SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) May 8, 1997
DavCo Restaurants, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-22006 52-1633813
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1657 Crofton Boulevard
Crofton, Maryland 21114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 721-3770
Not Applicable
(Former name or former address, if changed since last report)
Item 5. Other Events.
DavCo Restaurants, Inc. ("DavCo") and
Wendy's International, Inc. ("Wendy's") have entered into a
binding letter of intent, effective as of May 8, 1997 (the
"Letter of Intent"). The Letter of Intent sets forth the terms
of a new Master Franchise Agreement to be entered into by
DavCo and Wendy's which will amend certain provisions of
the various current franchise agreements between the parties.
The amendments described in the Letter of Intent include,
among other things, extending the DavCo Development
Agreement to 2015, permitting Southern Hospitality
Corporation, as subsidiary of DavCo, to build five additional
restaurants in the Nashville, Tennessee area, terminating
Wendy's right of first refusal with respect to DavCo's St.
Louis metropolitan operations, permitting DavCo to operate
other non-Wendy's businesses, and reducing the restrictions
on the ownership of DavCo. A copy of the Letter of Intent
is attached hereto as Exhibit 10.54.
Item 7. Financial Statements, Pro Forma
Financial Information and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
10.54 Letter of Intent, dated as of April
28, 1997, effective as of May 8, 1997, by
and among Wendy's International, Inc.,
DavCo Restaurants, Inc., MDF, Inc.,
Southern Hospitality Corporation, Citicorp
Venture Capital, Ltd., Harvey Rothstein
and Ronald Kirstien.
SIGNATURE
Pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DAVCO RESTAURANTS, INC.
By: /S/ Ronald D. Kirstien
-----------------------
Name: Ronald D. Kirstien
Title: President and Director
Dated: June 10, 1997
April 28, 1997
Dave Norman
DavCo Restaurants, Inc.
1657 Crofton Blvd.
Crofton, MD 21114
LETTER OF INTENT
Dear Dave:
Per our conversations, this Letter of Intent has
been prepared to summarize the agreement of the
parties and is intended to be binding.
1. INTENT
This Letter of Intent ("Letter of Intent") is
intended to describe in general terms the
intent of the parties with respect to the
matters referenced in the draft Master
Franchise Agreement sent to Wendy's
under cover letter dated December 23,
1996 ("Discussion Draft"). For purposes of
simplicity and clarification, this Letter of
Intent numerically follows the points set out
in the Discussion Draft and utilizes the
same defined terms as referenced therein.
(The final Letter of Intent may delete many
of those references). To the extent this
Letter of Intent contains affirmative
statements that certain provisions of the
existing agreements remain unchanged,
that is not intended to imply that other
provisions of our existing agreements
which are not referenced will necessarily
be deleted. The parties recognize that
there are a number of agreements
outstanding reflecting various efforts to
address the unique structure of DavCo that
will need to be reviewed and clarified in the
context of this Letter of Intent. Upon the
execution of this Letter of Intent, the
parties intend to incorporate the terms and
conditions contained in the various
documents which are outstanding
(including the terms of this Letter of Intent)
into one master agreement (the "Master
Agreement") designed to reflect in detail
the current status of all franchise
agreements between Wendy's and DavCo
(and DavCo's subsidiaries).
2. ACQUISITION OF ADDITIONAL
FRANCHISEES
2.1 A. As of the effective date, Harvey
Rothstein and Ron Kirstein (the
"Principals"), DavCo, SHC, and
MDFagree that neither they nor any
entity which any of them directly or
indirectly controls will acquire (by
merger, assignment or otherwise)
any additional Wendy's Restaurants
or an interest in any entity which
directly or indirectly owns more than
a twenty percent (20%) voting
interest or more than a twenty
percent (20%) equity interest in a
franchisee of Wendy's.
Notwithstanding anything else in
this paragraph to the contrary, said
parties will acquire no interest
whatsoever (directly or indirectly) in
an entity whose primary assets
relate to (or are used in) the
Wendy's business. The
aforementioned parties shall be
prohibited from acquiring any such
interest unless Wendy's in its sole
and absolute discretion elects to
waive this provision. Said parties
agree that they shall not commence
or participate in any negotiations
inconsistent with this provision
without first obtaining Wendy's
written waiver.
B. The aforementioned parties
recognize and acknowledge that
Wendy's has made numerous
accommodations to deal with
DavCo's unique equity structure,
the competitive interests of CVC
and the consequences of broad
public ownership. In consideration
of these matters, the parties agree
that the restrictions and limitations
imposed herein by Wendy's are
reasonable, necessary and
appropriate considering all of the
facts involved.
2.2 It is agreed that this prohibition shall not
apply to any acquisition, merger or
assignment of interest in other franchises
or other franchisees located within the
states of Maryland and Virginia. In such
event, Wendy's standard consent and right
of first refusal shall apply consistent with
system standards, and if any such
transaction constitutes a change in control
of any franchisee, the parties shall execute
a NUFA modified in accordance with the
Modification Agreement attached as
Exhibit A.
