SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 October 21, 1997
DavCo Restaurants, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 000-22006 52-1633813
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(State or Other Commission File (IRS Employer
Jurisdiction Number) Identification No.)
Incorporation
1657 Crofton Boulevard, Crofton, Maryland 21114
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (410) 721-3770
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events
DavCo Restaurants, Inc. executed a definitive merger agreement with
DavCo Acquisition Holding Inc., for a merger transaction in which Davco
Acquisition Holding Inc. would acquire all of DavCo's issued and outstanding
shares (other than shares held by DavCo Acquisition Holding Inc.) for $20 cash
per share, following unanimous approval of the proposed transaction by the Board
of Directors of DavCo (after a vote in which the interested directors abstained
from voting).
As previously disclosed, DavCo Acquisition Holding Inc. is owned by an
investor group that is headed by Ronald D. Kristien, the Company's President and
Chief Executive Officer, and Harvey Rothstein, Executive Vice President of the
Company, and includes the Company's principal stockholder, Citicorp Venture
Capital, Ltd., which currently holds approximately 48% of the Company's
outstanding shares, and certain affiliates of Kirstien, Rothstein and CVC.
The terms of the merger agreement require approval by a majority of
the Company's stockholders, including approval by a majority of stockholders
unaffiliated with the investor group. In addition, the merger is subject to
certain conditions, including a limitation on the number of dissenting
shareholders, regulatory approvals and the receipt of necessary financing. The
investor group has obtained a commitment from Global Alliance Finance Company,
LLC, a wholly-owned subsidiary of Deutsche Bank North America, to provide up to
$150 million of debt financing to complete the merger.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits.
10.60 Amended and Restated Agreement and Plan of Merger, among
DavCo Restaurants, Inc., DavCo Acquisition Holding Inc.
and DavCo Merger Sub Inc., dated as of October 21, 1997.
20.1 Press Release, dated October 21, 1997, announcing the
definitive merger agree- ment between DavCo Restaurants,
Inc. and DavCo Acquisition Holding Inc.
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SIGNATURES
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.
(Registrant)
Date: November 5, 1997 By: /s/ Ronald D. Kirstien
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Name: Ronald D. Kirstien
Title: President and Chairman
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EXHIBITS INDEX
Exhibit
Number Description Page
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10.60 Amended and Restated Agreement and Plan of 8
Merger, among DavCo Restaurants, Inc.,
DavCo Acquisition Holding Inc. and Davco
Merger Sub Inc. dated October 21, 1997
20.1 Press Release, dated October 21, 1997, announcing 61
the definitive merger agreement between DavCo
Restaurants, Inc. and DavCo Acquisition Holding Inc.
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Exhibit 10.60
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 21, 1997
AMONG
DAVCO ACQUISITION HOLDING INC.,
DAVCO MERGER SUB INC.
AND
DAVCO RESTAURANTS, INC.
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER.....................................................................2
SECTION 1.1. The Merger.....................................................2
SECTION 1.2. Closing........................................................2
SECTION 1.3. Effective Time.................................................2
SECTION 1.4. Effects of the Merger..........................................2
SECTION 1.5. Certificate of Incorporation; By-laws..........................3
SECTION 1.6. Directors......................................................3
SECTION 1.7. Officers.......................................................3
ARTICLE II
EFFECT OF THE MERGER ON THE SECURITIES OF THE CONSTITUENT
CORPORATIONS...................................................................3
SECTION 2.1. Effect on Capital Stock........................................3
SECTION 2.2. Stock Option Plans.............................................5
SECTION 2.3. Exchange of Certificates.......................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES.................................................8
SECTION 3.1. Representations and Warranties
of the Company.................................................8
SECTION 3.2. Representations and Warranties
of Parent and Sub......................................13
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER...............................................................16
SECTION 4.1. Conduct of Business of the Company............................16
SECTION 4.2. Other Actions.................................................18
ARTICLE V
ADDITIONAL AGREEMENTS.........................................................18
SECTION 5.1. Meeting of Stockholders.......................................18
SECTION 5.2. Proxy Statement; Schedule 13E-3...............................18
SECTION 5.3. Access to Information; Confidentiality........................19
SECTION 5.4. Commercially Reasonable Efforts...............................20
