived assets including equipment
and related goodwill whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Under SFAS No.
121, an assessment is made to determine if the sum of the expected future
undiscounted cash flows from the use of the assets and eventual disposition is
less than the carrying value. If the sum of the expected undiscounted cash
flows is less than the carrying value, an impairment loss is recognized by
measuring the excess of carrying value over fair value (generally estimated by
projected future discounted cash flows from the applicable operation or
independent appraisal). In the third quarter of 1996, the Company adopted
the provisions of SFAS No. 121 which resulted in a noncash pretax charge
of approximately $5,711. The provision includes charges for impairments
to the carrying value of certain restaurant and foodservice contract
assets, reacquired franchise rights, investments and certain other assets.
<PAGE>
Accounting Pronouncements Not Yet Adopted
In October 1995, the FASB issued SFAS No. 123 - "Accounting for Stock-
Based Compensation". SFAS No. 123 establishes accounting and disclosure
requirements using a fair value-based method of accounting for stock-based
employee compensation plans. Under the provisions of No. SFAS 123, effective
for the fiscal year beginning June 30, 1996, the Company may either adopt the
new fair value-based accounting method or continue the intrinsic value-based
method for employee stock-based compensation and provide pro forma
disclosures of net income and earnings per share as if the accounting
provisions of SFAS No. 123 had been adopted. The Company plans to adopt only
the disclosure requirements of SFAS No. 123. The Company generally does
not grant options to outsiders, accordingly, the adoption of SFAS 123 is
not expected to have a material effect on the Company's consolidated net
earnings or cash flows.
2. Merger with Champps Entertainment, Inc. and The Great Bagel and Coffee
Company
On February 21, 1996, CEI Acquisition Corp., a wholly-owned subsidiary of DAKA,
merged with and into Champps whereupon Champps became a wholly-owned
subsidiary of DAKA pursuant to an Agreement and Plan of Merger dated October
10, 1995 (the "Merger Agreement"). Under the terms of the Merger Agreement, the
Champps common-stock holders exchanged their holdings in Champps' common stock
for 2,181,722 shares of DAKA common stock valued at approximately $49,634 on
the merger date. On April 3, 1996, the Company merged with The Great Bagel and
Coffee Company ("Great Bagel and Coffee") whereby the Company exchanged 339,236
shares of DAKA common stock valued at approximately $8,566 for all outstanding
shares of Great Bagel and Coffee common stock (collectively the "Mergers" and
the "Merged Companies").
The Mergers have each been accounted for as poolings-of-interests and,
accordingly, the consolidated financial statements have been restated to
include the accounts of Champps and Great Bagel and Coffee for all periods
presented.
In connection with the Mergers, in 1996 the Company recorded a charge for
merger costs of $2,900. Included in these costs are legal, investment
banking and professional fees associated with the transaction, costs
associated with combining the operations of previously separate companies and
instituting certain operational efficiencies.
<PAGE>
The following presents the operations of the previously separate
companies prior to the consummation of the Mergers:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
DAKA ....................$ 388,320 (4) $ 320,605 (1) $ 249,795 (1)
CEI ..................... 14,253 (2) 12,470 6,849
Great Bagel and Coffee .. 2,251 (3) 1,762 502
--------- --------- ---------
$ 404,824 $ 334,837 $ 257,146
========= ========= =========
Net income (loss):
DAKA ....................$ 811 (4) $ 9,116 (1) $ 6,902 (1)
CEI ..................... (109)(2) 209 620
Great Bagel and Coffee .. 203 (3) 258 64
--------- --------- ---------
$ 905 $ 9,583 $ 7,586
========= ========= =========
</TABLE>
(1) As previously reported
(2) For the six-month period ended December 31, 1995
(3) For the nine months ended March 31, 1996
(4) Includes the results of operations of CEI and Great Bagel and Coffee
subsequent to December 31, 1995 and March 31, 1996, respectively.
Transactions between DAKA and the Merged Companies prior to the Mergers were
not significant. The Company has not recorded an adjustment to conform the
accounting policies of the Merged companies to DAKA's, as such policies were
generally comparable.
<PAGE>
3. Acquisition and Disposition Transactions
Business transactions accounted for using the purchase method of accounting,
present the results of operations and cash flows of the acquired business from
the date of acquisition in the Company's consolidated financial statements. The
following presents the business acquisitions accounted for as purchases and
dispositions occurring during the three-year period ended June 29, 1996:
1994 Transactions
On March 29, 1994, the Company acquired a 50% ownership interest in ADC, a
newly formed Company which then acquired two Champps restaurants located in
Minnesota for a purchase price of $2,800 plus 100,000 shares of ADC Common
Stock. In addition, the Company invested $2,800 in ADC in the form of Preferred
Stock. The terms of the Preferred Stock provided for an 8% dividend, payable
quarterly, mandatory redemption in March 1997 and allowed the Company to
convert the Preferred Stock into Common Stock at any time at an initial
conversion price of $6 per share. In addition, the Preferred Stock has voting
privileges as if converted to Common Stock, giving the Company 57% voting
control of ADC; accordingly, ADC has been included in the Company's
consolidated financial statement (see 1996 Transactions).
On June 7, 1994, Fuddruckers acquired the assets, operations and certain
working capital items of nine Fuddruckers restaurants located in Minnesota,
Nebraska and Missouri from a franchisee. The purchase price of $6,273 was paid
in cash at the closing. Also, during fiscal 1994, in a series of
transactions, Fuddruckers and a majority-owned subsidiary acquired three
Fuddruckers restaurants and the remaining 50% interest in two restaurants
from its joint venture partners. The total purchase price for these five
restaurants was $2,382 and consisted of a combination of cash and
offsets of notes receivable from the sellers.
<PAGE>
1995 Transactions
On December 15, 1994, Daka acquired certain assets and foodservice contracts
from Rowe, Inc. for a purchase price of $1,378 substantially all of which was
paid in cash.
On February 1, 1995, Fuddruckers acquired the assets, operations and certain
working capital items of a Fuddruckers restaurant in Texas from a franchisee
for a purchase price of $623 which was paid in cash. On June 23, 1995,
Fuddruckers acquired the assets of four Fuddruckers restaurants located in
Canada from a franchisee for a purchase price of $961 and the issuance of a 19%
interest in the acquired restaurants to the former franchisee. The purchase
price for the four restaurants in Canada consisted of offsets to amounts
receivable from the franchisee.
On February 8, 1995, Daka acquired an 80.01% general partnership interest in a
newly formed limited partnership, Daka Restaurants, L.P. ("DRLP"), in exchange
for cash of $10,085. Simultaneously, DRLP acquired substantially all of the
assets and foodservice contracts comprising the educational and corporate
foodservice business of ServiceMaster Management Services L.P. ("SMMSLP") for a
purchase price of approximately $21,117, $10,250 for the foodservice contracts
and fixed assets and $10,867 for the working capital assets. The purchase price
was comprised of a cash payment of $10,085, the assumption of $806 of
liabilities, a deferred payment of $10,226 due on August 8, 1995, and the
issuance of a 19.99% limited partnership interest in DRLP to SMMSLP. The
deferred payment was paid by DRLP on June 13, 1995 at a discount of $94. In
addition, the Company and SMMSLP entered into a Put/Call Agreement related to
SMMSLP's limited partnership interest in DRLP which was exercised by SMMSLP
subsequent to June 29, 1996 (see Note 10).
Also during 1995, the Company sold, at book value which approximated fair
market value, three Fuddruckers restaurants located in the Kansas City and
Omaha markets for a purchase price of $1,300 substantially all of which is
payable in the form of notes receivable collateralized by all of the assets of
the restaurants sold.
<PAGE>
1996 Transactions
On March 31, 1996, the Company entered into separate Stock Purchase Agreements
(the "Stock Agreements") with two stockholders of ADC (the "Selling
Stockholders") to acquire the 43% voting interest in ADC not held by the
Company. Pursuant to the terms of the Stock Agreements, the Company issued
254,548 shares of DAKA common stock valued at $6,427 in exchange for the
outstanding shares of ADC common stock. Based upon an independent
valuation, the fair market value of the 43% voting interest acquired
approximated the consideration given by the Company.
On March 31, 1996, the Company sold one of the restaurants to a Selling
Stockholder of ADC in exchange for a $1,280 promissory note collateralized
by the assets of the restaurant. Interest accrues at the rate of
8.5% per annum and is payable in monthly installments. The note matures on
March 31, 2003, at which time the outstanding balance, $1,180, will be due.
Based on an independent valuation obtained by the Company, the book value
of the restaurant assets sold approximated their fair market value at
March 31, 1996.
The following pro forma results of operations assume that the 1996 purchase
transactions described above occurred at the beginning of 1996, 1995 and
1994. In addition to combining the historical results of operations, the pro
forma amounts shown include adjustments for the estimated effect of
depreciation, amortization and interest expense associated with such
transactions.
The pro forma information below does not purport to be indicative of the
results of operations that would have actually been achieved if the
transactions described above had actually been consummated as of the beginning
of 1996, 1995 and 1994. In addition, the pro forma information below does not
purport to be indicative of the results of operations which may be achieved in
the future.
<TABLE>
<CAPTION>
(Unaudited)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues ..................................... $ 404,824 $382,727 $ 366,706
Net income ................................... $ 692 $ 10,231 $ 8,450
Net income available for
common stockholders ......................... $ 692 $ 9,831 $ 7,650
Earnings per share:
Primary ...................................... $ 0.07 $ 1.40 $ 1.21
Fully diluted ................................ $ 0.06 $ 0.99 $ 0.89
</TABLE>
<PAGE>
4. Investments
In January 1996, the Company acquired a 16.7% equity interest in the form of
convertible redeemable preferred stock (the "Preferred Stock") in La Salsa
Holding Co. ("La Salsa"), a franchisor and operator of La Salsa Mexican
restaurants for approximately $5,000. Each share of Preferred Stock may be
converted into La Salsa's Class D Common Stock at $1.50 per share and is
redeemable at face value in installments beginning on March 3, 2000. In
addition, the Company received warrants to acquire, within 18 months, shares of
convertible redeemable preferred stock representing an additional 13.3% equity
interest for approximately $7,100. In addition, the Company entered into a
10-year license agreement with La Salsa to operate La Salsa outlets within
certain existing Fuddruckers restaurants whereby the Company will pay a
franchise fee, royalty payments equal to 5% of La Salsa gross sales, certain
training costs and marketing fund fees for each outlet opened. The Company's
investment in La Salsa is accounted for under the cost method of accounting.
On March 24, 1994, the Company acquired a 49% interest in Innovative Dining
Management, Inc. ("IDM"), a newly formed contract foodservice management
company, in exchange for $10 in cash. The Company invested $70 in 1994, an
additional $70 in 1995 in the form of Preferred Stock and advanced $50 to IDM in
exchange for a long-term note collateralized by all of the assets of IDM. In
addition, on December 31, 1994, Daka sold one of its educational foodservice
contracts and related assets to IDM at book value in exchange for a note
receivable of $329. In the third quarter of 1996, the Company wrote off its
investment in and note receivable from IDM in connection with the initial
adoption of SFAS 121 (see Note 1).
5. Long-Term Debt
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Borrowings under
revolving line-of-credit $ 92,969 $ 45,969
Convertible Subordinated Notes -- 20,538
Notes payable 747 546
Capital lease obligations 6,146 3,976
(see Note 10) ------- -------
99,862 71,029
Less current portion (1,507) (851)
------- -------
$ 98,355 $ 70,178
======== ========
</TABLE>
<PAGE>
During 1996, the Company amended its revolving line-of-credit agreements
(the "Amended" and the "June Agreement", collectively the "1996 Agreements")
principally to increase the Company's borrowing limit from $75,000 to $150,000,
extend the maturity date to June 30, 1999 and amend certain loan covenants.
The terms of the 1996 Agreements provided the Company with the option of
borrowing on a variable basis at either the bank's base rate, defined as the
higher of the Federal Funds Rate plus .25% or the bank's prime rate, (8.25%
at June 29, 1996) or on a fixed basis at LIBOR, plus a margin of between .5%
and 1.75% (6.56% at June 29, 1996) subject to prospective adjustment if the
Company achieved pre-defined levels of debt to consolidated earnings before
interest and income taxes. At June 29, 1996, approximately $89,000 of
outstanding borrowings had fixed rates expiring through the first quarter of
1997. The Company is charged a commitment fee of .25% per annum on the unused
portion of the line-of-credit. The agreement is collateralized by all of the
assets of the Company and its wholly-owned subsidiaries and contains various
covenants which, among other things, require a minimum level of interest
coverage, tangible assets and tangible net worth. The terms of the
agreement prohibit the payment of dividends with respect to the Company's
Common Stock. Borrowing capacity under the revolving line-of-credit is
reduced by any outstanding letters of credit issued by the Company.
At June 29, 1996, the Company was not in compliance with its debt service
coverage, minimum tangible net worth and fixed charge coverage covenants. On
October 15, 1996, the Company obtained a waiver of noncompliance related to
such covenants from its lenders. The Company also renegotiated certain terms
and conditions of the 1996 Agreements (the "October Agreement"), decreasing
the Company's borrowing limit from $150 million to $125 million (reduced by
$20 million on June 30, 1997), changing the maturity date to October 1,
1997, restricting restaurant expansion and capital expenditures, and amending
certain loan covenants. Borrowing rates were increased to a 3% margin and a
1.75% margin on fixed basis and variable basis borrowings, respectively, and
the commitment fee increased to .50% per annum on the unused portion. Costs
associated with obtaining and negotiating the Company's October Agreement are
expected to approximate $450. At June 29, 1996, the Company has available
borrowings under the October Agreement of approximately $22 million.
In December 1995, the Company entered into an interest rate swap agreement
whereby $3,500 of notional principal amount under a certain financing facility
will bear interest at 6.57%. The interest rate swap agreement is effective July
1, 1996 and expires September 1, 2000. The Company also entered into an
interest rate swap agreement in August 1995 whereby, effective September 21,
1995, $30,000 of notional principal amount under the Company's revolving
line-of-credit agreement will bear interest at 5.96% plus a margin
determined in accordance with the terms of the line-of-credit agreement,
which effectively sets the interest rate at 7.5%. The swap agreement
expires on September 22, 1997. The Company recorded additional interest
expense during 1996 totaling approximately $62, pursuant to the swap agreement
rate.
<PAGE>
During 1993, the Company sold $28,750 of 7% Convertible Subordinated Notes
("Notes"). The Notes were scheduled to mature on March 15, 2003 and required
semi-annual payments of interest on March 15 and September 15 and were
convertible into Common Stock at the option of the Holder, at any time prior to
maturity or redemption, at a conversion price of $12 per share, subject to
adjustment in certain instances. The Company was permitted to redeem the Notes,
in whole or in part, at any time after March 26, 1996. During 1996, $20,484 of
Notes were converted into Common Stock by the Holders of such Notes. In
connection with the conversion, the Company increased Stockholders' Equity by
$19,851, net of related unamortized deferred debt issue costs. Subsequent to
the conversion, the Company redeemed the remaining outstanding Notes. The
conversion and redemption had no effect on fully diluted earnings per share
since the shares issuable per conversion of the Notes were included in the
calculation of fully diluted earnings per share.
Notes payable include several notes bearing interest ranging from 6% to 11%,
require monthly or quarterly payments of principal and interest and mature at
various times ranging from July 1996 to July 2002.
Maturities of long-term debt, including capital lease obligations, are as
follows:
1997 .................. $ 1,507
1998 .................. 94,474
1999 .................. 1,565
2000 .................. 1,300
2001 .................. 991
Thereafter ............ 25
-------
$99,862
=======
<PAGE>
6. Convertible Preferred Stock
In January 1992, the Company sold, for $10,000 in cash, 100,000 shares of
Series A Convertible Preferred Stock ("Preferred Stock"), which may be
redeemed, in whole or in part, at any time at the Company's option. The
Preferred Stock is convertible at any time into a number of shares of Common
Stock to be determined by multiplying the number of shares of Preferred Stock
to be converted by $100 and dividing the result by a specified conversion
price. The initial conversion price of $4.50 per share would result in the
issuance upon conversion of 2,222,222 shares of Common Stock. The terms of the
Preferred Stock require that the Company pay dividends semi-annually at the
rate of 8% per annum, provided however, that no such dividends will be payable
if for at least 30 trading days during the previous six-month period the per
share price of the Common Stock attains certain minimum levels. The minimum
levels were not attained during each of the three six-month periods ended
December 30, 1994 resulting in the payment of $800 and $400 in dividends for
fiscal 1994 and fiscal 1995, respectively. The minimum levels were attained in
periods subsequent to December 31, 1994 and accordingly, no dividends were
required to be paid.. During the six-month period June 29, 1996, the 30 day
minimum per share price of the Common Stock was $20.00, and increases at the
rate of approximately 10% every six months thereafter until June 30, 2000. In
addition, initial Holders of the Preferred Stock were issued contingent
warrants to purchase 2,222,222 shares of Common Stock at $4.50 per share. The
contingent warrants expire on January 30, 2002 and may be exercised in whole or
in part only upon redemption of the Preferred Stock by the Company.
During 1996, Holders of 88,088 shares of the Preferred Stock converted such
shares into 1,957,521 shares of Common Stock resulting in the expiration of
1,957,521 contingent warrants. The conversion had no effect upon fully
diluted earnings per share as these shares were included in the calculation of
fully diluted earnings per share. The Holders of the Preferred Stock were
entitled to elect two directors of the Company, so long as more than 50% of the
Preferred Stock originally issued remained outstanding, and one director so
long as 25% of the Preferred Stock originally issued remained outstanding. In
addition, the Holders of the Preferred Stock were entitled to vote on all
matters submitted to the Company's Stockholders for a vote. Each share of
Preferred Stock is entitled to one vote for each share of Common Stock issuable
upon conversion of the Preferred Stock at the time the vote is taken. Upon any
liquidation of the Company, the Holders of Preferred Stock are entitled to be
paid an amount equal to $100 per share plus accrued and unpaid dividends before
any payment to the Holders of Common Stock. Additionally, any sale or issuance
of Common Stock by the Company or its Stockholders which results in another
person owning more than 50% of the Common Stock is an event of default which
reduces the conversion price then in effect by 50%.
<PAGE>
The terms of the Preferred Stock Certificate of Designation require the Company
to comply with certain conditions. In the event of the Company's failure to pay
dividends, redeem the Preferred Stock when required, achieve a specified market
price for the Common Stock during 1997-1999, voluntary bankruptcy or
insolvency, the Certificate of Designation provides for a reduction in the
conversion price of the Preferred Stock of up to 40%, an additional 2%
added to the annual dividend rate, and in the event of voluntary bankruptcy,
immediate redemption and the right to elect an additional director who
would be entitled to cast a number of votes equal to the sum of the number
of votes entitled to be cast by all other directors plus one, depending
on the nature of the event of noncompliance.
7. Other Assets
The components of other assets are as follows:
1996 1995
---- ----
Goodwill ....................... $ 23,698 $ 23,548
Other .......................... 17,791 13,056
-------- --------
41,489 36,604
Less accumulated amortization .. (8,772) (5,162)
-------- --------
$ 32,717 $ 31,442
======== ========
8. Accrued Expenses
The components of accrued expenses are as follows:
1996 1995
---- ----
Salaries, wages and related taxes ... $ 6,596 $ 6,195
Taxes ............................... 2,394 2,787
Insurance ........................... 2,111 3,096
Other ............................... 4,009 6,125
------- -------
$15,110 $18,203
======= =======
<PAGE>
9. Income Taxes
In 1994, the Company changed its method of accounting for income taxes by
adopting SFAS No. 109 - "Accounting for Income Taxes". Prior to 1994, the
Company accounted for income taxes pursuant to SFAS No. 96, "Accounting
for Income Taxes". The Company elected to record the effect of adopting
SFAS No. 109 in 1994's consolidated financial statements rather
than by restating prior years' consolidated financial statements. The adoption
of SFAS No. 109 had no material impact on net income and earnings per share.
Income tax expense is comprised of the following:
1996 1995 1994
---- ---- ----
Income before extraordinary gain:
Currently payable:
Federal ................................. $ 2,025 $ 5,403 $ 2,312
State ................................... 712 1,868 1,027
------- ------- -------
2,737 7,271 3,339
------- ------- -------
Deferred income tax (benefit) expense ... (2,608) (1,954) 358
------- ------- -------
Income tax expense ...................... $ 129 $ 5,317 $ 3,697
======= ======= =======
Deferred tax assets and liabilities are comprised of the following:
Asset
(Liability)
1996 1995
Current:
Inventories $ (368) $ (284)
Accrued expenses 528 566
Prepaid expenses (1,429) (1,091)
Net operating loss carryforwards 327 342
Other 155 231
------- -------
(787) (236)
------- -------
Noncurrent:
Net operating loss carryforwards 2,820 2,760
Impairment charges 1,766 --
Depreciation and amortization (272) 263
Deferred income 194 255
Accrued expenses 2,205 1,909
Less valuation allowance (1,227) (2,860)
------- -------
5,486 2,327
------- -------
$ 4,699 $ 2,091
======= =======
<PAGE>
The following is a reconciliation of income taxes at the federal statutory rate
to the Company's income tax expense:
1996 1995 1994
---- ---- ----
Income taxes computed at statutory
federal income tax rates $ 352 $ 5,215 $ 3,949
Non-deductible merger costs 986 -- --
Non-deductible goodwill amortization 406 -- --
State income taxes, net of federal tax benefit 318 949 773
Net operating loss carryforwards -- -- (408)
Reduction of valuation allowance (1,633) (171) (320)
Income tax credits -- (414) (723)
Other, net 300 (262) 426
------- ------- -------
Income tax expense $ 129 $ 5,317 $ 3,697
------- ------- -------
Effective tax rate 12.5% 35.7% 32.8%
======= ======= =======
As of June 29, 1996, the Company had federal net operating loss carryforwards of
approximately $9,250 expiring at various dates through 2011. Approximately
$6,500 of the losses are related to Fuddruckers and $2,750 are related to
Fuddruckers' 63% owned subsidiary, Atlantic Restaurant Ventures, Inc. ("ARVI").
Fuddruckers' net operating loss carryforwards are limited in use to $922
annually and can only be used to offset taxable income of Fuddruckers. ARVI's
net operating loss carryforwards can only be used to offset taxable income of
ARVI, of which $1,550 of the $2,750, is limited in use to $129 annually. In 1995
and 1994, the Company provided a valuation allowance for the tax benefit of
Fuddruckers' and ARVI's net operating loss carryforwards not expected to be
utilized in the succeeding year based on historical operating results and other
available evidence. In 1996, as a result of changes to the realization estimate
of Fuddruckers' net operating loss carryforwards, the Company reversed the
valuation allowance relating to Fuddruckers' net operating loss carryforwards
and reported an income tax benefit of $1,935. This tax benefit was offset, in
part, by a $302 increase in the valuation allowance related to ARVI. During
1995,the valuation allowance was reduced by $342 relating to the net operating
losses expected to be utilized by Fuddruckers in 1996. This decrease in the
valuation allowance was offset, in part, by a $171 increase resulting from
net operating loss incurred by ARVI in 1995.
10. Commitments and Contingencies
Leases
The Company has entered into lease agreements for certain restaurant facilities
and office space. The fixed terms of the leases range up to 20 years and, in
general, contain multiple renewal options for various periods ranging from 5 to
25 years. Certain leases contain provisions which require additional payments
based on sales performance and the payment of common area maintenance charges
and real estate taxes. In addition, the Company's foodservice contracts, which
may be canceled by either party upon 30 to 90 days notice provide for the
payment of various forms of rent. Finally, the Company also leases certain
restaurant and computer equipment under operating leases which expire at various
dates through June, 2001.
<PAGE>
In October 1995, Fuddruckers obtained a commitment for a $25,000 sale-leaseback
financing facility from Franchise Finance Corporation of America ("FFCA").
Pursuant to the terms of the facility, Fuddruckers will sell and lease back from
FFCA up to 20 Fuddruckers restaurants to be constructed, in which Fuddruckers
has an ownership interest in the real estate and will pay a commitment fee of
1.5% of the sale price of each property sold to FFCA. The sale price is limited
to the lesser of 80% of the fair market value of the property or $1,250. The
unused commitment, if any, expires on October 31, 1996. The leases provide for a
fixed minimum rent plus additional rent based on a percentage of sales and
provide for an initial lease term of 20 years with two 5-year renewal options
exercisable at the option of Fuddruckers. The terms and conditions of the
sale-leaseback are such that they do not meet the criteria for treatment as
capital leases under SFAS No. 13 - "Accounting For Leases. As of June
29, 1996, 11 Fuddruckers restaurants have been sold to FFCA and
approximately $11.8 million of the commitment was available for use.
The Company is currently negotiating future financing commitments
with FFCA.
In December 1995, CEI obtained a commitment for a $40,000 development and
sale-leaseback financing facility from AEI Fund Management, Inc. ("AEI").
Pursuant to the terms of the agreement, CEI will sell and lease back from AEI
Champps restaurants to be constructed, in which CEI has an ownership interest in
the real estate and will pay a commitment fee of 1% of the sale price of each
property sold to AEI. The purchase price will be equal to the total project cost
of the property, as defined in the agreement, not to exceed its appraised value
(the "Purchase Price"). The unused commitment, if any, expires on December 6,
1997. The leases, to be guaranteed by DAKA, provide for a fixed minimum rent
based on a percentage of the respective property's Purchase Price, subject to
subsequent CPI-based increases. The leases also provide for an initial term of
20 years with two 5-year renewal options exercisable at the option of CEI. The
terms and conditions of the sale-leaseback are such that they do not meet the
criteria for treatment as capital leases under SFAS No. 13. As of June 29,
1996 no Champps restaurants have been sold to AEI.
In December 1995, the Company obtained a $3,500 capital lease facility from
Chase Equipment Leasing, Inc. ("Chase"). The lease provides for fifty-one
consecutive monthly rental payments, based on the total of all progress payments
made by Chase, commencing on or before July 1, 1996. Interest accrues at the
LIBOR rate plus 1%. As of June 29, 1996, there were no borrowings under this
facility.
In January, 1996, CEI obtained a $5,000 capital lease facility from a third
party lender to fund the cost of certain restaurant, audio/visual and point of
sale equipment related to new restaurant construction. The lease facility has a
five-year term and an implicit interest rate of 10.2%. As of June 29, 1996,
approximately $4,000 of the lease facility commitment was available for use.
Total rent expense including payments made pursuant to foodservice contracts in
1996, 1995 and 1994 amounted to $27,240, $22,058 and $17,696, respectively.
Total contingent rentals included in rent expense amounted to $4,889, $3,165 and
$1,262, respectively.
Included in property and equipment in 1996, 1995 and 1994 are $6,213, $4,841 and
$1,413, respectively, of equipment held pursuant to capital lease arrangements.
The related accumulated amortization was $1,413, $770 and $555, respectively.
Capital lease additions for equipment totaled $3,718, $2,326 and $1,674, in
1996, 1995 and 1994, respectively.
<PAGE>
Future minimum lease payments pursuant to leases with noncancelable lease terms
in excess of one year during each of the next five years and thereafter are as
follows:
Years Operating Capital
Ending Leases Leases
1997 ............................................. $ 16,965 $ 1,743
1998 ............................................. 16,703 1,661
1999 ............................................. 15,876 1,651
2000 ............................................. 15,085 1,279
2001 ............................................. 14,825 633
Thereafter ....................................... 101,482 63
-------- --------
Total future minimum lease payments .............. $180,936 7,030
======== ========
Less amount representing interest ................ (884)
--------
Present value of future minimum lease payments ... $ 6,146
========
Put/Call Agreements
On October 22, 1993, Fuddruckers entered into an agreement with a partnership
affiliated with the president of a majority-owned subsidiary of Fuddruckers
pursuant to which the partnership has agreed to purchase substantially all
shares of common stock of the subsidiary not currently owned by Fuddruckers. The
partnership also invested $1,100 in shares of the subsidiary's preferred stock.
Additionally, Fuddruckers and the partnership entered into a Put/Call Agreement
whereby Fuddruckers has an option to purchase and the partnership has the right
to require Fuddruckers to purchase all the common and preferred stock of the
subsidiary owned by the partnership for a purchase price of $5,400 plus a
premium based on the subsidiary's future financial performance. The put/call
option is exercisable by either Fuddruckers or the partnership between March 15,
1999 and February 15, 2000. On the date of the Put/Call Agreement the fair
market value of the subsidiary's common stock plus the redemption value of the
preferred stock was greater than the present value of the put/call price of
$5,400 based upon an independent valuation of the common stock obtained by the
Company from an investment banking firm. Similarly, at June 29, 1996, based upon
an independent valuation, the value of the common and preferred stock was in
excess of the present value of the put/call price.
In connection with the acquisition by DRLP, the Company and SMMSLP entered into
a Put/Call Agreement whereby SMMSLP is permitted to require the Company to
purchase its limited partnership interest in DRLP anytime during the ten-year
term of the partnership for a purchase price equal to $2,600 plus SMMSLP's
portion of any net undistributed earnings of DRLP. In addition, the Company is
permitted to require SMMSLP to sell its limited partnership interest to the
Company at any time after February 8, 2000 for a purchase price of 120% of the
sum of (i) $2,600 and (ii) SMMSLP's portion of any net undistributed earnings of
DRLP. On July 13, 1996, SMMSLP exercised its Put right pursuant to the
provisions of the Put/Call Agreement.
<PAGE>
Purchase Commitments
In July 1995, the Company entered into a five year Exclusive Coffee
Manufacturing Agreement (the "Coffee Agreement") with a third party supplier of
ground and whole bean coffees, including flavored and gourmet coffee products.
Purchase prices to be paid by the Company are based on commodity market
exchange prices. At June 29, 1996, the Company's commitment under the Coffee
Agreement is approximately $11,883.
Litigation
In certain circumstances, where management and legal counsel believe that a loss
has been incurred, the Company has recorded an estimate of such loss. The
Company is also engaged in various other legal actions arising in the ordinary
course of business which, in the judgment of management based upon consultation
with legal counsel, the Company has adequate legal defenses or insurance
coverage with respect to these actions or believes that the ultimate outcome
will not have a material adverse affect on the Company's consolidated financial
position, results of operations or cash flows.
11. Stock Options and Employee Benefit Plans
Stock Options
The Company has an Incentive Stock Option Plan, a Non-Qualified Stock Option
Plan and two senior executive stock option plans (the "Plans"). The Plans
provide for the granting of options to purchase an aggregate of 1,250,000 shares
of Common Stock. As of June 29, 1996, there were 71,530 shares reserved for
issuance under the Plans.
Under the Plans, options may be granted for a term of up to ten years to
eligible employees at an exercise price equal to the fair market value of the
Common Stock on the date of the grant. At June 29, 1996, 539,146 options to
purchase shares of Common Stock under the Plans were exercisable. The activity
related to all stock options issued under the Plans referred to above is
summarized as follows:
Number of Exercise Price
Shares Per Share
------ ---------
Outstanding, June 26, 1993 299,985 $ 2.50 - 11.75
Options granted 268,378 9.88
Options exercised (43,108) 2.50 - 11.75
Options canceled (6,125) 2.50 - 11.75
--------
Outstanding, July 2, 1994 519,130 2.50 - 11.75
========
Options granted 154,905 12.88 - 17.37
Options exercised (37,360) 2.50 - 12.88
Options canceled (22,020) 2.50 - 11.75
--------
Outstanding, July 1, 1995 614,655 2.50 - 17.37
========
Options granted 530,635 11.05 - 35.94
Options exercised (201,920) 2.50 - 28.63
Options canceled (53,180) 2.50 - 28.63
--------
Outstanding, June 29, 1996 890,190 2.50 - 35.94
========
<PAGE>
Employee Benefit Plans
The Company sponsors a 401(k) retirement plan for the benefit of its nonunion
Associates. The Plan enables Associates to contribute up to 15% of their annual
compensation. The Company makes discretionary contributions to the Plan. The
Company contributed $305, $375 and $0 to the Plan in 1996, 1995 and 1994,
respectively.
Effective July 3, 1994, the Company implemented a long-term incentive
compensation plan for its Chief Executive Officer whereby a portion of the
increase in the market value of the Company's Common Stock over predefined
amounts, is payable in either cash or stock at the option of the Company.
Amounts payable under the plan vest on June 30, 1997. At June 29, 1996, $1,221
had been accrued representing a pro rata portion of the amount expected to be
payable under the plan based on the market value of the Company's Common Stock
on June 29, 1996. During 1995, the Company's Board of Directors and stockholders
approved the Equity Incentive Plan for its senior management whereby stock
options will be issued at not less than fair market value and will vest three
years from the grant date. The Company granted approximately 300,000 options
under this plan in 1996. There were no options granted under this plan during
1995.
12. Fair Value of Financial Instruments
The estimated fair value of financial instruments has been
determined by the Company using available market information and appropriate
valuation methodologies. The following methods and assumptions were used to
estimate the fair value of the Company's financial instruments for which it was
practicable to estimate that value:
Current Assets and Liabilities - The carrying amount of cash, trade
receivables, trade accounts payable and accrued expenses approximates fair
value because of the short maturity of these instruments.
Notes Receivable - The carrying value of notes receivable approximates fair
value and were estimated based on discounted cash flows expected to be
received using interest rates at which similar loans are made to borrowers
with similar credit ratings, or if the loan is collateral dependent,
management's estimate of the fair value of the collateral.
Long-term Debt - The fair values of each of the Company's long-term debt
instruments approximates the carrying values since the interest rates are
generally floating or fixed for a period of short duration and are based on
prevailing market rates.
Interest Rate Swaps - The fair value of interest rate swaps is the amount
at which they could be settled based on estimates obtained from dealers.
The amount required to settle outstanding interest rate swaps at June 29,
1996 and July 1, 1995 was approximately $60 and $4, respectively.
<PAGE>
13. Segment Information
Income from foodservice, restaurant and franchising operations have been
determined applying the accounting policies in Note 1. Revenue and costs as
shown below are directly related to each business and do not include an
allocation of corporate expenses, non-operating income, interest expense and
income taxes. There are no sales among the Company's three businesses. The table
below presents certain financial information for the Company's contract
foodservice, Fuddruckers and Champps businesses, for 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Total Revenues:
Sales from profit and loss contracts ........................... $ 218,361 $ 193,154 $ 150,839
Management and other fees ...................................... 6,148 5,715 6,132
Restaurant sales - Fuddruckers ................................. 131,592 110,703 87,030
Franchising income - Fuddruckers ............................... 6,575 5,372 4,318
Restaurant sales - Champps ..................................... 41,593 19,257 8,273
Franchising income - Champps ................................... 555 636 554
--------- --------- ---------
Total revenues ............................................... $ 404,824 $ 334,837 $ 257,146
========= ========= =========
Foodservice:
Sales from profit and loss contracts ........................... $ 218,361 $ 193,154 $ 150,839
Operating expenses:
Labor costs ................................................... 74,554 65,481 51,814
Product costs ................................................. 78,666 69,964 53,199
Other operating expenses ...................................... 33,137 30,581 23,274
Depreciation and amortization ................................. 5,665 4,509 3,398
Impairment charges ............................................ 3,198 -- --
Merger costs .................................................. 300 -- --
--------- --------- ---------
Income from profit and loss contracts .......................... 22,841 22,619 19,154
Management and other fees ...................................... 6,148 5,715 6,132
--------- --------- ---------
Income from foodservice operations ............................. 28,989 28,334 25,286
--------- --------- ---------
Fuddruckers:
Sales from restaurant operations ............................... 131,592 110,703 87,030
Operating expenses:
Labor costs ................................................... 38,137 31,889 25,034
Product costs ................................................. 37,146 30,785 24,209
Other operating expenses ...................................... 35,582 28,504 22,358
Depreciation and amortization ................................. 7,953 5,273 4,029
Impairment charges ............................................ 2,450 -- --
--------- --------- ---------
Income from restaurant operations .............................. 10,324 14,252 11,400
Franchising income ............................................. 6,575 5,372 4,318
--------- --------- ---------
Income from restaurant and franchising operations .............. 16,899 19,624 15,718
--------- --------- ---------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 1994 1995
---- ---- ----
<S> <C> <C> <C>
Champps:
Sales from restaurant operations ............................. 41,593 19,257 8,273
Operating expenses:
Labor costs ................................................. 13,797 5,971 2,600
Product costs ............................................... 11,981 5,590 2,318
Other operating expenses .................................... 9,406 3,951 1,669
Depreciation and amortization ............................... 3,596 1,056 277
Impairment charges .......................................... 63 -- --
Merger costs ................................................ 2,600 -- --
-------- -------- --------
Income from restaurant operations ............................ 150 2,689 1,409
Franchising income ........................................... 555 636 554
-------- -------- --------
Income from restaurant and franchising operations ............ 705 3,325 1,963
-------- -------- --------
Income from operations before selling,
general and administrative expenses .......................... 46,593 51,283 42,967
Selling, general and administrative expenses (1) ............. 40,848 32,906 29,033
-------- -------- --------
Operating income ............................................. 5,745 18,377 13,934
Interest expense ............................................. 5,874 4,344 2,883
Interest income .............................................. (352) (859) (331)
Income before income taxes and minority interests ............ 203 14,892 11,382
Income tax expense ........................................... 129 5,317 3,697
Minority interests ........................................... (831) (8) 99
-------- -------- --------
Net income ................................................... $ 905 $ 9,583 $ 7,586
======== ======== ========
</TABLE>
(1) Selling, general and administrative expenses include depreciation expense
on corporate assets of $1,278, $852 and $769 in 1996, 1995 and 1994,
respectively.
<PAGE>
Corporate assets include cash and cash equivalents, computer equipment and
deferred income taxes. The following table presents certain balance sheet
information for the Company's foodservice, Fuddruckers and Champps subsidiaries:
1996 1995 1994
---- ---- ----
Foodservice:
Total assets $ 80,844 $ 74,703 $ 49,376
Capital expenditures 7,530 6,684 6,263
Fuddruckers:
Total assets 104,177 83,834 62,178
Capital expenditures 41,231 29,011 8,941
Champps:
Total assets 27,387 15,729 13,183
Capital expenditures 13,771 5,309 671
Corporate:
Total assets 19,149 6,587 4,242
Capital expenditures 5,698 2,407 1,032
<PAGE>
15. Quarterly Results (Unaudited)
The following unaudited quarterly financial data should be read in conjunction
with the audited consolidated financial statements, related notes and
Management's Discussion and Analysis of Results of Operations and Financial
Condition:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
<S> <C> <C> <C> <C> <C>
1996:
Revenues ................................... $ 93,514 $ 108,191 $ 103,214 $ 99,905 $ 404,824
Gross profit ............................... 14,323 17,177 4,389 10,704 46,593
Income (loss) before income taxes
and minoritt interests..................... 3,662 5,996 (7,621) (1,834) 203
Net income (loss) .......................... 2,255 3,816 (5,528) 362 905
Net income:
Primary .................................. 0.27 0.38 (0.56) 0.03 0.09
Fully diluted ............................ 0.22 0.35 (0.56) 0.03 0.09
1995:
Revenues ................................... $ 67,102 $ 81,007 $ 90,145 $ 96,583 $ 334,837
Gross profit ............................... 10,814 13,070 13,089 14,310 51,283
Income before income taxes ................. 2,631 4,231 3,735 4,295 14,892
Net income ................................. 1,697 2,796 2,384 2,706 9,583
Net income:
Primary .................................. 0.26 0.37 0.35 0.38 1.35
Fully diluted ............................ 0.18 0.28 0.24 0.26 0.96
</TABLE>
Certain amounts related to the third quarter of 1996 have been reclassified to
reflect further analysis performed by the Company to the amount provided as of
March 30, 1996, related to the adoption of SFAS No. 121 and the
write-down of reacquired franchise rights, investments and other assets. Such
reclassifications have the effect of reducing the amounts reported as
"impairment and other charges" as of March 30, 1996 by approximately $2,250 and
increasing the amount reported as "cost of sales and operating expenses" by
approximately $2,250. The reclassifications had no effect on the reported gross
profit, income before income taxes and minority interests, net income or
primary and fully diluted earnings per share for the quarter ended
March 30, 1996.
Exhibit 11
DAKA INTERNATIONAL, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
YEARS ENDED JUNE 29, 1996, JULY 1, 1995 AND JULY 2, 1994
<TABLE>
<CAPTION>
Years Ended
-----------------
June 29, July 1, July 2,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Primary:
Net income 905 9,583 7,586
Net income available to common stockholders 905 9,183 6,786
------ ------ ------
Weighted average number of shares outstanding 9,624 6,530 5,909
Weighted average number of options outstanding 347 260 173
------ ------ ------
9,971 6,790 6,082
====== ====== ======
Primary earnings per share:
Net income available to common stockholders 0.09 1.35 1.12
====== ====== ======
Fully Diluted:
Net income available to common stockholders 905 9,183 6,786
Add back dividend on Preferred Stock -- 400 800
Add back interest expense on Convertible Notes,
after tax effect -- 1,147 1,324
------ ------ ------
905 10,730 8,910
------ ------ ------
Weighted average number of shares outstanding 9,924 6,973 5,909
Weighted average number of options outstanding 347 321 201
Shares issuable upon conversion of Preferred Stock 264 2,222 2,222
Shares issuable upon conversion of Notes -- 1,712 2,396
------ ------ ------
10,535 11,228 10,728
====== ====== ======
Fully diluted earnings per share:
Net income 0.09 0.96 0.83
====== ====== ======
</TABLE>
SERIES D CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
LA SALSA HOLDING CO., a Delaware corporation
January 12, 1996
<PAGE>
TABLE OF CONTENTS
Exhibit A Amended and Restated Certificate of Incorporation
Exhibit B Form of Series D Convertible Preferred Stock Warrant
Exhibit C Fourth Amended and Restated Restricted Stock Agreement
Exhibit D Fourth Amended and Restated Registration Rights Agreement
Exhibit E Opinion of Brobeck, Phleger & Harrison
Schedule 1.1 Schedule of Investors
Schedule 2 Schedule of Exceptions
Schedule 2.4(c) Schedule of Shareholders
Schedule 2.13 Patents and Trademarks
<PAGE>
SERIES D CONVERTIBLE PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES D CONVERTIBLE PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT is made as of the 12th day of January, 1996, by and among La Salsa
Holding Co., a Delaware corporation (the "Company"), and each of the Investors
listed on Schedule 1.1 hereto (each of which is herein referred as an
"Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
Purchase and Sale of Stock and Warrants
Sale and Issuance of Stock
The Company has adopted and filed with the Secretary of State of Delaware
the Amended and Restated Certificate of Incorporation in the form attached
hereto as Exhibit A (the "Restated Certificate").
Subject to the terms and conditions of this Agreement, each Investor
agrees, severally, to purchase at the Closing and the Company agrees to sell and
issue to each Investor at the Closing, that number of shares of the Company's
Series D Convertible Preferred Stock set forth opposite each Investor's name on
Schedule 1.1 hereto for the purchase price set forth thereon.
Sale and Issuance of Warrants
Subject to the terms and conditions of this Agreement, each Investor
agrees, severally, to purchase at the Closing and the Company agrees to sell and
issue to each Investor at the Closing, a warrant, in the form attached hereto as
Exhibit B (a "Warrant"), to purchase that number of shares of the Company's
Series D Convertible Preferred Stock set forth opposite such Investor's name on
Schedule 1.1 hereto (the "Warrant Shares") at an exercise price of $1.50 per
share for the purchase price set forth opposite such Investor's name on Schedule
1.1 hereto.
Closing
The purchase and sale of the Series D Convertible Preferred Stock and the
Warrants shall take place at the offices of Brobeck, Phleger & Harrison, Two
Embarcadero Place, 2200 Geng Road, Palo Alto, California, by mail or facsimile
transmission, or by deposit in and release from escrow of this Agreement and the
consideration, instruments and documents contemplated hereby, on the date hereof
or at such other time and place and in such other manner as the Company and each
of the Investors mutually agree upon orally or in writing (which time and place
are designated as the "Closing"). At the Closing the Company shall deliver to
each Investor certificates representing the Series D Convertible Preferred Stock
which such Investor is purchasing andan executed Warrant representing the
warrant such Investor is purchasing against payment of the purchase price
therefor by check, wire transfer, cancellation of indebtedness, or any
combination thereof. In the event that payment by an Investor is made, in whole
or in part, by cancellation of indebtedness, then such Investor shall surrender
to the Company for cancellation at the Closing any evidence of such indebtedness
or shall execute an instrument of cancellation in form and substance acceptable
to the Company.
Representations and Warranties of the Company
Except as otherwise set forth in the applicable section of Schedule 2
hereto, the Company hereby represents and warrants to each Investor that:
Organization, Good Standing and Qualification
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. La Salsa Franchise, Inc.
("Franchise") is a wholly owned subsidiary of the Company duly organized,
validly existing and in good standing under the laws of the State of California
(Franchise hereinafter shall be referred to as the "Subsidiary"). Each of the
Company and the Subsidiary is qualified to do business as a foreign corporation
in every other jurisdiction in which the failure to so qualify would have a
material adverse effect on the business of the Company or the Subsidiary. Each
of the Company and the Subsidiary has the requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as presently conducted and as proposed to be conducted. The Company has
previously delivered to the Investors true and accurate copies of the Company's
and the Subsidiary's respective Restated Certificate (or Articles) of
Incorporation, as amended, and Bylaws, as presently in effect.
Corporate Power
The Company has all requisite legal and corporate power and authority to
enter into this Agreement and to sell the shares of Series D Convertible
Preferred Stock pursuant to Section 1, and to carry out and perform its other
obligations under the terms of this Agreement.
Subsidiaries and Affiliates
Except for the Subsidiary, the Company does not own or control, directly or
indirectly, any other interest or investment in any corporation, partnership,
association or other form of business entity.
Capitalization
The authorized capital of the Company consists of:
Class A Common Stock. 33,300,000 shares of $.001 par value Class A Common
Stock, of which 135,666 shares are issued and outstanding as of the Closing.
Class B Common Stock. 1,000,000 shares of $.001 par value Class B Common
Stock (collectively with the Class A Common Stock, the "Common Stock"), none of
which are issued and outstanding as of the Closing. Preferred Stock. 29,300,000
shares of $.01 par value Preferred Stock (the "Preferred Stock"), of which
10,200,000 have been designated Series A Convertible Preferred Stock, 10,100,000
of which are issued and outstanding as of the Closing, 4,800,000 have been
designated Series B Convertible Preferred Stock, 4,633,333 of which are issued
and outstanding as of the Closing, 1,500,000 have been designated Series C
Convertible Preferred Stock, 1,333,333 of which are issued and outstanding as of
the Closing, and 12,800,000 have been designated Series D Convertible Preferred
Stock, 3,137,092 of which are issued and outstanding as of the Closing. The
rights, privileges and preferences of all of the Series A, B, C and D
Convertible Preferred Stock are as stated in the Restated Certificate.
All such issued and outstanding shares referred to in Sections 2.4(a),
2.4(b) and 2.4(c) above are duly authorized and validly issued, are fully paid
and nonassessable, are owned beneficially and of record by the shareholders and
in the amounts set forth in Schedule 2.4(c)(1) ("Schedule of Shareholders")
attached hereto, and have been offered, issued, sold and delivered by the
Company in compliance with applicable federal and state securities laws.
Except for (i) the warrant dated February 20, 1993, initially to purchase
100,000 shares of Common Stock issued to Foothill Capital Corporation (the
"Foothill Warrant"), (ii) the option to purchase 41,000 shares of Common Stock
issued to Dick Campbell, (iii) the option to purchase 20,000 shares of Common
Stock issued to Victoria Tanner ,(iv) currently outstanding options to purchase
2,455,737 shares of Common Stock granted to employees pursuant to the Stock
Option Plan for Executive and Key Employees of La Salsa Holding Co. (the "Option
Plan"), (v) the conversion privileges of the Series A, B, C and D Convertible
Preferred Stock and (vi) the rights provided in Section 8 of that certain Fourth
Amended and Restated Restricted Stock Agreement of even date herewith, by and
among the Company and certain of its stockholders, the form of which is attached
hereto as Exhibit C (the "Restricted Stock Agreement"), there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. In addition to the aforementioned options, the
Company has reserved an additional 276,417 shares of its Common Stock for
purchase upon exercise of options to be granted in the future under the Option
Plan.
Authorization
All corporate action on the part of the Company, its officers, directors
and stockholders necessary for the authorization, execution and delivery of this
Agreement, the Warrants, that certain Third Amended and Restated Registration
Rights Agreement of even date herewith, by and among the Company and certain of
its stockholders, the form of which is attached hereto as Exhibit D (the "Rights
Agreement"), and the Restricted Stock Agreement, the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance and delivery of the Series D Convertible Preferred Stock being sold
hereunder, the Warrant Shares issuable upon exercise of the Warrants and
theCommon Stock issuable upon conversion of the Series D Convertible Preferred
Stock being sold hereunder and the Warrant Shares has been taken or will be
taken prior to the Closing. This Agreement, the Warrants and the Rights
Agreement, when executed and delivered by the Company, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with their
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies and (iii) to the extent the indemnification provisions contained in the
Rights Agreement may be limited by applicable federal or state securities laws.
Valid Issuance of Stock
The Series D Convertible Preferred Stock being purchased by the Investors
hereunder, when issued, sold and delivered in accordance with the terms hereof
for the consideration expressed herein, and the Warrant Shares, upon exercise of
the Warrants in accordance with the terms thereof for the consideration
expressed therein, will be duly and validly issued, fully paid and
nonassessable, shall be free of any liens, claims, encumbrances or other rights
of third parties (collectively "Liens") other than those set forth herein, in
the Warrants or in the Restricted Stock Agreement, and will have been issued
free and clear of any preemptive rights, rights of first refusal or redemption
rights of any person. The Common Stock issuable upon conversion of such stock
and the Warrant Shares has been duly and validly reserved, and neither it nor
the issuance thereof is subject to any preemptive rights or rights of first
refusal or redemption rights, and, upon issuance, it will be validly issued,
fully paid and nonassessable.
Compliance with Laws and Other Instruments
The business and operations of each of the Company and Subsidiary have been
and are being conducted in all material respects in accordance with all
applicable federal, state and local statutes, rules, regulations, ordinances,
and orders of any governmental authority, including without limitation, all
federal and state statutes and regulations applicable to franchises and all
immigration laws or regulations, including the Immigration Reform and Control
Act of 1986, as amended and the regulations promulgated thereunder. Further,
neither the Company nor the Subsidiary is presently charged with or, to the
Company's knowledge, under governmental investigation with respect to, any
actual or alleged violation of any of the foregoing and is not presently the
subject of any pending or threatened adverse proceeding by any regulatory
authority having jurisdiction over its business, properties or operations.
The execution, delivery and performance by the Company of this Agreement,
the Warrants, the Rights Agreement and the Restricted Stock Agreement:
will not require from the Board of Directors or stockholders of the Company
any consent or approval except as have been obtained;
will not require any authorization, consent, approval, license, exemption
of or filing or registration with any court or governmental department,
commission, board, bureau, agency or instrumentality of government other than as
provided by applicable securities laws;
will not cause the Company or Subsidiary to violate or contravene (i) any
provision of law presently in effect, (ii) any rule or regulation presently in
effect of any agency or government, domestic or foreign, (iii) any order, writ,
judgment, injunction, decree, determination or awa presently in effect or (iv)
any provision of the respective Restated Certificate or Articles of
Incorporation or Bylaws of the Company or the Subsidiary;
will not violate or be in conflict with, result in a material breach of or
constitute (with or without notice or lapse of time or both) a default under,
any material indenture, loan or credit agreement, note agreement, deed of trust,
mortgage, security agreement or other material agreement, lease, instrument,
commitment or arrangement to which the Company or the Subsidiary is a party or
by which the Company or the Subsidiary or any of its material properties, assets
or rights is bound or affected (including, without limitation, any stockholders
agreement or registration rights agreement in effect prior to the date hereof);
will not result in the creation or imposition of any Lien; and
will not result in the termination of any license, certificate, permit,
franchise or right held by the Company or the Subsidiary.
No Brokers or Finders
No person or other entity ("Person") has, or as a result of the
transactions contemplated herein will have, any right or valid claim against the
Company, or the Subsidiary or, to the Company's knowledge, any Investor for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor from any
liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
Financial Statements
The Company has delivered to each Investor (a) the Company's consolidated
unaudited balance sheet (the "Balance Sheet") as of October 31, 1995 (the
"Balance Sheet Date") and the unaudited statements of income for the
ten-monthperiod then ended and (b) the Company's audited balance sheet and
profit and loss statement as of December 31, 1994, together with the related
opinion of Deloitte and Touche LLP, independent certified public accountants.
These financial statements present fairly the financial condition of the
Company and the Subsidiary at the Balance Sheet Date and other dates therein
specified and the results of their operations for the periods therein specified,
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior accounting periods.
Changes
Except as disclosed on Schedule 2 hereto, since the Balance Sheet Date,
neither the Company nor the Subsidiary has:
discharged or satisfied any material Liens other than those securing
current liabilities in the ordinary course of business consistent with past
practice;
paid any material obligation or liability other than current liabilities in
the usual and ordinary course of business;
mortgaged, pledged, or subjected to or suffered any Liens on any of its
material assets, tangible or intangible;
sold, transferred or leased any of its material assets except in the usual
and ordinary course of business;
cancelled or compromised any material debt or claim, or waived or released
any material right;
suffered any material physical damage, destruction or loss (whether or not
covered by insurance);
entered into any material transaction other than in the usual and ordinary
course of business except for this Agreement;
encountered any labor difficulties or labor union organizing activities;
declared or paid any dividends on or made any other distributions with
respect to, or purchased or redeemed, any of its outstanding capital stock;
made any change in the accounting principles, methods or practices followed
by it or depreciation or amortization policies or rates theretofore adopted;
made any loans to its employees, officers, or directors in excess of $1,000
other than travel advances made in the ordinary course of business;
made any extraordinary increases in the compensation of any of its
employees, officers, or directors;
suffered or caused any other event or condition of any character that has
materially and adversely affected its business or prospects; or
entered into any agreement, or otherwise obligated itself, to do any of the
foregoing.
Material Agreements of the Company
Except as disclosed on Schedule 2 hereto, neither the Company nor the
Subsidiary is a party to any written or oral:
agreement with any labor union;
agreement for the purchase of material fixed assets or for the purchase of
materials, supplies or equipment in excess of normal operating requirements;
agreement for the employment of any officer, individual employee or other
Person on a full-time basis or any agreement with any Person for consulting
services, in each case not terminable at will;
bonus, pension, profit sharing, retirement, stock purchase, stock option,
deferred compensation, medical, hospitalization or life insurance or similar
plan, contract or understanding with respect to any or all of the employees of
the Company or the Subsidiary or any other Person;
material indenture, loan or credit agreement, note agreement, deed of
trust, mortgage, security agreement, promissory note or other agreement or
instrument relating to or evidencing indebtedness for borrowed money or
subjecting any material asset or property of the Company or the Subsidiary to
any Liens or evidencing any material indebtedness;
guaranty of any material indebtedness;
any agreement to which any stockholder, officer or director of the Company
or Subsidiary, or any "affiliate" or "associate" of such persons (as such terms
are defined in the rules and regulations promulgated under the federal
Securities Act of 1933, as amended (the "Act")) is presen a party which pertains
to the furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity; lease or agreement
other than as described in (g) under which the Company or the Subsidiary is
lessee of or holds or operates any property, real or personal, owned by any
other Person under which payments to such Person exceed $10,000 per annum;
lease or agreement under which the Company is lessor or permits any Person
to hold or operate any material property, real or personal, owned or controlled
by the Company;
agreement obligating the Company or the Subsidiary to pay any royalty or
similar charge for the use or exploitation of any tangible or intangible
property;
covenant not to compete or other restriction on the Company's ability to
conduct its business as presently conducted; or
agreement other than those described in paragraphs (a)-(k) above that (i)
are not cancelable on 30-day notice and (ii) require future expenditures of the
Company or its Subsidiary in excess of $100,000 per annum or pursuant to which
the Company or such Subsidiary will receive in exc of $200,000 per annum.
Tax Returns and Audits
All required federal, state and local tax returns of the Company have been
prepared and duly and timely filed, and all material federal, state and local
taxes required to be paid with respect to the periods covered by such returns
have been paid, or the Company has made provision for the payment of the same.
There are no outstanding agreements by the Company for the extension of time for
the assessment of any tax. The Company is not, and has not been, delinquent in
the payment of any material tax, assessment or governmental charge. The Company
does not currently have any material tax deficiency proposed or assessed against
it, has no knowledge of any proposed liability for any tax to be imposed upon
the Company's or the Subsidiary's properties or assets for which there is not
adequate reserve in the financial statements referenced in Section 2.9, and has
not executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. To the Company's best knowledge,
none of the Company's federal income tax returns nor any state income or
franchise tax returns has ever been audited by governmental authorities.
Patents, Trademarks and Other Intangible Assets
The Company and/or the Subsidiary (i) own or have the right to use all
patents, trademarks, trade dress, service marks, trade names, copyrights or
licenses and rights (collectively herein "Proprietary Rights") which are listed
as described, together with any applicable registration numbers and dates, on
Schedule 2.13, and which are all of the Proprietary Rights used in or necessary
for the conduct of their respective businesses as now conducted, or proposed to
be conducted without infringing upon or otherwise acting adverselyto the right
or claimed right of any Person under or with respect to any of the Proprietary
Rights and (ii) are not obligated or under any liability whatsoever to make any
payments by way of royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any patent, trademark, service mark, trade name, copyright or
other intangible asset, with respect to the use thereof or in connection with
the conduct of their businesses.
The Company and the Subsidiary own and have the unrestricted right to use
all trade secrets, including know-how, inventions, designs, processes, computer
programs and technical data and information (collectively herein "intellectual
property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by them, free
and clear of any right, lien, or claim of others, including without limitation
former employers of its employees; provided however, that the possibility exists
that other Persons, completely independently of the Company, the Subsidiary or
their respective employees or agents, could have developed intellectual property
similar or identical to those of the Company and the Subsidiary.
Employment Benefit Plans--ERISA
Neither the Company nor the Subsidiary maintains or makes contributions to
any pension, profit sharing or other employee pension benefit plan within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). Neither the Company nor the Subsidiary has any material
liability with respect to any such plan (including, without limitation, any
unfunded past service or other liability or any accumulated funding deficiency)
or any material liability to the Pension Benefit Guaranty Corporation or under
Title IV of ERISA, with respect to a multi-employer pension benefit plan, nor
would the Company or the Subsidiary have any such liability if any such plan
were terminated or if the Company or such Subsidiary withdrew, in whole or in
part, from any multi-employer plan.
Title to Property and Encumbrances
With only such exceptions as are immaterial individually and in the
aggregate, each of the Company and the Subsidiary has good and marketable title
to all its properties and assets, including without limitation the properties
and assets used in the conduct of its business, except for properties disposed
of in the ordinary course of business since the Balance Sheet Date and except
for properties held under valid and subsisting leases that are in full force and
effect and that are not in default, subject to no Lien, except those reflected
on the Balance Sheet or the notes thereto and except for liens for taxes not yet
due and other immaterial liens arising in the ordinary course of business and
not in connection with borrowed money.
Condition of Properties
With only such exceptions as are immaterial individually and in the
aggregate, all facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by each of the Subsidiary and the Company are
in good operating condition and repair and are adequate and sufficient for the
Company's and each Subsidiary's business.
Insurance Coverage
There is in full force and effect one or more policies of insurance issued
by insurers of recognized responsibility, insuring the Company and the
Subsidiary's respective properties and businesses against such losses and risks,
and in such amounts, as are customary in the case of corporations of established
reputation engaged in the same or similar business and similarly situated.
Neither the Company nor the Subsidiary has been refused any insurance coverage
sought or applied for, and the Company has no reason to believe that it will be
unable to renew its or their existing insurance coverage upon terms at least as
favorable as those presently in effect, other than possible increases in
premiums that do not result from any act or omission of the Company or such
Subsidiary.
Litigation
Except as disclosed on Schedule 2 hereto, there is no legal action, suit,
arbitration or other legal, administrative or other governmental investigation,
inquiry or proceeding (whether federal, state, local or foreign) pending or
threatened against or affecting the Company, the Subsidiary or their respective
properties, assets or businesses. To the best knowledge of the Company, none of
the pending proceedings or threatened actions listed on Schedule 2 hereto might
result, either in any case or in the aggregate, in any material adverse change
in the business or financial condition of the Company and the Subsidiary taken
as a whole or any of their properties or assets or in any material impairment of
the right or ability of the Company and the Subsidiary to carry on their
business as now conducted or as proposed to be conducted, or in any material
liability on the part of the Company or the Subsidiary, and none that challenges
the validity of this Agreement, the Warrants or any action taken or to be taken
in connection herewith. The foregoing includes, without limiting its generality,
actions pending or, to the actual knowledge of the Company, threatened (or any
threat thereof) involving the prior employment of any of the Company's or the
Subsidiary's employees, or their use in connection with the Company's or such
Subsidiary's business of any information or techniques allegedly proprietary to
any of their former employers. Neither the Company nor the Subsidiary is in
default with respect to any order, writ, judgment, injunction, decree,
determination or award of any court or of any governmental agency or
instrumentality (whether federal, state, local or foreign).
Licenses
With only such exceptions as are immaterial individually and in the
aggregate, the Company and its Subsidiary possess from the appropriate agency,
commission, board and governmental body and authority, whether state, local or
federal, all licenses, permits, authorizations, approvals, franchises and rights
that are necessary for the Company and its Subsidiary to engage in the business
currently conducted and proposed to be conducted by them; and all such
certificates, licenses, permits, authorizations and rights have been lawfully
and validly issued, are in full force and effect, will not be revoked,
cancelled, withdrawn, terminated or suspended and have a term of perpetual
existence.
Employee Compliance With Prior Agreements
To the best knowledge of the Company, no employee of the Company or the
Subsidiary is in violation of any terms of any employment contract, patent or
trade secret disclosure agreement or any other contract oragreement relating to
the right of any such employee to be employed by the Company or such Subsidiary
because of the nature of the business conducted or to be conducted by the
Company or such Subsidiary. The Company is unaware of any proposed, threatened
or actual union organization activity affecting the current or prospective
operations of the Company or the Subsidiary.
Suppliers
Neither the Company nor the Subsidiary has received any notice, and the
Company does not otherwise know, that any supplier of the respective businesses
of the Company and the Subsidiary has taken or indicated an intent to take any
steps that could result in a material increase in costs, or a material
restriction of material adverse effect on the ability to acquire any item
material to the conduct of their businesses or the operation of any of the
assets or properties necessary for the conduct of such businesses.
Disclosure; Business Plan
No representation or warranty by the Company in this Agreement or in any
written statement or certificate furnished to the Investors, or any of them, in
connection with the transactions contemplated by this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements made not misleading in light of
the circumstances under which they were made. The Company has delivered to
Investors the La Salsa 1995 Operating Plan, ("The Plan"). The Plan was prepared
in good faith by the Company, on the basis of reasonable assumptions and
investigations, to describe the Company's and the Subsidiary's plans, objectives
and projected growth.
Registration Rights
Except as provided in the Foothill Warrant and in the Rights Agreement, the
Company is not obligated to register (through either demand registration or
piggyback registration) any of its presently outstanding securities or any of
its securities that may hereafter be issued pursuant to any existing agreement.
Use of Proceeds
The proceeds from the sale of the Series D Convertible Preferred Stock
shall be used for new restaurant capital expenditures, equipment and leasehold
financing, general working capital purposes and in the operation of the
Company's business.
Registration Rights Agreement
To the Company's best knowledge, the Rights Agreement will constitute a
valid and legally binding obligation of each of the parties thereto, enforceable
in accordance with its terms, except (i) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies and (ii) to the extent the indemnification provisions contained in the
Rights Agreement may be limited by applicable federal or state securities laws.
Representations and Warranties of the Investors
Each Investor, severally but not jointly, hereby represents and warrants
that:
Authorization
This Agreement, when executed and delivered by such Investor, will
constitute its valid and legally binding obligation, enforceable in accordance
with its terms.
Purchase Entirely for Own Account
This Agreement is made with such Investor in reliance upon such Investor's
representation to the Company, which by such Investor's execution of this
Agreement such Investor hereby confirms, that the Series D Convertible Preferred
Stock and Warrant to be received by such Investor (the "Securities") will be
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, such Investor further represents that such Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities. Such Investor represents that it has full
power and authority to enter into this Agreement.
Disclosure of Information
Such Investor has made investigations that it considers necessary or
appropriate in deciding whether to purchase the Securities. Each Investor
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Securities. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement or
the right of the Investors to rely thereon.
Investment Experience
Such Investor is an investor in securities of companies in the development
stage and acknowledges that it is able to fend for itself, can bear the economic
risk of its investment and has such knowledge and experience in financial or
business matters that it is capable of evaluating the merits and risks of the
investment in the Securities. Such Investor also represents it is an "accredited
investor" as that term is defined in Regulation D under the Act and that, except
as disclosed in writing to the Company, it was not organized for the purpose of
acquiring the Securities.
Restricted Securities
It understands that the Securities it is purchasing are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Act, only in certain limited
circumstances. In this connection, each Investor represents that it is familiar
with Rule 144 promulgated under the Act ("Rule 144"), as presently in effect,
and understands the resale limitations imposed thereby and by the Act.
Further Limitations on Disposition
Without in any way limiting the representations set forth above, each
Investor further agrees not to make any disposition of allor any portion of the
Securities unless and until the transferee has agreed in writing for the benefit
of the Company to be bound by the terms of Sections 6 and 7 of this Agreement
and:
There is then in effect a Registration Statement as defined under the Act
covering such proposed disposition and such disposition is made in accordance
with such Registration Statement; or
(i) Such Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a reasonably detailed
statement of the circumstances surrounding the proposed disposition and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act.
Legends
It is understood that the certificates evidencing the Securities may bear
one or all of the following legends:
"These securities have not been registered under the Securities Act of
1933, as amended. They may not be sold, offered for sale, pledged, or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel reasonably
satisfactory to the Company that such registration is not required. Copies of
the agreements which cover the purchase of these securities, which restrict
their transfer and voting and which contain certain provisions binding on any
holder of these securities may be obtained by written request made by the holder
of record of this certificate to the Secretary of the Company at its principal
executive offices."
"The transfer of the shares of stock represented by this certificate is
restricted under the terms of a Fourth Amended and Restated Restricted Stock
Agreement dated January 12, 1996, a copy of which is on file at the office of
the Company."
Any legend required by the laws of the State of California and any
applicable Blue Sky laws of various states and jurisdictions.
Conditions to Investors' Obligations at Closing
The obligations of each Investor under subsection 1.1 (b) of this Agreement
are subject to the fulfillment on or before the Closing of each of the following
conditions, the waiver of which shall not be effective against any Investor who
does not consent in writing thereto:
Representations and Warranties
The representations and warranties of the Company contained in Section 2
shall be true on and as of the Closing with the same effect as though such
representations and warranties had been made upon and as of such Closing.
Performance
The Company shall have performed and complied with all agreements,
obligations and conditions contained in this Agreement that are required to be
performed or complied with by it on or before the Closing.
Compliance Certificate
The Investors shall have received a certificate executed by the President
of the Company, dated the Closing Date, certifying that the conditions specified
in Sections 4.1 and 4.2 have been fulfilled.
Third Amended and Restated Registration Rights Agreement
The Company, each Investor, and the holders of a majority of "Registrable
Securities," as such term is defined in the Rights Agreement, shall have entered
into the Rights Agreement.
Fourth Amended and Restated Restricted Stock Agreement
The Company, each Investor, the holders of at least two-thirds (2/3) of the
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock and Series D Convertible Preferred Stock,
taken together as a single class, and the holders of at least two-thirds of the
outstanding shares of Series D Convertible Preferred Stock shall have entered
into the Restricted Stock Agreement.
Opinion of Company Counsel
Each Investor shall have received from Brobeck, Phleger & Harrison, counsel
for the Company, an opinion, dated as of the Closing, in the form attached
hereto as Exhibit E.
Stockholder Approval
The stockholders of La Salsa Holding Co. shall have approved the Restated
Certificate.
Due Diligence Review
The Investors shall have completed to their sole satisfaction their due
diligence review of the Company and its operations, business, assets and
financial condition.
Warrants
The Company and the Investors shall have executed the Warrants.
Conditions to the Company's Obligations at Closing
The obligations of the Company to each Investor under this Agreement are
subject to the fulfillment by that Investor on or before the Closing of each of
the following conditions:
Representations and Warranties
The representations and warranties of the Investors contained in Section 3
shall be true upon and as of the Closing with the same effect as though such
representations and warranties had been made upon and as of the Closing.
Payment of Purchase Price
Each Investor shall have delivered the purchase price for the Shares as
specified in Section 1.1(b) and the Warrants as specified in Section 1.2.
Third Amended and Restated Registration Rights Agreement
The Company, each Investor, and the holders of a majority of "Registrable
Securities," as such term is defined in the Rights Agreement, shall have entered
into the Rights Agreement.
Fourth Amended and Restated Restricted Stock Agreement
The Company, each Investor, the holders of at least two-thirds (2/3) of the
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock and Series D Convertible Preferred Stock,
taken together as a single class, and the holders of at least two-thirds of the
outstanding shares of Series D Convertible Preferred Stock shall have entered
into the Restricted Stock Agreement.
Qualifications
The consent or approval of all relevant Blue Sky authorities shall have
been obtained with respect to the offer and sale to the Investors of the
Securities or such offer and sale shall be exempt from such consent or approval
as evidenced in form reasonably satisfactory to the Company.
Warrants
The Company and the Investors shall have executed the Warrants.
Drag-Along Rights
In the event that the holders of (i) a majority of the Company's voting
capital stock and (ii) a majority of the Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, Series C Convertible Preferred Stock and
Series D Convertible Preferred Stock, voting as a sin class ((i) and (ii)
together, the "Selling Holders"), determine to accept an offer from any person
(other than a Selling Holder or any Affiliate thereof) to purchase all of the
Company's Common Stock on a fully converted basis, then each Investor, to the
extent required by the purchaser, shall sell, and shall cause any Affiliate of
it to sell, all shares of Common Stock and other securities convertible into
Common Stock (the "Drag-Along Stock") held by it or such Affiliate pursuant to
such offer to purchase (the "Drag-Along Sale"). All holders of Drag-Along Stock
shall (x) receive the same consideration per share of Drag-Along Stock, shall be
subject to the same terms and conditions of sale and shall otherwise be treated
equally or, where appropriate, pro rata based upon the number of shares of
Drag-Along Stock, as the case may be, held by each holder and (y) execute such
documents and take such actions as may be reasonably required by the selling
group representative (the "Selling Holders Representative," which initially
shall be Sienna Holdings, Inc. until the Investors are notified of the name and
address of a successor Selling Holders Representative). Any such sale by any
Investor shall be on the same terms and conditions as the proposed Drag-Along
Sale by the Selling Holders; provided, however, that each selling stockholder
shall contribute pro rata based upon the number of shares being sold by each, a
percentage of the total sa proceeds as agreed upon by the holders of a majority
of the shares being sold, to an escrow fund to be established by the Selling
Holders Representative to serve as the exclusive source of indemnification
obligations (other than representations as to unencumbered ownership of and
ability to transfer the shares being sold of any other seller in the Drag-Along
Sale, which shall be the sole responsibility of each selling stockholder) to the
purchaser in the Drag-Along Sale.
The Selling Holders participating in a Drag-Along Sale (or the Selling
Holders Representative on behalf of such Selling Holders) shall promptly provide
each Investor with written notice (the "Sale Notice") not more than 60 nor less
than 30 days prior to the date of the Drag-Along Sa (the "Sale Date"). Each Sale
Notice shall set forth: (i) the name and address of each proposed transferee or
purchaser of shares of Drag-Along Stock in the Drag-Along Sale; (ii) the form of
consideration to be paid for such shares and the terms and conditions of payment
offered by each proposed transferee or purchaser; (iii) confirmation that the
proposed purchaser or transferee has been informed of the "Drag-Along Rights"
provided for herein and has agreed to purchase shares of Drag-Along Stock in
accordance with the terms hereof; and (iv) the Sale Date.
The provisions of this Section 6 shall apply regardless of the form of
consideration received in the Drag-Along Sale. Any non-cash consideration
proposed for the Drag-Along Stock shall be limited to debt instruments and/or
freely tradeable property, and each Investor shall accept i pro rata share of
such non-cash consideration for the Drag-Along Stock based on its proportional
ownership of shares of Drag-Along Stock.
"Affiliate" of a specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person and, in the case of a person who is an
individual, shall include (i) members of such specified person's immediate
family (as defined in instruction 2 of Item 404(a) of Regulation S-K promulgated
by the Securities and Exchange Commission) and (ii) trusts whose trustee and
beneficiaries include only such specified persons or members of such person's
immediate family as determined in accordance with the foregoing clause (i). For
the purposes of this definition, "control, when used with respect to any person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
The provisions of this Section 6 shall terminate upon the closing of a firm
commitment underwritten public offering of the Common Stock pursuant to a
registration statement declared effective under the Act.
Covenants of the Company
The Company hereby covenants and agrees with the Investors as follows:
Basic Information and Access
As soon as practicable after the end of each fiscal quarter and each fiscal
year, and in any event within forty-five (45) days after each fiscal quarter and
within one hundred five (105) days after each fiscal year, the Company shall
furnish to each Investor, so long as each Investo holds shares of Series D
Convertible Preferred Stock, and subject to Section 7.3 hereof, consolidated
balance sheets of the Company and its Subsidiary as of the end of each fiscal
quarter and fiscal year, and consolidated statements of income and cash flow of
the Company and its Subsidiary for such fiscal quarter and fiscal year,
respectively, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in each case in comparative
form the figures for the previous fiscal quarter or fiscal year, all in
reasonable detail and, in the case of such quarterly reports, certified by the
Company's chief financial officer and accompanied by a brief narrative
description on the Company's business activities during said quarter, and, in
the case of such annual reports, certified by independent public accountants of
recognized national standing.
The Company shall permit each Investor so long as such Investor holds
shares of Series D Convertible Preferred Stock, and subject to Section 7.3
hereof, (i) to visit and inspect at such Investor(s) expense any of the
properties of the Company or any of its Subsidiary and to discuss and their
affairs, finances and accounts with its and their officers, all upon reasonable
notice to the Company and/or its Subsidiary, at such reasonable times and as
often as may be reasonably requested; (ii) to be represented at the Company's
expense at all meetings of the Board of Directors of the Company by one person
or, if the Investors (excluding Sienna and InterWest) are not represented by a
director of the Company, two persons, in either case to be designated by a
majority of the Investors (excluding Sienna and InterWest), with respect to
which reasonable notice shall be provided to each Investor; and (iii) to discuss
the affairs, finances and accounts of the Company with its officers and consult
with and advise the officers of the Company as to the management of the Company
at all reasonable times and as often as reasonably requested, provided that the
Investors shall maintain the confidentiality of any proprietary information of
the Company thereby obtained and provided further that the Investors shall
conduct all such inspections in a manner that is not disruptive to the employees
or operations of the Company.
Additional Information
In addition, the Company shall deliver to each Investor, so long as such
Investor holds shares of Series D Convertible Preferred Stock:
as soon as practicable after the end of each fiscal month, and in any event
within thirty (30) days thereafter, consolidated balance sheets of the Company
and its Subsidiary, if any, as at the end of such month, and a consolidated
statement of income of theCompany and its Subsidiary if any, for each month and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles consistently applied, with such statements
certified as having been prepared in accordance with generally accepted
accounting principles consistently applied, by the chief financial officer of
the Company, and accompanied by a brief narrative description of the Company's
business activities during said month; and
no later than thirty (30) days prior to the end of any fiscal year, a
business plan and budget for the Company for the succeeding fiscal year
(commencing with the Company's 1995 fiscal year), containing information, data
and other materials typically included in a business plan and budget of a
Company similar in size and nature to the Company, inclusive without limitation,
in respect of the budget, budget date for each month of such fiscal year.
Suspension of Certain Covenants
The covenants set forth in Sections 7.1 and 7.2 shall terminate and be of
no further force or effect with respect to all Investors after the effective
date of a registration statement filed by the Company under the federal
Securities Act of 1933, as amended, covering the underwritten offer and sale of
Common Stock to the public and having aggregate net proceeds to the Company of
not less than ten million dollars ($10,000,000).
Negative Covenants
In addition to any restrictions contained in the Restated Certificate,
without the prior written consent of the holders of a majority of the then
outstanding shares of Series B, Series C and Series D Convertible Preferred
Stock, the Company shall not:
except as provided in the Restated Certificate or pursuant to the Option
Plan, redeem any shares of any class of its capital stock or cause or permit any
Employee Stock Ownership Plan as defined in 4975(e)(7) of the Internal Revenue
Code of 1986, as amended, or other employee stock ownership plan to purchase
shares of any class of its capital stock;
assume, guarantee, endorse or otherwise become directly or contingently
liable for any obligation or indebtedness other than such liabilities as
presently exist or are incurred in the ordinary course of business, including
the acquisition and/or development of Company restaurants;
sell, assign, lease or otherwise dispose of any of its assets, including
its receivables and any of the stock of any Subsidiary, other than in the
ordinary course of business, including the acquisition, disposition and/or
development of Company restaurants;
make any loan or advance to any employee of the Company or any Subsidiary
thereof except (i) the payment of salaries (which, in the case of officers,
shall be approved in advance by the Company's Board of Directors), (ii) advances
for reasonable travel expenses in connection with th Company's business, and
(iii) the acceptance of promissory notes approved in advance by the Board of
Directors given for the purchase of the Company's capital stock if otherwise
permitted by this Section 7.4; and
own, or permit any Subsidiary of the Company to own, any stock or other
securities of any corporation, partnership, association or other form of
business entity except the securities of a wholly-owned Subsidiary of the
Company or such Subsidiary.
Additional Covenants
In addition, the Company shall, or shall cause each of its Subsidiary, as
applicable, to:
promptly pay and discharge, or cause to be paid and discharged, when due
and payable, all lawful taxes, assessments and governmental charges or levies
imposed upon the income, profits, property or business of the Company or any
Subsidiary; provided, however, that any such tax, assessment, charge or levy
need not be paid if the validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company shall have set aside on its
books adequate reserves with respect thereto; and provided, further, that the
Company shall pay all such taxes, assessments, charges or levies forthwith upon
the commencement or proceedings to foreclose any lien that may have attached as
security therefor;
promptly pay or cause to be paid when due, or in conformance with customary
trade terms, all other indebtedness incident to the operations of the Company
and its Subsidiary;
keep its properties and those of its Subsidiary in good repair, working
order and condition, reasonable wear and tear excepted, and from time to time
make all needful and proper repairs, renewals, replacements, additions and
improvements thereto;
comply, and cause its Subsidiary to comply, with the provisions of all
leases to which any of them is a party or under which any of them occupies
property;
keep its assets and those of its Subsidiary that are of an insurable
character insured by reputable insurers against loss or damage by fire and
explosion in amounts customary for companies in similar businesses similarly
situated; and maintain, with financially sound and reputable insurers, insurance
against other hazards and risks and liability to persons and property to the
extent and in the manner customary for companies in similar businesses similarly
situated;
keep true records and books of account in which full, true and correct
entries will be made of all dealings or transactions in relation to its business
and affairs in accordance with generally accepted accounting principles applied
on a consistent basis;
duly observe and conform to, and cause its Subsidiary to so observe and
conform to, in all material respects, all valid requirements of governmental
authorities relating to the conduct of their businesses or to their property or
assets; and
maintain in full force and effect its corporate existence and rights and
use its best efforts to maintain in full force and effect all licenses and other
rights to use patents, processes, licenses, trademarks, service marks, trade
names or copyrights owned or possessed by it or any Subsidiary and necessary to
the conduct of its business.
Additional Sales of Series D Convertible Preferred Stock
Following the Closing, the Company shall not issue any additional shares of
Series D Convertible Preferred Stock.
Indemnification
Indemnification of the Investors
The Company hereby agrees to indemnify and hold harmless the Investors
against any and all losses, liabilities, damages, demands, claims, suits,
actions, judgments, causes of action, assessments, costs, and expenses,
including, without limitation, interest, penalties, attorneys' fees, any and all
expenses incurred in investigating, preparing, and defending against any
litigation, commenced or threatened, and any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation (collectively, "Investor
Damages"), asserted against, resulting from, imposed upon, or incurred or
suffered by any of the Investors directly or indirectly, as a result of or
arising from any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants, or agreements made by the Company in
this Agreement or any facts or circumstances constituting such an inaccuracy,
breach, or nonfulfillment (all of which, shall be referred to as "Identifiable
Claims").
Procedure For Indemnification with Respect to Identifiable Claims
In the event that an Investor asserts the existence of a claim giving rise
to Investor Damages, it shall give written notice to the Company. Such written
notice shall state that it is being given pursuant to this Section 8.2, specify
the nature and amount of the claim asserted and indicate the date on which such
assertion shall be deemed accepted and the amount of the claim deemed a valid
claim (such date to be established in accordance with the next sentence). If the
Company, within 30 days after the mailing of notice by such Investor, shall not
give written notice to such Investor announcing its intent to contest such
assertion of such Investor, such assertion shall be deemed accepted and the
amount of claim shall be deemed a valid claim. In the event, however, that the
Company contests the assertion of a claim by giving such writtennotice to such
Investor within said period, then the parties shall act in good faith to reach
agreement regarding such claim.
Miscellaneous
Survival of Warranties
The warranties, representations and covenants of the Company and Investors
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing and shall in no way be affected by
any investigation of the subject matter thereof made by or on behalf of the
Investors or the Company.
Successors and Assigns
Except as otherwise provided herein, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of
Series D Convertible Preferred Stock sold hereunder or any Common Stock issued
upon conversion of the Series D Convertible Preferred Stock). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
Governing Law
This Agreement shall be governed by and construed under the laws of the
State of California (without regard to the application of choice of law rules),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party hereto, and as to those matters the law
of the jurisdiction under which the respective entity derives its powers shall
govern.
Disclosure of Information
The parties agree to maintain the confidentiality of the terms and
conditions of this Agreement prior to Closing, except to the extent required by
law. No party shall disseminate (except to the parties to this Agreement) any
press release or announcement concerning the transactions contemplated by this
Agreement or the parties hereto prior to Closing, without the prior written
consent of all parties.
Counterparts
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
Titles and Subtitles
The titles and subtitles used in this Agreement are used for convenience
only and are not to be considered in construing or interpreting this Agreement.
Notices
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and to the party to be notified at the
address indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other parties. A copy of any notices sent to the Company shall be sent to:
Sienna Holdings, One Market, Steuart Street Tower, Suite 2550, San Francisco,
California 94105 Attn: Daniel L. Skaff; InterWest Partners, 3000 Sand Hill Road,
Building 3, Suite 255, Menlo Park, CA 94025, Attn: Mr. Wallace R. Hawley;
Brobeck, Phleger & Harrison, Two Embarcadero Place, 2200 Geng Road, Palo Alto,
CA 94303, Attn: Gari L. Cheever, Esq.; and Noro-Moseley Partners, 9 North
Parkway Square, 4200 Northside Parkway, Atlanta, GA 30327, Attn: Jack R. Kelly,
Jr. All notices and communications shall be deemed to have been received: (i) in
the case of personal delivery, on the date of such delivery; (ii) in the case of
telex or facsimile transmission, on the date on which the sender receives
confirmation by telex or facsimile transmission that such notice was received by
the addressee, provided that a copy of such transmission is additionally sent by
mail as set forth in (iv) below; (iii) in the case of overnight air courier, on
the second business day following the day sent, with receipt confirmed by the
courier; and (iv) in the case of mailing by first class certified or registered
mail, postage prepaid, return receipt requested, on the fifth business day
following such mailing.
Attorney's Fees; Expenses
If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement, the Warrants, the Rights Agreement, the Restricted
Stock Agreement or the Restated Certificate, the prevailing party shall be
entitled to reasonable attorney's fees, costs, and necessary disbursements in
addition to any other relief to which such party may be entitled.
Amendments and Waivers
Any term of this Agreement may be amended and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only with the written consent of the
Company and the holders of a majority of the shares of Common Stock issued or
issuable pursuant to conversion of the Series D Convertible Preferred Stock
issued pursuant to this Agreement. Any amendment or waiver effected in
accordance with this section shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding, each future holder of
all such securities, and the Company.
Severability
If one or more provisions of this Agreement are held to be unenforceable
under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its term.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
THE COMPANY:
LA SALSA HOLDING CO., a Delaware corporation
By: /s/ Charles L. Boppell
-------------------------------
Charles L. Boppell
President and Chief
Executive Officer
Address: 11601 Santa Monica Blvd.
Los Angeles, CA 90025
THE INVESTORS:
CASUAL DINING VENTURES, INC.
By: /s/ Charles W. Redepenning, Jr.
------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President
Address: One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
<PAGE>
SCHEDULE 1.1
Schedule of Investors
<TABLE>
<CAPTION>
Number of Shares Purchase Price
of Series D of Series D Number of Purchase Aggregate
Convertible Convertible Warrant Price of Purchase
Name Preferred Stock Preferred Stock Shares Warrant Price
<S> <C> <C> <C> <C> <C>
Casual Dining
Ventures, Inc. ................... 4,166,667 $5,000,000.40 4,729,470 $4,729.47 $5,004,729.87
</TABLE>
<PAGE>
SCHEDULE 2.4(c)
SCHEDULE OF SHAREHOLDERS
Common Stock
Name Shares
Charles L. Boppell ........................................ 13,333
James Crooks .............................................. 4,000
Antonio De La Rosa ........................................ 12,000
Robert G. Gammel .......................................... 6,000
Frank J. Holdraker ........................................ 6,000
Moon Fong Mathewson ....................................... 9,125
Edward T. Peabody ......................................... 30,000
Catherine Sabatini ........................................ 5,000
Thomas V. Saiza ........................................... 13,500
Larry Sarokin ............................................. 12,000
Steve Sather .............................................. 10,000
Steven R. Selcer .......................................... 6,000
Sheryl Weingart ........................................... 2,708
Ronald D. Weinstock Inc. .................................. 6,000
-------
Total ..................................................... 135,666
=======
<PAGE>
Series A Convertible Preferred Stock
Name Shares
Theodore H. Ashford ........................................ 3,320
Donald Benjamin ............................................ 9,000
Crown Associates III, L.P. ................................. 33,204
Crown-Glynn Associates, L.P. ............................... 15,938
U.S. Trust Company of New York, ............................ 17,266
as Trustee for the Crown Trust
Bankers Trust Company, ..................................... 99,613
as Master Trustee for
Hughes Aircraft Retirement Plan
InterWest Partners IV .............................. 3,182,190
Frank Holdraker ............................................ 4,500
Sienna Holdings, Inc., ..................................... 3,218,462
as Trustee for La Salsa, Inc. .............................
Howdy S. Kabrins ........................................... 64,000
Charles Lynch .............................................. 82,000
Noro-Moseley Partners II, L.P. ............................. 99,613
Seidler Salsa, L.P. ........................................ 33,204
Sienna Holdings, Inc. as Nominee ........................... 41,000
Sienna Limited Partnership I ............................... 3,182,190
Vicki Tanner ............................................... 10,000
Ronald D. Weinstock Inc. ................................... 4,500
----------
Total ...................................................... 10,100,000
==========
<PAGE>
Series B Convertible Preferred Stock
Name Shares
Theodore H. Ashford ......................................... 33,333
Crown Associates III, L.P. .................................. 333,333
Crown-Glynn Associates, L.P. ................................ 160,000
U.S. Trust Company of New York, ............................. 173,334
as Trustee for the Crown Trust
Bankers Trust Company, ...................................... 1,000,000
as Master Trustee for
Hughes Aircraft Retirement Plan
InterWest Partners IV ............................... 800,000
Noro-Moseley Partners II, L.P. .............................. 1,000,000
Seidler Salsa, L.P. ......................................... 333,333
Sienna Limited Partnership I ................................ 800,000
---------
Total ....................................................... 4,633,333
=========
Series C Convertible Preferred Stock
Name Shares
Theodore H. Ashford ......................................... 4,309
Crown Associates III, L.P. .................................. 86,187
Noro-Moseley Partners II, L.P. .............................. 129,280
Seidler Salsa, L.P. ......................................... 43,093
Bankers Trust Company, ...................................... 129,280
as Master Trustee for
Hughes Aircraft Retirement Plans
Sienna Limited Partnership I ................................ 468,182
Sienna Holdings, Inc. ....................................... 4,820
InterWest Partners IV ....................................... 468,182
---------
Total ....................................................... 1,333,333
=========
<PAGE>
Series D Convertible Preferred Stock
Name Shares
FMA High Yield Income L.P. ................................. 749,067
WSIS Flexible Income Partners L.P. ......................... 112,360
WSIS High Income L.P. ...................................... 337,080
Sienna Limited Partnership II .............................. 1,498,134
InterWest Partners IV ...................................... 337,080
Bankers Trust Company as ................................... 50,839
Master Trustee for
Hughes Aircraft
Retirement Plans
Noro-Moseley Partners II, L.P. ............................. 50,839
Theodore H. Ashford ........................................ 1,693
---------
Total ...................................................... 3,137,092
=========
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2.13
REGISTERED TRADEMARKS
Mark Goods Reg. No. Dec. Use and/or Renewal
<S> <C> <C> <C> <C> <C>
*DESIGN OF MAN & KNIFE Aerated water 1,522,842 1-31-89 1-31-2009
*LA SALSA Aerated water 1,517,380 12-20-88 12-20-2008
LA SALSA (California) Restaurant services 7826 3-21-79 3-21-99
*LA SALSA Restaurant services 1,257,963 11-15-83 11-15-2003
*LA SALSA & DESIGN OF
MAN WITH KNIFE Restaurant services 1,331,404 4-16-85 4-16-2005
*THE TRADITION CONTINUES Restaurant services 1,352,247 7-30-85 7-30-2005
*LA SALSA (Script) Restaurant services 1,417,032 11-11-86 11-11-2006
*DESIGN OF MAN WEARING SOMBRERO Restaurant services 1,645,652 5-21-91 5-21-97 5-21-2001
*THE ORIGINAL GOURMET BURRITO Burritos for consumption on
or off the premises 1,652,067 7-23-91 7-23-97 7-23-2001
*THE BOX Restaurant services, namely,
the sale of goods for
off-site consumption 1,678,143 3-3-92 3-3-98 3-3-2002
WE DO NOT OWN A CAN OPENER!! Restaurant services 1,733,866 11-17-92 11-17-98 11-17-2002
QUE HUEVOS THE MEXICAN
POWER BREAKFAST Restaurant services 1,735,499 11-24-92 11-24-98 11-24-2002
AN AUTHENTIC INVITATION Restaurant services 1,743,734 12-29-92 12-29-98 12-29-2002
*ENJOY THE PASSION Restaurant services 1,784,616 7-27-93 7-27-99 7-27-2003
</TABLE>
<TABLE>
<CAPTION>
PENDING APPLICATIONS
Mark Goods Reg. No. Date
<S> <C> <C> <C>
*LA SALSA - FRESH MEXICAN GRILL Restaurant services 424,105 8-11-93
*FRESH MEXICAN GRILL Restaurant services 586,109 10-17-94
*LA SALSA - THE ORIGINAL TAQUERIA Restaurant services Awaiting Information
LA SALSA (Stick Logo) Restaurant services 645,397 3-13-95
LA SALSA (Red and Green Design) Restaurant services 704,220 7-21-95
CALIFORNIAN "VEGGIE" Burrito for consumption
on or off the premises 714,379 8-11-95
ALWAYS FRESH...ALWAYS FUN! Restaurant services 023,474 11-24-95
</TABLE>
* designates registration assigned to or in the name of La Salsa Holding Co.