2.3 CVC acknowledges that in connection with
its direct or indirect acquisition of any
equity or voting interest in a Wendy'
franchise or franchisee in the future, it shall
be required to comply with Wendy's then-current
policies, and CVC's interest in
DavCo shall not be viewed as the basis for
any exceptions involving other entities.
CVC further acknowledges receipt of
Wendy's transaction policy amendment
dated November 4, 1994.
3. DAVCO RECAP AGREEMENT
3.1 A. The Letters of Credit shall remain at
$2 million, and Paragraph 1.3 and
1.4 of the Recap Agreement shall
remain applicable.
B. Paragraph 4.1 of the Recap
Agreement shall be modified to
reflect the following:
From the date of this Letter
of Intent, DavCo shall be free
itself to become involved in
other businesses and to set
up new subsidiaries to be
involved in such businesses,
subject to the noncompete
provisions of the franchise
agreements. MDF and SHC
shall remain exclusively
Wendy's entities and owned
100% by DavCo.
C. Paragraph 4.2 of the Recap
Agreement would be modified so as
to allow for the applicability of the
30-day grace period to DavCo, to
the extent it is otherwise available
to other franchisees in the Wendy's
system.
3.2. Paragraph 6.9 of the Recap Agreement shall
be modified to reflect the following:
A. As to existing and future franchise
agreements, CVC shall comply with
Paragraph 6.9 of the Recap
Agreement; provided, however, as
to NUFAs executed by DavCo, SHC
or MDF, the covenant not to
compete which shall be applicable
to CVC shall be limited to the
applicable DMA as follows: During
the term of the franchise agreement
and for two (2) years thereafter,
except as permitted in Paragraph
6.9 of the Recap Agreement, CVC
shall not have an interest in any
quick-service restaurant selling
chicken sandwiches or hamburgers
or products similar to the products
being sold at Wendy's Restaurants
generally if such restaurant is
located in the same DMA as a
Wendy's Restaurant operated by
DavCo or its subsidiaries. CVC
shall also comply with the
confidentiality provisions of the
Franchise Agreements.
4. DAVCO IPO AGREEMENT (CONSENT
AND WAIVER)
4.1 A. It is acknowledged that the MDF
Plan referenced in Paragraph 3 of
the Consent and Waiver has been
completed.
B. Paragraph 6.4 of the Consent and
Waiver shall be modified to include
the following language:
Provided, however, if either
of the Principals directly or
indirectly acquire 20% or
more of DavCo, they shall
comply with the following
requirements and conditions:
(subject to the limitations set
forth in Paragraph 4.1.D of
the Letter of Intent:
i) Paragraph 14(a)(xv)
of the Unit Franchise
Agreement,
Paragraph 18(a)(xvi)
of the Restaurant
Franchise Agreement
and Paragraph 14.2.B
of the New Unit
Franchise Agreement
shall be applicable to
such Principal and
shall be modified
accordingly.
ii) Such Principal shall
promptly agree in
writing to comply with
the confidentiality
provisions of the then-existing
franchise agreements.
iii) An operator with
equity pursuant to
Paragraph 4.2.2
below has been
identified and
approved by Wendy's
(if not previously
approved by
Wendy's).
iv) The acquisition of
such interest by a
Principal shall not
have any adverse
effect on DavCo's
financial condition
whatsoever,
including, without
limitation, its
outstanding debt, the
fixed charge coverage
ratio (or other
financial ratios or
factors).
v) The Principal has no
involvement in the
management/operation of nor owns
directly or indirectly a
major interest (20% or
more equity or voting
interest; 5% or more
equity or voting
interest if a public
entity) in any quick-service restaurant
business having locations within three
(3) miles of a Wendy's Old
Fashioned Hamburgers Restaurant and
operating under a nationally or
regionally recognized brand name in
the U.S., or in any quick-service
restaurant covered by the
noncompetition provisions of the
franchise agreements (as amended)
which are in effect at that
time, including without limitation the
provisions of Paragraph 5(B) below;
C. DavCo shall notify Wendy's in
writing within twenty (20) days of
any filing reflecting an interest
which does not comply with
Paragraph 4.1(B) or within twenty
(20) days of the date DavCo
becomes aware of the existence of
an interest which does not comply
with Paragraph 4.1(B) (whichever is
first). Wendy's shall have the
absolute right to declare a default
under the franchise agreements
subject to an opportunity to cure
pursuant to the franchise
agreements.
D. It is acknowledged that CVC (as
part of the Control Block which
previously existed under the
Consent and Waiver) already has
an interest in excess of 20%, and
the conditions in Paragraph 4.1(B)
shall not be applicable to CVC
subject to its compliance with the
balance of this Letter of Intent. It is
acknowledged that the Principals
have certain rights and restrictions
under the Franchise Agreements
which are unique to them. As a
result, to the extent either of them in
the future acquires 20% or more of
DavCo, any pre-existing
agreements which they are then
party to or interests which they then
hold, which are not in violation of
their other commitments and
obligations under the Letter of Intent
or under the Franchise Agreements
shall be grandfathered as
exceptions to Paragraph 4.1(B)(v)
above.