SECTION 5.5. Financing.....................................................20
SECTION 5.6. Indemnification; Directors' and
Officers' Insurance...........................................20
SECTION 5.7. Public Announcements..........................................22
SECTION 5.8. Acquisition Proposals.........................................22
SECTION 5.9. Stockholder Litigation........................................23
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SECTION 5.10. Board Action Relating to Stock
Option Plans and Warrants..............................23
ARTICLE VI
CONDITIONS PRECEDENT..........................................................24
SECTION 6.1. Conditions to Each Party's Obligation
to Effect the Merger..........................................24
SECTION 6.2. Conditions to Obligations of Parent
and Sub.......................................................25
SECTION 6.3. Conditions to Obligations of
the Company............................................25
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER.............................................26
SECTION 7.1. Termination...................................................26
SECTION 7.2. Effect of Termination.........................................27
SECTION 7.3. Expenses......................................................28
SECTION 7.4. Amendment.....................................................28
SECTION 7.5. Extension; Waiver.............................................28
SECTION 7.6. Procedure for Termination,
Amendment, Extension or Waiver................................28
ARTICLE VIII
GENERAL PROVISIONS............................................................29
SECTION 8.1. Nonsurvival of Representations
and Warranties................................................29
SECTION 8.2. Fees and Expenses.............................................29
SECTION 8.3. Definitions...................................................29
SECTION 8.4. Notices.......................................................29
SECTION 8.5. Interpretation................................................30
SECTION 8.6. Counterparts..................................................30
SECTION 8.7. Entire Agreement;
Third-Party Beneficiaries.....................................30
SECTION 8.8. Governing Law.................................................31
SECTION 8.9. Assignment....................................................31
SECTION 8.10. Enforcement...................................................31
SECTION 8.11. Severability..................................................31
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 21, 1997
AMONG
DAVCO ACQUISITION HOLDING INC.,
A DELAWARE CORPORATION ("PARENT"),
DAVCO MERGER SUB INC.,
A DELAWARE CORPORATION AND A WHOLLY OWNED SUBSIDIARY OF
PARENT ("SUB"),
AND
DAVCO RESTAURANTS, INC.,
A DELAWARE CORPORATION (THE "COMPANY").
W I T N E S S E T H :
WHEREAS, the Board of Directors of each of Parent, Sub and the Company has
adopted resolutions approving this Agreement, pursuant to which Sub shall be
merged with and into the Company and the Company shall become a wholly owned
direct subsidiary of the Parent (the "Merger"); and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, as of the date hereof, Ronald D. Kirstien, Harvey Rothstein and
Citicorp Venture Capital, Ltd. (collectively, the "Affiliated Stockholders") own
or have the power to vote 3,996,578 shares of the common stock of the Company
(representing approximately 57% of the total number of outstanding shares of the
Company's common stock as of the date hereof);
WHEREAS, in accordance with applicable law, the Company's Restated
Certificate of Incorporation and the terms of this Agreement, the affirmative
vote of the holders of a majority of the outstanding common stock of the Company
and the affirmative vote of holders of a majority of the outstanding shares of
common stock that are not beneficially owned by the Affiliated Stockholders or
by persons that are Affiliates or Associates (as such terms are defined in
Section 8.3) of the Affiliated Stockholders are required to adopt and approve
this Agreement and the Merger and to consummate the Merger; and
WHEREAS, as of November 4, 1997, the parties hereto determined to amend and
restate this Agreement in accordance herewith.
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NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement and Plan of Merger (the "Agreement"), and in accordance
with the Delaware General Corporation Law (the "DGCL") Sub shall be merged with
and into the Company at the Effective Time (as hereinafter defined). Upon the
Effective Time, the separate existence of Sub shall cease, and the Company shall
continue as the surviving corporation (the "Surviving Corporation").
SECTION 1.2. Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 7.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. New York City time on the second business day following the date
on which the last to be fulfilled or waived of the conditions set forth in
Article VI shall be fulfilled or waived in accordance with this Agreement (the
"Closing Date"), at the offices of Dechert Price & Rhoads, Bell Atlantic Tower,
1717 Arch Street, Philadelphia, Pennsylvania, unless another date, time or place
is agreed to in writing by the parties hereto.