<PAGE>
TRADEMARK COUNTRY LIST
REGISTRATIONS
<TABLE>
<CAPTION>
Mark Country Goods No. & Date Renewable
<S> <C> <C> <C> <C> <C>
LA SALSA Canada Paper and party items, namely, menus, posters, paper decorations,
hats, cups; restaurant services; namely, take-out food services
and bar and lounge services 399,493 6-26-92 6-26-2007
LA SALSA Japan Tea, coffee, cocoa, soft drinks, fruit juices, ice, in Japanese
Class 29 2,276,702 10-31-90 7-31-2000
LA SALSA Japan Paper napkins, other napkins, cups, other tableware, other goods
belonging to this class (Japanese Class 19) 2,269,547 9-21-90 6-21-2000
</TABLE>
<PAGE>
TRADEMARK COUNTRY LIST
REGISTRATIONS
<TABLE>
<CAPTION>
Mark Country Goods Filing Info.
<S> <C> <C> <C> <C>
LA SALSA Australia Restaurant services 656396 3-23-95
LA SALSA Japan Restaurant services 35034/1996 4-7-95
LA SALSA Mexico Restaurant services 158658 1-15-93
LA SALSA Puerto Rico Restaurant services Awaiting filing information
</TABLE>
<PAGE>
SCHEDULE 2
Schedule of Exceptions
<PAGE>
EXHIBIT A
Amended and Restated Certificate of Incorporation
<PAGE>
EXHIBIT B
Form of Series D Convertible Preferred Stock Warrant
<PAGE>
EXHIBIT C
Fourth Amended and Restated Restricted Stock Agreement
<PAGE>
EXHIBIT D
Third Amended and Restated Registration Rights Agreement
STOCK PURCHASE AGREEMENT
By and Among
Casual Dining Ventures, Inc.
and
DAKA International, Inc.
and
Champps Development Group, Inc., Steven J. Wagenheim,
Arthur E. Pew, III, PDS Financial Corporation, Douglas B. Tenpas
and
Certain Other Stockholders of Americana Dining Corp. named on Exhibit A
Dated as of March 18, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE VI. TERMINATION OF AGREEMENT
Section 6.01. Termination
Section 6.02. Effect of Termination
Section 6.03. Right to Proceed
ARTICLE VII. SURVIVAL; INDEMNIFICATION
Section 7.01 Survival of Representations, Warranties, Etc.
Section 7.02. Indemnification by the Sellers
Section 7.03. Limitations on Indemnification by Stockholders
Section 7.04. Indemnification by the Company
Section 7.05 No Limitation of Rights
Section 7.06. Notice; Defense of Claims
ARTICLE VIII. REGISTRATION RIGHTS
Section 8.01. Definitions
Section 8.02 Resale Registration
Section 8.03 Registration Procedures
Section 8.04 Registration Expenses
Section 8.05 Indemnification and Contribution
Section 8.06 Restrictions on Sale
Section 8.07 Transfer of Registration Rights
ARTICLE IX. MISCELLANEOUS
Section 9.01. Law Governing
Section 9.02. Notices
Section 9.03. Prior Agreements Superseded
Section 9.04. Assignability
Section 9.05. Fees and Expenses
Section 9.06. Publicity and Disclosures
Section 9.07. Captions and Gender
Section 9.08. Execution in Counterparts
Section 9.09. Certain Remedies; Severability
Section 9.10. Amendments; Waivers
Section 9.11. Exhibits and Schedules
Exhibit A - Certain Stockholders of Americana Dining Corp.
Exhibit 5.01(b) - Form of Corporate Opinion of Sellers' Counsel
Exhibit 5.02(b)(i) - Form of Opinion of Company's Counsel
Exhibit 5.02(d) - Forms of DAKA, ADC and Edgebrook, Inc. Releases
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of this 18th
day of March, 1996, by and among DAKA International, Inc., a Delaware
corporation ("DAKA"), Casual Dining Ventures, Inc., a Delaware corporation and a
wholly-owned subsidiary of DAKA ("CDVI"), Champps Development Group, Inc., a
Minnesota corporation ("CDG"), Steven J. Wagenheim, the sole stockholder of CDG
("Wagenheim"), Arthur E. Pew, III ("Pew"), PDS Financial Corporation ("PDSFC"),
Douglas B. Tenpas (for himself or for the benefit of his former spouse, who is
also a signatory to this Agreement) ("Tenpas") and such of the other
stockholders of Americana Dining Corp., a Delaware corporation ("ADC"), named on
Exhibit A attached hereto who may after the date hereof and prior to the Closing
(as defined herein) become parties to this Agreement by executing and delivering
a counterpart of this Agreement (each an "Other Selling Stockholder" and
collectively the "Other Selling Stockholders"). CDG, Wagenheim, Pew, PDSFC,
Tenpas and the Other Selling Stockholders are referred to herein individually as
a "Seller" and collectively as the "Sellers". DAKA and CDVI are referred to
herein collectively as the "Company".
W I T N E S S E T H
WHEREAS, CDG is the record and beneficial owner of 434,000 shares of
common stock, par value $.01 per share, of ADC ("ADC Common Stock") and
Wagenheim is the President of ADC; and
WHEREAS, Pew is the record and beneficial owner of 140,000 shares of ADC
Common Stock; and
WHEREAS, PDSFC is the record and beneficial owner of 20,000 shares of ADC
Common Stock; and
WHEREAS, Tenpas is the record and beneficial owner of 50,000 shares of ADC
Common Stock; and
WHEREAS, the Other Selling Stockholders listed on Exhibit A hereto are the
record and beneficial owners of his, her or its shares of ADC Common Stock; and
WHEREAS, all shares of ADC Common Stock owned beneficially and of record by
all Sellers are hereinafter referred to collectively as the "Shares;" and
WHEREAS, CDVI is the record and beneficial owner of 1,400,000 shares of ADC
Common Stock and of 466,667 shares of preferred stock, par value $.01 per share,
of ADC and DAKA is the record and beneficial owner of all issued and outstanding
shares of capital stock of CDVI; and
WHEREAS, Sellers desire to transfer to CDVI all of the Shares in exchange
for shares of the common stock, par value $.01 per share, of DAKA (the "DAKA
Common Stock") to be issued by DAKA to CDVI and immediately transferred by CDVI
to Sellers and CDVI desires to acquire from Sellers all of the Shares in
exchange for such shares of DAKA Common Stock in an arrangement qualifying as a
reorganization under the provisions of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"), whereby, after giving effect to
such transactions, CDVI will own beneficially and of record in excess of 80% of
the issued and outstanding shares of ADC Common Stock, on the terms and
conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
<PAGE>
ARTICLE I. PURCHASE AND SALE OF SHARES
Section 1.01. Plan; Purchase and Sale of the Shares
CDVI and Sellers hereby adopt a plan of reorganization pursuant to the
provisions of Section 368(a)(1)(B) of the Code. The terms and conditions
governing this plan of reorganization are hereinafter set forth. Subject to the
terms and conditions of this Agreement and in reliance on the representations,
warranties and covenants herein set forth, CDVI hereby agrees to purchase from
the Sellers, and the Sellers hereby agree to sell and deliver to CDVI, at the
Closing (as hereinafter defined in Section 1.05 hereof), the Shares free and
clear of any and all liens, claims, options, charges, encumbrances or rights of
any nature ("Claims").
Section 1.02. Consideration
Subject to the terms and conditions of this Agreement and in reliance on
the representations, warranties and covenants set forth herein, and in
consideration of the sale and delivery by the Sellers of the Shares, CDVI hereby
agrees to issue to the Sellers .18182 of one share of DAKA Common Stock, for
each Share of ADC Common Stock sold and delivered to CDVI, subject to possible
adjustment, as provided in Section 1.03 hereof. No fractional shares will be
issued by CDVI to the Sellers. Instead, the total number of shares of DAKA
Common Stock to be issued to each Seller (regardless of whether such Seller's
Shares are represented by a single or multiple certificates) will be rounded up
or down to the nearest number of whole shares of DAKA Common Stock (or in the
case of .5, to the next higher whole number). Reference is made to the
representations and warranties of the Sellers set forth in Section 2.04 hereof,
including, without limitation, the acknowledgment and understanding that (a) the
DAKA Common Stock to be issued to the Sellers hereunder has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), or any
state securities laws, (b) the DAKA Common Stock to be issued to the Sellers
hereunder will be subject to transfer restrictions under the Securities Act and
applicable state securities laws and may not be transferred unless (x) it is
subsequently registered under the Securities Act and applicable state securities
laws or (y) there is delivered to DAKA an opinion of counsel satisfactory to
DAKA that such registration is not required,and (c) DAKA will place a
restrictive legend to the foregoing effect on the certificate(s) representing
the DAKA Common Stock to be issued to the Sellers hereunder.
<PAGE>
Section 1.03. Adjustments to Consideration
In the event that (a) on the Closing Date (as such term is hereinafter
defined), the Closing Price (as such term is hereinafter defined) of a share of
DAKA Common Stock is less than $21.00 per share and (b) Sellers owning a
majority of the Shares elect to terminate this Agreement pursuant to Section
6.01(e) hereof, then CDVI will have the right to rescind such termination by
adjusting the consideration for the Shares as follows, in which case the Sellers
will be obligated to proceed with the sale and delivery of the Shares: in
consideration for each Share of ADC Common Stock to be sold by each of the
Sellers, CDVI will deliver a fraction of one share of DAKA Common Stock
(determined to the nearest one-tenth of one-thousandth of a share) calculated by
multiplying (i) .18182 by (ii) the quotient of (x) $21.00 divided by (y) the
Closing Price. For purposes of this Agreement, the term "Closing Price" shall
mean the average per share closing sale price of DAKA Common Stock as reported
on the Nasdaq National Market over the twenty (20) trading days immediately
preceding the second trading day prior to the Closing Date. Notwithstanding the
foregoing, if between the date of this Agreement and the Closing Date the
outstanding shares of DAKA Common Stock or ADC Common Stock are changed into a
different number of shares or a different class or series, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the consideration described above shall be
correspondingly and proportionately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
Section 1.04. General Releases
(a) Each Seller, by executing and delivering this Agreement, and in
consideration of the covenants and agreements of the Company contained herein
and other good and valuable consideration hereby:
(i) releases and discharges ADC, DAKA, and their respective subsidiaries, each
of the present and former stockholders, directors, officers, employees and
agents of ADC, DAKA, and their respective subsidiaries, affiliates of any
of the foregoing and their respective successors and assigns (each a
"Released Party") of and from any and all commitments, indebtedness, suits,
demands, claims, obligations and liabilities, contingent or otherwise, of
every kind and nature, including claims and causes of action both at law
and in equity, which such Seller and/or his or her or its successors,
heirs, executors, administrators or assigns ever had, now has or, to the
extent arising from or in connection with any act, omission or state of
facts taken or existing on or prior to the date hereof and the Closing
Date, may have after the date hereof against any Released Party, whether
asserted, unasserted, absolute, contingent, known or unknown, other than
claims or causes of action arising under or pursuant to this Agreement, and
each document executed in connection herewith, including, without
limitation, rights to indemnification under Article VII of this Agreement;
and
<PAGE>
(ii) waives any rights such Seller may have under that certain Shareholders
Agreement dated as of March 28, 1994, by and among ADC and the stockholders
of ADC (the "Shareholders Agreement"), including, without limitation, any
rights of first refusal and any rights of pro rata participation.
(b) The foregoing release shall be fully effective and unconditional upon
execution and delivery of this Agreement and shall not be affected by
termination of this Agreement other than (i) termination by the Company in
breach of the provisions of Section 6.01 hereof or (ii) termination by the
Sellers pursuant to Section 6.01(d) hereof.
(c) Notwithstanding the foregoing general releases, no Seller who is
employed by ADC shall be deemed to have waived or released any claim against ADC
for wages or benefits due from ADC that are due and payable on or prior to the
Closing Date.
Section 1.05. Closing
The sale and delivery and the purchase and acceptance of the Shares (the
"Closing") shall take place at the offices of the Company on the day on which
all of the conditions to Closing set forth in Article V (other than conditions
to be satisfied at the Closing which shall be satisfied or waived as of the
Closing) have been satisfied or waived in accordance with the terms hereof, such
day being referred to herein as the Closing Date.
Section 1.06. Deliveries at Closing
At the Closing, (a) DAKA shall issue to CDVI the number of shares of DAKA
Common Stock to be delivered by CDVI to the Sellers hereunder in consideration
of the Shares and CDVI shall execute in favor of and deliver to DAKA a
promissory note in an original principal amount equal to the product of (x) the
Closing Price on the Closing Date by (y) such number of shares of DAKA Common
Stock; (b) each Seller shall deliver a certificate or certificates representing
all Shares owned beneficially and of record by such Seller, together with stock
powers (or the equivalent) duly executed in blank and such other documents as
may be required to transfer to CDVI good and valid title to such Shares free and
clear of all Claims, (c) CDVI shall deliver to each Seller a certificate or
certificates representing the appropriate number of shares of DAKA Common Stock
bearing the legend provided in Section 2.04(d) hereof issued in the name of such
Seller and (d) each Seller shall resign any office such Seller holds as a
director and/or officer of ADC effective as of the Closing Date. All transfer,
excise or similar taxes arising out of the sale or delivery of the Shares to
CDVI shall be paid by the Sellers.
Section 1.07. Actions Subsequent to Closing
The Sellers and the Company after the Closing, and without further
consideration, shall from time to time execute and deliver or cause to be
executed and delivered such further instruments of transfer, assignments,
consents or documents as may be reasonably necessary or appropriate to carry out
the intent and purposes hereof.
<PAGE>
ARTICLE II. REPRESENTATION AND WARRANTIES OF THE SELLERS
Section 2.01. Making of Representations and Warranties
As a material inducement to the Company to enter into this Agreement and to
consummate the transactions contemplated hereby, each of CDG, Wagenheim, Pew,
PDSFC, Tenpas and the Other Selling Stockholders, severally as to himself,
herself or itself only and not jointly, hereby make to the Company the
representations and warranties contained in this Article II.
Section 2.02. Ownership of Capital Stock; Related Rights
(a) Each Seller owns beneficially and of record all of the Shares set forth
or referred to in the preamble hereof, as applicable. Upon delivery to CDVI at
the Closing of the certificates representing the Shares duly endorsed in blank
for transfer or with stock powers attached duly executed in blank, against
delivery of the consideration therefor described in Article I hereof, good and
valid title to the Shares shall be transferred to CDVI, free and clear of any
and all Claims.
(b) Except for the Shareholders Agreement, no Seller has any outstanding
subscriptions, options, warrants, commitments, agreements, arrangements or
commitments of any kind for or relating to the issuance, or sale of, or
outstanding securities convertible into or exchangeable for, any shares of
capital stock of any class or other equity interests of ADC; (b) no Seller has
any preemptive right, right of first refusal or similar right to acquire the
Shares or any other shares of capital stock of ADC in connection with the
transactions contemplated by this Agreement or otherwise; (c) there are no
restrictions on the transfer of the Shares, other than those imposed by relevant
state and federal securities or insurance laws; (d) ADC has no obligation to
purchase, redeem or otherwise acquire any of the Shares or to pay any dividend
or make any other distribution in respect thereto; and (e) there are no voting
trusts or proxies relating to any of the Shares.
Section 2.03. Authority of Sellers
(a) Each Seller has full authority, power and (if an individual) capacity
to enter into this Agreement and each agreement, document and instrument to be
executed and delivered by or on behalf of such Seller pursuant to or as
contemplated by this Agreement and to carry out the transactions contemplated
hereby and thereby. This Agreement and each agreement, document and instrument
to be executed and delivered by such Seller or pursuant to or as contemplated by
this Agreement constitute, or when executed and delivered by such Seller will
constitute, valid and binding obligations of such Seller enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other laws applicable to creditors'
rights and remedies and to the exercise of judicial discretion in accordance
with general principles of equity.
<PAGE>
(b) The execution, delivery and performance by each Seller of
this Agreement and each such agreement, document and instrument:
(i) if such Seller is a corporation, partnership or other legal entity, do not
and will not violate any provision of the charter or by-laws or governing
partnership agreement or other organizational document, if any, of such
Seller;
(ii) do not and will not violate any laws, rules or regulations of the United
States or any state or other jurisdiction applicable to such Seller, or
require such Seller to obtain any approval, consent or waiver of, or to
make any filing with, any person (governmental or otherwise) that has not
been obtained or made; and
(iii)do not and will not result in a breach of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of
any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which
such Seller is a party or by which the property of such Seller is bound or
affected, or result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance on the Shares or any
other asset or property of such Seller.
Section 2.04. Investment Representations
(a) Each Seller is acquiring the shares of DAKA Common Stock to be issued
to such Seller hereunder in exchange for such Seller's Shares for such Seller's
own account for investment only and not with a view to, or with any intention
of, a distribution or resale thereof, in whole or in part, in violation of the
Securities Act or any rule or regulation thereunder, as amended from time to
time.
(b) No Seller (i) is directly or indirectly controlled by, or acting on
behalf of any person which is, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, required to register as such under
such Act or (ii) was formed solely for the purpose of acquiring the DAKA Common
Stock to be issued to the Sellers hereunder.
(c) Each Seller (i) has carefully reviewed the disclosure information
provided by the Company; (ii) has requested and received such other information,
as it has deemed relevant, regarding the Company for purposes of evaluating its
acquisition of the DAKA Common Stock to be issued to the Sellers hereunder;
(iii) is aware of the risks associated with an investment in the DAKA Common
Stock; and (iv) has not received any form of general solicitation or advertising
in connection with his or her or its decision to acquire the DAKA Common Stock
to be issued to the Sellers hereunder. No Seller has relied in any way on any
information with respect to the DAKA Common Stock or the Companygenerally other
than the representations of the Company contained herein or materials furnished
by the Company in writing in connection herewith.
<PAGE>
(d) Each Seller acknowledges and understands that (i) the DAKA Common Stock
to be issued to the Sellers hereunder has not been registered under the
Securities Act, or any state securities laws; (ii) the DAKA Common Stock to be
issued to the Sellers hereunder will be subject to transfer restrictions under
the Securities Act and applicable state securities laws and may not be
transferred unless (x) it is subsequently registered under the Securities Act
and applicable state securities laws or (y) there is delivered to DAKA an
opinion of counsel satisfactory to DAKA that such registration is not required;
and (iii) DAKA will place a restrictive legend on the certificate(s)
representing the DAKA Common Stock to be issued to the Sellers hereunder,
containing the following language:
"The shares represented by this Certificate were issued without registration
under the Securities Act of 1933, as amended (the "Act") and without
registration under applicable state securities laws, in reliance upon
exemptions contained in the Act and such laws. No transfer of these shares
or any interest therein may be made except pursuant to effective
registration statements under said laws unless this Corporation has
received an opinion of counsel satisfactory to it that such transfer or
disposition does not require registration under said laws and, for any
sales under Rule 144 of the Act, such evidence as it shall request for
compliance with that rule."
(e) Each Seller (i) is able to bear the economic risks of the acquisition
of shares of DAKA Common Stock hereunder and has adequate means of providing for
current needs and possible contingencies; (ii) either alone or with his or her
or its advisors has had the opportunity to ask questions and receive answers
concerning the Company and the terms and conditions of the acquisition of DAKA
Common Stock in exchange for the Shares, as well as the opportunity to obtain
any additional information necessary to verify the accuracy of information
furnished in connection therewith which the Company possesses or can acquire
without unreasonable effort or expense; and (iii) together with his or her or
its advisors, if any, has such knowledge and experience in financial and
business matters that such Seller is capable of evaluating the merits and risks
of this acquisition of DAKA Common Stock in exchange for the Shares, and of
making an informed investment decision, and has relied solely upon the advice of
his or her or its own counsel, accountant and other advisors, with regard to the
legal, investment, tax and other considerations regarding such acquisition.
Section 2.05. General Release Representations.
With respect to the general release of the Released Parties, as defined in
Section 1.04 hereof, by the Sellers (a) none of the Sellers has assigned any
claim or possible claim against any Released Party, (b) each Seller fully
intends to release all claims against the Released Parties including, without
limitation, known, unknownand contingent claims (other than those specifically
reserved in Section 1.04 hereof), and (iii) each Seller has consulted with
counsel with respect to the general release set forth in Section 1.04 hereof and
has been fully apprised of the consequences thereof.
<PAGE>
Section 2.06. Information Supplied to the Company
To the best of Sellers' knowledge, neither this Agreement, nor any
certificate furnished pursuant to or in connection with this Agreement by or on
behalf of any Seller contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
therein not misleading in the light of the circumstances under which they were
made. To the best knowledge of Wagenheim, there is no material fact directly
relating to the business, operations or condition of ADC (other than facts which
relate to general economic trends or conditions) that currently is having or, to
the best knowledge of Wagenheim, in the future is reasonably likely to (so far
as may now be reasonably foreseen based upon material facts of which Wagenheim
is now aware) have a material adverse effect on the properties, business,
condition (financial or otherwise) or prospects of ADC.
Section 2.07. Investment Banking; Brokerage
There are no claims for investment banking fees, brokerage commissions,
finder's fees or similar compensation (exclusive of professional fees of lawyers
and accountants) in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of any
Seller.
<PAGE>
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 3.01. Making of Representations and Warranties
As a material inducement to the Sellers to enter into this Agreement and to
consummate the transactions contemplated hereby, the Company hereby makes to
them the representations and warranties contained in this Article III.
Section 3.02. Organization and Corporate Power.
Each of DAKA and CDVI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware with full corporate
power and authority to own or lease its properties and to conduct its business
in the manner and in the places where such properties are owned or leased or
such business is conducted and to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by it pursuant to or as
contemplated by this Agreement and to carry out the transactions contemplated
hereby and thereby.
Section 3.03. Authority
The execution, delivery and performance of this Agreement and each
agreement, document and instrument to be executed and delivered by the Company
pursuant to this Agreement have been duly authorized by all necessary corporate
action of the Company, and no other corporate action on the part of the Company
is required in connection therewith. This Agreement and each such agreement,
document and instrument constitutes, or when executed and delivered by the
Company will constitute, valid and binding obligations of the Company
enforceable in accordance with their respective terms. The execution,
deliveryand performance by the Company of this Agreement and each such
agreement, document and instrument:
(a) do not and will not violate any provisions of the certificate of
incorporation or by-laws of DAKA or CDVI;
(b) do not and will not result in any violation by the Company of any laws,
rules or regulations of the United States or any state or other jurisdiction
applicable to the Company or any of its affiliates, or require the Company or
any of its affiliates to obtain any approval, consent or waiver of, or to make
any filing of any notice with, any person (governmental or otherwise) that has
not been obtained or made; and
(c) do not and will not result in a breach of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of any
indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, order, writ, judgment, injunction, decree,
determination or arbitration award to which the Company is a party or by which
the property of the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any property or asset owned by the Company except for such
occurrence that would not have a material adverse effect on the properties,
business, condition (financial or otherwise), or prospects of the Company.
Section 3.04. Investment Banking; Brokerage
There are no claims for investment banking fees, brokerage commissions,
finder's fees or similar compensation (exclusive of professional fees of lawyers
and accountants) in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of ADC or
the Company.
Section 3.05. DAKA Common Stock
The DAKA Common Stock to be issued hereunder in exchange for the Shares
shall, when issued in accordance with this Agreement, be validly issued, fully
paid and non-assessable.
Section 3.06. Investment Representation
All Shares of ADC Common Stock being acquired by CDVI under the terms of
this Agreement are being acquired by CDVI for investment for its own account
without a view to, and not for sale in connection with, any distribution of the
ADC Common Stock.
<PAGE>
ARTICLE IV. COVENANTS.
Section 4.01. Sale of Shares; Acquisition Proposals
Unless and until this Agreement is terminated in accordance with its terms
for any reason, no Seller shall directly or indirectly exchange, deliver,
assign, pledge, encumber or otherwise transfer or dispose of any Shares
(including options in respect thereof) owned beneficially and of record by such
Seller, norshall any Seller directly or indirectly grant any right of any kind
to acquire, dispose of, vote or otherwise control in any manner any Shares.
Unless and until this Agreement is terminated in accordance with its terms,
neither any Seller nor any director, officer, employee or agent of any Seller
shall, directly or indirectly, (a) take any action to solicit, initiate
submission of or encourage proposals or offers from any person relating to any
acquisition or purchase of all or any portion of the Shares or all or (other
than in the ordinary course of business consistent with past practice) any
portion of any assets of, or any equity interest in, such Seller or ADC, any
merger or business combination with such Seller or ADC, or any other
acquisition, transaction or financing or joint venture involving such Seller or
ADC (an "Acquisition Proposal"), (b) participate in any negotiations regarding
an Acquisition Proposal with any person other than the Company and its
affiliates and representatives, (c) furnish any information with respect to or
afford access to the properties, books or records of such Seller or ADC to any
person who may consider making or has made an offer with respect to an
Acquisition Proposal other than the Company and its affiliates and
representatives, or (d) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any person
other than the Company and its affiliates and representatives to do or seek any
of the foregoing. The Sellers shall promptly notify the Company upon receipt of
any offer or indication that any person is considering making an offer with
respect to an Acquisition Proposal or any request for information relative to
ADC, and will keep the Company fully informed of the status and details of any
such offer, indication or request.
Section 4.02. Consents and Approvals
(a) The Sellers will use their best efforts to cause all conditions to the
obligations of the parties hereunder to be satisfied and to obtain or cause to
be obtained prior to the Closing Date all necessary consents and approvals to
the performance of the obligations of the Sellers under this Agreement. The
Sellers will cooperate in all respects with the Company with a view toward
obtaining timely satisfaction of the conditions to the Closing set forth herein.
(b) The Company will use its best efforts to cause all conditions to the
obligations of the parties hereunder to be satisfied and to obtain or cause to
be obtained prior to the Closing Date all necessary consents and approvals to
the performance of the obligations of the Company under this Agreement. The
Company will cooperate in all respects with the Sellers with a view toward
obtaining timely satisfaction of the conditions to the Closing set forth herein.
Section 4.03. Breach of Representations and Warranties
Promptly upon any Seller becoming aware of any breach, or the impending or
threatened occurrence of any event which would cause or constitute a breach, or
would have caused or constituted a breach had such event occurred or been known
prior to the date hereof, of any of the representations and warranties of the
Sellers contained in or referred to in this Agreement and made as of the date
hereof, the Sellers shall give detailed written notice thereof to the Company
and shall use their best efforts to prevent or promptly remedy the same.
Section 4.04. Confidentiality
In the course of the Sellers' involvement with ADC as stockholders or
employees or otherwise, the Sellers have had, and may from time to time after
the date hereof have, access to confidential records, data, customer lists,
trade secrets and similar confidential information owned or used by ADC in the
course of its business (the "Confidential Information"). Accordingly, each
Seller agrees (a) to hold the Confidential Information in strict confidence, (b)
not to disclose Confidential Information to any person, and (c) not to use,
directly or indirectly, any of the Confidential Information for any competitive
or commercial purpose; provided, however, that the limitations set forth above
shall not apply to any Confidential Information which (i) is then generally
known to the public other than by reason of a breach of this Section 4.04; or
(ii) is disclosed in accordance with an order of a court of competent
jurisdiction or applicable law. Upon request by the Company, all data,
memoranda, customer lists, notes, programs and other papers and items, and
reproductions thereof relating to the foregoing matters in a Seller's possession
or control shall be returned to the Company or ADC.
<PAGE>
Section 4.05. Non-Hire of ADC Employees
Until March 1, 1997, none of the Sellers shall hire or attempt to hire any
officer or other employee of ADC or encourage any officer or other employee to
terminate his or her relationship with ADC; provided, however, that Wagenheim or
any affiliate of Wagenheim shall be permitted to employ (i) all staff currently
employed in the operation by ADC of the Champps Americana restaurant located at
2397 Palmer Drive, New Brighton, Minnesota 53112 ("New Brighton Employees") and
(ii) Mitchel J. Wachman after the later of (A) June 30, 1996 or (B) such date on
which Wagenheim ceases to be an employee of ADC.
Section 4.06. Non-Hire of New Brighton Employees
None of DAKA, ADC or any of their affiliates shall hire or attempt to hire
any New Brighton Employee or encourage any New Brighton Employee to terminate
his or her relationship with Wagenheim or any affiliate of Wagenheim.
Section 4.07. ADC Indemnification By-Laws.
For a period of five years following the Closing, the Company shall cause
ADC not to amend its charter or by-laws as in existence on the date hereof so as
to adversely affect the right of Wagenhein and Pew as directors of ADC to
indemnification thereunder.
ARTICLE V. CONDITIONS
Section 5.01. Conditions to the Obligations of the Company
The obligation of the Company to consummate the transactions contemplated
by this Agreement are subject to the fulfillment, prior to or at the Closing, of
the following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the representations and
warranties of the Sellers made pursuant to this Agreement shall be true and
correct in all material respects on and as of the Closing Date, with the same
effect as though made on and as of the Closing Date; the Sellers shall, on or
before the Closing Date, have performed andsatisfied all of their covenants and
agreements set forth herein, which by the terms hereof, are to be performed and
satisfied on or before the Closing Date; and the Sellers shall have delivered to
the Company certificates executed as of the Closing Date certifying to the
foregoing effect.
<PAGE>
(b) Opinion of Counsel and Other Documents. On the Closing Date, the
Company shall have received (i) opinions of counsel for the Sellers dated as of
the Closing Date and addressed to the Company, substantially in the form
attached as Exhibit 5.01(b) hereto, and (ii) such other certificates and
documents with respect to the Sellers as counsel for the Company shall have
reasonably requested at least two (2) business days prior to the Closing Date.
(c) No Actions or Proceedings. No action or proceeding by or before any
court, administrative body or governmental agency shall have been instituted or
threatened by or on behalf of any Seller or which seeks to enjoin, restrain or
prohibit, or might result in money damages to any party hereto in respect of,
this Agreement or the complete consummation of the transactions contemplated by
this Agreement, or which otherwise would in the reasonable judgment of the
Company make it inadvisable to consummate such transactions. No law or
regulation shall be in effect and no court order shall have been entered in any
action or proceeding instituted by any party which enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions
contemplated by this Agreement.
(d) Company Approvals and Consents. The Company shall have made all filings
with and notifications of governmental authorities, regulatory agencies and
other entities required to be made by it in connection with the execution and
delivery of this Agreement and the performance by it of the transactions
contemplated hereby; the Company shall have received all required
authorizations, waivers, consents and permits to permit the consummation of the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to the Company, from all third parties.
(e) Deliveries. The Sellers shall have delivered or entered into the
documents and instruments contemplated by this Agreement, in each case, in form
and substance satisfactory to the Company and its counsel.
(f) ADC Approvals and Consents. ADC shall have made all filings with and
notifications of governmental authorities, regulatory agencies and other
entities, if any, required to be made in connection with the execution and
delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of ADC subsequent to the
Closing Date, and ADC shall have received all required authorizations, waivers,
consents and permits to permit the consummation of the transactions contemplated
by this Agreement, in the form and substance reasonably satisfactory to the
Company, with any conditions or limitations contained therein or imposed thereby
subject to the approval of the Company, from all third parties, including,
without limitation, applicablegovernmental authorities, regulatory agencies,
lessors, lenders and contract parties, required in connection with transactions
contemplated by this Agreement or by ADC's permits, leases, licenses and
franchises, to avoid a breach, default, termination, acceleration or
modification of any agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award as a result of the execution or performance of this
Agreement, or otherwise in connection with the execution and performance of this
Agreement.
<PAGE>
(g) Material Adverse Changes. There shall not have been since the date of
this Agreement, any change or series of changes that, in the reasonable business
judgment of the Company, acting in good faith, have or could reasonably be
anticipated to have a material adverse effect on the properties, business,
condition (financial or otherwise) or prospects of ADC.
(h) Proceedings Satisfactory to the Company. All proceedings to be taken by
the Sellers in connection with the consummation of the Closing and the other
transactions contemplated hereby and all certificates, opinions, instruments and
other documents required to effect the transaction contemplated hereby
reasonably requested by the Company will be reasonably satisfactory in the form
and substance to the Company and its counsel.
(i) Minimum Number of Shares of ADC Common Stock to be Transferred. On or
before the Closing Date, a sufficient number of Other Selling Stockholders shall
have become parties to this Agreement such that (i) at the Closing, CDVI will
acquire at least 840,001 shares of ADC Common Stock and (ii) immediately after
the Closing, CDVI will own beneficially and of record at least 2,240,001 shares
of ADC Common Stock, representing 80% or more of the issued and outstanding
shares of ADC Common Stock.
(j) The transactions contemplated by that certain Asset Purchase Agreement
(the "APA") between ADC and New Brighton Ventures, Inc. dated as of March 18,
1996 shall have closed in accordance with the terms of the APA and the documents
and other instruments attached to or referred to in the APA shall have been
executed and delivered.
Section 5.02. Conditions to the Obligations of the Sellers
The obligations of the Sellers to consummate the transactions contemplated
by this Agreement are subject to the fulfillment of, prior to or at the Closing,
the following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects on and as of the Closing Date, with the same effect as
though made on and as of the Closing Date; the Company shall, on or before the
Closing Date, have performed and satisfied all of its covenants and agreements
set forth herein which by the terms hereof are to be performed and satisfied by
the Company on or before the Closing Date; and the Company shall have delivered
to the Sellers a certificate as of the Closing Date certifying to the foregoing
effect. (b) Opinion of Counsel and Other Documents. On the Closing Date (i) the
Sellers shall have received an opinion of counsel for the Company, dated as of
the Closing Date and addressed to the Sellers, substantially in the form
attached as Exhibit 5.02(b)(i) hereto, (ii) Wagenheim and Pew shall have
received a tax opinion from Briggs and Morgan Professional Association
substantially to the effect that the acquisition by CDVI of the ADC Common Stock
held by CDG and Pew solely in exchange for DAKA Common Stock will constitute a
tax-free reorganization within the meaning of Section 368(a)(1)(B) of the Code
and no taxable gain or loss will be recognized to CDG and Pew upon the exchange
of their ADC Common Stock solely for DAKA Common Stock, and (iii) such other
certificates and documents as counsel to the Sellers shall have reasonably
requested from the Company at least five (5) business days prior to the Closing
Date.
(c) No Actions or Proceedings. No action or proceeding by or before any
court, administrative body or governmental agency shall have been instituted or
threatened which seeks to enjoin, restrain or prohibit, or might result in
damages in respect of, this Agreement or the complete consummation of the
transactions as contemplated by this Agreement. No law or regulation shall be in
effect and no court order shall have been entered in any action or proceeding
instituted by any party which enjoins, restrains or prohibits this Agreement or
the complete consummation of the transactions as contemplated by this Agreement.
<PAGE>
(d) General Releases. Each of DAKA, ADC and Edgebrook, Inc., a Minnesota
corporation and a stockholder of ADC, shall have executed and delivered to each
of CDG, Wagenheim, and Pew a general release substantially in the form of
Exhibit 5.02(d) attached hereto.
(e) Minimum Number of Shares of ADC Common Stock to be Transferred. On or
before the Closing Date, a sufficient number of Other Selling Stockholders shall
have become parties to this Agreement such that (i) at the Closing, CDVI will
acquire at least 840,001 shares of ADC Common Stock and (ii) immediately after
the Closing, CDVI will own beneficially and of record at least 2,240,001 shares
of ADC Common Stock, representing 80% or more of the issued and outstanding
shares of ADC Common Stock.
(f) The transactions contemplated by the APA shall have closed in
accordance with the terms of the APA and the documents and other instruments
attached to or referred to in the APA shall have been executed and delivered.
(g) The Acknowledgment Agreement by and among DAKA, ADC and Arthur E. Pew,
III shall have been executed and delivered to Pew by DAKA and ADC on or before
the Closing.
ARTICLE VI. TERMINATION OF AGREEMENT
Section 6.01. Termination
This Agreement may be terminated any time prior to the Closing Date as
follows:
(a) With the mutual consent of CDVI and the Sellers owning a majority of
the Shares.
(b) By either CDVI or the Sellers owning a majority of the Shares, if the
Closing has not occurred on or before June 1, 1996; provided, however, that if
the only reason why the Closing has not occurred is that the condition set forth
in Section 5.01(f) has not been satisfied, then such date shall be automatically
extended until August 31, 1996.
(c) By CDVI, if there has been a material misrepresentation or breach of
warranty on the part of any Seller in the representations and warranties
contained herein or a material breach of covenants on the part of any Seller and
the same has not been cured within 10 days after notice thereof. In the event of
any termination pursuant to this Section 6.01(c), written notice setting forth
the reasons therefor shall forthwith be given by CDVI to the Sellers.
(d) By Sellers owning a majority of the Shares, if there has been a
material misrepresentation or breach of warranty on the part of the Company in
the representations and warranties contained herein or a material breach of
covenants on the part of the Company and the same has not been cured within 10
days after notice thereof. In the event of any termination pursuant to this
Section 6.01(d), written notice setting forth the reasons therefor shall
forthwith be given by the Sellers to the Company.
(e) By Sellers owning a majority of the Shares, if the Closing Price (as
defined in Section 1.02 hereof) of the DAKA Common Stock is less than $21.00;
provided, however, that such termination shall be deemed rescinded and not
effective if CDVI elects to adjust the consideration for the Shares as provided
in Section 1.03.
Notwithstanding anything herein to the contrary, the right to terminate
this Agreement under Section 6.01 shall not be available to any party to the
extent the failure of such party, respectively, to fulfill any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date (as a result, for
example, of an action or failure to act causing a failure of a condition
precedent).
<PAGE>
Section 6.02. Effect of Termination
All obligations of the parties hereunder shall cease upon any termination
pursuant to Section 6.01; provided, however, that (i) the provisions of this
Article VI shall survive any termination of this Agreement; (ii) the Sellers'
general release set forth in Section 1.04 hereof shall be and remain fully
effective and unconditional regardless of such termination, except in the event
of termination by the Sellers pursuant to Section 6.01(d); (iii) nothing herein
shall relieve any party from any liability for amaterial error or omission in
any of its representations or warranties contained herein or a material failure
to comply with any of its covenants, conditions or agreements contained herein;
and (iv) any party may proceed as further set forth in Section 6.03 below.
Section 6.03. Right to Proceed
Anything in this Agreement to the contrary notwithstanding, if any of the
conditions specified in Section 5.01 hereof have not been satisfied, the Company
shall have the right to proceed with the transactions contemplated hereby
without waiving any of its rights hereunder, and if any of the conditions
specified in Section 5.02 hereof have not been satisfied, the Sellers, by a
decision of the Sellers owning a majority of the Shares, shall have the right to
proceed with the transactions contemplated hereby without waiving any of their
rights hereunder.
ARTICLE VII. SURVIVAL; INDEMNIFICATION
Section 7.01. Survival of Representations, Warranties, Etc
All representations, warranties, agreements, covenants and obligations
herein or in any schedule or certificate delivered by any party incident to the
transactions contemplated hereby are material and may be relied upon by the
party receiving the same and shall survive the Closing regardless of any
investigation by or knowledge of such party and shall not merge into the
performance of any obligation by any party hereto.
Section 7.02. Indemnification by the Sellers
(a) CDG, Wagenheim, Pew, PDSFC and Tenpas, on behalf of themselves and
their respective successors, executors, administrators, estates, heirs and
permitted assigns, jointly and severally, and (b) the other Selling
Stockholders, on behalf of themselves and their respective successors,
executors, administrators, estates, heirs and permitted assigns, severally and
not jointly, agree subsequent to the Closing Date to indemnify and hold harmless
the Company, ADC, their respective affiliates and their respective shareholders,
officers, directors, employees and agents (individually, a "Company Indemnified
Party" and collectively, the "Company Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against a party entitled to
indemnification (a "Loss" or "Losses"), as such losses are incurred, arising out
of, based upon or in connection with:
<PAGE>
(i) conditions, circumstances or occurrences which constitute or result in any
breach of any representation or warranty made by any Seller in this
Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered under or in connection with this
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thingcovered by any such
representations or warranties (collectively, "Representation and Warranty
Claims");
(ii) any breach of any covenant or agreement made by any Seller in this
Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered under or in connection with this
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant
or agreement;
(iii)any fees and expenses of the Sellers (including without limitation legal
fees and accounting fees) relating to the execution, delivery and
performance of this Agreement paid, assumed or otherwise borne by ADC.
Section 7.03. Limitations on Indemnification by Stockholders
(a) Subject to the exceptions set forth in Section 7.03(b), with respect to
any particular indemnification claim asserted by the Company Indemnified Parties
under Section 7.02, the particular Seller who has breached a representation or
warranty or covenant as to himself or herself or itself shall be primarily
liable with respect to such claim for the full amount of such claim and the
non-breaching Sellers (subject to the further limitation that the liability of
the Other Selling Stockholders shall be several and not joint) shall be liable
with respect to such claim only to the extent that the full amount of such
indemnification claim is not recoverable by the Company Indemnified Parties from
the breaching Seller.
(b) Dollar-for-Dollar Claims. Notwithstanding anything herein to the
contrary, recovery by Company Indemnified Parties on account of indemnification
claims made pursuant to Section 7.02 hereof shall not be subject to any
limitation, whether pursuant to this Section 7.03 or otherwise, and they shall
be entitled to dollar-for-dollar recovery, in seeking indemnification from any
Seller with respect to (i) Losses arising from fraud or an intentional
misrepresentation on the part of any Seller; (ii) Losses arising from
intentional breach of a covenant by any Seller; (iii) Losses involving a breach
by a Seller of the representations and warranties contained in Sections 2.02 and
2.03
Section 7.04. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Sellers from and
against and in respect of all Losses sustained, suffered or incurred by or made
against any of them arising out of, based upon or in connection with (a)
conditions, circumstances or occurrences which constitute or result in any
breach of any representation or warranty made by the Company in this Agreement
or in any schedule, exhibit, certificate, financial statement, agreement or
other instrument delivered under or in connection with this Agreement, or by
reason of any claim, action or proceeding asserted or instituted arising out of
any matter or thing covered by any such representations and (b) any breach of
any covenant or agreement made by the Company in this Agreement or in any
schedule, exhibit, certificate, financial statement, agreement or other
instrument delivered under or in connection with this Agreement, or by reason of
any claim, action or proceedingasserted or instituted arising out of any matter
or thing covered by any such covenant or agreement.
<PAGE>
Section 7.05. No Limitation of Rights
Notwithstanding anything herein to the contrary, the limitations set forth
in this Article VII shall apply only with respect to post-Closing
indemnification obligations and shall in no way limit any rights the Company or
Sellers may have in law or equity in the event the Closing does not occur.
Section 7.06. Notice; Defense of Claims
Promptly after receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations hereunder would
apply, the indemnified party shall give notice thereof in writing to the
indemnifying party, but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted. If within 20 days
after receiving such notice the indemnifying party gives written notice to the
indemnified party stating that (i) it would be liable under the provisions
hereof for indemnity in the amount of such claim if such claim were successful,
(ii) that it shall be fully responsible (with no reservation of any rights) for
all liabilities relating to such claim, liability or expense and that it will
provide full indemnification (whether or not otherwise required hereunder) to
the indemnified party with respect to such claim, liability or expense and (iii)
that it disputes and intends to defend against such claim, liability or expense
at its own cost and expense, then counsel for the defense shall be selected by
the indemnifying party (subject to the consent of the indemnified party which
consent shall not be unreasonably withheld) and the indemnified party shall not
be required to make any payment with respect to such claim, liability or expense
as long as the indemnifying party is conducting a good faith and diligent
defense at its own expense; provided, however, that the assumption of defense of
any such matters by the indemnifying party shall relate solely to the claim,
liability or expense that is subject or potentially subject to indemnification,
and provided further that prior to such assumption of defense the indemnifying
party shall enter into an agreement with the indemnified party in form and
substance satisfactory to the indemnified party pursuant to which the
indemnifying party unconditionally guarantees the payment and performance of any
liability or obligation which may arise out of or in any way relating to such
claim, liability or expense or the facts giving rise thereto. The indemnifying
party shall have the right, with the consent of the indemnified party, which
consent shall not be unreasonably withheld, to settle all indemnifiable matters
related to claims by third parties which are susceptible to being settled
provided its obligation to indemnify the indemnifying party therefor will be
fully satisfied. The indemnifying party shall keep the indemnified party
apprised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fullyparticipate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
<PAGE>
ARTICLE VIII. REGISTRATION RIGHTS
Section 8.01. Definitions
As used in this Article VIII, the following terms shall have the following
meanings:
"Advice" has the meaning set forth in Section 8.03.
"Affiliate" means, with respect to any specified person, any other person who,
directly or indirectly, controls, is controlled by, or is under common
control with such specified person.
"Commission" means the Securities and Exchange Commission.
"Controlling Persons" has the meaning set forth in Section 8.05(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended from time
to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Holder" means (i) any Seller and (ii) each person (other than DAKA and its
Affiliates) to whom any Seller transfers Securities as provided in Section
8.07 hereof, if the person to whom such Securities are transferred acquires
such Securities as Registrable Securities.
"Lock-up Period" has the meaning set forth in Section 8.06.
"Lock-up Request" has the meaning set forth in Section 8.06.
"Prospectus" means the prospectus included in any Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement,
and by all other amendments and supplements to the prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference or deemed to be incorporated by reference in such
prospectus.
"Registrable Securities" means the Securities; provided, however, that any
Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective
and such Registrable Securities have been disposed of pursuant to such
effective Registration Statement, (ii) such Registrable Securities become
eligible for sale pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act or (iii) such Securities cease to be
outstanding.
"Registration Statement" means any registration statement of DAKA that covers
any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.
"Securities" means the shares of DAKA Common Stock issued to the Sellers
pursuant to this Agreement so long as they are owned beneficially and of
record by a Holder.
"Securities Act" means the Securities Act of 1933, as amended from time to time,
or any successor statute, and the rules and regulations of the Commission
promulgated thereunder.
"Suspension Notice" has the meaning set forth in Section 8.03.
"Suspension Period" has the meaning set forth in Section 8.03.
<PAGE>
Section 8.02. Resale Registration
(a) Filing; Effectiveness. If on any one (1) occasion after October 1,
1996, one or more Holders holding an aggregate of at least 9,000 Registrable
Securities shall notify DAKA in writing that they intend to offer or cause to be
offered for public resale all or any portion of their Registrable Securities,
DAKA will notify all of the Holders of Registrable Securities of its receipt of
such notification and upon the written request of any such Holder delivered to
DAKA within 15 days after receipt from DAKA of such notification, DAKA shall use
reasonable efforts to prepare and file a registration statement on Form S-3 (the
"Resale Registration Statement") under the Securities Act covering the resale by
such Holders of their Registrable Securities pursuant to Rule 415 under the
Securities Act from time to time in transactions not involving any underwritten
public offering and use reasonable efforts (i) tocause such Resale Registration
Statement to be declared effective by the Commission for such Registrable
Securities as soon as practicable thereafter and (ii) to keep the Resale
Registration Statement continuously effective until the earliest of (x) the date
on which such Holders no longer hold any Registrable Securities registered under
the Resale Registration Statement or (y) the second anniversary of the Closing
Date; provided, however, that (A) upon the request of one or more Holders
holding an aggregate of at least 9,000 Registrable Securities received prior to
October 1, 1996, DAKA will proceed promptly and in good faith to prepare the
Resale Registration Statement, even if DAKA is not required to file it with the
Commission until October 1, 1996, so as to avoid a delay past October 1, 1996 in
making such filing and (B) if DAKA prior to October 1, 1996 files any
registration statement with the Commission under the Securities Act (other than
on Form S-4 or a similar form relating to business combinations or exchanges or
Form S-8 or a similar form relating to any employee benefit plan), then DAKA
shall give the Holders notice thereof and the Holders may demand registration
pursuant to this Section 8.02 immediately after such filing. DAKA shall not be
required to cause a registration statement requested pursuant to this Section
8.02 to become effective prior to 90 days following the effective date of a
registration statement initiated by DAKA if any managing underwriter named in
such registration statement has advised DAKA in writing that the registration or
sale of additional securities by stockholders of DAKA within such 90-day period
would have a material adverse effect on the likelihood of success of such
underwritten offering; provided, however, that DAKA shall use its best efforts
to achieve such effectiveness promptly following such 90-day period if the
request pursuant to this Section 8.02 has been made prior to the expiration of
such 90-day period. DAKA may postpone the filing of any Registration Statement
required hereunder for a reasonable period of time, not to exceed 60 days, if
DAKA has been advised by outside legal counsel that such filing would require
the disclosure of a material transaction or other matter and DAKA determines
reasonably and in good faith that such disclosure would have a material adverse
effect on DAKA; provided, however, that DAKA shall (A) use reasonable efforts to
disclose such material transaction or other matter as soon as in its good faith
judgment it is prudent to do so and (B) may so postpone such filing only if all
other persons who are named as selling securityholders under then effective
registration statements filed by DAKA with the Commission and all directors of
DAKA are advised of the fact that a material transaction or other matter is not
being disclosed during the length of such postponement and of the consequences
of such nondisclosure under the Securities Act and the Exchange Act.
(b) Effective Registration. A registration will not be deemed to have been
effected as a Resale Registration unless the Resale Registration Statement with
respect thereto has been declared effective by the Commission; provided,
however, that if after it has been declared effective, the offering of
Registrable Securities pursuant to a Resale Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Resale Registration
Statement will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Resale Registration Statement may legally resume.
<PAGE>
Section 8.03. Registration Procedures
In connection with the obligations of DAKA to effect or cause the
registration of any Registrable Securities pursuant to the terms and conditions
of this Agreement, DAKA shall use reasonable efforts to effect the registration
and sale of such Registrable Securities in accordance with the intended method
of distribution thereof, and in connection therewith:
(a) DAKA shall prepare and file with the Commission a Registration
Statement on Form S-3 or other similar form under the Securities Act which
permits secondary sales of securities in a "shelf registration," and use
reasonable efforts to cause such Registration Statement to become effective and
remain effective in accordance with the provisions of this Agreement;
(b) DAKA shall promptly prepare and file with the Commission such
amendments and post-effective amendments to each Registration Statement as may
be necessary to keep such Registration Statement effective for as long as such
registration is required to remain effective pursuant to the terms hereof; shall
cause the Prospectus to be supplemented by any required Prospectus supplement,
and, as so supplemented, to be filed pursuant to Rule 424 under the Securities
Act; and shall comply with the provisions of the Securities Act applicable to it
with respect to the disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders set forth in such Registration
Statement or supplement to the Prospectus;
(c) DAKA shall promptly furnish to any Holder such number of copies of the
Prospectus (including each preliminary Prospectus) and any amendments or
supplements thereto, as such Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
being sold by such Holder;
(d) DAKA shall, on or prior to the date on which a Registration Statement
is declared effective, use reasonable efforts to register or qualify the
Registrable Securities covered by such Registration Statement under such other
securities or "blue sky" laws of such states of the United States as any Holder
requests; provided, however, that DAKA shall not be required (i) to qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 8.03(d) or (ii) to file any general
consent to service of process;
(e) DAKA shall promptly notify each Holder, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the Commission or any state
securities authority for amendments and supplements to a Registration Statement
and Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement, (iv) of the issuance
by any state securities commission or other regulatory authority of any order
suspending thequalification or exemption from qualification of any of the
Registrable Securities under state securities or "blue sky" laws, and (v) of the
happening of any event which makes any statement made in a Registration
Statement or related Prospectus untrue or which requires the making of any
changes in such Registration Statement or Prospectus so that they will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As
soon as practicable following expiration of the Suspension Period (as defined
below), DAKA shall prepare and file with the Commission and furnish a supplement
or amendment to such Prospectus so that, as thereafter deliverable to the
purchasers of such Registrable Securities, such Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
<PAGE>
In the case of a Resale Registration Statement, each Holder, upon receipt
of any notice (a "Suspension Notice") from DAKA of the happening of any event of
the kind described in Section 8.03(e)(v), shall forthwith discontinue
disposition of the Registrable Securities pursuant to the Resale Registration
Statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
8.03(e) or until it is advised in writing (the "Advice") by DAKA that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus, and,
if so directed by DAKA, such Holder will, or will request any broker-dealer
acting as such Holder's agent or as an underwriter to, deliver to DAKA (at
DAKA's expense) all copies, other than permanent file copies then in such
Holder's or broker-dealer's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice; provided,
however, that in no event shall the period from the date on which any Holder
receives a Suspension Notice to the date on which any Holder receives either the
Advice or copies of the supplemented or amended Prospectus contemplated by
Section 8.03(e) (the "Suspension Period") exceed 60 days; and provided further
that such Suspension Notice shall not be effective unless DAKA has
contemporaneously given an analogous notice to all other persons named as
selling securityholders in then effective registration statements filed by DAKA
with the Commission and to DAKA's directors. In the event that DAKA shall give
any Suspension Notice, the time periods for which a Resale Registration
Statement is required to be kept effective pursuant to Section 8.02 hereof shall
be extended by the number of days during the Suspension Period.
Section 8.04. Registration Expenses
DAKA shall bear all expenses incurred in connection with the registration
of the Registrable Shares pursuant to Section 8.02 of this Agreement. Such
expenses shall include, without limitation, all printing, legal and accounting
expenses incurred by DAKA and all registration and filing fees imposed by the
Commission, any state securities commission or the NASDAQ National Market. The
Holders shall be responsible for any brokerage or underwriting commissions and
taxes of any kind (including, without limitation, transfer taxes) with respect
to any disposition, sale or transfer of Registrable Securities and for any
legal, accounting and other expenses incurred by them.
Section 8.05. Indemnification and Contribution
(a) Indemnification by DAKA. DAKA agrees to indemnify and hold harmless, to
the full extent permitted by law, each Holder, its partners, officers,
directors, trustees, stockholders, employees and agents, and each person who
controls such Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, or is under common control with, or is
controlled by, such Holder, together with the partners, officers, directors,
trustees, stockholders, employees and agents of such controlling person
(collectively, the "Controlling Persons"), from and against all losses, claims,
damages, liabilities and expenses (including without limitation reasonable legal
fees and expenses incurred by any Holder or any such Controlling Person
documented in writing) (collectively, the "Damages") to which such Holder, its
partners, officers, directors, trustees, stockholders, employees and agents, and
any such Controlling Person may become subject under the Securities Act or
otherwise, insofar as such Damages (or proceedings in respect thereof) arise out
of or are based upon any untrue or alleged untrue statement of material fact
contained in any Registration Statement (or any amendment thereto) pursuant to
which Registrable Securities were registered under the Securities Act, or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (as amended or
supplemented if DAKA shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, except insofar as such
Damages arise out of or are based upon any such untrue statement or omission
based upon information relating to such Holder furnished in writing to DAKA by
such Holder specifically for use therein; provided, however, that DAKA shall not
be liable to any Holder under this Section 8.05(a) to the extent that any such
Damages were caused by the fact that such Holder sold Securities to a person as
to whom it shall be established that there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus as then amended
or supplemented if, and only if, (i) DAKA has previously furnished copies of
such amended or supplemented Prospectus to such Holder and (ii) such Damages
were caused by any untrue statement or omission or alleged untrue statement or
omission contained in the Prospectus so delivered which was corrected in such
amended or supplemented Prospectus.
<PAGE>
(b) Indemnification by the Holders. Each Holder agrees, severally and not
jointly, to indemnify and hold harmless DAKA, its stockholders, directors,
officers and each person, if any, who controls DAKA within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from DAKA to such Holder, but only with
reference to information relating to such Holder furnished in writing to DAKA by
such selling Holder specifically for use in any Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto);
provided, however, that such selling Holder shall not be obligated to provide
such indemnity to the extent that such Damages result from the failure of DAKA
to promptly amendor take action to correct or supplement any such Registration
Statement or Prospectus on the basis of corrected or supplemental information
provided by such selling Holder to DAKA expressly for such purpose. In no event
shall the liability of any Holder of Registrable Securities hereunder be greater
in amount than the amount of the proceeds received by such Holder upon the sale
of the Registrable Securities giving rise to such indemnification obligation.
(c) Contribution. To the extent that the indemnification provided for in
paragraph (a) or (b) of this Section 8.05 is unavailable to an indemnified party
or insufficient in respect of any Damages, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such Damages in such proportion as is appropriate to reflect the relative
fault of DAKA on the one hand and the Holders on the other hand in connection
with the statements or omissions that resulted in such Damages, as well as any
other relevant equitable considerations. The relative fault of DAKA on the one
hand and of the Holders on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by DAKA or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
If indemnification is available under paragraph (a) or (b) of this Section
8.05, the indemnifying parties shall indemnify each indemnified party to the
full extent provided in such paragraphs without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 8.05(c).
DAKA and each Holder agrees that it would not be just or equitable if
contribution pursuant to this Section 8.05(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein.
<PAGE>
Section 8.06. Restrictions on Sale
In the event of an underwritten public offering for the account of DAKA,
upon the written request (the "Lock-up Request") of the managing underwriter (or
underwriters) of such offering, each Holder agrees not to effect any public sale
or distribution of any securities similar to those being registered in such
offering (other than pursuant to such offering), including, without limitation,
through sales of Securities pursuant to a Resale Registration Statement, during
the 14 days prior to, and during the 90-day period beginning on the effective
date of the Registration Statement relating to such offering (the "Lock-up
Period"); provided, however, that the Holders shall not be required to comply
with such Lock-up Request unless DAKA simultaneously demands analogous
restrictions on sale and uses all reasonable efforts to obtain from all other
persons who are contractually bound with DAKA to comply with such Lock-up
Requests and from DAKA's directors. In the event of the delivery of a Lock-up
Request, the time periods for which a Resale Registration Statement is required
to be kept effective pursuant to Section 8.02 hereof shall be extended by the
number of days during the Lock-up Period.
Section 8.07 Transfer of Registration Rights
The registration rights of the Sellers and any Holders under this Article
VIII may be transferred to any transferee of Registrable Securities that
acquires at least 1,000 shares of Registrable Securities (appropriately adjusted
for stock splits, stock dividends and the like). Each such transferee shall be
deemed to be a "Holder" for purposes of this Article VIII.
ARTICLE IX. MISCELLANEOUS
Section 9.01. Law Governing
This Agreement shall be construed under and governed by the internal laws,
and not the law of conflicts, of the State of Minnesota.
Section 9.02. Notices
Any notice, request, demand or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given if
delivered or sent by facsimile transmission (promptly followed by hard copy
confirmation), upon receipt, or if sent by registered or certified mail upon the
sooner of the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid or acknowledgment of
receipt, as follows:
To the Company: One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
Attn: Charles W. Redepenning, Jr.
Senior Vice President and General Counsel
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Attn: Ettore Santucci, P.C.
To Wagenheim c/o Steven J. Wagenheim
and the Other 2397 Palmer Drive
Selling Stockholders: New Brighton, MN 53112
with a copy to: Briggs and Morgan
2400 IDS Center
Minneapolis, MN 55402
Attn: Avron L. Gordon, Esquire
To Pew: Arthur E. Pew, III
2515 Manitou Island
White Bear Lake, MN 55110
<PAGE>
To PDSFC: PDS Financial Corporation
6442 City West Parkway, Suite 300
Minneapolis, MN 55344
Attn: David R. Mylrea
Chief Operating Officer
To Tenpas: Douglas B. Tenpas
4653 Ewing Avenue South
Minneapolis, MN 55410
or to such other address of which any party may notify the other parties as
provided above.
Section 9.03. Prior Agreements Superseded.
This Agreement supersedes all prior understandings and agreements among the
parties relating to the subject matter hereof.
Section 9.04. Assignability
This Agreement shall be assignable by the Company (a) prior to the Closing
to a subsidiary of the Company although no such assignment shall relieve the
Company of any liabilities or obligations under this Agreement and (b) after the
Closing, to any person. This Agreement shall not otherwise be assignable by the
Company without the prior written consent of Sellers owning a majority of the
Shares or (except as otherwise permitted by Section 8.07 hereof) by any Seller
without prior written consent of the Company. This Agreement shall be binding
upon and enforceable by, and shall inure to the benefit of, the parties hereto
and their respective successors, heirs, executors, administrators and permitted
assigns, and no others. Notwithstanding the foregoing, nothing in this Agreement
is intended to give any person not named herein the benefit of any legal or
equitable right, remedy or claim under this Agreement, except as expressly
provided herein.
Section 9.05. Fees and Expenses
Each of the parties to this Agreement shall pay his or her or its own
expenses and costs associated with the negotiation, execution and delivery of
this Agreement and any agreement or instrument contemplated hereby and the
consummation of the transactions contemplated hereby, including all fees and
expenses of counsel, accountants and financial advisors or other professionals
acting on behalf of such party.
Section 9.06. Publicity and Disclosures
None of the parties hereto nor any of their respective stockholders,
affiliates, officers, directors or employees shall issue or cause the
publication of any press release or other announcement with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of the Company and Sellers owning a majority of the Shares, except to
the extent disclosure is required by any applicable law or regulation or by any
court or authorized administrative or governmental agency.
Section 9.07. Captions and Gender
The captions in this Agreement are for convenience only and shall not
affect the construction or interpretation of any term or provision hereof. The
use in this Agreement of the masculine pronoun in reference to a party hereto
shall be deemed to include the feminine or neuter pronoun, as the context may
require.
Section 9.08. Execution in Counterparts
For the convenience of the parties and to facilitate execution, this
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same document.
<PAGE>
Section 9.09. Certain Remedies; Severability
It is specifically understood and agreed that any breach of this Agreement
by any of the parties will result in irreparable injury to the aggrieved party,
that the remedy at law alone will be an inadequate remedy for such breach and
that, in addition to any other remedy for such breach and that, in addition to
any other remedy it may have, such aggrieved party shall be entitled to enforce
the specific performance of this Agreement by the breaching party and to seek
both temporary and permanent injunctive relief, without the necessity of proving
actual damages, but without limitation of their rights to recover such damages.
In case any of the provisions contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable in any respect, any such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had been limited or modified (consistent with
its general intent) to the extent necessary to make it valid, legal and
enforceable, or if it shall not be possible to so limit or modify such invalid,
illegal or unenforceable provision or part of a provision, this Agreement shall
be construed as if such invalid, illegal or unenforceable provision or part of a
provision had never been contained in this Agreement.
Section 9.10. Amendments; Waivers
This Agreement may not be amended or modified except by a writing duly and
validly executed by the Company and Sellers owning a majority of the Shares. Any
party hereto may waive any covenant or condition intended for its benefit in its
discretion, but delay on the part of any party in exercising any right, power or
privilege hereunder shall not operate as a waiver thereof, nor shall any waiver
on the part of any party of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. The rights and remedies of any party arising out of or otherwise in
respect of any inaccuracy in or breach of any representation or warranty, or any
failure to perform or comply with any covenant or agreement, contained in this
Agreement shall in no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of any such inaccuracy,
breach or failure is based may also be the subject matter of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy,
breach or failure.
Section 9.11. Exhibits and Schedules
The Exhibits and Schedules to this Agreement are a part of this Agreement
as if set forth in full herein. Any reference to this Agreement or any provision
hereof shall be deemed to include a reference to the Schedules and Exhibits
hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date set forth above.
CASUAL DINING VENTURES, INC.
By: /s/ Charles W. Redepenning, Jr.
----------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President and
General Counsel
DAKA INTERNATIONAL, INC.
By: /s/ Charles W. Redepenning, Jr
---------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President and
General Counsel
CHAMPPS DEVELOPMENT GROUP, INC.
By: /s/ Steven J. Wagenheim
--------------------------------
Steven J. Wagenheim
President
/s/ Steven J. Wagenheim
-----------------------
Steven J. Wagenheim
/s/ Arthur E. Pew, III
----------------------
Arthur E. Pew, III
PDS FINANCIAL CORPORATION
By: /s/ David R. Mylrea
----------------------------
David R. Mylrea
Chief Operating Officer
TENPAS
By: /s/ Douglas B. Tenpas
------------------------------
Douglas B. Tenpas
/s/ Kathleen R. Tenpas
----------------------
Kathleen R. Tenpas
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 19 , 1996 /s/ Robert Tinsley
------------------ ----------------------------------------------
Name: Robert Tinsley
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 19 , 1996 /s/ Donald Johansen
------------------ -----------------------------------------------
Name: Donald Johansen
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 19 , 1996 /s/ Sterling Brazier
- -------------------------------------------------------------------------------
Name: Sterling Brazier
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 21 , 1996 /s/ Timothy Cary
------------------ --------------------------------------------
Name: Timothy Cary
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 19 , 1996 /s/ Anthony F. Kroeten
------------------ ------------------------------------------------
Name: Anthony F. Kroeten
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 20 , 1996 /s/ Debra Kroph Mastin
--------------- ---------------------------------------------------
Name: Debra Kroph Mastin
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 22 , 1996 /s/ Court Hawley
------------------ ------------------------------------------------
Name: Court Hawley
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 21 , 1996 /s/ Eric LaClair
----------------- -------------------------------------------------
Name: Eric LaClair
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 19 , 1996 /s/ Sally Touve
- -------------------------------------------------------------------------------
Name: Sally Touve
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 18 , 1996 /s/ Mitchel Wachman
------------------ ------------------------=-----------------------
Name: Mitchel Wachman
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 19 , 1996 /s/ Edmund Fadel
- -------------------------------------------------------------------------------
Name: Edmund Fadel
<PAGE>
OTHER SELLING STOCKHOLDER'S SIGNATURE PAGE
The undersigned hereby agrees to become a party to and be bound by that
certain Stock Purchase Agreement dated as of March 18, 1996 by and among Casual
Dining Ventures, Inc., DAKA International, Inc. and certain stockholders of
Americana Dining Corp., a Minnesota corporation.
Date: March 18 , 1996 /s/ David W. Walker
----------------- ---------------=---------------------------------
Name: David W. Walker
<PAGE>
EXHIBIT A
CERTAIN STOCKHOLDERS OF AMERICANA DINING CORP.
Robert Tinsley
Donald Johansen
Sterling Brazier
Timothy Cary
Anthony Kroeten
Debra Kropf Mastin
Court Hawley
Eric LaClair
Sally Touve
Mitchel I. Wachman
Edmund F. Fadel
David Walker
ASSET PURCHASE AGREEMENT
BETWEEN
AMERICANA DINING CORP.,
AS SELLER
AND
NEW BRIGHTON VENTURES, INC.,
AS BUYER
DATED: March ___, 1996
<PAGE>
TABLE OF CONTENTS
Exhibits:
Exhibit A: Sublease Agreement
Exhibit B: Sub-License Agreement
Exhibit C: Promissory Note
Exhibit D: Security Agreement
Exhibit E: Assignment of Contracts, Licenses, Permits, Agreements,
Warranties and Approvals
Exhibit F: Stock Pledge Agreement
Exhibit G: Limited Guaranty
Exhibit H: Opinion of Seller Counsel
Exhibit I: Lessor Consent and Certificate
Exhibit J: Opinion of Buyer's Counsel
Exhibit K: Interim Management Agreement
Schedules:
Schedule I: Assumed Contracts
Schedule II: List of Furniture, Fixtures and Equipment
Schedule III: Permitted Encumbrances
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made and entered into as
of the ___ day of March, 1996, by and between:
(a) Americana Dining Corp., a Delaware corporation (the "Seller").
(b) New Brighton Ventures, Inc., a Minnesota corporation (the "Buyer").
RECITALS
WHEREAS, Seller presently operates a restaurant and on-sale beverage
business (collectively, the "Restaurant") located at 2397 Palmer Drive, New
Brighton, Minnesota 55112 (the "Location").
WHEREAS, Seller owns furniture, fixtures, equipment and leasehold
improvements, goodwill and other general intangibles at the Location. Buyer
desires to purchase and have assigned and transferred to it such assets.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, it is hereby agreed by and between the parties
as follows:
ARTICLE
CERTAIN DEFINITIONS
Section 1
Definitions
For purposes of this Agreement, the following terms shall have the meanings
set forth below: "Assumed Obligations" means:
All obligations accruing from and after the Date of Closing (as hereafter
defined) under the Sublease and under the other leases, contracts, purchase
agreements, permits, licenses and other obligations described on Schedule I
attached hereto and other similar or replacement agreements entered into by
Seller in the ordinary course of business of operating the Restaurant in
accordance with past practice between the date hereof and the Date of Closing,
including, without limitation, all base rent, common area charges, operating
expenses and other similar costs, expenses, obligations and liabilities accruing
under such agreements from and after the Date of Closing.
All Taxes (as defined below) incurred by or on behalf of Buyer from and after
the Date of Closing in connection with the operation of the Restaurant from and
after the Date of Closing.
The fees and expenses payable by Buyer under Section 14.8 below.
To the extent not included above, any and all debts, liabilities and obligations
which arise, result from, or relate in any way to the operation of the
Restaurant by Buyer following the Date of Closing, including all amounts due any
employees employed in connection with the operation of business conducted on the
Location from and after the Date of Closing, including, without limitation, all
salaries, wages and other amounts due such employees and all employee payroll
deductions such as FICA, state and federal withholding taxes, unemployment
compensation taxes, union or other required payments or deductions and all
vacation or sick leave benefits or pay (but only to the extent that such amounts
relate to services performed by such employees at the Location or such other
location as previously designated by Mr. Wagenheim from and after the Date of
Closing). "Main Lease" means the following: (a) Lease Agreement dated as of
October 17, 1990 between Daniel W. Engelsma, Bruce W. Engelsma and Philip F.
Boelter, as Trustees of the Lloyd Engelsma 1984 Family Trust, underIrrevocable
Trust Agreement dated June 20, 1984, as Lessor (the "Main Lessor") and Renard
Ventures, II, Ltd., as Tenant. (b) Amendment to Lease Agreement dated as of
January 7, 1991. (c) Amendment to Lease Agreement dated as of February 26, 1991.
(d) Assignment of Lease, Acceptance or Assignment and Consent to Assignment
between Renard Ventures, II, Ltd. and Champps Entertainment, Inc. (e) Amendment
No. 3 to Lease Agreement executed as of February 12, 1992 by the Sub-Lessor and
the Main Lessor. "Sublease" means the Sublease Agreement to be executed between
Buyer and Seller as of the Date of Closing in substantially the form of Exhibit
A attached hereto. "Taxes" means all federal, state, local, foreign, and other
taxes, including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, franchise taxes, capital stock taxes, employment and
payroll-related taxes, withholding taxes, stamps taxes, transfer taxes and
windfall profit taxes, whether or not measured in whole or in part by net
income,and all deficiencies, or other additions, including interest, fines and
penalties
ARTICLE
SALE AND PURCHASE OF ASSETS
Section 2
Property to be Sold
Seller, in consideration of the covenants and agreements of Buyer hereinafter
set forth, does hereby agree to sell, transfer, assign and convey unto Buyer,
its successors and assigns, the business and goodwill of the Restaurant and the
tangible operating assets located at the Location and used in the operation of
the Restaurant (collectively, the "Assets") (exclusive, however, of the assets
described in Section 2.3 below), including, but not limited to the following:
The furniture fixtures and equipment described on Schedule II attached hereto
and all furniture, fixtures, equipment, furnishings, maintenance equipment and
leasehold improvements, all trade fixtures, furnishings, machinery and
equipment, cooking utensils, glassware, dishes, silverware, and supplies and
other personal property located on or about the Location or used by Seller in
the operation of the Restaurant at the Location.
Customer lists, vendor lists, operating paper goods and business forms, rights
to telephone numbers and directory listings and goodwill associated with the
Restaurant.
The Seller's interest, if any, in the service and maintenance contracts, real
estate and equipment leases, permits and licenses and other contracts, permits
and licenses pertaining to the operation of the Restaurant at the Location and
described on Schedule I hereto.
Section 2
"AS-IS" PURCHASE
IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT BUYER HAS FULLY EXAMINED THE ASSETS
AND HAS RELIED ON ITS OWN DISCRETION AND JUDGMENT WITH REGARD TO THE
TRANSACTIONS CONTEMPLATED HEREUNDER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, THE
ASSETS HAVE BEEN SOLD ON AN "AS IS" AND "WHERE IS" BASIS, WITH NO
REPRESENTATIONS OR WARRANTIES OF SELLER OF ANY KIND, TYPE OR NATURE, INCLUDING,
WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY REGARDING THE VALUE, PAST,
PRESENT OR FUTURE INCOME, COMPLIANCE WITH SPECIFICATIONS, SIZE, LOCATION, AGE,
USE, MERCHANTABILITY, DESIGN, QUALITY, DESCRIPTION, DURABILITY, OPERATION OR
CONDITIONS OF THE ASSETS, WHETHER VISIBLE OR NOT.
Section 2
Excluded Assets
Buyer and Seller expressly understand and agree that Seller has not agreed to
sell, assign, transfer or convey (a) Seller's corporate minute book, stock
books,accounts receivable and other rights to payment, bonds and savings
certificates and bank accounts, (b) all trade names, trademarks, service marks,
symbols, logos, copyrights and other proprietary materials or trade rights used
by Seller in the operation of the Restaurant and all registrations, applications
and licenses for any of the foregoing, it being understood that Buyer and Seller
will, on the Date of Closing, enter into a Sub-License Agreement in
substantially the form attached hereto as Exhibit B (the "Sub-License
Agreement") whereby Buyer will obtain certain rights to use the foregoing in the
operation of the Restaurant under the terms and conditions set forth in the
Sub-License Agreement, and (c) all cash and cash equivalents except as otherwise
provided in Article IV hereof.
Section 2
Assets to be Transferred Free and Clear
The Assets to be transferred by Seller to Buyer shall be transferred free and
clear of all liabilities, obligations, security interests, and encumbrances,
except for the security interests and encumbrances of Seller ("Permitted
Encumbrances") set forth on Schedule III attached hereto.
Section 2
Assumption of Liabilities
Buyer, in consideration of the covenants and agreements of Seller hereinafterset
forth, does hereby agree to assume and perform the Assumed Obligations.
ARTICLE
PURCHASE PRICE
Section 3
Purchase Price and Payment
Buyer, in consideration of the covenants and agreements of Seller, hereby agrees
to pay to Seller as and for the purchase price for the Assets (exclusive of the
price of inventory and cash-on-hand as provided in Article IV hereof) the sum of
ONE MILLION THREE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($1,350,000) (the
"Purchase Price"): (a) The sum of $70,000 shall be due and payable in cash or
certified funds on the Date of Closing. (b) The balance of the Purchase Price
(to wit: $1,280,000) shall be payable in the form of a promissory note (the
"Note") to be executed and delivered as of the Date of Closing in substantially
the form of Exhibit C attached hereto. Payment and performance of Note shall be
secured by the following documents to be executed as of the Date of Closing:
@Style #7@ (i) Security Agreement (the "Security Agreement") to be executed by
the Buyer in substantially the form of Exhibit D attached hereto. @Style #7@
(ii) Assignment of Contracts, Licenses, Permits, Agreements, Warranties and
Approvals (the "Assignment of Contracts") to be executed by the Buyer in the
form of Exhibit E attached hereto. (iii) Stock Pledge Agreement (the "Stock
Pledge Agreement") to be executed by Steven J. Wagenheim, and other stockholders
of Buyer in the form of Exhibit F attached hereto. @Style #7@ (iv) Limited
Guaranty (the "Limited Guaranty") be executed by Steven J. Wagenheim in the form
of Exhibit G attached hereto.
Section 3
Allocation of Purchase Price
Buyer and Seller shall attempt in good faith to reach an agreement on or before
the Date of Closing with regard to the allocation of the Purchase Price between
the Assets to be acquired hereunder. The Purchase Price shall be allocated among
the Assets in accordance with the agreement of the parties. Seller and Buyer
shall prepare their federal, state, local and foreign tax returns in a manner
which is consistent with allocation to be prepared in accordance with this
Agreement, and, to the extent applicable, shall comply with, andfurnish
information required by, Section 1060 of the Tax Code of 1986 and the treasury
regulations thereunder.
ARTICLE
INVENTORY AND CASH-ON-HAND
Buyer shall purchase on the Date of Closing, and Seller shall sell, all of
Seller's inventory of non-obsolete food, miscellaneous saleable products and
beverages (the "Inventory") located within the Location based on an inventory
taken the night prior to the Date of Closing by representatives of Buyer and
Seller. Such inventory of assets and supplies shall be in writing and shall
describe the quantity of each item constituting a part of the Inventory. The
Inventory shall be valued at the Seller's invoice prices, except that unusable
or obsolete supply shall be written to zero value. The price of the Inventory,
as determined in accordance with this Article IV, shall be accepted by the
parties on the Date of Closing and shall be paid by Buyer, in cash, within
fifteen (15) days from the Date of Closing. In addition to the foregoing, the
Buyer shall tender cash to Seller on the Date of Closing in an amount equal to
the Restaurant's cash-on-hand (consisting of so-called "change funds" at the
Location) and such cash-on-hand shall be transferred to Buyer as of the Date of
Closing.
ARTICLE
PRORATION
The following items relating to the Assets will be prorated between Buyer and
Seller as of the Closing Date:
Pre-paid lease and service contracts and other items assumed by Buyer (except
that there shall be no proration of prepaid fees under any management contract).
Water and other utility charges, assignable deposits, rent and all other common
area maintenance charges due under the Main Lease.
Prepaid liquor and food license fees and other fees and other charges for
licenses and permits assigned by Seller to Buyer (but only to the extent that
such licenses and permits are assignable by Seller to Buyer under applicable
law).
Vacation pay and employee wages.
All other items customarily prorated and adjusted in connection with the sale of
property of the type contemplated by this Agreement. All prorations required
under this Article V shall be allocated so that items relating to time periods
prior to the Closing Date will be allocated to Seller and items relating to
timeperiods beginning on or after the Closing Date will be allocated to Buyer
(but only to the extent that such assets are part of the Assets acquired by
Buyer hereunder and such liabilities are part of the Assumed Obligations assumed
by Buyer). Seller shall provide Buyer with its written estimate of the amount
payable by Buyer or Seller, as the case may be, under this Article V within ten
(10) days of the Date of Closing. Buyer and Seller shall negotiate in good faith
to resolve any disagreements concerning the adjustments contemplated under this
Article V prior to the Date of Closing. In the event that the parties are unable
to resolve any such disagreement within fifteen (15) days following delivery to
Buyer of Seller's estimate, then, in such event, the parties shall submit the
dispute to a mutually accepted independent accountant (the "Reviewing
Accountant") to resolve such disagreement. Any determination by the Reviewing
Accountant shall be completed by no later than ninety (90) days following the
submission of the matter and shall be final, binding and conclusive with respect
to the matters in dispute, absent fraud or manifest error. The fees of the
Reviewing Accountant shall be proportioned equally between Buyer and Seller. The
net amount of the prorations required hereunder shall be settled and paid in
cash on or before the later of (a) June 1, 1996or (b) if prior to June 1, 1996
these matters are submitted to the Reviewing Accountant, within five days
following receipt of the report of the Reviewing Accountant. If any terms
prorated as of the Date of Closing are based on estimates (including, without
limitation, percentage rents and common area charges under the Main Lease) such
proration shall be adjusted at such time as the final adjustments of such
payments are made and any amounts due Seller or Buyer, as the case may be, on
account thereof shall be paid in cash within ten (10) days following such
adjustment.
ARTICLE
CLOSING
Section 6
Date of Closing
The date of closing ("Date of Closing" or "Closing Date") shall occur at 9:00
a.m. on April 1, 1996. The closing shall take place at the offices of Briggs and
Morgan, 2400 IDS Center, Minneapolis, Minnesota, or at such other place as the
parties may agree. Buyer shall assume possession of the Restaurant and Assets at
the Location as of midnight on March 31, 1996.
Section 6
Deliveries of Seller
At the closing, Seller shall deliver the following documents to Buyer:
Such bills of sale, assumptions of obligations, assignments and other
instruments of transfer, in form and substance reasonably satisfactory to Buyer,
as shall be sufficient to transfer to Buyer all of Seller's right, title and
interest in and to the Assets and all Assumed Obligations.
Certified resolutions of Seller's Board of Directors to evidence Seller's
authority to execute, deliver and perform this Agreement and the documents
required to consummate the transactions contemplated by this Agreement.
An opinion of counsel for Seller in substantially the form attached hereto as
Exhibit H.
An executed Sublease, together with an executed consent and estoppel certificate
from the Main Lessor in substantially the form of Exhibit I attached hereto.
An executed Sub-License, substantially in the form of Exhibit B, together with
the consent thereto of Champps Entertainment, Inc. in form and substance
reasonably acceptable to Buyer. The instruments of transfer to be delivered
under this Section 6.2 shall (i) be in the form and will contain the warranties,
covenants and other provisions which are usual and customary for transferring
the type of property involved under the laws of thejurisdiction applicable to
such transfer (provided, however, that such warranties and covenants shall not
expand or be otherwise inconsistent with any of the representations, covenants
or warranties of this Agreement), (ii) be in form and substance reasonably
satisfactory to Buyer and its counsel, and (iii) effectively vest in Buyer good
and marketable title to all the Assets free and clear of all liens, restrictions
and encumbrances other than the Permitted Encumbrances.
Section 6
Deliveries of Buyer
At the closing, the Buyer (or Mr. Wagenheim, as appropriate) shall deliver to
Seller the following:
The Note, Security Agreement, Assignment of Contracts (together with one or more
completed UCC-1 financing statements suitable for filing with the Minnesota
Secretary of State and such local filing offices as Seller may determine).
The Sublease.
The Limited Guaranty and Stock Pledge Agreement (together with original
certificates representing all issued and outstanding capital stock of Buyer with
stock powers executed in blank). Certified resolutions of Buyer's Board of
Directors and sole shareholder to evidence Buyer's authority to execute,delivery
and perform this Agreement, the Note, Security Agreement and Assignment of
Contracts and the other documents required to consummate the transactions
contemplated by this Agreement. An opinion of counsel for Buyer in substantially
the form of Exhibit J attached hereto. Insurance certificate showing that Buyer
has in effect insurance in compliance with the Note and Security Agreement and
naming the Seller as loss payee on casualty policies and as an additional
insured party on liability policies. Such other documents, certificates and
instruments as may be reasonably requested by Seller in connection with the
transactions contemplated hereby.
Section 6
Collection of Accounts Receivable
From and after the Date of Closing, Buyer shall use reasonable commercial
efforts in accordance with usual and customary business procedures to collect
for the account of Seller the balance due under all credit card sales and other
accounts receivable generated by Seller in connection with the operation of the
Restaurant prior to the Date of Closing; provided, however, that Buyer shall not
be obligated to Seller in any way for the collection of the accountsreceivables
other than for the actual accounting to Seller of the money actually received
for the account of Seller subsequent to the Closing Date and for a period of
sixty (60) days thereafter. All amounts collected by the Buyer for the account
of Seller under this Section 6.4 shall be immediately remitted to Seller. It is
understood and agreed that Buyer shall not be required to institute litigation
or other collection actions with respect to any of Seller's account debtors.
ARTICLE
CONDUCT OF BUSINESS
Section 7
Conduct of Business up to Closing Date
During the period between the date hereof and the Closing Date, Seller agrees
that it will continue to operate the Restaurant diligently and only in the
ordinary course of business. Seller will not take any action which will cause
any material change in the operations of the Restaurant or in the properties
utilized in its operations, other than changes in the ordinary course of
business. Seller agrees to:
Use its best efforts to preserve intact for Buyer the Restaurant's business and
employees and the favor of the customers, suppliers and others having relations
with the Restaurant in connection with the operation thereof. Refrain from
making any sale or disposition of any asset or property to be acquired by the
Buyer hereunder other than in the ordinary course of business, from purchasing
any capital asset relating to the Restaurant costing more than $25,000 and from
mortgaging, pledging, subjecting to a lien or otherwise encumbering any of the
properties or assets to be acquired by Buyer hereunder. Refrain from making any
change in the compensation payable or to become payable to any of the employees
of the Restaurant. Promptly notify Buyer of any breach or default by Seller
under the terms of this Agreement.
Section 7
Authorization from Others
Prior to the Closing Date, Seller will use its best efforts, but without cost to
Seller, to obtain, the consent of the Lessor to the Sublease contemplated under
sub-paragraph (d) of Section 6.2 above and all other authorizations, consents
and permits of others required to permit the consummation by Seller of the
transactions contemplated by this Agreement.
Section 7
Consummation of Agreement
Seller shall use its best efforts, but without cost to Seller, to perform and
fulfill all conditions and obligations on its part to be performedand fulfilled
under this Agreement, to the end that the transactions contemplated by this
Agreement shall be fully carried out.
Section 7
Non-Competition
Seller agrees that, so long as the Sub-License remains in effect in accordance
with its terms, Seller will not, without the express written consent of Buyer,
within seven (7) miles from the Location, directly or indirectly, engage or
participate in the ownership, operation, licensing, franchising (whether as
owner, part-owner, shareholder, partner or otherwise) of restaurants that Buyer
is able to show are substantially similar in trade dress and concept to "Champps
Americana" restaurants, as such trade dress and concept is incorporated as of
the Date of Closing in the Restaurant, except for any such restaurants that are
currently in operation; provided, however, that Seller may make passive
investments in a competitive enterprise, the shares of which are publicly
traded, if such investment constitutes less than one percent (1%) of the equity
of such enterprise. Without implied limitation, the foregoing covenant shall
include: (i) until March 1, 1997 not hiring for or on behalf of Seller or any of
its affiliates any officer or employee of Buyer; and (ii) not soliciting for
hire by Seller or any of its affiliates any officer or employee of Buyer or any
ofits affiliates and not encouraging for or on behalf of Seller or any of its
affiliates any officer, employee, licensee, franchisee, supplier or other
service provider to terminate his or her relationship with Buyer or any of its
affiliates.
Section 7
Employees
Except as may be otherwise agreed by the parties as a result of good faith
negotiation, Seller shall use its best efforts, but without cost to Seller, to
insure that all existing employees of the Restaurant employed at the Location
will, if required by Buyer on or prior to the Date of Closing, remain as
employees following the Date of Closing contemplated herein. It is anticipated
and agreed that such existing employees of Seller will become employees of the
Buyer as of the Date of Closing. Buyer shall offer employment to all employees
of the Restaurant employed at the Location except those listed on the schedule
set forth in clause (b) below and all such employees who accept Buyer's offer of
employment shall become employees of Buyer as of the Date of Closing. The
parties acknowledge and agree that Buyer shall not acquire any rights or
interests of Seller in, or assume or have any obligations or liabilities of
Seller under, any employee benefit plans of Seller with the exception of
vacationsaccrued but not taken as of the Date of Closing. Under no
circumstances, however, shall the Buyer be obligated to retain any of Seller's
existing employees following the Date of Closing.
Not later than March 15, 1996, Buyer shall provide Seller with a schedule of the
employees, if any, that will not be offered employment by the Buyer following
the Date of Closing. If required by the Buyer prior to closing, Seller shall be
free in its sole discretion to either re-assign or terminate the employment of
the employees identified by Buyer on such schedule. Seller warrants that it will
not, without the prior written consent of Buyer, enter into any contract of
employment (except for the employment of hourly employees in the ordinary course
of business) with respect to any employees of the Restaurant.
Notwithstanding the foregoing, Buyer acknowledges that Seller has not provided
the existing employees of the Restaurant with a notice of employment loss under
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. ss.2101, et.
seq., on the basis of the understanding and agreement of the parties that the
transaction contemplated hereunder willnot result in an "employment loss" within
the meaning of such statute.
Section 7
Removal of Assets
Seller shall not remove from the Location any of the physical Assets to be
purchased hereunder (except for items replaced in the ordinary course of
business with items of equivalent value).
Section 7
Access
Seller shall permit the Buyer, and its agents or employees, to have access to
the Restaurant during ordinary business hours for the purpose of observing the
operation of the Restaurant and reviewing the books and records of the
Restaurant, all at the sole cost and expense of Buyer. Under no circumstances
shall Buyer participate in the management of the Restaurant prior to closing and
under no circumstances shall the Buyer have any liability for any disputes or
damages arising from such management.
Section 7
Termination of Management Agreements
Seller shall, on or before the Date of Closing, and as a condition of closing:
Terminate all existing management contracts or agreements with respect to the
Restaurant.