E. Paragraph 9.1 of the Consent and
Waiver (with regard to an
indemnity) shall remain applicable
to future offerings and to protect
Wendy's against any third-party
claims with respect to prior offerings
as well.
F. Paragraph 12.1 and 12.2 of the
Consent and Waiver shall remain
applicable.
G. All parties shall contemporaneously
herewith execute a Mutual Release
of Claims in the form attached
hereto as Exhibit B.
4.2 A. In Paragraph 6.1 of the Consent
and Waiver, the restrictions on the
activities and stock ownership of
MDF shall remain (See 3.1(B)
above).
B. As to Paragraph 6.3 of the Consent
and Waiver, it is the intent of the
parties that the control block
restrictions on DavCo and CVC
would be removed with the following
understanding:
i) subject to Paragraph 4.1 (B)
above (regarding the 20%
owner).
ii) Wendy's shall have the right
to consent and Wendy's
agrees not to unreasonably
withhold its prior written
consent to a public offering
or any exempt offering by
DavCo to five (5) or more
persons or entities of DavCo
shares (or debt) subject to
the following conditions:
a) Compliance with the
terms and conditions
of Paragraphs 9.1 and
9.2 of the Consent
and Waiver.
b) DavCo, MDF, SHC,
and CVC shall
execute a release of
all claims in the form
referenced under
Paragraph 6.3.D.3(c)
of the Consent and
Waiver, unless the
offering is only a debt
offering and does not
involve any voting or
equity interest in
DavCo (nor any
interest which is
convertible to voting
or equity interest). It
is also agreed
(without prejudice to
the rights of either
party) that any
release obtained from
DavCo in connection
with a transfer or
issuance of DavCo
stock (and only in
such instance) shall
not include a release
of third-party claims of
Wendy's direct
negligence involving
the implementation of
Wendy's operational
systems.
c) Payment of any and
all indebtedness to
Wendy's, its
subsidiaries and any
advertising
cooperative by
DavCo, MDF and
SHC.
d) In the event a NUFA
has been executed by
DavCo, MDF or SHC,
compliance with
Paragraph 13.6 of the
NUFA.
e) The offering complies
with Wendy's financial
standards (including
but not limited to the
fixed charge coverage
ratio and restrictions
on guaranteed
returns) applicable to
transfers of interest
as set forth in
Wendy's transaction
policy as amended
from time to time.
iii) CVC shall not transfer ten
percent (10%) or more of
DavCo's equity or voting
interest in a transfer or
series of related transfers to
any person or entity (or a
group of affiliated persons
and entities), through a
private offering or private or
exempt transaction of any
kind without a waiver of
Wendy's right of first refusal.
C. Wendy's retains a right of first
refusal and prior written consent
with respect to any transfer of
franchise rights, the business or all
or substantially all of the assets
related to the business associated
with one (1) or more Wendy's
Restaurants (except as provided in
Paragraph 6 below). It is
understood and acknowledged that
the right of first refusal referenced in
this paragraph shall exist only if the
Wendy's Restaurant is to continue
to operate as a Wendy's; however,
it is also understood and
acknowledged that DavCo
(including its subsidiaries) has no
authorization to close any Wendy's
Restaurant except as may be
specifically approved in writing by
Wendy's.
4.2.2 As to Paragraph 8.3.2 of the Consent and
Waiver, the parties would agree to new
restrictions on equity for the operator (Ron
Kirstien).
i) While the operator need not
retain a certain percentage
interest (given the size of
DavCo), we would establish
some equity requirements
based upon a dollar
investment or a number of
shares owned. Wendy's
acknowledges that an equity
interest with a value of
approximately $100,000
shall be sufficient equity for
the operator.
ii) Other portions of 8.3.2 shall
remain (e.g. temporary
period, and authorization of
Kirstien to sign documents).
4.2.3 Wendy's prefers to keep Paragraph 9.2 of
the Consent and Waiver as is. The final
language in the Master Agreement may in
Wendy's discretion also include language
from the next to the last paragraph on
Page 11 of Wendy's transaction policy.
5. NONCOMPETITION AGREEMENTS
A. DavCo, the Principals, any
replacement operator approved by
Wendy's, and any entity which any
of them directly or indirectly
controls, shall comply with the
standard 005 UFA and RFA
confidentiality provisions and
noncompete provisions as
applicable to specific geographic
areas. If a NUFA is executed by
DavCo or its subsidiaries, then the
noncompete provision of the NUFA
shall also be applicable to the
aforementioned parties.
B. Notwithstanding anything else
herein to the contrary, in addition to
these standard provisions, during
the term of any of the Franchise
Agreements and any renewal
thereof, neither DavCo, the
Principals, any replacement
operator approved by Wendy's, nor
any entity which any of them directly
or indirectly controls shall have any
interest, direct or indirect, in the
ownership or operation of any
quick-service restaurant located
anywhere in the continental United
States which sells hamburgers or
chili.