SECTION 1.3. Effective Time. The parties hereto will file with the
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
on the date of the Closing (or on such other date as Parent and the Company may
agree) a certificate of merger or other appropriate documents, executed in
accordance with the relevant provisions of the DGCL, and make all other filings
or recordings required under the DGCL in connection with the Merger. The Merger
shall become effective upon the filing of the certificate of merger with the
Delaware Secretary of State, or at such later time as is specified in the
certificate of merger (the "Effective Time").
SECTION 1.4. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
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SECTION 1.5. Certificate of Incorporation; By-laws. (a) At the Effective
Time, the Company's Restated Certificate of Incorporation shall be amended so as
to read in its entirety as set forth in Exhibit A to this Agreement and as so
amended shall become the certificate of incorporation of the Surviving
Corporation.
(b) The By-Laws of Sub as in effect at the Effective Time shall be, from
and after the Effective Time, the By-Laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6. Directors. The directors of Sub at the Effective Time shall
become, from and after the Effective Time, the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.7. Officers. At the Effective Time, the officers of the Company
shall become the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE SECURITIES OF THE CONSTITUENT
CORPORATIONS
SECTION 2.1. Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of any holder:
(a) Common Stock of Sub. Each share of common stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of Common Stock,
par value $0.001 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent - Owned Stock. Each share of
the capital stock of the Company issued or outstanding immediately prior to the
Effective Time that is owned by the Company or by Parent or Sub shall be
cancelled automatically and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange therefor.
(c) Conversion of Company Shares. At the Effective Time, each share of the
common stock, par value $.001 per share, of the Company (the "Common Stock")
that is then issued and outstanding (such shares of Common Stock being
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hereinafter referred to collectively as the "Company Shares") (in each case,
other than shares to be cancelled pursuant to subsection 2.1(b) above and other
than shares held by Dissenting Shareholders (as hereinafter defined), which
shares will not constitute "Company Shares" hereunder), and, subject to Section
2.2 hereof, each Warrant (as defined in Section 2.2 hereof) that by its terms is
exercisable from and after the Effective Time only for the amount of Merger
Consideration that such Warrant would have been entitled to receive if it had
been exercised prior to the Effective Time, or that is amended in accordance
with Section 5.10, shall be converted into and become the right to receive, upon
surrender of the certificate representing such Company Share or Warrant in
accordance with Section 2.3, $20.00 in cash, without interest thereon (the
"Merger Consideration"), less, in the case of any Warrant, the amount of any
cash exercise price payable upon exercise of such Warrant.
(d) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Common Stock issued and outstanding immediately prior to the
Effective Time held by a holder (a "Dissenting Shareholder") (if any) who has
the right to demand, and who properly demands, an appraisal of such shares in
accordance with Section 262 of the DGCL (or any successor provision)
("Dissenting Shares") shall not be converted into a right to receive the Merger
Consideration unless such Dissenting Shareholder fails to perfect or otherwise
loses such Dissenting Shareholder's right to such appraisal, if any. If, after
the Effective Time, such Dissenting Shareholder fails to perfect or loses any
such right to appraisal, each such share of such Dissenting Shareholder shall be
treated as a share that had been converted as of the Effective Time into the
right to receive the Merger Consideration in accordance with this Section 2.1.
The Company shall give prompt notice to Parent of any demands received by the
Company for appraisal of any Company Shares, and Parent shall have the right to
participate in and direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands.
(e) Cancellation and Retirement of Common Stock. As of the Effective Time,
all certificates representing shares of Common Stock, other than certificates
representing shares to be cancelled in accordance with Section 2.1(b) or
Dissenting Shares, issued and outstanding immediately prior to the Effective
Time, shall no longer be outstanding and shall automatically be cancelled and
shall cease to exist, and each holder of a certificate representing any such
shares of Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration upon surrender of such
certificate in accordance with Section 2.3.