Except for the Permitted Encumbrances, obtain a release or termination of any
liens or encumbrances on any ofthe Assets to be acquired under this Agreement,
including, without limitation, the release or termination of that certain UCC-1
financing statement executed by Seller in favor of DAKA International Inc.
("DAKA") as ---- filed with the Minnesota Secretary of State on March 30, 1994
as File Number 1661931.
Obtain the consent of the current mortgagee under that certain Combination
Mortgage, Security Agreement and Fixture Filing executed by Seller in favor of
DAKA on or about March 28, 1994.
Subject to all applicable provisions of Article I hereof, pay and discharge as
the same become due, all of Seller's trade obligations and liabilities required
to be paid on or prior to the Closing Date with respect to Seller's ownership
and operation of the Restaurant, including, but not limited to:
All amounts due vendors or other persons providing goods, supplies or services
to the Restaurant.
All utilities, including sewer, water, gas, electric and other services.
All amounts due any lessor under any lease for the Restaurant as of the Closing
Date and as of any possession date of the Restaurant as basic rent, commonarea
expense, percentage rent or other payment or charge required to be made by the
lessee or sublessee thereunder, it being understood between Seller and Buyer
that there shall be a pro rata and per diem adjustment between Seller and Buyer
of said liabilities under such lease.
All amounts due Seller's employees, including salaries, wages and other
emoluments due such employees as of the Closing Date, also including employee
payroll deductions such as FICA, state and federal withholding taxes,
unemployment compensation taxes, union or other required payments or deductions,
accrued employees' vacation pay or sick leave benefits.
ARTICLE
ASSUMPTION OF LIABILITIES
Buyer shall assume on the Date of Closing all obligations, duties and
liabilities arising under or with respect to any of the Assumed Obligations.
Seller and Buyer acknowledge and agree that Buyer has not agreed to assume any
of Seller's liabilities and obligations except for the Assumed Obligations. The
assumption of the AssumedObligations by Buyer hereunder shall not enlarge any
rights of third parties under contracts or arrangements with Buyer or Seller and
nothing herein shall prevent any party from contesting in good faith with any
third party any of said liabilities. Except as expressly provided herein, Buyer
does not and shall not assume any liabilities or obligations of the Seller or
any other person, corporation, partnership, or entity, incurred as a consequence
of the ownership of the Assets or as a consequence of the operation of the
Restaurant or as a consequence of this Agreement or the sale, assignment and
transfer contemplated hereunder. Without limiting the generality of the
foregoing, it is understood and agreed that Buyer shall not assume and shall not
pay any of the following liabilities:
Liabilities incurred by Seller in connection with this Agreement and the
transactions provided for herein (including, without limitation, counsel and
accountant's fees, and expenses pertaining to the performance by Seller of its
obligations hereunder).
Except as provided in Section 14.8 below, Taxes of Seller (whether relating to
periods before or after the Date of Closing), including any liability for Taxes
arising out of any transferee liability.
Liabilities of Seller with respect to any options, warrants, agreements or
convertible or other rights to acquire any shares of its capital stock of any
class.
Liabilities in connection with or relating to all actions, suits, claims,
proceedings, demands, assessments and judgments, costs, losses, liabilities,
damages, deficiencies and expenses (whether or not arising out of third-party
claims), including, without limitation, interest, penalties, reasonable
attorneys' and accountants' fees and all amounts paid in investigation, defense
or settlement of any of the foregoing.
ARTICLE
CONDITIONS
Section 9
Conditions to Obligations of Seller
Unless waived by Seller in writing, the obligations of Seller to sell the Assets
are subject to the satisfaction on or prior to the Closing Date of each of the
following conditions:
Buyer shall have delivered to Seller the documents and items identified in
Section 6.3 hereof.
Buyer shall have complied in all material respects with the covenants,
agreements and conditions of Buyer contained herein to be performed at or prior
to the closing. The transactions contemplated under the Stock Purchase Agreement
(the "SPA") executed between DAKA and certain shareholders of Seller as of March
___, 1996 shall have closed in accordance with the terms of the SPA and the
documents and other instruments attached to or referred to in the SPA shall have
been executed and delivered.
The representations and warranties of Buyer contained herein shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date and all actions,
proceedings, instruments and documents required to carry out this Agreement and
the transactions contemplated hereby and all related legal matters contemplated
by this Agreement shall have been approved by counsel for Seller, and such
counsel shall have received on behalf of Seller such other certificates,
opinions, and documents in form satisfactory to counsel for Seller, as Seller
may reasonably require from Buyer to evidence compliance with the terms and
conditions hereof as of the closing and the correctness as of the closing of the
representations and warranties of Buyer. Seller shall also have received all
required authorizations, waivers, consents and permits to permit the
transactions contemplatedby this Agreement, in form and substance reasonably
satisfactory to Seller, from all third parties, including without limitation
applicable governmental authorities, regulatory agencies, Seller's lessors,
lenders and contract parties, required in connection with the transfer of Assets
or Seller's contracts, permits, leases, licenses and franchises, to avoid a
breach, default, termination, accelerations or modification of any agreement,
contract, instruments, mortgage, lien, lease, permit, authorization, order,
writ, judgment, injunction, decree, determination or arbitration award binding
on Seller or otherwise applicable to the Restaurant as a result of, or in
connection with, the execution and performance of this Agreement or as a result
of any action taken by any party holding a mortgage, lien or other encumbrance
on the Location. Seller shall diligently and in good faith undertake to obtain
the approvals, licenses and other matters referred to in subsection (e) of this
Section 9.1. Buyer shall reasonably cooperate with the Seller in the performance
by the Seller of its obligations hereunder.
Section 9
Conditions to Obligations of Buyer
Unless waived by Buyer in writing, the obligations of Buyer to purchase the
Assets are subject to the satisfaction on or prior to the Closing Date of each
of the following conditions:
Seller shall have delivered to Buyer the documents and items identified in
Section 6.2 hereof.
Seller shall have complied in all material respects with the covenants,
agreements and conditions of Seller contained herein to be performed at or prior
to the closing. The transactions contemplated under the SPA shall have closed in
accordance with the terms of the Merger Agreement and the documents and other
instruments attached to or referred to in the SPA shall have been executed and
delivered.
The representations and warranties of Seller contained herein shall be true and
correct in all material respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date and all actions,
proceedings, instruments and documents required to carry out this Agreement and
the transactions contemplated hereby and all related legal matters contemplated
by this Agreement shall have been approved by counsel for Buyer, and such
counselshall have received on behalf of Buyer such other certificates, opinions,
and documents in form satisfactory to counsel for Buyer, as Buyer may reasonably
require from Seller to evidence compliance with the terms and conditions hereof
as of the closing and the correctness as of the closing of the representations
and warranties of Seller.
Except as provided in Section 9.3 below, Buyer shall have received (i) all
health, restaurant, food, liquor and other governmental licenses, permits and
approvals necessary or appropriate, in the reasonable judgment of the Buyer, to
the continued operation and management of the Restaurant, and (ii) all required
authorizations, waivers, consents and permits to permit the continuation of the
business of the Restaurant and the transactions contemplated by this Agreement,
in form and substance reasonably satisfactory to Buyer, from all third parties,
including, without limitations, applicable governmental authorities, regulatory
agencies, Seller's lessors, lenders, the holders of any mortgages or other liens
on the Location and contract parties, required in connection with the transfer
of Assets or Seller's contracts, permits, leases, licenses and franchises, to
avoid a breach, default, termination, accelerations or modification of
anyagreement, contract, instruments, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award binding on Seller or otherwise applicable to the Restaurant as
a result of, or in connection with, the execution and performance of this
Agreement or as a result of any action taken by any party holding a mortgage,
lien or other encumbrance on the Location. Buyer shall diligently and in good
faith undertake to obtain the approvals, licenses and other matters referred to
in subsection (e) of this Section 9.2. Seller shall reasonably cooperate with
the Buyer in the performance by the Buyer of its obligations hereunder.
Section 9
Liquor License.
This transaction shall be submitted to the appropriate licensing authorities of
the City of New Brighton, Minnesota (the "City"), and any other governmental
authority responsible for the issuance of first-class on-sale food and liquor
licenses and Buyer and Seller shall each use their best efforts and utmost good
faith and use all diligence to secure such licenses. Pending issuance of the
food and liquor license referred to in this Section 9.3, the Buyer shall operate
the Restaurant under authority of Seller's existinglicenses under the terms of
an interim management agreement (the "Interim Management Agreement") in
substantially the form of Exhibit K attached hereto. Notwithstanding anything to
the contrary contained in Interim Management Agreement, Seller shall not be
obligated to provide Buyer with overhead, corporate, accounting, legal and other
similar services following the Date of Closing.
In the event that either party is notified that the City will not permit the
parties to continue operation of the Restaurant on the terms of the Interim
Management Agreement, or in the event that Seller's existing food and beverage
license shall become subject to any proceeding for the revocation of such
license, or in the event that the existing license should not be renewed for
reasons outside of Buyer's control, then, in any such event:
The instruments of transfer referred to in Section 6.2 shall be returned to
Seller and Buyer shall execute and deliver to Seller (or cause to be executed
and delivered) all documents and instruments necessary to revest Seller with
good and marketable title to the Assets (subject to the Permitted Encumbrances
and suchother liens and encumbrances incurred by or on behalf of Seller).
Seller shall return to Buyer all payments made by Buyer hereunder or under the
Note, together with interest on such amount from the date of payment by Buyer to
Seller, until repaid by Seller, at an annual rate of six (6) percent, less the
actual net profit recovered by Buyer for the operation of the Restaurant and
payable to Buyer under the Interim Management Agreement for the period beginning
on the Date of Closing and ending on the date of retransfer contemplated under
this Section 9.3.
If, despite the best efforts of each party to obtain a liquor license,
appropriate food and liquor licenses are terminated or not issued to Buyer until
within one year following the Closing Date or upon formal notification of denial
of such licenses by the City, whichever first will occur, and in the further
event of a dispute or controversy with regard to the payments to be made or
received in accordance with Section 9.3(a) above, then, in any such event, such
a dispute or controversy shall be submitted to a final, binding and conclusive
arbitration pursuant to Minn. Stat. ss. 572.08 et. seq. to be conducted in
accordance with the rulesand procedures of the American Arbitration Association
("AAA"). Three independent arbitrators, one to be approved each of the parties
and third by the two so chosen shall be selected, either based on mutual
agreement or from the panel submitted by the AAA. The panel shall have
authority, within its discretion to award, as part of its decision such
additional amounts for actual damages, expenses, costs and attorney fees if it
finds bad faith as to one of the parties. Additional, the panel may award
interest at the annual rate of six percent (6%) from the date determined by the
panel until such payments are paid. The decision of the arbitrators shall be
final and binding, and for the purpose of entering any award, the decision may
be reduced to a judgment of any court of appropriate jurisdiction.
Notwithstanding the foregoing, Buyer or Seller or both shall be entitled to seek
injunctive action against the City to enjoin the non-renewal or termination of
the liquor license as a result of the transaction contemplated herein. If such
injunction is granted, Section 9.3(a) shall not be implemented until final
adjudication is exhausted.
Notwithstanding anything to the contrary contained herein, or in any instrument
of transfer delivered hereunder,the Buyer shall not acquire a pecuniary interest
in the Restaurant prior to the issuance of the new licenses referred to in
Section 9.3(a) in violation of any applicable state or local law or ordinance.
ARTICLE
TERMINATION OF AGREEMENT
Section 10
Termination
This Agreement and the transactions contemplated hereby may be terminated at any
time prior to the Closing Date:
By mutual written consent of Seller and Buyer.
By either Buyer or by Seller if the closing shall not have occurred prior to the
close of business on May 15, 1996, provided, however, that the party seeking to
terminate this Agreement pursuant to this Section 10.1(b) may do so only if the
failure to close shall not have resulted from the failure of such party to
comply with any of the terms of this Agreement or from the inaccuracy of any
representation or warranty of such party.
ARTICLE
SELLER REPRESENTATIONS
As an integral part of this Agreement, and in order to induce Buyer to enter
into this Agreement and purchase the Assets, Seller hereby covenants, represents
and warrants to Buyer:
Section 11
Execution and Delivery; Effect of Agreement
Seller is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware with full corporate power and authority
to own or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
currently conducted or proposed to be conducted.
Section 11
Authority of Seller
Seller has full right, authority and power to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by Seller
pursuant to this Agreement and to carry out the transactions contemplated
hereby. The execution, delivery and performance by Seller of this Agreement and
each such other agreement, documents and instrument have been duly authorized by
all necessary action of Seller and no other action on the part of Seller is
required in connection therewith.
This Agreement and each agreement, document and instrument executed and
delivered by Seller pursuant to this Agreement constitutes, or when executed and
delivered will constitute, valid and binding obligations of Seller enforceable
in accordance with their terms. The execution, delivery and performance by
Seller of this Agreement and each such agreement, document and instrument:
Does not and will not violate any provision of the Articles of Incorporation or
by-laws of Seller.
Does not and will not violate any laws of the United States, or any state or
other jurisdiction applicable to Seller or require Seller to obtain any
approval, consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that has not been obtained or made (except that
certain governmental consents and authorizations are required in connection with
the operation of a bar and restaurant business at the Location).
Except for those consents required under the Main Lease, except for those liens
or charges to be discharged at closing, does not and will not result in a breach
of, constitute a default under, accelerate anyobligation under, or give rise to
a right of termination of any indenture or loan or credit agreement or other
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which Seller is a party or by which the property of
Seller is bound or affected, or result in the creation or imposition of any
mortgage, pledge, lien, security interest or other charge or encumbrance on any
of the Assets.
Section 11
Conduct of Business
To the knowledge of Seller:
Except as disclosed on Schedule III attached hereto, Buyer will acquire at
closing title to the Assets free from, and not subject to, any lien, mortgage,
restriction, encumbrance or other charge of any kind.
Seller is currently in possession of the Location pursuant to the Main Lease;
Seller has not defaulted in the payment of performance of any obligation of
Seller under the Main Lease.
There are no collective bargaining agreements in effect with any of Seller's
employees. Seller has and will pay all its trade payables and other obligations
relating to the Restaurant which are due or required to be paid on or prior to
the Date of Closing through the Date of Closing. Seller has prepared and filed
with the appropriate United States, State and local governmental agencies, all
tax returns required to be filed and has paid all taxes payable or which have
become due pursuant to any assessments, deficiency notice, 30-day letter, or
similar notice received by Seller, if any.
Except as disclosed on Schedule III attached hereto, there is no claim, action,
suit, proceeding, arbitration, investigation or inquiry pending before any
Federal, probate, municipal, or other court, or any governmental administrative
or self-regulatory body or agency, or any private arbitration tribunal, or to
the Seller's knowledge threatened against, or relating to affecting Seller by
reason of the Restaurant or the transactions contemplated by this Agreement.
Seller has not:
Except for the Permitted Encumbrances, mortgaged, pledged or subjected to lien
or any other encumbrance any of the Assets.
Sold, transferred, or leased any of the Assets, except for the sale of inventory
in the ordinary course of business. As used herein, the terms "Seller's
knowledge," "knowledge of Seller," or words of similar effect shall mean the
actual personal knowledge of the employees of DAKA, without attribution for the
knowledge of Mr. Wagenheim, Edmund Fadel or any employees of Seller who report
directly to Messrs. Wagenheim or Fadel.
ARTICLE
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
Section 12
Execution and Delivery; Effect of Agreement
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota with full corporate power and authority
to own or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
currently conducted or proposed to be conducted.
Section 12
Authority of Buyer
Buyer has full right, authority and power to enter into this Agreement and each
agreement, document and instrument to be executed and delivered by Buyer
pursuant tothis Agreement, including but not limited to the Note, Security
Agreement, Assignment of Contracts and Sublease, and to carry out the
transactions contemplated hereby. The execution, delivery and performance by
Buyer of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary action of Buyer and no other action
on the part of Buyer is required in connection therewith. This Agreement and
each agreement, document and instrument executed and delivered by Buyer pursuant
to this Agreement constitutes, or when executed and delivered will constitute,
valid and binding obligations of Buyer enforceable in accordance with their
terms. The execution, delivery and performance by Buyer of this Agreement and
each such agreement, document and instrument:
Does not and will not violate any provision of the Articles of Incorporation or
Bylaws of Buyer.
Does not and will not violate any laws of the United States, or any state or
other jurisdiction applicable to Buyer or require Buyer to obtain any approval,
consent or waiver of, or make any filing with, any person or entity
(governmental or otherwise) that hasnot been obtained or made (except that
certain governmental consents and authorizations are required in connection with
the operation of a bar and restaurant business at the Location).
As of the Date of Closing, the Stock Pledge Agreement and Limited Guaranty will
represent legal, valid and binding obligations of Mr. Wagenheim and such
instruments shall be enforceable against Mr. Wagenheim in accordance with their
respective terms.
Section 12
Consents
No consent, approval or authorization of, or exemption by, or filing with, any
governmental or regulatory authority or any other third party is required to be
obtained by Buyer in connection with the execution, delivery or performance by
Buyer of this Agreement, the Note, the Security Agreement, the Assignment of
Contracts, the Stock Pledge Agreement or the Limited Guaranty, or the taking by
Buyer of any other action contemplated hereby.
Section 12
Title to Assets
As of the Date of Closing, Buyer shall own the Assets free and clear of all
liens and encumbrances, except for the Permitted Encumbrances and such other
liens and encumbrances as may have been created by Seller prior to the Date of
Closing.
Section 12
Availability of Funds
Buyer will have available at the closing sufficient funds to enable it to
consummate the transactions contemplated by this Agreement.
Section 12
Solvency
The present fair saleable value of the assets of the Buyer will, immediately
following the Date of Closing, exceed the amount that will be required to be
paid on or in respect of its debts and other liabilities (including contingent
liabilities) as they mature. The assets of the Buyer do not, and immediately
following the Date of Closing will not, constitute unreasonably small capital to
carry out its business as conducted or as proposed to be conducted. The Buyer
does not intend to, or believe that it will, incur debts beyond its ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be received by the Buyer and the amounts to be payable on or in respect
of its obligations).
Section 12
Litigation
There is no litigation pending or, to Buyer's knowledge, threatened by or
against or affecting Buyer, which seeks to enjoin, challenge the validity of
this Agreement or obtain damages or other relief in respect of the consummation
of the transaction contemplated hereby.
Section 12
Representation by Counsel
Buyer has been represented by legal counsel in connection with the
transactioncontemplated in this Agreement and has relied upon such independent
counsel with respect to all legal and tax consequence of the transaction
contemplated herein.
Section 12
Sophisticated Investor
Buyer is a knowledgeable and sophisticated investor in assets of the type to be
conveyed under this Agreement.
Section 12
No Brokers
Neither Buyer nor any of its affiliates has employed any broker, finder or agent
in connection with the transactions contemplated by this Agreement, and neither
Buyer not any of its affiliates has otherwise become obligated for any broker's,
finder's, agent's or similar fee with respect to the transactions contemplated
by this Agreement.
ARTICLE
SURVIVAL AND INDEMNIFICATION
Section 13
Survival of Warranties
All representations, warranties, agreements, covenants and obligations herein or
in any schedule, exhibit, certificate or financial statement delivered by any
party to the other party incident to the transactions contemplated hereby are
material, shall be deemed to have been relied upon by the other party and shall
survive the closing regardless of any investigation and shall not merge in the
performance of any obligation by either party hereto; provided, however, that
suchrepresentations, warranties, agreements, covenants and obligations shall
expire on the same dates as and to the extent that the rights to indemnification
with respect thereto under this Article XIII shall expire.
Section 13
Indemnification by Seller
Seller shall indemnify and hold Buyer and its respective subsidiaries and
affiliates and persons servings as shareholders, officers, directors, partners
or employees thereof (individually a "Buyer Indemnified Party" and collectively
the "Buyer Indemnified Parties") harmless from and against any damages,
liabilities, losses, taxes, fines, penalties, costs, and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing pursuant to this
Article XIII) (hereafter, "Losses") which may be sustained or suffered by any of
them arising out or based upon any of the following matters:
Fraud, intentional misrepresentation or a deliberate or wilful breach by Seller
of any of their representations, warranties or covenants under this Agreement or
in any certificate, schedule or exhibit delivered pursuant hereto. Any other
breach of any representations, warranty or covenant of Seller under this
Agreement or in any certificate, schedule or exhibit delivered pursuant hereto,
or by reason of any claim, action or proceeding asserted or instituted growing
out of any matter or thing constituting a breach of such representations,
warranties or covenants.
Any liability of Seller for Taxes owed by it payable for any period prior to the
Date of Closing.
Any and all claims, debts, liabilities and obligations of any type kind or
nature which arose, result from or relate in any way to the operation of the
Restaurant prior the Date of Closing, but only to the extent that such
obligations do not constitute Assumed Obligations.
The claim of any broker, finder or other agent employed by or on behalf of
Seller.
Any and all employment practices, decisions, actions or proceedings undertaken
by Seller prior to the Date of Closing in connection with the operation of the
Restaurant.
Section 13
Limitations on Indemnification by Seller
Notwithstanding the foregoing, the right of Buyer Indemnified Parties to
indemnification under Section 13.1 shall be subject to the following provisions:
No indemnification shall be payable pursuant to Section 13.2(b) above to any
Buyer Indemnified Party, until Losses for which the Buyer may be indemnified
hereunder exceed $35,000, whereupon the full amount of such Losses in excess of
$20,000 shall be recovered in accordance with the terms hereof; provided,
however, that under no circumstances shall the aggregate amount recovered or
payable pursuant to Section 13.2(b) to any and all of the Buyer Indemnified
Parties exceed the sum payable under Section 3.1 hereof.
No indemnification shall be payable to a Buyer Indemnified Party with respect to
claims asserted pursuant to Section 13.2(b) (exclusive of claims for
indemnification for Taxes or tax related matters) after expiration of eighteen
(18) months from the Date of Closing (the "Indemnification Cut-Off Date").
Section 13
Indemnification by Buyer
Buyer agrees to indemnify and hold Seller and its respective, affiliates and
persons serving as officers, directors or employees thereof and Mr. Pew
(individually, a "Seller Indemnified Party" and collectively the "Seller
Indemnified Parties") harmless from and against any damages, liabilities, losses
and expenses (including, without limitation, reasonable fees of counsel) of any
kind ornature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing pursuant to this Article XIII) (hereafter, "Losses") which may be
sustained or suffered by any of them arising out of or based upon any of the
following matters:
A breach of any representations, warranty or covenants made by Buyer in this
Agreement or in any certificate delivered by Buyer hereunder, or by reason of
any claims, action or proceeding asserted or instituted growing out of any
matter or thing constituting such a breach.
Any and all failures of the Buyer to pay or to perform and discharge any of the
Assumed Obligations. Any and all claims, debts, liabilities and obligations of
any type kind or nature which arose, result from or relate in any way to the
operation of the Restaurant after the Date of Closing.
Any and all employment practices, decisions, actions or proceedings undertaken
by Buyer following the Date of Closing in connection with the operation of the
Restaurant.
Section 13
Limitation on Indemnification by Buyer
Notwithstanding the foregoing, the right of Seller Indemnified Partiesto
Indemnification under Section 13.4 shall be subject to the following provisions:
No indemnification shall be payable pursuant to Section 13.3(a) above to any
Seller Indemnified Party, until Losses for which the Seller may be indemnified
hereunder exceed $35,000, whereupon the full amount of such Losses in excess of
$20,000 shall be recovered in accordance with the terms hereof.
No indemnification shall be payable to Seller or Mr. Pew with respect to claims
asserted pursuant to Section 13.3 above after the Indemnification Cut-Off Date.
Section 13
Notice; Defense of Claims
Promptly after receipt by an indemnified party of notice of any claim, liability
or expense to which the indemnification obligations hereunder would apply, the
indemnified party shall give notice thereof in writing to the indemnifying
party, but the omission to so notify the indemnifying party promptly will not
relieve the indemnifying party from any liability except to the extent that the
indemnifying party shall have been prejudiced as a result of the failure or
delay in giving such notice. Such notice shall state the information then
available regarding the amount and nature of such claim, liability or expense
and shall specify the provision or provisions of thisAgreement under which the
liability or obligation is asserted. If within 20 days after receiving such
notice the indemnifying party gives written notice to the indemnified party
stating that it disputes and intends to defend against such claim, liability or
expense at its own cost and expense, then counsel for the defense shall be
selected by the indemnifying party (subject to the consent of the indemnified
party which consent shall not be unreasonably withheld) and the indemnified
party shall make no payment on such claim, liability or expense as long as the
indemnifying party in conducting a good faith and diligent defense.
Notwithstanding anything herein stated, the indemnified party shall at all times
have the right to fully participate in such defense at its own expense directly
or through counsel; provided, however, if the named parties to the action or
proceeding include both the indemnifying party and the indemnified party and
representations of both parties by the same counsel would be inappropriate under
applicable standard of professional conduct, the expense of separate counsel for
the indemnified party shall be paid by the indemnifying party. If no such notice
of intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party,undertake the
defense of such claim, liability or expense (with counsel selected by the
indemnified party), and shall have the right to compromise or settle the same
(exercising reasonable business judgment). If such claim, liability or expense
is one that by its nature cannot be defended solely by the indemnify party, then
the indemnified party shall make available all information and assistance that
the indemnify party may reasonably request and shall cooperate with the
indemnify party in such defense.
Section 13
Calculation of Losses
In calculating the amount of any Losses under this Agreement, the parties shall
take into account, and reduce the Losses by an amount equal to (i) the net
amount of any allowable present tax benefit, as a result of the circumstance
giving rise to the Losses, (ii) the present value of any future tax benefit, as
a result of the circumstance giving rise to the Losses, and (iii) the amount of
any claim or recover available under any insurance policies or against any third
parties. For purposes of determining the net amount of any present tax benefit,
the marginal combined federal, state and local income tax rate of Buyer and
Seller shall be deemed to be forty percent (40%) and payments shall be made on
such basis. Subject to the provisions of Sections 13.3 and 13.4, Losses for
which a person isrequired to indemnify another person hereunder shall be
calculated on a dollar for dollar basis.
ARTICLE
MISCELLANEOUS
Section 14
Entire Agreement
This Agreement has been executed in conjunction with execution of the SPA and
the closing contemplated hereunder shall be subject to the closing contemplated
under the SPA. This Agreement (including the Exhibits and Schedules attached
hereto) constitutes the entire understanding of the parties with respect to the
matters provided for herein and supersedes any previous agreements and
understanding between the parties with respect to the subject matter hereof.
Matters disclosed by Seller to Buyer pursuant to any Section of this Agreement
shall be deemed to be disclosed with respect to all sections of this Agreement.
No amendment, modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing and duly executed
by the parties hereto.
Section 14
Successors and Assigns
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and permitted assigns of the parties
hereto. This Agreement may not be assigned, in whole or inpart, by any party
without the prior written consent of the other party hereto. Notwithstanding the
foregoing, no assignment of this Agreement or any of the rights or obligations
hereof shall release the assignor of his or its obligations under this Agreement
and, upon any such assignment, the representations, warranties, covenants and
agreements contained in this Agreement, plus any other representations,
warranties, covenants and agreements reasonably required as a result of such
assignment, shall be deemed to have been made by the assignee as well as by the
assignor.
Section 14
Risk of Loss
Until this transaction is consummated the entire risk of loss with respect to
the Assets and business of Seller shall be borne by Seller which shall, in all
events, keep the Assets fully insured against loss, damage or destruction. From
and after the closing of this transaction, risk of loss shall be borne by Buyer.
In the event that prior to the Closing Date the Assets, or any portion thereof,
are materially destroyed or damaged by fire or other casualty or loss, or the
premises or buildings in which the Restaurant are located are so damaged or
destroyed, Seller shall promptly notify Buyer in writing, and Buyer shall have
ten (10) days after receipt of suchnotice to elect to (i) cancel and terminate
this Agreement, or (ii) consummate the purchase contemplated hereby.
In the event of such damage or destruction as described in Section 14.3(b)
above, and Buyer elects to consummate the transaction contemplated hereby,
Seller shall assign to Buyer all of Seller's rights under, and interest in, all
of Seller's insurance policies and contracts and all other rights of Seller to
seek indemnification for such loss or damage, all amounts recovered thereunder
or thereby by Buyer to remain the sole property of Buyer. If Buyer does not
rebuild, replace or restore assets which have been damaged or destroyed, or is
prevented from doing so by law or under the terms of any lease applicable to the
premises where such damage or destruction occurred, then all such amounts
recovered, other than amounts recovered for lost profits or business
interruption shall be paid to Seller and to be credited to the payment required
under Section 6.2 of this Agreement.
In the event of the damage or destruction referred to in Section 14.3(b) of this
Agreement, and Buyer shall not elect to consummate the transactions contemplated
by this Agreement, then upon termination and cancellation of thisAgreement,
Seller shall refund to Buyer, together with interest thereon, the earnest money,
if any, paid by Buyer to Seller under this Agreement.
Section 14
Counterparts
This Agreement may be executed in one or more counterparts, each of which shall
for all purposes be deemed to be an original and all of which shall constitute
the same instrument.
Section 14
No Construction Against Author
This Agreement shall not be construed more strictly against one party than
against the other by virtue of the fact that it may have been drafted or
prepared by counsel for one of the parties, it being recognized that Buyer and
Seller have each contributed substantially and materially to the preparation of
this Agreement.
Section 14
Headings
The headings of the Articles and Sections of this Agreement are included for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction hereof.
Section 14
Modifications and Waivers
Any of the terms or conditions of this Agreement may be waived in writing at any
time by the party which is entitled to the benefits thereof. No waiver of any of
the provisions of this Agreement shall be deemed to orshall constitute a waiver
of any other provisions hereof (whether or not similar).
Section 14
Fees and Expenses
Each of the parties will bear its own expenses in connection with the
negotiation and the consummation of the transactions contemplated by this
Agreement, and, except as expressly provided herein, no expenses of Seller
relating in any way to the purchase and sale of the Assets hereunder and the
transactions contemplated hereby, including, without limitation legal,
accounting or other professional expenses of Seller, shall be charged or paid by
Buyer or included in any of the Assumed Obligations.
Buyer will pay all costs incurred, whether at or subsequent to the Date of
Closing, in connection with any sales, use, excise, real property and transfer
taxes and charges applicable to such transfer, all recording charges and title
company fees and premiums applicable to the recordation of deeds and mortgages
and other instruments of transfer and the issuance of the title insurance
contemplated hereunder, and all costs of obtaining or transferring permits,
registrations, applications and other tangible and intangible properties. Buyer
will pay all premiums, charges and costs ofobtaining and providing surveys,
appraisals, UCC and title searches for the benefit of Buyer with respect to the
Assets.
Notwithstanding anything to the contrary contained herein, the prevailing party
in any litigation commenced hereunder shall be entitled to such parties fees and
expenses, including reasonable attorneys fees and disbursements.
Section 14
Publicity and Disclosures
No press releases or public disclosure, either written or oral, of the
transactions contemplated by this Agreement, shall be made by a party to this
Agreement without the prior written consent of Buyer and Seller.
Section 14
Notices
Any notice, request, instruction or other document to be given hereunder by any
party hereto to any other party shall be in writing and delivered personally or
sent by registered or certified mail, postage prepaid, addressed as follows: If
to Seller: c/o DAKA International, Inc. 1 Corporate Place 55 Ferncroft Road
Danvers, Massachusetts 01923-4001 Attention: Charles W. Redepenning
With copy to:
Goodwin, Proctor & Hoar, LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Ettore A. Santucci
If to Buyer:
2397 Palmer Drive
New Brighton, MN 53112
Attn: Stephen J. Wagenheim
With copy to:
Briggs and Morgan
2200 First National Bank Building
St. Paul, Minnesota 55101
Attention: Richard D. Anderson
or at such other address for a party as shall be specified by like notice. Any
notice which is delivered personally in the manner provided herein shall be
deemed to have been duly given to the party to whom it is directed upon actual
receipt by such party (or its agent for notices hereunder). Any notice which is
addressed and mailed in the manner herein provided shall be conclusively
presumed to have been duly given to the party to which it is addressed at the
close of business, local time of the recipient, on the third day after the day
it is so placed in the mail.
Section 14
Governing Law
This Agreement shall be construed in accordance with and governed by the laws of
the State of Minnesota applicable to agreements made and to be performed insuch
jurisdiction and without giving effect to the principles of conflicts of law of
such jurisdiction.
Section 14
Further Assurances
At any time or from time to time after the Closing Date, either party shall, at
the request of the other party, and at such other party's expense, execute and
deliver any further instruments or documents and take all such further action as
such party reasonably may request in order to consummate and make effective the
transactions contemplated by this Agreement.
Section 14
Severability
If any provision hereof shall be held by any court of competent jurisdiction to
be illegal, void or unenforceable, such provision shall be of no force and
effect, but the illegality, voiding or unenforceability of any such provision
shall have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
Section 14
Survival
Except as set forth in Article XIII above, the representations, warranties,
covenants and agreements set forth in this Agreement or in any writing delivered
by Buyer or Seller hereunder shall survive the closing contemplated hereunder.
Section 14
Legal Representation
The parties acknowledge that the law firm of Briggs and Morgan has
exclusively represented the Buyer in connection with the negotiation and
execution of thisAgreement and that Seller has retained separate legal
representation to review this Agreement. Seller has relied on its own
independent legal review and analysis and the advice of its independent legal
counsel in connection with the negotiation and execution of this Agreement and
not upon the advice of counsel of Briggs and Morgan. The parties further
acknowledge that Briggs and Morgan has performed certain services for Seller in
connection with the organization and incorporation of Seller and that Briggs and
Morgan may, if requested by Buyer, perform certain services for Buyer following
the Date of Closing. The parties hereby waive any claim of conflict of interest
in connection with the representation referred to in this Section 14.15 and
agree that Briggs and Morgan shall not be disqualified by reason of its
representation of Buyer from representation of Buyer in connection with any
dispute or controversy arising out of this Agreement or out of any of the
documents referred to herein.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered on the day and year first above written.
NEW BRIGHTON VENTURES, INC.,
a Minnesota corporation
BY: /s/ Steven J. Wagenheim
---------------------------
Its: President
AMERICANA DINING CORPORATION,
a Delaware corporation
By: /s/ Charles W. Redepenning, Jr.
-----------------------------------
Its: Sr. Vice President
The Great Bagel and Coffee Company
STOCK PURCHASE AGREEMENT
Dated as of March 29, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF SHARES
1.01. Plan; Purchase and Sale of the Shares
1.02. Consideration
1.03. Closing
1.04. Deliveries at Closing
1.05. Actions Subsequent to Closing
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE GB&C ENTITIES
AND THE STOCKHOLDERS
2.01. Organization and Corporate Power
2.02. Capitalization
2.03. Authority of each GB&C Entity and each Stockholder
2.04. Ownership of Capital Stock; Related Rights
2.05. Investment Representations
2.06. Real and Personal Property
2.07. Financial Statements
2.08. Taxes
2.09. Collectibility of Accounts Receivable
2.10. Inventories
2.11. Absence of Certain Developments
2.12. Intellectual Property
2.13. Contracts
2.14. Litigation
2.15. Insurance
2.16. Warranty or Other Claims
2.17. Finder's Fee
2.18. Transactions with Interested Persons
2.19. Permits; Compliance with Laws
2.20. Environmental Compliance
2.21. Disclosure
2.22. Employees; Labor Matters
2.23. Customers, Distributors and Suppliers
2.24. Banking Relations
2.25. Powers of Attorney
2.26. Corporate Records;Copies of Documents
2.27. Employee Benefit Programs
2.28. List of Directors and Officers
2.29. Non-Foreign Status
2.30. Transfer of Shares
2.31. Attributes Regarding Pooling Accounting
2.32. Definition of the GB&C Entities' Knowledge
i
<PAGE>
2.33. Stockholder Personal Guaranties
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization
3.02. Certificate of Incorporation and By-Laws
3.03. Capitalization
3.04. Authority Relative to this Agreement
3.05. Consents and Approvals; No Violations
3.06. SEC Reports
3.07. Absence of Certain Changes
3.08. Brokers
3.09. DAKA Common Stock
3.10. Definition of the Company's Knowledge
3.11. Disclosure
3.12. No Investment Company
3.13. Tax Representations
ARTICLE IV COVENANTS OF THE GB&C ENTITIES AND THE STOCKHOLDERS
4.01. Conduct of Respective Businesses of the GB&C Entities Pending
the Transactions Contemplated Hereby
4.02. Sale of Shares; Acquisition Proposals
4.03. Breach of Representations and Warranties
4.04. Confidentiality
4.05. Further Action; Reasonable Best Efforts
4.06. Access
4.07. Financial Information
4.08. General Release
4.09. Affiliates of the GB&C Entities
ARTICLE V. COVENANTS OF THE COMPANY
5.01. Consents and Approvals
5.02. Confidentiality
ARTICLE VI. CONDITIONS
6.01. Conditions to the Obligations of the Company
6.02. Conditions to the Obligations of the Stockholders
ARTICLE VII. TERMINATION OF AGREEMENT
7.01. Termination
7.02. Effect of Termination
7.03. Right to Proceed
ii
<PAGE>
ARTICLE VIII. SURVIVAL; INDEMNIFICATION
8.01. Survival of Representations, Warranties, Etc
8.02. Indemnification by the Stockholders
8.03. Limitations on Indemnification by Stockholders
8.04. Indemnification by the Company
8.05. Limitations on Indemnification by the Company
8.06. Notice; Defense of Claims
8.07. Indemnification by the GB&C Entities
ARTICLE IX. REGISTRATION RIGHTS
9.01. Definitions
9.02. Resale Registration
9.03. Registration Procedures
9.04. Registration Expenses
9.05. Indemnification and Contribution
9.06. Restrictions on Sale
9.07. Transfer of Registration Rights
ARTICLE X. NON-COMPETITION AGREEMENT
10.01. Non-Competition Agreement
ARTICLE XI. MISCELLANEOUS
11.01. Fees and Expenses
11.02. Accounting Matters and Tax Returns
11.03. Governing Law
11.04. Notices
11.05. Entire Agreement
11.06. Assignability
11.07. Captions and Gender
11.08. Execution in Counterparts
11.09. Amendments; Waivers
11.10. Publicity and Disclosures
11.11. Specific Performance
11.12. Severability
iii
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of this ___ day
of March, 1996, by and among DAKA International, Inc., a Delaware corporation
(the "Company" or "DAKA"), The Great Bagel and Coffee Franchising Corp., a
Delaware corporation ("GB&C1"), GBC Credit Company, a Nevada corporation
("GB&C2"), Gemini Production Facility, Inc. an Arizona corporation ("GB&C3"),
The Great Bagel and Coffee Company, an Arizona corporation ("GB&C4"), Mark C.
Gordon, Brian H. Loeb, Jason R. Olivier, Michael F. Zerbib, Nicholas D. Zerbib,
and Thierry E. Zerbib. GB&C1, GB&C2, GB&C3 and GB&C4 are referred to herein
individually as a "GB&C Entity" and collectively as the "GB&C Entities." Mark C.
Gordon, Brian H. Loeb, Jason R. Olivier, Michael F. Zerbib, Nicholas D. Zerbib
and Thierry E. Zerbib are referred to herein individually as a "Stockholder" and
collectively as the "Stockholders."
W I T N E S S E T H
WHEREAS, Mark C. Gordon is the record and beneficial owner of 0.98 of a
share of the common stock, no par value per share, of GB&C1, 0.98 of a share of
the common stock, no par value per share, of GB&C2, 0.98 of a share of the
common stock, no par value per share, of GB&C3, and 1.96 shares of the common
stock, no par value per share, of GB&C4; and
WHEREAS, Brian H. Loeb is the record and beneficial owner of 12.005
shares of the common stock, no par value per share, of GB&C1, 12.005 shares of
the common stock, no par value per share, of GB&C2, 12.005 shares of the common
stock, no par value per share, of GB&C3, and 24.01 shares of the common stock,
no par value per share, of GB&C4; and
WHEREAS, Jason R. Olivier is the record and beneficial owner of 51
shares of the common stock, no par value per share, of GB&C1, 51 shares of the
common stock, no par value per share, of GB&C2, 51 shares of the common stock,
no par value per share, of GB&C3, and 102 shares of the common stock, no par
value per share, of GB&C4; and
WHEREAS, Michael F. Zerbib is the record and beneficial owner of 12.005
shares of the common stock, no par value per share, of GB&C1, 12.005 shares of
the common stock, no par value per share, of GB&C2, 12.005 shares of the common
stock, no par value per share, of GB&C3, and 24.01 shares of the common stock,
no par value per share, of GB&C4; and
WHEREAS, Nicholas D. Zerbib is the record and beneficial owner of
12.005 shares of the common stock, no par value per share, of GB&C1, 12.005
shares of the common stock, no par value per share, of GB&C2, 12.005 shares of
the common stock, no par value per share, of GB&C3, and 24.01 shares of the
common stock, no par value per share, of GB&C4; and
WHEREAS, Thierry E. Zerbib is the record and beneficial owner of 12.005
shares of the common stock, no par value per share, of GB&C1, 12.005 shares of
the common stock, no
<PAGE>
par value per share, of GB&C2, 12.005 shares of the common stock, no par value
per share, of GB&C3, and 24.01 shares of the common stock, no par value per
share, of GB&C4; and
WHEREAS, the Stockholders collectively own all of the issued and
outstanding capital stock of all of the GB&C Entities (the "Shares"); and
WHEREAS, the Stockholders desire to transfer to DAKA all of the Shares
in exchange for shares of the common stock, par value $.01 per share, of DAKA
(the "DAKA Common Stock") to be issued to the Stockholders by DAKA and DAKA
desires to acquire from the Stockholders all of the Shares in exchange for such
shares of DAKA Common Stock in an arrangement (i) that will qualify as a
reorganization under the provisions of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (ii) that will be accounted
for as a pooling of interests, whereby, after giving effect to such
transactions, DAKA will own beneficially and of record the Shares, on the terms
and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. PURCHASE AND SALE OF SHARES.
1.01. Plan; Purchase and Sale of the Shares.
The Company and the Stockholders hereby adopt plans of reorganization
pursuant to the provisions of Section 368(a)(1)(B) with respect to each of the
GB&C Entities. The terms and conditions governing these plans of reorganization
are hereinafter set forth. Subject to the terms and conditions of this Agreement
and in reliance on the representations, warranties and covenants herein set
forth, the Company hereby agrees to purchase from the Stockholders, and the
Stockholders hereby agree to sell and deliver to the Company, at the Closing (as
hereinafter defined in Section 1.03 hereof), the Shares free and clear of any
and all liens, claims, options, charges, encumbrances or rights of any nature
("Claims").
<PAGE>
1.02. Consideration.
Subject to the terms and conditions of this Agreement and in reliance
on the representations, warranties and covenants set forth herein, and in
consideration of the sale and delivery by the Stockholders of the Shares, the
Company hereby agrees to issue to the Stockholders for the Shares an aggregate
number of shares of DAKA Common Stock calculated by dividing (i) $7,871,736, by
(ii) the Closing Price, with each Stockholder receiving the percentage of shares
of DAKA Common Stock set forth next to such Stockholder's name on Schedule 1.02
attached hereto. For purposes of this Agreement, the term "Closing Price" shall
mean the average per share closing sale price of DAKA Common Stock as reported
on the Nasdaq National Market over the thirty (30) trading days immediately
preceding the third trading day prior to the Closing Date. No fractional shares
will be issued by the Company to the Stockholders. Instead, the total number of
shares of DAKA Common Stock to be issued to each Stockholder (regardless of
whether such Stockholder's Shares are represented by a single or multiple
certificates) will be rounded up or down to the nearest number of whole shares
of DAKA Common Stock (or in the case of .5, to the next higher whole number).
Reference is made to the representations and warranties of the Stockholders set
forth in Section 2.05 hereof, including, without limitation, the acknowledgment
and understanding that (a) the DAKA Common Stock to be issued to the
Stockholders hereunder has not been registered under the Securities Act of 1933,
as amended (the "Securities Act"), or any state securities laws, (b) the DAKA
Common Stock to be issued to the Stockholders hereunder will be subject to
transfer restrictions under the Securities Act and applicable state securities
laws and may not be transferred unless such transfer or disposition does not
require registration under said laws, and (c) the Company will place a
restrictive legend to the foregoing effect on the certificate(s) representing
the DAKA Common Stock to be issued to the Stockholders hereunder. At the written
request of the Stockholders furnished not later than 30 days following the
Closing Date, the Company shall allocate the aggregate number of shares of DAKA
Common Stock among each of the GB&C Entities, based on the relative fair market
values of each of the GB&C Entities (as determined by the Stockholders (it being
acknowledged that the Company has not participated in the determination of such
relative value)), and issue replacement certificates to each of the
Stockholders; it being the intent of each Stockholder, if written request is
made therefor, to receive the consideration set forth in this Section 1.02 based
on the relative value of each of the GB&C Entities.
1.03. Closing.
The sale and delivery and the purchase and acceptance of the Shares
(the "Closing") shall take place at the offices of the Company not later than
five days after the day on which all of the conditions to Closing set forth in
Article VI (other than conditions to be satisfied at the Closing which shall be
satisfied or waived as of the Closing) have been satisfied or waived in
accordance with the terms hereof, such day being referred to herein as the
Closing Date. Notwithstanding anything in Section 7.01 to the contrary, in the
event all conditions to Closing have been satisfied or waived on or prior to the
applicable termination date specified therein, then neither party shall be
entitled to exercise its right of termination as contemplated therein by reason
of the fact that this Section 1.03 contemplates that the Closing shall occur
five days after satisfaction or waiver of all such conditions, such provision
being included for the convenience of the parties and their counsel in
connection with the Closing.
1.04. Deliveries at Closing.
At the Closing, (a) each Stockholder shall deliver a certificate or
certificates representing all Shares owned beneficially and of record by such
Stockholder, together with stock powers (or the equivalent) duly executed in
blank and such other documents as may be required to transfer to the Company
good and valid title to such Shares free and clear of all Claims, (b) DAKA shall
deliver to each Stockholder a certificate or certificates representing the
appropriate number of shares of DAKA Common Stock bearing the legend provided in
Section 2.05(d) hereof issued in the name of such Stockholder, (c) each
Stockholder shall deliver the instruments provided by Sections 4.08 and 4.09
hereof and(d) each Stockholder shall resign any office such Stockholder holds as
a director and/or officer of any GB&C Entity effective as of the Closing Date.
All transfer, excise or similar taxes arising out of the sale or delivery of the
Shares to the Company shall be paid by the Stockholders.
<PAGE>
1.05. Actions Subsequent to Closing.
The Stockholders and the Company after the Closing, and without further
consideration, shall from time to time execute and deliver or cause to be
executed and delivered such further instruments of transfer, assignments,
consents or documents as may be reasonably necessary or appropriate to carry out
the intent and purposes hereof.
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE GB&C ENTITIES
AND THE STOCKHOLDERS
In order to induce the Company to enter into this Agreement, the
Stockholders, jointly and severally, make to the Company the representations and
warranties contained in this Article II, except that the representations and
warranties in Sections 2.03(b) and 2.04 are made severally by each Stockholder
as to himself.
2.01. Organization and Corporate Power.
(a) GB&C1 is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and is qualified
to do business as a foreign corporation in each jurisdiction in which such
qualification is required. GB&C has all required corporate power and authority
to own its property, to carry on its business as presently conducted or
contemplated, to enter into and perform this Agreement and generally to carry
out the transactions contemplated hereby. The copies of the Certificate of
Incorporation and By-laws of GB&C1, as amended to date, which have been
furnished to counsel for the Company by GB&C1, are correct and complete at the
date hereof. GB&C1 is not in violation of any term of its Certificate of
Incorporation or By-laws, or in violation of any term of any material agreement,
instrument, judgment, decree, order, or, except as reflected in schedules
furnished to the Company hereunder as of the date hereof, any statute, rule or
government regulation applicable to GB&C1.
(b) GB&C2 is a corporation duly organized, validly existing
and in good standing under the laws of the State of Nevada, and is qualified to
do business as a foreign corporation in each jurisdiction in which such
qualification is required. GB&C2 has all required corporate power and authority
to own its property, to carry on its business as presently conducted or
contemplated, to enter into and perform this Agreement and generally to carry
out the transactions contemplated hereby. The copies of the Certificate of
Incorporation and By-laws of GB&C2, as amended to date, which have been
furnished to counsel for the Company by GB&C2, are correct and complete at the
date hereof. GB&C2 is not in violation of any term of its Certificate of
Incorporation or By-Laws, or in violation of any term of any material agreement,
instrument, judgment, decree, order, or, except as reflected in schedules
furnished to the Company hereunder as of the date hereof, any statute, rule or
government regulation applicable to GB&C2.
(c) GB&C3 is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona, and is qualified to
do business as a foreign corporation in each jurisdiction in which such
qualification is required. GB&C3 has all required corporate power and authority
to own its property, to carry on its business as presently conducted or
contemplated, to enter into and perform this Agreement and generally to carry
out the transactions contemplated hereby. The copies of the Certificate of
Incorporation and By-laws of GB&C3, as amended to date, which have been
furnished to counsel for the Company by GB&C3, are correct and complete at the
date hereof. GB&C3 is not in violation of any term of its Certificate of
Incorporation or By-Laws, or in violation of any term of any material agreement,
instrument, judgment, decree, order, or, except as reflected in schedules
furnished to the Company hereunder as of the date hereof, any statute, rule or
government regulation applicable to GB&C3.
<PAGE>
(d) GB&C4 is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona, and is qualified to
do business as a foreign corporation in each jurisdiction in which such
qualification is required. GB&C4 has all required corporate power and authority
to own its property, to carry on its business as presently conducted or
contemplated, to enter into and perform this Agreement and generally to carry
out the transactions contemplated hereby. The copies of the Certificate of
Incorporation and By-laws of GB&C4, as amended to date, which have been
furnished to counsel for the Company by GB&C4, are correct and complete at the
date hereof. GB&C4 is not in violation of any term of its Certificate of
Incorporation or By-Laws, or in violation of any term of any material agreement,
instrument, judgment, decree, order, or, except as reflected in schedules
furnished to the Company hereunder as of the date hereof, any statute, rule or
government regulation applicable to GB&C4.
2.02. Capitalization.
The authorized and issued capital stock of each of the GB&C Entities
are as set forth in Schedule 2.02(a) hereto. All of the Shares have been duly
and validly authorized and issued and are fully paid and non-assessable and have
been issued in compliance with applicable federal and state securities laws. The
Shares are held of record and beneficially by the Stockholders in the amounts
indicated in Schedule 2.02(b) hereto, free and clear of any Claims. Except as
set forth on Schedule 2.02(a) or Schedule 2.02(b), no Stockholder is the record
or beneficial owner of any capital stock, partnership interest, shares of
beneficial interest or other similar interest in any GB&C Entity. Except as
provided above or in said Schedule 2.02(a), (i) there are no outstanding
subscriptions, options, warrants, commitments, agreements, arrangements or
commitments of any kind for or relating to the issuance, or sale of, or
outstanding securities convertible into or exchangeable for, any shares of
capital stock of any class or other equity interests of any of the GB&C
Entities; (ii) no person has any preemptive right, right of first refusal or
similar right to acquire the Shares, any other shares of capital stock of any of
the GB&C Entities in connection with the transactions contemplated by this
Agreement or otherwise; (iii) there are no restrictions on the transfer of any
shares of capital stock of any of the GB&C Entities, other than those imposed by
relevant state and federal securities laws; (iv) no person has any right to
cause any of the GB&C Entities to effect the registration under the Securities
Act of 1933, as amended, of any shares of its capital stock or any other
securities (including debt securities); (v) none of the GB&C Entities has an
obligation to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein, or to pay any dividend or make any other distribution
in respect thereto; (vi) there are no voting trusts, stockholders' agreements,
or proxies relating to any securities of any of the GB&C Entities and (vii) none
of the GB&C Entities owns or has any direct or indirect interest in or control
over any corporation, partnership, joint venture or other entity of any kind.
2.03. Authority of each GB&C Entity and each Stockholder.
(a) Each of the GB&C Entities has full right, power and
authority to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by it pursuant to or as contemplated by
this Agreement and to carry out the transactions contemplated hereby and
thereby. The execution, delivery and performance by each of the GB&C Entities of
this Agreement and each such other agreement, document and instrument have been
duly authorized by all necessary corporate action of each of the GB&C Entities
and the Stockholders and no other corporate action on the part of any of the
GB&C Entities or the Stockholders is required in connection therewith. This
Agreement and each agreement, document and instrument to be executed and
delivered by any of the GB&C Entities pursuant to or as contemplated by this
Agreement constitute, or will when executed and delivered constitute, valid and
binding obligations of each of the GB&C Entities, enforceable in accordance with
their respective terms. Except as reflected in schedules furnished to the
Company hereunder as of the date hereof, the execution, delivery and performance
by each of the GB&C Entities of this Agreement and each such other agreement,
document and instrument:
<PAGE>
(i) do not and will not violate any provision of the charter or by-laws of any
of the GB&C Entities;
(ii) do not and will not violate any laws of the United States, or any state or
other jurisdiction applicable to any of the GB&C Entities or require any of
the GB&C Entities to obtain any approval, consent or waiver of, or make any
filing with, any person or entity (governmental or otherwise) that has not
been obtained or made;
(iii)do not and will not result in a breach of, constitute a default under,
accelerate any obligation under, require a consent under, cause a
termination under, or give rise to a right of termination of any indenture
or loan or credit agreement or any other material agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award, whether
written or oral, to which any of the GB&C Entities is a party or by which
the property of any of the GB&C Entities is bound or affected, or result in
the creation or imposition of any mortgage, pledge, lien, security interest
or other charge or encumbrance on any of the assets of any of the GB&C
Entities.
(b) Each Stockholder has full right, authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by him pursuant to or as contemplated by
this Agreement and to carry out the transactions contemplated hereby and
thereby. This Agreement and each agreement, document and instrument to be
executed and delivered by such Stockholder pursuant to or as contemplated by
this Agreement constitute, or when executed and delivered will constitute, valid
and binding obligations of such Stockholder, enforceable in accordance with
their respective terms. Except as reflected in schedules furnished to the
Company hereunder, the execution, delivery and performance by such Stockholder
of this Agreement and each such agreement, document and instrument:
(i) do not and will not violate any laws of the United States, or any state or
other jurisdiction applicable to such Stockholder or such Stockholder to
obtain any approval, consent or waiver of, or make any filing with, any
person or entity (governmental or otherwise) that has not been obtained or
made;
(ii) do not and will not result in a breach of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of
any indenture or loan or credit agreement or any other material agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order,
writ, judgment, injunction, decree, determination or arbitration award to
which such Stockholder is a party or by which the property of such
Stockholder is bound or affected, or result in the creation or imposition
of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of any of the GB&C Entities.
2.04. Ownership of Capital Stock; Related Rights.
(a) Each Stockholder owns beneficially and of record all of
the Shares set forth opposite such Stockholder's name on Schedule 2.02(b)
hereto. Upon delivery to the Company at the Closing of the certificates
representing the Shares duly endorsed in blank for transfer or with stock powers
attached duly executed in blank, against delivery of the consideration therefor
described in Article I hereof, good and valid title to the Shares shall be
transferred to the Company, free and clear of any and all Claims.
(b) Except as set forth in Schedule 2.04, no Stockholder has
any outstanding subscriptions, options, warrants, commitments, agreements,
arrangements or commitments of any kind for or relating to the issuance, or sale
of, or outstanding securities convertible into or exchangeable for, any shares
of capital stock of any class or other equity interests of the GB&C Entities. No
Stockholder has any preemptive right, right of first refusal or similar right to
acquire the Shares or any other shares of capital stock of the GB&C Entities in
connection with the transactions contemplated by this Agreement or otherwise.
Except as set forth in Schedule 2.04, there are no restrictions on the transfer
of the Shares by any Stockholder, other than those imposed by relevant state and
federal securities laws, the GB&C Entities have no obligation to purchase,
redeem or otherwise acquire any of the Shares or to pay any dividend or make any
other distribution in respect thereto and there are no voting trusts or proxies
binding upon any Stockholder relating to any of the Shares.
2.05. Investment Representations.
(a) Each Stockholder is acquiring the shares of DAKA Common
Stock to be issued to such Stockholder hereunder in exchange for such
Stockholder's Shares for such Stockholder's own account for investment only and
not with a view to, or with any intention of, a distribution or resale thereof,
in whole or in part, in violation of the Securities Act or any rule or
regulation thereunder, as amended from time to time.
(b) No Stockholder (i) is directly or indirectly controlled
by, or acting on behalf of any person which is, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, required to
register as such under such Act.
(c) Each Stockholder (i) has carefully reviewed the Company
SEC Reports (as defined in Section 3.06 hereof) provided by the Company; (ii)
has requested and received such other information, as it has deemed relevant,
regarding the Company for purposes of evaluating its acquisition of the DAKA
Common Stock to be issued to the Stockholders hereunder; (iii) is aware of the
risks associated with an investment in the DAKA Common Stock; and (iv) has not
received any form of general solicitation or advertising in connection with his
or her or its decision to acquire the DAKA Common Stock to be issued to the
Stockholders hereunder. No Stockholder has relied in any way on any information
with respect to the DAKA Common Stock or the Company generally other than the
representations of the Company contained herein or materials furnished by the
Company in writing in connection herewith.
<PAGE>
(d) Each Stockholder acknowledges and understands that (i) the
DAKA Common Stock to be issued to the Stockholders hereunder has not been
registered under the Securities Act, or any state securities laws; (ii) the DAKA
Common Stock to be issued to the Stockholders hereunder will be subject to
transfer restrictions under the Securities Act and applicable state securities
laws and may not be transferred unless (x) it is subsequently registered under
the Securities Act and applicable state securities laws or (y) such transfer or
disposition does not require registration under said laws; and (iii) the Company
will place a restrictive legend on the certificate(s) representing the DAKA
Common Stock to be issued to the Stockholders hereunder, containing the
following language:
"The shares represented by this Certificate were issued without registration
under the Securities Act of 1933, as amended (the "Act") and without
registration under applicable state securities laws, in reliance upon exemptions
contained in the Act and such laws. No transfer of these shares or any interest
therein may be made except pursuant to effective registration statements under
said laws unless such transfer or disposition does not require registration
under said laws."
(e) Each Stockholder (i) is able to bear the economic risks of
the acquisition of shares of DAKA Common Stock hereunder and has adequate means
of providing for current needs and possible contingencies; (ii) either alone or
with his or her or its advisors has had the opportunity to ask questions and
receive answers concerning the Company and the terms and conditions of the
acquisition of DAKA Common Stock in exchange for the Shares, as well as the
opportunity to obtain any additional information necessary to verify the
accuracy of information furnished in connection therewith which the Company
possesses or can acquire without unreasonable effort or expense; and (iii)
together with his or her or its advisors, if any, has such knowledge and
experience in financial and business matters that such Stockholder is capable of
evaluating the merits and risks of this acquisition of DAKA Common Stock in
exchange for the Shares, and of making an informed investment decision, and has
relied solely upon the advice of his or her or its own counsel, accountant and
other advisors, with regard to the legal, investment, tax and other
considerations regarding such acquisition.
2.06. Real and Personal Property.
(a) Real Property. The GB&C Entities own no real property. All
of the real property leased by the GB&C Entities is identified on Schedule
2.06(a) (herein referred to as the "Leased Real Property")
(i) Status of Leases. All leases of Leased Real Property are ----------------
identified on Schedule 2.06(a), and true and complete copies thereof have
been delivered to the Company. Each of said leases has been duly authorized
and executed by the respective GB&C Entity and is in full force and effect.
Except as set forth in Schedule 2.06(a), none of the GB&C Entities is in
default under any of said leases, nor has any event occurred which, with
notice or the passage of time, or both, would give rise to such a default.
Except as set forth in Schedule 2.06(a), to the GB&C Entities's knowledge,
the other party to each of said leases is not in default under any of said
leases and there is no event which, with notice or the passage of time, or
both, would give rise to such a default.
(ii) Consents. Except as set forth in Schedule 2.06(a), no consent or approval
is required with respect to the transactions contemplated by this Agreement
from the other parties to any lease of Leased Real Property, or from any
regulatory authority, no filing with any regulatory authority is required
in connection therewith, and to the extent that any such consents,
approvals or filings are required, the GB&C Entities or the Stockholders
will use their best efforts to obtain or complete them before the Closing.
(iii)Condition of Leased Real Property. Except as set forth in
--------------------------------- Schedule 2.06(a), to the GB&C Entities'
knowledge, there are no material defects in the physical condition of any
land, buildings or improvements constituting part of the Leased Real
Property, including without limitation, structural elements, mechanical
systems, loading areas, and to the GB&C Entities' knowledge, all such
buildings and improvements are in good operating condition and repair, have
been well maintained and are free from infestation by rodents or insects.
Access to the Leased Real Property is by a public way or public street.
(iv) Compliance with the Law. None of the GB&C Entities -----------------------
has received any notice from any governmental authority of any violation of
any law, ordinance, regulation, license, permit or authorization issued
with respect to any Leased Real Property that has not been heretofore
corrected and no such violation exists which could have an adverse affect
on the operation or value of any Leased Real Property. All improvements
located on or constituting part of the Leased Real Property and their use
and operation by the GB&C Entities were and are now in compliance in all
respects with all applicable laws, ordinances, regulations, licenses,
permits and authorizations, expect as set forth in Schedule 2.06(a). No
approval or consent to the transactions contemplated by this Agreement is
required of any governmental authority with jurisdiction over any aspect of
the Leased Real Property or its use or operations. None of the GB&C
Entities has received any notice of any real estate tax deficiency or
assessment or is aware of any proposed deficiency, claim or assessment with
respect to any of the Leased Real Property, or any pending or threatened
condemnation thereof.
<PAGE>
(b) Personal Property. A complete description of the material
machinery and equipment of the GB&C Entities is contained in Schedule 2.06(b)
hereto. Except as specifically disclosed in said Schedule or in the Base Balance
Sheet (as hereinafter defined), each of the GB&C Entities has good and
marketable title to all of its personal property. Except as set forth in
Schedule 2.06(b) none of such personal property or assets is subject to any
mortgage, pledge, lien, conditional sale agreement, security title, encumbrance
or other charge except as specifically disclosed in said Schedule or in the Base
Balance Sheet. The Base Balance Sheet reflects all personal property of each of
the GB&C Entities. Except as otherwise specified in Schedule 2.06(b) hereto, all
leasehold improvements, furnishings, machinery and equipment of each of the GB&C
Entities are in good repair, have been well maintained, and substantially comply
with all applicable laws, ordinances and regulations, and such machinery and
equipment is in good working order (ordinary wear and tear excepted).
2.07. Financial Statements.
(a) The GB&C Entities have delivered to the Company the
following financial statements, copies of which are attached hereto as Schedule
2.07:
(i) Consolidated balance sheet of the GB&C Entities as at February 29, 1996 and
related statements of income, retained earnings and cash flows for the two
(2) month period then ended (such base balance sheet as referred to herein
as the "Base Balance Sheet");
(ii) Separate balance sheets of the GB&C Entities as at February 29, 1996 and
related statements of income for the two (2) month period then ended;
(iii)Consolidated balance sheet as at December 31, 1995 and related income
statement of the GB&C Entities for the fiscal year then ended;
(iv) Separate balance sheets as at December 31, 1995 and related income
statements for each of the GB&C Entities for the fiscal year then ended;
(v) Balance sheet as at December 31, 1994 and statement of operations and
retained earnings for the fiscal year then ended for GB&C4;
(vi) Balance sheet as at December 31, 1994 and statement of operations and
retained earnings and statement of cash flows for the period from February
9, 1994 through December 31, 1994 for GB&C1.
Said financial statements have been prepared in accordance with
generally accepted accounting principles applied consistently during the periods
covered thereby, are complete and correct in all material respects and present
fairly in all material respects the financial condition of the GB&C Entities at
the dates of said statements and the results of their operations for the periods
covered thereby.
(b) As of the date of the Base Balance Sheet, none of the
GB&C Entities had any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, known or unknown (including
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others, liabilities for taxes due or then accrued or to become
due, or contingent or potential liabilities relating to activities of the GB&C
Entities or the conduct of their business prior to the date of the Base Balance
Sheet regardless of whether claims in respect thereof had been asserted as of
such date), except liabilities stated or adequately reserved against on the Base
Balance Sheet, or reflected in Schedules furnished to the Company hereunder as
of the date hereof.
<PAGE>
(c) As of the date hereof and as of the Closing, none of the
GB&C Entities has had and will have any liabilities of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown (including without limitation, liabilities as guarantor or otherwise
with respect to obligations of others, or liabilities for taxes due or then
accrued or to become due or contingent or potential liabilities relating to
activities of the GB&C Entities or the conduct of their business prior to the
date hereof or the Closing, as the case may be, regardless of whether claims in
respect thereof had been asserted as of such date), except liabilities (i)
stated or adequately reserved against on the Base Balance Sheet or the notes
thereto, (ii) reflected in Schedules furnished to the Company hereunder on the
date hereof, or (iii) incurred after the date of the Base Balance Sheet in the
ordinary course of business of any GB&C Entity.
2.08. Taxes.
(a) The GB&C Entities have paid or caused to be paid all
federal, state, local, municipal, foreign, and other taxes, including without
limitation income taxes, estimated taxes, alternative minimum taxes, excise
taxes, sales taxes, use taxes, value-added taxes, gross receipts taxes,
franchise taxes, capital stock taxes, employment and payroll-related taxes,
withholding taxes, stamp taxes, transfer taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof, whether disputed or
not.
(b) The GB&C Entities have in accordance with applicable law
filed all federal, state, local and foreign tax returns required to be filed by
them through the date hereof, and all such returns correctly and accurately set
forth the amount of any Taxes relating to the applicable period. A list of all
federal, state, local and foreign income tax returns filed with respect to the
GB&C Entities after 1992 is set forth in Schedule 2.08 attached hereto. For
every taxable period of each of the GB&C Entities ended on or after December 31,
1992, the GB&C Entities have delivered to the Company complete and correct
copies of all federal, state, local and foreign income tax returns, examination
reports and statements of deficiencies assessed against or agreed to by the GB&C
Entities. Schedule 2.08 attached hereto sets forth all federal tax elections
under the Internal Revenue Code of 1986, as amended (the "Code"), that are in
effect with respect to each of the GB&C Entities or for which an application by
the GB&C Entities is pending.
(c) Neither the Internal Revenue Service nor any other
governmental authority is now asserting or, to the knowledge of the GB&C
Entities or the Stockholders, threatening to assert against any GB&C Entity any
deficiency or claim for additional Taxes. No claim has ever been made by an
authority in a jurisdiction where the GB&C Entities do not file reports and
returns that any of the GB&C Entities is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of any of the
GB&C Entities that arose in connection with any failure (or alleged failure) to
pay any Tax. None of the GB&C Entities has not entered into a closing agreement
pursuant to Section 7121 of the Code.
(d) Except as set forth in Schedule 2.08 attached hereto,
there has not been any audit of any tax return filed by any of the GB&C
Entities, no audit of any tax return of any of the GB&C Entities is in progress,
and none of the GB&C Entities has been notified by any tax authority that any
such audit is contemplated or pending. Except as set forth in Schedule 2.08, no
extension of time with respect to any date on which a tax return was or is to be
filed by any of the GB&C Entities is in force, and no waiver or agreement by any
of the GB&C Entities is in force for the extension of time for the assessment or
payment of any Taxes.
(e) None of the GB&C Entities has ever consented to have the
provisions of Section 341(f)(2) of the Code applied to it. None of the GB&C
Entities has agreed to, and none of the GB&C Entities has been requested by any
governmental authority to, make any adjustments under Section 481(a) of the Code
by reason of a change in accounting method or otherwise. None of the GB&C
Entities has ever made any payments, or is obligated to make any payments, or is
a party to any agreement that under certain circumstances would obligate it to
make any payments, that will not be deductible under Section 280G of the Code.
Each of the GB&C Entities has disclosed on its federal income tax returns all
positions taken therein that could give rise to a penalty for underpayment of
federal Tax under Section 6662 of the Code. None of the GB&C Entities has ever
had any liability for unpaid Taxes because it is a member of an "affiliated
group" (as defined in Section 1504(a) of the Code). Except as set forth in
Schedule 2.08 attached hereto, the GB&C Entities are not a party to any tax
sharing agreement.
(f) Schedule 2.08 sets forth the following information with
respect to the GB&C Entities as of the most recent practicable date (as well as
on an estimated pro forma basis as of the Closing Date giving effect to the
consummation of the transactions contemplated hereby): the tax basis of the GB&C
Entities in their assets and liabilities and the amount of any unused and
unexpired net operating loss, net capital loss, investment credit, foreign tax
credit, other credit or excess charitable contribution carryforwards of the GB&C
Entities;
For purposes of this Section 2.08, all references to Sections of the Code shall
include any predecessor provisions to such Sections and any similar provisions
of federal, state, local or foreign law.
<PAGE>
2.09. Collectibility of Accounts Receivable.
Except as set forth on Schedule 2.09 all of the accounts receivable of
the GB&C Entities shown or reflected on the Base Balance Sheet or existing at
the date hereof (less the reserve for bad debts set forth on the Base Balance
Sheet) are and all the accounts receivable of the GB&C Entities existing on the
Closing Date will then be valid and enforceable claims, fully collectible and
subject to no setoff or counterclaim. Except as set forth on Schedule 2.09 the
GB&C Entities do not have any accounts or loans receivable from any person, firm
or corporation which is affiliated with the GB&C Entities or from any director,
officer, employee or Stockholder of the GB&C Entities.
2.10. Inventories.
Except as disclosed in Schedule 2.10, all inventory items shown on the
Base Balance Sheet or existing at the date hereof are and all inventories
existing on the Closing Date will then be of a quality and quantity saleable in
the ordinary course of business of the Company. All inventory items disclosed on
Schedule 2.10 as exceptions pursuant to the immediately preceding sentence
reflect write-downs to realizable values in the case of items which have become
obsolete or unsalable through regular distribution channels in the ordinary
course of the business of the GB&C Entities. The values of the inventories
stated in the Base Balance Sheet and the latest balance sheet included in the
unaudited financial statements reflect the normal inventory valuation policies
of the GB&C Entities consistent with past practices and were determined in
accordance with generally accepted accounting principles, practices and methods
consistently applied. Purchase commitments are not in excess of normal
requirements and none is at a price materially in excess of current market
prices. Since the date of the Base Balance Sheet, no inventory items have been
sold or disposed of except through sales in the ordinary course of business.
2.11. Absence of Certain Developments.
Except as specifically disclosed in Schedule 2.11, since the date of
the Base Balance Sheet, there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of any of the GB&C Entities which change by
itself or in conjunction with all other such changes has been materially adverse
with respect to any of the GB&C Entities;
(b) Any contingent liability incurred by any of the GB&C
Entities as guarantor or otherwise with respect to the obligations of others or
any cancellation of any material debt or claim owing to, or waiver of any
material right of, any of the GB&C Entities;
(c) Except as set forth on Schedule 2.06(b), any mortgage,
encumbrance or lien placed on any of the properties of any of the GB&C Entities
which remains in existence on the date hereof or will remain on the Closing
Date;
(d) Any obligation or liability of any nature incurred by any
of the GB&C Entities, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown, other than obligations and liabilities
incurred in the ordinary course of business consistent with the terms of this
Agreement (it being understood that product liability claims shall not be deemed
to be incurred in the ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of any of the GB&C Entities other than in the ordinary
course of business;
<PAGE>
(f) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, assets or
business of any of the GB&C Entities;
(g) Any declaration, setting aside or payment of any dividend
by any of, or the making of any other distribution in respect of the ownership
interests of any of the GB&C Entities, or any direct or indirect redemption,
purchase or other acquisition by any of the GB&C Entities of its own ownership
interests;
(h) Any labor trouble or claim of unfair labor practices
involving any of the GB&C Entities; any change in the compensation payable or to
become payable by any of the GB&C Entities to any of its officers, directors,
employees, agents, independent contractors or stockholders other than normal
merit increases in accordance with its usual practices, or any bonus payment or
arrangement made to or with any of such officers, employees, agents or
independent contractors (subject to Section 4.01(g));
(i) Any change with respect to the officers or management of
any of the GB&C Entities;
(j) Any payment (i) on account of the promissory notes
described in Schedule 2.18, or (ii) (other than mandatory scheduled payments) on
account of the promissory notes or other liabilities of any of the GB&C Entities
set forth in Section (xii) (Promissory Notes) of Schedule 2.13;
(k) Any obligation or liability incurred or any payment made
or item of value delivered by any of the GB&C Entities to any of their
respective present or former officers, directors, stockholders, partners, or
employees, or any loans or advances made by any of the GB&C Entities to any of
their respective present or former officers, directors, stockholders, partners
or employees, except normal compensation and expense allowances payable to
officers or employees subject to Section 4.01(g);
(l) Any change in accounting methods or practices, used by
any of the GB&C Entities;
(m) Any other transaction entered into by any of the GB&C
Entities other than transactions in the ordinary course of business; or
(n) Any agreement or understanding whether in writing or
otherwise, for any of the GB&C Entities or the Stockholders to take any of the
actions specified in paragraphs (a) through (m) above.
2.12. Intellectual Property.
(a) Except as described in Schedule 2.12, the GB&C Entities
have ownership, or unrestricted license to use, of all patents, copyrights,
service works, trade dress, trade secrets, trademarks, or other proprietary
rights (collectively, "Intellectual Property") used or to be used in the
business of the GB&C Entities as presently conducted or contemplated. The GB&C
Entities' rights in all of such Intellectual Property are freely transferable.
Except as described in Schedule 2.12, there are no claims or demands of any
other person pertaining to any of such Intellectual Property and no proceedings
have been instituted, or are pending or threatened, which challenge the rights
of the GB&C Entities in respect thereof. The GB&C Entities have the right to
use, free and clear of claims or rights of other persons, all customer lists,
recipes, operating procedures, designs, manufacturing or other processes,
computer software, systems, data compilations, research results and other
information required for or incident to the ownership and operation of the
business of the GB&C Entities as presently conducted or contemplated.
<PAGE>
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to any of the GB&C Entities or used or to be used by any of the GB&C
Entities in their business as presently conducted or contemplated, and all other
items of Intellectual Property which are material to the business or operations
of any of the GB&C Entities, are listed in Schedule 2.12. All of such patents,
patent applications, trademark registrations, trademark applications and
registered copyrights have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States Register of
Copyrights, or the corresponding offices of other jurisdictions as identified on
said Schedule, and have been properly maintained and renewed in accordance with
all applicable provisions of law and administrative regulations in the United
States and each such jurisdiction.
(c) All licenses or other agreements under which any of the
GB&C Entities are granted rights in Intellectual Property are listed in Schedule
2.12. All said licenses or other agreements are in full force and effect, there
is no material default by any GB&C Entity who is a party thereto, and to the
GB&C Entities' knowledge there is no material default by any party thereto that
is not a GB&C Entity, and, except as set forth on Schedule 2.12, all of any GB&C
Entity's rights thereunder are freely assignable. To the knowledge of the GB&C
Entities, the licensors under said licenses and other agreements have and had
all requisite power and authority to grant the rights purported to be conferred
thereby. True and complete copies of all such licenses or other agreements, and
any amendments thereto, have been provided to the Company.
(d) All licenses or other agreements under which any of the
GB&C Entities has granted rights to others in Intellectual Property owned or
licensed by the GB&C Entities are listed in Schedule 2.12. All of said licenses
or other agreements are in full force and effect, there is no material default
by any party thereto, and, except as set forth on Schedule 2.12, all of the
rights of the GB&C Entities thereunder are freely assignable. True and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been provided to the Company.
(e) The GB&C Entities have taken all steps required in
accordance with sound business practice to establish and preserve their
ownership of all Intellectual Property rights with respect to their products,
services and concepts. Except as described in Schedule 2.12(e), the GB&C
Entities have no knowledge of any infringement by others of any Intellectual
Property rights of the GB&C Entities.
(f) The present and contemplated business, activities and
products of the GB&C Entities do not infringe any Intellectual Property of any
other person. No proceeding charging the GB&C Entities with infringement of any
adversely held Intellectual Property has been filed or is threatened to be
filed. To the knowledge of the GB&C Entities, there exists no unexpired
trademark or service mark or related application which includes claims that
would be infringed by or otherwise adversely affect the products, activities or
business of the GB&C Entities. The GB&C Entities were not made and are not
making unauthorized use of any confidential information or trade secrets of any
person, including without limitation, any former employer of any past or present
employee of the GB&C Entities. Except as set forth in Schedule 2.12, the GB&C
Entities do not have, and, to the knowledge of the GB&C Entities or the
Stockholders, none of the GB&C Entities' employees have, any agreements or
arrangements with any persons other than the GB&C Entities related to
confidential information or trade secrets of such persons or restricting any
such employee's engagement in business activities of any nature.
2.13. Contracts.
(a) Except for contracts, commitments, plans, agreements and
licenses described in Schedule 2.13 (true and complete copies of which have been
delivered to the Company), none of the GB&C Entities is a party to or subject
to:
(i) any plan or contract providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any
labor union;
<PAGE>
(ii) any employment contract or contract for services, or any contract which
provides for discretionary payments (including, without limitation bonuses,
incentive payments, stock dividends, or payments relating to the ownership
of stock) which is not terminable within 30 days by such GB&C Entity
without liability for any penalty or severance payment;
(iii)any contract or agreement for the purchase of any commodity, material or
equipment except purchase orders in the ordinary course for less than
$5,000 each, such orders not exceeding $10,000 in the aggregate;
(iv) any other contracts or agreements creating any obligations of such GB&C
Entity of $10,000 or more with respect to any such contract or agreement
not specifically disclosed elsewhere under this Agreement;
(v) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a
supplier;
(vi) any contract or agreement which by its terms does not terminate or is not
terminable without penalty by such GB&C Entity or its successors within one
year after the date hereof;
(vii)any contract or agreement for the sale or lease of its products not made
in the ordinary course of business;
(viii) any contract with any sales agent or distributor of products of such GB&C
Entity;
(ix) any contract containing covenants limiting the freedom of such GB&C Entity
to compete in any line of business or with any person or entity;
(x) any contract or agreement for the purchase of any fixed asset for a price
in excess of $5,000 whether or not such purchase is in the ordinary course
of business;
(xi) any license agreement (as licensor or licensee);
(xii)any indenture, mortgage, promissory note, loan agreement, guaranty or
other agreement or commitment for the borrowing of money; or
(xiii) any contract or agreement with any officer, employee, director or
stockholder of such GB&C Entity or with any persons or organizations
controlled by or affiliated with it.
(b) All contracts, agreements, leases and instruments to which any of
the GB&C Entities is a party or by which any of the GB&C Entities is obligated
are valid and are in full force and effect and constitute legal, valid and
binding obligations of such GB&C Entity and, to the best knowledge of the
Stockholders and the GB&C Entities, the other parties thereto, enforceable in
accordance with their respective terms. None of the GB&C Entities or any
Stockholder knows of any notice or threat of or basis for the termination of any
such agreements within one year from the date hereof, which termination may have
a material adverse effect on the properties, assets, business, condition
(financial or otherwise), total surplus, results of operation or prospects (a
"Material Adverse Effect") of the GB&C Entities or, to the best knowledge of the
Stockholders, any other party to any material contract, agreement or instrument
of the GB&C Entities is in default in complying with any provisions thereof, and
no condition or event or fact exists which, with notice, lapse of time or both
would constitute a default thereunder on the part of the GB&C Entities or, to
the best knowledge of the Stockholders, any other party thereto, except for any
such default, condition, event or fact that, individually or in the aggregate,
would not have a Material Adverse Effect on any of the GB&C Entities.
2.14. Litigation.
Except as disclosed in Schedule 2.14, there is no litigation or
governmental proceeding or investigation pending or, to the best knowledge of
the GB&C Entities or the Stockholders, threatened against any of the GB&C
Entities affecting any of their properties or assets, or against any officer or
key employee of any of the GB&C Entities relating to the business of the GB&C
Entities, or which may call into question the validity, or materially hinder the
enforceability or performance, of this Agreement; nor has there occurred any
event or does there exist any condition on the basis of which any litigation,
proceeding or investigation might properly be instituted with any substantial
chance of a recovery which would be materially adverse to the GB&C Entities.
<PAGE>
2.15. Insurance.
The physical properties and assets of the GB&C Entities are insured to
the extent disclosed in Schedule 2.15 and all insurance policies and
arrangements of the GB&C Entities are disclosed in said Schedule. Said insurance
policies and arrangements are in full force and effect, all premiums with
respect thereto are currently paid, and the GB&C Entities are in compliance in
all respects with the terms thereof. Said insurance is adequate and customary
for the business engaged in by the GB&C Entities and is sufficient for
compliance by the GB&C Entities with all requirements of law and all agreements
and leases to which the GB&C Entities are a party.
2.16. Warranty or Other Claims.
There are no existing or threatened product liability, warranty or
other similar claims, or any fact upon which a claim of such nature could be
based, against any of the GB&C Entities for products or services which are
defective or fail to meet any product or service warranties.
2.17. Finder's Fee.
Except as provided on Schedule 2.17, none of the GB&C Entities or the
Stockholders has incurred or become liable for any broker's commission or
finder's fee relating to or in connection with the transactions contemplated by
this Agreement.
2.18. Transactions with Interested Persons.
Except as set forth in Schedule 2.18 hereto, none of the Stockholders,
officers, supervisory employees or directors of the GB&C Entities and, to the
knowledge of the GB&C Entities or the Stockholders, none of their respective
spouses or family members owns directly or indirectly on an individual or joint
basis any material interest in, or serves as an officer or director or in
another similar capacity of, any competitor or supplier of any of the GB&C
Entities, or any organization which has a material contract or arrangement with
the GB&C Entities. Except as set forth in Schedule 2.18, there are no loans,
leases or other continuing transactions between any of the GB&C Entities and any
present or former stockholder, director or officer of any of the GB&C Entities,
or any member of such officer's, director's or stockholder's immediate family,
or any person controlled by such officer, director or stockholder or his or her
immediate family.
2.19. Permits; Compliance with Laws.
Except as set forth in Schedule 2.06(a), the GB&C Entities have all
necessary franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges (collectively "Permits") necessary to permit the GB&C Entities to own
their respective properties and to conduct their respective businesses as the
same are presently conducted or proposed to be conducted and all such Permits
are valid and in full force and effect. No Permit is subject to termination as a
result of the execution of the Agreement or consummation of the transactions
contemplated hereby. The GB&C Entities are now and have heretofore been in
compliance with all applicable statutes, ordinances, orders, rules and
regulations (including all applicable environmental laws and regulations)
promulgated by any federal, state, municipal or other governmental authority
which apply to the conduct of their business, except for any such non-compliance
or violation that, individually or in the aggregate, would not have a Material
Adverse Effect on any of the GB&C Entities. None of the GB&C Entities has ever
entered into or been subject to any judgment, consent decree, compliance order
or administrative order with respect to any environmental or health and safety
law or received any request for information, notice, demand letter,
administrative inquiry or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any such
law. None of the GB&C Entities and none of the Stockholders knows of any pending
or threatened change of any law, ordinance or regulation which could adversely
affect any of the GB&C Entities or any of their businesses.
<PAGE>
2.20. Environmental Compliance.
(a) To the best of the GB&C Entities' and the Stockholders'
knowledge, except as set forth in Schedule 2.20, (i) none of the GB&C Entities
has ever generated, transported, used, stored, treated, disposed of, or managed
any Hazardous Waste (as defined below); (ii) no Hazardous Material (as defined
below) has ever been or is threatened to be spilled, released, or disposed of at
any site presently or formerly owned, operated, leased, or used by any of the
GB&C Entities, or has ever come to be located in the soil or groundwater at any
such site; (iii) no Hazardous Material has ever been transported from any site
presently or formerly owned, operated, leased, or used by any of the GB&C
Entities for treatment, storage, or disposal at any other place; (iv) none of
the GB&C Entities presently own, operate, lease, or use, nor have they
previously owned, operated, leased, or used any site on which underground
storage tanks are or were located; and (v) no lien has ever been imposed by any
governmental agency on any property, facility, machinery, or equipment owned,
operated, leased, or used by any of the GB&C Entities in connection with the
presence of any Hazardous Material.
(b) To the best of the GB&C Entities' and the Stockholders'
knowledge, except as set forth in Schedule 2.20, (i) none of the GB&C Entities
has liability under, nor has any GB&C Entity ever violated, any Environmental
Law (as defined below); (ii) each of the GB&C Entities, any property owned,
operated, leased, or used by the any of the GB&C Entities, and any facilities
and operations thereon are presently in compliance with all applicable
Environmental Laws; (iii) none of the GB&C Entities has ever entered into or
been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) none of the GB&C Entities have knowledge or reason
to know that any of the items enumerated in clause (iii) of this paragraph will
be forthcoming.
(c) To the best of the GB&C Entities' and the Stockholders'
knowledge, except as set forth in Schedule 2.20, no site owned, operated,
leased, or used by any of the GB&C Entities contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(d) To the best of the GB&C Entities' and the Stockholders'
knowledge, the GB&C Entities have provided to the Company copies of all
documents, records, and information available to the GB&C Entities concerning
any environmental or health and safety matter relevant to any of the GB&C
Entities, whether generated by the GB&C Entities or others, including, without
limitation, environmental audits, environmental risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous Materials,
spill control plans, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and safety
matters issued by any governmental agency.
(e) For purposes of this Section 2.20, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant, or other substance which may pose a threat to the environment or to
human health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; (iii) "Environmental Law" shall mean any
environmental or health and safety-related law, regulation, rule, ordinance, or
by-law at the foreign, federal, state, or local level, whether existing as of
the date hereof, previously enforced, or subsequently enacted; and (iv) the
"GB&C Entities" shall mean and include the GB&C Entities and all other entities
for whose conduct the GB&C Entities are or may be held responsible under any
Environmental Law.
<PAGE>
2.21. Disclosure.
The representations, warranties and statements contained in this
Agreement and in the certificates, exhibits and schedules delivered by any of
the Stockholders or the GB&C Entities pursuant to this Agreement to the Company
do not contain any untrue statement of a material fact, and, when taken
together, do not omit to state a material fact required to be stated therein or
necessary in order to make such representations, warranties or statements not
misleading in light of the circumstances under which they were made. There is no
material fact directly relating to the business, operations or condition of the
GB&C Entities (other than facts which relate to general economic trends or
conditions) that has a Material Adverse Effect or, to the best knowledge of the
GB&C Entities and the Stockholders, in the future may (so far as may now be
reasonably foreseen based upon material facts of which they are now aware) have
a Material Adverse Effect on any of the GB&C Entities that has not been set
forth in this Agreement or in the Schedules hereto. Notwithstanding any
provision in this Agreement to the contrary, neither the GB&C Entities nor any
Stockholder makes any representation regarding the accuracy of any financial
forecasts furnished to the Company with respect to the GB&C Entities.
2.22. Employees; Labor Matters.
The GB&C Entities employ a total of approximately 48 full-time
employees and 36 part-time employees and generally enjoy good employer-employee
relationships. None of the GB&C Entities currently employs, will as of the
Closing date employ, or has employed during the six calendar months prior to the
Closing date 48 or more employees in any single facility. The GB&C Entities do
not employ a total of 48 or more employees (excluding employees who work less
than 20 hours per week or who have worked for the GB&C Entities less than six of
the last twelve months) and will not have employed 48 or more employees at any
point during the 90 days prior to and including the Closing date. None of the
GB&C Entities is delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. Upon termination of the employment of any of said employees, neither
the GB&C Entities nor the Company will by reason of the transactions
contemplated under this Agreement or anything done prior to the Closing be
liable to any of said employees for so-called "severance pay" or any other
payments, except as set forth in Schedule 2.22. None of the GB&C Entities has
any policy, practice, plan or program of paying severance pay or any form of
severance compensation in connection with the termination of employment, except
as set forth in said Schedule. The GB&C Entities are in compliance with all
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours. There are no charges of employment discrimination or unfair
labor practices, nor are there any strikes, slowdowns, stoppages of work, or any
other concerted interference with normal operations which are existing, pending
or threatened against or involving any of the GB&C Entities. No question
concerning representation exists respecting any employees of any of the GB&C
Entities. There are no grievances, complaints or charges that have been filed
against any of the GB&C Entities under any dispute resolution procedure
(including, but not limited to, any proceedings under any dispute resolution
procedure under any collective bargaining agreement) that might have an adverse
effect on any of the GB&C Entities or the conduct of their respective
businesses, and there is no arbitration or similar proceeding pending and no
claim therefor has been asserted. No collective bargaining agreement is in
effect or is currently being or is about to be negotiated by any of the GB&C
Entities. None of the GB&C Entities has received any information indicating that
any of its employment policies or practices is currently being audited or
investigated by any federal, state or local government agency. Each of the GB&C
Entities is, and at all times since November 6, 1986 has been, in compliance
with the requirements of the Immigration Reform Control Act of 1986.
2.23. Customers, Distributors and Suppliers.
Schedule 2.23(a) sets forth any customer, sales representative or
distributor (whether pursuant to a commission, royalty or other arrangement)
which accounts for more than 20% of the sales of any GB&C Entity for the twelve
(12) months ended December 31, 1995 (collectively, the "Customers and
Distributors"). Schedule 2.23(b) lists all of the suppliers of the GB&C Entities
to whom during the fiscal year ended December 31, 1995, the GB&C Entities, in
the aggregate, made payments aggregating $10,000 or more showing, with respect
to each, the name, address and dollar volume involved (the "Suppliers"). The
relationships of the GB&C Entities with their Customers, Distributors and
Suppliers are good commercial working relationships. No Customer, Distributor or
Supplier has canceled, materially modified, or otherwise terminated its
relationship with any GB&C Entity, or has during the last twelve months
decreased materially its services, supplies or materials to any GB&C Entity or
its usage or purchase of the services or products of any GB&C Entity, nor to the
knowledge of the GB&C Entities, does any Customer, Distributor or Supplier have
any plan or intention to do any of the foregoing.