C. In connection with any RFA
executed by the parties, it is
acknowledged that there is no
further clarification or agreement as
to what constitutes a "product
similar" and both parties reserve
their rights in this regard.
6. TERMINATION OF MDF FIRST
REFUSAL AGREEMENT
Wendy's is not prepared to terminate this
agreement. Wendy's will allow MDF to
terminate franchise agreements and close
stores as Wendy's Restaurants in the St.
Louis DMA without Wendy's having any
right of consent or a right of first refusal in
order to sell these units for an alternative
use, provided DavCo gives to Wendy's
ninety (90) days prior written notice of any
such closings, setting out the intended
details of such closings, promptly
de-identifies the restaurant(s) after closure,
and reasonably cooperates with Wendy's
in minimizing any potential negative media
coverage or marketing associated with
such closings. Wendy's would retain its
consent and the two rights of first refusal
with respect to the Central Illinois
Restaurants, consistent with the franchise
agreements and the 1991 agreement.
Provided, however, if DavCo receives a
bona fide offer to acquire all or
substantially all of the assets of MDF (or
stock), Wendy's right of first refusal and
consent shall be applicable to the entire
transaction and shall not be limited to the
Central Illinois Restaurants.
7. SHC AGREEMENT ("CONSENT TO
MERGER")
A. Regarding Paragraph 4 of the
Consent to Merger (concerning
letters of credit) - See Paragraph
3.1(A) above.
B. Regarding Paragraph 6 of the
Consent to Merger (concerning
SHC stock restrictions)- See
Paragraph 3.1(B) above.
C. Regarding Paragraph 12 of the
Consent to Merger (concerning
SHC activities)- See Paragraph
3.1(B) above.
D. Regarding Paragraph 16 of the
Consent to Merger (concerning
Wendy's future approval)- See
Paragraph 4.1(D) above.
8. MODIFICATION OF RESTAURANT
CLOSING AGREEMENT
A. In lieu of the December 30, 1991
(replacement store) letter of
agreement which has expired and in
order to address those Restaurants
closed pursuant to that letter of
agreement, Wendy's would provide
DavCo with a revision to the
Performance Schedule of the
Baltimore/Washington Development
Agreement, such that the number of
Restaurants recognized as open as
of December 31, 1996 would be
134, the number of Restaurants
required in each of years 1997-2004
would be reduced from 7 to 6,
and in 2005 from 8 to 6. DavCo
would then be required to have
open or under construction 6
additional Restaurants in 2006 and
6 additional Restaurants in 2007. In
addition, from 2008 to 2015 (8
years), DavCo would have open or
under construction an additional five
(5) stores per year for a total of 240
stores under that Development
Agreement; provided, however, all
Unit Franchise Agreements, all
other franchise agreements
executed pursuant to the right of
first refusal, and the right of first
refusal itself under the Development
Agreement would expire on
December 31, 2025. DavCo
understands that strict compliance
with the Performance Schedule
shall be required, time being of the
essence. All future store closings
would be pursuant to Wendy's then-current
policies and standards applicable to the system.
DavCo may in any given year develop more
than the annual minimum required
number of Restaurants up to the
total of 240 through the year 2015.
See the Performance Schedule
attached hereto as Exhibit C.
B. It is acknowledged and agreed that
DavCo shall have the opportunity to
be considered for other Restaurant
closings in connection with Wendy's
then-existing standard policies,
guidelines, and procedures, which
currently include (without limitation)
the execution of a general release
of all claims in Wendy's standard
form.
9. NEW UNIT FRANCHISE AGREEMENTS
9.1. A The NUFA shall be signed for any
acquisition and any new store other
than the 240 Restaurants
referenced in Paragraph 8 above
(except as otherwise provided in
Paragraph 9.3 below), including
Restaurants built pursuant to the
right of first refusal under the
Development Agreement. The
terms of any NUFA signed by
DavCo, SHC or MDF shall be
applicable to those entities, the two
key employees (the Principals and
others as set forth in the NUFA (and
to the extent otherwise agreed to in
this Letter of Intent).
9.2 The terms of any NUFA executed by
DavCo, SHC, MDF or Heron (a wholly-owned
subsidiary of DavCo) shall be modified
as set forth in the Modification
Agreement in its final executed form, but
the parties understand that these
modifications are unique to DavCo and its
structure and shall not be assignable, and
Wendy's then-current form franchise
agreement (without modification) shall be
executed in connection with any transfer
under Paragraph 4.2.C above.
9.3 As indicated above, in the event of a
transfer, acquisition or new store
development (other than the 240
Restaurants referenced in Paragraph 8
above), the then-current agreement shall
be executed, however, Wendy's will permit
SHC to develop five (5) additional
Restaurants within the Nashville,
Tennessee DMA pursuant to a Restaurant
Franchise Agreement (subject to Wendy's
standard policies and procedures related
to new development), provided these
Restaurants are under construction by
December 31, 2001 and opened within six
(6) months after commencing construction,
and Wendy's Legal Department is given
written notice of DavCo's intent to consider
such development at least thirty (30) days
prior to their request for a real estate letter
authorizing the investigation of such sites.