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SECTION 2.2. Stock Option Plans. For purposes of this Agreement, the term
"Warrant" means each unexercised option (including without limitation any
Company Stock Option, as hereafter defined) or warrant to purchase Company
Shares from the Company (whether such option or warrant is vested or not) that
is outstanding at the Effective Time. The term "Company Stock Option" means each
outstanding option to purchase shares of Common Stock (a "Company Stock Option")
issued under the Company's 1994 Employee Stock Option Plan, 1996 Employee Stock
Option Plan, 1997 Employee Stock Option Plan, 1994 Director Stock Option Plan,
1996 Director Stock Option Plan and 1997 Director Stock Option Plan
(collectively, the "Company Stock Option Plans"). As of the date hereof, the
unexercisable portion of each Company Stock Option shall become immediately
exercisable for the amount of Merger Consideration that would have been payable
in respect of any Company Shares issuable for any such Company Stock Option, if
such Company Stock Option had been exercised immediately prior to the Effective
Time, subject to all expiration, lapse, exercise price and other terms and
conditions thereof. Each holder of Warrants that by their terms are exercisable
from and after the Effective Time only for the amount of Merger Consideration
that such Warrants would have been entitled to receive if they had been
exercised prior to the Effective Time, or that are amended in accordance with
Section 5.10, shall be entitled to receive an aggregate amount equal to the
Merger Consideration multiplied by the aggregate number of Company Shares
issuable upon the exercise in full of all Warrants held by such holder as of the
Effective Time, less the aggregate cash exercise price payable upon exercise of
all Warrants held by such holder.
SECTION 2.3. Exchange of Certificates. (a) Paying Agent. As of the
Effective Time, Sub (or the Company, as the Surviving Corporation) shall
deposit, or shall cause to be deposited, with or for the account of a bank or
trust company designated by Sub, which shall be reasonably satisfactory to the
Company (the "Paying Agent"), for the benefit of the holders of shares of Common
Stock and the holders of the Warrants, cash in an aggregate amount equal to (i)
the product of (x) the number of shares of Common Stock and Warrants issued and
outstanding at the Effective Time (other than shares to be cancelled pursuant to
subsection 2.1(b) above and Dissenting Shares) and (y) Merger Consideration less
(ii) the aggregate cash exercise price payable upon exercise of all Warrants
(such amount being hereinafter referred to as the "Payment Fund").
(b) Exchange Procedures. As soon as practicable after the Effective Time,
each holder of an outstanding certificate or certificates which prior thereto
represented Company Shares or Warrants (other than shares to be cancelled
pursuant to subsection 2.1(b) above and Dissenting Shares) shall, upon surrender
to the Paying Agent of such certificate or
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certificates and acceptance thereof by the Paying Agent, be entitled to the
amount of cash which the aggregate number of Company Shares or Warrants
previously represented by such certificate or certificates surrendered shall
have been converted into the right to receive pursuant to subsection 2.1(c). The
Paying Agent shall accept such certificates upon compliance with such reasonable
terms and conditions as the Paying Agent may impose to effect an orderly
exchange thereof in accordance with normal exchange practices. If the
consideration to be paid in the Merger (or any portion thereof) is to be
delivered to any person other than the person in whose name the certificate
representing Company Shares or Warrants surrendered in exchange therefor is
registered, it shall be a condition to such exchange that the certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such exchange shall pay to the Paying
Agent any transfer or other taxes required by reason of the payment of such
consideration to a person other than the registered holder of the certificate
surrendered, or shall establish to the satisfaction of the Paying Agent that
such tax has been paid or is not applicable. After the Effective Time, there
shall be no further transfer on the records of the Company or its transfer agent
of certificates representing Company Shares or Warrants and if such certificates
are presented to the Company for transfer, they shall be cancelled against
delivery of the Merger Consideration as hereinabove provided. Until surrendered
as contemplated by this subsection 2.3(b), each certificate representing Company
Shares or Warrants (other than certificates representing shares to be cancelled
in accordance with Section 2.1(b) or Dissenting Shares), shall be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without any interest thereon, as
contemplated by Sections 2.1 and 2.2. No interest will be paid or will accrue on
any cash payable as Merger Consideration to any holder of Company Shares or
Warrants.
(c) Letter of Transmittal. Promptly after the Effective Time (but in no
event more than five days thereafter), the Surviving Corporation shall require
the Paying Agent to mail to each record holder of certificates that immediately
prior to the Effective Time represented Company Shares or Warrants which have
been converted pursuant to Section 2.1, a form of letter of transmittal and
instructions for use in surrendering such certificates and receiving the
consideration to which such holder shall be entitled therefor pursuant to
Section 2.1.