<PAGE>
2.24. Banking Relations.
All of the arrangements which any GB&C Entity has with any banking
institution are completely and accurately described in Schedule 2.24 attached
hereto, indicating with respect to each of such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.25. Powers of Attorney.
Except as set forth in Schedule 2.25, no GB&C Entity or Stockholder has
any outstanding power of attorney.
2.26. Corporate Records; Copies of Documents.
The corporate record books of each of the GB&C Entities accurately
record all corporate action taken by their respective stockholders and board of
directors and committees. The copies of the corporate records of each of the
GB&C Entities, as made available to the Company for review, are true and
complete copies of the originals of such documents. Each GB&C Entity has made
available for inspection and copying by the Company and its counsel true and
correct copies of all documents referred to in this Section or in the Schedules
delivered to the Company pursuant to this Agreement.
2.27. Employee Benefit Programs.
(a) Schedule 2.27 lists every Employee Program (as defined
below) that has been maintained (as defined below) by any GB&C Entity at any
time during the three-year period ending on the Closing date.
(b) Each Employee Program which has ever been maintained by
any GB&C Entity and which has at any time been intended to qualify under Section
401(a) or 501(c)(9) of the Code has received a favorable determination or
approval letter from the Internal Revenue Service ("IRS") regarding its
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Employee Program
through and including the Closing (or, if earlier, the date that all of such
Employee Program's assets were distributed). No event or omission has occurred
which would cause any such Employee Program to lose its qualification under the
applicable Code section.
(c) No GB&C Entity knows or has reason to know, of any
failure of any party to comply with any laws applicable to the Employee Programs
that have been maintained by any GB&C Entity. With respect to any Employee
Program ever maintained by any GB&C Entity, there has occurred no "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or
breach of any duty under ERISA or other applicable law (including, without
limitation, any health care continuation requirements or any other tax law
requirements, or conditions to favorable tax treatment, applicable to such
plan), which could result, directly or indirectly, in any taxes, penalties or
other liability to any GB&C Entity, or the Company. No litigation, arbitration,
or governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program.
(d) No GB&C Entity or any Affiliate (as defined below) (i) has
ever maintained any Employee Program which has been subject to title IV of ERISA
(including, but not limited to, any Multiemployer Plan (as defined below)) or
(ii) has ever provided health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA) or has ever promised to provide such
post-termination benefits.
<PAGE>
(e) With respect to each Employee Program maintained by any
GB&C Entity within the three years preceding the Closing, complete and correct
copies of the following documents (if applicable to such Employee Program) have
previously been delivered to the Company: (i) all documents embodying or
governing such Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended;
(ii) the most recent IRS determination or approval letter with respect to such
Employee Program under Code Sections 401 or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; (vi) any documents
evidencing any loan to an Employee Program that is a leveraged employee stock
ownership plan; and (vii) all other materials reasonably necessary for Buyer to
perform any of its responsibilities with respect to any Employee Program
subsequent to the Closing (including, without limitation, health care
continuation requirements).
(f) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans within the meaning
of ERISA Section 3(3), including, but not limited to, multiple employer
welfare arrangements (within the meaning of ERISA Section 3(4)), plans to
which more than one unaffiliated employer contributes and employee benefit
plans (such as foreign or excess benefit plans) which are not subject to
ERISA; and (B) all stock option plans, bonus or incentive award plans,
severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee
benefit plans, agreements, and arrangements not described in (A) above. In
the case of an Employee Program funded through an organization described in
Code Section 501(c)(9), each reference to such Employee Program shall
include a reference to such organization.
(ii) An entity "maintains" an Employee Program if such entity sponsors,
contributes to, or provides (or has promised to provide) benefits under
such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity, or their spouses, dependents, or
beneficiaries.
(iii)An entity is an "Affiliate" of a GB&C Entity if it would have ever been
considered a single employer with such GB&C Entity under ERISA Section
4001(b) or part of the same "controlled group" as such GB&C Entity for
purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means a (pension or non-pension) employee benefit plan
to which more than one employer contributes and which is maintained
pursuant to one or more collective bargaining agreements.
2.28. List of Directors and Officers.
Schedule 2.28 hereto contains a true and complete list of all current
directors and officers of each GB&C Entity. In addition, Schedule 2.28 hereto
contains a list of all employees of the GB&C Entities and the salaries of such
employees as of the date hereof.
2.29. Non-Foreign Status.
No Stockholder is a "foreign person" within the meaning of Section 1445
of the Code and Treasury Regulations Section 1.1445-2.
<PAGE>
2.30. Transfer of Shares.
No holder of stock of any GB&C Entity has at any time transferred any
of such stock to any employee of any GB&C Entity, which transfer constituted or
could be viewed as compensation for services rendered to any GB&C Entity by said
employee.
2.31. Attributes Regarding Pooling Accounting.
The GB&C Entities are autonomous and have never been a subsidiary or
division of another corporation. The GB&C Entities have not changed the equity
interest of its voting common stock in contemplation of the transaction
contemplated by this Agreement to be consummated pursuant hereto or any other
business combination, including but not limited to such changes effected by
distributions to stockholders and additional issuances, exchanges and
retirements of securities. No GB&C Entity has ever reacquired any shares of its
voting common stock. To the best knowledge of the GB&C Entities, the GB&C
Entities have disclosed to the Company all facts and circumstances regarding the
GB&C Entities and the transactions in which the GB&C Entities have engaged which
could reasonably be expected to adversely effect or preclude accounting for the
transaction contemplated by this Agreement as a pooling of interests if
consummated at any time from the date hereof through October 15, 1996.
2.32. Definition of the GB&C Entities' Knowledge.
As used in this Agreement, the phrases "to the GB&C Entities'
knowledge" or "to the best of the GB&C Entities' knowledge" (or words of similar
import) means the knowledge or the best knowledge of any Stockholder or
individual set forth on Schedule 2.32, and includes any fact, matter or
circumstance which any of such individuals, as an ordinary and prudent business
person in the same capacity with respect to the same type and size of business
as the GB&C Entities, should have known.
2.33. Stockholder Personal Guaranties.
Set forth on Schedule 2.33 are all personal guaranties executed by any
Stockholder with respect to any contract, lease or other agreement to which a
GB&C Entity is or was a party.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the GB&C Entities and the
Stockholders as follows:
3.01. Organization.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to conduct its business as it is currently
conducted, except where the failure to have such power, authority or
governmental approval would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
3.02. Certificate of Incorporation and By-Laws.
The Company has provided to the GB&C Entities a true, complete and
correct copy of the Certificate of Incorporation and the By-Laws, each as
amended to date, of the Company. Such Certificate of Incorporation, By-Laws are
in full force and effect. The Company is not in violation of any provision of
its Certificate of Incorporation or By-Laws.
3.03. Capitalization.
The authorized capital stock of the Company consists of 30,000,000
shares of common stock, par value $.01 per share ("Company Common Stock") and
1,000,000 shares of preferred stock, $.01 par value per share ("Company
Preferred Stock"). As of the date of this Agreement, (i) 9,489,235 shares of
Company Common Stock are issued and outstanding, (ii) 751,778 shares of Company
Common Stock are issuable upon the exercise of outstanding stock options granted
pursuant to the Company's employee stock option plans, (iii) no shares of
Company Common Stock are held in the treasury of Company, and (iv) 11,912 shares
of Company Preferred Stock are issued and outstanding and 294,822 shares of
Company Common Stock are issuable upon conversion of such shares, and (v)
1,047,664 shares of Company Common Stock are issuable upon conversion of
outstanding convertible subordinated notes (which have been called for
redemption on April 4, 1996).
<PAGE>
3.04. Authority Relative to this Agreement.
Except as set forth on Schedule 3.04, the Company has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Company, and no other
corporate proceedings or action on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated by this
Agreement. This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by the
Company, constitutes the valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms.
3.05. Consents and Approvals; No Violations.
(a) The Board of Directors of the Company has approved this
Agreement.
(b) Except as set forth in Schedule 3.05, the execution and
delivery of this Agreement by the Company does not, and the performance of the
transactions contemplated by this Agreement by the Company will not, require any
filing with or notification to, or any consent, approval, authorization or
permit from, any Governmental Entity or any other person except (i) for
applicable requirements of the Securities Act, the Exchange Act and state
securities or "blue sky" laws, or (ii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
(A) would not prevent or delay the Company from performing its obligations under
this Agreement in any material respect, or (B) would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
(c) Except as set forth in Schedule 3.05, the execution and
delivery of this Agreement by the Company does not, and the performance of the
transactions contemplated by this Agreement by the Company will not, (i)
conflict with or violate the Certificate of Incorporation or By-Laws of the
Company, (ii) conflict with or violate any order, writ, injunction, decree,
statute, treaty, law, rule or regulation applicable to the Company or by which
any property or asset of the Company is bound or affected or (iii) result in a
violation or a breach of, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or result in the loss of
a benefit under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company is a party or any property
or asset of the Company is bound or affected, except, in the case of clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that (A) would not prevent or delay the Company from performing its
obligations under this Agreement in any material respect or (B) would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
3.06. SEC Reports.
(a) The Company has filed all forms, reports and documents
required to be filed by it with the SEC since June 30, 1994 and has heretofore
made available to the GB&C Entities, in the form filed with the SEC (excluding
any exhibits thereto), (i) its Annual Report on Form 10-K for the fiscal year
ended July 1, 1995, (ii) its Quarterly Report for the fiscal quarter ended
September 30, 1995, (iii) its Quarterly Report for the fiscal quarter ended
December 30, 1995, (iv) its definitive proxy statement dated as of January 16,
1996, and (iv) all other forms, reports, registration statements and other
documents filed by the Company with the SEC since December 31, 1995 (the forms,
reports, registration statements and other documents referred to in clauses (i)
and (ii) above being referred to herein, collectively, as the "Company SEC
Reports"). The Company SEC Reports and any other forms, reports and other
documents filed by the Company with the SEC after the date of this Agreement (i)
were or will be prepared in accordance with the requirements of the Securities
Act and the Exchange Act, as the case may be, and the rules and regulations
thereunder and (ii) did not at the time they were filed, or will not at the time
they are filed, contain any untrue statement of a 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 the light of the circumstances under which they were
or are made, not misleading.
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Company SEC Reports was
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented the consolidated financial
position, results of operations and cash flows of the Company and its
consolidated subsidiaries as the case may be, as at the respective dates thereof
and for the respective periods indicated therein (subject, in the case of
unaudited statements, to normal and recurring year-end adjustments that were not
and are not expected, individually or in the aggregate, to be material in
amount).
<PAGE>
3.07. Absence of Certain Changes.
(a) Since December 31, 1995, except as disclosed in any
Company SEC Report, there has not been (i) a Company Material Adverse Effect,
(ii) any declaration, setting aside or payment of any dividend or other
distribution in respect of any shares of any capital stock of the Company, (iii)
any entry into any agreement, commitment or transaction by the Company that is
material to the Company, except agreements, commitments or transactions in the
ordinary course of business, (iv) any change by the Company in accounting
methods, principles or practices, or (v) any damage, destruction or loss
(whether or not covered by insurance) with respect to any property or asset of
the Company and having, individually or in the aggregate, a Material Adverse
Effect on the Company.
(b) To the best knowledge of the Company, the Company has
disclosed to the GB&C Entities all facts and circumstances regarding the Company
and the transactions it has engaged in which could reasonably be expected to
adversely affect or preclude accounting for the transaction contemplated by this
Agreement as a pooling of interests if consummated at any time from the date
hereof through October 15, 1996. As of the date hereof, to the best knowledge of
the Company based on the facts and circumstances known to it, the Company has no
reason to believe that accounting for the transactions contemplated hereby as a
pooling of interests if consummated at any time from the date hereof through
October 15, 1996 would not be available.
3.08. Brokers.
Except as set forth in Schedule 3.08, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or commission from
the Company in connection with the transactions contemplated herein by this
Agreement.
3.09. DAKA Common Stock.
The DAKA Common Stock to be issued hereunder in exchange for the Shares
shall, when issued in accordance with this Agreement, be validly issued, fully
paid and non-assessable.
3.10. Definition of the Company's Knowledge.
As used in this Agreement, the phrase "to the knowledge of the Company"
or "to the best knowledge of the Company" (or words of similar import) means the
knowledge or the best knowledge of those individuals identified in Schedule
3.10, and includes any fact, matter or circumstance which any of such
individuals, as an ordinary and prudent business person employed in the same
capacity in the same type and size of business as the Company, should have
known.
3.11. Disclosure.
To the best knowledge of the Company, all material facts relating to
the business, operations, properties, assets, liabilities (contingent or
otherwise) and financial condition of the Company have been disclosed to the
GB&C Entities in or in connection with this Agreement. The representations,
warranties and statements made by the Company in this Agreement and in the
certificates delivered pursuant hereto do not contain any untrue statement of
the material fact, and, when taken together, do not omit to state any material
fact necessary to make such representations, warranties and statements, in light
of the circumstances under which they are made, not misleading.
3.12. No Investment Company.
The Company is not an "investment company" within the meaning of
Sections 368(a)(2)(F)(iii) and (iv) of the Code.
3.13. Tax Representations.
(a) The Company has no present plan or intent to reacquire
any of its stock issued in connection with the transactions contemplated hereby;
(b) The Company has no present plan or intent to cause any of
the GB&C Entities to issue additional shares of stock that would result in the
Company losing "control" (within the meaning of Section 368(c) of the Code) of
any of the GB&C Entities.
(c) It is the present intent of the Company to cause each of
the GB&C Entities (or the Company or a subsidiary of the Company in the event
that the Company or such subsidiary acquires the assets of such GB&C Entity
pursuant to a transfer described in clause (ii) or (iii) of Section 3.13(e)) to
continue the historic business of such GB&C Entity or use a significant portion
of the historic business assets of such GB&C Entity in a business.
<PAGE>
(d) The Company has no present plan or intent to sell or
otherwise dispose of the stock of any of the GB&C Entities except for transfers
of stock to corporations "controlled" (within the meaning of Section 368(c) of
the Code) by the Company or dispositions by merger into the Company or into any
direct wholly owned subsidiary of the Company or by liquidation.
(e) The Company has no present plan or intent to cause any of
the GB&C Entities to sell or otherwise dispose of any of their assets except for
(i) dispositions made in the ordinary course of business, (ii) transfers
described in Section 368(a)(2)(C) of the Code, or (iii) dispositions by merger
into the Company or into any direct wholly owned subsidiary of the Company or by
liquidation.
ARTICLE IV COVENANTS OF THE GB&C ENTITIES AND THE STOCKHOLDERS
4.01. Conduct of Respective Businesses of the GB&C Entities Pending the
Transactions Contemplated Hereby.
Each of the Stockholders and the GB&C Entities covenants and agrees
that between the date of this Agreement and the Closing Date, the GB&C Entities
shall and the Stockholders shall cause each GB&C Entity to (i) carry on its
respective businesses in the usual, regular and ordinary course, consistent with
past practice, (ii) use its reasonable best efforts to preserve intact its
present business organizations, keep available the services of its present
officers and employees, (iii) keep in effect casualty, public liability,
worker's compensation and other insurance policies in coverage amounts not less
than those in effect as of the date of this Agreement, (iv) preserve and protect
the rights of each GB&C Entity in Intellectual Property (as defined by Section
2.12 hereof), and (v) use its best efforts to preserve its relationships with
customers, franchisees, suppliers, licensors and other persons with which it has
significant business dealings. Without limiting the generality of the foregoing,
between the date of this Agreement and the Effective Time, each GB&C Entity
shall not, and the Stockholders shall prevent each GB&C Entity from, doing,
proposing or agreeing, directly or indirectly, to do any of the following
without the prior written consent of the Company:
(a) (i) Declare, set aside or pay any dividend or make any
other distribution (whether in cash, stock, or property or any combination
thereof) in respect of any of its capital stock, as the case may be, (ii) split,
combine, reclassify or subdivide any of its capital stock or (iii) repurchase,
redeem or otherwise acquire any of its capital stock;
(b) Authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
(collectively, "Issue") any shares of stock of any class or any other securities
(including indebtedness having the right to vote) or equity equivalents
(including, without limitation, phantom stock or stock appreciation rights);
(c) Acquire or encumber or sell, lease, transfer or dispose
of any assets other than in the ordinary course of business;
(d) Incur any long-term indebtedness for borrowed money,
guarantee any indebtedness, issue or sell debt securities or warrants or rights
to acquire any debt securities, guarantee (or otherwise become liable or
potentially liable for) any debt of others, make any loans, advances or capital
contributions; mortgage, pledge or otherwise encumber any material assets; or
create or suffer any material lien thereupon other than in the ordinary course
of business consistent with prior practice or incur any short-term indebtedness
for borrowed money except for credit facilities in existence on the date hereof;
(e) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than any payment, discharge or satisfaction (i) in the
ordinary course of business consistent with past practice of trade payables
other than promissory notes or other liabilities set forth in section (xii) of
Schedule 2.13, (ii) on account of mandatory scheduled payments with respect to
the promissory notes set forth in section (xii) (promissory notes) other than
promissory notes also set forth in Schedule 2.18 or (iii) consented to in
writing by the Company;
<PAGE>
(f) Change any of the accounting principles or practices used
by it (except as required by generally accepted accounting principles);
(g) Make any change in the compensation payable or to become
payable to any officers, employees or agents of any GB&C Entity or grant any
severance or termination pay to, or enter into or amend any employment,
severance or other agreement or arrangement with, any of its or any other GB&C
Entity's directors, officers or other employees, or establish, adopt or enter
into or amend any collective bargaining, bonus, incentive, deferred
compensation, profit sharing, stock option or purchase, insurance, pension,
retirement or other employee benefit plan;
(h) Amend or otherwise change such GB&C Entity's Certificate
of Incorporation or By-Laws;
(i) Enter into a new agreement, contract or commitment
involving payment to or by the Company of $10,000 or more or amend any existing
agreement that could reasonably be expected to have a Material Adverse Effect on
any GB&C Entity;
(j) Enter into or modify or amend any lease, license
agreement, franchise agreement or development agreement;
(k) Knowingly engage in any transaction or cause any fact or
circumstance to occur which would preclude accounting for the transaction
contemplated by this Agreement as a pooling of interests.
4.02. Sale of Shares; Acquisition Proposals.
Unless and until this Agreement is terminated in accordance with its
term for any reason, no Stockholder shall directly or indirectly exchange,
deliver, assign, pledge, encumber or otherwise transfer or dispose of any Shares
(including options in respect thereof) owned beneficially and of record by such
Stockholder, nor shall any Stockholder directly or indirectly grant any right of
any kind to acquire, dispose of, vote or otherwise control in any manner any
Shares. Unless and until this Agreement is terminated in accordance with its
terms, neither any GB&C Entity, nor any Stockholder nor any director, officer,
employee or agent of any GB&C Entity shall, directly or indirectly, (a) take any
action to solicit, initiate submission of or encourage proposals or offers from
any person relating to any acquisition or purchase of all or any portion of the
Shares or all or (other than in the ordinary course of business consistent with
past practice) any portion of any assets of, or any equity interest in any GB&C
Entity, any merger or business combination with any GB&C Entity, or any other
acquisition, transaction or financing or joint venture involving such
Stockholder or any GB&C Entity (an "Acquisition Proposal"), (b) participate in
any negotiations regarding any Acquisition Proposal with any person other than
the Company and its affiliates and representatives, (c) furnish any information
with respect to or afford access to the properties, books or records of such
Stockholder or any GB&C Entity to any person who may consider making or has made
an offer with respect to an Acquisition Proposal other than the Company and its
affiliates and representatives, or (d) otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt by any
person other than the Company and its affiliates and representatives to do or
seek any of the foregoing. The Stockholders shall promptly notify the Company
upon receipt of any offer or indication that any person is considering making an
offer with respect to an Acquisition Proposal or any request for information
relative to any GB&C Entity, and will keep the Company fully informed of the
status and details of any such offer, indication or request.
<PAGE>
4.03. Breach of Representations and Warranties.
Promptly upon any Stockholder becoming aware of any breach, or the
impending or threatened occurrence of any event which would cause or constitute
a breach, or would have caused or constituted a breach had such event occurred
or been known prior to the date hereof, of any of the representations and
warranties of the Stockholders contained in or referred to in this Agreement and
made as of the date hereof, the Stockholders shall give detailed written notice
thereof to the Company and shall use their best efforts to prevent or promptly
remedy the same.
4.04. Confidentiality.
In the course of the Stockholders' involvement with GB&C Entities as
stockholders or employees or otherwise, the Stockholders have had, and may from
time to time after the date hereof have, access to confidential records, data,
trade secrets and similar confidential information owned or used by a GB&C
Entity in the course of its business (the "Confidential Information").
Accordingly, each Stockholder agrees (a) to hold the Confidential Information in
strict confidence, (b) not to disclose Confidential Information to any person,
and (c) not to use, directly or indirectly, any of the Confidential Information
for any competitive or commercial purpose; provided, however, that the
limitations set forth above shall not apply to any Confidential Information
which (i) is then generally known to the public other than by reason of a breach
of this Section 4.04; or (ii) is disclosed in accordance with an order of a
court of competent jurisdiction or applicable law. Upon request by the Company,
all data, memoranda, customer lists, notes, programs and other papers and items,
and reproductions thereof relating to the foregoing matters in a Stockholder's
possession or control shall be returned to the Company or a GB&C Entity.
4.05. Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions hereof, each
of the GB&C Entities and the Stockholders shall use its reasonable best efforts
to take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
herein including, without limitation, using its reasonable best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of any governmental or regulatory authority, domestic
or foreign (a "Governmental Entity"), and all parties to contracts with any GB&C
Entity or any Stockholder as are necessary for the consummation of the
transactions contemplated herein. In case at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each GB&C Entity and each
Stockholder shall use their reasonable best efforts to take all such action.
Each such party shall promptly consult with the other with respect to, provide
any necessary information with respect to and provide the other (or its counsel)
with copies of, (i) all filings made by such party with any Governmental Entity
or any other person in connection with the execution of this Agreement and the
consummation of the transactions contemplated hereby and (ii) all other written
materials submitted or prepared by any such party concerning obtaining all
licenses, permits, consents, approvals, authorizations and orders that are
required to be obtained in connection with the execution of this Agreement and
the consummation of the transactions contemplated by this Agreement.
(b) Each GB&C Entity and each Stockholder shall use its best
efforts to cause all conditions to Closing herein to be satisfied and shall not
take any action, or enter into any transaction, that would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
4.06. Access.
The GB&C Entities and the Stockholders shall permit the Company and its
authorized representatives (including without limitation the Company's
attorneys, accountants, financial advisors and pension and environmental
consultants) to have full access to all of the properties, assets, books,
records, business files, executive personnel, tax returns, contracts and
documents of the GB&C Entities and furnish to the Company and its authorized
representatives such financial and other information with respect to such
business or properties as the Company may from time to time reasonably request.
4.07. Financial Information.
Each GB&C Entity shall, and the Stockholders shall cause each GB&C
Entity to: (i) provide such financial and other information and documents as the
Company may reasonably request in connection with any filings to be made by the
Company under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, (ii) use its best efforts to cause its independent
public accountants, to deliver such consents, reports and comfort letters in
connection therewith as the Company may reasonably request, provided that all
such consents, reports and comfort letters shall be at the expense of the
Company, (iii) generally cooperate with the Company and its representatives and
agents in connection therewith, (iv) provide monthly financial statements,
including a balance sheet as of month-end and a monthly income statement, as
soon as practicable but not later than 30 days after the last day of each month
and quarterly financial statements (unaudited) and annual financial statements
(audited) meeting the requirements set forth in Section 2.07 hereof as soon as
practicable but not later than 45 days after the last day of each quarter or
fiscal year, as applicable, and (v) make such representations relating to
accounting for the transactions contemplated hereby as a pooling of interests as
may be required by Deloitte & Touche LLP, which representations shall be set
forth in Schedule 4.07.
<PAGE>
4.08. General Release.
Each Stockholder agrees to deliver at the Closing a general release in
the form of Exhibit 4.08 attached hereto releasing all claims which such
Stockholder has or may have through the Closing Date other than such claims and
rights referred to in such general release which shall survive the Closing and
remain in effect (including rights arising under this Agreement).
4.09. Affiliates of the GB&C Entities.
On or before the Closing Date (a) the GB&C Entities shall deliver to
the Company a letter identifying all persons who may be deemed affiliates of the
GB&C Entities under Rule 145 of the Securities Act ("Rule 145"), including,
without limitation, all directors and executive officers of the GB&C Entities
and (b) the GB&C Entities shall advise the persons identified in such letter of
the resale restrictions imposed by applicable securities laws. The GB&C Entities
shall use their best efforts to obtain as soon as practicable from any person
who may be deemed to have become an affiliate of the GB&C Entities after the
GB&C Affiliates' delivery of the letter referred to above and prior to the
Closing Date, a written agreement substantially in the form of Exhibit 4.09.
ARTICLE V. COVENANTS OF THE COMPANY.
5.01. Consents and Approvals.
The Company will use its best efforts to obtain prior to the Closing
all necessary consents and approvals to the performance of its obligations under
this Agreement, including, without limitation, the consents and approvals
described in Schedule 3.05 attached hereto, and will cooperate in all respects
with the GB&C Entities and the Stockholders with a view toward obtaining timely
satisfaction of conditions to the Closing set forth herein. The Company will
keep the GB&C Entities and the Stockholders informed of the status of any
inquiries made of the Company by any governmental agency as authority with
respect to this Agreement or the transactions contemplated hereby.
5.02. Confidentiality.
From the date of this Agreement until the Closing, or for a period of
five years from the date of this Agreement if the Closing does not take place
for any reason, all confidential business and related information furnished to
the Company and its affiliates and representatives by either a GB&C Entity or a
Stockholder shall be kept confidential by the Company and its affiliates and
representatives; provided, however, that the foregoing shall be inapplicable (a)
with respect to information which (i) is or becomes available to the public
without breach of this confidentiality obligation, or (ii) is or becomes
available to the Company from a third party, provided that the third party did
not receive the same, directly or indirectly, from a GB&C Entity or a
Stockholder and was not under an obligation of confidentiality to the source of
such information at the time it was disclosed to the Company, (b) in connection
with filings contemplated by this Agreement and (c) to the extent disclosure is
required by any applicable law or regulation, by any authorized administrative
or governmental agency or, in the opinion of counsel to the Company, in
connection with any proposed public offering of the Company's securities
pursuant to applicable requirements of the securities laws or any stock exchange
or self-regulatory organization; provided, however, that the Company will
provide notice to the GB&C Entities and the Stockholders before disclosing any
information pursuant to this Section 5.02 and will cooperate with the GB&C
Entities and the Stockholders on endeavoring to preserve, to the extent
reasonably practicable and not inconsistent with its legal obligations
(including the obligation to make timely, full and accurate disclosure in a
prospectus or securities filings or reports), the confidential nature thereof.
The Stockholder acknowledges and agrees that a copy of this Agreement, together
with exhibits and schedules hereto may be filed by the Company as an exhibit to
a Registration Statement filed by the Company under the Securities Act, and that
financial information derived from or contained in the financial statements
included in Schedule 2.07 will be set forth in the prospectus included as part
of such Registration Statement.
<PAGE>
ARTICLE VI. CONDITIONS.
6.01. Conditions to the Obligations of the Company.
The obligation of the Company to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, prior to or at
the Closing, of the following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the GB&C Entities and the Stockholders made
pursuant to this Agreement shall be true and correct in all material respects on
and as of the Closing Date, with the same effect as though made on and as of the
Closing Date; the GB&C Entities and the Stockholders shall, on or before the
Closing Date, have performed and satisfied all of their covenants and agreements
set forth herein, which by the terms hereof, are to be performed and satisfied
on or before the Closing Date; and the GB&C Entities and the Stockholders shall
have delivered to the Company certificates executed as of the Closing Date
certifying to the foregoing effect.
(b) Opinion of Counsel and Other Documents. On the Closing
Date, the Company shall have received (i) opinions of counsel for the GB&C
Entities and the Stockholders dated as of the Closing Date and addressed to the
Company, substantially in the form attached as Exhibit 6.01(b) hereto, and (ii)
such other certificates and documents with respect to the Stockholders as
counsel for the Company shall have reasonably requested at least two (2)
business days prior to the Closing Date.
(c) No Actions or Proceedings. No action or proceeding by or
before any court, administrative body or governmental agency shall have been
instituted or threatened by or on behalf of any GB&C Entity or any Stockholder
or which seeks to enjoin, restrain or prohibit, or might result in money damages
to any party hereto in respect of, this Agreement or the complete consummation
of the transactions contemplated by this Agreement, or which otherwise would in
the reasonable judgment of the Company make it inadvisable to consummate such
transactions. No law or regulation shall be in effect and no court order shall
have been entered in any action or proceeding instituted by any party which
enjoins, restrains or prohibits this Agreement or the complete consummation of
the transactions contemplated by this Agreement.
(d) Company Approvals and Consents. The Company shall have
made all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by it in connection with the
execution and delivery of this Agreement and the performance by it of the
transactions contemplated hereby; the Company shall have received all required
authorizations, waivers, consents and permits required to be received by the
Company to permit the consummation of the transactions contemplated by this
Agreement, in form and substance reasonably satisfactory to the Company, from
all third parties.
(e) Deliveries. The GB&C Entities and the Stockholders shall
have delivered or entered into the documents and instruments contemplated by
this Agreement, in each case, in form and substance satisfactory to the Company
and its counsel.
(f) GB&C Entities Approvals and Consents. The GB&C Entities
shall have made all filings with and notifications of governmental authorities,
regulatory agencies and other entities, if any, required to be made by the GB&C
Entities in connection with the execution and delivery of this Agreement, the
performance of the transactions contemplated hereby and the continued operation
of the business of the GB&C Entities subsequent to the Closing Date. The GB&C
Entities and the Stockholders shall have received all required authorizations,
waivers, consents and permits to permit the consummation of the transactions
contemplated by this Agreement, in the form and substance reasonably
satisfactory to the Company, with any conditions or limitations contained
therein or imposed thereby subject to the approval of the Company, from (i)
lessors of stores operated by the GB&C Entities rather than franchisees and (ii)
other third parties, including, without limitation, applicable governmental
authorities, regulatory agencies, lenders and contract parties, required in
connection with transactions contemplated by this Agreement or by any GB&C
Entity's permits, leases, licenses and franchises, to avoid a breach, default,
termination, acceleration or modification of any agreement, contract,
instrument, mortgage, lien, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award as a result of the
execution or performance of this Agreement, or otherwise in connection with the
execution and performance of this Agreement.
<PAGE>
(g) Material Adverse Changes. There shall not have been since
the date of this Agreement, any change or series of changes that, in the
reasonable business judgment of the Company, acting in good faith, have or could
reasonably be anticipated to have a Material Adverse Effect on any GB&C Entity.
(h) Proceedings Satisfactory to the Company. All proceedings
to be taken by the GB&C Entities and the Stockholders in connection with the
consummation of the Closing and the other transactions contemplated hereby and
all certificates, opinions, instruments and other documents required to effect
the transaction contemplated hereby reasonably requested by the Company will be
reasonably satisfactory in the form and substance to the Company and its
counsel.
(i) The Company shall have received confirmation in writing
from Salomon Brothers that the amounts owed them will not exceed the amount
disclosed in Schedule 2.17.
(j) The Company shall have received from Fred R. Olivier and
Maria Olivier a general release in the form of Exhibit 4.08 hereto.
(k) The Company shall have received in writing from Snell &
Wilmer L.L.P. an acknowledgment that fees due them in connection with their
representation of the GB&C Entities will not exceed $17,500.
6.02. Conditions to the Obligations of the Stockholders.
The obligations of the Stockholders to consummate the transactions
contemplated by this Agreement are subject to the fulfillment of, prior to or at
the Closing, the following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date, with
the same effect as though made on and as of the Closing Date; the Company shall,
on or before the Closing Date, have performed and satisfied all of its covenants
and agreements set forth herein which by the terms hereof are to be performed
and satisfied by the Company on or before the Closing Date; and the Company
shall have delivered to the Stockholders a certificate as of the Closing Date
certifying to the foregoing effect.
(b) Opinion of Counsel and Other Documents. On the Closing
Date, the GB&C Entities and the Stockholders shall have received (i) an opinion
of counsel for the Company, dated as of the Closing Date and addressed to the
GB&C Entities and the Stockholders, substantially in the form attached as
Exhibit 6.02(b)(i) hereto and (ii) such other certificates and documents as
counsel to the Stockholders shall have reasonably requested from the Company at
least two (2) business days prior to the Closing Date.
(c) No Actions or Proceedings. No action or proceeding by or
before any court, administrative body or governmental agency shall have been
instituted or threatened which seeks to enjoin, restrain or prohibit, or might
result in damages in respect of, this Agreement or the complete consummation of
the transactions as contemplated by this Agreement. No law or regulation shall
be in effect and no court order shall have been entered in any action or
proceeding instituted by any party which enjoins, restrains or prohibits this
Agreement or the complete consummation of the transactions as contemplated by
this Agreement.
<PAGE>
ARTICLE VII. TERMINATION OF AGREEMENT.
7.01. Termination.
This Agreement may be terminated any time prior to the Closing Date as
follows:
(a) With the mutual consent of the Company and the
Stockholders owning a majority of the Shares.
(b) By either the Company or the Stockholders owning a
majority of the Shares, if the Closing has not occurred on or before April 30,
1996.
(c) By the Company, if there has been a material
misrepresentation or breach of warranty on the part of any GB&C Entity or
Stockholder in the representations and warranties contained herein or a material
breach of covenants on the part of any GB&C Entity or Stockholder and the same
has not been cured within 10 days after notice thereof. In the event of any
termination pursuant to this Section 7.01(c), written notice setting forth the
reasons therefor shall forthwith be given by the Company to the GB&C Entities
and the Stockholders.
(d) By Stockholders owning a majority of the Shares, if there
has been a material misrepresentation or breach of warranty on the part of the
Company in the representations and warranties contained herein or a material
breach of covenants on the part of the Company and the same has not been cured
within 10 days after notice thereof. In the event of any termination pursuant to
this Section 7.01(d), written notice setting forth the reasons therefor shall
forthwith be given by the Stockholders to the Company.
Notwithstanding anything herein to the contrary, the right to terminate
this Agreement under this Section 7.01 shall not be available to any party to
the extent the failure of such party, respectively, to fulfill any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date (as a result, for
example, of an action or failure to act causing a failure of a condition
precedent).
7.02. Effect of Termination.
All obligations of the parties hereunder shall cease upon any
termination pursuant to Section 7.01; provided, however, that (i) the provisions
of this Article VII and of Sections 5.02 and 11.09 shall survive any termination
of this Agreement; (ii) nothing herein shall relieve any party from any
liability for a material error or omission in any of its representations or
warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein; and (iii) any party may
proceed as further set forth in Section 7.03 below.
7.03. Right to Proceed.
Anything in this Agreement to the contrary notwithstanding, if any of
the conditions specified in Section 6.01 hereof have not been satisfied, the
Company shall have the right to proceed with the transactions contemplated
hereby without waiving any of its rights hereunder, and if any of the conditions
specified in Section 6.02 hereof have not been satisfied, the Stockholders, by a
decision of the Stockholders owning a majority of the Shares, shall have the
right to proceed with the transactions contemplated hereby without waiving any
of their rights hereunder.
ARTICLE VIII. SURVIVAL; INDEMNIFICATION
8.01. Survival of Representations, Warranties, Etc.
All representations, warranties, agreements, covenants and obligations
herein or in any schedule or certificate delivered by any party incident to the
transactions contemplated hereby are material and may be relied upon by the
party receiving the same and shall survive the Closing regardless of any
investigation by or knowledge of such party and shall not merge into the
performance of any obligation by any party hereto, subject to the provisions of
this Article VIII.
8.02. Indemnification by the Stockholders.
The Stockholders, on behalf of themselves and their respective
successors, executors, administrators, estates, heirs and permitted assigns,
jointly and severally, agree subsequent to the Closing Date to indemnify and
hold harmless the Company, its affiliates and their respective shareholders,
officers, directors, employees and agents (individually, a "Company Indemnified
Party" and collectively, the "Company Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against any Company Indemnified Party
(a "Loss" or "Losses") arising out of, based upon or in connection with:
<PAGE>
(a) conditions, circumstances or occurrences which constitute
or result in any breach of any representation or warranty made by either a
Stockholder or a GB&C Entity in this Agreement or in any schedule, exhibit,
certificate, financial statement, agreement or other instrument delivered under
or in connection with this Agreement (collectively, "Stockholder Representation
and Warranty Claims");
(b) any breach of any covenant or agreement made by either a
Stockholder or a GB&C Entity in this Agreement or in any Schedule, exhibit,
certificate, financial statement, agreement or other instrument delivered under
or in connection with this Agreement, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such covenant or agreement;
(c) any fees and expenses (including without limitation legal
fees and accounting fees) relating to this Agreement or any transactions
contemplated hereby paid, assumed or otherwise borne by any GB&C Entity.
Claims under clauses (a) through (c) of this Section 8.02 hereinafter
collectively referred to as "Company Indemnifiable Claims".
The rights of Company Indemnified Parties to recover indemnification in
respect of any occurrence referred to in clauses (b) and (c) of this Section
8.02 shall not be limited by the fact that such occurrence may not constitute an
inaccuracy in or breach of any representation or warranty referred to in clause
(a) of this Section 8.02.
8.03. Limitations on Indemnification by Stockholders.
(a) General Threshold. Subject to the exceptions set forth in
Section 8.03(d), the Stockholders shall not be obligated to indemnify Company
Indemnified Parties in respect of Stockholder Representation and Warranty Claims
except to the extent the cumulative amount of all Stockholder Representation and
Warranty Claims exceeds fifty thousand Dollars ($50,000) (the "Company
Threshold"), whereupon the full amount of such losses shall be recoverable in
accordance with the terms hereof.
(b) General Maximum Indemnification. Subject to the
exceptions set forth in Section 8.03(d), neither Stockholder shall be obligated
to indemnify Company Indemnified Parties in respect of Stockholder
Representation and Warranty Claims that exceed $7,871,736.
(c) Time Limits for Claims. Subject to the exceptions set
forth in Section 8.03(d), no claim for indemnification may be made by any
Company Indemnified Party in respect of Stockholder Representation and Warranty
Claims unless the written notice required by Section 8.06 with respect to such
Losses shall have been received by the Stockholders on a date prior to the 18
month anniversary of the Closing; provided, however, that the limitation of this
clause (c) shall not apply to Company Indemnifiable Losses described in Section
8.03(d), indemnification with respect to which shall expire six (6) months after
the termination of the applicable statute of limitations relating to the subject
matter covered by such Section; and provided further, however, that in each case
if prior to the applicable date of expiration a specific state of facts shall
have become known which may constitute or give rise to any Company Indemnifiable
Loss as to which indemnity may be payable and a Company Indemnified Party shall
have given notice of such facts to the Stockholders, then the right to
indemnification with respect thereto shall remain in effect until such matter
shall have been finally determined and disposed of, and any indemnification due
in respect thereof shall have been paid, according to the date on which notice
of the applicable claim is given.
(d) Dollar-for-Dollar Claims. Notwithstanding anything herein
to the contrary, Company Indemnified Parties shall not be subject to any
limitation, whether pursuant to this Section 8.03 or otherwise, and shall be
entitled to dollar-for-dollar recovery, in seeking indemnification from either
Stockholder with respect to the following:
<PAGE>
(i) Losses arising from fraud or an intentional misrepresentation on the part
of either Stockholder;
(ii) Losses arising from breach of a covenant by a GB&C Entity or a Stockholder;
(iii)Except as otherwise provided in any schedule to this Agreement, losses
involving a breach by a Stockholder of the representations and warranties
contained in Sections 2.02, 2.03 (except 2.03(a)(ii)), 2.04, 2.08(a), (b),
(c) and (d), 2.11(g) or 2.17; and
(iv) Losses described in Section 8.02(c).
Indemnification pursuant to this Section 8.03(d) shall not be counted
against the maximum amount set forth in Section 8.03(b).
(e) No Limitation of Rights. Notwithstanding anything herein
to the contrary, the limitations set forth in this Section 8.03 shall apply only
with respect to post-Closing indemnification obligations and shall in no way
limit any rights the Company may have in law or equity, in the event the Closing
does not occur.
8.04. Indemnification by the Company.
The Company agrees subsequent to the Closing Date to indemnify and hold
harmless the Stockholders from and against and in respect of all Losses
sustained, suffered or incurred by or made against any of them arising out of,
based upon or in connection with (a) conditions, circumstances or occurrences
which constitute or result in any breach of any representation or warranty made
by the Company in this Agreement or in any Schedule, exhibit, certificate,
financial statement, agreement or other instrument delivered under or in
connection with this Agreement, or by reason of any claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by any such
representations or warranties (collectively, "Stockholder Representation and
Warranty Claims"); and (b) any breach of any covenant or agreement made by the
Company in this Agreement or in any Schedule, exhibit, certificate, financial
statement, agreement or other instrument delivered under or in connection with
this Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant or
agreement (such claims under clauses (a) and (b) being hereinafter collectively
referred to as "Stockholder Indemnifiable Claims").
8.05. Limitations on Indemnification by the Company.
(a) The right of any Stockholders to indemnification under
Section 8.04 shall be subject to the following provisions:
(i) Indemnification with respect to Stockholder Representation and Warranty
Claims shall expire on the eighteen (18) month anniversary of the Closing;
provided, however, that the limitation of this clause (i) shall not apply
to Stockholder Representation and Warranty Claims based on any inaccuracy
in or breach of Section 3.04, which shall expire with respect to any such
Section six (6) months after the termination of the applicable statute of
limitations relating to the subject matter covered by such Section; and
provided, further, that if prior to the above date of expiration a specific
state of facts shall have become known which may constitute or give rise to
any Stockholder Representation and Warranty Claim as to which indemnity may
be payable and the Stockholders shall have given notice of such facts to
the Company, then the right to indemnification with respect thereto shall
remain in effect without regard to when such matter shall have been finally
determined and disposed of, according to the date on which notice of the
applicable claim is given. The limitations herein with respect to
Stockholder Representation and Warranty Claims shall not limit the rights
of Stockholder with respect to any other claims.
(ii) No indemnification shall be payable with respect to Stockholder
Representation and Warranty Claims except to the extent that the cumulative
amount of all Stockholder Representation and Warranty Claims shall exceed
$50,000, whereupon the full amount of such claims shall be recoverable in
accordance with the terms hereof.
(b) Notwithstanding anything herein to the contrary, the
Stockholders shall not be subject to limitation, whether pursuant to Section
8.05(a) hereof or otherwise, in seeking indemnification with respect to any
Stockholder Indemnifiable Claim (i) involving fraud or an intentional
misrepresentation by the Company, (ii) arising from breach of a covenant by the
Company or (iii) involving a breach by the Company of the representations and
warranties contained in Section 3.04 and 3.09.
(c) Notwithstanding anything herein to the contrary, the
limitations set forth in this Section 8.05 shall apply only with respect to
post-Closing indemnification obligations and shall in no way limit any rights
any party may have in the event the Closing does not occur.
<PAGE>
8.06. Notice; Defense of Claims.
Promptly after receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations hereunder would
apply, the indemnified party shall give notice thereof in writing to the
indemnifying party (the Company with respect to claims by any Stockholder and
the Stockholders, as applicable, with respect to claims by Company Indemnified
Parties), but the omission to so notify the indemnifying party promptly will not
relieve the indemnifying party from any liability except to the extent that the
indemnifying party shall have been prejudiced as a result of the failure or
delay in giving such notice. Such notice shall state the information then
available regarding the amount and nature of such claim, liability or expense
and shall specify the provision or provisions of this Agreement under which the
liability or obligation is asserted. If within 20 days after receiving such
notice the indemnifying party gives written notice to the indemnified party
stating that (i) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful (ii) that it shall be
fully responsible (with no reservation of any rights) for all liabilities
relating to such claim, liability or expense and that it will provide full
indemnification (whether or not otherwise required hereunder) to the indemnified
party with respect to such claim, liability or expense and (iii) that it
disputes and intends to defend against such claim, liability or expense at its
own cost and expense, then counsel for the defense shall be selected by the
indemnifying party (subject to the consent of the indemnified party which
consent shall not be unreasonably withheld) and the indemnified party shall not
be required to make any payment with respect to such claim, liability or expense
as long as the indemnifying party is conducting a good faith and diligent
defense at its own expense; provided, however, that the assumption of defense of
any such matters by the indemnifying party shall relate solely to the claim,
liability or expense that is subject or potentially subject to indemnification,
and provided further that prior to such assumption of defense the indemnifying
party shall enter into an agreement with the indemnified party in form and
substance satisfactory to the indemnified party pursuant to which the
indemnifying party unconditionally guarantees the payment and performance of any
liability or obligation which may arise out of or in any way relating to such
claim, liability or expense or the facts giving rise thereto. The indemnifying
party shall have the right, with the consent of the indemnified party, which
consent shall not be unreasonably withheld, to settle all indemnifiable matters
related to claims by third parties which are susceptible to being settled
provided its obligation to indemnify the indemnifying party therefor will be
fully satisfied. The indemnifying party shall keep the indemnified party
apprised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party shall, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense. If such claim, liability or expense is one that by
its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense.
8.07. Indemnification by the GB&C Entities.
The GB&C Entities and their successors agree to indemnify and hold
harmless the Stockholders against all claims against any Stockholder arising
from any personal guaranty set forth on Schedule 2.33, provided that the
contract, lease or other agreement with respect to which such personal guaranty
was executed is dated before the date hereof, and provided that, except as set
forth on Schedule 8.07, the cause of action giving rise to a claim for
indemnification under this Section 8.07 arose after the date of consummation of
the transactions contemplated hereby. Notwithstanding the foregoing, the rights
of any Company Indemnified Parties under Article 8 hereof shall in no way be
impaired by the foregoing indemnification. Indemnification under this Section
8.07 shall not be subject to the expiration provisions and amount limitation of
Section 8.05.
<PAGE>
ARTICLE IX. REGISTRATION RIGHTS.
9.01. Definitions.
As used in this Article IX, the following terms shall have the
following meanings:
"Advice" has the meaning set forth in Section 9.03.
"Affiliate" means, with respect to any specified person, any other
person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified person.
"Commission" means the Securities and Exchange Commission.
"Controlling Persons" has the meaning set forth in Section 9.05(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
"Holder" means (i) any Stockholder and (ii) each person (other than the
Company and its Affiliates) to whom any Stockholder transfers Securities as
provided in Section 9.07 hereof, if the person to whom such Securities are
transferred acquires such Securities as Registrable Securities.
"Lock-up Period" has the meaning set forth in Section 9.06.
"Lock-up Request" has the meaning set forth in Section 9.06.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, and by
all other amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Securities" means the Securities; provided, however, that
any Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) such Registrable Securities become eligible for
sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (iii) such Securities cease to be outstanding.
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"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the provisions
of this Agreement and all amendments and supplements to any such registration
statement, including post-effective amendments, in each case including the
Prospectus, all exhibits, and all material incorporated by reference or deemed
to be incorporated by reference in such registration statement.
"Securities" means the shares of Company Common Stock issued to the
Stockholders pursuant to this Agreement so long as they are owned beneficially
and of record by a Holder.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Suspension Notice" has the meaning set forth in Section 9.03.
"Suspension Period" has the meaning set forth in Section 9.03.
9.02. Resale Registration.
(a) Filing; Effectiveness. No later than October 15, 1996,
the Company shall file a registration statement on Form S-3 (the "Resale
Registration Statement") under the Securities Act covering the resale by such
Holders of their Registrable Securities pursuant to Rule 415 under the
Securities Act from time to time in transactions not involving any underwritten
public offering and use its best efforts (i) to cause such Resale Registration
Statement to be declared effective by the Commission for such Registrable
Securities as soon as practicable thereafter and (ii) to keep the Resale
Registration Statement continuously effective until the earliest of (x) the date
on which such Holders no longer hold any Registrable Securities registered under
the Resale Registration Statement or (y) the second anniversary of the Closing
Date. The Company may at its option include the Registrable Securities of the
Holders in any Registration Statement filed by the Company. The Company shall
not be required to request that a registration statement requested pursuant to
this Section 9.02 become effective prior to 90 days following the effective date
of a registration statement initiated by the Company if any managing underwriter
named in such registration statement has advised the Company in writing that the
registration or sale of additional securities by stockholders of the Company
within such 90-day period would have a material adverse effect on the likelihood
of success of such underwritten offering; provided, however, that the Company
shall use its best efforts to achieve such effectiveness promptly following such
90- day period if the request pursuant to this Section 9.02 has been made prior
to the expiration of such 90-day period. The Company may postpone the filing of
any Registration Statement required hereunder for a reasonable period of time,
not to exceed 60 days, if the Company has been advised by outside legal counsel
that such filing would require the disclosure of a material transaction or other
matter and the Company determines reasonably and in good faith that such
disclosure would have a Material Adverse Effect on the Company; provided,
however, that the Company shall (A) use reasonable efforts to disclose such
material transaction or other matter as soon as in its good faith judgment it is
prudent to do so and (B) may so postpone such filing only if all other persons
who are named as selling securityholders under then effective registration
statements filed by the Company with the Commission and all directors of the
Company are advised of the fact that a material transaction or other matter is
not being disclosed during the length of such postponement and of the
consequences of such nondisclosure under the Securities Act and the Exchange
Act.
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(b) Effective Registration. A registration will not be deemed
to have been effected as a Resale Registration unless the Resale Registration
Statement with respect thereto has been declared effective by the Commission;
provided, however, that if after it has been declared effective, the offering of
Registrable Securities pursuant to a Resale Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Resale Registration
Statement will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Resale Registration Statement may legally resume.
9.03. Registration Procedures.
In connection with the obligations of the Company to effect or cause
the registration of any Registrable Securities pursuant to the terms and
conditions of this Agreement, the Company shall use reasonable efforts to effect
the registration and sale of such Registrable Securities in accordance with the
intended method of distribution thereof, and in connection therewith:
(a) The Company shall prepare and file with the Commission a
Registration Statement on Form S-3 or other similar form under the Securities
Act which permits secondary sales of securities in a "shelf registration," and
use reasonable efforts to cause such Registration Statement to become effective
and remain effective in accordance with the provisions of this Agreement;
(b) The Company shall promptly prepare and file with the
Commission such amendments and post-effective amendments to each Registration
Statement as may be necessary to keep such Registration Statement effective for
as long as such registration is required to remain effective pursuant to the
terms hereof; shall cause the Prospectus to be supplemented by any required
Prospectus supplement, and, as so supplemented, to be filed pursuant to Rule 424
under the Securities Act; and shall comply with the provisions of the Securities
Act applicable to it with respect to the disposition of all Registrable
Securities covered by such Registration Statement during the applicable period
in accordance with the intended methods of disposition by the Holders set forth
in such Registration Statement or supplement to the Prospectus;
(c) The Company shall promptly furnish to any Holder such
number of copies of the Prospectus (including each preliminary Prospectus) and
any amendments or supplements thereto, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities being sold by such Holder;
(d) The Company shall, on or prior to the date on which a
Registration Statement is declared effective, use reasonable efforts to register
or qualify the Registrable Securities covered by such Registration Statement
under such other securities or "blue sky" laws of such states of the United
States as any Holder requests; provided, however, that the Company shall not be
required (i) to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 9.03(d) or (ii)
to file any general consent to service of process;
(e) The Company shall promptly notify each Holder, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission or any state securities authority for amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement, (iv) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities or
"blue sky" laws, and (v) of the happening of any event which makes any statement
made in a Registration Statement or related Prospectus untrue or which requires
the making of any changes in such Registration Statement or Prospectus so that
they will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As soon as practicable following expiration of the Suspension
Period (as defined below), the Company shall prepare and file with the
Commission and furnish a supplement or amendment to such Prospectus so that, as
thereafter deliverable to the purchasers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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In the case of a Resale Registration Statement, each Holder, upon
receipt of any notice (a "Suspension Notice") from the Company of the happening
of any event of the kind described in Section 9.03(e)(v), shall forthwith
discontinue disposition of the Registrable Securities pursuant to the Resale
Registration Statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 9.03(e) or until it is advised in writing (the "Advice") by the Company
that the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated by reference in the
Prospectus, and, if so directed by the Company, such Holder will, or will
request any broker-dealer acting as such Holder's agent or as an underwriter to,
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's or broker-dealer's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice; provided, however, that in no event shall the period
from the date on which any Holder receives a Suspension Notice to the date on
which any Holder receives either the Advice or copies of the supplemented or
amended Prospectus contemplated by Section 9.03(e) (the "Suspension Period")
exceed 60 days; and provided further that such Suspension Notice shall not be
effective unless the Company has contemporaneously given an analogous notice to
all other persons named as selling securityholders in then effective
registration statements filed by the Company with the Commission and to the
Company's directors. In the event that the Company shall give any Suspension
Notice, the time periods for which a Resale Registration Statement is required
to be kept effective pursuant to Section 9.02 hereof shall be extended by the
number of days during the Suspension Period.
9.04. Registration Expenses.
The Company shall bear all expenses incurred in connection with the
registration of the Registrable Shares pursuant to Section 9.02 of this
Agreement. Such expenses shall include, without limitation, all printing, legal
and accounting expenses incurred by the Company and all registration and filing
fees imposed by the Commission, any state securities commission or the Nasdaq
National Market. The Holders shall be responsible for any brokerage or
underwriting commissions and taxes of any kind (including, without limitation,
transfer taxes) with respect to any disposition, sale or transfer of Registrable
Securities and for any legal, accounting and other expenses incurred by them.
9.05. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each Holder,
its partners, officers, directors, trustees, stockholders, employees and agents,
and each person who controls such Holder within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act, or is under common
control with, or is controlled by, such Holder, together with the partners,
officers, directors, trustees, stockholders, employees and agents of such
controlling person (collectively, the "Controlling Persons"), from and against
all losses, claims, damages, liabilities and expenses (including without
limitation reasonable legal fees and expenses incurred by any Holder or any such
Controlling Person documented in writing) (collectively, the "Damages") to which
such Holder, its partners, officers, directors, trustees, stockholders,
employees and agents, and any such Controlling Person may become subject under
the Securities Act or otherwise, insofar as such Damages (or proceedings in
respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act, or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such Damages arise out of or are based upon any such untrue
statement or omission based upon information relating to such Holder furnished
in writing to the Company by such Holder specifically for use therein; provided,
however, that the Company shall not be liable to any Holder under this Section
9.05(a) to the extent that any such Damages were caused by the fact that such
Holder sold Securities to a person as to whom it shall be established that there
was not sent or given, at or prior to the written confirmation of such sale, a
copy of the Prospectus as then amended or supplemented if, and only if, (i) the
Company has previously furnished copies of such amended or supplemented
Prospectus to such Holder and (ii) such Damages were caused by any untrue
statement or omission or alleged untrue statement or omission contained in the
Prospectus so delivered which was corrected in such amended or supplemented
Prospectus.
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(b) Indemnification by the Holders. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, its
stockholders, directors, officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to such Holder, but only with reference to information relating to such
Holder furnished in writing to the Company by such selling Holder specifically
for use in any Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto); provided, however, that
such selling Holder shall not be obligated to provide such indemnity to the
extent that such Damages result from the failure of the Company to promptly
amend or take action to correct or supplement any such Registration Statement or
Prospectus on the basis of corrected or supplemental information provided by
such selling Holder to the Company expressly for such purpose. In no event shall
the liability of any Holder of Registrable Securities hereunder be greater in
amount than the amount of the proceeds received by such Holder upon the sale of
the Registrable Securities giving rise to such indemnification obligation.
(c) Contribution. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 9.05 is unavailable to an
indemnified party or insufficient in respect of any Damages, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such Damages in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Holders on the other hand in connection with the statements or omissions that
resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
Holders on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
If indemnification is available under paragraph (a) or (b) of this
Section 9.05, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in such paragraphs without regard to the relative fault
of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 9.05(c).
The Company and each Holder agrees that it would not be just or
equitable if contribution pursuant to this Section 9.05(c) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to herein.
9.06. Restrictions on Sale.
In the event of an underwritten public offering for the account of the
Company, upon the written request (the "Lock-up Request") of the managing
underwriter (or underwriters) of such offering, each Holder agrees not to effect
any public sale or distribution of any securities similar to those being
registered in such offering (other than pursuant to such offering), including,
without limitation, through sales of Securities pursuant to a Resale
Registration Statement, during the 14 days prior to, and during the 90-day
period beginning on the effective date of the Registration Statement relating to
such offering (the "Lock-up Period"); provided, however, that the Holders shall
not be required to comply with such Lock-up Request unless the Company
simultaneously demands analogous restrictions on sale and uses all reasonable
efforts to obtain from all other persons who are contractually bound with the
Company to comply with such Lock-up Requests and from the Company's directors.
In the event of the delivery of a Lock-up Request, the time periods for which a
Resale Registration Statement is required to be kept effective pursuant to
Section 9.02 hereof shall be extended by the number of days during the Lock-up
Period.
9.07. Transfer of Registration Rights.
The registration rights of the Stockholders and any Holders under this
Article IX may be transferred to any transferee of Registrable Securities that
acquires at least 1,000 shares of Registrable Securities (appropriately adjusted
for stock splits, stock dividends and the like). Each such transferee shall be
deemed to be a "Holder" for purposes of this Article IX.
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ARTICLE X. NON-COMPETITION AGREEMENT.
10.01. Non-Competition Agreement.
Each of the Stockholders shall execute and deliver a Non-Competition
Agreement in the form of Exhibit 10.01 attached hereto (the "Non- Competition
Agreement"), whereby each of them agrees that during the period commencing on
the date of the Closing and ending on the later of (a) the date which is three
(3) years after the date of the Closing or (b) the second anniversary of the
date on which the relevant individual ceases to be an employee or consultant of
DAKA or a GB&C Entity or any of their respective affiliates for any reason, he
will not, without the express written consent of the Company, directly or
indirectly, anywhere in the United States, engage in any activity which is, or
participate or invest in or assist (whether as owner, part-owner, shareholder,
partner, director, officer, trustee, employee, franchiser, licensor, agent or
consultant, or in any other capacity) any business organization other than the
Company (or any affiliate of the Company) that is engaged in the current
business of the GB&C Entities, including without limitation the manufacture,
sale, franchising, marketing, licensing or distribution of bagels or coffee;
except that each such individual may make passive investments in a competitive
enterprise the shares of which are publicly traded if such investment
constitutes less than one percent of the equity of such enterprise. Without
implied limitation, the forgoing covenant shall include, to the extent permitted
by applicable law, hiring or attempting to hire for or on behalf of any such
competitor any officer or other employee of the Company, the GB&C Entities or
any of their respective affiliates, encouraging any officer or other employee to
terminate his or her relationship or employment with the Company, the GB&C
Entities or any of their respective affiliates, soliciting for or on behalf of
any such competitor any licensee, franchisee, supplier or other service provider
of the Company, the GB&C Entities or any of their respective affiliates, and
diverting to any Person (as hereinafter defined) any license, franchise, supply
or other business opportunity of the Company, the GB&C Entities or any of their
respective affiliates. As of the date of this Agreement, other than with respect
to the GB&C Entities, no Stockholder is performing any consulting or other
duties for, nor is a party to any similar agreement with, any business or
venture competing with the Company, the GB&C Entities or any of their respective
affiliates. For purposes of this Agreement, the term "Person" shall mean an
individual, a corporation, an association, a partnership, an estate, a trust,
and any other entity or organization. For purposes of this Section 10.01, the
term "affiliate" shall mean, as to any Person, (i) each direct or indirect
subsidiary of such Person, (ii) each other Person of which such Person is a
direct or indirect subsidiary, and (iii) each other direct or indirect
subsidiary of such other Person.
ARTICLE XI. MISCELLANEOUS.
11.01. Fees and Expenses.
(a) Each of the parties will bear its own expenses in
connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of any of the GB&C Entities or
the Stockholders relating in any way to the purchase and sale of the Shares
hereunder and the transactions contemplated hereby, including without limitation
legal, accounting or other professional expenses of any of the GB&C Entities or
the Stockholders, shall be charged to or paid or borne by any of the GB&C
Entities or the Company.
(b) The Stockholders will pay all costs incurred, whether at
or subsequent to the Closing, in connection with the transfer of the Shares to
the Company as contemplated by this Agreement, including without limitation, all
transfer taxes and charges applicable to such transfer, and all costs of
obtaining permits, waivers, registrations or consents with respect to any
assets, rights or contracts of the GB&C Entities.
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11.02. Tax Accounting Matters and Tax Returns.
(a) The books of each of the GB&C Entities shall, consistent
with Section 1362(e)(6)(D) of the Code, be closed effectively as of the day
preceding the Closing Date and, accordingly, a separate and distinct accounting
period of each of the GB&C Entities shall commence on the Closing Date.
(b) With respect to each applicable federal income tax return
obligation of the GB&C Entities for the taxable year that includes the Closing
Date, two tax returns shall be required for each of the GB&C Entities, one
return covering each GB&C Entity's "S short year" (within the meaning of Section
1362(e)(1)(A) of the Code or the corresponding provision under applicable state
law) and a second covering each GB&C Entity's "C short year" (within the meaning
of Section 1362(e)(1)(B) of the Code); provided that all returns relating to
periods after the "S short year" shall be subject to applicable federal
consolidated return rules and regulations. State income tax returns will be
filed in a consistent manner unless otherwise required by applicable state law.
(c) The Stockholders and the Company shall cooperate in the
preparation and filing of all tax returns relating to each of the GB&C Entities'
S and C short years. In particular, the Stockholders, the Company, and each of
the GB&C Entities shall make available to each other, as reasonably requested,
all information, records, or documents that shall be necessary for the
preparation and filing of all tax returns for each of the GB&C Entities' S short
years and C short years. The Stockholders, the GB&C Entities, and the Company
shall also cooperate with each other in connection with information relating to
the adjusted basis of GB&C assets and the stock of the GB&C Entities as of the
date of the Closing.
(d) It is expressly provided herein that the tax returns for
the S short years of the GB&C Entities shall not be filed with the applicable
taxing authority without the written consent of Michael F. Zerbib and Jason R.
Olivier, which consent shall not be unreasonably withheld.
(e) All information, records, and documents used in
connection with the preparation of income tax returns of the GB&C Entities for
the taxable year that includes the Closing Date shall be preserved and
maintained until the expiration of any applicable statute of limitations.
(f) Each of the Company, the GB&C Entities, and the
Stockholders shall, in connection with any tax returns filed by the any of the
foregoing, report or reflect the acquisition by the Company of the stock of the
GB&C Entities as reorganizations within the meaning of Section 368 of the Code.
For this purpose, in the event requested by the Company, the Stockholders shall
furnish (i) certificates reflecting, as of the Closing Date, the absence of any
plan or intention to dispose of more than fifty percent (50%) of the aggregate
shares of DAKA Common Stock receivable by the Stockholders pursuant to this
Agreement, and (ii) such other representations that the Company may reasonably
request to establish the status of such acquisitions as reorganizations under
Section 368 of the Code.
11.03. Governing Law.
This Agreement shall be construed under and governed by the internal
laws of the State of Delaware without regard to its conflict of laws provisions.
11.04. Notices.
Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been given
if delivered or sent by facsimile transmission, upon receipt, or if sent by
registered or certified mail, upon the sooner of the date on which receipt is
acknowledged or the expiration of three days after deposit in United States post
office facilities properly addressed with postage prepaid. All notices to a
party will be sent to the addresses set forth below or to such other address or
person as such party may designate by notice to each other party hereunder:
<PAGE>
TO THE COMPANY: DAKA International, Inc.
One Corporate Place
55 Ferncroft Road
Danvers, MA 01923-4001
Attn: Charles W. Redepenning, Jr.
With a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attn: Ettore A. Santucci, P.C.
Facsimile: (617) 523-1231
TO THE GB&C ENTITIES: The Great Bagel & Coffee Co.
125 West Genini Drive
Suite E 4/5
Temple, AZ 85283
Attn: Jason Olivier
With a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attn: Ettore A. Santucci, P.C.
Facsimile: (617) 523-1231
TO ANY STOCKHOLDER: Michael F. Zerbib
3216 N. 3rd Street
Phoenix, AZ 85012
With a copy to: Snell & Wilmer LLP
One Arizona Center
400 E. VanBuren, 10th Floor
Phoenix, AZ 85004-0001
Attn: Terry Morris Roman
Facsimile: (602) 382-6070
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
<PAGE>
11.05. Entire Agreement.
This Agreement, including the Schedules and exhibits referred to herein
and the other writings specifically identified herein or contemplated hereby, is
complete, reflects the entire agreement of the parties with respect to its
subject matter, and supersedes all previous written or oral negotiations,
commitments and writings. No promises, representations, understandings,
warranties and agreements have been made by any of the parties hereto except as
referred to herein or in such Schedules and exhibits or in such other writings;
and all inducements to the making of this Agreement relied upon by either party
hereto have been expressed herein or in such Schedules or exhibits or in such
other writings.
11.06. Assignability.
This Agreement shall be assignable by the Company prior to the Closing
to a subsidiary of the Company although no such assignment shall relieve the
Company of any liabilities or obligations under this Agreement. This Agreement
shall not otherwise be assignable by the Company without the prior written
consent of Stockholders owning a majority of the Shares or (except as otherwise
permitted by Section 9.07 hereof) by any Stockholder without prior written
consent of the Company. This Agreement shall be binding upon and enforceable by,
and shall inure to the benefit of, the parties hereto and their respective
successors, heirs, executors, administrators and permitted assigns, and no
others. Notwithstanding the foregoing, nothing in this Agreement is intended to
give any person not named herein the benefit of any legal or equitable right,
remedy or claim under this Agreement, except as expressly provided herein.
11.07. Captions and Gender.
The captions in this Agreement are for convenience only and shall not
affect the construction or interpretation of any term or provision hereof. The
use in this Agreement of the masculine pronoun in reference to a party hereto
shall be deemed to include the feminine or neuter, as the context may require.
11.08. Execution in Counterparts.
For the convenience of the parties and to facilitate execution, this
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same document.
11.09. Amendments; Waivers.
This Agreement may not be amended or modified except by a writing duly
and validly executed by each Stockholder and the Company. Any party hereto may
waive any covenant or condition intended for its benefit in its discretion, but
delay on the party of any party in exercising any right, power or privilege
hereunder shall not operate as a waiver thereof, nor shall any waiver on the
part of any party of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies of any party arising out of or otherwise in respect of
any inaccuracy in or breach of any representation or warranty, or any failure to
perform or comply with any covenant or agreement, contained in this Agreement
shall in no way be limited by the fact that the act, omission, occurrence or
other state of facts upon which any claim of any such inaccuracy, breach or
failure is based may also be the subject matter of any other representation,
warranty, covenant or agreement contained in this Agreement (or in any other
agreement between the parties) as to which there is no inaccuracy, breach or
failure.
<PAGE>
11.10. Publicity and Disclosures.
Until the Closing Date, so long as this Agreement is in effect, none of
the parties hereto nor any of their respective stockholders, subsidiaries,
affiliates, officers, directors or employees shall issue or cause the
publication of any press release or other announcement with respect to this
Agreement or the other transactions contemplated hereby without the prior
written consent of the other parties hereto, which consent shall not be
unreasonably withheld, except to the extent disclosure is required by any
applicable law or regulation or by any court or authorized administrative or
governmental agency.
11.11. Specific Performance.
The parties agree that it would be difficult to measure damages which
might result from a breach of this Agreement by the GB&C Entities, the
Stockholders or the Company and that money damages would be an inadequate remedy
for such a breach. Accordingly, if there is a breach or proposed breach of any
provision of this Agreement by the GB&C Entities, the Stockholders or the
Company, and the Company or the Stockholders, as the non-breaching party, does
not elect to terminate under Article VII, the non-breaching party shall be
entitled, in addition to any other remedies which such party may have, to an
injunction or other appropriate equitable relief to restrain such breach without
having to show or prove actual damage to such party.
11.12. Severability.
The parties agree that, in the event that any provision of this
Agreement or the application of any such provision to any party is held by a
court of competent jurisdiction to be contrary to law, the provision in question
shall be construed so as to be lawful and the remaining provisions of this
Agreement shall remain in full force and effect.
<PAGE>
SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT
DATED MARCH __, 1996
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
DAKA INTERNATIONAL, INC.
By: /s/ Charles W. Redepenning, Jr.
--------------------------------------
Charles W. Redepenning, Jr.
Senior Vice President and General Counsel
THE GREAT BAGEL AND COFFEE
FRANCHISING CORP.
By: /s/ Jason R. Olivier
---------------------------
GBC CREDIT COMPANY
By: /s/ Jason R. Olivier
---------------------------
GEMINI PRODUCTION FACILITY, INC.
By: /s/ Jason R. Olivier
---------------------------
THE GREAT BAGEL AND COFFEE COMPANY
By: /s/ Jason R. Olivier
---------------------------
<PAGE>
SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT
DATED _________ __, 1996
/s/ Mark C. Gordon
------------------
Mark C. Gordon
/s/ Brian H. Loeb
-----------------
Brian H. Loeb
/s/ Jason R. Olivier
--------------------
Jason R. Olivier
/s/ Michael F. Zerbib
---------------------
Michael F. Zerbib
/s/ Nicholas D. Zerbib
----------------------
Nicholas D. Zerbib
/s/ Thierry E. Zerbib
---------------------
Thierry E. Zerbib
STOCK PURCHASE AGREEMENT
By and Among
Casual Dining Ventures, Inc.
and
DAKA International, Inc.
and
Edgebrook, Inc.
Dated as of March 31, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I. PURCHASE AND SALE OF SHARES
Section 1.01. Plan; Purchase and Sale of the Shares
Section 1.02. Consideration
Section 1.03. Adjustments to Consideration
Section 1.04. General Releases
Section 1.05. Closing
Section 1.06. Deliveries at Closing
Section 1.07. Actions Subsequent to Closing
ARTICLE II. REPRESENTATION AND WARRANTIES OF EDGEBROOK
Section 2.01. Making of Representations and Warranties
Section 2.02. Ownership of Capital Stock; Related Rights
Section 2.03. Authority of Edgebrook
Section 2.04. Investment Representations
Section 2.05. General Release Representations
Section 2.06. Information Supplied to the Company
Section 2.07. Investment Banking; Brokerage
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.01. Making of Representations and Warranties
Section 3.02. Organization and Corporate Power
Section 3.03. Authority
Section 3.04. Investment Banking; Brokerage
Section 3.05. DAKA Common Stock
Section 3.06. Investment Representation
ARTICLE IV. COVENANTS
Section 4.01. Sale of Shares; Acquisition Proposals
Section 4.02. Consents and Approvals
Section 4.03. Breach of Representations and Warranties
Section 4.04. Confidentiality
Section 4.05. Non-Hire of ADC Employees
ARTICLE V. CONDITIONS
Section 5.01. Conditions to the Obligations of the Company
Section 5.02. Conditions to the Obligations of Edgebrook
(i)
<PAGE>
ARTICLE VI. TERMINATION OF AGREEMENT
Section 6.01. Termination
Section 6.02. Effect of Termination
Section 6.03. Right to Proceed
ARTICLE VII. SURVIVAL; INDEMNIFICATION
Section 7.01. Survival of Representations, Warranties, Etc.
Section 7.02. Indemnification by Edgebrook
Section 7.03. Limitations on Indemnification by Edgebrook
Section 7.04. Indemnification by the Company
Section 7.05. No Limitation of Rights
Section 7.06. Notice; Defense of Claims
ARTICLE VIII. REGISTRATION RIGHTS
Section 8.01. Definitions
Section 8.02. Resale Registration
Section 8.03. Registration Procedures
Section 8.04. Registration Expenses
Section 8.05. Indemnification and Contribution
Section 8.06. Restrictions on Sale
Section 8.07. Transfer of Registration Rights
ARTICLE IX. MISCELLANEOUS
Section 9.01. Law Governing
Section 9.02. Notices
Section 9.03. Prior Agreements Superseded
Section 9.04. Assignability
Section 9.05. Fees and Expenses
Section 9.06. Publicity and Disclosures
Section 9.07. Captions
Section 9.08. Execution in Counterparts
Section 9.09. Certain Remedies; Severability
Section 9.10. Amendments; Waivers
(ii)
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of the 31st
day of March, 1996, by and among DAKA International, Inc., a Delaware
corporation ("DAKA"), Casual Dining Ventures, Inc., a Delaware corporation and a
wholly-owned subsidiary of DAKA ("CDVI"), and Edgebrook, Inc., a Minnesota
corporation ("Edgebrook") and a stockholder of Americana Dining Corp., a
Delaware corporation ("ADC"). DAKA and CDVI are referred to herein collectively
as the "Company."
W I T N E S S E T H
WHEREAS, Edgebrook is the record and beneficial owner of 505,000 shares
of common stock, par value $.01 per share, of ADC ("ADC Common Stock"); and
WHEREAS, the shares of ADC Common Stock owned beneficially and of
record by Edgebrook are hereinafter referred to collectively as the "Shares;"
and
WHEREAS, CDVI is the record and beneficial owner of 2,295,000 shares of
ADC Common Stock and of 466,667 shares of preferred stock, par value $.01 per
share, of ADC and DAKA is the record and beneficial owner of all issued and
outstanding shares of capital stock of CDVI; and
WHEREAS, Edgebrook desires to transfer to CDVI all of the Shares in
exchange for shares of the common stock, par value $.01 per share, of DAKA (the
"DAKA Common Stock") to be issued by DAKA to CDVI and immediately transferred by
CDVI to Edgebrook and CDVI desires to acquire from Edgebrook all of the Shares
in exchange for such shares of DAKA Common Stock in an arrangement qualifying as
a reorganization under the provisions of Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"), whereby, after giving effect to
such transactions, CDVI will own beneficially and of record in excess of 80% of
the issued and outstanding shares of ADC Common Stock, on the terms and
conditions hereinafter set forth;
<PAGE>
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I. PURCHASE AND SALE OF SHARES.
Section 1.01. Plan; Purchase and Sale of the Shares. CDVI and Edgebrook
hereby adopt a plan of reorganization pursuant to the provisions of Section
368(a)(1)(B) of the Code. The terms and conditions governing this plan of
reorganization are hereinafter set forth. Subject to the terms and conditions of
this Agreement and in reliance on the representations, warranties and covenants
herein set forth, CDVI hereby agrees to purchase from Edgebrook, and Edgebrook
hereby agrees to sell and deliver to CDVI, at the Closing (as hereinafter
defined in Section 1.05 hereof), the Shares free and clear of any and all liens,
claims, options, charges, encumbrances or rights of any nature ("Claims").
Section 1.02. Consideration. Subject to the terms and conditions of
this Agreement and in reliance on the representations, warranties and covenants
set forth herein, and in consideration of the sale and delivery by Edgebrook of
the Shares, CDVI hereby agrees to issue to Edgebrook .18182 of one share of DAKA
Common Stock, for each Share of ADC Common Stock sold and delivered to CDVI,
subject to possible adjustment, as provided in Section 1.03 hereof. No
fractional shares will be issued by CDVI to Edgebrook. Instead, the total number
of shares of DAKA Common Stock to be issued to Edgebrook (regardless of whether
Edgebrook's Shares are represented by a single or multiple certificates) will be
rounded up or down to the nearest number of whole shares of DAKA Common Stock
(or in the case of .5, to the next higher whole number). Reference is made to
the representations and warranties of Edgebrook set forth in Section 2.04
hereof, including, without limitation, the acknowledgment and understanding that
(a) the DAKA Common Stock to be issued to Edgebrook hereunder has not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws, (b) the DAKA Common Stock to be issued to
Edgebrook hereunder will be subject to transfer restrictions under the
Securities Act and applicable state securities laws and may not be transferred
unless (x) it is subsequently registered under the Securities Act and applicable
state securities laws or (y) there is delivered to DAKA an opinion of counsel
satisfactory to DAKA that such registration is not required, and (c) DAKA will
place a restrictive legend to the foregoing effect on the certificate(s)
representing the DAKA Common Stock to be issued to Edgebrook hereunder.
Section 1.03. Adjustments to Consideration. In the event that (a) on
the Closing Date (as such term is hereinafter defined), the Closing Price (as
such term is hereinafter defined) of a share of DAKA Common Stock is less than
$21.00 per share and (b) Edgebrook elects to terminate this Agreement pursuant
to Section 6.01(e) hereof, then CDVI will have the right to rescind such
termination by adjusting the consideration for the Shares as follows, in which
case Edgebrook will be obligated to proceed with the sale and delivery of the
Shares: in consideration for each Share of ADC Common Stock to be sold by
Edgebrook, CDVI will deliver a fraction of one share of DAKA Common Stock
(determined to the nearest one-tenth of one-thousandth of a share) calculated by
multiplying (i) .18182 by (ii) the quotient of (x) $21.00 divided by (y) the
Closing Price. For purposes of this Agreement, the term "Closing Price" shall
mean the average per share closing sale price of DAKA Common Stock as reported
on the Nasdaq National Market over the twenty (20) trading days immediately
preceding the second trading day prior to the Closing Date. Notwithstanding the
foregoing, if between the date of this Agreement and the Closing Date the
outstanding shares of DAKA Common Stock or ADC Common Stock are changed into a
different number of shares or a different class or series, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the consideration described above shall be
correspondingly and proportionately adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split, combination or exchange
of shares.
<PAGE>
Section 1.04. General Releases.
(a) Edgebrook, by executing and delivering this Agreement, and
in consideration of the covenants and agreements of the Company contained herein
and other good and valuable consideration hereby:
(i) releases and discharges ADC, DAKA, and their respective subsidiaries, each
of the present and former stockholders, directors, officers, employees and
agents of ADC, DAKA, and their respective subsidiaries, affiliates of any
of the foregoing and their respective successors and assigns (each a
"Released Party") of and from any and all commitments, indebtedness, suits,
demands, claims, obligations and liabilities, contingent or otherwise, of
every kind and nature, including claims and causes of action both at law
and in equity, which Edgebrook and/or its successors, administrators or
assigns ever had, now has or, to the extent arising from or in connection
with any act, omission or state of facts taken or existing on or prior to
the date hereof and the Closing Date, may have after the date hereof
against any Released Party, whether asserted, unasserted, absolute,
contingent, known or unknown, other than claims or causes of action arising
under or pursuant to this Agreement, and each document executed in
connection herewith, including, without limitation, rights to
indemnification under Article VII of this Agreement; and
(ii) waives any rights Edgebrook may have under that certain Shareholders
Agreement dated as of March 28, 1994, by and among ADC and the stockholders
of ADC (the "Shareholders Agreement"), including, without limitation, any
rights of first refusal and any rights of pro rata participation.
(b) The foregoing release shall be fully effective and
unconditional upon execution and delivery of this Agreement and shall not be
affected by termination of this Agreement other than (i) termination by the
Company in breach of the provisions of Section 6.01 hereof or (ii) termination
by Edgebrook pursuant to Section 6.01(d) hereof.
Section 1.05. Closing. The sale and delivery and the purchase and
acceptance of the Shares (the "Closing") shall take place at the offices of the
Company on the day on which all of the conditions to Closing set forth in
Article V (other than conditions to be satisfied at the Closing which shall be
satisfied or waived as of the Closing) have been satisfied or waived in
accordance with the terms hereof, such day being referred to herein as the
Closing Date.
<PAGE>
Section 1.06. Deliveries at Closing. At the Closing, (a) DAKA shall
issue to CDVI the number of shares of DAKA Common Stock to be delivered by CDVI
to Edgebrook hereunder in consideration of the Shares and CDVI shall execute in
favor of and deliver to DAKA a promissory note in an original principal amount
equal to the product of (x) the Closing Price on the Closing Date by (y) such
number of shares of DAKA Common Stock; (b) Edgebrook shall deliver a certificate
or certificates representing all Shares owned beneficially and of record by
Edgebrook, together with stock powers (or the equivalent) duly executed in 3
blank and such other documents as may be required to transfer to CDVI good and
valid title to such Shares free and clear of all Claims and (c) CDVI shall
deliver to Edgebrook a certificate or certificates representing the appropriate
number of shares of DAKA Common Stock bearing the legend provided in Section
2.04(d) hereof issued in the name of Edgebrook. All transfer, excise or similar
taxes arising out of the sale or delivery of the Shares to CDVI shall be paid by
the Edgebrook.
Section 1.07. Actions Subsequent to Closing. Edgebrook and the Company
after the Closing, and without further consideration, shall from time to time
execute and deliver or cause to be executed and delivered such further
instruments of transfer, assignments, consents or documents as may be reasonably
necessary or appropriate to carry out the intent and purposes hereof.
ARTICLE II. REPRESENTATION AND WARRANTIES OF EDGEBROOK.
Section 2.01. Making of Representations and Warranties. As a material
inducement to the Company to enter into this Agreement and to consummate the
transactions contemplated hereby, Edgebrook makes to the Company the
representations and warranties contained in this Article II.
Section 2.02. Ownership of Capital Stock; Related Rights.
(a) Edgebrook owns beneficially and of record all of the
Shares set forth in the preamble hereof. Upon delivery to CDVI at the Closing of
the certificates representing the Shares duly endorsed in blank for transfer or
with stock powers attached duly executed in blank, against delivery of the
consideration therefor described in Article I hereof, good and valid title to
the Shares shall be transferred to CDVI, free and clear of any and all Claims.
(b) Except for the Shareholders Agreement, Edgebrook has no
outstanding subscriptions, options, warrants, commitments, agreements,
arrangements or commitments of any kind for or relating to the issuance, or sale
of, or outstanding securities convertible into or exchangeable for, any shares
of capital stock of any class or other equity interests of ADC; (b) Edgebrook
has no preemptive right, right of first refusal or similar right to acquire the
Shares or any other shares of capital stock of ADC in connection with the
transactions contemplated by this Agreement or otherwise; (c) there are no
restrictions on the transfer of the Shares, other than those imposed by relevant
state and federal securities or insurance laws; (d) ADC has no obligation to
purchase, redeem or otherwise acquire any of the Shares or to pay any dividend
or make any other distribution in respect thereto; and (e) there are no voting
trusts or proxies relating to any of the Shares.
<PAGE>
Section 2.03. Authority of Edgebrook.
(a) Edgebrook has full authority and power to enter into this
Agreement and each agreement, document and instrument to be executed and
delivered by or on behalf of Edgebrook pursuant to or as contemplated by this
Agreement and to carry out the transactions contemplated hereby and thereby.
This Agreement and each agreement, document and instrument to be executed and
delivered by Edgebrook or pursuant to or as contemplated by this Agreement
constitute, or when executed and delivered by Edgebrook will constitute, valid
and binding obligations of Edgebrook enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws applicable to creditors' rights and remedies and to
the exercise of judicial discretion in accordance with general principles of
equity.
(b) The execution, delivery and performance by Edgebrook of
this Agreement and each such agreement, document and instrument:
(i) do not and will not violate any provision of the charter or by- laws or
governing partnership agreement or other organizational document, if any,
of Edgebrook;
(ii) do not and will not violate any laws, rules or regulations of the United
States or any state or other jurisdiction applicable to Edgebrook, or
require Edgebrook to obtain any approval, consent or waiver of, or to make
any filing with, any person (governmental or otherwise) that has not been
obtained or made; and
(iii)do not and will not result in a breach of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of
any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which
Edgebrook is a party or by which the property of Edgebrook is bound or
affected, or result in the creation or imposition of any mortgage, pledge,
lien, security interest or other charge or encumbrance on the Shares or any
other asset or property of Edgebrook.
Section 2.04. Investment Representations.
(a) Edgebrook is acquiring the shares of DAKA Common Stock to
be issued to it hereunder in exchange for its Shares for Edgebrook's own account
for investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, in violation of the
Securities Act or any rule or regulation thereunder, as amended from time to
time.
(b) Edgebrook (i) is not directly or indirectly controlled
by, or acting on behalf of any person which is, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, required to
register as such under such Act or (ii) was not formed solely for the purpose of
acquiring the DAKA Common Stock to be issued to it hereunder.
<PAGE>
(c) Edgebrook (i) has carefully reviewed the disclosure
information provided by the Company; (ii) has requested and received such other
information, as it has deemed relevant, regarding the Company for purposes of
evaluating its acquisition of the DAKA Common Stock to be issued to it
hereunder; (iii) is aware of the risks associated with an investment in the DAKA
Common Stock; and (iv) has not received any form of general solicitation or
advertising in connection with its decision to acquire the DAKA Common Stock to
be issued to it hereunder. Edgebrook has not relied in any way on any
information with respect to the DAKA Common Stock or the Company generally other
than the representations of the Company contained herein or materials furnished
by the Company in writing in connection herewith.
(d) Edgebrook acknowledges and understands that (i) the DAKA
Common Stock to be issued to it hereunder has not been registered under the
Securities Act, or any state securities laws; (ii) the DAKA Common Stock to be
issued to it hereunder will be subject to transfer restrictions under the
Securities Act and applicable state securities laws and may not be transferred
unless (x) it is subsequently registered under the Securities Act and applicable
state securities laws or (y) there is delivered to DAKA an opinion of counsel
satisfactory to DAKA that such registration is not required; and (iii) DAKA will
place a restrictive legend on the certificate(s) representing the DAKA Common
Stock to be issued to Edgebrook hereunder, containing the following language:
"The shares represented by this Certificate were issued
without registration under the Securities Act of 1933, as
amended (the "Act") and without registration under applicable
state securities laws, in reliance upon exemptions contained
in the Act and such laws. No transfer of these shares or any
interest therein may be made except pursuant to effective
registration statements under said laws unless this
Corporation has received an opinion of counsel satisfactory to
it that such transfer or disposition does not require
registration under said laws and, for any sales under Rule 144
of the Act, such evidence as it shall request for compliance
with that rule."
(e) Edgebrook (i) is able to bear the economic risks of the
acquisition of shares of DAKA Common Stock hereunder and has adequate means of
providing for current needs and possible contingencies; (ii) either alone or
with its advisors has had the opportunity to ask questions and receive answers
concerning the Company and the terms and conditions of the acquisition of DAKA
Common Stock in exchange for the Shares, as well as the opportunity to obtain
any additional information necessary to verify the accuracy of information
furnished in connection therewith which the Company possesses or can acquire
without unreasonable effort or expense; and (iii) together with its advisors, if
any, has such knowledge and experience in financial and business matters that
Edgebrook is capable of evaluating the merits and risks of this acquisition of
DAKA Common Stock in exchange for the Shares, and of making an informed
investment decision, and has relied solely upon the advice of its own counsel,
accountant and other advisors, with regard to the legal, investment, tax and
other considerations regarding such acquisition.
<PAGE>
Section 2.05. General Release Representations. With respect to the
general release of the Released Parties, as defined in Section 1.04 hereof, by
Edgebrook (a) Edgebrook has not assigned any claim or possible claim against any
Released Party, (b) Edgebrook fully intends to release all claims against the
Released Parties including, without limitation, known, unknown and contingent
claims (other than those specifically reserved in Section 1.04 hereof), and
(iii) Edgebrook has consulted with counsel with respect to the general release
set forth in Section 1.04 hereof and has been fully apprised of the consequences
thereof.
Section 2.06. Information Supplied to the Company. To the best of
Edgebrook's knowledge, neither this Agreement, nor any certificate furnished
pursuant to or in connection with this Agreement by or on behalf of Edgebrook
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading
in the light of the circumstances under which they were made.
Section 2.07. Investment Banking; Brokerage. There are no claims for
investment banking fees, brokerage commissions, finder's fees or similar
compensation (exclusive of professional fees of lawyers and accountants) in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of Edgebrook.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 3.01. Making of Representations and Warranties. As a material
inducement to Edgebrook to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company hereby makes to it the
representations and warranties contained in this Article III.
Section 3.02. Organization and Corporate Power. Each of DAKA and CDVI
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with full corporate power and authority to own or
lease its properties and to conduct its business in the manner and in the places
where such properties are owned or leased or such business is conducted and to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by it pursuant to or as contemplated by this Agreement
and to carry out the transactions contemplated hereby and thereby.
<PAGE>
Section 3.03. Authority. The execution, delivery and performance of
this Agreement and each agreement, document and instrument to be executed and
delivered by the Company pursuant to this Agreement have been duly authorized by
all necessary corporate action of the Company, and no other corporate action on
the part of the Company is required in connection therewith. This Agreement and
each such agreement, document and instrument constitutes, or when executed and
delivered by the Company will constitute, valid and binding obligations of the
Company enforceable in accordance with their respective terms. The execution,
delivery and performance by the Company of this Agreement and each such
agreement, document and instrument:
(a) do not and will not violate any provisions of the
certificate of incorporation or by-laws of DAKA or CDVI;
(b) do not and will not result in any violation by the Company
of any laws, rules or regulations of the United States or any state or other
jurisdiction applicable to the Company or any of its affiliates, or require the
Company or any of its affiliates to obtain any approval, consent or waiver of,
or to make any filing of any notice with, any person (governmental or otherwise)
that has not been obtained or made; and
(c) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, order, writ, judgment, injunction, decree,
determination or arbitration award to which the Company is a party or by which
the property of the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any property or asset owned by the Company except for such
occurrence that would not have a material adverse effect on the properties,
business, condition (financial or otherwise), or prospects of the Company.
Section 3.04. Investment Banking; Brokerage. There are no claims for
investment banking fees, brokerage commissions, finder's fees or similar
compensation (exclusive of professional fees of lawyers and accountants) in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of ADC or the Company.
Section 3.05. DAKA Common Stock. The DAKA Common Stock to be issued
hereunder in exchange for the Shares shall, when issued in accordance with this
Agreement, be validly issued, fully paid and non-assessable.