10. JURISDICTION AND VENUE:
Wendy's, DavCo, MDF, SHC and CVC
agree that any action brought by Wendy's
against DavCo, MDF, SHC or CVC, or any
action brought by DavCo, MDF, SHC or
CVC against Wendy's (or its subsidiaries),
whether federal or state, shall be brought
only within the state of Delaware, and the
parties hereby waive all questions of
personal jurisdiction or venue for the
purpose of carrying out this provision,
provided, however, this agreement and the
individual franchise agreements referenced
herein shall be interpreted and construed
under the laws of the State of Ohio, and in
the event of any conflict of law, the laws of
Ohio shall prevail, without regard to and
without giving effect to the application of
Ohio conflict of law rules. Nothing in this
paragraph is intended by the parties to
subject this agreement or the franchise
agreements referenced herein to any
franchise or similar law, rule or regulation
of the State of Ohio or of any other state to
which it would not otherwise be subject.
Upon execution of this Letter of Intent, the parties
shall proceed to incorporate the provisions
contained herein into an overall agreement which
shall also include the provisions of other
agreements between the parties. In the event of
a conflict, this Letter of Intent shall control,
provided, however, every reasonable effort is
made to interpret the agreements as being
consistent with the Letter of Intent, except as
specifically set forth herein to the contrary.
Sincerely,
WENDY'S INTERNATIONAL, INC.
By: /S/ W.S. Wirt
__________________________
Title: VP-Franchise
___________________________
ACCEPTED AND AGREED TO BY
DAVCO RESTAURANTS, INC.
By: /S/ Ronald Kirstien
-------------------
Title:
-------------------
MDF, INC.
By: /S/Ronald Kirstien
------------------
Title:
------------------
SOUTHERN HOSPITALITY CORPORATION
By: /S/ Ronald Kirstien
-------------------
Title:
-------------------
CITICORP VENTURE CAPITAL, LTD.
By: /S/ Byron Knief
-------------------
Title:
-------------------
/S/ Harvey Rothstein
- ------------------------------
HARVEY ROTHSTEIN, INDIVIDUALLY
/S/ Ronald Kirstien
- -----------------------------
RONALD KIRSTIEN, INDIVIDUALLY
MODIFICATION AGREEMENT
This Modification Agreement (the
"Agreement") is made in Dublin, Ohio, as of the
date set forth below, by and between Wendy's
International, Inc., an Ohio corporation
(hereinafter "Wendy's"), DavCo Restaurants, Inc.,
a Delaware corporation (hereinafter "DavCo"),
MDF, Inc., a Delaware corporation (hereinafter
"MDF"), and Southern Hospitality Corporation, a
Tennessee corporation (hereinafter "SHC").
WHEREAS, DavCo, MDF and SHC are
existing franchisees of Wendy's, and Heron is a
wholly-owned subsidiary of DavCo formed to
develop combined motor fuel facility, convenience
store and Wendy's Old Fashioned Hamburgers
Restaurant sites; and
WHEREAS, Wendy's has proposed to offer
grants of franchise rights under old
Unit Franchise Agreements (hereinafter "UFA") or
New Unit Franchise Agreements (hereinafter
"NUFA"); and
WHEREAS, the following modifications to
the terms of the NUFA will govern the grant of
franchise rights to DavCo, MDF, SHC and Heron
for restaurants not granted under the UFA.
NOW, THEREFORE, in consideration of
the terms and conditions hereinafter set forth, the
parties, intending to be legally bound, mutually
agree as follows:
1. The second sentence of subparagraph 4.4
is hereby modified to read as follows:
"Franchisor reserves the
right to require payment of
any and all fees by means of
electronic, computer, wire, or
automated transfer or
bank clearing services, and
Franchisee agrees to
undertake all
action reasonably necessary
to accomplish such transfers,
provided, however, this
payment method shall be
required by Franchisor only
if the Franchisee has in the
past been delinquent (a
notice of default having been
issued) for one or more
payments due under the
Agreement."
2. Subparagraphs 5.1.A, 5.1.B and
5.1.D are hereby deleted in their entirety from the
NUFA.
3. Subparagraph 5.2.B is hereby
modified so as to delete in their entirety the last
two (2) sentences of that subparagraph.
4. The first sentence of Subparagraph
5.2.D is hereby modified to read as follows:
"Franchisee shall employ a
qualified and licensed
general contractor to
construct the Restaurant and
to complete all
improvements."
5. Subparagraph 6.5 is hereby deleted
in its entirety.
6. Subparagraph 6.6 is hereby
amended so as to include the following provision:
"Provided, however,
Franchisee shall not be
required by Franchisor
to operate the Franchised
Business during hours that
are otherwise prohibited by
local ordinance or prohibited
by the landlord under the
terms of a lease entered into
with an unrelated third party."