(d) No Further Ownership Rights in Common Stock or Preferred Stock. The
Merger Consideration paid upon the surrender for exchange of certificates
representing Company Shares or Warrants in accordance with the terms of this
Article II shall be deemed to have been issued and paid in full
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satisfaction of all rights pertaining to the Company Shares or Warrants
theretofore represented by such certificates.
(e) Termination of Payment Fund. Any portion of the Payment Fund which
remains undistributed to the holders of the certificates representing Company
Shares or Warrants for 120 days after the Effective Time shall be delivered to
the Surviving Corporation, upon demand, and any holders of Company Shares or
Warrants who have not theretofore complied with this Article II shall thereafter
look only to the Surviving Corporation and only as general creditors thereof for
payment of their claim for the Merger Consideration.
(f) No Liability. None of Parent, Sub, the Surviving Corporation or the
Paying Agent shall be liable to any person in respect of any cash, shares,
dividends or distributions payable from the Payment Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any certificates representing Company Shares or Warrants shall not have been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which the Merger Consideration in respect of such
certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.1(c))), any such cash, shares,
dividends or distributions payable in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(g) Investment of Payment Fund. The Paying Agent shall invest the Payment
Fund, as directed by the Surviving Corporation, in (i) direct obligations of the
United States of America, (ii) obligations for which the full faith and credit
of the United States of America is pledged to provide for the payment of
principal and interest, (iii) commercial paper rated the highest quality by
either Moody's Investors Services, Inc. or Standard & Poor's Corporation, or
(iv) certificates of deposit, bank repurchase agreements or bankers, acceptances
of commercial banks with capital exceeding $100 million, and any net earnings
with respect thereto shall be paid to the Surviving Corporation as and when
requested by the Surviving Corporation; provided that any such investment or any
such payment of earnings shall not delay the receipt by holders of Company
Shares or Warrants of the Merger Consideration or otherwise impair such holders'
respective rights hereunder.
(h) Withholding Rights. The Surviving Corporation, Parent or Sub shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Shares or Warrants such
amounts as the Surviving Corporation, Parent or Sub is required
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to deduct and withhold with respect to the making of such payment under the Code
(as hereinafter defined), or any provision of state, local or foreign tax law,
including, without limitation, withholdings required in connection with payments
with respect to Company Stock Options held by employees of the Company. To the
extent that amounts are so withheld by the Surviving Corporation, Parent or Sub,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder in respect of which such deduction and
withholding was made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Company. The Company
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. The Company is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed (individually or in the
aggregate) would not have a material adverse effect on the business, financial
condition or results of operations of the Company and the Subsidiaries (as
defined in subsection 3.1(b) hereof) taken as a whole ("Material Adverse
Effect"). The Company has delivered to Parent complete and correct copies of its
Restated Certificate of Incorporation (the "Certificate of Incorporation") and
By-laws, as amended to the date of this Agreement.
(b) Subsidiaries. Section 3.1(b) of the disclosure schedule attached hereto
(the "Disclosure Schedule") sets forth the name, jurisdiction of incorporation,
capitalization and number of shares of outstanding capital stock of each class
owned, directly or indirectly, by the Company of each corporation of which the
Company owns, directly or indirectly, a majority of the outstanding capital
stock (individually, a "Subsidiary" and, collectively, the "Subsidiaries"). All
the issued and outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable. All such shares owned, directly or
indirectly, by the Company are owned by the Company beneficially and of record,
free and clear of all liens, pledges, encumbrances or restrictions of any kind.