Section 3.06. Investment Representation. All Shares of ADC Common Stock
being acquired by CDVI under the terms of this Agreement are being acquired by
CDVI for investment for its own account without a view to, and not for sale in
connection with, any distribution of the ADC Common Stock.
<PAGE>
ARTICLE IV. COVENANTS.
Section 4.01. Sale of Shares; Acquisition Proposals. Unless and until
this Agreement is terminated in accordance with its terms for any reason,
Edgebrook shall not directly or indirectly exchange, deliver, assign, pledge,
encumber or otherwise transfer or dispose of any Shares (including options in
respect thereof) owned beneficially and of record, nor shall Edgebrook directly
or indirectly grant any right of any kind to acquire, dispose of, vote or
otherwise control in any manner any Shares. Unless and until this Agreement is
terminated in accordance with its terms, neither Edgebrook nor any director,
officer, employee or agent of Edgebrook shall, directly or indirectly, (a) take
any action to solicit, initiate submission of or encourage proposals or offers
from any person relating to any acquisition or purchase of all or any portion of
the Shares or all or (other than in the ordinary course of business consistent
with past practice) any portion of any assets of, or any equity interest in,
Edgebrook or ADC, any merger or business combination with Edgebrook or ADC, or
any other acquisition, transaction or financing or joint venture involving
Edgebrook or ADC (an "Acquisition Proposal"), (b) participate in any
negotiations regarding an Acquisition Proposal with any person other than the
Company and its affiliates and representatives, (c) furnish any information with
respect to or afford access to the properties, books or records of Edgebrook or
ADC to any person who may consider making or has made an offer with respect to
an Acquisition Proposal other than the Company and its affiliates and
representatives, or (d) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any person
other than the Company and its affiliates and representatives to do or seek any
of the foregoing. Edgebrook shall promptly notify the Company upon receipt of
any offer or indication that any person is considering making an offer with
respect to an Acquisition Proposal or any request for information relative to
ADC, and will keep the Company fully informed of the status and details of any
such offer, indication or request.
Section 4.02. Consents and Approvals.
(a) Edgebrook will use its best efforts to cause all
conditions to the obligations of the parties hereunder to be satisfied and to
obtain or cause to be obtained prior to the Closing Date all necessary consents
and approvals to the performance of its obligations under this Agreement.
Edgebrook will cooperate in all respects with the Company with a view toward
obtaining timely satisfaction of the conditions to the Closing set forth herein.
(b) The Company will use its best efforts to cause all
conditions to the obligations of the parties hereunder to be satisfied and to
obtain or cause to be obtained prior to the Closing Date all necessary consents
and approvals to the performance of the obligations of the Company under this
Agreement. The Company will cooperate in all respects with Edgebrook with a view
toward obtaining timely satisfaction of the conditions to the Closing set forth
herein.
Section 4.03. Breach of Representations and Warranties. Promptly upon
Edgebrook becoming aware of any breach, or the impending or threatened
occurrence of any event which would cause or constitute a breach, or would have
caused or constituted a breach had such event occurred or been known prior to
the date hereof, of any of its representations and warranties contained in or
referred to in this Agreement and made as of the date hereof, Edgebrook shall
give detailed written notice thereof to the Company and shall use its best
efforts to prevent or promptly remedy the same.
<PAGE>
Section 4.04. Confidentiality. In the course of Edgebrook's involvement
with ADC as stockholders or employees or otherwise, Edgebrook has had, and may
from time to time after the date hereof have, access to confidential records,
data, customer lists, trade secrets and similar confidential information owned
or used by ADC in the course of its business (the "Confidential Information").
Accordingly, Edgebrook agrees (a) to hold the Confidential Information in strict
confidence, (b) not to disclose Confidential Information to any person, and (c)
not to use, directly or indirectly, any of the Confidential Information for any
competitive or commercial purpose; provided, however, that the limitations set
forth above shall not apply to any Confidential Information which (i) is then
generally known to the public other than by reason of a breach of this Section
4.04; or (ii) is disclosed in accordance with an order of a court of competent
jurisdiction or applicable law. Upon request by the Company, all data,
memoranda, customer lists, notes, programs and other papers and items, and
reproductions thereof relating to the foregoing matters in Edgebrook's
possession or control shall be returned to the Company or ADC.
Section 4.05. Non-Hire of ADC Employees. Until March 1, 1997, Edgebrook
shall not hire or attempt to hire any officer or other employee of ADC or
encourage any officer or other employee to terminate his or her relationship
with ADC.
ARTICLE V. CONDITIONS.
Section 5.01. Conditions to the Obligations of the Company. The
obligation of the Company to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or at the Closing, of the
following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of Edgebrook made pursuant to this Agreement
shall be true and correct in all material respects on and as of the Closing
Date, with the same effect as though made on and as of the Closing Date;
Edgebrook shall, on or before the Closing Date, have performed and satisfied all
of their covenants and agreements set forth herein, which by the terms hereof,
are to be performed and satisfied on or before the Closing Date; and Edgebrook
shall have delivered to the Company certificates executed as of the Closing Date
certifying to the foregoing effect.
(b) Other Documents. On the Closing Date, the Company shall
have received such other certificates and documents with respect to Edgebrook as
counsel for the Company shall have reasonably requested at least two (2)
business days prior to the Closing Date.
<PAGE>
(c) No Actions or Proceedings. No action or proceeding by or
before any court, administrative body or governmental agency shall have been
instituted or threatened by or on behalf of Edgebrook or which seeks to enjoin,
restrain or prohibit, or might result in money damages to any party hereto in
respect of, this Agreement or the complete consummation of the transactions
contemplated by this Agreement, or which otherwise would in the reasonable
judgment of the Company make it inadvisable to consummate such transactions. No
law or regulation shall be in effect and no court order shall have been entered
in any action or proceeding instituted by any party which enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions
contemplated by this Agreement.
(d) Company Approvals and Consents. The Company shall have
made all filings with and notifications of governmental authorities, regulatory
agencies and other entities required to be made by it in connection with the
execution and delivery of this Agreement and the performance by it of the
transactions contemplated hereby; the Company shall have received all required
authorizations, waivers, consents and permits to permit the consummation of the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to the Company, from all third parties.
(e) Deliveries. Edgebrook shall have delivered or entered into
the documents and instruments contemplated by this Agreement, in each case, in
form and substance satisfactory to the Company and its counsel.
(f) ADC Approvals and Consents. ADC shall have made all
filings with and notifications of governmental authorities, regulatory agencies
and other entities, if any, required to be made in connection with the execution
and delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the business of ADC subsequent to the
Closing Date, and ADC shall have received all required authorizations, waivers,
consents and permits to permit the consummation of the transactions contemplated
by this Agreement, in the form and substance reasonably satisfactory to the
Company, with any conditions or limitations contained therein or imposed thereby
subject to the approval of the Company, from all third parties, including,
without limitation, applicable governmental authorities, regulatory agencies,
lessors, lenders and contract parties, required in connection with transactions
contemplated by this Agreement or by ADC's permits, leases, licenses and
franchises, to avoid a breach, default, termination, acceleration or
modification of any agreement, contract, instrument, mortgage, lien, lease,
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award as a result of the execution or performance of this
Agreement, or otherwise in connection with the execution and performance of this
Agreement.
<PAGE>
(g) Material Adverse Changes. There shall not have been since
the date of this Agreement, any change or series of changes that, in the
reasonable business judgment of the Company, acting in good faith, have or could
reasonably be anticipated to have a material adverse effect on the properties,
business, condition (financial or otherwise) or prospects of ADC.
(h) Proceedings Satisfactory to the Company. All proceedings
to be taken by Edgebrook in connection with the consummation of the Closing and
the other transactions contemplated hereby and all certificates, opinions,
instruments and other documents required to effect the transaction contemplated
hereby reasonably requested by the Company will be reasonably satisfactory in
the form and substance to the Company and its counsel.
Section 5.02. Conditions to the Obligations of Edgebrook. The
obligation of Edgebrook to consummate the transactions contemplated by this
Agreement are subject to the fulfillment of, prior to or at the Closing, the
following additional conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects on and as of the Closing Date, with
the same effect as though made on and as of the Closing Date; the Company shall,
on or before the Closing Date, have performed and satisfied all of its covenants
and agreements set forth herein which by the terms hereof are to be performed
and satisfied by the Company on or before the Closing Date; and the Company
shall have delivered to Edgebrook a certificate as of the Closing Date
certifying to the foregoing effect.
(b) Other Documents. On the Closing Date, Edgebrook shall have
received such other certificates and documents as counsel to Edgebrook shall
have reasonably requested from the Company at least five (5) business days prior
to the Closing Date.
(c) No Actions or Proceedings. No action or proceeding by or
before any court, administrative body or governmental agency shall have been
instituted or threatened which seeks to enjoin, restrain or prohibit, or might
result in damages in respect of, this Agreement or the complete consummation of
the transactions as contemplated by this Agreement. No law or regulation shall
be in effect and no court order shall have been entered in any action or
proceeding instituted by any party which enjoins, restrains or prohibits this
Agreement or the complete consummation of the transactions as contemplated by
this Agreement.
<PAGE>
ARTICLE VI. TERMINATION OF AGREEMENT.
Section 6.01. Termination. This Agreement may be terminated any time
prior to the Closing Date as follows:
(a) With the mutual consent of CDVI and Edgebrook.
(b) By either CDVI or Edgebrook, if the Closing has not
occurred on or before June 1, 1996; provided, however, that if the only reason
why the Closing has not occurred is that the condition set forth in Section
5.01(f) has not been satisfied, then such date shall be automatically extended
until August 31, 1996.
(c) By CDVI, if there has been a material misrepresentation or
breach of warranty on the part of Edgebrook in the representations and
warranties contained herein or a material breach of covenants on the part of
Edgebrook and the same has not been cured within 10 days after notice thereof.
In the event of any termination pursuant to this Section 6.01(c), written notice
setting forth the reasons therefor shall forthwith be given by CDVI to
Edgebrook.
(d) By Edgebrook, if there has been a material
misrepresentation or breach of warranty on the part of the Company in the
representations and warranties contained herein or a material breach of
covenants on the part of the Company and the same has not been cured within 10
days after notice thereof. In the event of any termination pursuant to this
Section 6.01(d), written notice setting forth the reasons therefor shall
forthwith be given by Edgebrook to the Company.
(e) By Edgebrook, if the Closing Price (as defined in Section
1.02 hereof) of the DAKA Common Stock is less than $21.00; provided, however,
that such termination shall be deemed rescinded and not effective if CDVI elects
to adjust the consideration for the Shares as provided in Section 1.03.
Notwithstanding anything herein to the contrary, the right to terminate
this Agreement under Section 6.01 shall not be available to any party to the
extent the failure of such party, respectively, to fulfill any of its
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date (as a result, for
example, of an action or failure to act causing a failure of a condition
precedent).
Section 6.02. Effect of Termination. All obligations of the parties
hereunder shall cease upon any termination pursuant to Section 6.01; provided,
however, that (i) the provisions of this Article VI shall survive any
termination of this Agreement; (ii) Edgebrook's general release set forth in
Section 1.04 hereof shall be and remain fully effective and unconditional
regardless of such termination, except in the event of termination by Edgebrook
pursuant to Section 6.01(d); (iii) nothing herein shall relieve any party from
any liability for a material error or omission in any of its representations or
warranties contained herein or a material failure to comply with any of its
covenants, conditions or agreements contained herein; and (iv) any party may
proceed as further set forth in Section 6.03 below.
<PAGE>
Section 6.03. Right to Proceed. Anything in this Agreement to the
contrary notwithstanding, if any of the conditions specified in Section 5.01
hereof have not been satisfied, the Company shall have the right to proceed with
the transactions contemplated hereby without waiving any of its rights
hereunder, and if any of the conditions specified in Section 5.02 hereof have
not been satisfied, Edgebrook, shall have the right to proceed with the
transactions contemplated hereby without waiving any of its rights hereunder.
ARTICLE VII. SURVIVAL; INDEMNIFICATION.
Section 7.01. Survival of Representations, Warranties, Etc. All
representations, warranties, agreements, covenants and obligations herein or in
any schedule or certificate delivered by any party incident to the transactions
contemplated hereby are material and may be relied upon by the party receiving
the same and shall survive the Closing regardless of any investigation by or
knowledge of such party and shall not merge into the performance of any
obligation by any party hereto.
Section 7.02. Indemnification by Edgebrook. Edgebrook, on behalf of
itself and its respective successors, administrators, estates, and permitted
assigns, agrees subsequent to the Closing Date to indemnify and hold harmless
the Company, ADC, their respective affiliates and their respective shareholders,
officers, directors, employees and agents (individually, a "Company Indemnified
Party" and collectively, the "Company Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against a party entitled to
indemnification (a "Loss" or "Losses"), as such losses are incurred, arising out
of, based upon or in connection with:
(i) conditions, circumstances or occurrences which constitute or result in any
breach of any representation or warranty made by Edgebrook in this
Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered under or in connection with this
Agreement, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such
representations or warranties (collectively, "Representation and Warranty
Claims");
(ii) any breach of any covenant or agreement made by Edgebrook in this Agreement
or in any schedule, exhibit, certificate, financial statement, agreement or
other instrument delivered under or in connection with this Agreement, or
by reason of any claim, action or proceeding asserted or instituted arising
out of any matter or thing covered by any such covenant or agreement;
<PAGE>
(iii)any fees and expenses of Edgebrook (including without limitation legal
fees and accounting fees) relating to the execution, delivery and
performance of this Agreement paid, assumed or otherwise borne by ADC.
Section 7.03. Limitations on Indemnification by Edgebrook.
Notwithstanding anything herein to the contrary, recovery by Company Indemnified
Parties on account of indemnification claims made pursuant to Section 7.02
hereof shall not be subject to any limitation, and they shall be entitled to
dollar-for-dollar recovery, in seeking indemnification from Edgebrook with
respect to (i) Losses arising from fraud or an intentional misrepresentation on
the part of Edgebrook; (ii) Losses arising from intentional breach of a covenant
by Edgebrook; (iii) Losses involving a breach by Edgebrook of the
representations and warranties contained in Sections 2.02 and 2.03
Section 7.04. Indemnification by the Company. The Company agrees to
indemnify and hold harmless Edgebrook from and against and in respect of all
Losses sustained, suffered or incurred by or made against any of them arising
out of, based upon or in connection with (a) conditions, circumstances or
occurrences which constitute or result in any breach of any representation or
warranty made by the Company in this Agreement or in any schedule, exhibit,
certificate, financial statement, agreement or other instrument delivered under
or in connection with this Agreement, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such representations and (b) any breach of any covenant or agreement made by
the Company in this Agreement or in any schedule, exhibit, certificate,
financial statement, agreement or other instrument delivered under or in
connection with this Agreement, or by reason of any claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by any such
covenant or agreement.
Section 7.05. No Limitation of Rights. Notwithstanding anything herein
to the contrary, the limitations set forth in this Article VII shall apply only
with respect to post-Closing indemnification obligations and shall in no way
limit any rights the Company or Edgebrook may have in law or equity in the event
the Closing does not occur.
<PAGE>
Section 7.06. Notice; Defense of Claims. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to which the
indemnification obligations hereunder would apply, the indemnified party shall
give notice thereof in writing to the indemnifying party, but the omission to so
notify the indemnifying party promptly will not relieve the indemnifying party
from any liability except to the extent that the indemnifying party shall have
been prejudiced as a result of the failure or delay in giving such notice. Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense and shall specify the provision or
provisions of this Agreement under which the liability or obligation is
asserted. If within 20 days after receiving such notice the indemnifying party
gives written notice to the indemnified party stating that (i) it would be
liable under the provisions hereof for indemnity in the amount of such claim if
such claim were successful, (ii) that it shall be fully responsible (with no
reservation of any rights) for all liabilities relating to such claim, liability
or expense and that it will provide full indemnification (whether or not
otherwise required hereunder) to the indemnified party with respect to such
claim, liability or expense and (iii) that it disputes and intends to defend
against such claim, liability or expense at its own cost and expense, then
counsel for the defense shall be selected by the indemnifying party (subject to
the consent of the indemnified party which consent shall not be unreasonably
withheld) and the indemnified party shall not be required to make any payment
with respect to such claim, liability or expense as long as the indemnifying
party is conducting a good faith and diligent defense at its own expense;
provided, however, that the assumption of defense of any such matters by the
indemnifying party shall relate solely to the claim, liability or expense that
is subject or potentially subject to indemnification, and provided further that
prior to such assumption of defense the indemnifying party shall enter into an
agreement with the indemnified party in form and substance satisfactory to the
indemnified party pursuant to which the indemnifying party unconditionally
guarantees the payment and performance of any liability or obligation which may
arise out of or in any way relating to such claim, liability or expense or the
facts giving rise thereto. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all indemnifiable matters related to claims by third parties
which are susceptible to being settled provided its obligation to indemnify the
indemnifying party therefor will be fully satisfied. The indemnifying party
shall keep the indemnified party apprised of the status of the claim, liability
or expense and any resulting suit, proceeding or enforcement action, shall
furnish the indemnified party with all documents and information that the
indemnified party shall reasonably request and shall consult with the
indemnified party prior to acting on major matters, including settlement
discussions. Notwithstanding anything herein stated to the contrary, the
indemnified party shall at all times have the right to fully participate in such
defense at its own expense directly or through counsel; provided, however, if
the named parties to the action or proceeding include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the expense of separate counsel for the indemnified party shall be paid
by the indemnifying party. If no such notice of intent to dispute and defend is
given by the indemnifying party, or if such diligent good faith defense is not
being or ceases to be conducted, the indemnified party shall, at the expense of
the indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense. If such claim,
liability or expense is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense.
<PAGE>
ARTICLE VIII. REGISTRATION RIGHTS.
Section 8.01. Definitions.
As used in this Article VIII, the following terms shall have the
following meanings:
"Advice" has the meaning set forth in Section 8.03.
"Affiliate" means, with respect to any specified person, any other
person who, directly or indirectly, controls, is controlled by, or is under
common control with such specified person.
"Commission" means the Securities and Exchange Commission.
"Controlling Persons" has the meaning set forth in Section 8.05(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute, and the rules and regulations of
the Commission promulgated thereunder.
"Holder" means (i) Edgebrook and (ii) each person (other than DAKA and
its Affiliates) to whom Edgebrook transfers Securities as provided in Section
8.07 hereof, if the person to whom such Securities are transferred acquires such
Securities as Registrable Securities.
"Lock-up Period" has the meaning set forth in Section 8.06.
"Lock-up Request" has the meaning set forth in Section 8.06.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, and by
all other amendments and supplements to the prospectus, including post-effective
amendments, and in each case including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Securities" means the Securities; provided, however, that
any Securities shall cease to be Registrable Securities when (i) a Registration
Statement covering such Registrable Securities has been declared effective and
such Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) such Registrable Securities become eligible for
sale pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (iii) such Securities cease to be outstanding.
<PAGE>
"Registration Statement" means any registration statement of DAKA that
covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any such registration statement,
including post-effective amendments, in each case including the Prospectus, all
exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
"Securities" means the shares of DAKA Common Stock issued to Edgebrook
pursuant to this Agreement so long as they are owned beneficially and of record
by a Holder.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor statute, and the rules and regulations of the
Commission promulgated thereunder.
"Suspension Notice" has the meaning set forth in Section 8.03.
"Suspension Period" has the meaning set forth in Section 8.03.
<PAGE>
Section 8.02. Resale Registration.
(a) Filing; Effectiveness. If on any one (1) occasion after
October 1, 1996, one or more Holders holding an aggregate of at least 9,000
Registrable Securities shall notify DAKA in writing that they intend to offer or
cause to be offered for public resale all or any portion of their Registrable
Securities, DAKA will notify all of the Holders of Registrable Securities of its
receipt of such notification and upon the written request of any such Holder
delivered to DAKA within 15 days after receipt from DAKA of such notification,
DAKA shall use reasonable efforts to prepare and file a registration statement
on Form S-3 (the "Resale Registration Statement") under the Securities Act
covering the resale by such Holders of their Registrable Securities pursuant to
Rule 415 under the Securities Act from time to time in transactions not
involving any underwritten public offering and use reasonable efforts (i) to
cause such Resale Registration Statement to be declared effective by the
Commission for such Registrable Securities as soon as practicable thereafter and
(ii) to keep the Resale Registration Statement continuously effective until the
earliest of (x) the date on which such Holders no longer hold any Registrable
Securities registered under the Resale Registration Statement or (y) the second
anniversary of the Closing Date; provided, however, that (A) upon the request of
one or more Holders holding an aggregate of at least 9,000 Registrable
Securities received prior to October 1, 1996, DAKA will proceed promptly and in
good faith to prepare the Resale Registration Statement, even if DAKA is not
required to file it with the Commission until October 1, 1996, so as to avoid a
delay past October 1, 1996 in making such filing and (B) if DAKA prior to
October 1, 1996 files any registration statement with the Commission under the
Securities Act (other than on Form S-4 or a similar form relating to business
combinations or exchanges or Form S-8 or a similar form relating to any employee
benefit plan), then DAKA shall give the Holders notice thereof and the Holders
may demand registration pursuant to this Section 8.02 immediately after such
filing. DAKA shall not be required to cause a registration statement requested
pursuant to this Section 8.02 to become effective prior to 90 days following the
effective date of a registration statement initiated by DAKA if any managing
underwriter named in such registration statement has advised DAKA in writing
that the registration or sale of additional securities by stockholders of DAKA
within such 90-day period would have a material adverse effect on the likelihood
of success of such underwritten offering; provided, however, that DAKA shall use
its best efforts to achieve such effectiveness promptly following such 90-day
period if the request pursuant to this Section 8.02 has been made prior to the
expiration of such 90-day period. DAKA may postpone the filing of any
Registration Statement required hereunder for a reasonable period of time, not
to exceed 60 days, if DAKA has been advised by outside legal counsel that such
filing would require the disclosure of a material transaction or other matter
and DAKA determines reasonably and in good faith that such disclosure would have
a material adverse effect on DAKA; provided, however, that DAKA shall (A) use
reasonable efforts to disclose such material transaction or other matter as soon
as in its good faith judgment it is prudent to do so and (B) may so postpone
such filing only if all other persons who are named as selling securityholders
under then effective registration statements filed by DAKA with the Commission
and all directors of DAKA are advised of the fact that a material transaction or
other matter is not being disclosed during the length of such postponement and
of the consequences of such nondisclosure under the Securities Act and the
Exchange Act.
<PAGE>
(b) Effective Registration. A registration will not be deemed
to have been effected as a Resale Registration unless the Resale Registration
Statement with respect thereto has been declared effective by the Commission;
provided, however, that if after it has been declared effective, the offering of
Registrable Securities pursuant to a Resale Registration Statement is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Resale Registration
Statement will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Resale Registration Statement may legally resume.
Section 8.03. Registration Procedures. In connection with the
obligations of DAKA to effect or cause the registration of any Registrable
Securities pursuant to the terms and conditions of this Agreement, DAKA shall
use reasonable efforts to effect the registration and sale of such Registrable
Securities in accordance with the intended method of distribution thereof, and
in connection therewith:
(a) DAKA shall prepare and file with the Commission a
Registration Statement on Form S-3 or other similar form under the Securities
Act which permits secondary sales of securities in a "shelf registration," and
use reasonable efforts to cause such Registration Statement to become effective
and remain effective in accordance with the provisions of this Agreement;
(b) DAKA shall promptly prepare and file with the Commission
such amendments and post-effective amendments to each Registration Statement as
may be necessary to keep such Registration Statement effective for as long as
such registration is required to remain effective pursuant to the terms hereof;
shall cause the Prospectus to be supplemented by any required Prospectus
supplement, and, as so supplemented, to be filed pursuant to Rule 424 under the
Securities Act; and shall comply with the provisions of the Securities Act
applicable to it with respect to the disposition of all Registrable Securities
covered by such Registration Statement during the applicable period in
accordance with the intended methods of disposition by the Holders set forth in
such Registration Statement or supplement to the Prospectus;
(c) DAKA shall promptly furnish to any Holder such number of
copies of the Prospectus (including each preliminary Prospectus) and any
amendments or supplements thereto, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities being sold by such Holder;
(d) DAKA shall, on or prior to the date on which a
Registration Statement is declared effective, use reasonable efforts to register
or qualify the Registrable Securities covered by such Registration Statement
under such other securities or "blue sky" laws of such states of the United
States as any Holder requests; provided, however, that DAKA shall not be
required (i) to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 8.03(d) or (ii)
to file any general consent to service of process;
(e) DAKA shall promptly notify each Holder, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
Commission or any state securities authority for amendments and supplements to a
Registration Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement, (iv) of the issuance by any state securities commission or other
regulatory authority of any order suspending the qualification or exemption from
qualification of any of the Registrable Securities under state securities or
"blue sky" laws, and (v) of the happening of any event which makes any statement
made in a Registration Statement or related Prospectus untrue or which requires
the making of any changes in such Registration Statement or Prospectus so that
they will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. As soon as practicable following expiration of the Suspension
Period (as defined below), DAKA shall prepare and file with the Commission and
furnish a supplement or amendment to such Prospectus so that, as thereafter
deliverable to the purchasers of such Registrable Securities, such Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
<PAGE>
In the case of a Resale Registration Statement, each Holder, upon
receipt of any notice (a "Suspension Notice") from DAKA of the happening of any
event of the kind described in Section 8.03(e)(v), shall forthwith discontinue
disposition of the Registrable Securities pursuant to the Resale Registration
Statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
8.03(e) or until it is advised in writing (the "Advice") by DAKA that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the Prospectus, and,
if so directed by DAKA, such Holder will, or will request any broker-dealer
acting as such Holder's agent or as an underwriter to, deliver to DAKA (at
DAKA's expense) all copies, other than permanent file copies then in such
Holder's or broker-dealer's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice; provided,
however, that in no event shall the period from the date on which any Holder
receives a Suspension Notice to the date on which any Holder receives either the
Advice or copies of the supplemented or amended Prospectus contemplated by
Section 8.03(e) (the "Suspension Period") exceed 60 days; and provided further
that such Suspension Notice shall not be effective unless DAKA has
contemporaneously given an analogous notice to all other persons named as
selling securityholders in then effective registration statements filed by DAKA
with the Commission and to DAKA's directors. In the event that DAKA shall give
any Suspension Notice, the time periods for which a Resale Registration
Statement is required to be kept effective pursuant to Section 8.02 hereof shall
be extended by the number of days during the Suspension Period.
Section 8.04. Registration Expenses. DAKA shall bear all expenses
incurred in connection with the registration of the Registrable Shares pursuant
to Section 8.02 of this Agreement. Such expenses shall include, without
limitation, all printing, legal and accounting expenses incurred by DAKA and all
registration and filing fees imposed by the Commission, any state securities
commission or the NASDAQ National Market. The Holders shall be responsible for
any brokerage or underwriting commissions and taxes of any kind (including,
without limitation, transfer taxes) with respect to any disposition, sale or
transfer of Registrable Securities and for any legal, accounting and other
expenses incurred by them.
Section 8.05. Indemnification and Contribution.
(a) Indemnification by DAKA. DAKA agrees to indemnify and
hold harmless, to the full extent permitted by law, each Holder, its partners,
officers, directors, trustees, stockholders, employees and agents, and each
person who controls such Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, or is under common control
with, or is controlled by, such Holder, together with the partners, officers,
directors, trustees, stockholders, employees and agents of such controlling
person (collectively, the "Controlling Persons"), from and against all losses,
claims, damages, liabilities and expenses (including without limitation
reasonable legal fees and expenses incurred by any Holder or any such
Controlling Person documented in writing) (collectively, the "Damages") to which
such Holder, its partners, officers, directors, trustees, stockholders,
employees and agents, and any such Controlling Person may become subject under
the Securities Act or otherwise, insofar as such Damages (or proceedings in
respect thereof) arise out of or are based upon any untrue or alleged untrue
statement of material fact contained in any Registration Statement (or any
amendment thereto) pursuant to which Registrable Securities were registered
under the Securities Act, or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading, or caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if DAKA shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such Damages arise out of or are based upon any such untrue
statement or omission based upon information relating to such Holder furnished
in writing to DAKA by such Holder specifically for use therein; provided,
however, that DAKA shall not be liable to any Holder under this Section 8.05(a)
to the extent that any such Damages were caused by the fact that such Holder
sold Securities to a person as to whom it shall be established that there was
not sent or given, at or prior to the written confirmation of such sale, a copy
of the Prospectus as then amended or supplemented if, and only if, (i) DAKA has
previously furnished copies of such amended or supplemented Prospectus to such
Holder and (ii) such Damages were caused by any untrue statement or omission or
alleged untrue statement or omission contained in the Prospectus so delivered
which was corrected in such amended or supplemented Prospectus.
<PAGE>
(b) Indemnification by the Holders. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless DAKA, its
stockholders, directors, officers and each person, if any, who controls DAKA
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from DAKA to such
Holder, but only with reference to information relating to such Holder furnished
in writing to DAKA by such selling Holder specifically for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto); provided, however, that such selling Holder
shall not be obligated to provide such indemnity to the extent that such Damages
result from the failure of DAKA to promptly amend or take action to correct or
supplement any such Registration Statement or Prospectus on the basis of
corrected or supplemental information provided by such selling Holder to DAKA
expressly for such purpose. In no event shall the liability of any Holder of
Registrable Securities hereunder be greater in amount than the amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Contribution. To the extent that the indemnification
provided for in paragraph (a) or (b) of this Section 8.05 is unavailable to an
indemnified party or insufficient in respect of any Damages, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such Damages in such proportion as is
appropriate to reflect the relative fault of DAKA on the one hand and the
Holders on the other hand in connection with the statements or omissions that
resulted in such Damages, as well as any other relevant equitable
considerations. The relative fault of DAKA on the one hand and of the Holders on
the other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
DAKA or by the Holders and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
If indemnification is available under paragraph (a) or (b) of this
Section 8.05, the indemnifying parties shall indemnify each indemnified party to
the full extent provided in such paragraphs without regard to the relative fault
of said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 8.05(c).
DAKA and each Holder agrees that it would not be just or equitable if
contribution pursuant to this Section 8.05(c) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to herein.
Section 8.06. Restrictions on Sale. In the event of an underwritten
public offering for the account of DAKA, upon the written request (the "Lock-up
Request") of the managing underwriter (or underwriters) of such offering, each
Holder agrees not to effect any public sale or distribution of any securities
similar to those being registered in such offering (other than pursuant to such
offering), including, without limitation, through sales of Securities pursuant
to a Resale Registration Statement, during the 14 days prior to, and during the
90-day period beginning on the effective date of the Registration Statement
relating to such offering (the "Lock-up Period"); provided, however, that the
Holders shall not be required to comply with such Lock-up Request unless DAKA
simultaneously demands analogous restrictions on sale and uses all reasonable
efforts to obtain from all other persons who are contractually bound with DAKA
to comply with such Lock-up Requests and from DAKA's directors. In the event of
the delivery of a Lock-up Request, the time periods for which a Resale
Registration Statement is required to be kept effective pursuant to Section 8.02
hereof shall be extended by the number of days during the Lock-up Period.
<PAGE>
Section 8.07. Transfer of Registration Rights. The registration rights
of Edgebrook and any Holders under this Article VIII may be transferred to any
transferee of Registrable Securities that acquires at least 1,000 shares of
Registrable Securities (appropriately adjusted for stock splits, stock dividends
and the like). Each such transferee shall be deemed to be a "Holder" for
purposes of this Article VIII.
ARTICLE IX. MISCELLANEOUS.
Section 9.01. Law Governing. This Agreement shall be construed under
and governed by the internal laws, and not the law of conflicts, of the State of
Minnesota.
Section 9.02. Notices. Any notice, request, demand or other
communication required or permitted hereunder shall be in writing and shall be
deemed to have been given if delivered or sent by facsimile transmission
(promptly followed by hard copy confirmation), upon receipt, or if sent by
registered or certified mail upon the sooner of the expiration of three days
after deposit in United States post office facilities properly addressed with
postage prepaid or acknowledgment of receipt, as follows:
To the Company: One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
Attn: Charles W. Redepenning, Jr.
Senior Vice President and General Counsel
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Attn: Ettore Santucci, P.C.
To Edgebrook: One Financial Plaza
120 South 6th Street
Minneapolis, MN 55424
Attn: Craig A. Oberlander
or to such other address of which any party may notify the other parties as
provided above.
<PAGE>
Section 9.03. Prior Agreements Superseded. This Agreement supersedes
all prior understandings and agreements among the parties relating to the
subject matter hereof.
Section 9.04. Assignability. This Agreement shall be assignable by the
Company (a) prior to the Closing to a subsidiary of the Company although no such
assignment shall relieve the Company of any liabilities or obligations under
this Agreement and (b) after the Closing, to any person. This Agreement shall
not otherwise be assignable by the Company without the prior written consent of
Edgebrook or (except as otherwise permitted by Section 8.07 hereof) by Edgebrook
without prior written consent of the Company. This Agreement shall be binding
upon and enforceable by, and shall inure to the benefit of, the parties hereto
and their respective successors, heirs, executors, administrators and permitted
assigns, and no others. Notwithstanding the foregoing, nothing in this Agreement
is intended to give any person not named herein the benefit of any legal or
equitable right, remedy or claim under this Agreement, except as expressly
provided herein.
Section 9.05. Fees and Expenses. Each of the parties to this Agreement
shall pay its own expenses and costs associated with the negotiation, execution
and delivery of this Agreement and any agreement or instrument contemplated
hereby and the consummation of the transactions contemplated hereby, including
all fees and expenses of counsel, accountants and financial advisors or other
professionals acting on behalf of such party.
Section 9.06. Publicity and Disclosures. None of the parties hereto nor
any of their respective stockholders, affiliates, officers, directors or
employees shall issue or cause the publication of any press release or other
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of the Company and Edgebrook, except to
the extent disclosure is required by any applicable law or regulation or by any
court or authorized administrative or governmental agency.
Section 9.07. Captions. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof.
Section 9.08. Execution in Counterparts. For the convenience of the
parties and to facilitate execution, this Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same document.
<PAGE>
Section 9.09. Certain Remedies; Severability. It is specifically
understood and agreed that any breach of this Agreement by any of the parties
will result in irreparable injury to the aggrieved party, that the remedy at law
alone will be an inadequate remedy for such breach and that, in addition to any
other remedy for such breach and that, in addition to any other remedy it may
have, such aggrieved party shall be entitled to enforce the specific performance
of this Agreement by the breaching party and to seek both temporary and
permanent injunctive relief, without the necessity of proving actual damages,
but without limitation of their rights to recover such damages. In case any of
the provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, any such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had been limited or modified (consistent with its
general intent) to the extent necessary to make it valid, legal and enforceable,
or if it shall not be possible to so limit or modify such invalid, illegal or
unenforceable provision or part of a provision, this Agreement shall be
construed as if such invalid, illegal or unenforceable provision or part of a
provision had never been contained in this Agreement.
Section 9.10. Amendments; Waivers. This Agreement may not be amended or
modified except by a writing duly and validly executed by the Company and
Edgebrook. Any party hereto may waive any covenant or condition intended for its
benefit in its discretion, but delay on the part of any party in exercising any
right, power or privilege hereunder shall not operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege. The rights and remedies of any party arising out of or
otherwise in respect of any inaccuracy in or breach of any representation or
warranty, or any failure to perform or comply with any covenant or agreement,
contained in this Agreement shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
inaccuracy, breach or failure is based may also be the subject matter of any
other representation, warranty, covenant or agreement contained in this
Agreement (or in any other agreement between the parties) as to which there is
no inaccuracy, breach or failure.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date set forth above.
CASUAL DINING VENTURES, INC.
By: /s/ Charles W. Redepenning, Jr.
----------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President
DAKA INTERNATIONAL, INC.
By: /s/ Charles W. Redepenning, Jr.
-----------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President
EDGEBROOK, INC.
By: /s/ Craig Oberlander
-----------------------------
Name: Craig Oberlander
Title: President
CERTIFICATE OF INCORPORATION
of
DAKA INTERNATIONAL, INC.
AS AMENDED
<PAGE>
FIRST: The name of the Corporation is DAKA International, Inc.
(hereinafter the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, State of Delaware. The name of its
registered agent at that address is The Corporation Trust Company.
THIRD: The nature of the business to be conducted or promoted and the
purposes of the Corporation are to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of the
State of Delaware as set forth in Title 8 of the Delaware Code (the "GCL").
FOURTH: The total number of shares of capital stock of all classes
which the Corporation shall have the authority to issue is thirty-one million
(31,000,000) shares, of which thirty million (30,000,000) shares shall be Common
Stock, par value $.01 per share, and one million (1,000,000) shares shall be
Preferred Stock, par value $.01 per share." The Board of Directors is expressly
authorized to provide for the issuance of all or any shares of the Preferred
Stock, in one or more classes or series, and to fix for each such class or
series such voting powers, full or limited, or no voting powers, and such
distinctive designations, preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issuance of such class or
series and as may be permitted by the GCL, including, without limitation, the
authority to provide that any such class or series may be (a) subject to
redemption at such time or times and at such price or prices; (b) entitled to
receive dividends (which may be cumulative or non-cumulative) at such rates, on
such conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or classes or any other
series; (c) entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation; or (d) convertible into, or
exchangeable for, shares of any other class or classes of stock, or of any other
series of the same or any other class or classes of stock, of the Corporation at
such price or prices or at such rates of exchange and with such adjustments; all
as may be stated in such resolution or resolutions. Except as otherwise
specifically required by law or as specifically provided in any resolution of
the Board of Directors providing for the issuance of any particular class or
series of Preferred Stock, the exclusive voting power of the Corporation shall
be vested in the Common Stock of the Corporation. Each share of Common Stock
shall entitle the holder thereof to one vote at all meetings of the stockholders
of the Corporation."
<PAGE>
FIFTH: The name and mailing address of the Sole Incorporator is as
follows:
Name: Mailing Address:
Arthur M. Aaron One Beacon Street
Boston, Massachusetts 02108
SIXTH:
A. The business and affairs of the Corporation shall be managed by or
be under the direction of the Board of Directors which shall consist of not less
than three or more than seven directors, the exact number of which shall be
determined from time to time by the Board of Directors pursuant to a resolution
duly adopted by a majority of the total number of authorized directors, whether
or not one or more vacancies on the Board of Directors exist at the time any
such resolution is presented to the Board of Directors. Election of directors
need not be by written ballot unless the By-Laws so provide. The directors shall
be divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. Initially, Class
I directors shall be elected for a one-year term, Class II directors for a
two-year term and Class III directors for a three-year term. At each succeeding
annual meeting of stockholders beginning in 1989, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy in the Board of
Directors resulting from any increase in the authorized number of directors may
be filled by a majority of the Board of Directors then in office, provided that
a quorum is present, and any other vacancy occurring in the Board of Directors
may be filled by a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director. Any director elected to fill a vacancy
not resulting from an increase in the number of directors shall have the same
remaining term as that of his predecessor. A director elected by the Board of
Directors to fill a newly created directorship resulting from an increase in the
number of directors shall hold office until the next election of the class of
which such director was chosen.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of Preferred Stock issued by the corporation shall have the
right, voting separately by class or series, to elect directors at an annual or
special meeting of stockholders, the election, term of office, filling of
vacancies and other features of such directorships shall be governed by the
terms of the Certificate of Designation applicable thereto, and such directors
so elected shall not be divided into classes pursuant to this Section A of
Article SIXTH unless expressly provided by such terms.
<PAGE>
B. The Board of Directors shall have the power to make, adopt, alter,
amend, change, add to or repeal the By-Laws of the Corporation by resolution
adopted by affirmative vote of a majority of the entire Board of Directors.
Stockholders may not make, adopt, alter, amend, change, add to or repeal the
By-Laws of the Corporation except upon the affirmative vote of the holders of
record of shares of Voting Stock (as defined in Article TENTH) representing at
least 80% of the votes entitled to be cast by the holders of all of the then
outstanding shares of Voting Stock, voting as a single class.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the GCL or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 279 of the GCL, order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
EIGHTH: Meetings of stockholders may be held within or without the
State of Delaware, as the By-Laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the GCL) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation. Special meetings of the
stockholders of the Corporation may not be called by the stockholders of the
Corporation.
NINTH: Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of the Corporation to the contrary, no action
required to be taken at any annual or special meeting of stockholders of the
Corporation may be taken by written consent without a meeting except any action
taken upon the signing of a consent in writing, setting forth the action so
taken, by all stockholders of the Corporation entitled to vote thereon.
TENTH:
A. In addition to any affirmative vote required by law or this
Certificate of Incorporation or the By-Laws of the Corporation, and except as
otherwise expressly provided in Section B of this Article TENTH, a Business
Combination (as hereinafter defined) with, or proposed by or on behalf of, any
interested Stockholder (as hereinafter defined) or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than eighty percent (80%) of the
votes entitled to be cast by the holders of all the then outstanding shares of
Voting Stock (as hereinafter defined), voting together as a single class,
excluding Voting Stock beneficially owned by such Interested Stockholder. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be specified,
by law or in any agreement with any national securities exchange or otherwise.
<PAGE>
B. The provisions of Section A of this Article TENTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or by
any other provision of this Certificate of Incorporation or the By-Laws of the
Corporation, or any agreement with any national securities exchange, if all of
the conditions specified in either of the following Paragraphs 1 or 2 are met
or, in the case of a Business Combination not involving the payment of
consideration to the holders of the Corporation's outstanding Capital Stock (as
hereinafter defined), if the condition specified in the following Paragraph 1 is
met:
1. The Business Combination shall have been approved (whether
such approval is made prior to or subsequent to the acquisition of, or
announcement or public disclosure of the intention to acquire, beneficial
ownership of the Voting Stock that caused the Interested Stockholder to become
an Interested Stockholder), either specifically or as a transaction which is
within an approved category of transactions, by a majority (whether such
approval is made prior to or subsequent to the acquisition of, or announcement
or public disclosure of the intention to acquire, beneficial ownership of the
Voting Stock that caused the Interested Stockholder to become an Interested
Stockholder) of the Continuing Directors (as hereinafter defined).
2. All of the following conditions shall have been met:
(a) The aggregate amount of cash and the Fair
Market Value (as hereinafter defined), as of the date of the consummation of the
Business Combination, of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the highest amount determined under clauses (i), (ii), (iii) and (iv) below:
(i) the highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of Common Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of shares
of Common Stock (x) within the two-year period immediately prior to the
first public announcement of the proposed Business Combination (the
"Announcement Date") or (y) in the transaction in which it became an
Interested Stockholder, whichever is higher, in either case as adjusted for
any subsequent stock split, stock dividend, subdivision or reclassification
with respect to Common Stock;
(ii) the Fair Market Value per share of Common Stock on the Announcement Date or
on the date on which the Interested Stockholder became an Interested
Stockholder (the "Determination Date"), whichever is higher, as adjusted
for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to Common Stock;
(iii)the price per share equal to the Fair Market Value per share of Common
Stock determined pursuant to the immediately preceding clause (ii),
multiplied by the ratio of (x) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
or on behalf of the Interested Stockholder for any share of Common Stock in
connection with the acquisition by the Interested Stockholder of beneficial
ownership of shares of Common Stock within the two-year period immediately
prior to the Announcement Date, as adjusted for any subsequent stock split,
stock dividend, subdivision or reclassification with respect to Common
Stock to (y) the Fair Market Value per share of Common Stock on the first
day in such two-year period on which the Interested Stockholder acquired
beneficial ownership of any share of Common Stock, as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification
with respect to Common Stock; and
<PAGE>
(iv) the Corporation's net income per share of Common Stock for the four
consecutive fiscal quarters immediately preceding the Announcement Date,
multiplied by the higher of the then price/earnings multiple (if any) of
such Interested Stockholder or the highest price/earnings multiple of the
Corporation within the two-year period immediately preceding the
Announcement Date (such price/earnings multiples being determined as
customarily computed and reported in the financial community).
(b) The aggregate amount of cash and the Fair
Market Value, as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock other than Common Stock shall
be at least equal to the highest amount determined under clauses (i), (ii),
(iii) and (iv) below:
(i) the highest per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by or on behalf of the Interested
Stockholder for any share of such class or series of Capital Stock in
connection with the acquisition by the Interested Stockholder of beneficial
ownership of shares of such class or series of Capital Stock (x) within the
two-year period immediately prior to the Announcement Date or (y) in the
transaction in which it became an Interested Stockholder, whichever is
higher, in either case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to such class or
series of Capital Stock;
(ii) the Fair Market Value per share of such class or series of Capital Stock on
the Announcement Date or on the Determination Date, whichever is higher, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock;
(iii)the price per share equal to the Fair Market Value per share of such class
or series of Capital Stock determined pursuant to the immediately preceding
clause (ii), multiplied by the ratio of (x) the highest per share price
(including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any
share of such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of shares
of such class or series of Capital Stock within the two-year period
immediately prior to the Announcement Date, as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with respect
to such class or series of Capital Stock to (y) the Fair Market Value per
share of such class or series of Capital Stock on the first day in such
two-year period on which the Interested Stockholder acquired beneficial
ownership of any share of such class or series of Capital Stock, as
adjusted for any subsequent stock split, stock dividend, subdivision or
reclassification with respect to such class or series of Capital Stock; and
(iv) the highest preferential amount per share to which the holders of shares of
such class or series of Capital Stock would be entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation regardless of whether the Business Combination
to be consummated constitutes such an event.
The provisions of this Paragraph 2 shall be required to be met with respect to
every class or series of outstanding Capital Stock, whether or not the
Interested Stockholder has previously acquired beneficial ownership of any
shares of a particular class or series of Capital Stock.
(c) The consideration to be received by holders of
a particular class or series of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or indirect acquisition of beneficial
ownership of shares of such class or series of Capital Stock. If the
consideration so paid for shares of any class or series of Capital Stock varied
as to form, the form of consideration for such class or series of Capital Stock
shall be either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock previously
acquired by the Interested Stockholder.
<PAGE>
(d) After the Determination Date and prior to the
consummation of such Business Combination: (i) except as approved by a majority
of the Continuing Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors; (iii) there shall have been an increase in the
annual rate of dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction that has the effect of reducing the
number of outstanding shares of Common Stock, unless the failure so to increase
such annual rate is approved by a majority of the Continuing Directors; and (iv)
such Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would not result in
any increase in the Interested Stockholder's percentage beneficial ownership of
any class or series of Capital Stock.
(e) A proxy or information statement describing the
proposed Business Combination and complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations promulgated
thereunder (the "Act") (or any subsequent provisions replacing such Act, rules
or regulations) shall be mailed to all stockholders of the Corporation at least
30 days prior to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed pursuant to such
Act or subsequent provisions). The proxy or information statement shall contain
on the first page thereof, in a prominent place, any statement as to the
advisability (or inadvisability) of the Business Combination that the Continuing
Directors, or any of them, may choose to make and, if deemed advisable by a
majority of the Continuing Directors, the opinion of an investment banking firm
selected by a majority of the Continuing Directors as to the fairness (or not)
of the terms of the Business Combination from a financial point of view to the
holders of the outstanding shares of Capital Stock other than the Interested
Stockholder and its Affiliates or Associates (as hereinafter defined), such
investment banking firm to be paid a reasonable fee for its services by the
Corporation.
(f) Such Interested Stockholder shall not have made
any major change in the Corporation's business or equity capital structure
without the approval of a majority of the Continuing Directors.
C. The following definitions shall apply with respect to this Article
TENTH:
1. The term "Business Combination" shall mean:
(a) any merger or consolidation of the Corporation
or any Subsidiary (as hereinafter defined) with (i) any Interested Stockholder
or (ii) any other company (whether or not itself an Interested Stockholder)
which is or after such merger or consolidation would be an Affiliate or
Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder involving any
assets, securities or commitments of the Corporation, any Subsidiary or any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder which (except for any arrangement, whether as employee, consultant
or otherwise, other than as a director, pursuant to which any Interested
Stockholder or any Affiliate or Associate thereof shall, directly or indirectly,
have any control over or responsibility for the management of any aspect of the
business or affairs of the Corporation, with respect to which arrangements the
value tests set forth below shall not apply), together with all other such
arrangements (including all contemplated future events), has an aggregate Fair
Market Value and/or involves aggregate commitments of $10,000,000 or more or
constitutes more than 5 percent of the book value of the total assets (in the
case of transactions involving assets or commitments other than capital stock)
or 5 percent of the stockholders' equity (in the case of transactions in capital
stock) of the entity in question (the "Substantial Part"), as reflected in the
most recent fiscal year-end consolidated balance sheet of such entity existing
at the time the stockholders of the Corporation would be required to approve or
authorize the Business Combination involving the assets, securities and/or
commitments constituting any Substantial Part; or
<PAGE>
(c) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or for any amendment to the
Corporation's By-Laws; or
(d) any reclassification of securities (including
any reverse stock split), or recapitalization of the Corporation, or any merger
or consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
(e) any agreement, contract or other arrangement
providing for any one or more of the actions specified in the foregoing clauses
(a) to (d).
2. The term "Capital Stock" shall mean all capital stock of
the Corporation authorized to be issued from time to time under Article FOURTH
of this Certificate of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to
stockholders of the Corporation generally.
3. The term "person" shall mean any individual, firm, company
or other entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of such person
has any agreement, arrangement or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who (a) is, or has announced or publicly disclosed a
plan or intention to become, the beneficial owner of Voting Stock representing
fifteen percent (15%) or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Stock; or (b) is an Affiliate or Associate
of the Corporation and at any time within the two-year period immediately prior
to the date in question was the beneficial owner of Voting Stock representing
fifteen percent (15%) or more of the votes entitled to be cast by the holders of
all then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital
Stock (a) which such person or any of its Affiliates or Associates beneficially
owns, directly or indirectly; (b) which such person or any of its Affiliates or
Associates has, directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or understanding; or
(c) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock.
6. The terms "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 under the Act as in
effect on September 15, 1988 (the term "registrant" in said Rule 12b-2 meaning
in this case the Corporation).
7. The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 4 of this Section (c), the term
"Subsidiary" shall mean only a company of which a majority of each class of
equity security is beneficially owned by the Corporation.
8. The term "Continuing Director" means any member of the
Board of Directors, while such person is a member of the Board of Directors, who
is not an Affiliate or Associate or representative of the Interested Stockholder
and was a member of the Board of Directors prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director while such successor is a member of the Board of Directors, who is not
an Affiliate or Associate or representative of the Interested Stockholder and is
recommended or elected to succeed the Continuing Director by a majority of
Continuing Directors.
<PAGE>
9. "Fair Market Value" means (a) in the case of cash, the
amount of such cash; (b) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of a share
of such stock on the New York Stock Exchange Composite Tape or, if such stock is
not quoted on the Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal United States securities
exchange registered under the Act on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or if no such quotations
are available, the fair market value on the date in question of a share of such
stock as determined in good faith by a majority of the Continuing Directors; and
(c) in the case of property other than cash or stock, the fair market value of
such property on the date in question as determined in good faith by a majority
of the Continuing Directors.
10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be received"
as used in Paragraphs 2(a) and 2(b) of Section B of this Article TENTH shall
include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
D. A majority of the Continuing Directors shall have the power and duty
to determine for the purposes of this Article TENTH on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
TENTH, including, without limitation, (a) whether a person is an Interested
Stockholder, (b) the number of shares of Capital Stock or other securities
beneficially owned by any person, (c) whether a person is an Affiliate or
Associate of another, (d) whether a Proposed Action (as hereinafter defined) is
with, or proposed by, or on behalf of an Interested Stockholder or an Affiliate
or Associate of an Interested Stockholder, (e) whether the assets that are the
subject of any Business Combination have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Combination has, an aggregate Fair Market Value of $10,000,000
or more, and (f) whether the assets or securities that are the subject of any
Business Combination constitute a Substantial Part. Any such determination made
in good faith shall be binding and conclusive on all parties.
E. Nothing contained in this Article TENTH shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
F. The fact that any Business Combination complies with the provisions
of Section B of this Article TENTH shall not be construed to impose any
fiduciary duty, obligation or responsibility on the Board of Directors, or any
member thereof, to approve such Business Combination or recommend its adoption
or approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors, or
any member thereof, with respect to evaluations of or actions and responses
taken with respect to such Business Combination.
G. For the purposes of this Article TENTH, a Business Combination or
any proposal to amend, repeal or adopt any provision of this Certificate of
Incorporation inconsistent with this Article TENTH (collectively, "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (a) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the Corporation who with respect to such Interested Stockholder,
would not qualify to serve as a Continuing Director or (b) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person a majority of the Continuing Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, Affiliate, Associate or person, based on
information known to them after reasonable inquiry.
H. Notwithstanding any other provisions of this Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation or the By-Laws of the Corporation), any proposal to
amend, repeal or adopt any provision of this Certificate of Incorporation
inconsistent with this Article TENTH which is proposed by or on behalf of an
Interested Stockholder or an Affiliate or Associate of an Interested Stockholder
shall require the affirmative vote of the holders of not less than eighty
percent (80%) of the votes entitled to be cast by the holders of all the then
outstanding shares of Voting Stock, voting together as a single class, excluding
Voting Stock beneficially owned by such Interested Stockholder; provided,
however, that this Section H shall not apply to, and such eighty percent (80%)
vote shall not be required for, any amendment, repeal or adoption unanimously
recommended by the Board of Directors if all of such directors are persons who
would be eligible to serve as Continuing Directors within the meaning of Section
C, Paragraph 8 of this Article TENTH.
<PAGE>
ELEVENTH:
A. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware GCL or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Section A of Article ELEVENTH shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
B. The Corporation shall indemnify to the full extent authorized or
permitted by law (as now or hereafter in effect) any person made, or threatened
to be made, a defendant or witness to any action, suit or proceeding (whether
civil or criminal or otherwise) by reason of the fact that such person, or such
person's testator or intestate, is or was a director or officer, employee or
agent of the Corporation or by reason of the fact that such person, at the
request of the Corporation, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise, in
any capacity. No amendment to or repeal of this Section B of Article ELEVENTH
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
C. The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the GCL. The Corporation may also create a trust fund,
grant a security interest and/or use other means (including, but not limited to,
letters of credit, surety bonds and/or other similar arrangements), as well as
enter into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to any or
all of the foregoing, to insure the payment of such amounts as may become
necessary to effect indemnification as provided therein, or elsewhere.
TWELFTH: No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association or other organization in which one or all
of its directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purposes,
if:
(a) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the votes of the
disinterested directors be less than a quorum; or
(b) the material facts as to his relationship or interest and
as to the contract or transaction are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or
(c) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
THIRTEENTH: Any merger or consolidation pursuant to Sections 251 or 252
of the GCL involving the Corporation, any sale, lease or exchange of all or
substantially all of the Corporation's property and assets pursuant to Section
271 of the GCL or any dissolution of the Corporation pursuant to Section 275 of
the GCL shall require the affirmative vote of the holders of two-thirds of the
Voting Stock (as defined in Article TENTH).
FOURTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation, provided, however,
that notwithstanding any other provision of this Certificate of Incorporation,
any agreement with any national securities exchange or any provision of law
which might permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of Voting Stock (as
defined in Article TENTH) required by any other provision of this Certificate of
Incorporation, any agreement with any national securities exchange or any
provision of law, the affirmative vote of the holders of record of shares of
Voting Stock representing at least eighty percent (80%) of the votes entitled to
be cast by the holders of all the then outstanding shares of Voting Stock,
voting together as a single class, shall be required to alter, amend or repeal
Article SIXTH, Article EIGHTH, Article NINTH, Article TENTH, Article THIRTEENTH,
or this Article FOURTEENTH, or to adopt any provision inconsistent therewith.
<PAGE>
I, THE UNDERSIGNED, being the Sole Incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the GCL, do make this
Certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true, and accordingly have hereunto set my hand this
15th day of September, 1988.
/s/ Arthur M. Aaron
-------------------
Arthur M. Aaron
Sole Incorporator
THIRD AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made and entered into as of January 12,
1996, by and among La Salsa Holding Co., a Delaware corporation (the "Company"),
and the persons and entities listed on Schedule 1 hereto (the "Investors") for
the purpose of (i) amending and restating the rights related to registration
pursuant to the Securities Act of 1933 (the "Act" ) for the shares of capital
stock of the Company purchased by the Investors pursuant to the Original
Agreements, the Series B Stock Purchase Agreement, the Series C Stock Purchase
Agreement and the Original Series D Stock Purchase Agreement (as defined below)
and (ii) to establish such similar registration rights for the shares of Series
D Convertible Preferred Stock purchased pursuant to a Series D Convertible
Preferred Stock and Warrant Purchase Agreement (the "New Agreement"), by and
between the Company and Casual Dining Ventures, Inc. ("CDV"), to be executed
concurrently herewith and shares of Series D Convertible Preferred Stock
issuable upon exercise of a warrant purchased by CDV pursuant to the New
Agreement (the "CDV Warrant").
WHEREAS, in connection with the transactions contemplated
under that certain Asset and Stock Purchase and Reorganization Agreement, dated
as of February 19, 1992 (the "Asset Purchase Agreement"), the Company, Sienna
Limited Partnership I, a California limited partnership ("Sienna"), InterWest
Partners IV, a California limited partnership ("InterWest"), Howdy S. Kabrins
("Kabrins"), La Salsa, Inc., a California corporation ("La Salsa"), and Sienna
Holdings, Inc., a California corporation, as Nominee ("Nominee"), entered into
that certain Series A Preferred and Common Stock Purchase Agreement, dated as of
March 4, 1992 (the "First Agreement"), under which the parties were granted
certain registration rights related to the capital stock acquired pursuant to
the Asset Purchase Agreement and the First Agreement;
WHEREAS, Michael E. Kassan ("Kassan") entered into a Series A
Preferred and Common Stock Purchase Agreement, dated as of August 26, 1992 by
and among Kassan, the Company, Sienna and InterWest (the "Kassan Agreement")
which granted Kassan certain registration rights related to the capital stock he
acquired under the Kassan Agreement, and such shares were subsequently
transferred to Howdy S. Kabrins;
WHEREAS, Charles A. Lynch ("Lynch," and collectively with
Kabrins, La Salsa, Nominee, Sienna, InterWest and Kassan, the "Original
Investors") entered into a Series A Preferred and Common Stock Purchase
Agreement, dated as of August 26, 1992 by and among Lynch, the Company, Sienna
and InterWest (the "Lynch Agreement") which granted Lynch certain registration
rights related to the capital stock he acquired under the Lynch Agreement;
<PAGE>
WHEREAS, Sienna and InterWest purchased additional shares of
the Company's capital stock pursuant to a Series A Preferred and Common Stock
Purchase Agreement, dated as of October 6, 1992 by and among the Company, Sienna
and InterWest (the "Second Agreement," and collectively with the First
Agreement, Kassan Agreement and Lynch Agreement, the "Original Agreements")
which granted registration rights for the shares purchased thereunder identical
to the rights granted in the First Agreement;
WHEREAS, on May 11, 1993, the Company filed an amendment to
its certificate of incorporation which reclassified the capital stock purchased
pursuant to the Original Agreements into Series A Convertible Preferred Stock
(collectively with the Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock, the
"Convertible Preferred Stock");
WHEREAS, the Company, Theodore H. Ashford ("Ashford"), Crown
Associates III, L.P., a Delaware limited partnership ("C.A. III"), Crown-Glynn
Associates, L.P., a Delaware limited partnership ("Crown-Glynn"), U.S. Trust
Company of New York as Trustee for the Crown Trust ("Crown Trust, " and
collectively with C.A. III and Crown- Glynn, "Crown"), Bankers Trust Company, as
Master Trustee for Hughes Aircraft Retirement Plans ("Hughes"), InterWest,
Noro-Moseley Partners II, L.P., a Georgia limited partnership ("Noro-Moseley"),
Seidler Salsa, L.P., a Delaware limited partnership ("Seidler"), and Sienna
(collectively, the "Series B Investors") entered into that certain Series B
Convertible Preferred Stock Purchase Agreement dated as of May 12, 1993 (the
"Series B Stock Purchase Agreement"), and in connection therewith entered into a
Registration Rights Agreement dated as of May 12, 1993, (the "Registration
Rights Agreement"), by and among the Company, the Original Investors, and the
Series B Investors, which superseded the registration rights granted in the
Original Agreements and granted certain registration rights for the shares
purchased under the Series B Stock Purchase Agreement and the Original
Agreements;
WHEREAS, the Company, Ashford, C.A. III, Noro-Moseley,
Seidler, Hughes, Sienna, Nominee and InterWest (collectively, the "Series C
Investors") entered into that certain Series C Convertible Preferred Stock
Purchase Agreement dated as of April 1, 1994 (the "Series C Stock Purchase
Agreement"), and in connection therewith entered into an Amended and Restated
Registration Rights Agreement dated as of April 1, 1994 (the "Amended
Registration Rights Agreement"), by and among the Company, the Original
Investors, the Series B Investors and the Series C Investors, which superseded
the registration rights granted in the Registration Rights Agreement and granted
certain registration rights for the shares purchased under the Original
Agreements, the Series B Stock Purchase Agreement and the Series C Stock
Purchase Agreement;
<PAGE>
WHEREAS, the Company, FMA High Yield Income L.P., WSIS
Flexible Income Partners L.P., WSIS High Income L.P., Sienna Limited Partnership
II, InterWest, Hughes, Noro-Moseley and Ashford (collectively, the "Original
Series D Investors") entered into that certain Series D Convertible Preferred
Stock Purchase Agreement dated as of March 3, 1995 and March 8, 1995 (the
"Original Series D Stock Purchase Agreement"), and in connection therewith
entered into a Second Amended and Restated Registration Rights Agreement dated
as of March 3, 1995 (the "Second Amended and Restated Registration Rights
Agreement"), by and among the Company, the Original Investors, the Series B
Investors, the Series C Investors and the Original Series D Investors, which
superseded the registration rights granted in the Second Amended and Restated
Registration Rights Agreement and granted certain registration rights for the
shares purchased under the Original Agreements, the Series B Stock Purchase
Agreement, the Series C Stock Purchase Agreement and the Original Series D Stock
Purchase Agreement;
WHEREAS, the second Amended and Restated Registration Rights
Agreement may be amended and restated with the written consent of each of (i)
the Company, (ii) the holders of a majority of the Registrable Securities (as
such term is defined in such agreement) and (iii) the holders of greater than
sixty-six and two thirds percent (66-2/3%) of the outstanding shares of Series D
Convertible Preferred Stock and Series D Notes;
WHEREAS, the Company, the holders of a majority of the
Registrable Securities and the holders of greater than sixty-six and two-thirds
percent (66-2/3%) of the outstanding shares of Series D Convertible Preferred
Stock and Series D Notes; and
WHEREAS, the parties hereto desire to amend and restate the
Second Amended and Restated Registration Rights Agreement in connection with the
sale of additional shares of Series D Convertible Preferred Stock financing of
the Company to CDV by executing this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, the parties hereto agree as follows:
1. Definitions. For purposes of this Section 1:
(a) The term "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
<PAGE>
(b) The term "Registrable Securities" means (1) any Common
Stock of the Company issued or issuable upon the conversion of the Company's
Convertible Preferred Stock, or in the case of the Series D Convertible
Preferred Stock, upon the conversion of the convertible senior subordinated
notes issuable in redemption of such Series D Convertible Preferred Stock (the
"Series D Notes"), issued pursuant to, or issued in exchange for the securities
issued pursuant to, the Asset Purchase Agreement, the Original Agreements, the
Series B Stock Purchase Agreement, the Series C Stock Purchase Agreement, the
Original Series D Stock Purchase Agreement, the New Agreement, the Foothill
Warrant or the CDV Warrant, (2) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of the securities set forth in (1) above
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Agreement are not assigned.
(c) The term "Holder" means any person owning or having the
right to acquire Registrable Securities or any assignee thereof in accordance
with Section 8 hereof.
(d) The term "Foothill Warrant" means the warrant dated
February 20, 1993, issued to Foothill Capital Corporation, initially to purchase
100,000 shares of Common Stock.
2. Request for Registration.
(a) If the Company shall receive at any time after the date
hereof a written request from the Holders of a majority of the Registrable
Securities that the Company file a registration statement under the Act, then
the Company shall, within ten (10) days of receipt thereof, give written notice
in accordance with Section 14(d) of such request to all Holders and shall,
subject to the limitations of subsection 2(b), effect as soon as practicable,
and in any event shall use its best efforts to effect within sixty (60) days of
the receipt of such request (or ninety (90) days in the case of an initial
public offering), the registration under the Act of all Registrable Securities
that such Holders initiating the registration request hereunder ("Initiating
Holders") and any other Holders request to be registered within twenty (20) days
of the mailing of such notice by the Company.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2, and the Company shall include such information in the written
notice referred to in subsection 2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to a majority in interest of the
Initiating Holders; provided, however, that if the Company has not selected an
underwriter reasonably acceptable to the Initiating Holders within twenty (20)
days after the Company's receipt of the request for registration from the
Initiating Holders, then the Initiating Holders may select an underwriter
reasonably acceptable to the Company in connection with such registration. In
such event, the right of any Holder to include his Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
<PAGE>
(c) Notwithstanding the foregoing, the Company shall not be
obligated to effect more than three registrations, filings and qualifications
pursuant to Section 2.
(d) CDV shall forfeit one of the demand registrations granted
to CDV under Section 3 below for each registration effected under this Section 2
in which shares of Registrable Securities held by CDV are included.
3. CDV Request for Registration.
(a) If the Company shall receive at any time after three (3)
months after the effective date of the first registration statement for a public
offering of securities of the Company (other than a registration statement
relating either to the sale of securities to employees of the Company pursuant
to a stock option, stock purchase or similar plan or a transaction under Rule
145 of the Act) a written request from CDV that the Company file a registration
statement under the Act, then the Company shall, subject to the limitations of
subsection 3(b), effect as soon as practicable, and in any event shall use its
best efforts to effect within sixty (60) days of the receipt of such request,
the registration under the Act of all Registrable Securities that CDV requests
hereunder.
(b) If CDV intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise the
Company as a part of its request made pursuant to this Section 3. The
underwriter will be selected by the Company and shall be reasonably acceptable
to CDV; provided, however, that if the Company has not selected an underwriter
reasonably acceptable to CDV within twenty (20) days after the Company's receipt
of the request for registration from CDV, then CDV may select an underwriter
reasonably acceptable to the Company in connection with such registration. In
such event, the right of CDV to include its Registrable Securities in such
registration shall be conditioned upon CDV's participation in such underwriting
and the inclusion of CDV's Registrable Securities in the underwriting to the
extent provided herein. CDV shall (together with the Company as provided in
subsection 5(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 3, if the underwriter advises CDV in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the number of shares of Registrable Securities that may be
included by CDV in the underwriting shall be reduced accordingly; provided,
however, that if the number of shares of Registrable Securities that may be
included in the underwriting is less than fifty percent (50%) of the number of
shares of Registrable Securities requested to be registered by CDV, such
registration shall not be treated as effected for purposes of Section 3(c)
below.
<PAGE>
(c) Notwithstanding the foregoing, the Company shall not be
obligated to effect more than three registrations, filings and qualifications
pursuant to Section 3.
4. Company Registration.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for stockholders other than the Holders) any of its stock or other
securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a compensatory Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration (which shall
include a list of the jurisdictions in which the Company intends to attempt to
qualify such securities under the applicable Blue Sky or other state securities
laws). Upon the written request of each Holder given within twenty (20) days
after mailing of such notice by the Company in accordance with Section 14(d),
the Company shall, subject to the provisions of subsection 4(b), cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 4 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
(b) In connection with any offering involving an underwriting
of shares of the Company's capital stock, the Company shall not be required
under Section 4(a) to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine, in their sole discretion, will not jeopardize the
success of the offering by the Company. If: (a) the total amount of securities,
including Registrable Securities, requested by Holders to be included in such
offering exceeds (b) the amount of securities to be sold other than by the
Company that the underwriters determine in their sole discretion is compatible
with the success of the offering, then the Company shall be required to include
in the offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling Holders according to the total amount of
securities entitled to be included therein owned by each selling stockholder or
in such other proportions as shall mutually be agreed to by all such selling
stockholders).
<PAGE>
5. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days;
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement;
(c) furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them;
(d) use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering, provided each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing; and
<PAGE>
(g) use its best efforts to furnish, at the request of any
Holder requesting registration of Registrable Securities pursuant to this
Agreement, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Agreement, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i) an
opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities,
and (ii) a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
6. Holders to Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Agreement with respect to the Registrable Securities of any selling Holder that
such Holder shall furnish to the Company such information regarding such Holder,
the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
such Holder's Registrable Securities.
7. Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sections 2, 3 and 4,
including without limitation all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
selling Holders (which counsel shall be reasonably satisfactory to all selling
Holders) shall be borne by the Company.
<PAGE>
8. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) The Company will indemnify and hold harmless each Holder,
any underwriter (as defined in the Act) for such Holder and each person, if any,
who controls such Holder or underwriter within the meaning of the Act or the
Securities Exchange Act of 1934, as amended (the "1934 Act"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation"): (i) any untrue statement
or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained
therein or any amendments or supplements thereto, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934 Act
or any state securities law. The Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld) unless such settlement includes an unconditional
term thereof whereby the claimant or plaintiff gives to the Company a release
from all liability with respect to such claim or action, nor shall the Company
be liable to any particular Holder, underwriter or controlling person in any
such case for any such loss, claim, damage, liability, or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by any such Holder, underwriter or controlling
person.
(b) Each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within the
meaning of the Act, any underwriter, any other Holder selling securities in such
registration statement and any controlling person of any such underwriter or
other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
registration. Each such Holder will pay, as incurred, any legal or other
expenses reasonably incurred by any person intended to be indemnified pursuant
to this subsection 8(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 8(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, (which consent shall
not be unreasonably withheld) unless such settlement includes an unconditional
term thereof whereby the claimant or plaintiff gives to the Holder a release
from all liability with respect to such claim or action; provided further, that
in no event shall any indemnity under this subsection 8(b) exceed the gross
proceeds from the offering received by such Holder.
<PAGE>
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 8, deliver to
the indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if, and only if, prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 8, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 8.
(d) The obligations of the Company and Holders under this
Section 8 shall survive the completion of any offering of Registrable Securities
in a registration statement under this Agreement and otherwise.
9. Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to this Agreement may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities; provided the Company is, within a reasonable time
after such transfer, furnished with written notice of the name and address of
such transferee or assignee and the securities with respect to which such
registration rights are being assigned, and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act.
10. Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would grant to such holder or
prospective holder registration rights.
11. "Market Stand-Off" Agreement. Each Investor hereby agrees
that, during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company or such nderwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
<PAGE>
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements; and
(c) such period shall not exceed one hundred eighty (180) days
after the effective date of such registration statement.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
12. Amendment of Registration Rights. Any provision of this
Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of each of (i) the Company and
(ii) the holders of a majority of the Registrable Securities. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities and the Company.
13. Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Agreement after ten (10)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with an
underwritten public offering of the Common Stock of the Company with aggregate
proceeds to the Company in excess of $10,000,000.
<PAGE>
14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California (without regard to the
application of choice of law rules), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party hereto, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
(b) Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(c) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(d) Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties. A copy of any notices sent to the Company
shall be sent to: Sienna Holdings, One Market, Steuart Street Tower, Suite 2550,
San Francisco, CA 94105-1008, Attn: Mr. Daniel L. Skaff; InterWest Partners,
3000 Sand Hill Road, Building 3, Suite 255, Menlo Park, CA 94025, Attn: Mr.
Wallace R. Hawley; Brobeck, Phleger & Harrison, Two Embarcadero Place, 2200 Geng
Road, Palo Alto, CA 94303, Attn: Gari L. Cheever, Esq. A copy of any notice sent
to Noro- Moseley shall be sent to: Jones, Day, Reavis & Pogue, 3500 One
Peachtree Center, 303 Peachtree Street, Atlanta, Georgia 30308-3242, Attn: John
E. Zamer, Esq. All notices and communications shall be deemed to have been
received: (i) in the case of personal delivery, on the date of such delivery;
(ii) in the case of telex or facsimile transmission, on the date on which the
sender receives confirmation by telex or facsimile transmission that such notice
was received by the addressee, provided that a copy of such transmission is
additionally sent by mail as set forth in (iv) below; (iii) in the case of
overnight air courier, on the second business day following the day sent, with
receipt confirmed by the courier; and (iv) in the case of mailing by first class
certified or registered mail, postage prepaid, return receipt requested, on the
fifth business day following such mailing.
(e) Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
(f) Final Terms. This Agreement is the full and complete
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, negotiations and understandings, written or
oral, including without limitation, the Original Agreements, the Registration
Rights Agreement and the Amended Registration Rights Agreement, and the Original
Agreements, the Registration Rights Agreement, the Amended Registration Rights
Agreement and the Second Amended and Restated Registration Rights Agreement are
hereby terminated and shall be of no further force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
LA SALSA HOLDING CO.,
a Delaware Corporation
By: /s/ Charles L. Boppell
--------------------------------
Charles L. Boppell,
President and Chief Executive Officer
Address: 11601 Santa Monica Blvd.
Los Angeles, California 90025
INTERWEST PARTNERS IV,
a California Limited Partnership
By: INTERWEST MANAGEMENT PARTNERS IV,
L.P., its General Partner
By: /s/ Wallace R. Hawley
-------------------------------
Wallace R. Hawley,
General Partner
Address: 3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
<PAGE>
HOWDY S. KABRINS
/s/ Howdy S. Kabrins
--------------------
Address: 2800 Olympic Blvd., Suite 201
Santa Monica, California 90404
LA SALSA, INC.,
a California corporation
By: /s/ Howdy S. Kabrins
------------------------------
Howdy S. Kabrins,
President
Address: 2800 Olympic Blvd., Suite 201
Santa Monica, California 90404
<PAGE>
CROWN ASSOCIATES III, L.P.,
a Delaware Limited Partnership
By: /s/ Margaret S. McNamara
----------------------------------
Margaret S. McNamara
General Partner
Crown Partners III, L.P.
Address: 67 East Park Place, 8th Floor
Morristown, New Jersey 07960
CROWN-GLYNN ASSOCIATES, L.P.,
a Delaware Limited Partnership
By: /s/ Margaret S. McNamara
----------------------------------
Margaret S. McNamara
General Partner
Crown-Glynn Partners, L.P.
Address: 67 East Park Place, 8th Floor
Morristown, New Jersey 07960
<PAGE>
NUEBERGER & BERMAN AS TRUSTEE FOR THE CROWN TRUST
By: /s/
---------------
Name: (illegible)
Title:
Address: 605 Third Avenue, 36th Floor
New York, New York 10158
THEODORE H. ASHFORD
/s/ Theodore H. Ashford
-----------------------
Address: Building B-107 Greenville Center
3801 Kennett Pike
Wilmington, Delaware 19807
NORO-MOSELEY PARTNERS II, L.P.
a Georgia Limited Partnership
By: Moseley and Company II,
its General Partner
By: /s/ Jack R. Kelly
-----------------------------
Name: Jack R. Kelly
Title: General Partner
Address: 9 North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
<PAGE>
SEIDLER SALSA, L.P.,
a Delaware Limited Partnership
By: THE SEIDLER COMPANY, its General Partner
By: /s/ Peter Seidler
---------------------------
Peter Seidler
President
Address: 515 S. Figueroa St., Sixth Floor
Los Angeles, California 90071
BANKERS TRUST COMPANY AS MASTER
TRUSTEE FOR HUGHES AIRCRAFT RETIREMENT
PLANS
By: /s/ Brian Gaon
--------------------------
Name: Brian Gaon
Title: Attorney-in-Fact
Address: 34 Exchange Place
Jersey City, New Jersey 07302
CHARLES A. LYNCH
/s/ Charles A. Lynch
--------------------
Address: 96 Ridgeview Drive
Atherton, CA 94027
<PAGE>
SIENNA LIMITED PARTNERSHIP I
a California Limited Partnership
By: SIENNA ASSOCIATES, its General Partner
By: /s/ Daniel L. Skaff
-----------------------------
Daniel L. Skaff,
Chairman of the General Partner
Address: One Market
Steuart Street Tower
Suite 2550
San Francisco, CA 94105
SIENNA HOLDINGS, INC.
a California corporation, as Nominee
By: /s/ Daniel L. Skaff
-----------------------------
Daniel L. Skaff,
Chairman
Address: One Market
Steuart Street Tower
Suite 2550
San Francisco, CA 94105
<PAGE>
SIENNA LIMITED PARTNERSHIP II
a California Limited Partnership
By: SIENNA ASSOCIATES, its General Partner
By: /s/ Daniel L. Skaff
-----------------------------
Daniel L. Skaff,
Chairman of the General Partner
Address: One Market
Steuart Street Tower
Suite 2550
San Francisco, CA 94105
FMA HIGH YIELD INCOME L.P.
By: SCHRODER WERTHEIM INVESTMENT
SERVICES, INC., its general partner
By: /s/ David Gibson
----------------------------
Name: David Gibson
Title: Director
Address: 345 N. Maple Drive, Suite 320
Beverly Hills, CA 90210
Nominee (name in which the
securities are registered if
different than name of Investor):
Lewco Securities Corp.
Tax I.D. No.: 13-2765944
<PAGE>
WSIS FLEXIBLE INCOME PARTNERS L.P.
By: SCHRODER WERTHEIM INVESTMENT
SERVICES, INC., its general partner
By: /s/ David Gibson
----------------------------
Name: David Gibson
Title: Director
Address: 345 N. Maple Drive, Suite 320
Beverly Hills, CA 90210
Nominee (name in which the
securities are registered if
different than name of Investor):
Lewco Securities Corp.
Tax I.D. No.: 13-2765944
<PAGE>
WSIS HIGH INCOME L.P.
By: SCHRODER WERTHEIM INVESTMENT
SERVICES, INC., its general partner
By: /s/ David Gibson
----------------------------
Name: David Gibson
Title: Director
Address: 345 N. Maple Drive, Suite 320
Beverly Hills, CA 90210
Nominee (name in which the
securities are registered if
different than name of Investor):
Lewco Securities Corp.
Tax I.D. No.: 13-2765944
CASUAL DINING VENTURES, INC.
By: /s/ Charles W. Redepenning, Jr.
-------------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President
Address: One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
<PAGE>
DONALD BENJAMIN
/s/ Donald Benjamin
-------------------
FRANK HOLDRAKER
/s/ Frank Holdraker
-------------------
VICKI TANNER
--------------------
RONALD D. WEINSTOCK INC.
/s/ Ronald D. Weinstock Inc.
----------------------------
Ronald D. Weinstock, President
<PAGE>
SCHEDULE 1
FMA High Yield Income L.P.
WSIS Flexible Income Partners L.P.
WSIS High Income L.P.
Howdy S. Kabrins
La Salsa, Inc.
Crown Associates III, L.P.
Crown-Glynn Associates, L.P.
Nueberger & Berman as Trustee for the Crown Trust
Theodore H. Ashford
Noro-Moseley Partners II, L.P.
Seidler Salsa, L.P.
Bankers Trust Company as Master Trustee for Hughes Aircraft Retirement Plans
Charles A. Lynch
Sienna Limited Partnership I
Sienna Limited Partnership II
Sienna Holdings, Inc., as Nominee
InterWest Partners IV
<PAGE>
Donald Benjamin
Vicki Tanner
Ronald D. Weinstock Inc.
Frank Holdraker
Casual Dining Ventures, Inc.
FOURTH AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT
THIS AGREEMENT is made and entered into as of January 12,
1996, by and among La Salsa Holding Co., a Delaware corporation (the "Company"),
Howdy S. Kabrins ("Kabrins" or the "Founder"), La Salsa, Inc., a California
corporation ("La Salsa"), InterWest Partners IV, a California limited
partnership ("InterWest"), Sienna Holdings, Inc., a California corporation, as
Nominee ("Nominee"), Sienna Limited Partnership I, a California limited
partnership ("Sienna") and the other persons and entities listed on Schedule 1
hereto (Kabrins, La Salsa, InterWest, Nominee, Sienna and such persons and
entities are collectively referred to as the "Stockholders" or individually each
may be referred to as a "Stockholder") for the purpose of amending and restating
in its entirety the Third Amended Agreement (as defined below).
WHEREAS, the parties believe that it is in the best interest
of the Company and the Stockholders to provide for certain limitations on the
future disposition of the shares of capital stock of the Company held by the
Stockholders;
WHEREAS, in connection with the transactions contemplated
under that certain Asset and Stock Purchase and Reorganization Agreement (the
"Asset Purchase Agreement"), dated as of February 19, 1992, by and among
Kabrins, the Company, La Salsa and the other parties named therein, the parties
desired to restrict the sale, transfer, pledge, assignment, or encumbrance of
the shares of capital stock of the Company owned by the Stockholders pursuant to
a Restricted Stock Agreement dated as of March 4, 1992 (the "Original
Agreement");
WHEREAS, as of August 26, 1992, Charles A. Lynch and Michael
E. Kassan ("Kassan") became parties to the Original Agreement;
WHEREAS, the parties amended and restated the Original
Agreement in connection with the Series B Convertible Preferred Stock financing
of the Company pursuant to an Amended and Restated Restricted Stock Agreement
dated as of May 12, 1993 (the "Amended Agreement");
WHEREAS, the parties amended the Amended Agreement in
connection with the termination of Kabrins' employment with the Company and the
grant of certain franchise rights related to the Company's restaurants pursuant
to the First Amendment to Amended and Restated Restricted Stock Agreement dated
as of March 18, 1994;
WHEREAS, the parties amended and restated the Amended
Agreement in connection with the Series D Convertible Preferred Stock financing
of the Company pursuant to a Second Amended and Restated Restricted Stock
Agreement dated as of March 3, 1995 (the "Second Amended Agreement");
<PAGE>
WHEREAS, the parties amended the Second Amended Agreement in
connection with the transfer of certain shares by Kabrins pursuant to the
Amendment No. 1 to Second Amended and Restated Restricted Stock Agreement dated
as of October 12, 1995 (the "Amendment").
WHEREAS, the parties amended and restated the Second Amended
Agreement, as amended by the Amendment, in connection with the issuance of the
Company's Class B Common Stock and the transfer of certain shares by Kabrins
pursuant to a Third Amended and Restated Restricted Stock Agreement dated as of
November 14, 1995 (the "Third Amended Agreement");
WHEREAS, the parties hereto now desire to amend and restate
the Third Amended Agreement, in connection with the sale and issuance of
4,166,667 shares of the Company's Series D Convertible Preferred Stock and a
warrant (the "CDV Warrant") to purchase an additional 4,729,470 shares of the
Company's Series D Convertible Preferred Stock to Casual Dining Ventures, Inc.
("CDV"), to restrict the sale, transfer, pledge, assignment or encumbrance of
the shares of capital stock of the Company or any securities convertible into
Common Stock of the Company currently owned or subsequently acquired by the
Stockholders (the "Shares") by executing this Agreement;
WHEREAS, the Third Amended Agreement may be amended with the
written consent of (i) the holders of at least two-thirds (2/3) of the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock, voting
together as a single class and (ii) the holders of at least two-thirds (2/3) of
the outstanding shares of Series D Convertible Preferred Stock; and
WHEREAS, the holders of at least two-thirds (2/3) of the
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock and Series D Convertible Preferred Stock,
voting together as a single class and the holders of at least two-thirds (2/3)
of the outstanding shares of Series D Convertible Preferred Stock are parties
hereto.
NOW, THEREFORE, in consideration of the mutual covenants and
promises set forth herein, the parties hereto agree as follows:
<PAGE>
1. Right of First Refusal on Stockholder Transfers. Before any Shares registered
in the name of a Stockholder may be sold or transferred to a third party (a
"Proposed Transferee"), including a transfer by operation of law or other
involuntary transfer, such Shares shall first be offered to the Company, then to
the other Stockholders, in the following manner:
(a) Company Right of First Refusal.
(i) The Shares shall first be offered to the Company. The Stockholder proposing
to sell or transfer Shares (the "Selling Stockholder") shall deliver or
mail by certified mail a written notice (the "Notice") to the Company and
the other Stockholders (the "Non-Selling Stockholders") stating (i) such
Selling Stockholder's bona fide intention to sell or transfer Shares, (ii)
the number of Shares to be sold or transferred (which amount of Shares
shall be referred to herein as "Offered Securities") and (iii) the price
for which such Selling Stockholder proposes to sell or transfer such
Offered Securities.
(ii) The Company shall have the right, at any time within fifteen (15) days of
receipt of the Notice, to purchase all, but not less than all, of the
Offered Securities, at the price per share specified in the Notice. Such
right shall be exercised by written notice signed by an officer of the
Company and delivered or mailed as provided in Section 11(c) hereof, which
notice shall specify the time, place and date for settlement of such
purchase.
(b) Non-Selling Stockholder Right of First Refusal.
(i) If the Company elects not to exercise its right pursuant to Section 1(a)
hereof with respect to all of the Offered Securities, or if such right is
not exercised within fifteen (15) days of receipt of the Notice by the
Company, the Selling Stockholder shall notify the Non-Selling Stockholders
of such fact within five (5) days after the expiration of such fifteen (15)
day period.
(ii) Each Non-Selling Stockholder will have an option, for fifteen (15) days
after receiving the notice specified in Section 1(b)(i) hereof, to give
written notice to the Company and the Selling Stockholder of such
Non-Selling Stockholder's election to purchase its pro rata portion of all,
but not less than all, of the Offered Securities, which shall be equal to
the product of (i) the amount of Offered Securities multiplied by (ii) a
fraction, the numerator of which shall be the number of shares of Common
Stock of the Company held by such Non-Selling Stockholder (on an
as-converted basis), and the denominator of which shall be the aggregate
number of shares of Common Stock owned by the Non-Selling Stockholders as a
group (on an as-converted basis). The purchase price at which the Shares
are offered to the Non-Selling Stockholders shall be the price specified in
the Notice.
<PAGE>
(iii)If exercised by a Non-Selling Stockholder pursuant hereto, the right to
purchase the Offered Securities shall be exercised by written notice,
signed by such Non-Selling Stockholder, and delivered or mailed to the
Company and the Selling Stockholder as provided in Section 11(c) hereof.
The exercise of the option shall specify the time, place and date for
settlement of such purchase, which shall be consummated at a closing held
at the Company within ten (10) days after the expiration of the notice
period specified in Section 1(b)(ii). The Company shall promptly, in
writing, inform each Non-Selling Stockholder which purchases all the shares
available to it (a "Fully-Exercising Stockholder") of any other Non-Selling
Stockholder's failure to do likewise. During the seven (7) day period
commencing after receipt of such information, each Fully-Exercising
Stockholder shall be entitled to obtain that portion of the Shares for
which Non-Selling Stockholders were entitled to subscribe but which were
not subscribed for by the Non-Selling Stockholders (the "Unsubscribed
Shares") which is equal to the product of (i) the amount of Unsubscribed
Shares multiplied by (ii) a fraction, the numerator of which shall be the
number of shares of Common Stock of the Company held by such
Fully-Exercising Stockholder (on an as-converted basis), respectively, and
the denominator of which shall be the aggregate number of shares of Common
Stock owned by all Fully-Exercising Stockholders who wish to purchase
Unsubscribed Shares (on an as-converted basis).
(c) Permitted Sales of Refused Securities. If neither the
Company nor the Non-Selling Stockholders have purchased all of the Offered
Securities under their respective rights of first refusal as described herein,
the Selling Stockholder may sell all of the Offered Securities to any person at
the price specified in the Notice or at a higher price, provided that such sale
or transfer is consummated within one hundred twenty (120) days of the date of
the Notice, and provided further that any such sale is in accordance with all
the terms and conditions hereof. If the Selling Stockholder fails to consummate
the sale or transfer within such one hundred twenty (120) day period, the option
of the Company and the Non-Selling Stockholders provided hereby shall be deemed
to be revived with respect to such shares and no sale or transfer of Shares
shall be effected without first offering the shares in accordance herewith.
(d) Exempt Transfers. In addition to the permissible transfers
set forth in Section 6 hereof, the rights of first refusal herein shall not
pertain or apply in the case of:
(i) transfers in connection with a bona fide business acquisition of the
Company, whether by merger, consolidation, sale of assets, sale or exchange
of stock or otherwise; or
<PAGE>
(ii) transfers pursuant to a public offering registered under the Securities
Act.
2. Co-Sale Right. Subject to the rights of first refusal set forth in
- ------------- Section 1 hereof:
(a) In the event any of the Stockholders receive one or more
bona fide offers (collectively, the "Purchase Offer") from a third party to
purchase from such Stockholder (hereinafter referred to in this Section 2 as the
"Selling Stockholder") any or all of its Shares, upon specific terms and
conditions (including a specified purchase price payable in cash or other
property), then such Stockholder shall promptly provide to the Company and the
other Stockholders written notice of the terms and conditions of such Purchase
Offer (such notice is referred to herein as the "Transfer Notice"), and the
following provisions shall apply.
(b) Each of the other Stockholders shall have the right,
exercisable upon written notice to the Company and the Selling Stockholder
within fifteen (15) business days after receipt of the Transfer Notice, to
participate in the Selling Stockholder's sale of such stock pursuant to the
specified terms and conditions of such Purchase Offer. To the extent one or more
of the other Stockholders exercises such right of participation in accordance
with the terms and conditions set forth below, the number of shares of capital
stock which the Selling Stockholder may sell pursuant to such Purchase Offer
shall be correspondingly reduced. The right of participation of each of the
other Stockholders shall be subject to the following terms and conditions:
(i) Each of the other Stockholders may sell all or any part, of that number of
shares of the Company's Common Stock, or shares of the Company's Preferred
Stock or other convertible securities on an as-converted basis, being sold
by the Selling Stockholder equal to the product obtained by multiplying,
(x) the aggregate number of shares of Common Stock covered by the Purchase
Offer (assuming conversion of any Preferred Stock and other convertible
securities) by (y) a fraction, the numerator or which is the number of
shares of such Common Stock of the Company (assuming conversion of any
Preferred Stock and other convertible securities) owned at the time by such
Stockholder wishing to participate, and the denominator of which is the
combined number of shares of Common Stock of the Company (assuming
conversion of any Preferred Stock and other convertible securities) owned
at the time by the Selling Stockholder and the other Stockholders;
(ii) To the extent one of the other Stockholders elects not to sell the full
number of Shares it is entitled to sell pursuant to Section 1(b)(i) above,
the other Stockholders' rights to participate in the sale shall be
increased pro rata by a corresponding number of shares; and
<PAGE>
(iii)Each of the other Stockholders participating in such sale shall effect its
participation in any such sale by delivering to the Company for transfer to
the third-party offeror one or more certificates, properly endorsed for
transfer, which represent the number of shares of the capital stock of the
Company which such Stockholder elects to sell pursuant to this Section 2.