7. Subparagraph 6.8 is hereby
amended to include the following:
"It is understood and agreed
that the failure of Franchisee
to provide notice pursuant to
this subparagraph shall not
constitute a default under
Subparagraph 14.2.C in and
of itself. Subparagraph
14.2.C shall be based upon
the condition of the
Restaurant."
8. Subparagraphs 6.9, 6.10 and 6.17 is
hereby amended so as to include the following:
"With respect to color
scheme, it is understood and
agreed that Franchisee's
requirements hereunder may
be subject to local
ordinances and certain lease
requirements, and
Franchisee shall not be held
to be in violation of this
Agreement as a result of
complying with such local
ordinances and/or lease
requirements concerning
color scheme, provided
Franchisee has made
reasonable, good faith efforts
to comply with this provision.
9. Subparagraph 6.10 is hereby
modified to read as follows:
"At Franchisor's request,
which shall not be more often
than once every five (5)
years, Franchisee shall
refurbish the Restaurant at
its expense to conform to the
building design, trade dress,
color schemes, and
presentation of the
Proprietary Marks in a
manner reasonably
consistent with the image
then in effect for new
restaurants under the
System, including, without
limitation, remodeling,
redecoration, and
modifications to existing
improvements and
equipment."
10. The last sentence of Subparagraph
6.17 shall be modified to read as follows:
"Franchisee shall promptly
undertake all reasonable
action and make such reasonable
expenditures as are necessary to
implement such changes, including,
without limitation, acquiring and
installing new equipment at
the Restaurant, and hiring
and training additional
personnel."
11. Subparagraph 11.7 is hereby
modified to read as follows:
"For all advertising and
promotional plans which
require Franchisor's
approval prior to use, as set
forth in Sections 11.3 and
11.4 hereof, Franchisee or
the Cooperative, where
applicable, shall submit
samples of such plans and
materials to Franchisor (by
means described in Section
21 hereof), for Franchisor's
prior written approval.
12. Subparagraph 12.4 is hereby
modified to read as follows:
"In connection with all
significant construction,
reconstruction, or remodeling
of the Restaurant during the
term hereof, Franchisee will
cause the general contractor,
its subcontractors, and any
other contractor, to effect
and maintain at general
contractor's and all
other contractor's own
expense, such insurance
policies and with such
endorsements as are set
forth in the Manual or
otherwise in writing, and
which are written by
insurance companies
satisfactory to Franchisor."
13. Subparagraph 12.6 is hereby
deleted in its entirety from the NUFA.
14. Subparagraph 13.2.A is hereby modified to
read as follows:
"Neither Franchisee nor any
Owner shall transfer, pledge,
or otherwise encumber this
Agreement, any of the rights
or obligations
of Franchisee under this
Agreement, or any direct or
indirect interest in
Franchisee;"
15. Subparagraph 13.2.B is hereby
modified to read as follows:
Franchisees shall not issue
any further securities without
Wendy's prior written
consent except that DavCo
may proceed with a
secondary public offering of
its shares without Wendy's
consent to the extent such is
separately agreed to by the
parties.
16. Subparagraph 13.3.A is hereby
amended so as to include the following clause at
the end of that subparagraph:
"provided such other written
policies are consistently
enforced by Wendy's within
the Wendy's System."
17. The last sentence of Subparagraph
13.3.B is hereby modified to read as follows:
"Franchisor reserves the
right to disapprove any
proposed transfer
the result of which would be,
in the reasonable opinion of
Franchisor, a
disproportionately large
ownership of Wendy's
restaurants by the Proposed
Franchisee compared with
the number
of restaurants operated by all
franchisees in the System; it
is understood that if buyer
has an active Development
Agreement with Wendy's
requiring additional
restaurants to be built within
a specific time period and
buyer is in compliance with
that Development
Agreement, then buyer shall
not be rejected by Wendy's
based upon the penetration level
of Wendy's restaurants in
buyer's existing markets as
referenced in item (iii)
above."
18. Subparagraph 13.3.D is hereby
modified to read as follows:
"If Franchisor requests, the
Franchisee or Proposed
Franchisee, at their own
expense, shall modify the
Restaurant to reasonably
conform to the then-current
standards and specifications
of System restaurants, and
shall complete the
modifications prior to the
transfer or within the time
subsequent to the transfer
reasonably specified by
Franchisor;"
19. The second sentence of
Subparagraph 13.4 is hereby modified to read as
follows:
"Franchisor shall have the
right and option, exercisable
within forty-five (45) days
after receipt by Franchisor of
such written notification, all
information and
documentation which the
seller has provided to
the buyer and which the
seller has received from the
buyer, audited financial
statements for the seller,
audited financial statements
for the buyer to the extent they
exist (otherwise financial
statements from the buyer certified
by the President or Chief
Financial Officer of the
buyer), and all other
information required by
Wendy's transaction form, to
send written notice to the
seller that Franchisor intends
to purchase the seller's
interest on the same terms
and conditions as those
offered by the prospective
purchaser."