No Subsidiary has outstanding any
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securities convertible into or exchangeable or exercisable for any shares of its
capital stock, there are no outstanding options, warrants or other rights to
purchase or acquire any capital stock of any Subsidiary, there are no
irrevocable proxies with respect to such shares, and there are no contracts,
commitments, understandings, arrangements or restrictions by which any
Subsidiary or the Company is bound to issue additional shares of the capital
stock of a Subsidiary. Except for the Subsidiaries, and as otherwise disclosed
in Section 3.1(b) of the Disclosure Schedule, the Company does not own, directly
or indirectly, any capital stock or other equity securities of any corporation
or have any direct or indirect equity interest in any business. Each Subsidiary
(a) is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation; (b) has all requisite corporate
power and authority and any necessary governmental authority to carry on its
business as it is now being conducted and to own, operate and lease its
properties; and (c) is qualified or licensed to do business as a foreign
corporation and is in good standing in each of the jurisdictions in which (i)
the ownership or leasing of real property or the conduct of its business
requires such qualification or licensing and (ii) the failure to be so qualified
or licensed, either singly or in the aggregate, would have a Material Adverse
Effect. The Company has previously delivered to Parent and Sub complete and
correct copies of the Certificates or Articles of Incorporation and By-Laws of
each Subsidiary, each as amended to date. All such Certificates or Articles of
Incorporation and By-Laws are in full force and effect.
(c) Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 11,400,000 shares of Common Stock. At the close of
business on September 27, 1997, 6,428,821 shares of Common Stock were issued and
outstanding, 131,500 shares of Common Stock were reserved for issuance pursuant
to outstanding Company Stock Options, 996,644 shares of Common Stock were
reserved for issuance upon conversion of Warrants (other than Company Stock
Options), and 158,807 shares of Common Stock were held by the Company in its
treasury. Except as set forth above, at the close of business on September 27,
1997, no shares of capital stock or other equity securities of the Company were
issued, reserved for issuance or outstanding. All outstanding shares of capital
stock of the Company are, and all shares which may be issued pursuant to the
Company Stock Option Plan or any other outstanding Warrants will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. Except as set forth above or in Section 3.1(c) of
the Disclosure Schedule, the Company has no outstanding option, warrant,
subscription or other right, agreement or commitment which either (i) obligates
the Company to issue, sell or transfer, repurchase, redeem or otherwise acquire
or vote any shares of the capital stock of the
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Company or (ii) restricts the transfer of Common Stock. Except as set forth in
Section 3.1(c) of the Disclosure Schedule, the Company has no outstanding stock
appreciation rights, phantom stock or stock equivalents. Section 3.1(c) of the
Disclosure Schedule accurately sets forth the number of Company Shares issuable
upon exercise of each outstanding Warrant, and the applicable exercise price
with respect to each such Warrant.
(d) Authority; Enforceability; Noncontravention. The Company has the
requisite corporate power and authority to enter into this Agreement and,
subject to the approval of its stockholders as set forth in subsection 6.1(a)
with respect to the consummation of the Merger, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject to the approval of its stockholders as set forth in
subsection 6.1(a). This Agreement has been duly executed and delivered by the
Company and, assuming this Agreement constitutes the valid and binding agreement
of Parent and Sub, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except that the
enforceability hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought. Except as disclosed in Section 3.1(d) of the Disclosure
Schedule, the execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and compliance
with the provisions hereof will not, (i) violate any of the provisions of the
Restated Certificate of Incorporation or By-laws of the Company, (ii) subject to
the governmental filings and other matters referred to in the following
sentence, conflict with, result in a breach of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or require the consent of any person under, any indenture or other
agreement, permit, concession, franchise, license or similar instrument or
undertaking to which the Company is a party or by which the Company or any of
its assets is bound or affected, or (iii) subject to the governmental filings
and other matters referred to in the following sentence, contravene any law,
rule or regulation of any state or of the United States or any political
subdivision thereof or therein, or any order, writ, judgment, injunction,
decree, determination or award currently in effect, which, in the case of
clauses (ii) and (iii) above, singly or in the aggregate, would have a Material
Adverse Effect or prevent consummation of the transactions contemplated hereby.
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No consent, approval or authorization of, or declaration or filing with, or
notice to, any governmental agency or regulatory authority (a "Governmental
Entity"), which has not been received or made, is required by or with respect to
the Company in connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the transactions contemplated
hereby, except for (i) the requirements or the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), (ii) the filing of the certificate of merger
with the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(iii) such other consents, approvals, authorizations, filings or notices as are
set forth in Section 3.1(d)(iii) of the Disclosure Schedule and (iv) any
applicable filings under state antitakeover laws, or filings, authorizations,
consents or approvals the failure to make or obtain which, in the aggregate,
would not have a Material Adverse Effect or prevent consummation of the
transactions contemplated hereby.