(c) The stock certificates which the other Stockholders
deliver to the Company pursuant to this Section 2 shall be transferred by the
Company to the third-party offeror in consummation of the sale of the Company's
capital stock being sold pursuant to the terms and conditions specified in the
Transfer Notice, and the Company shall promptly thereafter remit to the other
Stockholders that portion of the proceeds of the sale to which the other
Stockholders are entitled by reason of their participation in such sale.
(d) The exercise or non-exercise of the rights of the other
Stockholders hereunder to participate in one or more sales by the Selling
Stockholder shall not adversely affect their rights to participate in subsequent
sales by the Selling Stockholder.
(e) For purposes of this Section 2 only, the definition of the
term "Stockholder" shall not include FMA High Yield Income L.P., WSIS High Yield
Income L.P., WSIS Flexible Income Partners L.P., or any transferee thereof
(collectively, "Schroder Wertheim"), unless the number of shares to be purchased
under a Purchase Offer exceeds fifty percent (50%) of the then outstanding
shares of Common Stock of the Company (on an as-converted basis).
3. Right to Purchase.
(a) Notwithstanding anything contained in Section 1 or Section
2 of this Agreement, if at any time Salsero I, Salsero II and Founder have all
of their Franchise Agreements terminated by the Franchisor as a result of
Salsero I and/or Salsero II and/or Founder failing to substantially comply with
their Franchise Agreements and their failure to diligently pursue to cure said
deficiencies or breaches, and said termination is accepted by Salsero I, Salsero
II and Founder, in writing, or said Franchise Agreements are deemed terminated
by a Court of competent jurisdiction and said judgment becomes final (a
"Termination Event"), the Company shall have the right within ninety (90) days
after the date of the Termination Event to purchase all of the Shares then owned
by Founder at the price set forth below.
<PAGE>
For purposes of this Section 3, "Personal Representative" shall mean the person
or persons, including any bank or trust company, who shall be the duly
appointed, qualified, and acting executor or executors of the last will and
testament of the Founder, or the duly appointed, qualified, and acting
administrator, administrator with the will annexed, or administrator to collect
of the estate of the Founder.
(b) Within ninety (90) days after the date of a Termination
Event, the Company shall have the right to: (i) first, purchase all, but not
less than all, of the Shares held by the Founder by giving written notice
thereof to the Founder, or his Personal Representative, as the case may be; and
(ii) second, purchase some, but not all of the Shares held by Founder and offer
to the other Stockholders those Shares held by Founder the Company elects not to
purchase (the "Available Shares"). If the Company elects to purchase all of the
Founder's Shares, the notice shall specify a date for the closing of such
purchase which shall be not more than thirty (30) days after the Termination
Event.
(c) If the Company elects not to purchase all of the Shares
held by the Founder, the Company shall, within ninety (90) days after such
Termination Event, notify the Founder, or his Personal Representative, as the
case may be, and all other Stockholders (hereinafter in this Section 3 referred
to individually and collectively as the "Offerees"), that it will not be
purchasing all of the Shares of such Founder. Such notice shall indicate the
number of Shares (if any) the Company will purchase and the number of Available
Shares. The Offerees shall then have the option, exercisable within thirty (30)
days after receipt of such notice from the Company, to purchase all, but not
less than all, of the Available Shares of the Founder, in proportion to their
respective ownership of the Company's capital Stock at the time, and to the
extent one of the other Offerees elects not to purchase the full number of
Shares it is entitled to purchase pursuant to this Section 3(c), the other
Offerees rights to participate in such purchase shall be increased pro rata by a
corresponding number of shares. The option set forth in this Section 3(c) shall
be exercised by written notice from the Offerees given to the Founder, or his
Personal Representative, as the case may be, and the Company within thirty (30)
days after receipt of such notice from the Company. Said notice shall specify a
date for the closing of the purchase which shall be not more than thirty (30)
days after receipt of the notice by the Company. The purchase price per share at
which the Offerees may purchase said Available Shares, and the terms and
conditions of such purchase, shall be the same as the price per share, and the
terms and conditions, at which the Company may purchase Shares pursuant to
Sections 3(b), 3(d) and 3(e) hereof. If the Company and/or one or more Offerees
are purchasing Shares pursuant hereto, the closings of such purchases shall be
simultaneous and shall be conditioned on one another. If at the end of thirty
(30) days after receipt of such notice from the Company, the Offerees have not
committed to purchase all of the Available Shares, then the rights of the
Company and the Offerees under Sections 3(b) and 3(c) herein shall be
terminated.
<PAGE>
(d) The price of the Shares being purchased pursuant to this
Section 3 will be equal to the fair market value of such Shares as of the
Termination Date, which value will be determined by mutual agreement between the
Company and the Founder, or his Personal Representative, as the case may be;
provided, however, that in the event that such mutual agreement is not reached
within thirty (30) days after the exercise by the Company or the Offerees of
their purchase rights hereunder (the "Exercise Date"), the fair market value of
such Shares shall be determined through an appraisal by an independent third
party mutually acceptable to such parties. In the event that such parties cannot
agree on an independent third party appraiser within forty-five days after such
Exercise Date, the Founder, or his Personal Representative, as the case may be,
shall select one (1) appraiser, and the Company, or Offerees who are purchasing
a majority of the Shares, as the case may be, shall select one (1) appraiser,
both selections to be made within sixty (60) days after such Exercise Date.
These two appraisers shall submit their respective valuations for the Shares
within thirty (30) days after their selection. If the higher of the two
valuations is within 10% of the lower, the average of such valuations will be
deemed the fair market value of the shares in question. Otherwise, the two
appraisers shall select a third appraiser who shall submit a valuation within
sixty (60) days of the selection of the two initial appraisers. At that time,
the valuation submitted which deviates the most from the average of the three
valuations shall be disregarded, and the average of the remaining two valuations
shall be deemed to be the applicable fair market value. In the event the
valuation of such Shares is determined by appraisal, the cost of such appraisal
shall be borne by the party who appointed the appraiser whose valuation deviated
the most from the final valuation.
(e) The purchase price of the Shares being purchased pursuant
to this Section 3 shall be payable at the closing, as specified in Section 5
hereof, at the option of the Company or any Offeree, as the case may be, either
(i) in cash, or (ii) with ten percent (10%) of such purchase price paid in cash,
and the remaining balance paid by a promissory note, with such promissory note
having a term of five (5) years, bearing interest at a fixed rate equal to the
prime lending rate, as determined on the business day immediately prior to such
closing by Bank of America, and providing for accrued interest to be due and
payable quarterly and principal amounts to be due and payable in five equal
annual installments; provided, that such promissory note shall be substantially
in the form of the Founder's Note as defined in the Asset Purchase Agreement.
(f) Notwithstanding anything to the contrary in this
Agreement, if the Company has the right to purchase Shares pursuant to this
Section 3, but, at the applicable time, the Company at such time is prohibited
or restricted from doing so by reason of any loan agreement or debt covenant,
then the Company's rights and options, shall be tolled and suspended for a
period of three (3) months from the date such rights or options first became
exercisable (provided that the Company shall have an additional three (3) months
to close any purchase of the Founder's Shares). In such case, all references in
this Section 3 to dates and time periods shall be deemed delayed for so long as
necessary to give effect to the provisions of this Section 3(f).
<PAGE>
(g) Upon expiration of all purchase options of the Company and
the Offerees, the Shares shall no longer be subject to the provisions of this
Section 3, but shall continue to be subject to all of the other restrictions and
rights contained in this Agreement.
(h) Non-Competition.
(i) The Founder agrees that in the event his or her Shares are purchased by the
Company or the Offerees pursuant to this Section 3, he shall not engage
(except in his capacity as an officer, director, and/or employee of the
Company), directly or indirectly, whether on his own account or as a
shareholder (other than as a shareholder of the Company or as a less than
2% shareholder of a publicly-held company), partner, joint venturer,
employee, consultant, advisor and/or agent, of any person, firm,
corporation, or other entity, in any or all of the following activities in
any of the counties of California in which La Salsa is doing business at
the date of the closing of the purchase of Founder's Shares, for a period
of three (3) years after the date of the termination referred to in Section
3(a):
(A) Own, operate or franchise (1) any Mexican or
"south of the border" type restaurant, including without limitation, one which
utilizes the concepts of "tacos al carbon" or "tacquerias" or (2) any business
which sells, distributes or in any other way markets retail products which the
Company has researched, developed or marketed prior to the Founder's termination
of employment;
(B) Solicit customers or business patronage which
results in competition with the Company or any of its affiliates in any of the
types of business described in (A) above;
(C) Promote or assist, financially or otherwise,
any person, firm, association, corporation, or other entity engaged in any of
the types of business described in clause (A) above; or
(D) Solicit, offer employment to or hire any
employee of the Company or any of its subsidiaries in connection with the types
of business described in (A) above.
(ii) Without limitation, the parties agree and intend that the covenants
contained in this subsection 2(h) shall be deemed to be a series of
separate covenants and agreements, one for each and every county of each
state and political subdivision of the United States and other nation to
which this Agreement is applicable. If, in any judicial proceeding, a court
shall refuse to enforce in such action all of the separate covenants deemed
included herein, then at the option of the Company, wholly unenforceable
covenants shall be deemed eliminated from the provisions hereof for the
purpose of such proceeding to the extent necessary to permit the remaining
separate covenants to be enforced in such a proceeding.
<PAGE>
(iii)In the event the agreement in this Section 3(h) shall be determined by any
court of competent jurisdiction to be unenforceable by reason of its
extending for too great a period of time or over too great a geographical
area or by reason of its being too extensive in any other respect, it shall
be interpreted to extend over the maximum period of time for which it may
be enforceable and over the maximum geographical area as to which it may be
enforceable and to the maximum extent in all other respects as to which it
may be enforceable, and enforced as so interpreted, all as determined by
such court in such action. The parties hereto acknowledge and agree that
the time, scope, geographic area and other provisions of this Section 3(h)
have been specifically negotiated by sophisticated parties represented by
counsel of their own selection and specifically hereby agree that such
time, scope, geographic area and other provisions are reasonable under the
circumstances.
(iv) The parties agree that due to the unique nature of the services and
capabilities of Kabrins, there can be no adequate remedy at law for any
breach of his obligations hereunder, that any such breach may allow Kabrins
and/or third parties to unfairly compete with the Company resulting in
irreparable harm to the Company, and therefore, that upon any such breach
or any threat thereof, the Company shall be entitled to appropriate
equitable relief in addition to whatever remedies it might have at law.
Further, the Company shall be entitled to indemnification by Kabrins from
any loss or harm, including, without limitation, attorney's fees, in
connection with any breach, or any enforcement of his obligations
hereunder.
4. Further Restriction on the Shares.
For as long as the Shares are subject to the restrictive provisions set forth in
Sections 1, 2 and 3 of this Agreement, the Stockholders shall not pledge or
encumber any or all Shares which now or hereafter may be held or owned by them
provided, however, that Kabrins may pledge up to fifty percent (50%) of the
Shares owned by him to a nationally recognized financial institution if such
institution agrees in writing with the Company and the other Stockholders that
it will otherwise become a party to and bound by this Agreement.
5. Closing.
The closing of the purchase and sale of Shares pursuant to Section 3 of this
Agreement shall take place at the principal business office of the Company. On
the date of closing, the applicable Stockholder shall tender to the Company
and/or the applicable Offerees, as the case may be, certificates evidencing the
number of Shares to be purchased and sold pursuant to the terms hereof, properly
endorsed for transfer to the applicable purchaser with signature guaranteed, and
accompanied by any other documents which are necessary in the reasonable opinion
of the Company to evidence the authority of the applicable Offeror to make such
sale and transfer good title to the Shares. The Company and/or each applicable
Offeree, as the case may be, shall pay to the Stockholder the aggregate purchase
price of the Shares being purchased by it, him or her by delivering to the
Stockholder a promissory note in accordance with terms of this Agreement and/or
by delivering immediately available funds to the Stockholder, as applicable.
<PAGE>
6. Permissible Transfers.
Notwithstanding the above, and except as otherwise set forth in Section 3 of
this Agreement, any rights granted under this Agreement to the Company or the
Stockholders with respect to transfers of Shares by other Stockholders shall not
apply to a transfer by a Stockholder (i) to the estate of such Stockholder, or
by gift, will, or intestate succession of such Stockholder to his or her spouse
or to the siblings, lineal descendants, or ancestors of such Stockholder or his
or her spouse, (ii) to a trust for the benefit of such Stockholder's spouse or
to the siblings, lineal descendants or ancestors of such Stockholder or his or
her spouse, (iii) between any Stockholders, (iv) as provided in Section 7 below;
(v) in the case of a Stockholder which is not a natural person, to any person(s)
or entity controlling, controlled by or under common control with such
Stockholder or in the case of a partnership to any partner thereof, so long as
such transfer does not violate any applicable securities laws; (vi) in the case
of Kassan, the transfer of 82,000 shares of Series A Convertible Preferred Stock
to Kabrins, (vii) in the case of Kabrins, the sale of 461,538 shares of Series A
Convertible Preferred Stock to the Company or its designee pursuant to that
certain Supplemental Agreement between Kabrins and the Company dated as of May
12, 1993, the pledge of 115,000 shares of Series A Convertible Preferred Stock
to Lou Adler pursuant to that certain Settlement Agreement and Mutual General
Release dated January 10, 1995, by and among Kabrins, Sylvano, Inc., a
California corporation, L.S. Malibu Partnership, a California limited
partnership, La Salsa Management, Inc., a California corporation, Lou Adler,
Sienna and the Company, the transfer of 10,000 shares of Series A Convertible
Preferred Stock to Vicki Tanner pursuant to that certain Stock Transfer
Agreement dated October 12, 1995, by and among Kabrins, Vicki Tanner and Sienna
Holdings, Inc. (the "Tanner Transfer"), or the transfer of 9,000, 4,500 and
4,500 shares of Series A Convertible Preferred Stock to Donald Benjamin, Ronald
D. Weinstock Inc. and Frank Holdraker, respectively (the "Management
Transferees") pursuant to certain Stock Transfer Agreements dated November 14,
1995, by and between Kabrins and each of the Management Transferees (the
"Management Transferee Transfers"); provided, however, that, in all cases above,
the transferee shall agree in writing to be subject to the terms hereof,
including the restrictions set forth in Section 3 hereof, to the same extent as
if he, she, or it were an original Stockholder of the Company and, in the case
of a transfer by Kabrins or his transferees other than either the Tanner
Transfer or the Management Transferee Transfers, to be subject to the terms of
the Voting Trust Agreement dated as of March 4, 1992, as amended, among certain
Stockholders and Sienna Holdings, Inc. as if such transferee were Kabrins.
7. Ownership Among Kabrins and La Salsa.
The parties hereto acknowledge that at the time the Shares were issued by the
Company pursuant to the Asset Purchase Agreement, such Shares were held
beneficially by La Salsa and not by Kabrins individually. Until such time as the
Shares are distributed to Kabrins, as an individual, La Salsa shall be treated
as a "Stockholder" for purposes of this Agreement and any proposed sales,
transfers, pledges, assignments, or encumbrances by La Salsa of any of the
Shares held by La Salsa shall be subject to the terms hereof; provided, that it
is agreed and understood that promptly following the issuance of the Shares, La
Salsa may distribute its Shares to Kabrins free of the provisions of Sections 1
and 2 herein.
<PAGE>
8. Right of First Offer on Company Issuances.
(a) If the Company proposes to issue any equity securities or
other securities convertible into capital stock of the Company, it shall give
written notice thereof to each of the Stockholders at least thirty (30) days
prior to the date of the proposed issuance. Such notice shall state (i) the
title of the securities to be issued, (ii) the issue price, (iii) the type of
consideration for the issuance and (iv) if the securities are not voting common
stock, the rights, privileges, preferences and other terms thereof. Each
Stockholder shall have fifteen (15) days in which to notify the Company in
writing that it will subscribe for and purchase up to all of its pro rata share
(pro rata to its combined ownership of the Shares, on an as-converted basis) of
such securities on the terms specified in the Company's notice. If a Stockholder
does not so subscribe, then those Stockholders who did subscribe shall have the
right to increase their subscriptions proportionately.
(b) After the notices described in Section 8(a) herein have
all been given, the Company shall have the right to cancel the proposed issuance
or proceed therewith, in which case the closing shall take place at a place and
on a date to be set by the Company upon at least ten (10) days prior written
notice. In any event, the closing pursuant to Section 8(a) or (b) herein shall
take place simultaneously with the closing of the remainder of the issuance.
(c) Notwithstanding the above, the provisions of this Section
8 shall not apply to (i) any issuance or proposed issuance of securities upon
the conversion, exchange or exercise of warrants, options, rights or other
securities previously issued in compliance with this Agreement, (ii) the
issuance to consultants to and former employees of the Company of options to
purchase an aggregate of 65,000 shares of Common Stock, (iii) any adjustment to
the number of warrant shares or exercise price required pursuant to the warrant
held by Foothill Capital Corporation dated February 20, 1993, initially to
purchase 100,000 shares of Common Stock, (iv) the issuance of options to
purchase, at no less than the fair market value of the Common Stock on the date
of such issuance, 2,877,820 shares of Common Stock pursuant to any stock option
plan or similar arrangement hereinafter instituted by the Corporation or any of
its Subsidiaries, (v) securities to the public pursuant to an effective
registration statement, (vi) securities as consideration, in whole or in part,
for the acquisition, in whole or in part, of a corporation or other business or
the assets thereof, (vii) the issuance of up to 1,000,000 shares of the
Company's Class B Common Stock, (viii) the sale and issuance of up to 4,166,667
shares of the Company's Series D Convertible Preferred Stock to CDV pursuant to
that certain Series D Convertible Preferred Stock and Warrant Purchase Agreement
of even date herewith (the "CDV Purchase Agreement") or (ix) the sale and
issuance of the CDV Warrant pursuant to the CDV Purchase Agreement.
<PAGE>
9. Election of Directors.
(a) Each of the Stockholders hereby agrees that for the term
of this Agreement, the board of directors of the Company shall, except as set
forth in Sections 9(e) and 9(f) below, consist of (i) four nominees designated
by Sienna and InterWest, (ii) two nominees designated by the Founder, (iii) one
nominee designated by the holders of a majority of the outstanding Series B
Convertible Preferred Stock (excluding Sienna and InterWest), (iv) one nominee
designated by Schroder Wertheim, (v) a number of nominees determined pursuant to
Section 9(g) below designated by CDV (or its successor, as set forth in Section
9(g) below) and (vi) one representative of Company management to be nominated by
a majority of the other directors. Each Stockholder shall vote its Shares, and
shall take all actions necessary, to ensure that the number of directors
constituting the entire board of directors shall be equal to the total number of
nominees as set forth above.
(b) Each Stockholder hereby agrees to vote all Shares owned
or held of record by it at each annual or special meeting in favor of, or to
take all actions by written consent in lieu of any such meeting necessary to
cause, the election as members of the board of directors of those individuals
nominated in accordance with, and to otherwise effect the intent of, this
Section 9.
(c) Each Stockholder hereby agrees that, except as set forth
in Sections 9(e), (f) and (g) herein, no directors shall be removed unless the
Stockholder which designated such nominee pursuant to Section 9(a) herein shall
have voted in favor of or consented in writing to such removal.
(d) In the event that a vacancy is created on the board of
directors by the death, disability, retirement, resignation or removal of a
director, each Stockholder agrees to use its best efforts to cause the directors
designated by it to vote for an individual designated to fill such vacancy and
serve as a director by whichever Stockholder had designated (pursuant to Section
9(a) above) the director whose death, disability, retirement, resignation or
removal resulted in such vacancy; provided, however, that such individual so
designated may not previously have been a director of the Company who was
removed from the board of directors.
(e) Notwithstanding anything to the contrary in this Section
9, if the Founder disposes of more than five percent (5%) but less than fifty
percent (50%) of the number of Shares initially issued to him by the Company in
connection with the closing of the transactions pursuant to the Asset Purchase
Agreement (such number to be adjusted to give effect to stock splits, stock
dividends and similar occurrences) (the "Initial Shares"), he shall only be
entitled to nominate one (1) director and the board of directors shall reduce
the number of total directors accordingly. To give effect to such change, the
Founder shall cause one of his nominated directors to resign, and, if no such
resignation occurs, each Stockholder shall take any and all actions required to
effect such removal. If the Founder disposes of more than fifty percent (50%) of
the Initial Shares, the Founder shall not be entitled to nominate any directors,
the board of directors shall reduce the number of total directors accordingly,
and the procedures set forth in the immediately preceding sentence shall be
followed with respect to all of the directors previously nominated by the
Founder.
<PAGE>
(f) Notwithstanding anything to the contrary in this Section
9, in the event of the occurrence of any of the following events (a "Schroder
Wertheim Change of Control"): (i) a change of more than fifty percent (50%) of
the voting power of FMA High Yield Income, L.P., WSIS Flexible Income Partners
L.P. or WSIS High Income L.P. (collectively, the "Schroder Wertheim Entities"),
or any entity controlling, controlled by or under common control with any of the
Schroder Wertheim Entities or (ii) the sale of all or substantially all of the
assets of any of the Schroder Wertheim Entities, Schroder Wertheim shall not be
entitled to nominate any directors and the board of directors shall reduce the
number of total directors accordingly. To give effect to such change, Schroder
Wertheim shall cause its nominated director to resign, and, if no such
resignation occurs, each Stockholder shall take any and all actions required to
effect the removal of such director.
The Schroder Wertheim Entities shall provide written notice (the "Change of
Control Notice") of any Schroder Wertheim Change of Control to the Company, to
be delivered as provided in Section 11(c) hereof, within fifteen (15) days of
such Schroder Wertheim Change of Control.
(g) So long as CDV holds at least 2,066,116 shares of the
Company's Series D Convertible Preferred Stock (4,424,020 shares if CDV has
exercised the CDV Warrant), CDV shall be entitled to nominate a number of
directors equal to the greater of (x) one director (two directors if CDV has
exercised the CDV Warrant in full) and (y) that number of directors such that
(i) the ratio of members of the Company's Board of Directors nominated by CDV to
the total number of members of the Company's Board of Directors is equal to (ii)
the ratio of the number of outstanding shares of the Company's Common Stock held
by CDV (assuming conversion of shares of Convertible Preferred Stock, but not
assuming the exercise of any options or warrants) to the number of outstanding
shares of the Company's capital stock (calculated on a fully-diluted basis), and
the board of directors shall increase or decrease the number of total directors
accordingly as necessary. In the event that the foregoing calculation would
result in a fraction, the number of directors that CDV shall be entitled to
nominate shall be rounded to the nearest whole number.
In the event that CDV holds less than 2,066,116 shares of the Company's Series D
Convertible Preferred Stock (4,424,020 shares if CDV has exercised the CDV
Warrant), CDV shall be entitled to nominate a number of directors such that (i)
the ratio of members of the Company's Board of Directors nominated by CDV to the
total number of members of the Company's Board of Directors is equal to (ii) the
ratio of the number of outstanding shares of the Company's Common Stock held by
CDV (assuming conversion of shares of Convertible Preferred Stock, but not
assuming the exercise of any options or warrants) to the number of outstanding
shares of the Company's capital stock (calculated on a fully-diluted basis), and
the board of directors shall increase or decrease the number of total directors
accordingly as necessary. In the event that the foregoing calculation would
result in a fraction, the number of directors that CDV shall be entitled to
nominate shall be rounded to the nearest whole number.
In the event that a single person acquires from CDV all of the shares of the
capital stock of the Company either (i) purchased under that certain Series D
Convertible Preferred Stock and Warrant Purchase Agreement of even date
herewith, by and between the Company and CDV, and, if exercised, the CDV Warrant
or (ii) issued upon conversion of such shares, then the rights of CDV hereunder
to designate nominees to the Company's Board of Directors shall terminate and be
of no further force and effect and, in lieu thereof, such acquiror shall have
the right to designate one (1) nominee to the Company's Board of Directors, and
the board of directors shall adjust the number of total directors accordingly.
<PAGE>
10. Schroder Wertheim Change of Control Right of First Refusal. In the event of
a Schroder Wertheim Change of Control, the Company shall have the right, at any
time within fifteen (15) days of receipt by the Company of the Change of Control
Notice, to purchase all, but not less than all, of the Shares held by the
Schroder Wertheim Entities (the "Schroder Wertheim Shares") at (i) if the
Schroder Wertheim Shares are shares of capital stock of the Company, a price per
share equal to the original purchase price of such Schroder Wertheim Shares or
(ii) if the Schroder Wertheim Shares are Senior Subordinated Convertible Notes
due 2002 (the "Series D Notes"), at a purchase price equal to the aggregate
principal amount of such Series D Notes, plus any accrued but unpaid interest.
Such right shall be exercised by written notice signed by an officer of the
Company and delivered or mailed as provided in Section 11(c) hereof, which
notice shall specify the time, place and date for settlement of such purchase.
11. Miscellaneous.
(a) Endorsement on Stock Certificates. Each certificate
representing Shares of the Company now or hereafter held by the Stockholders
shall be stamped with a legend in substantially the following form:
"The transfer of the shares of stock represented by this
certificate is restricted under the terms of a Fourth Amended and
Restated Restricted Stock Agreement dated January 12, 1996, a copy of
which is on file at the office of the Company."
(b) Specific Performance. The parties hereby declare that it
is impossible to measure in money the damages which would accrue to one or more
parties hereto, by reason of a failure of a party hereto to perform any of the
obligations under this Agreement. Therefore, if any party hereto shall institute
any action or proceeding to enforce the provisions hereof, any person (including
the Company) against whom such action or proceeding is brought hereby waives the
claim or defense therein that such party, or his or her Personal Representative,
as the case may be, has an adequate remedy at law, and such person shall not
urge in any such action or proceeding the claim or defense that such remedy at
law exists.
(c) Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and to the party to
be notified at the address indicated for such party on the signature page
hereof, or at such other address as such party may designate by ten (10) days'
advance written notice to the other parties, provided, that in the case of
notice to the Company, a copy shall be delivered to each Stockholder also. Any
notice intended for the estate of a party hereto shall be addressed to the
Personal Representative of such party at the address appearing on the records of
the Court by which such Personal Representative was appointed. A copy of any
notices sent to the Company shall be sent to: Brobeck, Phleger & Harrison, Two
Embarcadero Place, 2200 Geng Road, Palo Alto, CA 94303, Attn: Gari L. Cheever,
Esq. All notices and communications shall be deemed to have been received: (i)
in the case of personal delivery, on the date of such delivery; (ii) in the case
of telex or facsimile transmission, on the date on which the sender receives
confirmation by telex or facsimile transmission that such notice was received by
the addressee, provided that a copy of such transmission is additionally sent by
mail as set forth in (iv) below; (iii) in the case of overnight air courier, on
the second business day following the day sent, with receipt confirmed by the
courier; and (iv) in the case of mailing by first class certified or registered
mail, postage prepaid, return receipt requested, on the fifth business day
following such mailing.
(d) Invalid Provision. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other provisions
hereof, and the Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
(e) Modification. No change, modification, or amendment of
this Agreement shall be valid without the written consent of the holders of at
least two-thirds (2/3) of the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock and Series D
Convertible Preferred Stock, voting together as a single class.
<PAGE>
(f) Benefit of Agreement. This Agreement shall be binding
upon and inure to the benefit of the Company, and its successors and assigns,
the Stockholders, and his or her heirs, executors, administrators, and personal
representatives, and such other person or persons who may, from time to time,
become owners of the shares of capital stock of the Company, and become bound by
all the terms and conditions of this Agreement; provided, however, that the
rights granted to certain Stockholders in Section 9(a) to designate nominees to
the Company's Board of Directors may not be assigned without the prior written
consent of the Company.
(g) Term of Agreement. Except as otherwise specified herein,
this Agreement shall remain in force and effect until the consummation of an
underwritten public offering of the Common Stock of the Company with aggregate
proceeds to the Company in excess of $10,000,000, unless sooner terminated by
agreement among the Company and the Stockholders; provided, however, that
termination of this Agreement in the manner hereinbefore provided shall not
affect the validity of the exercise of any options contained herein prior to
such termination.
(h) Attorneys' Fees; Expenses.
(i) If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement or to protect the rights obtained hereunder the
prevailing party shall be entitled to its reasonable attorneys, fees,
costs, and disbursements in addition to any other relief to which it may be
entitled.
(ii) Each Stockholder shall pay in full all fees, costs and disbursements,
direct or indirect, incurred by the Company in connection with the sale or
transfer by such Stockholder to a third party of any Shares registered in
the name of such Stockholder, including a transfer by operation of law or
other involuntary transfer.
(i) Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California (without regard to the
application of choice of law rules), except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party hereto, and as to those matters the law of the jurisdiction under which
the respective entity derives its powers shall govern.
(j) Counterparts. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute one and the same
original Agreement.
(k) Final Terms. This Agreement is the full and complete
understanding of the parties with respect to the subject matter hereof and
supersedes all prior agreements, negotiations and understandings, written or
oral, including without limitation, the Original Agreement, the Amended
Agreement, as amended, and the Second Amended Agreement, as amended, and the
Original Agreement, the Amended Agreement, as amended, the Second Amended
Agreement, as amended, and the Third Amended Agreement are hereby terminated and
shall be of no further force and effect.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.
LA SALSA HOLDING CO.,
a Delaware Corporation
By: /s/ Charles L. Boppell
-----------------------------
Charles L. Boppell
President and Chief Executive Officer
Address: 11601 Santa Monica Blvd.
Los Angeles, California 90025
<PAGE>
HOWDY S. KABRINS
/s/ Howdy S. Kabrins
--------------------
Address: 2800 Olympic Blvd., Suite 201
Santa Monica, California 90404
LA SALSA, INC.,
a California corporation
By: /s/ Howdy S. Kabrins
---------------------------
Howdy S. Kabrins,
President
Address: 2800 Olympic Blvd., Suite 201
Santa Monica, California 90404
<PAGE>
SIENNA LIMITED PARTNERSHIP I
California Limited Partnership
By: SIENNA ASSOCIATES, its General Partner
By: /s/ Daniel L. Skaff
--------------------------
Daniel L. Skaff,
Chairman of the General Partner
Address: One Market
Steuart Street Tower
Suite 2550
San Francisco, CA 94105
SIENNA LIMITED PARTNERSHIP II
a California Limited Partnership
By: SIENNA ASSOCIATES, its General Partner
By: /s/ Daniel L. Skaff
--------------------------
Daniel L. Skaff,
Chairman of the General Partner
Address: One Market
Steuart Street Tower
Suite 2550
San Francisco, CA 94105
<PAGE>
SIENNA HOLDINGS, INC.
a California corporation, as Nominee
By: /s/ Daniel L. Skaff
--------------------------
Daniel L. Skaff,
Chairman
Address: One Market
Steuart Street Tower
Suite 2550
San Francisco, CA 94105
CHARLES A. LYNCH
/s/ Charles A. Lynch
--------------------
Address: 3000 Sand Hill Road
Building 1, Suite 125
Menlo Park, CA 94025
INTERWEST PARTNERS IV
a California Limited Partnership
By: INTERWEST MANAGEMENT
PARTNERS IV, L.P., its General Partner
By: /s/ Wallace R. Hawley
----------------------------
Wallace R. Hawley,
General Partner
Address: 3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
<PAGE>
FMA HIGH YIELD INCOME L.P.
By: SCHRODER WERTHEIM
INVESTMENT SERVICES, INC., its
general partner
By: /s/ David Gibson
-----------------------
Name: David Gibson
Title: Director
Address: 345 N. Maple Drive, Suite 320
Beverly Hills, CA 90210
Nominee (name in which the
securities are registered
if different than name of
Stockholder):
Lewco Securities Corp.
Tax I.D. No.: 13-2765944
WSIS FLEXIBLE INCOME PARTNERS L.P.
By: SCHRODER WERTHEIM
INVESTMENT SERVICES, INC., its
general partner
By: /s/ David Gibson
------------------------
Name: David Gibson
Title:Director
Address: 345 N. Maple Drive, Suite 320
Beverly Hills, CA 90210
Nominee (name in which the
securities are registered
if different than name of
Stockholder):
Lewco Securities Corp.
Tax I.D. No.: 13-2765944
<PAGE>
WSIS HIGH INCOME L.P.
By: SCHRODER WERTHEIM
INVESTMENT SERVICES, INC., its
general partner
By: /s/ David Gibson
-----------------------
Name: David Gibson
Title:Director
Address: 345 N. Maple Drive, Suite 320
Beverly Hills, CA 90210
Nominee (name in which the
securities are registered
if different than name of
Stockholder):
Lewco Securities Corp.
Tax I.D. No.: 13-2765944
CASUAL DINING VENTURES, INC.
By: /s/ Charles W. Redepenning, Jr.
--------------------------------------
Name: Charles W. Redepenning, Jr.
Title:Senior Vice President
Address: One Corporate Place
55 Ferncroft Road
Danvers, MA 01923
<PAGE>
NUEBERGER & BERMAN AS TRUSTEE FOR THE CROWN TRUST
By: /s/
-----------
Name: (illegible)
Title:
Address: 605 Third Avenue, 36th Floor
New York, New York 10158
CROWN ASSOCIATES III, L.P.,
a Delaware Limited Partnership
By: /s/ Margaret S. McNamara
-------------------------------
Margaret S. McNamara
General Partner
Crown Partners III, L.P.
Address: 67 East Park Place, 8th Floor
Morristown, New Jersey 07960
CROWN-GLYNN ASSOCIATES, L.P.,
a Delaware Limited Partnership
By: /s/ David F. Bellot
--------------------------
David F. Bellot
General Partner
Crown-Glynn Partners, L.P.
Address: 67 East Park Place, 8th Floor
Morristown, New Jersey 07960
<PAGE>
NORO-MOSELEY PARTNERS II, L.P.
a Georgia Limited Partnership
By: Moseley and Company II, its General Partner
By: /s/ Jack R. Kelly
------------------------
Name: Jack R. Kelly
Title:General Partner
Address: 9 North Parkway Square
4200 Northside Parkway, N.W.
Atlanta, Georgia 30327
THEODORE H. ASHFORD
/s/ Theodore H. Ashford
-----------------------
Address: Building B-107 Greenville Center
3801 Kennett Pike
Wilmington, Delaware 19807
SEIDLER SALSA, L.P.,
a Delaware Limited Partnership
By: THE SEIDLER COMPANY, its General Partner
By: /s/ Peter Seidler
-------------------------
Peter Seidler
President
Address: 515 S. Figueroa St., Sixth Floor
Los Angeles, California 90071
<PAGE>
BANKERS TRUST COMPANY AS
MASTER TRUSTEE FOR HUGHES
AIRCRAFT RETIREMENT PLANS
By: /s/ Brian Gaon
-------------------
Name: Brian Gaon
Title: Attorney-in-Fact
Address: 34 Exchange Place
Jersey City, New Jersey 07302
DONALD BENJAMIN
/s/ Donald Benjamin
-------------------
VICKI TANNER
-------------------
RONALD D. WEINSTOCK INC.
/s/ Ronald D. Weinstock Inc.
----------------------------
Ronald D. Weinstock, President
FRANK HOLDRAKER
/s/ Frank Holdraker
-------------------
<PAGE>
SCHEDULE 1
Stockholders (in addition to those Stockholders listed in the first paragraph of
this Agreement)
Charles A. Lynch
Theodore H. Ashford
Crown Associates III, L.P.
Crown-Glynn Associates, L.P.
Nueberger & Berman as Trustee for The Crown Trust
Noro-Moseley Partners II, L.P.
Seidler Salsa, L.P.
Bankers Trust Company, as Master Trustee for Hughes Aircraft Retirement Plans
FMA High Yield Income L.P.
WSIS Flexible Income Partners L.P.
WSIS High Yield Income L.P.
Sienna Limited Partnership II
Donald Benjamin
Vicki Tanner
Ronald D. Weinstock Inc.
Frank Holdraker
Casual Dining Ventures, Inc.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD
PURSUANT TO RULE 144 UNDER SUCH ACT.
LA SALSA HOLDING CO.
WARRANT TO PURCHASE SHARES OF SERIES D
CONVERTIBLE PREFERRED STOCK
This Warrant is issued to Casual Dining Ventures, Inc.
("Warrantholder") by La Salsa Holding Co., a Delaware corporation (the
"Company"), as of this 12th day of January, 1996, in connection with the
issuance and sale of shares of the Series D Convertible Preferred Stock of the
Company to Warrantholder pursuant to that certain Series D Convertible Preferred
Stock and Warrant Purchase Agreement, of even date herewith, by and between the
Company and Warrantholder (the "Purchase Agreement").
1. Purchase of Shares. Subject to the terms and conditions
hereinafter set forth, the holder of this Warrant is entitled, upon surrender of
this Warrant at the principal office of the Company (or at such other place as
the Company shall notify the holder hereof in writing), to purchase 4,729,470
shares of Series D Convertible Preferred Stock of the Company. The shares of
Series D Convertible Preferred Stock issuable pursuant to this Section 1 (the
"Shares") shall be subject to adjustment pursuant to Section 7 hereof.
2. Purchase Price. The purchase price for the Shares is $1.50
per share. Such price shall be subject to adjustment pursuant to Section 7
hereof (such price, as adjusted from time to time, is herein referred to as the
"Exercise Price").
3. Exercise Period. This Warrant is exercisable beginning
April 12, 1997 and shall remain so exercisable until and including July 12,
1997.
4. Method of Exercise. While this Warrant remains outstanding
and exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
<PAGE>
(i) the surrender of the Warrant, together with a duly executed copy of the
form of subscription attached hereto, to the Secretary of the Company at
its principal offices; and
(ii) the payment to the Company of an amount equal to the aggregate Exercise
Price for the number of Shares being purchased.
5. Certificates for Shares. Upon the exercise of the purchase
rights evidenced by this Warrant, one or more certificates for the number of
Shares so purchased shall be issued as soon as practicable thereafter, and in
any event within thirty (30) days of the delivery of the subscription notice.
6. Reservation of Shares. The Company covenants that it will
at all times keep available such number of authorized shares of its Series D
Convertible Preferred Stock, free from all preemptive rights with respect
thereto, which will be sufficient to permit the exercise of this Warrant for the
full number of Shares specified herein. The Company further covenants that such
Shares, when issued pursuant to the exercise of this Warrant, will be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens, and
charges with respect to the issuance thereof.
7. Adjustment of Exercise Price and Number of Shares. The
number of and kind of securities purchasable upon exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances.
If the Company shall at any time prior to the expiration of this Warrant
subdivide its Series D Convertible Preferred Stock, by split-up or otherwise, or
combine its Series D Convertible Preferred Stock or issue additional securities
as a dividend with respect to any shares of its Series D Convertible Preferred
Stock, the number of Shares issuable on the exercise of this Warrant shall
forthwith be proportionately increased in the case of a subdivision or stock
dividend, or proportionately decreased in the case of a combination. Appropriate
adjustments shall also be made to the purchase price payable per share, but the
aggregate purchase price payable for the total number of Shares purchasable
under this Warrant (as adjusted) shall remain the same. Any adjustment under
this Section 7(a) shall become effective at the close of business on the date
the subdivision or combination becomes effective, or as of the record date of
such dividend, or in the event that no record date is fixed, upon the making of
such dividend.
<PAGE>
(b) Reclassification, Reorganization, and
Consolidation. In case of any reclassification, capital reorganization or change
in the Series D Convertible Preferred Stock of the Company (other than as a
result of a subdivision, combination or stock dividend provided for in Section
7(a) above), then, as a condition of such reclassification, reorganization or
change, lawful provision shall be made, and duly executed documents evidencing
the same from the Company or its successor shall be delivered to the holder of
this Warrant, so that the holder of this Warrant shall have the right at any
time prior to the expiration of this Warrant to purchase, at a total price equal
to that payable upon the exercise of this Warrant, the kind and amount of shares
of stock and other securities and property receivable in connection with such
reclassification, reorganization or change by a holder of the same number of
shares of Series D Convertible Preferred Stock as were purchasable by the holder
of this Warrant immediately prior to such reclassification, reorganization or
change. In any such case appropriate provisions shall be made with respect to
the rights and interest of the holder of this Warrant so that the provisions
hereof shall thereafter be applicable with respect to any shares of stock or
other securities and property deliverable upon exercise hereof, and appropriate
adjustments shall be made to the purchase price per share payable hereunder,
provided the aggregate purchase price shall remain the same.
(c) Notice of Adjustment. When any adjustment is
required to be made in the number or kind of shares purchasable upon exercise of
the Warrant, or in the Warrant Price, the Company shall promptly notify the
holder of such event and of the number of shares of Series D Convertible
Preferred Stock or other securities or property thereafter purchasable upon
exercise of the Warrant.
8. No Fractional Shares or Scrip. No fractional shares or
scrip representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Warrant Price then in effect.
9. No Stockholder Rights. Prior to exercise of this Warrant,
the holder shall not be entitled to any rights of a stockholder with respect to
the Shares, including (without limitation) the right to vote such Shares,
receive dividends or other distributions thereon, exercise preemptive rights or
be notified of stockholder meetings, and such holder shall not be entitled to
any notice or other communication concerning the business or affairs of the
Company.
10. Successors and Assigns. The terms and provisions of this
Warrant and the Purchase Agreement shall inure to the benefit of, and be binding
upon, the Company and the holders hereof and their respective successors and
assigns.
11. Amendments and Waivers. Any term of this Warrant may be
amended and the observance of any term of this Warrant may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and Warrantholder. Any
waiver or amendment effected in accordance with this section shall be binding
upon Warrantholder, any future holder of the Shares, and the Company.
12. Governing Law. This Warrant shall be governed by the laws
of the State of California as applied to agreements among California residents
made and to be performed entirely within the State of California.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
LA SALSA HOLDING CO.
By: /s/ Charles L. Boppell
--------------------------------
Charles L. Boppell
President
Accepted and Agreed:
WARRANTHOLDER:
CASUAL DINING VENTURES, INC.
By: /s/ Charles W. Redepenning, Jr.
- ----------------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President and General Counsel
<PAGE>
SUBSCRIPTION
La Salsa Holding Co.
Attention: Corporate Secretary
The undersigned hereby elects to purchase, pursuant to the provisions of
the Warrant to Purchase Shares of Series D Convertible Preferred Stock issued by
La Salsa Holding Co. and held by the undersigned, ____________ shares of Series
D Convertible Preferred Stock of La Salsa Holding Co.
Payment of the exercise price per share required under such Warrant
accompanies this Subscription.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
Date:
Name:
By:
Title:
Address:
Name in which shares should be registered:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of June 25, 1996
among
DAKA INTERNATIONAL, INC.
SUBSIDIARY GUARANTORS
THE BANKS SIGNATORY HERETO
and
THE CHASE MANHATTAN BANK, N.A.
as Agent
<PAGE>
Table of Contents
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS
Section 1.01. Definitions
Section 1.02. Accounting Terms
ARTICLE 2. THE LOANS
Section 2.01. The Loans
Section 2.02. The Notes
Section 2.03. Purposes
Section 2.04. Borrowing Procedures
Section 2.05. Prepayments and Conversions
Section 2.06. Interest Periods; Renewals
Section 2.07. Changes of Commitments
Section 2.08. Certain Notices
Section 2.09. Minimum Amounts
Section 2.10. Interest
Section 2.11. Fees
Section 2.12. Payments Generally
Section 2.13. Treatment of Loans
Section 2.14. Restatement
ARTICLE 3. THE LETTERS OF CREDIT
Section 3.01. Letters of Credit
Section 3.02. Purposes
Section 3.03. Procedures for Issuance of Letters of Credit
Section 3.04. Participating Interests
Section 3.05. Payments
Section 3.06. Further Assurances
Section 3.07. Obligations Absolute
Section 3.08. Cash Collateral Account
Section 3.09. Letter of Credit Fees
ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC.
Section 4.01. Additional Costs
Section 4.02. Limitation on Types of Loans
Section 4.03. Illegality
Section 4.04. Certain Conversions pursuant to Sections 4.0
and 4.03
Section 4.05. Certain Compensation
ARTICLE 5. CONDITIONS PRECEDENT
Section 5.01. Documentary Conditions Precedent
Section 5.02. Additional Conditions Precedent
(i)
<PAGE>
Section 5.03. Deemed Representations
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
Section 6.01. Organization, Good Standing and Due Qualification
Section 6.02. Power and Authority; No Conflicts
Section 6.03. Legally Enforceable Agreements
Section 6.04. Litigation
Section 6.05. Financial Statements
Section 6.06. Ownership and Liens
Section 6.07. Taxes
Section 6.08. ERISA
Section 6.09. Subsidiaries and Ownership of Stock
Section 6.10. Credit Arrangements
Section 6.11. Operation of Business
Section 6.12. Hazardous Materials
Section 6.13. No Default on Outstanding Judgments or Orders
Section 6.14. No Defaults on Other Agreements
Section 6.15. Labor Disputes and Acts of God
Section 6.16. Governmental Regulation
Section 6.17. No Forfeiture
Section 6.18. Solvency
Section 6.19. Security Documents
ARTICLE 7. AFFIRMATIVE COVENANTS
Section 7.01. Maintenance of Existence
Section 7.02. Conduct of Business
Section 7.03. Maintenance of Properties
Section 7.04. Maintenance of Records
Section 7.05. Maintenance of Insurance
Section 7.06. Compliance with Laws
Section 7.07. Right of Inspection
Section 7.08. Reporting Requirements
Section 7.09. Additional Subsidiary Guarantors
ARTICLE 8. NEGATIVE COVENANTS
Section 8.01. Debt
Section 8.02. Guaranties, Etc.
Section 8.03. Liens
Section 8.04. Leases
Section 8.05. Investments
Section 8.06. Dividends
Section 8.07. Sale of Assets
Section 8.08. Stock of Subsidiaries, Etc.
Section 8.09. Transactions with Affiliates
Section 8.10. Mergers, Etc.
(ii)
<PAGE>
Section 8.11. Acquisitions
Section 8.12. No Activities Leading to Forfeiture
Section 8.13. Amendments or Waivers of Certain Documents
ARTICLE 9. FINANCIAL COVENANTS
Section 9.01. Interest Coverage Ratio
Section 9.02. Minimum Tangible Net Worth
Section 9.03. Leverage Ratio
Section 9.04. Tangible Assets
Section 9.05. Net Income
Section 9.06. Fixed Charge Coverage Ratio
ARTICLE 10. EVENTS OF DEFAULT
Section 10.01. Events of Default
ARTICLE 11. UNCONDITIONAL GUARANTY
Section 11.01. Guarantied Obligations
Section 11.02. Performance Under This Agreement
Section 11.03. Waivers
Section 11.04. Releases
Section 11.05. Marshaling
Section 11.06. Liability
Section 11.07. Primary Obligation
Section 11.08. Election to Perform Obligations
Section 11.09. No Election
Section 11.10. Severability
Section 11.11. Other Enforcement Rights
Section 11.12. Delay or Omission; No Waiver
Section 11.13. Restoration of Rights and Remedies
Section 11.14. Cumulative Remedies
Section 11.15. Survival
ARTICLE 12. THE AGENT
Section 12.01. Appointment, Powers and Immunities of Agent
Section 12.02. Reliance by Agent
Section 12.03. Defaults
Section 12.04. Rights of Agent as a Bank
Section 12.05. Indemnification of Agent
Section 12.06. Documents
Section 12.07. Non-Reliance on Agent and Other Banks
Section 12.08. Failure of Agent to Act
Section 12.09. Resignation or Removal of Agent
Section 12.10. Amendments Concerning Agency Function
Section 12.11. Liability of Agent
Section 12.12. Transfer of Agency Function
(iii)
<PAGE>
Section 12.13. Non-Receipt of Funds by the Agent
Section 12.14. Withholding Taxes
Section 12.15. Several Obligations and Rights of Banks
Section 12.16. Pro Rata Treatment of Loans, Etc.
Section 12.17. Sharing of Payments Among Banks
ARTICLE 13. MISCELLANEOUS
Section 13.01. Amendments and Waivers
Section 13.02. Usury
Section 13.03. Expenses
Section 13.04. Survival
Section 13.05. Assignment; Participations
Section 13.06. Notices
Section 13.07. Setoff
Section 13.08. JURISDICTION; IMMUNITIES
Section 13.09. Table of Contents; Headings
Section 13.10. Severability
Section 13.11. Counterparts
Section 13.12. Integration
Section 13.13. GOVERNING LAW
Section 13.14. Confidentiality
Section 13.15. Treatment of Certain Information
Section 13.16. New Subsidiary Guarantors
Section 13.17. Reaffirmation
Section 13.18. All Seasons Acquisition
Section 13.19. AEI Sale-Leasebacks
(iv)
<PAGE>
EXHIBITS
Exhibit A Promissory Note
Exhibit B Compliance Certificate
Exhibit C Opinion of Counsel to the Obligors
Exhibit D Amended and Restated Security Agreement
Exhibit E Amended and Restated Trademark Security Agreement
Exhibit F Third Amended and Restated Pledge Agreement
Exhibit G Form of Assumption Agreement
SCHEDULES
Schedule I Commitments
Schedule II Subsidiaries
Schedule III Credit Arrangements
Schedule IV Liens
(v)
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 25, 1996
among DAKA INTERNATIONAL, INC., a corporation organized under the laws of
Delaware (the "Borrower"); each of the Subsidiaries of the Borrower which is a
signatory hereto or which shall become a party hereto from time to time
(collectively the "Subsidiary Guarantors" and, together with the Borrower, the
"Obligors"); each of the banks which is a signatory hereto or which shall become
a party hereto from time to time (collectively, the "Banks"); and THE CHASE
MANHATTAN BANK, N.A., as agent for the Banks (in such capacity, together with
its successors in such capacity, the "Agent").
WHEREAS, the Borrower, the Subsidiary Guarantors, the Banks and the
Agent have entered into that certain Amended and Restated Credit Agreement dated
as of April 29, 1994 (as amended, the "Existing Credit Agreement") pursuant to
which the Banks have extended credit to the Obligors evidenced by certain
Promissory Notes (the "Existing Notes") issued by the Borrower and guarantied by
the Subsidiary Guarantors;
WHEREAS, the Borrower, the Subsidiary Guarantors, the Banks and the
Agent have agreed to enter this Agreement to provide for, among other things, an
increase in the aggregate Commitments to $150,000,000 and modifications of
certain covenants and definitions; and
WHEREAS, the Obligors are and will be operated as separate entities but
are and will be operated on an integrated basis in connection with their
respective financial resources; the Obligors have requested that the Banks make
loans to the Borrower, the repayment of which will be guarantied by the
Subsidiary Guarantors; the Subsidiary Guarantors will receive direct economic
and financial benefits from the Debt incurred under this Agreement by the
Borrower and the incurrence of such Debt is in the best interests of the
Subsidiary Guarantors; and the Obligors acknowledge that the Banks would not
provide the financing hereunder but for the joint and several obligations of the
Obligors hereunder with respect hereto.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.01. Definitions. As used in this Agreement the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"Acceptable Acquisition" means any Acquisition which meets all of the
following conditions: (a) the aggregate consideration paid for such Acquisition
does not exceed $7,500,000, (b) the aggregate consideration paid for such
Acquisition and for all prior Acquisitions during the same fiscal year does not
exceed $12,500,000, (c) the Acquisition has been approved in good faith by the
Board of Directors of the Person making the Acquisition and (d) no Default or
Event of Default exists or would exist after giving effect to such Acquisition.
<PAGE>
"Acquisition" means any transaction pursuant to which any Consolidated
Entity (a) acquires equity securities (or warrants, options or other rights to
acquire such securities) of any Person except in accordance with Section 8.05(d)
or (b) causes any Person to be merged into any Consolidated Entity, in any case
pursuant to a merger, purchase of assets or any reorganization providing for the
delivery or issuance to the holders of such Person's then outstanding
securities, in exchange for such securities, of cash or securities of any
Consolidated Entity, or a combination thereof, or (c) purchases all or
substantially all of the business or assets of any Person.
"Affiliate" means any Person (other than an Obligor): (a) which
directly or indirectly controls, or is controlled by, or is under common control
with, the Borrower; (b) which directly or indirectly beneficially owns or holds
10% or more of any class of voting stock of the Borrower; (c) 10% or more of the
voting stock of which is directly or indirectly beneficially owned or held by
the Borrower; or (d) which is a partnership in which the Borrower is a general
partner. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Second Amended and Restated Credit Agreement, as
amended or supplemented from time to time. References to Articles, Sections,
Exhibits, Schedules and the like refer to the Articles, Sections, Exhibits,
Schedules and the like of this Agreement unless otherwise indicated.
"Assumption Agreement" means each of the Assumption Agreements in the
form of Exhibit G delivered under Section 7.09 hereof.
"Banking Day" means any day on which commercial banks are not
authorized or required to close in New York, New York or in Boston,
Massachusetts and whenever such day relates to a Eurodollar Loan or notice with
respect to any Eurodollar Loan, a day on which dealings in Dollar deposits are
also carried out in the London interbank market.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Chase" means The Chase Manhattan Bank, N.A., a national banking
association organized under the laws of the United States of America, acting in
its capacity as a Bank hereunder.
"Closing Date" means the date this Agreement has been executed by the
Borrower, the Subsidiary Guarantors, the Banks and the Agent.
<PAGE>
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" means all of each Obligor's right, title and interest in
and to Property in which such Obligor has granted a Lien to the Agent under any
Facility Document.
"Commitment" means, with respect to each Bank, the obligation of such
Bank to make its Loans and participate in its Pro Rata Share of Letter of Credit
Obligations under this Agreement in the aggregate principal amount set forth on
Schedule I, as such amount may be reduced or otherwise modified from time to
time.
"Commitment Percentage" means, as to any Bank at any date of
determination thereof, the percentage of the aggregate Commitments constituted
by such Bank's Commitment at such date.
"Compliance Certificate" means the compliance certificate in the form
of Exhibit B to be delivered by the Borrower under the terms of this Agreement.
"Consolidated Debt" means, at any date of determination thereof, the
aggregate amount of Debt of the Consolidated Entities, as determined on a
consolidated basis in accordance with GAAP.
"Consolidated EBIT" means, with respect to any fiscal period, (a)
Consolidated Net Income for such period, plus (b) the aggregate amount of (i)
income taxes, (ii) Consolidated Interest Expense, (iii) transaction expense
incurred in the fiscal quarter ending on March 30, 1996 in connection with the
acquisition of Champps Entertainment, Inc. up to $2,900,000, (iv) transaction
expense incurred in the fiscal quarter ending on March 30, 1996 in connection
with the acquisition of The Great Bagel Coffee Company and certain other
businesses up to $500,000 and (v) the noncash charge taken in accordance with
Statement of Financial Accounting Standard No. 121 in the fiscal quarter ending
on March 30, 1996 in connection with charges for impairments to the carrying
value of certain restaurant and foodservice contract assets, write down of
goodwill, reacquired franchise rights, investments and other assets taken, up to
$8,000,000, to the extent that such aggregate amount was deducted in the
computation of Consolidated Net Income.
"Consolidated Entity" means the Borrower or any Subsidiary of the
Borrower whose accounts are or are required to be consolidated or included with
the accounts of the Borrower in accordance with GAAP.
<PAGE>
"Consolidated Funded Debt" means, at any time, the aggregate amount,
without duplication, of (a) indebtedness of the Consolidated Entities for
borrowed money (as reflected on the consolidated financial statements of the
Consolidated Entities), (b) indebtedness of the Consolidated Entities for the
deferred purchase price of Property or services (except trade payables in the
ordinary course of business), (c) obligations of the Consolidated Entities
arising under acceptance facilities, (d) obligations secured by any Lien on
Property of the Consolidated Entities (as reflected on the consolidated
financial statements of the Consolidated Entities) and (e) obligations of the
Consolidated Entities as lessee under Capital Leases (as reflected on the
consolidated financial statements of the Consolidated Entities), in each case as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, with respect to any fiscal
period, the amount of interest accrued on, and with respect to, Consolidated
Debt (including, without limitation, amortization of debt discount and imputed
interest on Capital Leases) plus all finance charges, premiums and other fees,
charges and expenses extracted in exchange for the forbearance from the
collection of money during such period in all cases as determined in accordance
with GAAP.
"Consolidated Liabilities" means all liabilities of the Consolidated
Entities, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any fiscal period, net
income for the Consolidated Entities for such fiscal period, as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth" means, at any date of determination thereof,
the sum of (a) the amount of any capital stock, paid in capital and similar
equity accounts plus (or minus in the case of a deficit) the capital surplus and
retained earnings of the Consolidated Entities at such date plus (b)
Consolidated Subordinated Debt.
"Consolidated Rental Expense" means, with respect to any fiscal period,
the aggregate amount of rental expense of the Consolidated Entities incurred
during such fiscal period, as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Subordinated Debt" means, at any date of determination
thereof, Debt of the Consolidated Entities which is subordinated to all
obligations owed to the Banks in amounts and on terms and conditions acceptable
to the Banks, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Tangible Assets" means, at any date of determination
thereof, all assets of the Consolidated Entities except assets of the
Consolidated Entities which would be classified as intangibles under GAAP
including, without limitation, patents, copyrights, trademarks, trade names,
franchises, goodwill and other similar intangible assets.
"Consolidated Tangible Net Worth" means, at any date of determination
thereof, the result of (a) Consolidated Tangible Assets minus (b) the result of
(i) Consolidated Liabilities minus (ii) Consolidated Subordinated Debt.
<PAGE>
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price of
Property or services (except trade payables in the ordinary course of business);
(c) Unfunded Benefit Liabilities of such Person (if such Person is not the
Borrower, determined in a manner analogous to that of determining Unfunded
Benefit Liabilities of the Borrower); (d) the face amount of any outstanding
letters of credit issued for the account of such Person; (e) obligations arising
under acceptance facilities; (f) Guaranties of such Person; (g) obligations
secured by any Lien on Property of such Person; (h) obligations of such Person
as lessee under Capital Leases; and (i) all capital stock of such Person subject
to repurchase or redemption during the term of this Agreement, other than at the
sole option of such Person.
"Debt to EBIT Ratio" means, at any time, the ratio of (a) Consolidated
Funded Debt to (b) Consolidated EBIT for the immediately preceding four fiscal
quarters of the Borrower, as determined at such time.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means, with respect to the principal of any Loan and, to
the extent permitted by law, any other amount payable by the Borrower or any of
the Subsidiary Guarantors under this Agreement or any other Facility Document,
or any Note that is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum during the period from and
including the due date, to, but excluding the date on which such amount is paid
in full equal to one percent (1%) above the Variable Rate as in effect from time
to time plus the Margin (if any); provided that, if the amount so in default is
principal of a Fixed Rate Loan and the due date thereof is a day other than the
last day of the Interest Period therefor, the "Default Rate" for such principal
shall be, for the period from and including the due date and to but excluding
the last day of the Interest Period therefor, two percent (2%) above the
interest rate for such Loan as provided in Section 2.10 hereof and, thereafter,
the rate provided for above in this definition.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, licenses, agreements or other governmental restrictions
relating to the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
<PAGE>
"ERISA Affiliate" means any corporation or trade or business which is a
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Borrower is a member, or (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
"Eurodollar Loan" means any Loan when and to the extent the interest
rate therefor is determined on the basis of the definition "Fixed Base Rate."
"Event of Default" has the meaning given such term in Section 9.01.
"Facility Documents" means this Agreement, the Notes, the Assumption
Agreements, the Letters of Credit, the Interest Rate Protection Agreements and
the Security Documents, as each may be amended from time to time.
"Federal Funds Rate" means, for any day, the rate per annum (expressed
on a 365/366 day basis of calculation, if the rate on Variable Rate Loans is so
calculated) equal to the weighted average of the rates on overnight federal
funds transactions as published by the Federal Reserve Bank of New York for such
day (or for any day that is not a Banking Day, for the immediately preceding
Banking Day).
"Fiscal Year Net Worth Increase Amounts" means the sum of (a) the
greater of (i) Zero Dollars ($0) and (ii) 50% of Consolidated Net Income of the
Consolidated Entities for each fiscal year of the Borrower ending after June 29,
1996 plus (b) 100% of the proceeds (net of underwriting commissions and
discounts and reasonable fees and expenses) from the issuance of capital stock
of the Borrower or from the incurrence of Consolidated Subordinated Debt during
such fiscal year.
"Fixed Base Rate" means with respect to any Interest Period for a Fixed
Rate Loan: the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of one percent (1%)) quoted at approximately 11:00 a.m. London time by the
principal London branch of the Reference Bank two Banking Days prior to the
first day of such Interest Period for the offering to leading banks in the
London interbank market of Dollar deposits in immediately available funds, for a
period, and in an amount, comparable to the Interest Period and principal amount
of the Eurodollar Loan which shall be made.
"Fixed Charge Coverage Ratio" means, at any date of determination
thereof, the ratio of (a) the sum of (i) Consolidated EBIT for the two (2) most
recently ended fiscal quarters of the Borrower, plus (ii) Consolidated Rental
Expense for such fiscal period (to the extent that such amount was deducted in
the computation of Consolidated EBIT for such fiscal period) to (b) the sum of
(i) Consolidated Interest Expense for such fiscal period, plus (ii) all
principal due on, and with respect to, Consolidated Debt during such fiscal
period, plus (iii) Consolidated Rental Expense for such fiscal period.
<PAGE>
"Fixed Rate" means, for any Fixed Rate Loan for any Interest Period
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of one percent (1%)) determined by the Agent to be equal to the quotient of (i)
the Fixed Base Rate for such Loan for such Interest Period, divided by (ii) one
minus the Reserve Requirement for such Loan for such Interest Period.
"Fixed Rate Loan" means any Eurodollar Loan.
"Forfeiture Proceeding" means any action, proceeding or investigation
affecting the Borrower, any of its Subsidiaries or any of its Affiliates before
any court, governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or the receipt of notice by any such party
that any of them is a suspect in or a target of any governmental inquiry or
investigation, which may result in an indictment of any of them or the seizure
or forfeiture of any of their Property which would have a Material Adverse
Effect.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 6.05 (except for changes concurred in by the Borrower's independent
public accountants).
"Guaranty" means, with respect to any Person, guaranties, endorsements
(other than for collection in the ordinary course of business) and other
contingent obligations of such Person with respect to the obligations of any
other Person (including, but not limited to, an agreement to purchase any
obligation, stock, assets, goods or services or to supply or advance any funds,
assets, goods or services, or an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth or otherwise to assure the
creditors of any such other Person against loss) other than guaranties of
obligations, or investment in certain assets, under food service contracts
incurred in the ordinary course of business.
"Hazardous Materials" means any and all pollutants, contaminants, toxic
or hazardous wastes or any other substances, the removal of which is required or
the generation, manufacture, refining, production, processing, treatment,
storage, handling, transportation, transfer, use, disposal, release, discharge,
spillage, seepage, or filtration of which is restricted, prohibited or penalized
by any applicable law.
"Interest Coverage Ratio" means, at any date of determination thereof,
the ratio of (a) Consolidated EBIT for the two (2) most recently ended fiscal
quarters of the Borrower to (b) Consolidated Interest Expense for such two (2)
most recently ended fiscal quarters.
<PAGE>
"Interest Period" means, with respect to any Fixed Rate Loan, the
period commencing on the date such Loan is made, converted from another type of
Loan or renewed, as the case may be, and ending, as the Borrower may select
pursuant to Section 2.06: on the numerically corresponding day in the first,
second, third, or sixth calendar month thereafter, provided that each such
Interest Period which commences on the last Banking Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Banking Day of the
appropriate calendar month.
"Interest Rate Protection Agreement" means an interest rate swap, cap
or collar agreement or similar arrangement between one or more Banks and an
Obligor providing for the transfer or mitigation of interest risks either
generally or under specific contingencies.
"Lending Office" means, for each Bank and for each type of Loan, the
lending office of such Bank (or of an affiliate of such Bank) designated as such
for such type of Loan on its signature page hereof or such other office of such
Bank (or of an affiliate of such Bank) as such Bank may from time to time
specify to the Agent and the Borrower as the office by which its Loans of such
type are to be made and maintained.
"Letter of Credit Availability" means, at any date of determination
thereof, the amount by which (a) the lower of (i) the result of (A) the
aggregate amount of the Commitments as of such date minus (B) the unpaid
aggregate principal amount of the Loans then outstanding (including all Loans
not then made as to which notice has been given by the Borrower under Section
2.08) and (ii) $10,000,000 exceeds (b) the aggregate amount of the Letter of
Credit Obligations at such date (including all Letter of Credit Obligations
under Letters of Credit not then issued as to which a request has been made
under Section 3.02).
"Letter of Credit Obligations" means, at any date of determination
thereof, all liabilities of the Consolidated Entities with respect to Letters of
Credit, whether or not any liability is contingent, including (without
limitation) the sum of (a) the aggregate amount available to be drawn under the
Letters of Credit then outstanding plus (b) the aggregate amount of all unpaid
Reimbursement Obligations.
"Leverage Ratio" means, at any time, the ratio of (a) the result of (i)
Consolidated Liabilities minus (ii) Consolidated Subordinated Debt to (b)
Consolidated Net Worth, in each case determined at such time.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loan" means any loan made by a Bank pursuant to Section 2.01.
<PAGE>
"Margin" means, for a each type of Loan, the percentage for such type
of Loan set forth opposite the range of the Debt to EBIT Ratio in the schedule
below as determined as of the last day of each fiscal quarter of the Borrower,
with adjustments to become effective on the date of receipt by the Agent of a
Compliance Certificate of a senior financial officer of the Borrower
demonstrating the Debt to EBIT Ratio for such fiscal quarter accompanied by the
most recent financial statements of the Consolidated Entities required to be
furnished to the Banks under Section 7.08:
Margin
Variable Rate Fixed Rate
Debt to EBIT Ratio Loans Loans
(a) less than 1.50 to 1.00 0% .50%
(b) equal to or greater than 1.50 to 0% .75%
1.00 and less than 2.00 to 1.00
(c) equal to or greater than 2.00 to 0% 1.00%
1.00 and less than 3.00 to 1.00
(d) equal to or greater than 3.00 to 0% 1.25%
1.00 and less than 4.00 to 1.00
(e) equal to or greater than 4.00 to .50% 1.75%
1.00
"Material Adverse Effect" means any material adverse effect on the
financial condition, operations, properties or business of the Consolidated
Entities, taken as a whole, or on the ability of the Borrower to repay the
principal, interest and all other amounts owing under the Notes and the other
Facility Documents.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Notes" means the promissory notes of the Borrower in the form of
Exhibit A hereto evidencing the Loans made by a Bank hereunder and all
promissory notes delivered in substitution or exchange therefor, as amended or
supplemented from time to time.
"Obligations" means the unpaid principal of and interest on (including
interest accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, whether or
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Notes and all other obligations and liabilities of any obligor
to the Agent or any Bank, whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may arise
under, out of, or in connection with, this Agreement, the Notes, any other
Facility Document and any other document made, delivered or given in connection
therewith or herewith, whether on account of principal, interest, Guaranties,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees and disbursements of counsel to the Agent or any
Bank) or otherwise.
<PAGE>
"Participating Bank" means, any Bank (other than Chase) with respect to
its Participating Interest in each Letter of Credit.
"Participating Interest" means, with respect to each Letter of Credit,
(a) in the case of Chase, its interest in such Letter of Credit after giving
effect to the granting of any participating interest therein pursuant hereto and
(b) in the case of each Participating Bank, its undivided participating interest
in such Letter of Credit.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"Pledge Agreement" means the Third Amended and Restated Pledge
Agreement in the form of Exhibit D to be delivered by the Borrower and certain
of its Subsidiaries under the terms of this Agreement, as amended or
supplemented from time to time.
"Prime Rate" means that rate of interest from time to time announced by
the Reference Bank at its principal office as its prime commercial lending rate.
"Principal Office" means the principal office of the Agent, presently
located at 1 Chase Manhattan Plaza, New York, New York 10081.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Pro Rata Share" means, with respect to each Bank, a share proportional
to such Bank's Commitment Percentage.
"Reference Bank" means The Chase Manhattan Bank, N.A. (or if The Chase
Manhattan Bank, N.A. no longer quotes on the London interbank market, such
successor leading bank in the London interbank market which shall be reasonably
appointed by the Agent).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
<PAGE>
"Regulatory Change" means, with respect to any national banking
association, any change after the date of this Agreement in United States
federal, state, municipal or foreign laws or regulations (including without
limitation Regulation D) or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks including
such national banking association, of or under any United States, federal,
state, municipal or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse Chase in accordance with the terms of this Agreement for the payment
made by Chase under any Letter of Credit.
"Required Banks" means, at any time while no Loans or Letters of Credit
are outstanding, Banks having at least 60% of the aggregate amount of the
Commitments and, at any time while Loans or Letters of Credit are outstanding,
Banks holding at least 60% of the aggregate principal amount of the Loans and
the Letter of Credit Obligations.
"Reserve Requirement" means, for any Interest Period for any Fixed Rate
Loan for any Interest Period therefor, the average maximum rate at which
reserves (including any marginal, supplemental or emergency reserves) are
required to be maintained during such Interest Period under Regulation D by
member banks of the Federal Reserve System in New York City with deposits
exceeding $1,000,000,000 against in the case of Eurodollar Loans, "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the foregoing, the Reserve Requirement shall reflect any other reserves
required to be maintained by such member banks by reason of any Regulatory
Change against (i) any category of liabilities which includes deposits by
reference to which the Fixed Base Rate for Eurodollar Loans is to be determined
as provided in the definition of "Fixed Base Rate" in this Section 1.01 or (ii)
any category of extensions of credit or other assets which include Eurodollar
Loans.
"Security Agreement" means the Amended and Restated Security Agreement
in the form of Exhibit D to be delivered by each of the Obligors under the terms
of this Agreement, as amended or supplemented from time to time.
"Security Documents" means the Security Agreement, the Pledge
Agreement, the Trademark Security Agreement and each other security document
that may from time to time be delivered to the Agent in connection herewith or
therewith.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other persons performing similar functions are at the
time owned directly or indirectly by such Person.
<PAGE>
"Termination Date" means June 30, 1999; provided that if such date is
not a Banking Day, the Termination Date shall be the next succeeding Banking Day
(or, if such next succeeding Banking Day falls in the next calendar month, the
next preceding Banking Day).
"Trademark Security Agreement" means the Amended and Restated Trademark
Security Agreement in the form of Exhibit E to be delivered by certain of the
Obligors under the terms of this Agreement, as amended or supplemented from time
to time.
"UCP" means the Uniform Customs and Practice for Documentary Credits
(1983Revision), International Chamber of Commerce Publication No. 500, as the
same maybe amended from time to time.
"Unfunded Benefit Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all benefit liabilities (within
the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair
market value of all Plan assets allocable to such benefit liabilities, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrower
or any ERISA Affiliate under Title IV of ERISA.
"Variable Rate" means, for any day, the higher of (a) the Federal Funds
Rate for such day plus 1/4 of one percent and (b) the Prime Rate for such day.
"Variable Rate Loan" means any Loan when and to the extent the interest
rate for such Loan is determined in relation to the Variable Rate.
Section 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
ARTICLE 2. THE LOANS.
Section 2.01. The Loans.
(a) Subject to the terms and conditions of this Agreement,
each of the Banks severally agrees to make loans (the "Loans") to the Borrower
from time to time from and including the date hereof to and including the
Termination Date, up to but not exceeding in the aggregate principal amount at
any one time outstanding, the result of (i) the amount of its Commitment minus
(ii) the amount of its Pro Rata Share of the Letter of Credit Obligations at
such time. The Loans may be outstanding as Variable Rate Loans or Eurodollar
Loans (each a "type" of Loans). Each type of Loans of each Bank shall be made
and maintained at such Bank's Lending Office for such type of Loans.
(b) The Loans shall be due and payable on the Termination
Date.
<PAGE>
Section 2.02. The Notes. The Loans of each Bank shall be evidenced by a
single promissory note in favor of such Bank in the form of Exhibit A, dated the
date of this Agreement, duly completed and executed by the Borrower.
Section 2.03. Purposes. The Borrower shall use the proceeds of the
Loans for general corporate purposes (including, without limitation, working
capital and to finance Acquisitions permitted under Section 8.11) and advances
to Subsidiary Guarantors for their respective corporate purposes. Such proceeds
shall not be used for the purpose, whether immediate, incidental or ultimate, of
buying or carrying "margin stock" within the meaning of Regulation U.
Section 2.04. Borrowing Procedures. The Borrower which intends to
effect a borrowing shall give the Agent notice of each borrowing to be made
hereunder as provided in Section 2.08. Not later than 1:00 p.m. New York, New
York time on the date of such borrowing, each Bank shall, through its Lending
Office and subject to the conditions of this Agreement, make the amount of the
Loan to be made by it on such day available to the Agent at the Principal Office
and in immediately available funds for the account of the Agent. The amount so
received by the Agent shall, subject to the conditions of this Agreement, be
made available to the Borrower, in immediately available funds, by the Agent
crediting an account of the Borrower designated by the Borrower and maintained
with the Agent at the Principal Office.
Section 2.05. Prepayments and Conversions. The Borrower shall have the
right to make prepayments of principal, or to convert one type of Loans into
another type of Loans, at any time or from time to time; provided that: (a) the
Borrower shall give the Agent notice of each such prepayment or conversion as
provided in Section 2.08; and (b) Fixed Rate Loans may be prepaid or converted
only on the last day of an Interest Period for such Loans unless the Borrower
agrees to provide to the Agent for the account of each Bank compensation in
accordance with Section 4.05.
Section 2.06. Interest Periods; Renewals. (a) In the case of each Fixed
Rate Loan, the Borrower shall select an Interest Period of any duration in
accordance with the definition of Interest Period in Section 1.01, subject to
the following limitations: (i) no Interest Period may extend beyond the
Termination Date; (ii) notwithstanding clause (i) above, no Interest Period
shall have a duration less than one month, and if any such proposed Interest
Period would otherwise be for a shorter period, such Interest Period shall not
be available; (iii) if an Interest Period would end on a day which is not a
Banking Day, such Interest Period shall be extended to the next Banking Day,
unless such Banking Day would fall in the next calendar month in which event
such Interest Period shall end on the immediately preceding Banking Day; and
(iv) no more than ten Interest Periods of each Bank may be outstanding at any
one time.
<PAGE>
(b) Upon notice to the Agent as provided in Section 2.08, the
Borrower may renew any Fixed Rate Loan on the last day of the Interest Period
therefor as the same type of Loans with an Interest Period of the same or
different duration in accordance with the limitations provided above. If the
Borrower shall fail to give notice to the Agent of such a renewal, such Fixed
Rate Loan shall automatically become a Variable Rate Loan on the last day of the
current Interest Period; provided that the foregoing shall not prevent the
conversion of any type of Fixed Rate Loan into another type of Loan in
accordance with Section 2.05.
Section 2.07. Changes of Commitments. The Borrower shall have the right
to reduce or terminate the amount of unused Commitments at any time or from time
to time, provided that: (a) the Borrower shall give notice of each such
reduction or termination to the Agent as provided in Section 2.08; and (b) each
partial reduction shall be in an aggregate amount at least equal to $1,000,000.
The Commitments once reduced or terminated may not be reinstated.
Section 2.08. Certain Notices. Notices by the Borrower to the Agent of
each borrowing pursuant to Section 2.04, and each prepayment or conversion
pursuant to Section 2.05 and each renewal pursuant to Section 2.06(b), and each
reduction or termination of the Commitments pursuant to Section 2.07 shall be
irrevocable and shall be effective only if received by the Agent not later than
12:00 noon New York, New York time, and (a) in the case of borrowings and
prepayments of, conversions into and (in the case of Fixed Rate Loans) renewals
of (i) Variable Rate Loans, given the same Banking Day; and (ii) Eurodollar
Loans, given three Banking Days prior thereto; (b) in the case of reductions or
termination of the Commitments, given three Banking Days prior thereto. Each
such notice shall specify the Loans to be borrowed, prepaid, converted or
renewed and the amount (subject to Section 2.09) and type of the Loans to be
borrowed, or converted, or prepaid or renewed (and, in the case of a conversion,
the type of Loans to result from such conversion and, in the case of a Fixed
Rate Loan, the Interest Period therefor) and the date of the borrowing or
prepayment, or conversion or renewal (which shall be a Banking Day). Each such
notice of reduction or termination shall specify the amount of the Commitments
to be reduced or terminated. The Agent shall promptly notify the Banks of the
contents of each such notice.
Section 2.09. Minimum Amounts. Except for borrowings which exhaust the
full remaining amount of the Commitments, prepayments or conversions which
result in the prepayment or conversion of all Loans of a particular type or
conversions made pursuant to Section 4.04, each borrowing, prepayment,
conversion and renewal of principal of Loans of a particular type shall be in an
amount not less than (i) $100,000 in the aggregate for all Banks in the case of
Variable Rate Loans and (ii) $500,000 in the aggregate in the case of Fixed Rate
Loans unless such minimum amount is waived by the Required Banks (borrowings,
prepayments, conversions or renewals of or into Loans of different types or, in
the case of Fixed Rate Loans, having different Interest Periods at the same time
hereunder to be deemed separate borrowings, prepayments, conversions and
renewals for the purposes of the foregoing, one for each type of Interest
Period). Anything in this Agreement to the contrary notwithstanding, the
aggregate principal amount of Fixed Rate Loans of each type having concurrent
Interest Periods shall be at least equal to $500,000.
<PAGE>
Section 2.10. Interest. Interest shall accrue on the outstanding and
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan is due at the following rates
per annum: (i) for a Variable Rate Loan, at a variable rate per annum equal to
the Variable Rate plus any Margin and (ii) for a Fixed Rate Loan, at a fixed
rate equal to the Fixed Rate plus the Margin. If the principal amount of any
Loan and any other amount payable by the Borrower hereunder or under the Notes
shall not be paid when due (at stated maturity, by acceleration or otherwise),
interest shall accrue on such amount to the fullest extent permitted by law from
and including such due date to but excluding the date such amount is paid in
full at the Default Rate.
(a) The interest rate on each Variable Rate Loan shall change
when the Variable Rate changes and interest on each such Loan shall be
calculated on the basis of a year of 360 days for the actual number of days
elapsed. Interest on each Fixed Rate Loan shall be calculated on the basis of a
year of 360 days for the actual number of days elapsed. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Agent shall notify the Borrower and the Banks.
(b) Accrued interest shall be due and payable in arrears upon
any full payment of principal or conversion and (i) for each Variable Rate Loan,
on the last day of each month commencing the first such date after such Loan;
and (ii) for each Fixed Rate Loan, on the last day of the Interest Period with
respect thereto and, in the case of an Interest Period greater than three months
or 90 days, at three-month intervals after the first day of such Interest
Period; provided that interest accruing at the Default Rate shall be due and
payable from time to time on demand of the Agent.
Section 2.11. Fees.
(a) The Borrower shall pay to the Agent for the account of
each Bank a commitment fee on the daily average of the result of (x) the unused
Commitment of such Bank minus (y) such Bank's Pro Rata Share of Letter of Credit
Obligations, for the period from and including the date hereof to the earlier of
the date the Commitments are terminated or the Termination Date at a rate per
annum equal to (i) if the Debt to EBIT Ratio is less than 2.00 to 1.00, 1/4 of
one percent or (ii) if the Debt to EBIT Ratio is greater than 2.00 to 1.00, 3/8
of one percent, calculated on the basis of a year of 360 days for the actual
number of days elapsed. The accrued commitment fee shall be due and payable in
arrears upon any reduction or termination of the Commitments and on the last day
of each September, December, March and June.
(b) The Borrower shall pay to the Agent for its own account
the fees set forth in the fee letter dated of even date herewith between the
Borrower and the Agent.
<PAGE>
Section 2.12. Payments Generally. All payments under this Agreement or
the Notes shall be made in Dollars in immediately available funds not later than
1:00 p.m. New York, New York time on the relevant dates specified above (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Banking Day) to the Agent's account number
910-2-696094 maintained at the Principal Office for the account of the
applicable Lending Office of each Bank. The Agent, or any Bank for whose account
any such payment is to be made, may (but shall not be obligated to) debit the
amount of any such payment which is not made by such time to any ordinary
deposit account of the Borrower with the Agent or such Bank, as the case may be,
and any Bank so doing shall promptly notify the Agent. The Borrower shall, at
the time of making each payment under this Agreement or the Notes, specify to
the Agent the principal or other amount payable by the Borrower under this
Agreement or the Notes to which such payment is to be applied (and in the event
that it fails to so specify, or if a Default or Event of Default has occurred
and is continuing, the Agent may apply such payment as it may elect in its sole
discretion (subject to Section 12.16)). If the due date of any payment under
this Agreement or the Notes would otherwise fall on a day which is not a Banking
Day, such date shall be extended to the next succeeding Banking Day and interest
shall be payable for any principal so extended for the period of such extension.
Each payment received by the Agent hereunder or under any Note for the account
of a Bank shall be paid promptly to such Bank, in immediately available funds,
for the account of such Bank's Lending Office.
Section 2.13. Treatment of Loans. All "Loans" (as defined in the
Existing Credit Agreement) which are outstanding under the Existing Credit
Agreement immediately prior to the Closing Date shall be deemed to be Loans made
hereunder at the Closing Date the type and Interest Period of which shall be
determined by the mutual agreement of the Borrower and the Banks and the
Borrower agrees to provide to the Agent for the account of each Bank
compensation in accordance with Section 3.05.
Section 2.14. Restatement. The terms and conditions of, and the
agreements, representations and warranties set forth in the Existing Credit
Agreement are hereby replaced and superseded in their entirety by the terms,
conditions, agreements, representations and warranties set forth in this
Agreement and the other Facility Documents and the Existing Credit Agreement
shall be of no further force and effect. Nothing contained herein or in any of
the other Facility Documents shall impair, limit or affect the continuation of
the liability of each Obligor for the Obligations heretofore incurred and the
security interests, Liens and other collateral interests heretofore granted,
pledged and assigned to the Agent by such Obligor. All loans, advances and other
financial accommodations under the Existing Credit Agreement and all other
Obligations of the Obligors to the Banks outstanding and unpaid as of the date
hereof pursuant to the Existing Credit Agreement shall be deemed to be
Obligations pursuant to the terms hereof and shall constitute and be deemed a
Loan by the Banks to the Borrower and shall be repayable in accordance with the
terms of this Agreement.
<PAGE>
ARTICLE 3. THE LETTERS OF CREDIT.
Section 3.01. Letters of Credit. (a) Subject to the terms and
conditions of this Agreement, Chase, on behalf of the Banks, and in reliance on
the agreement of the Banks set forth in Section 3.04, agrees to issue on any
Banking Day prior to the Termination Date for the account of the Borrower
irrevocable standby letters of credit in such form as may from time to time be
approved by Chase acting reasonably (together with the applications therefor,
the "Letters of Credit"); provided that on the date of the issuance of any
Letter of Credit, and after giving effect to such issuance, the Letter of Credit
Obligations shall not exceed the Letter of Credit Availability.
(b) Each Letter of Credit shall (i) have an expiry date no
later than the Termination Date, (ii) be denominated in Dollars, (iii) be in a
minimum face amount of $100,000 and (iv) provide for the payment of sight drafts
when presented for honor thereunder in accordance with the terms thereof and
when accompanied by the documents described or when such documents are
presented, as the case may be.
Section 3.02. Purposes. The Borrower shall use the Letters of Credit
for the purpose of securing obligations incurred in the ordinary course of the
business of the Obligors (including, without limitation, the insurance
obligations of the Obligors); provided that the Letters of Credit shall not be
used for the benefit of Subsidiaries who are not Subsidiary Guarantors for any
purpose.
Section 3.03. Procedures for Issuance of Letters of Credit. The
Borrower may from time to time request that Chase issue a Letter of Credit by
delivering to Chase at its address for notices specified herein an application
therefor in such form as may from time to time be approved by Chase acting
reasonably, completed to the satisfaction of Chase, and such other certificates,
documents and other papers and information as Chase may reasonably request. Upon
receipt of any application, Chase will process such application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit in such customized form as may reasonably be
requested by the Borrower (but in no event shall Chase issue any Letter of
Credit later than five Banking Days after receipt of the application therefor
and all such other certificates, documents and other papers and information
relating thereto) by issuing the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by Chase and the Borrower.
Chase shall furnish a copy of such Letter of Credit to the Borrower promptly
following the issuance thereof.
<PAGE>
Section 3.04. Participating Interests. In the case of each Letter of
Credit, effective as of the date of the issuance thereof, Chase agrees to allot
and does allot to each other Bank, and each such Bank severally and irrevocably
agrees to take and does take a Participating Interest in such Letter of Credit
in a percentage equal to such Bank's Pro Rata Share of the Letter of Credit
Obligations. On the date that any Bank becomes a party to this Agreement in
accordance with Section 13.05, Participating Interests in any outstanding Letter
of Credit held by the transferor Bank from which such transferee Bank acquired
its interest hereunder shall be proportionately reallotted between such
transferee Bank and such transferor Bank. Each Participating Bank hereby agrees
that its obligation to participate in each Letter of Credit, and to pay or to
reimburse Chase for its participating share of the drafts drawn thereunder, is
absolute, irrevocable and unconditional and shall not be affected by any
circumstances whatsoever (unless Chase's actions with respect thereto constitute
gross negligence or wilful misconduct), including, without limitation, the
occurrence and continuance of any Default or Event of Default, and that each
such payment shall be made without any offset, abatement, withholding or other
reduction whatsoever.
Section 3.05. Payments. (a) In order to induce Chase to issue the
Letters of Credit, the Borrower hereby agrees to reimburse Chase, unless such
Reimbursement Obligation has been accelerated pursuant to Section 10.02, on each
date that the Borrower has been notified by Chase that any draft presented under
any Letter of Credit is paid by Chase, for (i) the amount of the draft paid by
Chase and (ii) the amount of any taxes, reasonable fees, reasonable charges or
other reasonable costs or expenses whatsoever incurred by Chase in connection
with any payment made by Chase under, or with respect to, such Letter of Credit.
Each such payment shall be made to Chase at its office specified in Section
13.06, in lawful money of the United States and in immediately available funds
on the day that payment is made by Chase. Interest on any and all amounts
remaining unpaid by the Borrower under this Section 3.05 at any time from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full shall be payable to Chase on demand at a
fluctuating rate per annum equal to the Variable Rate plus 1% per annum plus the
Margin (if any).
(b) In the event that Chase makes a payment (a "Letter of
Credit Funding") under any Letter of Credit and is not reimbursed in full
therefor on the date of such Letter of Credit Funding, in accordance with the
terms hereof, Chase will promptly through the Agent notify each Participating
Bank that acquired its Participating Interest in such Letter of Credit from
Chase. No later than the close of business on the date such notice is given if
such notice is given, each such Participating Bank will transfer to the Agent,
for the account of Chase, in immediately available funds, an amount equal to
such Participating Bank's Pro Rata Share of the unreimbursed portion of such
Letter of Credit Funding, together with interest, if any, accrued thereon from
and including the date of such transfer at a rate per annum equal to the Federal
Funds Rate. Upon its receipt from such Participating Bank of such amount, Chase
will, if so requested by such Participating Bank, complete, execute and deliver
to such Participating Bank a Letter of Credit Participation Certificate dated
the date of such receipt and in such amount.
(c) Whenever, at any time after Chase has made payment under
a Letter of Credit and has received from any Participating Bank such
Participating Bank's Pro Rata Share of the unreimbursed portion of such payment,
Chase receives any reimbursement on account of such unreimbursed portion or any
payment of interest on account thereof, Chase will distribute to the Agent, for
the account of such Participating Bank, its Pro Rata Share thereof; provided,
however, that in the event that the receipt by Chase of such reimbursement or
such payment of interest (as the case may be) is required to be returned, such
Participating Bank will promptly return to the Agent, for the account of Chase,
any portion thereof previously distributed by Chase to it.
<PAGE>
Section 3.06. Further Assurances. The Borrower hereby agrees to do and
perform any and all acts and to execute any and all further instruments from
time to time reasonably requested by Chase more fully to effect the purposes of
this Agreement and the issuance of the Letters of Credit opened hereunder.
Section 3.07. Obligations Absolute. Provided that Chase has fulfilled
its obligations under the UCP, the payment obligations of the Borrower under
Section 3.05 shall be unconditional and irrevocable and shall be paid strictly
in accordance with the terms of this Agreement under all circumstances,
including, without limitation, the following circumstances:
(a) the existence of any claim, set-off, defense or other
right which the Borrower may have at any time against any beneficiary, or any
transferee, of any Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), Chase or any Participating
Bank, or any other Person, whether in connection with this Agreement, any other
Loan Document, the transactions contemplated herein, or any unrelated
transaction;
(b) any statement or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
unless Chase's actions with respect thereto constituted gross negligence or
willful misconduct;
(c) payment by Chase under any Letter of Credit against
presentation of a draft or certificate which does not comply with the terms of
such Letter of Credit, except payment resulting solely from the gross negligence
or willful misconduct of Chase; or
(d) any other circumstances or happening whatsoever, whether
or not similar to any of the foregoing, except circumstances or happenings
resulting solely from the gross negligence or willful misconduct of Chase.