20. The first sentence of Subparagraph
13.5 is hereby modified to read as follows:
"Franchisee shall neither
grant nor permit the
existence of any security
interest in this Agreement, or
in the securities of any
corporation, partnership or
other business entity which
is a Franchisee (or which directly
or indirectly controls a
Franchisee), without an
acknowledgment by the
security holder of the
Franchisor's right of first
refusal and Wendy's prior
written consent.
21. Subparagraph 14.2.B is hereby
modified to read as follows:
"If Franchisee is convicted of
a crime involving moral
turpitude, or any other crime or
offense that Franchisor believes is
reasonably likely to have a
material adverse effect on
the System, the Proprietary Marks,
the goodwill associated
therewith or Franchisor's
interest therein; and fails to
take appropriate action
against the responsible
individuals or mitigate the
adverse effect."
22. Subparagraph 14.2.H is hereby
modified to read as follows:
"If Franchisee repeatedly is
in default under Section 14.3
hereof for failure to
substantially comply with any
of the material requirements
imposed by this Agreement,
whether or not cured after
notice, or Franchisee
commits the same material
default on three (3)
occasions within any twelve-month
period, whether or not
cured after notice; or"
23. Paragraph 15.4 (including each of
its subparagraphs) is hereby deleted in
its entirety.
24. Subparagraph 15.10 is hereby
deleted in its entirety from the NUFA.
25. Paragraph 16.1 is hereby modified
to delete the language "(or the approved
Operator)" and the term "Franchisee" for the
purposes of this Paragraph shall not be construed
so as to require DavCo to devote its full time to
the management and operation of the Franchised Business.
26. Subparagraph 16.2.B is hereby modified to
read as follows:
"Own, maintain, invest in,
operate, engage in, be
employed by, have any
interest in, participate in any
capacity (by franchising or
otherwise) in any business
which is, or is intended to be,
either of the following:"
27. Subparagraph 16.2.B.2 is hereby
modified to read as follows:
"Any quick-service restaurant
selling chicken sandwiches
or hamburgers or products
similar to Franchisor (except
another Wendy's Old
Fashioned Hamburgers
restaurant operating
pursuant to a franchise
agreement executed by
Wendy's, as Franchisor)
which quick-service
restaurant is located within a
three-mile radius of the
Restaurant or within a three-mile
radius of any other
Wendy's Old Fashioned
Hamburgers restaurant
operating under the System,"
28. Subparagraphs 17.1.C and 17.2.C
are hereby deleted in their entirety.
29. Subparagraph 20.5 is hereby
amended to include the following sentence:
"Both parties agree to act in
good faith with respect to the
spirit of
this provision."
IN WITNESS WHEREOF, this Modification
Agreement shall be effective as of the date it is
executed by Wendy's International, Inc.
WENDY'S INTERNATIONAL, INC.
By:
Title:
Date:
DAVCO RESTAURANTS, INC.
By:
Title:
Date:
MDF, Inc.
By:
Title:
Date:
SHC
By:
Title:
Date:
MUTUAL RELEASE
This MUTUAL RELEASE, effective as of
May 8, 1997, is entered into by and
among DAVCO RESTAURANTS, INC., a Delaware
corporation, MDF, INC., a Delaware
corporation and subsidiary of DavCo Restaurants,
Inc., and SOUTHERN HOSPITALITY
CORPORATION, a Tennessee corporation
and subsidiary of DavCo Restaurants, Inc.
(collectively referred to as "DavCo"); WENDY'S
INTERNATIONAL, INC., an Ohio corporation
("Wendy's"); and Citicorp Venture Capital, Ltd., a
New York corporation ("CVC").
WHEREAS, Wendy's and one or more of the
parties comprising DavCo (and CVC in some
instances) are parties to franchise agreements and
various amendments and clarifications thereto,
including, without limitation, the Agreement and
Consent to Recapitalization dated February 10, 1993,
the Consent and Waiver Agreement dated August 3,
1993, and the Agreement and Consent to Merger
dated September 26, 1994 (collectively the "Franchise
Agreements") for the Wendy's Old Fashioned
Hamburgers Restaurants listed on Exhibit A (the
"Restaurants").
WHEREAS, Wendy's, DavCo and CVC are
entering into a Letter of Intent which is intended to
provide for the clarification of certain outstanding
issues between the parties under the Franchise
Agreements (the "Letter of Intent").
WHEREAS, the parties have agreed as part of
the consideration for the Letter of Intent to execute
this Mutual Release.