(e) Financial Statements; SEC Reports. The Company has previously furnished
Parent and Sub with true and complete copies of (i) its Annual Report on Form
10-K for the year ended September 28, 1996 (the "Annual Report") filed by the
Company with the Securities and Exchange Commission (the "SEC"), (ii) its
Quarterly Reports on Form 10-Q for the quarters ended December 28, 1996, March
29, 1997 and June 28, 1997 (collectively, the "Quarterly Reports" and, together
with the Annual Report, the "Reports") filed by the Company with the SEC, (iii)
proxy statements relating to all of the Company's meetings of shareholders
(whether annual or special) held or scheduled to be held since September 28,
1996 and (iv) each other registration statement, proxy or information statement
or current report on Form 8-K filed since September 28, 1996 by the Company with
the SEC. Since September 1, 1993, the Company has complied in all material
respects with its SEC filing obligations under the Exchange Act. The financial
statements and related schedules and notes thereto of the Company contained in
the Reports (or incorporated therein by reference) were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
except as noted therein, and fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended, subject (in the case of interim unaudited
financial statements) to normal year-end audit adjustments, and such financial
statements complied as of their respective dates in all material respects with
applicable rules and regulations of the SEC. Each such registration statement,
proxy statement and Report was prepared in accordance with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange
Act and did not, on the date
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of effectiveness in the case of such registration statements, on the date of
mailing in the case of such proxy statements and on the date of filing in the
case of such Reports, contain any untrue statement of a material fact or omit to
state a 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.
(f) Absence of Certain Changes or Events. Except as may be disclosed in the
Reports or as otherwise disclosed in Section 3.1(f) of the Disclosure Schedule,
since June 28, 1997 there has not been (a) any material adverse change in the
business, assets, financial condition or operations of the Company and the
Subsidiaries taken as a whole; (b) any damage, destruction or loss, whether
covered by insurance or not, having a material adverse effect upon the
properties or business of the Company and the Subsidiaries taken as a whole; (c)
any declaration, setting aside or payment of any dividend, except for the
Company's regular dividend to stockholders, or other distribution in respect of
the capital stock of the Company or any redemption or other acquisition by the
Company of any of its capital stock; (d) any issuance by the Company, or
commitment of the Company to issue, any shares of its Common Stock or securities
convertible into or exchangeable for shares of its Common Stock; (e) any
increase in the rate or terms of compensation payable or to become payable by
the Company or any Subsidiary to its directors, officers of key employees,
except increases occurring in the ordinary course of business in accordance with
its customary past practices; (f) any increase in the rate or terms of any
bonus, insurance, pension or other employee benefit plan, payment or arrangement
made to, for or with any directors, officers or key employees, except increases
occurring in the ordinary course of business in accordance with its customary
past practices; (g) any change by the Company in accounting methods, principles
or practices except as required by generally accepted accounting principles; (h)
an entry into any agreement, commitment or transaction by the Company or any
Subsidiary which is material to the Company and its Subsidiaries taken as a
whole, except agreements, commitments or transactions in the ordinary course of
business; (i) any material breach by the Company of any of its material
obligations under its franchise agreements with Wendy's International, Inc.
("Wendy's") or, to the Company's knowledge, by Wendy's of its material
obligations thereunder; (j) any incurrence, other than in the ordinary course of
business, of material indebtedness for money borrowed; or (k) any agreement or
commitment, whether in writing or otherwise, to take any action described in
this subsection 3.1(f). Since June 28, 1997, the Company and the Subsidiaries
have conducted their respective businesses in all material respects only in the
ordinary course, consistent with past custom and practice, except as
contemplated by this Agreement.