Section 3.08. Cash Collateral Account. If the Commitments are
terminated and all amounts owing under this Agreement, the Notes and the Letters
of Credit become due and payable pursuant to Section 10, the Borrower shall
deposit with the Agent, on the date such obligations become due and payable, an
amount in cash equal to the Letter of Credit Obligations as of such date and the
Letter of Credit fees in accordance with Section 3.09. Such amount shall be
deposited in a cash collateral account to be established by the Agent, for the
benefit of the Banks, and shall constitute collateral security for the Letter of
Credit Obligations and other amounts owing hereunder. All amounts in such cash
collateral account shall be maintained pursuant to a cash collateral account
agreement which shall grant to the Agent exclusive dominion and control
(including exclusive rights of withdrawal) over all such amounts and shall be
otherwise satisfactory in form and substance to the Agent.
<PAGE>
Section 3.09. Letter of Credit Fees. (a) The Borrower agrees to pay the
Agent, for the account of Chase and the Participating Banks, a non-refundable
letter of credit fee with respect to each Letter of Credit, payable in the same
currency as that in which such Letter of Credit is denominated, computed at the
rate per annum equal to one percent, calculated on the basis of a year of 360
days for the actual days elapsed, of the aggregate undrawn amount under such
Letter of Credit on the date on which such fee is calculated. Such fees shall be
payable quarterly in advance on the date of issuance of such Letter of Credit
and each three month anniversary thereof and shall be nonrefundable.
(b) The Borrower agrees to pay Chase, for its own account, its
normal and customary administration, amendment, transfer, payment and
negotiation fees charged in connection with its issuance and administration of
letters of credit.
ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC.
Section 4.01. Additional Costs. The Borrower shall pay directly to each
Bank from time to time on demand such amounts as such Bank may determine to be
necessary to compensate it for any costs which such Bank determines are
attributable to its making or maintaining any Fixed Rate Loans under this
Agreement or its Note or its obligation to make any such Loans hereunder, or any
reduction in any amount receivable by such Bank hereunder in respect of any such
Loans or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which: (i) changes the basis of taxation of any amounts
payable to such Bank under this Agreement or its Note in respect of any of such
Loans (other than taxes imposed on the overall net income of such Bank or of its
Lending Office for any of such Loans by the jurisdiction in which such Bank has
its principal office or such Lending Office); or (ii) imposes or modifies any
reserve, special deposit, deposit insurance or assessment, minimum capital,
capital ratio or similar requirements relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, such Bank
(including any of such Loans or any deposits referred to in the definition of
"Fixed Base Rate" in Section 1.01); or (iii) imposes any other condition
affecting this Agreement or its Note (or any of such extensions of credit or
liabilities). Each Bank will notify the Borrower of any event occurring after
the date of this Agreement which will entitle such Bank to compensation pursuant
to this Section 4.01(a) as promptly as practicable after it obtains knowledge
thereof and determines to request such compensation. If any Bank requests
compensation from the Borrower under this Section 4.01(a), the Borrower may, by
notice to such Bank (with a copy to the Agent), require that such Bank's Loans
of the type with respect to which such compensation is requested be converted in
accordance with Section 4.04.
<PAGE>
(a) Without limiting the effect of the foregoing provisions
of this Section 4.01, in the event that, by reason of any Regulatory Change, any
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified level of the amount of a category of deposits or other liabilities
of such Bank which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or a category of
extensions of credit or other assets of such Bank which includes Eurodollar
Loans or (ii) becomes subject to restrictions on the amount of such a category
of liabilities or assets which it may hold, then, if such Bank so elects by
notice to the Borrower (with a copy to the Agent), the obligation of such Bank
to make or renew, and to convert Loans of any other type into, Loans of such
type hereunder shall be suspended until the date such Regulatory Change ceases
to be in effect (and all Loans of such type held by such Bank then outstanding
shall be converted in accordance with Section 4.04).
(b) Determinations and allocations by a Bank for purposes of
this Section 4.01 of the effect of any Regulatory Change pursuant to subsections
(a) or (b) on its costs of making or maintaining Loans or its obligation to make
Loans, or on amounts receivable by, or the rate of return to, it in respect of
Loans or such obligation, and of the additional amounts required to compensate
such Bank under this Section 4.01, shall be conclusive, provided that such
determinations and allocations are made in good faith on a reasonable basis.
Section 4.02. Limitation on Types of Loans. Anything herein to the
contrary notwithstanding, if:
(a) the Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition of "Fixed Base Rate" in Section 1.01 are not being provided
in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any type of Fixed Rate Loans as provided in
this Agreement; or
(b) the Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest referred to
in the definition of "Fixed Base Rate" in Section 1.01 upon the basis of which
the rate of interest for any type of Fixed Rate Loans is to be determined do not
adequately cover the cost to the Banks of making or maintaining such Loans;
then the Agent shall give the Borrower and each Bank prompt notice thereof, and
so long as such condition remains in effect, the Banks shall be under no
obligation to make or renew Loans of such type or to convert Loans of any other
type into Loans of such type and the Borrower shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Loans of the affected type,
either prepay such Loans or convert such Loans into another type of Loans in
accordance with Section 2.05.
Section 4.03. Illegality. Notwithstanding any other provision in this
Agreement, in the event that it becomes unlawful for any Bank or its Lending
Office to (a) honor its obligation to make or renew Eurodollar Loans hereunder
or convert Loans of any type into Loans of such type, or (b) maintain Eurodollar
Loans hereunder, then such Bank shall promptly notify the Borrower thereof (with
a copy to the Agent) and such Bank's obligation to make or renew Eurodollar
Loans and to convert other types of Loans into Loans of such type hereunder
shall be suspended until such time as such Bank may again make, renew, or
convert and maintain such affected Loans and such Bank's outstanding Eurodollar
Loans, as the case may be, shall be converted in accordance with Section 4.04.
<PAGE>
Section 4.04. Certain Conversions pursuant to Sections 4.01 and 4.03.
If the Loans of any Bank of a particular type (Loans of such type being herein
called "Affected Loans" and such type being herein called the "Affected Type")
are to be converted pursuant to Section 4.01 or 4.03, such Bank's Affected Loans
shall be automatically converted into Variable Rate Loans on the last day(s) of
the then current Interest Period(s) for the Affected Loans (or, in the case of a
conversion required by Section 4.01(b) or 4.03, on such earlier date as such
Bank may specify to the Borrower with a copy to the Agent) and, unless and until
such Bank gives notice as provided below that the circumstances specified in
Section 4.01 or 4.03 which gave rise to such conversion no longer exist:
(a) to the extent that such Bank's Affected Loans have been
so converted, all payments and prepayments of principal which would otherwise be
applied to such Bank's Affected Loans shall be applied instead to its Variable
Rate Loans;
(b) all Loans which would otherwise be made or renewed by
such Bank as Loans of the Affected Type shall be made instead as Variable Rate
Loans and all Loans of such Bank which would otherwise be converted into Loans
of the Affected Type shall be converted instead into (or shall remain as)
Variable Rate Loans; and
(c) if Loans of other Banks of the Affected Type are
subsequently converted into Loans of another type (other than Variable Rate
Loans), such Bank's Variable Rate Loans shall be automatically converted on the
conversion date into Loans of such other type to the extent necessary so that,
after giving effect thereto, all Loans held by such Bank and the Banks whose
Loans are so converted are held pro rata (as to principal amounts, types and
Interest Periods) in accordance with their respective Commitments.
If such Bank gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 4.01 or 4.03 which gave rise to the
conversion of such Bank's Affected Loans pursuant to this Section 4.04 no longer
exist (which such Bank agrees to do promptly upon such circumstances ceasing to
exist) at a time when Loans of the Affected Type are outstanding, such Bank's
Variable Rate Loans shall be converted upon the written consent of the Borrower,
on the first day(s) of the next succeeding Interest Period(s) for such
outstanding Loans of the Affected Type to the extent necessary so that, after
giving effect thereto, all Loans held by the Banks holding Loans of the Affected
Type and by such Bank are held pro rata (as to principal amounts, types and
Interest Periods) in accordance with their respective Commitments.
<PAGE>
Section 4.05. Certain Compensation. The Borrower shall pay to the Agent
for the account of each Bank, upon the request of such Bank through the Agent,
such amount or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss, cost or expense which such Bank determines
is attributable to:
(a) any payment, prepayment, conversion or renewal of a Fixed
Rate Loan made by the Borrower on a date other than the last day of an Interest
Period for such Loan (whether by reason of acceleration or otherwise); or
(b) any failure by the Borrower to borrow, convert into or
renew a Fixed Rate Loan to be made, converted into or renewed by such Bank on
the date specified therefor in the relevant notice under Sections 2.04, 2.05 or
2.06, as the case may be.
Without limiting the foregoing, such compensation shall include an amount equal
to the excess, if any, of: (i) the present value of the amount of interest which
otherwise would have accrued on the principal amount so paid, prepaid, converted
or renewed or not borrowed, converted or renewed for the period from and
including the date of such payment, prepayment or conversion or failure to
borrow, convert or renew to but excluding the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or renew, to but excluding the last day of the Interest Period for such Loan
which would have commenced on the date specified therefor in the relevant
notice) at the applicable rate of interest for such Loan provided for herein;
over (ii) the present value of the amount of interest (as reasonably determined
by such Bank) such Bank would have bid in the London interbank market (if such
Loan is a Eurodollar Loan) for Dollar deposits for amounts comparable to such
principal amount and maturities comparable to such period. A determination of
any Bank as to the amounts payable pursuant to this Section 4.05 shall be
conclusive absent manifest error.
ARTICLE 5. CONDITIONS PRECEDENT.
Section 5.01. Documentary Conditions Precedent. The obligations of the
Banks to make the Loans and the obligations of the Banks to issue any Letter of
Credit are subject to the condition precedent that the Agent shall have received
on or before the date of such Loans or the issuance of such Letters of Credit
each of the following, in form and substance satisfactory to the Agent and its
counsel:
(a) counterparts of this Agreement executed by each of the
Borrower, the Subsidiary Guarantors, the Banks and the Agent;
<PAGE>
(b) the Notes duly executed by the Borrower;
(c) the Security Agreement, the Trademark Security Agreement
and the Pledge Agreement duly executed by each of the Obligors a party thereto
together with evidence that all actions necessary or appropriate (or, in any
event, as may be requested by the Agent) to create, perfect or protect the Liens
created or purported to be created by the Security Agreement, the Trademark
Security Agreement and the Pledge Agreement have been taken;
(d) [Intentionally Omitted];
(e) certificates or other evidence of casualty insurance
policies with appropriate loss payable endorsements indicating assignment of
proceeds thereunder to the Agent for the ratable benefit of the Banks and
certificates or other evidence of liability insurance with appropriate
endorsements indicating the coverage of the Agent for the ratable benefit of the
Banks as an additional insured;
(f) certificates of the Secretary or Assistant Secretary of
each of the Obligors, dated the Closing Date, (i) attesting to all corporate
action taken by such Obligor, including resolutions of its Board of Directors
authorizing the execution, delivery and performance of each of the Facility
Documents to which it is a party and each other document to be delivered
pursuant to this Agreement, (ii) certifying the names and true signatures of the
officers of such Obligor authorized to sign the Facility Documents to which it
is a party and the other documents to be delivered by such Obligor under this
Agreement and (iii) verifying that the charter and by-laws of such Obligor
attached thereto are true, correct and complete as of the date thereof;
(g) a certificate of a duly authorized officer of each of the
Obligors, dated the Closing Date, stating that the representations and
warranties in Article 6 are true and correct on such date as though made on and
as of such date and that no event has occurred and is continuing which
constitutes a Default or Event of Default;
(h) good standing certificates and certified copies of all
charter documents with respect to each Obligor certified by the Secretary of
State of its jurisdiction of incorporation, and evidence that each of the
Obligors is qualified as a foreign corporation in every other jurisdiction in
which it does business where the failure to so qualify could reasonably be
expected to have a Material Adverse Effect;
(i) favorable opinions of (i) Goodwin, Procter & Hoar L.L.P.,
outside counsel to the Obligors, (ii) Wolin, Fuller, Ridley & Miller L.L.P.,
special Texas counsel to the Obligors, and (iii) Fredrikson & Byron, P.A.,
special Minnesota counsel to the Obligors, each dated the Closing Date, in
substantially the form of Exhibit C and as to such other matters as the Agent or
any Bank may reasonably request;
(j) certified complete and correct copies of the financial
statements referred to in Section 6.05; and
<PAGE>
(k) certified complete and correct copies of all
documentation (the "All Seasons Term Sheet") evidencing the acquisition of all
of the outstanding capital stock (and all rights, options and warrants to
purchase capital stock) of All Seasons Services, Inc. (the "All Seasons
Acquisition").
On the Closing Date, the Existing Banks shall surrender to the Borrower the
Existing Notes held by it under the Existing Credit Agreement, in each case
marked "Replaced".
Section 5.02. Additional Conditions Precedent. The obligations of the
Banks to make any Loans pursuant to a borrowing which increases the amount
outstanding hereunder (including the initial borrowing) or to issue any Letter
of Credit shall be subject to the further conditions precedent that on the date
of such Loans, the following statements shall be true: the representations and
warranties contained in Article 6, in Article 3 of the Security Agreement, in
Article 3 of the Trademark Security Agreement and in Article 3 of the Pledge
Agreement, are true and correct on and as of the date of such Loans or the
issuance of such Letters of Credit as though made on and as of such date (except
(x) for in all instances transactions and changes not prohibited by this
Agreement and (y) all references to July 1, 1995 in Section 6.05 shall be to the
most recent fiscal year end for which financials are available and all
references to March 30, 1996 shall be to the most recent fiscal quarter end for
which financials are available); and no Default or Event of Default has occurred
and is continuing, or would result from such Loans or the issuance of such
Letter of Credit.
Section 5.03. Deemed Representations. Each notice of borrowing
hereunder or request for the issuance of a Letter of Credit and acceptance by
the Borrower of the proceeds of such borrowing or of the issuance of such Letter
of Credit shall constitute a representation and warranty that the statements
contained in Section 5.02 are true and correct both on the date of such notice
or request and, unless such Borrower otherwise notifies the Agent prior to such
borrowing or such issuance, as of the date of such borrowing or such issuance.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES.
Each of the Obligors hereby represents and warrants that:
Section 6.01. Organization, Good Standing and Due Qualification. Each
of the Consolidated Entities is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, has the
corporate, partnership or limited liability company power and authority to own
its assets and to transact the business in which it is now engaged or proposed
to be engaged, and is duly qualified as a foreign corporation, partnership or
limited liability company and in good standing under the laws of each other
jurisdiction in which such qualification is required and where such failure to
qualify could reasonably be expected to have a Material Adverse Effect.
<PAGE>
Section 6.02. Power and Authority; No Conflicts. The execution,
delivery and performance by each of the Obligors of the Facility Documents to
which it is a party have been duly authorized by all necessary corporate,
partnership or limited liability company action and do not and will not: (a)
require any consent or approval of its stockholders, partners or members; (b)
contravene its organizational documents; (c) violate any provision of, or
require any filing (other than the filing of the financing statements
contemplated by the Security Agreement and the filing of the Trademark Security
Agreement), registration, consent or approval under, any law, rule, regulation
(including, without limitation, Regulation U), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to any Consolidated Entity; (d) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which any
Consolidated Entity is a party or by which it or its properties may be bound or
affected if such breach, default or failure to obtain consent could reasonably
be expected to have a Material Adverse Effect; (e) result in, or require, the
creation or imposition of any Lien (other than as created under the Security
Documents), upon or with respect to any of the properties now owned or hereafter
acquired by any Consolidated Entity; or (f) cause any Consolidated Entity to be
in default under any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, agreement,
lease or instrument if such default could reasonably be expected to have a
Material Adverse Effect.
Section 6.03. Legally Enforceable Agreements. Each Facility Document to
which any Obligor is a party is, or when delivered under this Agreement will be,
a legal, valid and binding obligation of such Obligor enforceable against such
Obligor in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency and other similar laws
affecting creditors' rights generally.
Section 6.04. Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of any Obligor, threatened, against or affecting
any Consolidated Entity before any court, governmental agency or arbitrator,
which could reasonably be expected to have a Material Adverse Effect.
Section 6.05. Financial Statements. The consolidated and consolidating
balance sheets of the Consolidated Entities as at July 1, 1995, and the related
consolidated and consolidating income statements and statements of cash flows
and changes in stockholders' equity of the Consolidated Entities for the fiscal
year then ended, and the accompanying footnotes, together with the opinion on
the consolidated statements of Deloitte & Touche, independent certified public
accountants, and the interim consolidated and consolidating balance sheet of the
Consolidated Entities, as at March 30, 1996, and the related consolidated and
consolidating income statement and statements of cash flows and changes in
stockholders' equity of the Consolidated Entities, for the nine month period
then ended, copies of which have been furnished to each of the Banks, are
complete and correct and fairly present the financial condition of the
Consolidated Entities at such dates and the results of the operations of the
Consolidated Entities for the periods covered by such statements, all in
accordance with GAAP consistently applied.
<PAGE>
(a) The projections and pro forma financial information
provided by the Borrower regarding the All Seasons Acquisition are based on good
faith estimates and assumptions by the management of the Borrower, it being
recognized by the Banks, however, that projections as to future events are not
to be viewed as fact and that actual results during the period or periods
covered by any such projections may differ from the projected results and that
the differences may be material. After reviewing historical financial statements
and considering the pro forma position of the Consolidated Entities subsequent
to the All Seasons Acquisition, the Borrower believes in good faith that the
Consolidated Entities will continue to be in compliance with the financial
covenants contained in Article 9 on a pro forma basis.
(b) There are no liabilities of any Consolidated Entity, fixed
or contingent, which are material but are not reflected in the financial
statements or in the notes thereto and which would be required to be recorded in
such financial statements or notes in accordance with GAAP, other than
liabilities arising in the ordinary course of business since March 30, 1996. No
information, exhibit or report furnished by any Consolidated Entity to the Banks
in connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state a material fact or any fact necessary
to make the statements contained therein not materially misleading. Since March
30, 1996, there has been no change which could reasonably be expected to have a
Material Adverse Effect.
Section 6.06. Ownership and Liens. Each of the Consolidated Entities
has title to, or valid leasehold interests in, all of its properties and assets,
real and personal, including the properties and assets, and leasehold interests
reflected in the financial statements referred to in Section 6.05 (other than
any properties or assets disposed of in the ordinary course of business), and
none of the properties and assets owned by any Consolidated Entity and none of
its leasehold interests is subject to any Lien, except as disclosed in such
financial statements or as may be permitted hereunder and except for the Liens
created by the Security Documents.
Section 6.07. Taxes. Each of the Consolidated Entities has filed all
tax returns (federal, state and local) required to be filed and has paid all
taxes, assessments and governmental charges and levies thereon to be due,
including interest and penalties. The federal income tax liability of the
Consolidated Entities has been audited by the Internal Revenue Service and has
been finally determined and satisfied for all taxable years up to and including
the taxable year ended 1984.
Section 6.08. ERISA. To the best knowledge of each Obligor, each Plan
and Multiemployer Plan, is in compliance in all material respects with, and has
been administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other applicable Federal or state law, and
no event or condition is occurring or exists concerning which any Obligor would
be under an obligation to furnish a report to the Bank in accordance with
Section 7.08(j) hereof. As of the most recent valuation date for each Plan, each
Plan was "fully funded", which for purposes of this Section 6.08 shall mean that
the fair market value of the assets of the Plan is not less than the present
value of the accrued benefits of all participants in the Plan, computed on a
Plan termination basis. To the best knowledge of each Obligor, no Plan has
ceased being fully funded as of the date these representations are made with
respect to any Loan under this Agreement. For purposes of this Section 6.08,
"material" shall be determined in relation to the financial position of the
Consolidated Entities as specified in Section 10.01(g).
<PAGE>
Section 6.09. Subsidiaries and Ownership of Stock. Schedule I sets
forth the name of each Subsidiary of the Borrower, the jurisdiction of its
incorporation and the Persons owning the outstanding capital stock of such
Subsidiary. All of the outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable, and all such shares are owned
by the Borrower or another Subsidiary free and clear of all Liens. Except as set
forth in Schedule I, neither the Borrower nor any of its Subsidiaries owns or
holds the right to acquire any shares of stock or any other security or interest
in any other Person.
Section 6.10. Credit Arrangements. Schedule II is a complete and
correct list of all credit agreements, indentures, note purchase agreements,
guaranties of indebtedness of third parties for borrowed money and guaranties of
obligations of third parties as lessees under Capital Leases in excess of
$1,000,000, Capital Leases and other investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which any Consolidated Entity is in any
manner directly or contingently obligated; and the maximum principal or face
amounts of the credit in question, outstanding and which can be outstanding, are
correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are correctly described or indicated in such Schedule.
Section 6.11. Operation of Business. Each of the Consolidated Entities
possesses all licenses, permits, franchises, patents, copyrights, trademarks and
trade names, or rights thereto, which are material to conduct its business
substantially as now conducted and as presently proposed to be conducted and
where the failure to possess such licenses, permits, franchises, patents,
copyrights, trademarks and trade names could reasonably be expected to have a
Material Adverse Effect, and no Consolidated Entity is in violation of any valid
rights of others with respect to any of the foregoing where such violation is
material and could reasonably be expected to have a Material Adverse Effect.
Section 6.12. Hazardous Materials. Each of the Consolidated Entities is
in compliance with all Environmental Laws in effect in each jurisdiction where
it is presently doing business except where such failure to be in compliance
could not reasonably be expected to have a Material Adverse Effect. No
Consolidated Entity is subject to any liability under any Environmental Law
except where the existence of such liability could not reasonably be expected to
have a Material Adverse Effect.
<PAGE>
In addition, no Consolidated Entity has received any (i) notice from any
governmental authority by which any of its present or previously-owned or leased
real properties has been designated, listed, or identified in any manner by any
governmental authority charged with administering or enforcing any Environmental
Law as a Hazardous Material disposal or removal site, "Super Fund" clean-up
site, or candidate for removal or closure pursuant to any Environmental Law,
(ii) notice of any Lien arising under or in connection with any Environmental
Law that has attached to any revenues of, or to, any of its owned or leased real
properties, or (iii) summons, citation, notice, directive, letter, or other
written communication from any governmental authority concerning any intentional
or unintentional action or omission by such Consolidated Entity in connection
with its ownership or leasing of any real Property resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dumping, or otherwise
disposing of any Hazardous Material into the environment resulting in any
violation of any Environmental Law, in each case where the effect of which could
reasonably be expected to have a Material Adverse Effect.
Section 6.13. No Default on Outstanding Judgments or Orders. Each of
the Consolidated Entities has satisfied all judgments such that the aggregate
amount of outstanding judgments not otherwise fully covered by insurance does
not exceed $500,000 and no Consolidated Entity is in default with respect to any
final judgment, writ, injunction, decree, rule or regulation of any court,
arbitrator or federal, state, municipal or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign which
could reasonably be expected to have a Material Adverse Effect.
Section 6.14. No Defaults on Other Agreements. No Consolidated Entity
is in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
agreement or instrument which could reasonably be expected to have a Material
Adverse Effect.
Section 6.15. Labor Disputes and Acts of God. Neither any material part
of the business nor the properties of any Consolidated Entity are affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), which could reasonably be
expected to have a Material Adverse Effect.
Section 6.16. Governmental Regulation. No Consolidated Entity is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Investment Company Act of 1940, the Interstate Commerce Act, the Federal Power
Act or any statute or regulation limiting its ability to incur indebtedness for
money borrowed as contemplated hereby.
<PAGE>
Section 6.17. No Forfeiture. Neither the Borrower nor any of its
Subsidiaries or Affiliates is engaged in or proposes to be engaged in the
conduct of any business or activity which could result in a Forfeiture
Proceeding and no Forfeiture Proceeding against any of them is pending or
threatened.
Section 6.18. Solvency.
(a) The present balance sheet value of the assets of the
consolidated group of the Consolidated Entities after giving effect to all the
transactions contemplated by the Facility Documents and the funding of all
Commitments and the issuance of all Letters of Credit hereunder exceeds the
amount that will be required to be paid on or in respect of the existing debts
and other liabilities (including contingent liabilities) of such consolidated
group as determined in accordance with GAAP.
(b) The Property of each Obligor does not constitute
unreasonably small capital for such Obligor to carry out its business as now
conducted and as proposed to be conducted including the capital needs of such
Obligor.
(c) No Obligor intends to, nor does any Obligor believe that
it will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by such Obligor, and
of amounts to be payable on or in respect of debt of such Obligor). The cash
available to such Obligor after taking into account all other anticipated uses
of the cash of such Obligor, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of such Obligor when such amounts are required
to be paid.
(d) Except as may be otherwise fully covered by insurance, no
Obligor believes that final judgments against it in actions for money damages
will be rendered at a time when, or in an amount such that, such Obligor will be
unable to satisfy any such judgments promptly in accordance with their terms
(taking into account the maximum reasonable amount of such judgments in any such
actions and the earliest reasonable time at which such judgments might be
rendered). The cash available to each Obligor after taking into account all
other anticipated uses of the cash of such Obligor (including the payments on or
in respect of debt referred to in paragraph (c) of this Section 6.18), is
anticipated to be sufficient to pay all such final judgments promptly in
accordance with their terms.
Section 6.19. Security Documents. The Security Documents are effective
to create in favor of the Agent for the benefit of the Banks a legal, valid and
enforceable Lien on and security interest in all right, title and interest of
each Obligor in the Collateral securing the obligations of the Obligors under
this Agreement, the Notes, the Letters of Credit and the other Facility
Documents. To the extent that a Lien on and security interest in the Collateral
can be perfected by the filing of financing statements under the Uniform
Commercial Code, the Agent has a fully perfected and continuing first priority
Lien on and security interest in such Collateral described in the Security
Agreement, the Trademark Security Agreement and the Pledge Agreement, free from
all Liens other than Liens permitted under Section 8.03.
<PAGE>
ARTICLE 7. AFFIRMATIVE COVENANTS.
So long as any Obligation shall remain unpaid, any Letter of Credit
shall remain outstanding or any Bank shall have any Commitment under this
Agreement, the Borrower shall, and shall cause each of its Subsidiaries to:
Section 7.01. Maintenance of Existence. Preserve and maintain its
corporate existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified as a foreign corporation in each jurisdiction
in which such qualification is required and where such failure to so qualify
could reasonably be expected to have a Material Adverse Effect.
Section 7.02. Conduct of Business. Continue to engage in a business of
the same general type as conducted by it on the date of this Agreement.
Section 7.03. Maintenance of Properties. Maintain, keep and preserve
all of its Properties, tangible and intangible, (except those assets no longer
used or useful in the conduct of its business) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
Section 7.04. Maintenance of Records. Keep adequate records and books
of account, in which complete entries will be made in accordance with GAAP,
reflecting all financial transactions of the Consolidated Entities.
Section 7.05. Maintenance of Insurance. Maintain insurance with
financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
the same or a similar business and similarly situated, which insurance may
provide for reasonable deductibility from coverage thereof.
Section 7.06. Compliance with Laws. Comply in all material respects
with all applicable laws, rules, regulations and orders, such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its Property unless
contested in good faith by appropriate proceedings and for which appropriate
reserves have been established in accordance with GAAP.
Section 7.07. Right of Inspection. At any reasonable time and from time
to time, and upon reasonable advance notice but no advance notice shall be
required if a Default or an Event of Default then exists, permit the Agent or
any Bank or any agent or representative thereof, to examine and make copies and
abstracts from the records and books of account of, and visit the properties of,
such Consolidated Entity, and to discuss the affairs, finances and accounts of
such Consolidated Entity with its officers and directors and independent
accountants.
<PAGE>
Section 7.08. Reporting Requirements. Furnish directly to each of the
Banks:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Borrower, consolidated and
consolidating balance sheets of the Consolidated Entities as of the end of such
fiscal year and consolidated and consolidating income statements and statements
of cash flows and changes in stockholders' equity of the Consolidated Entities
for such fiscal year, all in reasonable detail and stating in comparative form
the respective consolidated and consolidating figures for the corresponding date
and period in the prior fiscal year and all prepared in accordance with GAAP and
as to the consolidated statements accompanied by an opinion thereon acceptable
to the Agent and each of the Banks by Deloitte & Touche or other independent
accountants of national standing selected by the Borrower; provided that
delivery within the period specified above of copies of the Annual Report on
Form 10-K of the Borrower filed with the Securities and Exchange Commission,
together with the adjustments to such consolidated financial statements
necessary to provide consolidating information for each of its Subsidiaries,
shall be deemed to satisfy the requirements of this Section 7.08(a) so long as
such Form 10-K as so adjusted shall contain the information referred to in this
Section 7.08(a);
(b) as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal year of the
Borrower, consolidated and consolidating balance sheets of the Consolidated
Entities as of the end of such quarter and consolidated and consolidating income
statements and statements of cash flows and changes in stockholders' equity of
the Consolidated Entities, for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, all in reasonable detail
and stating in comparative form the respective consolidated and consolidating
figures for the corresponding date and period in the previous fiscal year and
all prepared in accordance with GAAP and certified by the chief financial
officer of the Borrower (subject to year-end adjustments); provided that
delivery within the period specified above of copies of the Quarterly Report on
Form 10-Q of the Borrower filed with the Securities and Exchange Commission,
together with the adjustments to such consolidated financial statements
necessary to provide consolidating information for each of its Subsidiaries,
shall be deemed to satisfy the requirements of this Section 7.08(b) so long as
such Form 10-Q as so adjusted shall contain the information referred to in this
Section 7.08(b);
(c) simultaneously with the delivery of the financial
statements referred to above, a Compliance Certificate of the chief financial
officer of the Borrower (i) certifying that to the best of his knowledge no
Default or Event of Default has occurred and is continuing or, if a Default or
Event of Default has occurred and is continuing, a statement as to the nature
thereof and the action which is proposed to be taken with respect thereto, and
(ii) with computations demonstrating compliance with the covenants contained in
Article 9;
<PAGE>
(d) simultaneously with the delivery of the annual financial
statements referred to in Section 7.08(a), a certificate of the independent
public accountants who audited such statements to the effect that, in making the
examination necessary for the audit of such statements, they have obtained no
knowledge of any condition or event which constitutes a Default or Event of
Default, or if such accountants shall have obtained knowledge of any such
condition or event, specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;
(e) as soon as available and in any event within 30 days
after the end of each fiscal year of the Borrower, a written report setting
forth, among other things, in reasonable detail (i) the plans by the
Consolidated Entities for such fiscal year for financial, marketing and other
corporate strategies and covering such matters as are customary in the
restaurant and food service industries, and setting forth the amounts budgeted
for revenues and expenses and operating cash flow for such fiscal year and (ii)
the plans by the Consolidated Entities for the current fiscal year for
financial, marketing and other corporate strategies and covering such matters as
are customary in the restaurant and food service industries, and setting forth
the amounts budgeted for revenues and expenses and operating cash flow for the
current fiscal year;
(f) as soon as available and in any event no later than 10
days prior to any Consolidated Entity making an Acquisition, copies of all
historical financial statements of the business being acquired and pro forma
financial statements of the Consolidated Entities reflecting such Acquisition;
(g) promptly after the commencement thereof, notice of all
actions, suits, and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Consolidated Entity which, if determined adversely to such
Consolidated Entity, could reasonably be expected to have a Material Adverse
Effect;
(h) as soon as possible and in any event within 10 days after
the occurrence of each Default or Event of Default a written notice setting
forth the details of such Default or Event of Default and the action which is
proposed to be taken by the Obligors with respect thereto;
<PAGE>
(i) as soon as possible, and in any event within ten days
after any Obligor knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan,
whichever is applicable, have occurred or exist, a statement signed by a senior
financial officer of such Obligor setting forth details respecting such event or
condition and the action, if any, which such Obligor or its ERISA Affiliate
proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by the Borrower or an ERISA Affiliate
with respect to such event or condition): any reportable event, as defined in
Section 4043(b) of ERISA, with respect to a Plan, as to which PBGC has not by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum funding standard of Section 412 of the Code or Section 302
of ERISA including, without limitation, the failure to make on or before its due
date a required installment under Section 412(m) of the Code or Section 302(e)
of ERISA, shall be a reportable event regardless of the issuance of any waivers
in accordance with Section 412(d) of the Code) and any request for a waiver
under Section 412(d) of the Code for any Plan; the distribution under Section
4041 of ERISA of a notice of intent to terminate any Plan or any action taken by
the Borrower or an ERISA Affiliate to terminate any Plan; the institution by
PBGC of proceedings under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Borrower
or any ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by PBGC with respect to such Multiemployer Plan; the complete or
partial withdrawal from a Multiemployer Plan by the Borrower or any ERISA
Affiliate that results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt of the Borrower or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA; the institution of a proceeding by a
fiduciary or any Multiemployer Plan against the Borrower or any ERISA Affiliate
to enforce Section 515 of ERISA, which proceeding is not dismissed within 30
days; the adoption of an amendment to any Plan that pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA would result in the loss of
tax-exempt status of the trust of which such Plan is a part if the Borrower or
an ERISA Affiliate fails to timely provide security to the Plan in accordance
with the provisions of said Sections; any event or circumstance exists which may
reasonably be expected to constitute grounds for the Borrower or any ERISA
Affiliate to incur liability under Title IV of ERISA or under Sections
412(c)(11) or 412(n) of the Code with respect to any Plan; and the Unfunded
Benefit Liabilities of one or more Plans increase after the date of this
Agreement in an amount which is material in relation to the financial condition
of the Consolidated Entities, on a consolidated basis; provided, however, that
such increase shall not be deemed to be material so long as it does not exceed
during any consecutive 3 year period $500,000.
(j) promptly after the request of any Bank, copies of each
annual report filed pursuant to Section 104 of ERISA with respect to each Plan
(including, to the extent required by Section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in Section 103) and each
annual report filed with respect to each Plan under Section 4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall be furnished only if they are available to the Borrower or an ERISA
Affiliate;
<PAGE>
(k) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which the Borrower sends
to its stockholders, and copies of all regular, periodic and special reports,
and all registration statements which any Consolidated Entity files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national securities exchange;
(l) promptly after the commencement thereof or promptly after
any Obligor knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding; and
(m) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its Subsidiaries
as the Agent or any Bank may from time to time reasonably request.
Section 7.09. Additional Subsidiary Guarantors. In the event that any
Subsidiary of the Borrower shall have as determined at the end of each fiscal
quarter of the Borrower assets greater than $1,500,000 (as determined in
accordance with GAAP), the Borrower will immediately cause such Subsidiary to
become a "Subsidiary Guarantor" (and thereby an Obligor hereunder) pursuant to
an Assumption Agreement, and shall deliver such proof of corporate action,
incumbency of officers, opinions of counsel and other documents as is consistent
with those delivered by each Obligor pursuant to Article 4 of the Existing
Credit Agreement or as the Agent shall have reasonably requested.
ARTICLE 8. NEGATIVE COVENANTS.
So long as any Obligation shall remain unpaid, any Letter of Credit
shall remain outstanding or any Bank shall have any Commitment under this
Agreement, the Borrower shall not, and shall cause each of its Subsidiaries not
to:
Section 8.01. Debt. Create, incur, assume or suffer to exist any Debt,
except:
(a) Debt of the Obligors under this Agreement, the Notes, the
Letters of Credit and the other Facility Documents;
(b) Debt described in Schedule II and, unless otherwise
identified with an asterisk on Schedule II, any renewals, extensions or
refinancings thereof, provided that the principal amount thereof does not
increase;
(c) Consolidated Subordinated Debt;
(d) Debt of any Obligor to any other Obligor, provided that
(i) if such Debt is secured, such Debt is evidenced by a promissory note and
such note together with such security is pledged as collateral for the Loans,
the Letter of Credit Obligations and the other obligations under the Facility
Documents and (ii) if Debt is evidenced by a promissory note or other
instrument, such note is pledged to the Agent as collateral for the Loans, the
Letter of Credit Obligations and the other obligations under the Facility
Documents;
<PAGE>
(e) Debt consisting of Guaranties permitted pursuant to
Section 8.02;
(f) accounts payable to trade creditors in the ordinary
course of business for goods or services;
(g) Debt of any Consolidated Entity secured by purchase money
Liens or incurred in connection with Capital Leases provided that the aggregate
amount of such Debt for all Obligors shall not exceed at any time $15,000,000;
and
(h) other Debt of any Consolidated Entity not listed in
clauses (a) through (g), inclusive, provided that the aggregate amount of such
Debt for all Consolidated Entities does not exceed $1,000,000 at any time.
Section 8.02. Guaranties, Etc. Assume, guarantee, endorse or otherwise
become directly or contingently responsible or liable for any Guaranty, except:
(a) Guaranties by the Subsidiaries of the Borrower of the
Obligations;
(b) Guaranties by endorsement of negotiable instruments for
deposit or collection, similar transactions in the ordinary course of business;
(c) Guaranties constituting Debt permitted pursuant to
Section 8.01;
(d) Guaranties by any Obligor of any obligations of any other
Obligor permitted hereunder provided that the aggregate amount of such
obligations for all Obligors does not exceed $5,000,000;
(e) Guaranties by Fuddruckers, Inc. of rental payments owed
by Atlantic Restaurant Ventures, Inc. under leases of "Fuddruckers" restaurants
which will be or have been entered into in the ordinary course of business; and
(f) Guaranties by the Borrower of obligations under leases
permitted under Section 8.04.
Section 8.03. Liens. Create, incur, assume or suffer to exist, any
Lien, upon or with respect to any of its Properties, now owned or hereafter
acquired, except:
(a) Liens in favor of the Agent on behalf of the Banks
securing the Loans and the Letter of Credit Obligations hereunder;
(b) Liens for taxes or assessments or other government
charges or levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained in accordance with GAAP;
<PAGE>
(c) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 60 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been established
in accordance with GAAP;
(d) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(f) judgment and other similar Liens arising in connection
with court proceedings which do not exceed $1,000,000 in the aggregate or where
the execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings;
(g) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by any Obligor of the Property encumbered thereby
in the normal course of its business or materially impair the value of the
Property subject thereto;
(h) Liens described on Schedule IV not otherwise permitted
under this Section 8.03 and, to the extent that such Lien secures Debt permitted
under Section 8.01(b), Liens that secure any renewals, extensions or
refinancings of such Debt, but not the extension of such Lien to other Property;
(i) purchase money Liens on any Property hereafter acquired
or the assumption of any Lien on Property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale or other
title retention agreement or a Capital Lease; provided that any Property subject
to any of the foregoing is acquired by any Obligor in the ordinary course of its
business and the Lien on any such Property is created contemporaneously with
such acquisition; the obligation secured by any Lien so created, assumed or
existing shall not exceed 100% of the lesser of cost or fair market value as of
the time of acquisition of the Property covered thereby to such Obligor
acquiring the same; each such Lien shall attach only to the Property so acquired
and fixed improvements thereon; and the obligations secured by such Lien are
permitted by the provisions of Section 8.01(g).
<PAGE>
Section 8.04. Leases. Create, incur, assume or suffer to exist, any
obligation as lessee for the rental or hire of any real or personal Property,
except:
(a) leases existing on the date of this Agreement and any
extensions or renewals thereof;
(b) operating leases (other than Capital Leases) which are
entered into in the ordinary course of business;
(c) leases between any Obligor and any other Obligor; and
(d) Capital Leases permitted by Section 8.01 and Section
8.03.
Section 8.05. Investments. Make, or permit any of its Subsidiaries to
make, any loan or advance to any Person or purchase or otherwise acquire, or
permit any such Subsidiary to purchase or otherwise acquire, any capital stock,
assets, obligations or other securities of, make any capital contribution to, or
otherwise invest in, or acquire any interest in, any Person, except:
(a) direct obligations of the United States of America or any
agency thereof with maturities of one year or less from the date of acquisition;
(b) commercial paper of a domestic issuer rated at least "A1"
by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.;
(c) certificates of deposit with maturities of one year or
less from the date of acquisition issued by any commercial bank operating within
the United States of America having capital and surplus in excess of
$100,000,000;
(d) for stock, obligations or securities received in
settlement of debts (created in the ordinary course of business) owing to such
Consolidated Entity;
(e) in connection with any Acquisition permitted by Section
8.11;
(f) advances for reimbursement of expenses of employees
incurred in the ordinary course of business;
(g) to or in any Obligor; and
(h) in Property to be used or useful in the ordinary course
of business of such Consolidated Entity.
<PAGE>
Section 8.06. Dividends. Declare or pay, any dividends, purchase,
redeem, retire or otherwise acquire for value, any of its capital stock now or
hereafter outstanding, or make, any distribution of assets to its stockholders
as such whether in cash, assets or in obligations of such Consolidated Entity,
or allocate or otherwise set apart, any sum for the payment of any dividend or
distribution on, or for the purchase, redemption or retirement of any shares of
its capital stock, or make, any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock, or make, payments of
interest on, or payments or prepayments of principal of, or the setting apart of
money for a sinking or other analogous fund for the purchase, redemption,
retirement or other acquisition of principal or interest, on Consolidated
Subordinated Debt, except that:
(a) any Consolidated Entity may declare and deliver dividends
and make distributions payable solely in its common stock;
(b) any Consolidated Entity may purchase or otherwise acquire
shares of its capital stock by exchange for or out of the proceeds received from
a substantially concurrent issue of new shares of its capital stock; and
(c) any Consolidated Entity may declare and deliver dividends
and make distributions to the Borrower or any Obligor.
Section 8.07. Sale of Assets. Sell, lease, assign, transfer or
otherwise dispose of any of its now owned or hereafter acquired assets
(including, without limitation, shares of stock and indebtedness, receivables
and leasehold interests); except:
(a) for inventory disposed of in the ordinary course of
business;
(b) the sale or other disposition of assets no longer used or
useful in the conduct of its business;
(c) that any Obligor may sell, lease, assign, or otherwise
transfer its assets to any other Obligor; and
(d) that any Obligor may license its intellectual Property to
franchisees in the ordinary course of business.
Section 8.08. Stock of Subsidiaries, Etc. Sell or otherwise dispose of
any shares of capital stock of any Subsidiary of the Borrower, except in
connection with a transaction permitted under Section 8.10, or permit any such
Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 8.09. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of Property or the
rendering of any service, with any Affiliate, including, without limitation, the
purchase, sale or exchange of Property or the rendering of any service, with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of such Consolidated Entity's business and upon fair and reasonable
terms no less favorable to such Consolidated Entity than would obtain in a
comparable arm's length transaction with a Person not an Affiliate.
<PAGE>
Section 8.10. Mergers, Etc. Merge or consolidate with, or sell, assign,
lease or otherwise dispose of (whether in one transaction or in a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to, any Person, or acquire all or substantially all of the
assets or the business of any Person (or enter into any agreement to do any of
the foregoing), except that:
(a) any Consolidated Entity may merge into or consolidate
with or transfer assets to any Obligor; and
(b) any Consolidated Entity may effect any Acquisition
permitted by Section 8.11.
Section 8.11. Acquisitions. Make any Acquisition other than an
Acceptable Acquisition.
Section 8.12. No Activities Leading to Forfeiture. Engage in or propose
to be engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding.
Section 8.13. Amendments or Waivers of Certain Documents. (a) Defease
or make any payments the effect of which is to defease, or make any voluntary or
optional payment or prepayment on, or redemption of, Consolidated Subordinated
Debt in whole or in part, (b) amend, supplement or otherwise change (or agree to
any amendment or other change of) the terms of Consolidated Subordinated Debt,
if the effect of such amendment, supplement or change is to increase the
interest rate on Consolidated Subordinated Debt, advance the dates upon which
payment of principal or interest are due on Consolidated Subordinated Debt
(including any change that adds or modifies mandatory prepayments), change, in a
manner materially adverse to the Consolidated Entities or which confers
additional rights on the holders thereof, any event of default or covenant (or
any definition relating thereto) with respect to Consolidated Subordinated Debt,
change the redemption or repurchase provisions with respect to Consolidated
Subordinated Debt in a manner materially adverse to the Consolidated Entities or
which confers additional rights on the holders thereof, change the subordination
provisions of Consolidated Subordinated Debt or otherwise increase the
obligations of the obligor or confer additional rights on the holders of
Consolidated Subordinated Debt without, in each case, obtaining the prior
written consent of the Required Banks to such amendment or change.
ARTICLE 9. FINANCIAL COVENANTS.
So long as any Obligation shall remain unpaid, any Letter of Credit shall remain
outstanding or any Bank shall have any Commitment under this Agreement and as
determined as of the end of each fiscal quarter of the Borrower, each of the
Obligors jointly and severally covenant that:
Section 9.01. Interest Coverage Ratio. The Interest Coverage Ratio
shall be not less than 3.00 to 1.00.
<PAGE>
Section 9.02. Minimum Tangible Net Worth. Consolidated Tangible Net
Worth shall not be less than the sum of (a) $75,000,000 plus (b) for each fiscal
year of the Borrower ending after June 29, 1996, the aggregate sum of the Fiscal
Year Net Worth Increase Amounts calculated for each such fiscal year.
Section 9.03. Leverage Ratio. The Leverage Ratio shall be not greater
than 2.00 to 1.00.
Section 9.04. Tangible Assets. Consolidated Tangible Assets shall be
not less than $175,000,000.
Section 9.05. Net Income. Consolidated Net Income for the two (2) most
recently ended fiscal quarters shall be not less than $0 for both such quarters.
Section 9.06. Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio shall be not less than 1.25 to 1.00.
ARTICLE 10. EVENTS OF DEFAULT.
Section 10.01. Events of Default. Any of the following events shall be
an "Event of Default":
(a) the Borrower shall: (i) fail to pay the principal of any
Note on or before ten (10) days after the date when due and payable; (ii) fail
to pay any Reimbursement Obligation when due; or (iii) fail to pay interest on
any Note or any fee or other amount due hereunder on or before ten (10) days
after the date when due and payable;
(b) any material representation or warranty made or deemed
made by any Obligor in this Agreement or in any other Facility Document or which
is contained in any certificate, document, opinion, financial or other statement
furnished at any time under or in connection with any Facility Document shall
prove to have been incorrect in any material respect on or as of the date made
or deemed made;
(c) any Obligor shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.03 or Section 3.02, Section
8.06 through Section 8.11, inclusive, or Article 9; or (ii) fail to perform or
observe any term, covenant or agreement on its part to be performed or observed
(other than the obligations specifically referred to elsewhere in this Section
10.01) in any Facility Document and such failure shall continue for 30
consecutive days;
(d) any Consolidated Entity shall: (i) fail to pay any
indebtedness aggregating in excess of $500,000, including but not limited to
material indebtedness for borrowed money (excluding the payment obligations
described in (a) above), of such Obligor or any such Subsidiary, or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or (ii) fail to perform or
observe any term, covenant or condition on its part to be performed or observed
under any agreement or instrument relating to any such indebtedness, when
required to be performed or observed, if the effect of such failure to perform
or observe is to accelerate, or to permit the acceleration of, after the giving
of notice or passage of time, or both, the maturity of such indebtedness,
whether or not such failure to perform or observe shall be waived by the holder
of such indebtedness; or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;
<PAGE>
(e) any Consolidated Entity: (i) shall generally not, or be
unable to, or shall admit in writing its inability to, pay its debts as such
debts become due; or (ii) shall make an assignment for the benefit of creditors,
petition or apply to any tribunal for the appointment of a custodian, receiver
or trustee for it or a substantial part of its assets; or (iii) shall commence
any proceeding under any bankruptcy, reorganization, arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction, whether
now or hereafter in effect; or (iv) shall have had any such petition or
application filed or any such proceeding shall have been commenced, against it,
in which an adjudication or appointment is made or order for relief is entered,
or which petition, application or proceeding remains undismissed for a period of
60 days or more; or shall be the subject of any proceeding under which its
assets may be subject to seizure, forfeiture or divestiture (other than a
proceeding in respect of a Lien permitted under Section 8.03(b)); or (v) by any
act or omission shall indicate its consent to, approval of or acquiescence in
any such petition, application or proceeding or order for relief or the
appointment of a custodian, receiver or trustee for all or any substantial part
of its Property; or (vi) shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of 30 days or more;
(f) one or more judgments, decrees or orders for the payment
of money not otherwise fully covered by insurance in excess of $1,000,000 in the
aggregate shall be rendered against any Consolidated Entity and such judgments,
decrees or orders shall continue unsatisfied and in effect for a period of 30
consecutive days without being vacated, discharged, satisfied or stayed or
bonded pending appeal;
(g) any event or condition shall occur or exist with respect
to any Plan or Multiemployer Plan concerning which any Obligor is under an
obligation to furnish a report to the Bank in accordance with Section 7.08(j)
hereof and as a result of such event or condition, together with all other such
events or conditions, such Obligor has incurred or in the opinion of the Banks
is reasonably likely to incur a liability to a Plan, a Multiemployer Plan, the
PBGC, or a Section 4042 Trustee (or any combination of the foregoing) which is
material in relation to the financial position of the Consolidated Entities;
provided, however, that any such amount shall not be deemed to be material so
long as all such amounts do not exceed $500,000 in the aggregate during the term
of this Agreement;
(h) the Unfunded Benefit Liabilities of one or more Plans
have increased after the date of this Agreement in an amount which is material
(as specified in Section 7.08(j)(viii) hereof);
(i) (I) any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of Rules 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934) of 25% or more of the outstanding shares of voting stock of the Borrower;
and (ii) during any period of 12 consecutive months, commencing before or after
the date of this Agreement, individuals who at the beginning of such 12-month
period were directors of the Borrower cease for any reason to constitute a
majority of the board of directors of the Borrower;
(j) (i) any Forfeiture Proceeding shall have been commenced
or any Obligor shall have given any Bank written notice of the commencement of
any Forfeiture Proceeding as provided in Section 9.08(l) and such Forfeiture
Proceeding is not dismissed within 15 days of such commencement; or (ii) any
Bank has a good faith basis to believe that a Forfeiture Proceeding has been
threatened or commenced and such Forfeiture Proceeding is not dismissed within
15 days of such commencement;
(k) any of the Security Documents shall at any time after its
execution and delivery and for any reason cease: (i) to create a valid and
perfected first priority security interest in and to the Property purported to
be subject to such Agreement to the extent such security interest can be
perfected by the filing of financing statements under the Uniform Commercial
Code; or (ii) to be in full force and effect or shall be declared null and void,
or the validity or enforceability thereof shall be contested by any Obligor or
any Obligor shall deny it has any further liability or obligation under the
Security Documents or any Obligor shall fail to perform any of its obligations
thereunder; or
(l) the subordinating party shall have breached any of the
subordination provisions of any document, agreement or instrument evidencing or
relating to Consolidated Subordinated Debt.
Section 10.02. Remedies. If any Event of Default shall occur and be
continuing, the Agent shall, upon request of the Required Banks, by written
notice to the Borrower, (a) declare the Commitments to be terminated, whereupon
the same shall forthwith terminate and so shall the obligations of Chase to
issue any Letter of Credit, (b) declare the outstanding principal of the Notes,
all interest thereon and all other amounts payable under this Agreement, the
Notes and the other Facility Documents to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower
and/or (c) direct the Borrower to pay to the Agent an amount, to be held as cash
security in the cash collateral account held by the Agent under Section 3.08,
equal to the Letter of Credit Obligations then outstanding; provided that, in
the case of an Event of Default referred to in Section 10.01(e) or Section
10.01(i)(i) above, the Commitments shall be immediately terminated, and the
Notes, the Letter of Credit Obligations, all interest thereon and all other
amounts payable under this Agreement shall be immediately due and payable
without notice, presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
<PAGE>
Section 10.03. Cure. With respect to, and only with respect to, Events
of Default arising from the breach of any covenant contained in Section 8.01
through Section 8.05, inclusive, prior to the exercise of remedies under Section
10.02 and/or under the Security Documents, the Borrower shall be entitled to
receive written notice from the Agent (or any Bank) and an opportunity to cure
during the 15 day period subsequent to the date of such notice; provided that
such entitlement to notice and opportunity to cure shall only be available so
long as each Obligor complies with all of its obligations under Section 7.08.
ARTICLE 11. UNCONDITIONAL GUARANTY.
Section 11.01. Guarantied Obligations. Each of the Subsidiary
Guarantors, jointly and severally, in consideration of the execution and
delivery of this Agreement by the Banks and the Agent, hereby irrevocably and
unconditionally guarantees to the Agent, for the benefit of the Banks, as and
for such Subsidiary Guarantor's own debt, until final payment has been made:
(a) the due and punctual payment in cash of the Obligations,
in each case when and as the same shall become due and payable, whether at
maturity, pursuant to mandatory or optional prepayment, by acceleration or
otherwise, all in accordance with the terms and provisions hereof and thereof,
it being the intent of the Subsidiary Guarantors that the guaranty set forth in
this Section 11.01 (the "Unconditional Guaranty") shall be a guaranty of payment
and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping,
observance, and fulfillment by each of the Obligors of all duties, agreements,
covenants and obligations of the Obligors contained in each of the Facility
Documents to which it is a party.
Section 11.02. Performance Under This Agreement. In the event the
Borrower or any Subsidiary Guarantor fails to make, on or before the due date
thereof, any payment of the principal of, or interest on, the Notes, the Letter
of Credit Obligations or of any other amounts payable, or any other indebtedness
owing, under any of the Facility Documents or if the Borrower or any Subsidiary
Guarantor shall fail to perform, keep, observe, or fulfill any other obligation
referred to in clause (a) or clause (b) of Section 11.01 hereof in the manner
provided in the Notes, the Letters of Credit or in any of the other Facility
Documents, the Subsidiary Guarantors shall cause forthwith to be paid the
moneys, or to be performed, kept, observed, or fulfilled each of such
obligations, in respect of which such failure has occurred.
<PAGE>
Section 11.03. Waivers. To the fullest extent permitted by law, each
Subsidiary Guarantor does hereby waive:
(a) notice of acceptance of the Unconditional Guaranty;
(b) notice of any borrowings under this Agreement, or the
creation, existence or acquisition of any of the Obligations, subject to such
Subsidiary Guarantor's right to make inquiry of the Agent to ascertain the
amount of the Obligations at any reasonable time;
(c) notice of the amount of the Obligations, subject to such
Subsidiary Guarantor's right to make inquiry of the Agent to ascertain the
amount of the Obligations at any reasonable time;
(d) notice of adverse change in the financial condition of
the Borrower, any other Subsidiary Guarantor or any other fact that might
increase such Subsidiary Guarantor's risk hereunder;
(e) notice of presentment for payment, demand, protest, and
notice thereof as to the Notes, the Letters of Credit or any other instrument;
(f) notice of any Default or Event of Default;
(g) all other notices and demands to which such Subsidiary
Guarantor might otherwise be entitled (except if such notice or demand is
specifically otherwise required to be given to such Subsidiary Guarantor
hereunder or under the other Facility Documents);
(h) the right by statute or otherwise to require any or each
Bank or the Agent to institute suit against the Borrower or to exhaust the
rights and remedies of any or each Bank or the Agent against the Borrower, such
Subsidiary Guarantor being bound to the payment of each and all Obligations,
whether now existing or hereafter accruing, as fully as if such Obligations were
directly owing to each Bank by such Subsidiary Guarantor; and
(i) any defense arising by reason of any disability or other
defense (other than the defense that the Obligations shall have been fully and
finally performed and indefeasibly paid) of the Borrower or by reason of the
cessation from any cause whatsoever of the liability of the Borrower in respect
thereof.
Until all of the Obligations shall have been paid in full, none of the
Subsidiary Guarantors shall have any right of subrogation, reimbursement, or
indemnity whatsoever in respect thereof and no right of recourse to or with
respect to any assets or Property of the Borrower or any other Subsidiary
Guarantor. Nothing shall discharge or satisfy the obligations of the Subsidiary
Guarantor hereunder except the full and final performance and payment of the
Obligations by the Subsidiary Guarantors, upon which each Bank agrees to
transfer and assign its interest in the Notes to the Subsidiary Guarantors
without recourse, representation or warranty of any kind (other than that such
Bank owns such Notes and that such Notes are free of Liens created by such
holder). If an Event of Default shall exist, all of the Obligations shall in the
manner and subject to the limitations provided herein for the acceleration of,
the Notes and the Letter of Credit Obligations, forthwith become due and payable
without notice.
<PAGE>
Section 11.04. Releases. Each of the Subsidiary Guarantors consents and
agrees that, without notice to or by such Subsidiary Guarantor and without
affecting or impairing the obligations of such Subsidiary Guarantor hereunder,
each Bank or the Agent, in the manner provided herein, by action or inaction,
may:
(a) compromise or settle, extend the period of duration or
the time for the payment, or discharge the performance of, or may refuse to, or
otherwise not, enforce, or may, by action or inaction, release all or any one or
more parties to, any one or more of the Notes or the other Facility Documents;
(b) grant other indulgences to the Borrower in respect
thereof;
(c) amend or modify in any manner and at any time (or from
time to time) any one or more of the Notes, the Letters of Credit and the other
Facility Documents in accordance with Section 13.01 or otherwise;
(d) release or substitute any one or more of the endorsers or
guarantors of the Guaranteed Obligations whether parties hereto or not; and
(e) exchange, enforce, waive, or release, by action or
inaction, any security for the Obligations (including, without limitation, any
of the collateral therefor) or any other guaranty of any of the Notes or the
Letter of Credit Obligations.
Section 11.05. Marshaling. Each of the Subsidiary Guarantors consents
and agrees that:
(a) the Agent shall be under no obligation to marshal any
assets in favor of such Subsidiary Guarantor or against or in payment of any or
all of the Obligations; and
(b) to the extent the Borrower or any other Subsidiary
Guarantor makes a payment or payments to any Bank, which payment or payments or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, or required, for any of the foregoing reasons or for
any other reason, to be repaid or paid over to a custodian, trustee, receiver,
or any other party under any bankruptcy law, common law, or equitable cause,
then to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied thereby shall be revived and continued in full force
and effect as if said payment or payments had not been made and such Subsidiary
Guarantor shall be primarily liable for such obligation.
<PAGE>
Section 11.06. Liability. Each of the Subsidiary Guarantors agrees that
the liability of such Subsidiary Guarantor in respect of this Article 11 shall
be immediate and shall not be contingent upon the exercise or enforcement by any
Bank or the Agent of whatever remedies such Bank or the Agent may have against
the Borrower or any other Subsidiary Guarantor or the enforcement of any Lien or
realization upon any security such Bank or the Agent may at any time possess.
Section 11.07. Primary Obligation. The Unconditional Guaranty set forth
in this Article 11 is a primary and original obligation of each of the
Subsidiary Guarantors and is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect until the full and final payment of the Obligations without respect
to future changes in conditions, including change of law or any invalidity or
irregularity with respect to the issuance or assumption of any obligations
(including, without limitation, the Notes and the Letter of Credit Obligations)
of or by the Borrower or any other Subsidiary Guarantor, or with respect to the
execution and delivery of any agreement (including, without limitation, the
Notes and the other Facility Documents) of the Borrower or any other Subsidiary
Guarantor.
Section 11.08. Election to Perform Obligations. Any election by any of
the Subsidiary Guarantors to pay or otherwise perform any of the obligations of
the Borrower under the Notes or under any of the other Facility Documents,
whether pursuant to this Article 11 or otherwise, shall not release the Borrower
from such obligations or any of its other obligations under the Notes or under
any of the other Facility Documents.
Section 11.09. No Election. The Agent shall have the right to seek
recourse against any one or more of the Subsidiary Guarantors to the fullest
extent provided for herein for such Subsidiary Guarantor's obligations under
this Agreement (including, without limitation, this Article 11) in respect of
the Notes. No election to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of the
Agent's right to proceed in any other form of action or proceeding or against
other parties unless such holder has expressly waived such right in writing.
Specifically, but without limiting the generality of the foregoing, no action or
proceeding by any Bank or the Agent against the Borrower under any document or
instrument evidencing obligations of the Borrower to such Bank or the Agent
shall serve to diminish the liability of any of the Subsidiary Guarantors under
this Agreement (including, without limitation, this Article 11) except to the
extent that such Bank finally and unconditionally shall have realized payment by
such action or proceeding, notwithstanding the effect of any such action or
proceeding upon any Subsidiary Guarantor's right of subrogation against the
Borrower.
Section 11.10. Severability. Subject to Article 10 hereof, each of the
rights and remedies granted under this Article 11 to the Agent may be exercised
by the Agent without notice by the Agent to, or the consent of or any other
action by, the Agent, provided that each of the Subsidiary Guarantors will give
the Agent immediate notice of any exercise of rights and remedies by the Agent
under this Article 11.
<PAGE>
Section 11.11. Other Enforcement Rights. The Agent may proceed, as
provided in Article 11 hereof, to protect and enforce the Unconditional Guaranty
by suit or suits or proceedings in equity, at law or in bankruptcy, and whether
for the specific performance of any covenant or agreement contained herein
(including, without limitation, in this Article 11) or in execution or aid of
any power herein granted; or for the recovery of judgment for the obligations
hereby guarantied or for the enforcement of any other proper, legal or equitable
remedy available under applicable law. Each Bank shall have, to the fullest
extent permitted by law and this Agreement, a Lien upon, and right of set-off
against, any and all credits and any and all other Property of any Subsidiary
Guarantor, now or at any time whatsoever with, or in the possession of, such
holder, or anyone acting for such holder, as security for any and all
obligations of the Subsidiary Guarantors hereunder and such Lien shall be deemed
permitted for all purposes under Article 8 hereof.
Section 11.12. Delay or Omission; No Waiver. No course of dealing on
the part of any Bank or the Agent and no delay or failure on the part of any
such Person to exercise any right hereunder (including, without limitation, this
Article 11) shall impair such right or operate as a waiver of such right or
otherwise prejudice such Person's rights, powers and remedies hereunder. Every
right and remedy given by the Unconditional Guaranty or by law to any Bank or
the Agent may be exercised from time to time as often as may be deemed expedient
by such Person.
Section 11.13. Restoration of Rights and Remedies. If any Bank or the
Agent shall have instituted any proceeding to enforce any right or remedy under
the Unconditional Guaranty, under any Note held by such Bank, or under any
Security Document, and such proceeding shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to such Bank or the
Agent, then and in every such case each such Bank, the Agent, the Borrower and
each Subsidiary Guarantor shall, except as may be limited or affected by any
determination in such proceeding, be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject as
aforesaid, the rights and remedies of such Bank or the Agent shall continue as
though no such proceeding had been instituted.
Section 11.14. Cumulative Remedies. No remedy under this Agreement
(including, without limitation, this Article 11), the Notes or any of the other
Facility Documents is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other remedy
given hereunder this Agreement (including, without limitation, this Article 11),
under the Notes, the Letters of Credit or under any of the other Facility
Documents.
Section 11.15. Survival. So long as the Obligations shall not have been
fully and finally performed and indefeasibly paid, the obligations of the
Subsidiary Guarantors under this Article 11 shall survive the transfer and
payment of any Note and the payment in full of all the Notes and the Letter of
Credit Obligations and the expiration and termination of the Commitments.
<PAGE>
ARTICLE 12. THE AGENT.
Section 12.01. Appointment, Powers and Immunities of Agent. Each Bank
hereby irrevocably (but subject to removal by the Required Banks pursuant to
Section 12.09) appoints and authorizes the Agent to act as its agent hereunder
and under any other Facility Document with such powers as are specifically
delegated to the Agent by the terms of this Agreement and any other Facility
Document, together with such other powers as are reasonably incidental thereto.
The Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and any other Facility Document, and shall not by reason
of this Agreement be a trustee for any Bank. The Agent shall not be responsible
to the Banks for any recitals, statements, representations or warranties made by
any Obligor or any officer or official of such Borrower or any other Person
contained in this Agreement or any other Facility Document, or in any
certificate or other document or instrument referred to or provided for in, or
received by any of them under, this Agreement or any other Facility Document, or
for the value, legality, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Facility Document or any other
document or instrument referred to or provided for herein or therein, for the
perfection or priority of any collateral security for the Loans or the Letters
of Credit or for any failure by any Obligor to perform any of its obligations
hereunder or thereunder. The Agent may employ agents and attorneys-in-fact and
shall not be responsible, except as to money or securities received by it or its
authorized agents, for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. Neither the Agent nor any
of its directors, officers, employees or agents shall be liable or responsible
for any action taken or omitted to be taken by it or them hereunder or under any
other Facility Document or in connection herewith or therewith, except for its
or their own gross negligence or willful misconduct.
Section 12.02. Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. The Agent may deem and treat each Bank as
the holder of the Loans made by it and the Letter of Credit Obligations
attributable to it for all purposes hereof unless and until a notice of the
assignment or transfer thereof satisfactory to the Agent signed by such Bank
shall have been furnished to the Agent but the Agent shall not be required to
deal with any Person who has acquired a participation in any Loan or Letter of
Credit Obligation from a Bank. As to any matters not expressly provided for by
this Agreement or any other Facility Document, the Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in accordance
with instructions signed by the Required Banks, and such instructions of the
Required Banks and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks and any other holder of all or any portion of any
Loan or Letter of Credit Obligation.
<PAGE>
Section 12.03. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or Event of Default (other than the
non-payment of principal of or interest on the Loans and the Letter of Credit
Obligations to the extent the same is required to be paid to the Agent for the
account of the Banks) unless the Agent has received notice from a Bank or any
Obligor specifying such Default or Event of Default and stating that such notice
is a "Notice of Default." In the event that the Agent receives such a notice of
the occurrence of a Default or Event of Default, the Agent shall give prompt
notice thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment). The Agent shall (subject to Section 12.08) take such action with
respect to such Default or Event of Default which is continuing as shall be
directed by the Required Banks; provided that, unless and until the Agent shall
have received such directions, the Agent may take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interest of the Banks; and provided further that the
Agent shall not be required to take any such action which it determines to be
contrary to law.
Section 12.04. Rights of Agent as a Bank. With respect to its
Commitment, the Loans made by it and the Letter of Credit Obligations
attributable to it, the Agent in its capacity as a Bank hereunder shall have the
same rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its capacity as a
Bank. The Agent and its affiliates may (without having to account therefor to
any Bank) accept deposits from, lend money to (on a secured or unsecured basis),
and generally engage in any kind of banking, trust or other business with, any
Obligor (and any of its affiliates) as if it were not acting as the Agent, and
the Agent may accept fees and other consideration from any Obligor for services
in connection with this Agreement or otherwise without having to account for the
same to the Banks. Although the Agent and its affiliates may in the course of
such relationships and relationships with other Persons acquire information
about any Obligor, its Affiliates and such other Persons, the Agent shall have
no duty to disclose such information to the Banks.
Section 12.05. Indemnification of Agent. The Banks agree to indemnify
the Agent (to the extent not reimbursed under Section 13.03 or under the
applicable provisions of any other Facility Document, but without limiting the
obligations of the Obligors under Section 13.03 or such provisions), ratably in
accordance with the aggregate unpaid principal amount of the Loans made by the
Banks and the Letter of Credit Obligations attributable to the Banks (without
giving effect to any participations, in all or any portion of such Loans or such
Letter of Credit Obligations, sold by them to any other Person) (or, if no Loans
or Letter of Credit Obligations are at the time outstanding, ratably in
accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of this Agreement, any other Facility Document or any other documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses which the
Obligors are obligated to pay under Section 13.03 or under the applicable
provisions of any other Facility Document but excluding, unless a Default or
Event of Default has occurred, normal administrative costs and expenses incident
to the performance of its agency duties hereunder) or the enforcement of any of
the terms hereof or thereof or of any such other documents or instruments;
provided that no Bank shall be liable for any of the foregoing to the extent
they arise from the negligence or willful misconduct of the party to be
indemnified.
<PAGE>
Section 12.06. Documents. The Agent will forward to each Bank, promptly
after the Agent's receipt thereof, a copy of each report, notice or other
document required by this Agreement or any other Facility Document to be
delivered to the Agent for such Bank.
Section 12.07. Non-Reliance on Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Obligors and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any other Facility Document.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Obligors of this Agreement or any other Facility Document or
any other document referred to or provided for herein or therein or to inspect
the Properties or books of any Obligor. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the affairs, financial
condition or business of any Obligor (or any of their Affiliates) which may come
into the possession of the Agent or any of its affiliates. The Agent shall not
be required to file this Agreement, any other Facility Document or any document
or instrument referred to herein or therein, for record or give notice of this
Agreement, any other Facility Document or any document or instrument referred to
herein or therein, to anyone.
Section 12.08. Failure of Agent to Act. Except for action expressly
required of the Agent hereunder, the Agent shall in all cases be fully justified
in failing or refusing to act hereunder unless it shall have received further
assurances (which may include cash collateral) of the indemnification
obligations of the Banks under Section 12.05 in respect of any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action.
Section 12.09. Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving written notice thereof to the Banks and the
Borrower, and the Agent may be removed at any time with or without cause by the
Required Banks; provided that the Borrower and the other Banks shall be promptly
notified thereof. Upon any such resignation or removal, the Required Banks shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a bank which has
an office in New York, New York or Boston, Massachusetts. The Required Banks or
the retiring Agent, as the case may be, shall upon the appointment of a
successor Agent promptly so notify the Borrower and the other Banks. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article 11 shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.
<PAGE>
Section 12.10. Amendments Concerning Agency Function. The Agent shall
not be bound by any waiver, amendment, supplement or modification of this
Agreement or any other Facility Document which affects its duties hereunder or
thereunder unless it shall have given its prior consent thereto.
Section 12.11. Liability of Agent. The Agent shall not have any
liabilities or responsibilities to the Obligors on account of the failure of any
Bank to perform its obligations hereunder or to any Bank on account of the
failure of any Obligor to perform its obligations hereunder or under any other
Facility Document.
Section 12.12. Transfer of Agency Function. Without the consent of the
Obligors or any Bank, the Agent may at any time or from time to time transfer
its functions as Agent hereunder to any of its offices wherever located,
provided that the Agent shall promptly notify the Obligors and the Banks
thereof.
Section 12.13. Non-Receipt of Funds by the Agent. Unless the Agent
shall have been notified by a Bank or the Borrower (either one as appropriate
being the "Payor") prior to the date on which such Bank is to make payment
hereunder to the Agent or the Borrower is to make payment to the Agent, as the
case may be (either such payment being a "Required Payment"), which notice shall
be effective upon receipt, that the Payor does not intend to make the Required
Payment to the Agent, the Agent may assume that the Required Payment has been
made and may, in reliance upon such assumption (but shall not be required to),
make the amount thereof available to the intended recipient on such date and, if
the Payor has not in fact made the Required Payment to the Agent, the recipient
of such payment (and, if such recipient is the Borrower and the Payor Bank fails
to pay the amount thereof to the Agent forthwith upon demand, the Borrower)
shall, on demand, repay to the Agent the amount made available to it together
with interest thereon for the period from the date such amount was so made
available by the Agent until the date the Agent recovers such amount at a rate
per annum equal to the average daily Federal Funds Rate for such period.
<PAGE>
Section 12.14. Withholding Taxes. Each Bank represents that it is
entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Agent such forms, certifications,
statements and other documents as the Agent may request from time to time to
evidence such Bank's exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any Bank is not created or organized under the laws of the United States of
America or any state thereof, in the event that the payment of interest by the
Borrower is treated for U.S. income tax purposes as derived in whole or in part
from sources from within the U.S., such Bank will furnish to the Agent Form 4224
or Form 1001 of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Bank as evidence of such Bank's exemption from the withholding of U.S. tax with
respect thereto. The Agent shall not be obligated to make any payments hereunder
to such Bank in respect of any Loan, Letter of Credit or such Bank's Commitment
until such Bank shall have furnished to the Agent the requested form,
certification, statement or document.
Section 12.15. Several Obligations and Rights of Banks. The failure of
any Bank to make any Loan to be made by it on the date specified therefor or
make any payment with respect to any Reimbursement Obligation on the date
specified therefor shall not relieve any other Bank of its obligation to make
its Loan on such date, but no Bank shall be responsible for the failure of any
other Bank to make a Loan to be made by such other Bank or to make any payment
with respect to any Reimbursement Obligation. The amounts payable at any time
hereunder to each Bank shall be a separate and independent debt, and each Bank
shall be entitled to protect and enforce its rights arising out of this
Agreement, and it shall not be necessary for any other Bank to be joined as an
additional party in any proceeding for such purpose.
Section 12.16. Pro Rata Treatment of Loans, Etc. Except to the extent
otherwise provided: (a) each borrowing under Section 2.04 shall be made from the
Banks, each reduction or termination of the amount of the Commitments under
Section 2.07 shall be applied to the Commitments of the Banks, and each payment
of commitment fee accruing under Section 2.11 shall be made for the account of
the Banks, pro rata according to the amounts of their respective unused
Commitments; (b) each conversion under Section 2.05 of Loans of a particular
type (but not conversions provided for by Section 4.04), shall be made pro rata
among the Banks holding Loans of such type according to the respective principal
amounts of such Loans by such Banks; (c) each prepayment and payment of
principal of or interest on Loans of a particular type and a particular Interest
Period shall be made to the Agent for the account of the Banks holding Loans of
such type and Interest Period pro rata in accordance with the respective unpaid
principal amounts of such Loans of such Interest Period held by such Banks and
(d) each prepayment and payment of Letter of Credit Obligations shall be made
pro rata in accordance with the Pro Rata Share of the Banks in the Letter of
Credit Obligations attributable to such Banks.
<PAGE>
Section 12.17. Sharing of Payments Among Banks. If a Bank shall obtain
payment of any principal of or interest on any Loan made by it or any payment of
any Letter of Credit Obligations attributable to it through the exercise of any
right of setoff, banker's lien, counterclaim, or by any other means, it shall
promptly purchase from the other Banks participations in (or, if and to the
extent specified by such Bank, direct interests in) the Loans made by, or the
Letter of Credit Obligations attributable to, the other Banks in such amounts,
and make such other adjustments from time to time as shall be equitable to the
end that all the Banks shall share the benefit of such payment (net of any
expenses which may be incurred by such Bank in obtaining or preserving such
benefit) pro rata in accordance with the unpaid principal and interest on the
Loans and the Letter of Credit Obligations held by each of them. To such end the
Banks shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. The Obligors agree that any Bank so purchasing a participation (or
direct interest) in the Loans made by, or the Letter of Credit Obligations
attributable to, the other Banks may exercise all rights of setoff, banker's
lien, counterclaim or similar rights with respect to such participation (or
direct interest). Nothing contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness of
the Obligors.
Section 12.18. Security Documents. Subject to the foregoing provisions
of this Section 12, the Agent shall, on behalf of the Banks: (a) execute any and
all of the Security Documents on behalf of the Banks; (b) hold and apply any and
all Collateral, and the proceeds thereof, at any time received by it, in
accordance with the provisions of the Security Documents and this Agreement; (c)
exercise any and all rights, powers and remedies of the Banks under this
Agreement or any of the Security Documents, including the giving of any consent
or waiver or the entering into of any amendment, subject to the provisions of
Section 12.03; (d) execute, deliver and file UCC financing statements,
mortgages, deeds of trust, lease assignments and other such agreements, and
possess instruments on behalf of any or all of the Banks; and (e) in the event
of acceleration of the Borrower's obligations hereunder, use its best efforts to
sell or otherwise liquidate or dispose of the Collateral and otherwise exercise
the rights of the Banks thereunder upon the direction of the Required Banks.
Section 12.19. Collateral. Notwithstanding Section 12.18, the Agent and
the other Banks agree, as among themselves, that the Agent shall not, without
the consent of the Required Banks, make any sale or disposition of the
Collateral pursuant to any of the Security Documents. The Agent acknowledges to
the other Banks that it is acting in an agency capacity hereunder and that the
security interest in the Collateral granted under the Security Documents secures
the obligations of the Obligors under this Agreement, the Notes, the Letters of
Credit and the other Facility Documents owing to all of the Banks. In the event
of any Default or Event of Default, the Agent will apply and/or pay over to the
Banks any net proceeds derived from the Collateral pro rata on the basis of the
aggregate unpaid principal amount of the Loans made by the Banks and the Letter
of Credit Obligations attributable to the Banks. The Agent will be reimbursed or
properly indemnified by the Banks in the event the Agent is requested by the
Banks to take or omit to take any action with respect to the Collateral (any
such reimbursement or indemnification to be pro rata as provided in Section
12.05). The Agent shall have the right to retain counsel to advise it as to any
action or decision with respect to the Collateral and shall be reimbursed by the
other Banks for the cost of the same (to the extent the Agent is not reimbursed
by any Obligor) prior to distributing any of the Collateral or any proceeds
thereof (any such reimbursement to be pro rata as aforesaid).
<PAGE>
Section 12.20. Amendment of Section 12. Except with respect to Sections
12.18 and 12.19, the Borrower hereby agrees that the foregoing provisions of
this Section 12 constitute an agreement amount the Agent and the Banks (and the
Agent and the Banks acknowledge that the Borrower is not a party to or bound by
such foregoing provisions) and that any and all of the provisions of this
Section 12 may be amended at any time by the Required Banks without the consent
or approval of, or notice to, the Borrower.
ARTICLE 13. MISCELLANEOUS.
Section 13.01. Amendments and Waivers. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement or any other
Facility Document may be amended or modified only by an instrument in writing
signed by the Borrower, the Agent and the Required Banks, or by the Borrower and
the Agent acting with the consent of the Required Banks and any provision of
this Agreement or any other Facility Document may be waived by the Required
Banks or by the Agent acting with the consent of the Required Banks; provided
that no amendment, modification or waiver shall, unless by an instrument signed
by all of the Banks or by the Agent acting with the consent of all of the Banks:
(a) increase or extend the term, or extend the time or waive any requirement for
the reduction or termination, of the Commitments, (b) extend the date fixed for
the payment of principal of or interest on any Loan, (c) reduce the amount of
any payment of principal thereof or the rate at which interest is payable
thereon or any fee payable hereunder, (d) alter the terms of this Section 13.01,
(e) amend the definition of the term "Required Banks", (f) waive any of the
conditions precedent set forth in Article 5 hereof, (g) discharge any Subsidiary
Guarantor from its Unconditional Guaranty under Article 10 hereof or (h) release
all or any part of the Collateral (except for sales otherwise allowed hereunder)
and provided, further, that any amendment of Article 12 hereof or any amendment
which increases the obligations of the Agent hereunder shall require the consent
of the Agent. No failure on the part of the Agent or any Bank to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof or
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
Section 13.02. Usury. Anything herein to the contrary notwithstanding,
the obligations of the Borrower under this Agreement and the Notes shall be
subject to the limitation that payments of interest shall not be required to the
extent that receipt thereof would be contrary to provisions of law applicable to
a Bank limiting rates of interest which may be charged or collected by such
Bank.
<PAGE>
Section 13.03. Expenses. The Obligors shall reimburse the Agent on
demand for all reasonable costs, expenses, and charges (including, without
limitation, reasonable fees and charges of external legal counsel for the Agent)
in connection with the preparation of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
other Facility Document and any other documents prepared in connection herewith
or therewith. The Obligors shall reimburse the Agent and each Bank for all
reasonable costs, expenses and charges (including, without limitation,
reasonable fees and charges of external legal counsel for the Agent and each
Bank) in connection with the enforcement or preservation of any rights or
remedies during the existence of an Event of Default (including, without
limitation, in connection with any restructuring or insolvency or bankruptcy
proceeding). The Obligors agree to indemnify the Agent and each Bank and their
respective directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them arising out of or by reason of any investigation or
litigation or other proceedings (including any threatened investigation or
litigation or other proceedings) directly relating to this Agreement or to any
actual or proposed use by the Borrower of the proceeds of the Loans or to the
performance or enforcement of this Agreement or the other Facility Documents,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation or litigation or other
proceedings (but excluding any such losses, liabilities, claims, damages or
expenses incurred by reason of the gross negligence or wilful misconduct of the
Person to be indemnified).
Section 13.04. Survival. The obligations of the Obligors under Sections
4.01, 4.05 and 13.03 shall survive the repayment of the Loans and the Letters of
Credit and the termination of the Commitments.
Section 13.05. Assignment; Participations.
(a) This Agreement shall be binding upon, and shall inure to
the benefit of, the Obligors, the Agent, the Banks and their respective
successors and assigns, except that the Obligors may not assign or transfer
their rights or obligations hereunder. Each Bank may assign, or sell
participations in, all or any part of any Loan or its rights and obligations
under the Letters of Credit to another bank or other entity; provided that any
such assignment by such Bank of its rights and obligations in respect of the
Letters of Credit shall require the prior consent of Chase such consent not to
be unreasonably withheld; provided further that (i) in the case of an
assignment, upon notice thereof by the Bank to the Borrower with a copy to the
Agent, the assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights, benefits and obligations as it
would have if it were a Bank hereunder; and (ii) in the case of a participation,
the participant shall have no rights under the Facility Documents and all
amounts payable by the Borrower under Article 3 shall be determined as if such
Bank had not sold such participation. The agreement executed by such Bank in
favor of the participant shall not give the participant the right to require
such Bank to take or omit to take any action hereunder except action directly
relating to (i) the extension of a payment date with respect to any portion of
the principal of or interest on any amount outstanding hereunder allocated to
such participant, (ii) the reduction of the principal amount outstanding
hereunder or (iii) the reduction of the rate of interest payable on such amount
or any amount of fees payable hereunder to a rate or amount, as the case may be,
below that which the participant is entitled to receive under its agreement with
such Bank. Such Bank may furnish any information concerning the Obligors in the
possession of such Bank from time to time to assignees and participants
(including prospective assignees and participants); provided that such Bank
shall require any such prospective assignee or such participant (prospective or
otherwise) to agree in writing to maintain the confidentiality of such
information. In connection with any assignment pursuant to this paragraph (a),
the assigning Bank shall pay the Agent an administrative fee for processing such
assignment in the amount of $5,000.
<PAGE>
(b) In addition to the assignments and participations
permitted under paragraph (a) above, any Bank may assign and pledge all or any
portion of its Loans, its Notes and its rights and obligations under the Letters
of Credit to (i) any affiliate of such Bank or (ii) any Federal Reserve Bank as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank. No such assignment shall release the assigning Bank from its obligations
hereunder.
Section 13.06. Notices. Unless the party to be notified otherwise
notifies the other party in writing as provided in this Section, and except as
otherwise provided in this Agreement, notices shall be given to the Agent by
telephone, confirmed by telex, telecopy or other writing, and to the Banks and
to the Obligors by ordinary mail or telecopier addressed to such party at its
address on the signature page of this Agreement. Notices shall be effective: (a)
if given by mail, 72 hours after deposit in the mails with first class postage
prepaid, addressed as aforesaid; and (b) if given by telecopier, when the
telecopy is transmitted to the telecopier number as aforesaid; provided that
notices to the Agent and the Banks shall be effective upon receipt.
Section 13.07. Setoff. The Obligors agree that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim a Bank
may otherwise have, each Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final) held by it
for the account of the Obligors at any of such Bank's offices, in Dollars or in
any other currency, against any amount payable by the Obligors to such Bank
under this Agreement or such Bank's Note which is not paid when due (regardless
of whether such balances are then due to the Obligors), in which case it shall
promptly notify the Obligors and the Agent thereof; provided that such Bank's
failure to give such notice shall not affect the validity thereof. Payments by
the Obligors hereunder shall be made without setoff or counterclaim.
<PAGE>
Section 13.08. JURISDICTION; IMMUNITIES. (a) THE OBLIGORS HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY MASSACHUSETTS STATE OR UNITED
STATES FEDERAL COURT SITTING IN SUFFOLK COUNTY OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, AND THE OBLIGORS
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH MASSACHUSETTS STATE OR FEDERAL COURT. THE
OBLIGORS IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE OBLIGORS AT
ITS ADDRESS SPECIFIED IN SECTION 13.06. THE OBLIGORS AGREE THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. THE OBLIGORS FURTHER WAIVE ANY OBJECTION TO VENUE IN SUCH STATE AND ANY
OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON
CONVENIENS. THE OBLIGORS FURTHER AGREE THAT ANY ACTION OR PROCEEDING BROUGHT
AGAINST THE AGENT SHALL BE BROUGHT ONLY IN MASSACHUSETTS STATE OR UNITED STATES
FEDERAL COURT SITTING IN SUFFOLK COUNTY. THE OBLIGORS WAIVE ANY RIGHT THEY MAY
HAVE TO JURY TRIAL.
(b) Nothing in this Section 13.08 shall affect the right of
the Agent or any Bank to serve legal process in any other manner permitted by
law or affect the right of the Agent or any Bank to bring any action or
proceeding against any Obligor or its Property in the courts of any other
jurisdictions.
(c) To the extent that any Obligor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its Property,
such Obligor hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Notes.
Section 13.09. Table of Contents; Headings. Any table of contents and
the headings and captions hereunder are for convenience only and shall not
affect the interpretation or construction of this Agreement.
Section 13.10. Severability. The provisions of this Agreement are
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction. To the extent that mandatory and non-waivable
provisions of applicable law (including but not limited to any applicable laws
pertaining to fraudulent conveyance and any applicable business corporation,
partnership and limited liability company laws) otherwise would render the full
amount of any Subsidiary Guarantor's obligations hereunder and under the other
Facility Documents invalid or unenforceable, such Subsidiary Guarantor's
obligations hereunder and under the other Facility Documents shall be limited to
the maximum amount which does not result in such invalidity or unenforceability.
<PAGE>
Section 13.11. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 13.12. Integration. The Facility Documents set forth the entire
agreement among the parties hereto relating to the transactions contemplated
thereby and supersede any prior oral or written statements or agreements with
respect to such transactions.
Section 13.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE COMMONWEALTH OF MASSACHUSETTS.
Section 13.14. Confidentiality. Each Bank and the Agent agrees (on
behalf of itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Obligors pursuant to this Agreement which is identified by
the Obligors as being confidential at the time the same is delivered to the
Banks or the Agent, provided that nothing herein shall limit the disclosure of
any such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel for any of the Banks or the Agent, (iii) to
bank examiners, auditors or accountants, (iv) in connection with any litigation
to which any one or more of the Banks is a party or (v) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) agrees to use reasonable
precautions to keep such information confidential; and provided finally that in
no event shall any Bank or the Agent be obligated or required to return any
materials furnished by the Obligers.
Section 13.15. Treatment of Certain Information. The Obligors (a)
acknowledge that services may be offered or provided to it (in connection with
this Agreement or otherwise) by each Bank or by one or more of their respective
subsidiaries or affiliates and (b) acknowledge that information delivered to
each Bank by the Obligors may be provided to each such subsidiary and affiliate.
<PAGE>
Section 13.16. New Subsidiary Guarantors. Each of the Obligors not a
signatory to the Existing Credit Agreement unconditionally and irrevocably
accepts, adheres to, and becomes party to and bound as a "Subsidiary Guarantor"
under this Agreement, as fully if such Obligor had been signatory to the
Existing Credit Agreement as a "Subsidiary Guarantor". In confirmation (but
without limitation) of the foregoing, each such Obligor hereby (a)
unconditionally agrees to make prompt payment in full when due (whether at
stated maturity, by acceleration or otherwise) of the principal and interest on
all of the Obligations and (b) unconditionally grants, bargains, conveys,
assigns, transfers, mortgages, hypothecates, pledges, confirms and grants a
continuing security interest to the Agent, for the ratable benefit of the Banks,
in and to the Collateral.
Section 13.17. Reaffirmation. Each of the Obligors acknowledges that
the Liens granted to the Agent under the Security Documents in the Collateral
secures all obligations of each of the Obligors under this Agreement, the Notes,
the Letters of Credit and the other Facility Documents, including, without
limitation, all liabilities and obligations under the Loans as herein modified
and increased and all of the Letter of Credit Obligations. All references to
"Note" or "Notes" in any Facility Document shall be deemed to be to the Notes
issued hereunder. All references to "Secured Obligations" in any Facility
Document shall be deemed to include all liabilities and obligations under the
Loans as herein modified and increased and all of the Letter of Credit
Obligations. Each of the Obligors further acknowledges and reaffirms all of its
other respective obligations and duties under the Facility Documents to which it
is a party.
Section 13.18. All Seasons Acquisition. Notwithstanding Section 8.05
and Section 8.11, each of the Agent and the Banks hereby consents to the All
Seasons Acquisition in accordance with the terms of the All Seasons Term Sheet
for a purchase price of approximately $15,000,000 in Borrower common stock and
the contemporaneous repayment of all of the outstanding Debt of All Seasons
Services, Inc. in the approximate amount of $12,000,000-$14,000,000. Each of the
Agent and the Banks hereby agrees that the All Seasons Acquisition shall not be
counted towards the $12,500,000 annual limitation contained in the definition of
"Acceptable Acquisition" in Section 1.01.
Section 13.19. AEI Sale-Leasebacks. Notwithstanding Section 8.03,
Section 8.04, Section 8.05, Section 8.07 and Section 8.11, each of the Agent and
the Banks hereby consents to a development and sale-leaseback financing facility
up to a maximum principal amount of $40,000,000 for the proposed purchase and
subsequent sale by Champps Entertainment, Inc. ("Champps") of newly constructed
restaurants to, and the simultaneous leaseback from, AEI Fund Management, Inc.
("AEI") substantially in accordance with the terms and conditions of the
commitment letter dated December 7, 1995 from AEI to Champps, copies of which
have been furnished to the Banks. Each of the Agent and the Banks hereby agrees
that the purchase of any such restaurant subject to such sale-leaseback shall
not be counted towards the $12,500,000 annual limitation contained in the
definition of "Acceptable Acquisition" in Section 1.01.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DAKA INTERNATIONAL, INC.
By:
Name:
Title:
FUDDRUCKERS, INC.
By:
Name:
Title:
DAKA, INC.
By:
Name:
Title:
CASUAL DINING VENTURES, INC.
By:
Name:
Title:
ATLANTIC RESTAURANT VENTURES, INC.