NOW, THEREFORE, in consideration of the
premises and the mutual promises contained herein,
the parties, intending to be legally bound, mutually
agree as follows:
1. Subject to the exclusions in Paragraph 2
below, DavCo and CVC hereby RELEASE,
DISCHARGE and ACQUIT Wendy's, its
subsidiaries and all past and present officers,
directors, employees, successors, assigns and
agents from any and all liabilities, claims,
damages, demands, costs, indebtedness,
expenses, indemnities, compensation, actions
and causes of action of any kind whatsoever,
whether developed or undeveloped, known (or
unknown if they arose after September 22,
1994), fixed or contingent, arising out of,
under, or in connection with the Franchise
Agreements, the franchise relationship
between Wendy's and DavCo, the
Restaurants, or any Wendy's Old Fashioned
Hamburgers Restaurant currently or previously
owned or operated by DavCo, which DavCo
or CVC has asserted, may have asserted or
could have asserted against Wendy's (or any
of the aforementioned related parties) at any
time up to the date of this MUTUAL
RELEASE, including specifically, claims under
the Sherman and Clayton Acts and the
antitrust laws of the United States. This
release is (without limitation) intended to
include any and all claims of CVC, DavCo,
and its subsidiaries related to or arising out of
the acquisition of Southern Hospitality, Inc.
and Wendy's introduction of the new franchise
agreement to the system. This MUTUAL
RELEASE shall survive the assignment or
termination of any of the Franchise
Agreements and all other agreements,
documents and instruments in existence and is
not in any way conditioned upon any other
event or occurrence. This MUTUAL
RELEASE is not intended as a waiver of those
rights of DavCo which cannot legally be
waived under any applicable franchise laws.
2. Wendy's shall not be released from, and this
Mutual Release shall not affect, the following
obligations for which DavCo expressly
reserves its rights and remedies:
A. Wendy's shall be liable for ongoing
compliance (after the date hereof) with
the specific terms of the Franchise
Agreements, including, without
limitation, the Development
Agreement between Wendy's and
DavCo (as amended and referenced in
the Letter of Intent), and all other
agreements, documents and
instruments which exist, and nothing
herein shall be construed as a release
or waiver thereof.
3. Subject to the exclusions in Paragraph 4
below, Wendy's hereby RELEASES,
DISCHARGES and ACQUITS DavCo and
CVC, their subsidiaries and all past and
present officers, directors, employees,
successors, assigns and agents from those
liabilities, claims, damages, demands, costs,
indebtedness, expenses, compensation, actions
and causes of action of any kind whatsoever
that are known to Wendy's, arising out of,
under, or in connection with the Franchise
Agreements, the franchise relationship
between Wendy's and DavCo, the
Restaurants, or any Wendy's Old Fashioned
Hamburgers Restaurant, whether currently or
previously owned or operated by DavCo,
which Wendy's has asserted, may have
asserted or could have asserted against DavCo
or CVC (or any of the aforementioned related
parties) at any time up to the date of this
MUTUAL RELEASE, except as provided
below. This MUTUAL RELEASE shall
survive the assignment or termination of any of
the Franchise Agreements and all other
agreements, documents and instruments in
existence and is not in any way conditioned
upon any other event or occurrence.
4. DavCo shall not be released from, and this
MUTUAL RELEASE shall not affect the
following obligations for which Wendy's
expressly reserves its rights and remedies:
A. DavCo shall remain liable for all
monetary obligations (past, present
and future), under the Franchise
Agreements and all other agreements,
documents, and instruments, including,
without limitation, the letters of credit
referenced in the Franchise
Agreements, whether such obligations
are owed to Wendy's, its subsidiaries,
any advertising co-op, or any third
party.
B. DavCo shall remain liable for all
obligations (past, present and future)
arising out of, under, or in connection
with the indemnity provisions of the
Franchise Agreements, and nothing
herein shall be construed as waiving,
limiting or modifying Wendy's rights
under such provisions.
C. DavCo shall be liable for ongoing
compliance (after the date hereof) with
the specific terms of the Franchise
Agreements, including, without
limitation, the Development
Agreement between Wendy's and
DavCo (as amended and referenced in
the Letter of Intent) and all other
agreements, documents, and
instruments which exist, and nothing
herein shall be construed as a release
or waiver thereof.
IN WITNESS WHEREOF, this MUTUAL RELEASE
is effective as of the date referenced above.
WENDY'S INTERNATIONAL, INC.
By: /S/ W.S. Wirt
Title: VP-Franchise
DAVCO RESTAURANTS, INC.
By: /S/ Ronald Kirstien
Title:
MDF, INC.
By: /S/ Ronald Kirstien
Title:
SOUTHERN HOSPITALITY CORPORATION
By: /S/ Ronald Kirstien
Title:
CITICORP VENTURE CAPITAL
By: /S/ Byron Knief
Title:
PERFORMANCE SCHEDULE
FOR
CONTRACT #84
Cumulative Open or Under Construction
No. of Restaurants On or Before
__________________ __________________________
134 December 31, 1996
140 December 31, 1997
146 December 31, 1998
152 December 31, 1999
158 December 31, 2000
164 December 31, 2001
170 December 31, 2002
176 December 31, 2003
182 December 31, 2004
188 December 31, 2005
194 December 31, 2006
200 December 31, 2007
205 December 31, 2008
210 December 31, 2009
215 December 31, 2010
220 December 31, 2011
225 December 31, 2012
230 December 31, 2013
235 December 31, 2014
240 December 31, 2015