By:
Name:
Title:
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
DAKA RESTAURANTS, L.P.
By its General Partner, Daka, Inc.
By:
Name:
Title:
FRENCH QUARTER COFFEE COMPANY
By:
Name:
Title:
AMERICANA DINING CORP.
By:
Name:
Title:
CHAMPPS ENTERTAINMENT OF EDISON, INC.
By:
Name:
Title:
CHAMPPS ENTERTAINMENT OF TEXAS, INC.
By:
Name:
Title:
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
CHAMPPS ENTERTAINMENT OF WAYZATA, INC.
By:
Name:
Title:
CHAMPPS ENTERTAINMENT, INC.
By:
Name:
Title:
SPECIALTY CONCEPTS, INC.
By:
Name:
Title:
Address for Notices:
One Corporate Place
55 Ferncroft Road
Danvers, Massachusetts 01923
Telecopier No.:(508)774-1334
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
AGENT:
THE CHASE MANHATTAN BANK, N.A.
By:
Name:
Title:
Address for Notices:
4 Chase Metrotech Center
13th Floor
Brooklyn, NY 11245
Attention: New York Agency
with a copy to:
c/o Chemical New England Corporation
85 Welles Avenue
Suite 200
Boston, MA 01259
Attention: Roger Stone
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
BANKS:
THE CHASE MANHATTAN BANK, N.A.
By:
Name:
Title:
Lending Office and Address for Notices:
c/o Chemical New England Corporation
85 Welles Avenue
Suite 200
Boston, MA 01259
Attention: Roger Stone
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
BANKS:
FLEET NATIONAL BANK
By:
Name:
Title:
Lending Office and Address for Notices:
One Federal Street
Boston, MA 02211
Attention: Amy Tsokanis
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
BANKS:
MELLON BANK, N.A.
By:
Name:
Title:
Lending Office and Address for Notices:
One Boston Place
Boston, MA 02108
Attention: Steven Wagner
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
BANKS:
THE FIRST NATIONAL BANK OF BOSTON
By:
Name:
Title:
Lending Office and Address for Notices:
New England Corporate Banking
Mail Stop 01-07-05
100 Federal Street
Boston, MA 02110
Attention: William Latham
[SIGNATURE PAGE TO CREDIT AGREEMENT]
<PAGE>
SCHEDULE I
Commitments
The Chase Manhattan Bank, N.A. $78,333,333.34
Fleet National Bank $21,666,666.66
Mellon Bank, N.A. $25,000,000.00
The First National Bank of Boston $25,000,000.00
--------------
Total Commitments $150,000,000.00
SEVERANCE, NON-COMPETITION AND CONFIDENTIALITY AGREEMENT
SEVERANCE, NON-COMPETITION AND CONFIDENTIALITY AGREEMENT (the
"Agreement") dated as of March 18, 1996, by and between Steven J. Wagenheim
("Employee") and Americana Dining Corp. ("Americana").
WITNESSETH:
WHEREAS, Employee is employed by Americana as President pursuant to
that certain Employment Agreement dated March 28, 1994 (the "1994 Employment
Agreement"); and
WHEREAS, reference is made to the Asset Purchase Agreement dated as of
March 18, 1996, by and among Americana and New Brighton Ventures, Inc. ("New
Brighton Ventures") (together with any amendments thereto or modifications
thereof, the "Asset Purchase Agreement") pursuant to which New Brighton Ventures
will acquire the assets, subject to certain liabilities, of the New Brighton,
Minnesota Champps Americana restaurant (the "Restaurant") from Americana for a
purchase price of One Million Three Hundred Fifty Thousand Dollars ($1,350,000)
(the "Restaurant Acquisition") subject to the terms and conditions set forth in
the Asset Purchase Agreement; and
WHEREAS, in connection with the Restaurant Acquisition, and by the
mutual agreement of the parties, Employee will be relieved of his employment
duties with Americana following the closing of such transaction, upon the terms
and conditions set forth herein; and
WHEREAS, Employee and Americana desire to settle fully and finally all
differences between them, including any claims relating to Employee's employment
and termination from employment with Americana;
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth in this Agreement, the receipt and sufficiency of which is hereby
acknowledged, Employee and Americana agree as follows:
1. Termination of Employment. Employee agrees that his employment with
Americana will terminate effective July 1, 1996, that he will not be reemployed
by Americana, and that he will not apply for or otherwise seek employment with
Americana or any of its divisions, subsidiaries, or affiliates at any time.
Effective as of the Effective Time (as defined below), the duties and
responsibilities of Employee as an employee of Americana will be as described in
Section 3(c) of this Agreement, it being agreed and acknowledged that between
the Effective Date and June 30, 1996 the primary business activity of Employee
shall be to manage the Restaurant on behalf of New Brighton Ventures.
<PAGE>
2. Effective Date of Agreement. This Agreement shall become effective
as of the closing date of the Restaurant Acquisition in accordance with the
terms of the Asset Purchase Agreement (the "Effective Date"), but subject in all
events to the consummation of the Restaurant Acquisition and effective only if
the Restaurant Acquisition is actually consummated. Subject to the closing of
the Restaurant Acquisition, on the Effective Date, upon this Agreement becoming
effective, the 1994 Employment Agreement shall terminate and have no further
force or effect and shall be replaced and superseded for all purposes by this
Agreement. If the Restaurant Acquisition is not consummated for any reason
whatsoever, or if the Asset Purchase Agreement is terminated in accordance with
the provisions thereof for any reason whatsoever, this Agreement shall not
become effective and shall be null and void and shall have no force and effect
to the same extent as if this Agreement had never been executed and delivered by
the parties hereto and there shall be no liability under or by reason of the
terms hereof on the part of Americana or any of its affiliates, officers,
directors, employees, agents, successors or assigns, or of the Employee, without
limitation of any other rights any of them may have. If this Agreement does not
become effective in accordance with the preceding sentence, the 1994 Employment
Agreement shall remain in effect in accordance with its presently existing
terms.
3. Settlement with Employee. As a material inducement to Employee to
enter into this Agreement and in consideration for the release given by Employee
in paragraph 4 of this Agreement, Americana and the Employee agree to the
following:
(a) On the Effective Date, Americana will pay to Employee a
one-time, lump sum payment of One Hundred Thousand Dollars ($100,000) less all
applicable taxes and withholdings;
(b) Americana will continue to pay Employee his base salary
and fringe benefits through June 30, 1996, in accordance with the terms of the
1994 Employment Agreement, so long as Employee continues to perform the duties
and responsibilities set forth in Section 3(c) hereof, but will not be obligated
to pay Employee any bonus with respect to the fiscal year ending on or about
June 30, 1996; and
<PAGE>
(c) Employee agrees that between the Effective Date and June
30, 1996, Employee's duties and responsibilities will be limited to such of the
following duties and responsibilities as Americana from time to time may in its
discretion request Employee to perform: (i) managing and overseeing all aspects
of the pre-opening and opening of the Champps Americana restaurant in Columbus,
Ohio, by devoting thereto such time and effort, both on-site and off-site, as
Employee has in the past devoted to the pre-opening and opening by Americana of
other similar restaurants, including, most recently, the Champps Americana
restaurant located in Cleveland, Ohio, (ii) overseeing the management and
operations of the Champps Americana restaurants located in Cleveland, Ohio and
Richfield, Minnesota during this transition period (consistent with the
understanding the Employee will after the Effective Date primarily manage the
Restaurant on behalf of New Brighton Ventures) and (iii) performing such other
services in a senior management capacity as may be mutually agreed to by
Americana and Employee. After June 30, 1996, Employee agrees to make himself
available as an independent consultant to render such services at Americana's
request, in which case Americana shall compensate Employee for such consulting
services at a rate of $500 per day plus reasonable out-of-pocket, travel and
lodging expenses. Any such consulting requested by Americana shall not be deemed
to constitute employment by Americana of Employee, who shall at all times be
construed to be an independent contractor. Employee shall not hold himself out
as a partner, employee or agent of Americana, or incur, assume or create, in
writing or otherwise, any warranty, liability or other obligation of any kind,
express or implied, in the name of or on behalf of Americana.
4. General Release of Claims by Employee. As a material inducement to
Americana to enter into this Agreement and in consideration for the payments and
benefits to be provided by Americana to Employee as outlined in paragraph 3,
Employee hereby irrevocably and unconditionally releases, acquits and forever
discharges Americana, and each of its current and former owners, stockholders,
predecessors, successors, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, subsidiaries, whether wholly or partially
owned, and affiliates (and current and former agents, directors, officers,
employees, representatives and attorneys of such divisions, subsidiaries and
affiliates), and all persons acting by, through, under or in concert with any of
them (collectively "Releasees"), or any of them, from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements,
controversies, damages, actions, causes of action, suits, rights, demands,
costs, losses, debts and expenses (including attorneys' fees and costs actually
incurred), of any nature whatsoever, known or unknown, including, without
limitation, any claim under the Age Discrimination in Employment Act, as amended
("Claim" or "Claims"), which Employee now has, owns or holds, or claims to have,
own or hold or which Employee at any time heretofore had, owned or held, or
claimed to have, own or hold against each or any of the Releasees.
5. Non-Competition. In view of the fact that Employee, as a co-founder,
shareholder, director and officer of Americana, has had access to confidential
and proprietary information relating to Americana, and as a material inducement
to and a condition precedent to Americana's agreement to compensate Employee as
provided herein and to sell to New Brighton Ventures the Restaurant pursuant to
the Asset Purchase Agreement, in order to preserve the goodwill associated with
the business of Americana, Employee hereby agrees to the following restrictions
on his activities:
<PAGE>
(a) The Employee hereby agrees that during the period
commencing on the Effective Date and ending on the date which is three (3) years
after the Effective Date, he will not, other than as provided in paragraph 5(b)
hereof, without the express written consent of Americana, directly or
indirectly, anywhere in the geographic area set forth in paragraph 5(c) below,
engage or participate in any activity, invest in or otherwise assist (whether as
owner, part-owner, shareholder, partner, director, officer, trustee, employee,
agent or consultant, or in any other capacity) any business organization (other
than Americana pursuant to the terms of this Agreement) whose activities,
products or services are in the Designated Industry (as defined below); except
that the Employee may make passive investments in a competitive enterprise the
shares of which are publicly traded if such investment constitutes less than one
(1) percent of the equity of such enterprise. For purposes of this paragraph 5,
the term "Designated Industry" shall mean the business of owning, licensing,
franchising, operating or otherwise participating in the ownership or operation
of one or more restaurants that Americana is able to show are substantially
similar in trade dress and concept to "Champps Americana" restaurants, as such
trade dress and concept is either incorporated as of the Effective Date in
restaurants owned and operated or being developed by Americana or Champps
Entertainment, Inc. or articulated in plans, designs or proposals drawn or
formulated prior to the Effective Date, but is not intended to cover all "casual
dining" or sports-themed concepts. Without implied limitation, the foregoing
covenant shall include: (i) until March 1, 1997, not hiring for or on behalf of
Employee or any such business organization any officer or employee of Americana
or any of its affiliates, except that Employee or an affiliate of Employee shall
be permitted to employ (A) all staff currently employed by Americana in the
operation of the Restaurant ("Restaurant Personnel") and (B) Mitchel J. Wachman
after the later of (x) June 30, 1996 or (y) such date on which Employee ceases
to be an employee of Americana; and (ii) not soliciting for hire by Employee or
any such business organization any officer or employee of Americana or any of
its affiliates and not encouraging for or on behalf of Employee or any such
business organization any officer, employee, licensee, franchisee, supplier or
other service provider to terminate his or her relationship with Americana or
any of its affiliates except as permitted by clause (B) above. As of the date of
this Agreement, other than with respect to Americana or its affiliates, Employee
is not performing any consulting or other duties for, and is not a party to any
similar agreement with, any business or venture competing with Americana or any
of its affiliates.
(b) Notwithstanding anything to the contrary contained herein,
nothing herein shall restrict, limit or impair in any manner the ability or
right of Employee to engage in the following activities:
(i) Employee may, directly or through New Brighton Ventures or another
affiliate, manage or provide consulting services to other licensees or
franchisees of Americana with respect to Champps Americana restaurants,
including the licensee for the Milwaukee, Wisconsin Champps restaurant, at
their request, provided that such services comply with the terms and
conditions of the license or franchise agreement in effect with respect to
such location; and
(ii) Employee may own and operate, through New Brighton Ventures or another
entity owned or controlled by him, the Restaurant in accordance with the
Sub-License Agreement to be dated as of the Effective Date by and between
Americana, as sublicensor, and New Brighton Ventures, as sublicensee.
<PAGE>
(c) The provisions of this paragraph 5 shall apply in the
following geographic areas:
(i) all states in which Americana or any of its affiliates is, as of the date
hereof, conducting any business activities;
(ii) all states in which Americana or any of its affiliates commences conducting
business activities during the term of this Agreement; and
(iii) the United States of America.
(d) The parties acknowledge that the time, scope, geographic
area and other provisions of this paragraph 5 have been specifically negotiated
by sophisticated commercial parties and agree that (i) all such provisions are
reasonable under the circumstances, (ii) all such provisions are given as an
integral and essential part of the transactions contemplated hereby and (iii)
but for the covenants of the Employee contained in this paragraph 5, Americana
would neither enter into this Agreement nor the Asset Purchase Agreement nor
consummate the transactions contemplated hereby or thereby. The Employee has
independently consulted with his counsel and has been advised in all respects
concerning the reasonableness and propriety of the covenants contained herein,
with specific regard to the businesses conducted by Americana and its
affiliates.
(e) It is specifically understood and agreed that any breach
of the provisions of this paragraph 5 by the Employee will result in irreparable
injury to Americana and its affiliates, that the remedy at law alone will be an
inadequate remedy for such breach and that, in addition to any other remedy it
may have, Americana and its affiliates shall be entitled to seek specific
performance of this paragraph 5 by the Employee through such temporary and
permanent injunctive relief as a court of competent jurisdiction may award or
decree irrespective of whether Americana may be entitled to compensatory
damages. The parties hereto agree that the liability of the Employee for
breaches of the provisions of this paragraph 5 shall not be limited to the
amount of the payment received by the Employee pursuant to paragraph 3 of this
Agreement. In the event that any covenant contained in this paragraph 5 shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its extending for too great a period of time or over too great a geographic
area or by reason of its being too extensive in any other respect, it shall be
interpreted to extend only over the maximum period of time for which it may be
enforceable and/or over the maximum geographic area as to which it may be
enforceable and/or to the maximum extent in all other respects as to which it
may be enforceable, all as determined by such court in such action. In any such
action brought to enforce the Agreement, the prevailing party shall be awarded
reasonable attorneys' fees and costs and expenses incurred therein. The
existence of any claim or cause of action which the Employee may have against
Americana or any of its affiliates under this paragraph 5 shall not constitute a
defense or bar to the enforcement of any of the provisions of this Agreement and
shall be pursued through separate court action by the Employee.
<PAGE>
6. Confidentiality of Agreement. Employee agrees that all matters
relating to the existence and content of this Agreement are confidential and
agrees that he shall not disclose such matters to any person or entity except
his counsel, financial advisors and immediate family, but only if those
individuals agree to keep such matters confidential; provided, however, that
Employee may disclose this agreement in connection with good faith negotiations
with prospective employers, clients or business associates who agree to keep all
such matters so disclosed confidential and may, upon written notice to
Americana, disclose this Agreement to the extent required by applicable law or
regulation.
7. Non-Disparagement. Employee agrees not to make any statements which
disparage Americana or any of its affiliates or their respective employees,
officers, directors, stockholders, products or services. Americana agrees to
undertake good faith efforts to prevent its stockholders, directors, officers or
employees who are informed of this Agreement from making any statements which
disparage Employee.
8. Confidential Information. Employee acknowledges that by virtue of
his past employment with Americana, and by virtue of any services to be rendered
hereunder, he has had and will have access to confidential information and trade
secrets. Employee agrees not to reproduce or disclose to any other person or
entity or use for his own benefit or for the benefit of any other person or
entity any such confidential information or trade secrets of Americana or any of
its affiliates, except as is necessary for compliance with paragraph 3(c) and as
is appropriate to allow Employee to conduct the activities that he is permitted
to conduct pursuant to paragraph 5(b) hereof, to the extant that Employee
complies with the terms and conditions of this Agreement. Employee further
acknowledges that such information will be entrusted to him by Americana and
that Employee will take all steps necessary to protect the confidentiality of
such information. The term "confidential information" includes, but is not
limited to, financial information, business plans, customer lists, restaurant
design information or concepts, advertising concepts, recipes, matters which are
subject to trademark or copyright protection, trade secrets, marketing or sales
information, price and cost information, information regarding suppliers,
personnel information, prospects and opportunities which have been discussed or
considered by Americana or any of its affiliates, except that the term
"confidential information" does not include any information that is common
knowledge in the restaurant industry and is in the public domain (such as basic
restaurant business practices and skills which Employee acquired prior to his
association with Americana and its predecessors and possesses without
infringement upon any intellectual property or similar rights of Americana or
any of its affiliates), other than information that has become public on account
of Employee's failure to comply with the provisions of this Agreement. Employee
agrees to execute any documents reasonably necessary to protect the rights or
interests of Americana in confidential information.
<PAGE>
9. Litigation Cooperation. Employee hereby agrees to cooperate fully
with Americana in the defense or prosecution of any claims or actions now in
existence or which may be brought or threatened in the future against or on
behalf of Americana which relate to events that transpired while Employee was
employed by Americana. Employee's full cooperation in connection with such
claims or actions shall include, but not be limited to, his being available to
meet with counsel to prepare for trial or discovery, to assist in connection
with any audit, inspection, proceeding or inquiry, to act as a witness in
connection with litigation affecting Americana and, at the direction of
Americana, to cooperate with any auditor or governmental agency. Americana
agrees that it will pay Employee for any expenses he reasonably incurs and for
the reasonable value of his time spent in connection with such cooperation.
10. Non-Cooperation. Employee agrees that he shall not voluntarily
provide information to or otherwise cooperate with any individual, corporation,
firm, partnership, or other entity who is contemplating or pursuing litigation
against Americana and he shall not otherwise voluntarily participate in any
threatened or pending litigation against Americana, other than any action
brought by Employee to enforce this Agreement or to construe its terms.
11. Indemnification.
(a) As a further inducement to Americana to enter into this
Agreement, Employee hereby agrees to indemnify and hold each and all of the
Releasees harmless from and against any and all loss, cost, damage, or expense,
including, without limitation, attorneys' fees incurred by Releasees or any of
them arising out of any breach of this Agreement by Employee. In addition,
Employee recognizes that Americana would suffer irreparable injury in the event
he were to breach any of his obligations under this Agreement and agrees that
Americana will have the right to seek injunctive relief to enforce the terms of
this Agreement.
(b) Americana hereby agrees to indemnify and hold Employee
harmless from and against loss, cost, damage or expense, including, without
limitation, attorneys' fees incurred by Employee, arising out of actions or
omissions of Employee while employed by Americana to the extent that such
indemnification would be provided by Americana in the ordinary course of
business to other employees similarly situated with respect to similar actions
or omissions.
12. Non-Admission. This Agreement shall not in any way be construed as
an admission by Americana of any liability or any act of wrongdoing whatsoever
by Americana against Employee and Americana specifically disclaims any liability
or wrongdoing whatsoever against Employee or any other person on the part of
itself, its employees and its agents.
<PAGE>
13. Advice of Counsel. Employee represents and agrees that he has been
advised to discuss all aspects of this Agreement with his attorney, that he has
carefully read and fully understands all of the provisions of this Agreement and
that he is voluntarily entering into this Agreement.
14. Attorneys' Fees. Each party agrees that they will bear their own
costs and attorneys' fees in connection with this Agreement.
15. No Transfer. Employee represents that he has not heretofore
assigned or transferred, or purported to assign or transfer, to any person or
entity, any Claim against the Releasees or any portion thereof or interest
therein.
16. No Reliance. Employee represents and acknowledges that in executing
this Agreement he does not rely and has not relied upon any representation or
statement made by any of the Releasees or by any of the Releasees' agents,
representatives or attorneys with regard to the subject matter, basis or effect
of this Agreement, other than the promises and representations made in this
Agreement.
17. Binding Nature of Agreement. This Agreement shall be binding upon
each of the parties and upon their heirs, administrators, representatives,
executors, successors and assigns, and shall inure to the benefit of each party
and to their heirs, administrators, representatives, executors, successors, and
assigns.
18. Governing Law. This Agreement shall be deemed to be made and
entered into in the State of Minnesota, and shall in all respects be
interpreted, enforced and governed under the laws of said State. The language of
all parts of this Agreement shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against any of the
parties.
19. Severability. Should any provision of this Agreement be declared or
be determined by any court to be illegal or invalid, the validity of the
remaining parts, terms, or provisions shall not be affected thereby and said
illegal or invalid part, term, or provision shall be deemed not to be a part of
this Agreement.
20. Modification of Agreement. This Agreement may be amended, revoked,
changed, or modified only upon a written agreement executed by both parties. No
waiver of any provision of this Agreement will be valid unless it is in writing
and signed by the party against whom such waiver is charged.
21. Entire Agreement. This Agreement sets forth the entire agreement
between the parties hereto, and fully supersedes any and all prior agreements or
understandings between the parties hereto pertaining to the subject matter
hereof.
<PAGE>
22. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered in person or via
facsimile (promptly followed by hard copy confirmation) or mailed by certified
or registered mail, postage prepaid, or by express courier service, service fee
prepaid, to the addresses as specified below or to such other address of which
any party may notify the other parties as provided herein. Notices shall be
effective as of the date of such delivery or mailing.
To Americana: With a copy to:
One Corporate Place Goodwin, Procter & Hoar LLP
55 Ferncroft Road Exchange Place
Danvers, MA 01923-4001 Boston, MA 02109
Attn: Charles W. Redepenning, Jr., Esq. Attn: Ettore A. Santucci, P.C.
To Mr. Steven J. Wagenheim: With a copy to:
245 Kentucky Avenue North Briggs and Morgan, P.A.
Golden Valley, MN 55427 2400 IDS Center
Minneapolis, MN 55402
Attn: Avron L. Gordon, Esq.
23. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Severance,
Non-Competition and Confidentiality Agreement as of the date first set forth
above.
/s/ Steven J. Wagenheim
-----------------------
Steven J. Wagenheim
Then personally appeared before me Steven J. Wagenheim and stated that
the execution of the within Severance, Non-Competition and Confidentiality
Agreement was his free act and deed.
/s/ Jennifer P. Christman
-------------------------
Notary Public
My commission expires: January 21, 2000
AMERICANA DINING CORP.
By: /s/ Charles W. Redepenning, Jr.
-----------------------------------
Name: Charles W. Redepenning, Jr.
Title: Senior Vice President
and Secretary
Then appeared before me Charles W. Redepenning, Jr. for Americana
Dining Corp. and stated that he executed the within Severance, Non-Competition
and Confidentiality Agreement in his capacity as Senior Vice President and
Secretary for Americana Dining Corp., and that execution of this document was
within his authority.
/s/ Ettore Santucci
-------------------
Notary Public
My commission expires: Dec.21, 2001
LA SALSA
LICENSE AGREEMENT
(FUDDRUCKERS)
<PAGE>
LA SALSA
LICENSE AGREEMENT
(FUDDRUCKERS)
TABLE OF CONTENTS
SECTION 1: GRANT OF LICENSE
1.1 Grant
1.2 Development and Operation
1.3 Additional Restaurants; Relocation
SECTION 2: TERM
2.1 Term
2.2 Removal; Termination Without Cause
SECTION 3: RESTAURANT SYSTEM AND PROCEDURES
3.1 Openings
3.2 Operation
3.3 The Manuals
3.4 Changes to the Manuals
3.5 Products and Services
3.6 Confidentiality
3.7 LSF Property
3.8 Covenants
3.9 Employees
3.10 Approved Suppliers
3.11 Proprietary Ingredients
SECTION 4: TRAINING
4.1 Initial Training
4.2 Certified Training
4.3 Training Employees
4.4 Continuing Training
4.5 Expenses
i
<PAGE>
SECTION 5: MAINTENANCE; MODERNIZATION
5.1 Repairs and Maintenance
5.2 Modernization
SECTION 6: FEES
6.1 Fees
6.2 No Fees Refundable
6.3 Payment of Fees
SECTION 7: MARKETING AND ADVERTISING
7.1 Marketing, Promotion and Advertising Programs
7.2 Local or Regional Advertising
7.3 Marketing Fund
7.4 Marketing Fund Policy
7.5 Temporary Investment
7.6 Advertising Co-op
7.7 Approval of Advertising
SECTION 8: ACCOUNTING AND RECORD KEEPING
8.1 Records
8.2 Sales Reports
8.3 Other Reports
SECTION 9: AUDITS AND INSPECTIONS
9.1 Audit Rights
9.2 Inspection
9.3 Books and Records
SECTION 10: INDEMNIFICATION
10.1 Indemnification
SECTION 11: INSURANCE
11.1 Insurance
11.2 Certificates
ii
<PAGE>
SECTION 12: COVENANTS
12.1 Debts and Taxes
12.2 Compliance with Laws
SECTION 13: TRADEMARKS
13.1 Ownership
13.2 Goodwill
13.3 Use of Marks
13.4 Changes in Marks; Protection
13.5 Infringements
SECTION 14: TRANSFER
14.1 Personal Contracts; Definition
14.3 FUDDRUCKERS Franchisees
14.4 Assumption
14.5 Definition of "Change of Control"
SECTION 15: EXPIRATION AND TERMINATION
15.1 Termination for Cause
15.2 Requirements Upon Termination
SECTION 16: MISCELLANEOUS
16.1 No Effect
16.2 Right and Remedies
16.3 Consents
16.4 Partial Invalidity
16.5 Arbitration; Jurisdiction
16.6 Attorneys' Fees
16.7 Governing Law
16.8 Notices
16.9 Terms and Headings
16.10 Entire Agreement
16.11 Amendment or Modification
16.12 Counterparts
16.13 Facsimile Signatures
iii
<PAGE>
LA SALSA
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and executed as of February 14, 1996
("Effective Date") by and between La Salsa Franchise, Inc., a California
corporation with its principal place of business at Los Angeles, CA ("LSF") and
La Salsa Holding Co., a Delaware corporation ("Holding"), on the one hand, and
Fuddruckers, Inc., a Texas corporation, on behalf of itself and its subsidiaries
("Fuddruckers"), and DAKA International, Inc., a Delaware corporation ("DAKA"),
on the other hand.
RECITALS:
A. LSF and its parent Holding have developed a distinctive concept and
type of fresh Mexican grill restaurant featuring Mexican style food and related
items and beverages under the name "LA SALSA" (LA SALSA Restaurants").
B. Holding has authorized LSF to license others to use the various
trademarks and service marks employed in LA SALSA Restaurants, including the
federally registered mark "LA SALSA" (referred to together as the "Marks") and
to use the recipes, procedures and other techniques involved in operating a LA
SALSA Restaurant (the "Operating System").
C. Fuddruckers, a wholly-owned subsidiary of DAKA, has developed and
operates a chain of gourmet hamburger restaurants under the name "FUDDRUCKERS,"
which are well known and established on a national basis ("Restaurants").
D. DAKA and Fuddruckers desire that Fuddruckers obtain a license to use
the marks and Operating System in the operation of fresh Mexican grills (the
"Grills") to be included as part of the continued operation of certain
company-owned FUDDRUCKERS Restaurants which are now, and others which will be in
the future, mutually agreed upon by LSF and Fuddruckers.
E. LSF and Fuddruckers anticipate that in the future FUDDRUCKERS
franchisees will be offered the right to operate Grills as part of their
franchised FUDDRUCKERS restaurants under one or more additional agreements.
F. LSF is willing to grant a license to Fuddruckers upon the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises contained in
this Agreement, the parties hereby agree as follows:
SECTION 1: GRANT OF LICENSE
1.1 Grant. LSF hereby grants Fuddruckers a limited license to use the
Marks and the Operating System solely in direct connection with the sale of LA
SALSA food, beverage and other products from Grills contained within Restaurants
identified and mutually agreed upon between LSF and Fuddruckers. The first
twenty Restaurants will be identified by the parties within six months after the
date of this Agreement and specified on Exhibit A-2 attached hereto and
incorporated herein by reference. A partial list is currently attached as
Exhibit A-1. Fuddruckers expressly acknowledges and agrees that LSF has granted
franchise development territories and franchise locations which include
protected territory provisions that may prevent the development and/or operation
of any Grills by Fuddruckers within such protected territories.
<PAGE>
1.2 Development and Operation.
(a) Fuddruckers agrees to use its best efforts to open and
operate Grills at such twenty Restaurants as soon as possible after execution of
this Agreement and in any event within six months after the date of this
Agreement. These Grills will be opened and operated by Fuddruckers as test units
which will contain the image, signage, size, menu items, equipment, fixtures,
personnel, point of sale systems and other aspects of LA SALSA operations as LSF
and Fuddruckers may agree upon as to each Grill.
(b) Prior to developing additional Grills beyond the first
twenty and before the end of the Initial Term (defined below), the parties will
set forth in writing the plans and specifications to be used by Fuddruckers in
opening and operating such additional Grills and will sign and attach such
document to this Agreement as Exhibit B. The parties will also specify on
Exhibit B the mutually acceptable procedures for selecting additional
Restaurants for installing Grills and for relocating Grills to other
Restaurants. Fuddruckers agrees to comply with all of such plans, specifications
and procedures unless it has received the prior written consent of LSF.
(c) Only company-owned FUDDRUCKERS restaurants operated by
Fuddruckers and its subsidiaries in the United States will be operated pursuant
to this Agreement. A current list of the addresses of the company-owned
FUDDRUCKERS Restaurants to which the parties anticipate a Grill may be added is
attached hereto and incorporated herein by reference as Exhibit C. Fuddruckers
may add additional Restaurants to such list with the prior written approval of
LSF which approval will not be unreasonably withheld. Prior to the end of the
initial Term (as defined below), and from time to time thereafter, Fuddruckers
will delete any Restaurant from such list whenever it concludes that no Grill
will be added to such Restaurant.
(d) DAKA agrees to cause Fuddruckers to meet all of its
obligations under this Agreement.
1.3 Additional Restaurants; Relocation. Fuddruckers may add one or more
Restaurant Grills to this Agreement by written agreement signed in each case by
both Fuddruckers and LSF prior to opening of the Grill for such Restaurant.
Fuddruckers will not relocate a Grill or any other part of the program from any
of the Restaurants without the prior written consent of LSF, which consent will
not be unreasonably withheld.
<PAGE>
1.4 Protected Territory.
(a) "Protected Territory" for purposes of this Agreement shall
mean the area within three existing city blocks of any Restaurant located in a
central business district or within a one-mile radius of any Restaurant located
elsewhere.
(b) During the term of this Agreement, neither LSF nor Holding
will own, operate or grant any franchise or license to own or operate a LA SALSA
Restaurant within the Protected Territory around a Restaurant containing a
Grill.
(c) During the three years following the Effective Date,
neither LSF nor Holding will own, operate or grant any franchise or license to
own or operate a LA SALSA Restaurant within the Protected Territory around a
Restaurant listed on Exhibit C or added to Exhibit C pursuant to either Sections
1.2(c) or 1.3.
(d) Fuddruckers and Daka acknowledge and agree that LSF will
during the term hereof continue the development of LA SALSA company and
franchise Restaurants within areas adjacent to such Protected Territories and
expects to grant franchise area development rights to third parties covering
such areas.
(e) If Fuddruckers gives written notice of cancellation during
the Initial Term under Section 2.1(a) below, LSF and Holding shall have no
continuing obligation under this Section 1.4.
SECTION 2: TERM
2.1 Term.
(a) This Agreement will be effective as of the Effective Date
set forth above and will continue for an initial term ending one year after the
Effective Date (the "Initial Term"), subject to earlier termination as expressly
provided for in this Agreement. Unless Fuddruckers gives written notice of
cancellation to LSF on or before thirty days prior to the end of the Initial
Term, this Agreement will automatically continue after the Initial Term for a
period ending on the tenth of the Effective Date.
<PAGE>
(b) Each Grill opened by Fuddruckers during each calendar year
may operate under the terms of this Agreement until December 31 of the calendar
year set forth in the following table:
Calendar Expiration
Year of Opening Date of License
1996 December 31, 2006
1997 December 31, 2007
1998 December 31, 2008
1999 December 31, 2009
2000 December 31, 2010
2001 December 31, 2006
2002 December 31, 2006
2003 December 31, 2006
2004 December 31, 2006
2005 December 31, 2006
2006 December 31, 2006
(c) Prior to the end of the ten-year term of this Agreement,
the parties may enter into an additional ten-year License Agreement regarding
Grills upon terms and conditions mutually satisfactory to the parties. So long
as the following conditions are met, Fuddruckers may at its option by written
notice to LSF extend this Agreement to operate the Grills for an additional
period for each Grill of ten years from the expiration date set forth in the
above table and add additional Grills under this Agreement for an extended
period ending on December 31, 2016 (the "Extended Term"), so long as it meets
the following conditions:
(i) Fuddruckers must give LSF written notice of extension not less than ninety
days before the end of the initial ten-year term;
(ii) Fuddruckers must not at the time of its written notice of extension be in
material default (as defined hereafter) of this Agreement without having
cured such default within the applicable cure period;
(iii)Fuddruckers must agree to make within a reasonable period agreed to by
Fuddruckers and LSF all required changes as set forth in a written notice
from LSF, including as examples, (A) additional training requirements and
(B) modernization of the Grills and their equipment such as redecorating
certain Grills and installing new equipment to reflect the then current LA
SALSA standards and image as set forth in the Manuals or in writings issued
by LSF; and
(iv) Fuddruckers and LSF will adjust to their satisfaction the amount of the
Fees referred to in Section 6.1 in order to reflect changes in such fees
charged by LSF at that time.
<PAGE>
(d) For purposes of this Agreement unless otherwise
specifically provided, "material default" shall be defined as a Grill's material
deviation from LA SALSA's recipes, basic menu, decor and trade dress as
described in Exhibit B.
2.2 Removal; Termination Without Cause.
(a) LSF agrees that after the Initial Term Fuddruckers may at
any time and from time to time upon thirty (30) days written notice to LSF
remove any Restaurant from this Agreement.
(b) LSF further agrees that after the initial Term Fuddruckers
may at any time upon thirty (30) days written notice to LSF terminate this
Agreement in full without cause.
(c) Fuddruckers agrees that upon the effectiveness of any such
removal or such termination, LSF and Holding shall have no further obligation
under Section 1.4 above as to any Restaurant to which such removal or
termination applies.
SECTION 3: RESTAURANT SYSTEM AND PROCEDURES
3.1 Openings. LSF will advise and assist Fuddruckers in opening and
operating each Grill, including attendance at each of the first three Grill
openings. LSF representatives will assist Fuddruckers in coordinating the
pre-opening activities for each Grill and will be available to assist with its
operations for up to five (5) days during the opening week or as reasonably
requested by Fuddruckers. Fuddruckers agrees to reimburse LSF or Holding
promptly following invoice for all of their reasonable travel, lodging and other
costs incurred in connection with living expenses in providing this in-store
training and assistance for each Grill opening. Fuddruckers will carry out an
advertising program designed for the opening of each Grill, as mutually agreed
upon between Fuddruckers and LSF.
3.2 Operation.
(a) Fuddruckers agrees that it will identify and appoint an
individual who will be its representative in managing the Restaurants, Grills
and who will devote his or her best efforts and personal attention to the day to
day operation of the Grills (the "Representative") Fuddruckers may change to
another Representative from time to time following written notice to LSF.
(b) Fuddruckers hereby authorizes and appoints the
Representative with full authority to act on behalf of Fuddruckers and DAKA in
regard to performing or administering this Agreement. LSF may deal completely
with the Representative in such regard unless and until its actual receipt of
written notice from Fuddruckers of cancellation of such authority.
<PAGE>
(c) Fuddruckers agrees that it will operate each LA SALSA
Grill in accordance with the LA SALSA standards of high quality and friendly
service which will at no time be less than the same degree of high quality and
friendly service that Fuddruckers otherwise requires at the operation of its own
FUDDRUCKERS restaurants, recognizing that an integral part of the Operating
System includes vary friendly treatment of customers.
(d) Without limitation, Fuddruckers specifically agrees to
comply with all health, safety and other laws applicable to the operation of
each Grill.
3.3 The Manuals. LSF will furnish Fuddruckers with one copy of its
current LA SALSA operations Manuals ("Manuals") for each Restaurant prior to the
opening of each Grill. Fuddruckers acknowledges and agrees that because the
recipes and procedures set forth in the Manuals are fundamental to the Operating
System and the way the public identifies the Marks with the LA SALSA food
products, it will strictly follow such procedures and recipes at all times and
will use only high quality ingredients in preparing such products consistent
with the same level of quality used in its own food products.
3.4 Changes to the Manuals.
(a) Fuddruckers specifically agrees that the Manuals are an
integral, necessary and material element of the Operating System and that it
will be necessary for LSF, in order to maintain the high quality of the
Operating System and maximize its competitive position, to revise and update the
Manuals from time to time. LSF has the right at any time and from time to time,
in the good faith exercise of its reasonable business judgment, to revise,
delete from and add to the materials contained in the Manuals. Subject to the
limitations described below, Fuddruckers expressly agrees to comply promptly
with all such changes to the Manuals that are applicable system-wide to LA SALSA
outlets. LSF will furnish Fuddruckers from time to time portions or all of the
Manuals as and when they are updated, and Fuddruckers will keep each of the
Manuals current at all times.
(b) In light of the limited menu to be served at the Grills
and their location within FUDDRUCKERS Restaurants, the parties agree that: (i)
during the Initial Term Fuddruckers will not be required to make any
expenditures of more than $1,000.00 per Grill to comply with changes to the
Manuals; and (ii) after the Initial Term, Fuddruckers will not more than once
during any twelve (12) month period be obligated to make expenditures of more
than $5,000.00 per Grill to comply with changes in the Manuals or to make any
such change if Fuddruckers and LSF agree in the reasonable exercise of their
business judgment that the expenditures would not be commercially reasonable in
light of the remaining term of this Agreement.
3.5 Products and Services. Fuddruckers agrees to offer for sale from
the Grill at each Restaurant the food, beverages and other products described in
Exhibit B unless Fuddruckers and LSF agree in writing to any exceptions to
Exhibit B.
<PAGE>
3.6 Confidentiality.
(a) Fuddruckers and DAKA each agree that Holding and LSF are
the owners of all rights in and to the Operating System, including the
information and materials described or contained in the Manuals, and that the
Operating System and Manuals contain trade secrets and themselves constitute
trade secrets of LSF which have been or will be revealed to Fuddruckers and/or
DAKA in confidence. Fuddruckers and DAKA each agree not to disclose, duplicate,
license, sell or reveal any portion thereof to any other person, except an
employee of Fuddruckers required by his or her work to be familiar with such
information. Fuddruckers and DAKA each agree to keep and respect all
confidential information received from LSF, to obtain from the Representative an
agreement to keep and respect all such confidences and to be responsible for
compliance by the Representative with such agreement.
(b) Fuddruckers and DAKA will pursuant to this Agreement
disclose to LSF and Holding confidential, proprietary and trade secret
information regarding Fuddruckers and DAKA. LSF agrees that it and Holding will
keep and respect all confidential information received from Fuddruckers and DAKA
and will not disclose, duplicate, license, sell or reveal any portion thereof to
any person, except any employee of LSF or Holding required by his or her work to
be familiar with such information.
3.7 LSF Property. The Manuals and all other confidential materials
furnished to Fuddruckers hereunder are on loan only, will remain the property of
LSF and are required to be returned to LSF immediately for any Grill which is no
longer being operated under this Agreement.
3.8 Covenants.
(a) Fuddruckers and DAKA each agree that LA SALSA Restaurants
must compete (by among other things introducing new products, conducting
advertising programs and establishing alternative distribution outlets) against
similar businesses which may have far greater financial resources and may be
better established in the restaurant industry. Therefore, Fuddruckers and DAKA
agree to use their best efforts to assure compliance throughout the term of this
Agreement with this Section 3.8.
(b) LSF recognizes and agrees that (i) FUDDRUCKERS Restaurants
currently sell certain Mexican style food items, (ii) that other DAKA
subsidiaries and affiliates sell unbranded Mexican style food items at
institutional and other retailer specialty outlets and (iii) that other DAKA
subsidiaries and affiliates are franchisees of other restaurant chains that
feature Mexican style food items.
(c) DAKA and Fuddruckers agree that during the term of this
Agreement and any extension and for a period of one year after its expiration or
termination, Fuddruckers will not (i) use the LA SALSA Marks, trade dress,
recipes and other proprietary parts of the Operating System without the prior
express written consent of LSF, (ii) do any act which is injurious or
prejudicial to the goodwill associated with the LA SALSA chain, the Operating
System or the value of the marks, (iii) operate under a different name any
restaurant chain similar to the LA SALSA chain of restaurants which feature
primarily Mexican style food and related items under a "taqueria" or "fresh
Mexican grill" concept.
<PAGE>
(d) Fuddruckers and DAKA each agree that any violation of this
Section 3.8 would result, in irreparable injury to LSF and its Operating system
and that LSF would be without an adequate remedy at law. Fuddruckers and DAKA
each therefore agree that in the event of a breach or threatened breach of any
such covenant, LSF may obtain, in addition to any other remedies which it may
have hereunder or at law or in equity, a temporary and/or permanent injunction
and a decree for specific performance of the terms of this section 3.8 without
the necessity of showing actual or threatened damage.
(e) The parties agree that each of the foregoing covenants
will be construed as independent of each other and of any other covenant or
provision of this Agreement. If all or any portion of a covenant in this section
3.6 is held unenforceable by a court having valid jurisdiction in a final
decision between the parties hereto and from which no appeal has or may be
taken, Fuddruckers expressly agrees to be bound by the remaining portion of such
covenant.
3.9 Employees. The parties each hereby agree that such party will not
knowingly recruit and hire any person employed by the other party or by any
other LA SALSA franchisee without first obtaining such other party's written
consent. The parties agree that in the event of a breach of this covenant,
actual damages would be extremely difficult to compute, and accordingly, in the
event of such a breach, the breaching party agrees to pay the prior employer of
such person liquidated damages equal to the greater of (a) such person a prior
annual salary or (b) the annual salary and any bonus and other benefits paid or
to be paid by the breaching party to such person during the first year of
employment.
3.10 Approved Suppliers. Fuddruckers agrees to purchase all products
for sale at the Grille from suppliers who are then approved in writing by LSF as
an approved LA SALSA supplier. If Fuddruckers wants to purchase any products
from a supplier who is not so approved, Fuddruckers will notify LSF of such
supplier and instruct the proposed supplier to contact LSF and follow LSF's
procedures for becoming an approved LA SALSA supplier. LSF may charge a $250.00
fee for the fees and costs involved in these approval procedures. LSF agrees
upon request by Fuddruckers to expedite the approval process if Fuddruckers
demonstrates that it has been unable to purchase sufficient supplies from
approved suppliers on a timely basis to meet its needs.
3.11 Proprietary Ingredients. Fuddruckers agrees to buy to the extent
required by the Manuals certain proprietary ingredients from LSF or a designated
approved supplier (which may be an affiliate of LSF). Fuddruckers understands
and agrees that such ingredients are prepared pursuant to secret, proprietary
recipes and/or procedures belonging to LSF or its affiliates. LSF agrees that if
reasonably requested by Fuddruckers, it will use its best efforts to have such
proprietary ingredients made available for sale by additional designated
approved suppliers, subject to strict confidentiality requirements and
reasonable fees which may be charged by LSF to such suppliers for approval and
regular inspections for compliance.
<PAGE>
SECTION 4: TRAINING
4.1 Initial Training. LSF will make available to the Representative and
those persons identified to act as Grill Training managers the LA SALSA
Restaurant operations Training Course. Fuddruckers agrees that the
Representative and each Grill Training Manager must attend and complete LSF's
Restaurant Operations Training Course to the reasonable satisfaction of LSF. All
or a portion of the Restaurant Operations Training Course may be waived in
writing by LSF.
4.2 Certified Training. LSF will make available to Fuddruckers a LA
SALSA Operations Training Course program for purposes of training Fuddruckers,
Grill Training Managers. Certification training will be conducted by a LA SALSA
training manager either at a Holding Restaurant or an operating Grill which has
been certified by LSF for training. Upon successful completion of the Training
Course to LSF's satisfaction, LSF will certify each such Training Manager for
the purpose of training other employees of Fuddruckers. It is expressly
understood and agreed that each certified Training Manager and each certified
training Grill must continue to meet, on an ongoing basis, LSF's established
criteria to maintain such status as certified for LA SALSA training.
4.3 Training Employees. Except as set forth specifically herein,
Fuddruckers will be responsible for the initial and continuing training of all
Grill employees.
4.4 Continuing Training. The Representative and such other employees as
LSF may designate will, from time to time as reasonably required by LSF,
personally attend and complete LSF-provided refresher courses in LA SALSA
operations and food preparation and any training sessions held for the purpose
of introducing new products or procedures.
4.5 Expenses. Fuddruckers agrees to pay LSF $2,500.00 for each
Fuddruckers employee who enrolls in the LA SALSA initial Restaurant Operations
Training Course and for each Certified Training Manager trained by LSF or
Holding. Such payment will be paid prior to each such person's commencement of
training. Operations refresher courses and new product or new procedure training
sessions will be tuition-free to Fuddruckers and Fuddruckers, eligible
employees. All other training costs and expenses will be the responsibility of
Fuddruckers, such as the cost of travel, lodging, meals and other related and
incidental expenses.
<PAGE>
SECTION 5: MAINTENANCE; MODERNIZATION
5.1 Repairs and Maintenance. Fuddruckers agrees to maintain each Grill
and other portions of each Restaurant consistent with its own high quality and
service standards applicable to all FUDDRUCKERS restaurants as well as with LA
SALSA's standards as set forth in the Manuals. Except as may be expressly
provided in Exhibit B or the manuals, no changes of any kind in design,
equipment or decor will be made in any Grill without the prior written approval
of LSF in each instance.
5.2 Modernization.
(a) Subject to the limitations sct forth below, Fuddruckers
agrees, from time to time as reasonably required by LSF (taking into
consideration cost and the then remaining term of this Agreement), to modernize
each Grill to LSF's then current standards and specifications. Fuddruckers
understands and agrees that this obligation is in addition to the need to make
repairs, maintain equipment and purchase new equipment. No such modernization
will be required by LSF unless and until LSF, Holding and their wholly owned
affiliates ("Affiliates") have at that time implemented such standards and
specifications in at least twenty-five percent (25%) of the LA SALSA Restaurants
operated by them in the continental United States. No such modernization will be
required of Fuddruckers during the last two years of any Grill's operation under
this Agreement.
(b) In light of the limited menu to be served at the Grills
and their location within Fuddruckers Restaurants, the parties agree that
Fuddruckers will not more than once during any twelve (12) month period be
obligated to make modernization expenditures of more than $15,000 per Grill or
to make any such change if Fuddruckers and LSF agree in the reasonable exercise
of their business judgment that tho expenditures would not be commercially
reasonable in light of the remaining term of this Agreement. The parties agree
that the foregoing $15,000 limit may be increased during the term hereof by any
increases in the Cost of Living index determined by reference to nationwide
United States governmental statistics as compared to those existing at the date
of this Agreement.
SECTION 6: FEES
6.1 Fees. As partial consideration for the rights granted by LSF,
Fuddruckers will pay LSF:
(a) (i) For each of the first twenty Restaurants at which a
Grill is opened, an "Initial" fee for each Grill in the total amount of
$6,275.00 due on or before the opening of such Grill; and (ii) for any
Restaurants after the first twenty at which a Grill is opened, an "Initial" fee
for each Grill in the total amount of $3,600.00 due on or before the opening of
such Grill;
<PAGE>
(b) A monthly "License Fee" equal to five percent (5%) of
Gross Sales (as defined below) as payment to LSF for the continuing right to use
the LA SALSA Operating System and Marks; and
(c) A "Marketing Fund" Fee for each such month as its
contribution to the Marketing Fund provided for in Section 7.3 below.
6.2 No Fees Refundable. Fuddruckers agrees that the fees referred to
above in Section 6.1 are not refundable in whole or part under any circumstances
and have been fully earned by LSF by the grant of this license.
6.3 Payment of Fees.
(a) Fuddruckers agrees to pay LSF the License Fees and
Marketing Fund Fees provided for above monthly in lump sum so that LSF will
receive all of such Fees within fifteen (15) calendar days after the end each
month. Fuddruckers agrees that TIME IS OF THE ESSENCE regarding payment of all
Fees.
(b) Fuddruckers agrees to pay the License Fees and Fees to LSF
by timely mailing or delivering of a or less of the Restaurants containing
Grills are DAKA or Fuddruckers to a party not a member of the Companies (as
defined below), LSF may by written that the License Fees and Marketing Fund Fees
for paid by automatic direct transfer of funds. Within ten (10) days after
receipt of such notice, the transferee must furnish the information, execute
such forms, make such arrangements and complete such procedures as are
reasonably necessary to establish direct transfers from its account(s) to such
account(s) as LSF may designate in order to pay directly the License and
Marketing Fund Fees within the payment period referred to above. Without
limiting the foregoing, the transferee must obtain a telefax machine and/or
computer point of sale system as designated by LSF and to make timely telefax or
modem reports to LSF of the sales and other information necessary to allow LSF
to cause such transfers to be made and must maintain sufficient funds in its
account(s) to allow timely honoring of each payment to LSF by its bank or other
financial institution. LSF will require the transferee to specifically authorize
LSF to make such direct transfers of the License Fees and Marketing Fund Fees so
long as such transfers are limited to amounts computed with reference to sales
information furnished to LSF or with reference to good faith estimates by LSF.
(c) Notwithstanding when Fees are required to be paid,
Fuddruckers agrees to provide written sales reports to LSF on a weekly basis as
reasonably required by LSF so that LSF may maintain current information
regarding sales information.
(d) License Fees and Marketing Fund Fees which are not paid
when due will bear interest from and after their respective due dates at the
rate of eighteen percent (18%) per annum or the highest rate permitted by law,
whichever is less. Any late payment of any fees must be accompanied by a late
payment administrative charge of $25.00.
<PAGE>
6.4 Gross Sales. The term "Gross Sales" as used in this Agreement will
mean the total of all cash or other form of payment ("Receipts") received by
Fuddruckers for the sale of LA SALSA food, beverages and other products,
including promotional items or for catering services involving LA SALSA
products. Gross Sales will include all sales of LA SALSA items that are
collected through any FUDDRUCKERS Restaurant so long as they are directly
related to the Grill. if a Grill does not collect Receipts directly for the
beverages sold with LA SALSA food products , the allocation of beverages to
Gross Sales shall be computed each month by applying the percentage of sales
from Receipts of LA SALSA food products at the Restaurant to the percentage of
Receipts from all food products at the Restaurant against the total beverage
Receipts received during such month by such Restaurant. Neither Gross Sales nor
Receipts shall include (a) any sums collected and paid out for sales taxes
levied on the sale of food, beverages, property or services, (b) the proceeds
from the sale of a Grill' s used equipment, (c) meals provided to Fuddruckers
employees according to established Fuddruckers policies, (d) sales for which
refunds are made due to customer dissatisfaction or (e) any discounts or coupons
which are applied against the full sales price.
SECTION 7: MARKETING AND ADVERTISING
7.1 Marketing, Promotion and Advertising Programs. Recognizing the
value of marketing, advertising and promotions to enhance the goodwill and
public image of the LA SALSA chain of restaurants, the parties agree that LSF
will develop marketing, promotion and advertising programs designed to promote
and enhance the collective success of all LA SALSA Restaurants including the
Grills. It is expressly agreed that in all respects of such marketing, promotion
and advertising (such as type, quantity, timing, placement and choice of media,
market areas and advertising agencies), the decisions of LSF made in good faith
will be final and binding. In regard to all advertising and sales promotion
programs, both parties agree to cooperate with each other and refrain from any
action which the other party may deem to be harmful to its image.
7.2 Local or Regional Advertising. Fuddruckers agrees to spend on a
quarterly basis a minimum dollar amount equal to two percent (2%) of its Gross
Sales from the Grills in conducting direct advertising and sales promotion
programs for the Grills. All such programs must be approved in advance by LSF in
writing, and such expenditures will not include any overhead related to
marketing or advertising. LSF specifically agrees that Fuddruckers may conduct
advertising that promotes the Grills in conjunction with the Restaurants. LSF
may require Fuddruckers to provide proof of all such marketing, promotion and
advertising expenditures. Payments made to an Advertising Cooperative ("Co-op")
for the area in which a Grill is located, as provided for below, will be applied
towards Fuddruckers, required spending.
<PAGE>
7.3 Marketing Fund.
(a) LSF has established and maintains a marketing Fund, and
Fuddruckers agrees that its purpose is to maximize the general public
recognition and acceptance of LA SALSA Restaurants. Monies from the Marketing
Fund must be used to pay for marketing, promotion and advertising program
development such as, but not limited to, costs and expenses related to the
employment of advertising agencies, payment of talent and residuals, research
and development, design and development of trademarks and logos, creation of
materials, promotions, public relations, market research and clearance of
marketing, advertising and promotional programs.
(b) In addition to the spending required by Section 7.2 above,
Fuddruckers agrees to pay LSF a Marketing Fund Fee of one percent (1%) of Gross
Sales from operating the Grills for each payment period as set forth above in
Section 6.
(c) LSF, at its sole discretion, may at any time increase the
Marketing Fund Fee in any increments so long as the total Marketing Fund Fee
does not exceed a maximum of two percent (2%) of Gross Sales.
(d) LSF, Holding and their wholly-owned Affiliates will also
contribute to the Marketing Fund the same percentage of the Gross Sales from
their operations of LA SALSA Restaurants in the continental United States.
(e) LSF will deposit all Marketing Fund Fees in a separate
Marketing Fund account which is not considered an asset of LSF.
(f) Fuddruckers agrees that LSF has so obligation to make
expenditures for Fuddruckers or others which are equivalent or proportionate to
the contributions made to the Marketing Fund or to ensure that any particular
Grill benefits directly or pro rata from any marketing program or advertising.
(g) It negotiations on behalf of the Marketing Fund result in
payment by suppliers of allowances or rebates designated for the Marketing Fund,
all such funds will be paid promptly into the Marketing Fund.
(h) All monies in the Marketing Fund, including any interest
or other income earned from the investment of such monies, must be spent and
disbursed only in accordance with this Agreement and the Marketing Fund Policy
provided for in Section 7.4 below.
(i) LSF agrees to cause an annual accounting of the Marketing
Fund and to make the results of such accounting available to Fuddruckers upon
request. If such accounting is made by an independent accounting firm, the
expenses thereof shall be paid from the marketing Fund.
<PAGE>
7.4 Marketing Fund Policy. LSF may develop and modify from time to time
as necessary a Marketing Fund Policy which will include procedures and
guidelines for disbursements and expenditures from the Marketing Fund and other
administrative procedures as LSF may deem necessary or appropriate.
7.5 Temporary Investment. LSF may temporarily invest any or all of the
monies held in the Marketing Fund from time to time at the sole discretion of
LSF in accordance with the Marketing Fund Policy. All interest or other income
received from such investments will be used by LSF to pay for the expenses of
administering the Marketing Fund pursuant to the Marketing Fund Policy. Interest
or income received from temporary investments that exceed the reasonable
expenses of administering the fund will be considered part of the Marketing
Fund.
7.6 Advertising Co-op.
(a) LSF may from to time at its discretion designate any
geographical area as a basis for an Advertising Co-op for the purpose of
marketing, advertising and promoting LA SALSA Restaurants in that area,
including the restaurants operated by Holding. The Co-op will also serve as a
means of exchanging of ideas, sharing of information and problem solving.
(b) Fuddruckers agrees to become a member of a Co-op at any
time a Grill is located within the designated area for such Co-op.
(c) For each such Co-op, Fuddruckers agrees to execute and
deliver any agreements or undertakings required by such Co-op, to make minimum
contributions as required by its members and to maintain Fuddruckers states as a
member in good standing of such Co-op at all times.
(d) The contribution to a Co-op will be not less than one
percent (it) or more than two percent (21) of Gross Sales unless the Co-op
members agree to additional funding in accordance with established Bylaws.
(e) Fuddruckers agrees that a failure by Fuddruckers to comply
with a properly approved requirement or decision of such Co-op will be a
material default under this Agreement.
7.7 Approval of Advertising.
(a) All advertising copy and other materials used by
Fuddruckers must be in strict compliance with the requirements contained in the
Manuals and otherwise set forth by LSF.
<PAGE>
(b) If Fuddruckers wishes to use other or modified materials,
Fuddruckers must submit to LSF, in each instance and at least 15 business days
prior to first use, the proposed advertising copy and materials for approval in
advance of publication. Fuddruckers may use only advertising materials which
have been approved in writing by LSF.
(c) In no event will Fuddruckers, advertising for Grills
contain any statement or material which may be considered (i) in bad taste or
offensive to the public or to any group of persons or (ii) defamatory of any
person or an attack on any competitor.
7.8 Grand Opening. Fuddruckers agrees to conduct for each Grill a grand
opening promotion as mutually agreed to in each case by LSF and Fuddruckers.
SECTION 8: ACCOUNTING AND RECORD KEEPING
8.1 Records. Fuddruckers will maintain and preserve for a minimum of
three (3) years from the date of preparation full, complete and accurate books,
records and accounts in accordance with generally accepted accounting principles
covering all of the Restaurants at which a Grill is or has been operated. LSF
and DAKA will from time to time as necessary work together in good faith and
agree upon the use by Fuddruckers of the appropriate electronic cash registers,
computer programs, bookkeeping and record keeping forms.
8.2 Sales Reports.
(a) Fuddruckers agrees to provide LSF with weekly Sales
Reports for each Grill using such forms as are mutually agreed upon between
Fuddruckers and LSF. Fuddruckers will transmit such reports by modem or other
electronic means as mutually agreed upon by the parties so that LSF will receive
each report within twenty-four hours after the end of each LSF sales week (which
currently begins on Tuesday and ends at the close of business on the following
Monday).
(b) Fuddruckers will also provide LSF with Sales Reports for
each Grill covering each Fuddruckers accounting period and each Fuddruckers
fiscal year. Such reports will be sent to LSF within thirty (30) calendar days
after each accounting period and ninety (90) calendar days after each fiscal
year, respectively. If the accounting period does not cover the same weeks as
the Weekly Sales Reports, the report will include a reconciliation showing each
week or partial week included in such report.
8.3 Other Reports. In addition, if the ownership of Fuddruckers changes
to the extent that there is a change of control (as defined below), LSF may
require additional reports and documents regarding operation of the Grills and
the Restaurants at which Grills are located similar to what it then requires of
its LA SALSA franchisees, such as:
<PAGE>
(a) Restaurant Profit and Loss Statements, Balance Sheets and
Statements of cash Flows for each accounting period designated by LSF, which
information may be unaudited but must be certified by Fuddruckers to be true and
accurate and which must be received by LSF not later than thirty (30) calendar
days after the end of the accounting period as prescribed by LSF;
(b) Annual Balance Sheet, Profit and Loss statement and
Statements of Cash Flow for each Restaurant, which information may be unaudited
but must be certified by Fuddruckers to he true and accurate and which must be
received by LSF not later than ninety (90) calendar days after the end Of each
fiscal year;
(c) Sales and income tax reports covering the Grills; and
(d) Any amendments or corrections of any of the foregoing,
which must be sent immediately to LSF following preparation.
TIME IS OF THE ESSENCE with respect to completion and submission of
each such document.
SECTION 9: AUDITS AND INSPECTIONS
9.1 Audit Rights. Fuddruckers agrees that LSF will at all times have
the following audit rights:
(a) Representatives of LSF may on a reasonable basis review,
inspect and copy any and all accounting records and other such documents as may
be reasonably necessary to audit Fuddruckers, compliance with this Agreement,
including documents held or maintained by other affiliates of Fuddruckers.
(b) If any such inspection or audit reveals that the Gross
Sales reported in any report or statement are less then the actual Gross Sales
calculated during such inspection, then Fuddruckers will immediately pay LSF the
additional amount of fees owing by reason of the understatement of Gross sales
previously reported, together with interest as provided in Section 6.3. In the
event that any report or statement by Fuddruckers understated gross sales by
more than three percent (3%) of the actual Gross Sales calculated during LSF's
inspection, Fuddruckers will, in addition to paying for the additional fees, pay
and reimburse LSF for any and all expenses incurred in connection with its
inspection, including, but not limited to, reasonable accounting and legal fees,
together with interest if such fees are not timely reimbursed. Such payments
will be without prejudice to any other rights or remedies LSF may have under
this Agreement or otherwise.
(c) In addition to the above, in the event that the ownership
of Fuddruckers changes to the extent there is a change of control (as defined
below), representatives of LSF may inspect and copy such other documents as may
be reasonably necessary to confirm Fuddruckers, compliance with this Agreement.
<PAGE>
9.2 Inspection. LSF will have the right at any time and from time to
time without notice to have its representatives enter the Restaurant premises
for the purpose of inspecting its condition and its operations for compliance
with LSF's requirements contained in this Agreement and in the Manuals, and for
any other reasonable purpose connected with the operation of a Grill.
9.3 Books and Records. Without limiting the generality of Section 9.1,
LSF representatives will have the right at all times during normal business
hours to confer with Restaurant employees and customers and to inspect
Fuddruckers, books, records and sales tax returns or ouch portions thereof as
pertain to the operation of any Grill.
SECTION 10: INDEMNIFICATION
10.1 Indemnification.
(a) Fuddruckers will indemnify LSF, Holding their subsidiaries
and other affiliates and its or their officers, directors, employees, agents,
affiliates, successors and assigns from and against (i) any and all claims based
upon, arising out of or in any way related to the operation or condition of any
part of the Restaurants or Restaurants' premises, the conduct of the
Restaurants, businesses, the ownership or possession of real or personal
property, any negligent act, misfeasance or nonfeasance by Fuddruckers or any of
its agents, contractors, servants or employees, and including, without
limitation, all obligations of Fuddruckers incurred pursuant to any provisions
of this Agreement and (ii) any and all fees (including reasonable attorneys,
fees), costs and other expenses incurred by or on behalf of LSF in the
investigation of or defense against any and all such claims.
(b) LSF and Holding will indemnify DAKA and Fuddruckers, their
subsidiaries and other affiliates and its or their officers, directors,
employees, agents, affiliates, successors and assigns from and against any and
all claims based upon, arising out of or in a any way related to (i) claims that
the operation of any Grill violates territorial exclusivity granted to a LA
SALSA franchisee or developer by LSF or Holding, (ii) claims that the operation
of any Grill breaches an express or implied contractual obligation owed by LSF
or Holding to any LA SALSA franchisee or developer or (iii) claims that the
operation of any Grill constitutes tortious conduct against any such LA SALSA
franchisee or developer so long as the operation of such Grill has been
expressly approved by LSF. such indemnification shall include any and all fees
(including reasonable attorneys' fees), costs and other expenses incurred by or
on behalf of LSF in the investigation of or defense against any and all such
claims.
<PAGE>
SECTION 11: INSURANCE
11.1 Insurance. Fuddruckers agrees to maintain at all times adequate
insurance regarding the operation of each Restaurant at which a Grill is located
consistent with its general policy regarding insurance at all of its
Restaurants. Such policy may include self-insurance so long as it is adequate to
ensure continued operation of the Grills. Fuddruckers will take such action as
is necessary to cause LSF and Holding to be named as additional insureds in all
liability policies covering the Grills so that Fuddruckers, LSF and Holding will
at all times be protected against any and all loss, liability or occurrence,
arising out of or in connection with the construction, condition, operation, use
or occupancy of the Grills, the Restaurants or the Restaurants' premises. In all
events the insurance policy or policies will include (a) comprehensive general
liability insurance, including product liability coverage, in an amount
sufficient to satisfy the requirements of the umbrella liability insurance
policy required below, (b) liquor liability coverage (if any alcoholic beverages
are offered for sale from the Restaurant) , (c) umbrella liability insurance
providing a minimum of $5,000,000 additional coverage, and (d) workers,
compensation insurance as required by applicable law. Fuddruckers obligation to
maintain such insurance will not be limited in any way by reason of any
insurance maintained by LSF. LSF may require additional insurance if there is
any change in control of Fuddruckers or the Grill.
11.2 Certificates. Upon obtaining the insurance required by this
Agreement and on each policy renewal date thereafter, Fuddruckers will deliver
to LSF for its approval certificates of insurance showing compliance with the
requirements of this Section 11. Such certificates must state that the policy or
policies will not be canceled or altered without at least thirty (30) days,
prior written notice to LSF. Maintenance of such insurance and the performance
by Fuddruckers of its obligations under this Section 11 will not relieve
Fuddruckers under the indemnity provisions of this Agreement or limit such
liability.
SECTION 12: COVENANTS
12.1 Debts and Taxes. Fuddruckers will pay promptly when due all debts
and other obligations incurred directly or indirectly in connection with the
Restaurants and their operation; including, without limitation, all taxes and
assessments that may be assessed against the Restaurants' land, building and
other improvements, equipment, fixtures, signs, furnishings and other property,
and all undisputed liens and encumbrances of every kind and character incurred
by or on behalf of Fuddruckers in conducting the Restaurants' business.
Fuddruckers may contest any ouch debt or obligation in good faith so long as
such contest will not result in the loss of the Restaurant premises or
interruption of the Restaurant's operation.
12.2 Compliance with Laws. Fuddruckers will at its own cost and expense
promptly comply with all laws, ordinances, orders, rules, regulations and
requirements of all federal, state and municipal governments and appropriate
departments, commissions, boards and offices thereof. Without limiting the
generality of the foregoing, Fuddruckers will abide by all applicable rules and
regulations of any Public Health Department.
<PAGE>
SECTION 13: TRADEMARKS
13.1 Ownership. Fuddruckers agrees that LSF has the sole and exclusive
right (except for rights granted under existing and future franchise or license
agreements) to use the Marks in connection with the products and services to
which they are or may be applied by LSF. Fuddruckers represents, warrants and
agrees that neither during the term of this Agreement nor after its expiration
or other termination will Fuddruckers directly or indirectly contest or aid in
contesting the validity, ownership or use of the Marks by LSF or take any action
whatsoever in derogation of the rights claimed therein by LSF.
13.2 Goodwill. Nothing contained in this Agreement will be construed to
vest in Fuddruckers any right, title or interest in or to the Marks, the
goodwill now or hereafter associated therewith or any right in the design of any
Grill, other than the rights and license expressly granted herein during the
term hereof. Any and all goodwill associated with or identified by the Marks
will inure directly and exclusively to the benefit of LSF, including without
limitation any goodwill resulting from operation and promotion of the Grills.
13.3 Use of Marks. Fuddruckers will not use the Marks in connection
with any statement or material which may, in the judgment of LSF, be in bad
taste or inconsistent with LSF's public image, or tend to bring disparagement,
ridicule or scorn upon LSF, the Marks or the goodwill associated therewith.
13.4 Changes in Marks; Protection. LSF will have the right at any time
and from time to time upon notice to Fuddruckers to make additions to, deletions
from, and changes in the Marks, or any of them, all of which additions,
deletions and changes will be as effective as if they were incorporated in this
Agreement. All such additions, deletions and changes will be made in good faith,
on a reasonable basis and with a view toward the overall beat interest of the LA
SALSA Restaurants. LSF will protect and preserve the integrity and validity of
the marks by taking the actions deemed by LSF in its discretion to be
appropriate in the event of any apparent infringement of the Marks.
13.5 Infringements. Fuddruckers will notify LSF promptly of any claims
or charges of trademark infringement against LSF or Fuddruckers, as well as any
information Fuddruckers may have of any suspected infringement of the Marks.
Fuddruckers will take no action with regard to such matters without the prior
written approval of LSF and will cooperate in a manner expressly approved by
LSF.
<PAGE>
SECTION 14: TRANSFER
14.1 Personal Contracts; Definition.
(a) Fuddruckers agrees that a material part of the
consideration for LSF's entering into this Agreement is the personal confidence
reposed in Fuddruckers and its management. No person will succeed to any of the
rights of Fuddruckers under this Agreement by virtue of any voluntary or
involuntary proceeding in bankruptcy, receivership, attachment, execution,
assignment for the benefit of creditors, other legal process or transfer not
expressly authorized by LSF.
(b) Fuddruckers or DAKA may transfer interests herein among
members of the DAKA Family of Companies so long as DAKA and Fuddruckers remain
fully responsible for compliance with this Agreement and LSF is given prior
written notice of such transfer.
(c) For purposes of this Agreement, the DAKA Family of
Companies is defined as any corporation, partnership, joint venture or other
entity more than fifty percent (50%) of which is owned directly or indirectly by
DAKA.
14.2 Material Breach. Any attempt by Fuddruckers to transfer any of its
rights or interest under this Agreement will constitute a material breach of
this Agreement, and in such event LSF will have the right to terminate this
Agreement upon written notice to Fuddruckers. LSF will not be bound by any
attempted transfer in any manner whatsoever, by law or otherwise, of any of
Fuddruckers, rights or interests under this Agreement.
14.3 FUDDRUCKERS Franchisees. While the parties intend for LSF to grant
Grill licenses to FUDDRUCKERS franchisees as part of this program, the terms and
conditions of such licenses have not been agreed upon between these parties at
the time of this Agreement. The parties will negotiate in good faith during the
Initial Term to reach mutual agreement in regard to such licenses, including any
transfers by Fuddruckers to a franchisee of an existing Restaurant containing a
Grill. No such transfer will be allowed hereunder until such time.
14.4 Assumption. This Agreement and LSF's rights, interests and
obligations hereunder will inure to the benefit of any entity which succeeds to
the business of LSF and assumes the obligations of LSF hereunder. Subject only
to notice thereof, Fuddruckers hereby consents and agrees to any such transfer.
14.5 Definition of "Change of Control". The parties agree that for all
purposes of this Agreement, a "change of control" of ownership shall be defined
as any change of more than fifty percent (50%) of the beneficial or record
ownership of Fuddruckers and Fuddruckers or the surviving entity has a net worth
which is less than that of DAKA on a consolidated basis as of the Effective
Date.
<PAGE>
SECTION 15: EXPIRATION AND TERMINATION
15.1 Termination for Cause.
(a) LSF will have the right to terminate this Agreement
immediately upon written notice to Fuddruckers if a petition in bankruptcy, an
arrangement for the benefit of creditors or a petition for reorganization is
filed by or against Fuddruckers, or if Fuddruckers will make any assignment for
the benefit of creditors, or if a receiver or trustee is appointed for any one
of the Restaurants, unless remedied to the satisfaction of LSF within twenty
(20) days.
(b) In the event of any material failure by Fuddruckers to
make its payment obligations hereunder, LSF may terminate this Agreement in full
following ten (10) days written notice to Fuddruckers and DAKA unless such
delinquency has been cured within such ten day period.
(c) LSF may terminate the right of any Grill to operate under
his Agreement in the event of any substantial non-monetary default of this
Agreement as applied to such Grill. Fuddruckers will have the right to cure such
default during the period ending thirty (30) days after receipt from LSF or its
authorized representative of a written notice of default, except that if such
default cannot by its nature reasonably be cured within such thirty-day period,
and so long as Fuddruckers is diligently taking all action reasonably necessary
to effect such cure, the cure period will be extended to a reasonable amount of
time to effect such cure. If such default has not been cured by the end of the
applicable cure period, this Agreement will automatically terminate as to such
Grill.
(d) if a non-monetary default is a material default (as
defined in Section 2.1 above) and that material default has not been cured by
the end of the applicable cure period, this Agreement will automatically
terminate as to such Grill, and Fuddruckers agrees to pay LSF as liquidated
damages the amount of $25,000.00 for each Grill in such material default, with
the parties agreeing that actual damages are extremely difficult to ascertain
for any such default and that the foregoing liquidated damages are a reasonable
estimate thereof and for the costs to LSF of enforcing this Agreement.
(e) if at any time one-fifth (20%) of the Grills operating
under this Agreement have failed during the applicable cure period to cure
material defaults under subsection (d) above or to pay LSF its liquidated
damages thereunder, LSF may immediately terminate this Agreement in full upon
written notice to DAKA and Fuddruckers.
(f) In the event of any termination in full or as to any
Grill, LSF will have no further obligation under Section 1.4 above as to any
Restaurant no which such termination applies.
<PAGE>
15.2 Requirements Upon Termination. Upon the expiration, termination or
cancellation for whatever reason of the operation of a Grill under this
Agreement, Fuddruckers must in regard to each such Grill:
(a) immediately discontinue the use of the marks and the
Operating System, including all LA SALSA recipes;
(b) unless LSF consents to the contrary, remove the Marks
from all buildings, signs, fixtures and furnishings in each Restaurant,
eliminate entirely LSF's trade dress and alter and paint the Grills with a
design and color which is basically different from LSF's authorized design and
painting schemes so that there will no longer be any indication to the public
that the Restaurant was used to sell LA SALSA products. If Fuddruckers fails to
make or cause to be made any such change within thirty (30) days after written
notice, LSF will have the right to enter upon any Restaurant premises, without
being deemed guilty of trespass or any other tort, and make or cause to be made
such changes, and Fuddruckers will reimburse LSF for all of its reasonable
expenses immediately following demand;
(c) return to LSF all copies of the manuals, advertising and
promotional materials and other proprietary information relating to LA SALSA
Restaurants; and
(d) not thereafter use any identifying characteristic that is
in any way associated with LA SALSA or similar to those associated with LA
SALSA, or operate or do business under any name or in any manner that might tend
to give the public the impression that Fuddruckers is or was a licensee of or
otherwise associated with LSF and LA SALSA.
SECTION 16: MISCELLANEOUS
16.1 No Effect. The waiver by either party of any breach or default, or
series of breaches or defaults, of any term, covenant or condition herein or of
any same or similar term, covenant or condition in any other agreement between
LSF and Fuddruckers will not be deemed a waiver of any subsequent or continuing
breach or default of the same or any other terms, covenants or conditions
contained in this Agreement, or in any other agreement between LSF and
Fuddruckers.
16.2 Right and Remedies. All rights and remedies of a party will be
cumulative and not alternative, in addition to and not exclusive of any other
rights or remedies provided for herein or which may be available at law or in
equity in case of any breach, failure or default or threatened breach, failure
or default of any term, provision or condition of this Agreement. All rights and
remedies will be continuing and not exhausted by any one or more uses thereof
and may be exercised at any time or from time to time as often as may be
expedient Any option or election to enforce any such right or remedy may be
exercised or taken at any time and from time to time. The expiration or earlier
termination of this Agreement will not discharge or release Fuddruckers from any
liability or obligation then accrued or any liability or obligation continuing
beyond or arising out of the expiration or earlier termination of this
Agreement.
<PAGE>
16.3 Consents. Whenever the consent of a party is sought or required
hereunder, such consent will not be unreasonably withheld.
16.4 Partial Invalidity. If any part of this Agreement will for any
reason be declared invalid, unenforceable or impaired in any way, the validity
of the remaining portions will not be affected thereby, and such remaining
portions will remain in full force and effect as if this Agreement had been
executed with such invalid portion eliminated. it is hereby declared the
intention of the parties that they would have executed the remaining portion of
this Agreement without including therein any such portions which might be
declared invalid.
16.5 Arbitration; Jurisdiction. Except as set forth in this Section
16.5, any dispute between the parties which involves this Agreement and cannot
be resolved by the parties themselves will be submitted to binding arbitration
in accordance with the rules of the American Arbitration Association applicable
to commercial arbitrations. Such arbitration will be held within either the
county where LSF's executive headquarters are located or the county where DAKA's
executive headquarters are located (the "Home Counties"), and judgment upon the
decision of the arbitrator may be entered in any court having jurisdiction over
the matter. However, arbitration will not be used for any dispute which involves
Fuddruckers, continued usage of any of the Marks or the Operating System or any
issue involving injunctive relief against any party, all of which issues will be
submitted initially to a court within a Home County. The parties expressly
consent to personal jurisdiction in either Home County as set forth above and
agree that such court(s) will have exclusive jurisdiction over any such issues
not subject to arbitration.
16.6 Attorneys' Fees. If either party initiates any arbitration or
other legal proceeding which involves issues arising out of this Agreement, the
prevailing party in such action will be paid its reasonable attorneys, fees and
costs by the other party.
16.7 Governing Law. The parties agree that the law of the State of
California will apply to the construction and enforcement of this Agreement and
govern all questions which arise with reference hereto.
16.8 Notices. All notices and other communications required or
permitted to be given hereunder will be deemed given when delivered in person,
sent by telefax to such person's telefax number, sent by an established
overnight delivery service or mailed by registered or certified mail addressed
to the recipient at the address set forth below, unless that party will have
given such written notice of change of address to the sending party, in which
event the new address so specified will be used. It mailed, such notice shall be
deemed to have been received three days after mailing, and if sent by overnight
delivery, such notice shall be deemed to have been received the day following
sending.
<PAGE>
LSF and La Salsa Franchise, Inc.
Holding: 11601 Santa Monica Blvd.
Los Angeles, CA 90025
ATTN: The President
FUDDRUCKERS: Fuddruckers, Inc.
One Corporate Plaza
55 Ferncroft Road
Danvers, MA 01923-4001
ATTN: General Counsel
DANA: DANA International, Inc.
One Corporate Plaza
55 Ferncroft Road
Danvers, MA 01923-4001
ATTN: Sr. VP & General Counsel
16.9 Terms and Headings. All terms used in this Agreement regardless of
the number and gender in which they are used, will be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this Agreement may require, the
same as if such words had been written in this Agreement themselves. The
headings inserted in this Agreement are for reference purposes only and will not
affect the construction of this Agreement or limit the generality of any of its
provisions.
16.10 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement between the parties and supersede and
cancel any and all prior and contemporaneous agreements, understandings,
representations, inducements and statements, oral or written, of the parties in
connection with the subject matter hereof.
16.11 Amendment or Modification. Except as expressly authorized herein,
no amendment or modification of this Agreement will be binding unless executed
in writing by both LSF and Fuddruckers.
16.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original of this Agreement, but
all of which together shall constitute one and the same instrument.
16.13 Facsimile Signatures. The parties agree that signed copies of
this Agreement sent to the other parties by telefax or other facsimile
transmission will be considered binding on such signing party the same as if
delivered personally. Each party will thereafter send to each of the other
parties an originally signed copy of this Agreement for such party's records.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
FUDDRUCKERS: FUDDRUCKERS, INC.
By
Title:
DAKA: DAKA INTERNATIONAL, INC.
By
Title:
LSF: LA SALSA FRANCHISE, INC.
By
President
HOLDINGS: LA SALSA HOLDING CO.
By
President
<PAGE>
EXHIBIT A-1
FUDDRUCKERS/LA SALSA LOCATIONS
(February 14, 1996)
1. Park Plaza Center
340 Third Avenue
Chula Vista, CA 91910
2. 5500 Grossmont Center
La Mesa, CA 92041
3. Hastings Ranch Plaza
3883 E. Foothill Boulevard
Pasadena, CA 91107
4. Lakewood Center Mall
5229 North Clark St.
Lakewood, CA 90714
<PAGE>
EXHIBIT A-2
(To Come)
<PAGE>
EXHIBIT B
(To Come)
<PAGE>
EXHIBIT C
FUDDRUCKERS RESTAURANT LOCATIONS
February 14, 1996
ALABAMA
3440 Galleria Circle #135
Birmingham, AL 35244
CALIFORNIA
Rolling Hills Plaza SC #050
2549 Pacific Coast Highway
Torrance, CA 91107
Park Plaza Center #055
340 3rd Avenue
Chula Vista, CA 91941
Lakewood Center Mall #078
5229 North Clark Street
Lakewood, CA 90714
GEORGIA
240 Perimeter Center
Parkway #015
Atlanta, GA 30060
Peachtree Corners #065
3384 Holcombe Bridge Road
Norcross, GA 30092
Northlake Tower Festival
#091
3953 La Vista Road
Tucker, GA 30084
3953 La Vista Road
Tucker, GA 30084
1086 S. Baxter Street #185
Athens, GA 30606
Gwinnett Mall #220
2180 Merchants Way
Duluth, GA 30136
<PAGE>
FUDDRUCKERS RESTAURANT LOCATIONS
January 17, 1996
Town Center Mall #223
2708 Town Center Drive
Kennesaw, GA 30144
6360 Northpoint Parkway #233
Alpharetta, GA 30210
ILLINOIS
1500 Branding Lane #067
Downes Grove N. IL 60515
7731 Lemont Road #129
Downers Grove, S. IL 60515
1000 Rohlwing #188
Addison, IL 60101
4250 Fox Valley Center Drive #201
Aurora, IL 60504
1538 Clavey Road #057
Highland Park, IL 60035
300 Town Center #090
Matteson, IL 60443
1990 River Oaks Drive #105
Calumet City, IL 60409
1151 E. Dundee Road #134
Palatine, IL 60067
15756 South Harlem Avenue #213
Orland Park, IL 60452
(Barrington Road) #240
395 Barrington Road
Schaumburge, IL 60193
<PAGE>
INDIANA
95 West 81st Avenue #226
Merrillville, IN 46410
IOWA
Fuddruckers Express Care #259
1050 Southtown Drive
Waterloo, IA 50702
KENNTUCKY
(Turfway) #239
135 Hansel Avenue
Florence, KY 41042
MARYLAND
Annapolis Restaurant Park #065
175 Jennifer Road
Annapolis, MD 21401
125 Market Street #143
Baltimore, MD 21202
1300 Rockville Pike #174
Rockville, MD 20852
17111 Darnestown Road #218
Gaithersburg, MD 20878
1700 Riverstown Road #247
Pikesville, MD 21208
MASSACHUSETTS
(City Place) #150
27 Stuart Street
Boston, MA 02116
900 Broadway #151
Saugus, MA 01906
<PAGE>
MICHIGAN
4061 28th Street SE #166
Kentwood, MI 49512
MINNESOTA
3801 West 77th Street #043
Bloomington, MN 55435
2740 N. Snelling Avenue #060
Roseville, MN 55113
Park Place W. Office Center #073
6445 Wayzata Boulevard
St. Louis Park, MN 55337
8955 Spring Brook Road #242
Coon Rapids, MN 55433
5800 Shingle Creek Parkway #248
Brooklyn Center, MN 54430
MISSOURI
10752 Sunset Plaza #132
St. Louis, MO 63127
2175 Barrett Station Road #141
St. Louis, MO 63131
12333 Dorsett Road #207
Maryland Heights, MO 63043
OHIO
(Beechmont) #228
7705 Five Mile Road
Cincinati, OH 45230
(Winton Rd) #230
11992 Chaser Plaza Drive
Forest Park, OH 45740
<PAGE>
(Fields Ertel) #237
9996 Escott Drive
Mason, OH 45040
(Glenway) #238
6421 Glenway Avenue
Cincinnati, OH 45211
(Rookwood Pavilion( #245
2692 Madison Road Suite 3K
Norwood, OH 45206
(Crosswoods) #266
121 East Campus View Blvd.
Columbus, OH 43234
TEXAS
8602 Botts Lane #001
San Antonio, TX 78216
3100 Chimney Rock #002
Houston, TX 77056
9845 IH-10 West #003
San Antonio, TX 78230
2700 West Anderon Lane #004
Austin, TX 78757
(Willowbrook) #005
7611 FM 1960 West
Houston, TX 77070
(Greens Road) #007
403 Greens Road
Houston, TX 77060
2040 Nasa Road One #008
Clearlake, TAX 77058
855 Normandy #009
Houston, TX 77015
<PAGE>
(Brodie Oaks) #011
4024 South Lamar
Austin, TX 78704
2475 Kirkwood #013
Houston, TX 77077
11950 Kurland #026
Houston, TX 77034
3644 Irving Mall #063
Irving, TX 75062
115 Alamo Plaza #084
San Antonio, TX 78205
West Park Plaza (Ingram)
#106
6759 N.W. Loop 410
San Antonio, TX 78238
2205 North Central
Expressway #118
Suite 100
Plano, TX 75075
5080 Spectrum Drive #124
Suite 111W
Dallas, TX 75248
2290 Buckthorne Place #024
Woodlands, TX 77381
3301 FM 1960 West #200
Houston, TX 77068
10500 Town & Country #231
Houston, TX 77024
4360 Kingwood Drive #232
Kingwood, TX 77339
13010 N.W. Freeway #246
Houston, TX 77040
<PAGE>
(Copperfield) #269
7250 Highway 6 North
Houston, TX 7095
VIRGINIA
8317 West Broad Street #079
Richmond, VA 23229
4300 Backlick Road #083
Annandale, VA 22003
4625 Virginia Beach Blvd. #114
Virginia Bch., VA 23462
6201 Arlington Blvd., #142
Falls Church, BA 22011
1030 Elden Street #177
Herndon, VA 22070
3575 Chain Bridge Rd. #199
Fairfax, VA 22030
4141C Duke Street #209
Alexandria, VA 22134
1105 Merchants Way #243
Chesapeake, VA 23328
773 South Park Blvd. #249
Colonial Heights, VA 23834
101 Regal Avenue #250
Newport News, VA 23602
101 Midlothian Turnpike #260
Midlothian, VA 23235
2871 Plank Rd. #252
Fredericksburg, VA 22407
<PAGE>
(Potomac Mills) #264
14075 Shoppers Best Way
Woodbridge, VA 22193
WISCONSIN
160 West Bluemound #053
Brookfield, WI 53005
<PAGE>
UNDER DEVELOPMENT
CHESAPEAKE SQUARE, VA
2400 Chesapeake Square Ring Rd., Chesapeake, VA 23321
EDEN PRARIE, MN
11825 Technology Dr., Eden Prarie, MN 55344
CLEVELAND AVE., OH
6146 Cleveland Avenue, Columbus, OH 43231
MAPLE GROVE, MN
14500 Weaver Lake Road, Maple Grove, MN 55231
SUN CENTER, OH
3586 West Dublin Granville Road, Columbus, OH 43235
EAST MAIN, OH
5271 East Main St., Columbus, OH 43213
NO. ANDOVER, MA
Crossroads Shopping Center, Turnpike Street, No. Andover, MA 01845
SNELLVILLE, GA
1915 Scenic Highway (Presidential Market Ctr.), Snellville, GA 30278
AUSTIN, TX
6607 135 Frontage Rd., North Bound, Austin, TX 78752
GREENWAY PLAZA, (Houston) TX
3929 Southwest Freeway, Houston, TX 77027
STOUGHTON, MA
Turnpike Street, Rout 139, Stoughton Crossing, Stoughton, MA (zip N/A)
EAGAN, MN
Eagan Promenade
FREDERICK, MD
Westview Restaurant Park, Frederick, MD
MILFORD, MA
Quarry Square Mall, Milford, MA
COLUMBIA, MD
Lakeside Shopping Center, Columbia, MD
EASTON, OH
Morse Rd. and I-270, Easton, OH
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 33-62387 on Form S-3 and in Registration Statements Nos. 333-01587,
33-58065, 33-51994 and 33-29662 of DAKA International, Inc. all on Form S-8
of our report dated September 6, 1996 (except for Note 5 as to which the date
is October 15, 1996), appearing in the Annual Report on Form 10-K of DAKA
International, Inc. for the period ended June 29, 1996.
Deloitte & Touche LLP
Boston, Massachusetts
October 15, 1996
SPECIAL POWER OF ATTORNEY
The undersigned hereby constitutes and appoints, William H. Baumhauer and Earl
T. Benson and each of them, jointly and severally, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of DAKA International, Inc. for the fiscal year ended June 29, 1996,
and any an all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/Erline Belton
- -----------------------------------------
Erline Belton
Dated: September 6, 1996
<PAGE>
SPECIAL POWER OF ATTORNEY
The undersigned hereby constitutes and appoints, William H. Baumhauer and Earl
T. Benson and each of them, jointly and severally, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of DAKA International, Inc. for the fiscal year ended June 29, 1996,
and any an all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/Allen R. Maxwell
- -----------------------------------------
Allen R. Maxwell
Dated: September 6, 1996
<PAGE>
SPECIAL POWER OF ATTORNEY
The undersigned hereby constitutes and appoints, William H. Baumhauer and Earl
T. Benson and each of them, jointly and severally, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of DAKA International, Inc. for the fiscal year ended June 29, 1996,
and any an all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/Alan D. Schwartz
- -----------------------------------------
Alan D. Schwartz
Dated: September 6, 1996
<PAGE>
SPECIAL POWER OF ATTORNEY
The undersigned hereby constitutes and appoints, William H. Baumhauer and Earl
T. Benson and each of them, jointly and severally, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of DAKA International, Inc. for the fiscal year ended June 29, 1996,
and any an all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/E. L. Cox
- -----------------------------------------
E. L. Cox
Dated: September 6, 1996
<PAGE>
SPECIAL POWER OF ATTORNEY
The undersigned hereby constitutes and appoints, William H. Baumhauer and Earl
T. Benson and each of them, jointly and severally, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of DAKA International, Inc. for the fiscal year ended June 29, 1996,
and any an all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/Dean P. Vlahos
- -----------------------------------------
Dean P. Vlahos
Dated: September 6, 1996
<PAGE>
SPECIAL POWER OF ATTORNEY
The undersigned hereby constitutes and appoints, William H. Baumhauer and Earl
T. Benson and each of them, jointly and severally, his true and lawful
attorneys-in-fact and agents with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of DAKA International, Inc. for the fiscal year ended June 29, 1996,
and any an all amendments thereto, and to file the same with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/Joseph W. O'Donnell
- -----------------------------------------
Joseph W. O'Donnell
Dated: September 6, 1996
<TABLE> <S> <C>
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<CIK> 0000840826
<NAME> DAKA INTERNATIONAL, INC.
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
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<RECEIVABLES> 37,164
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 231,557
<SALES> 391,546
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</TABLE>