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(g) Company Schedule 13E-3 and Proxy Materials. All of the information
supplied by the Company for inclusion in the Rule 13e-3 Transaction Statement on
Schedule 13E-3 (the "Schedule 13E-3") referred to in Section 5.2 hereof will
not, on the date the Schedule 13E-3 is first filed, and all of the information
supplied by the Company for inclusion in the definitive proxy statement (the
"Definitive Proxy Statement") referred to in Section 5.2 hereof will not, on the
date when the Definitive Proxy Statement is first mailed to the Company's
shareholders, and the Schedule 13E-3 and the Definitive Proxy Statement, as then
amended or supplemented, will not, on the date of the Company's stockholders'
meeting referred to in Section 5.1 hereof or on the Closing Date (as defined in
Section 1.2 hereof), contain any statement which is false or misleading with
respect to any material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company makes no representation or warranty regarding
information furnished by Parent or Sub for inclusion in the Schedule 13E-3 or
the Definitive Proxy Statement (or any amendment or supplement thereto). The
Definitive Proxy Statement will comply as to form and, with respect to
information supplied or to be supplied in writing by or on behalf of the Company
for inclusion in the Definitive Proxy Statement, substance in all material
respects with the requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder.
(h) Board Recommendation. The Board of Directors of the Company has
recommended that the stockholders of the Company vote for approval and adoption
of this Agreement.
(i) Brokers. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by the Company, is entitled
to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement.
SECTION 3.2. Representations and Warranties of Parent and Sub. Parent and
Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent is a corporation
duly organized and validly existing under the laws of the jurisdiction in which
it is incorporated. Sub is a corporation duly organized, validly existing, and
in good standing under the laws of the jurisdiction in which it is incorporated.
Each of Parent and Sub has the requisite corporate power and authority to carry
on its business as now being conducted. Each of Parent and Sub is duly qualified
or licensed
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to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed (individually or in the aggregate) would
not have a Material Adverse Effect.
(b) Capitalization. As of the date of this Agreement, the authorized
capital stock of Parent consists of 1,000 shares of Common Stock, par value
$0.01 per share, no shares of which are presently issued and outstanding. As of
the date of this Agreement, the authorized capital stock of Sub consists of
1,000 shares of Common Stock, par value $0.01 per share, 1,000 shares of which
are presently issued and outstanding, which constitutes all of the issued and
outstanding capital stock of Sub. All of the issued and outstanding shares of
capital stock of Parent and Sub are validly issued, fully paid and
nonassessable. As of the Effective Time of the Merger, the capitalization of
Parent and Sub and the ownership of the issued and outstanding shares of
Parent's and Sub's capital stock will be in all material respects as described
in the Definitive Proxy Statement.
(c) Authority; Enforceability; Noncontravention. Parent and Sub have all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent and
Sub of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Parent and Sub. This Agreement
has been duly executed and delivered by and, assuming this Agreement constitutes
the valid and binding agreement of the Company, constitutes a valid and binding
obligation of each of Parent and Sub, enforceable against such party in
accordance with its terms, except that the enforceability hereof may be subject
to bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The execution and delivery
of this Agreement do not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this Agreement will not
(i) violate any of the provisions of the charter documents of Parent, or the
Certificate of Incorporation or Bylaws of Sub, (ii) subject to the governmental
filings and other matters referred to in the following sentence, conflict with,
result in a breach of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or require
the consent of any person
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under, any indenture, or other agreement, permit, concession, franchise, license
or similar instrument or undertaking to which Parent or any of its subsidiaries
is a party or by which Parent or any of its subsidiaries or any of their assets
is bound or affected, or (iii) subject to the governmental filings and other
matters referred to in the following sentence, contravene any law, rule or
regulation of any state or of the United States or any political subdivision
thereof or therein, or any order, writ, judgment, injunction, decree,
determination or award currently in effect, which, in the case of clauses (ii)
and (iii) above, singly or in the aggregate, would have a material adverse
effect on the business, financial condition or results of operations of Parent
and Sub taken as a whole or prevent consummation of the transactions
contemplated hereby. No consent, approval or authorization of, or declaration or
filing with, or notice to, any Governmental Entity which has not been received
or made is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement by Parent or Sub or the consummation by
Parent or Sub, as the case may be, of any of the transactions contemplated by
this Agreement, except for (i) the requirements or the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (ii) the filing of the certificate of
merger with the Delaware Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, (iii) such other consents, approvals, authorizations, filings or
notices as are set forth in Section 3.1(d)(iii) of the Disclosure Schedule and
(iv) any applicable filings under state antitakeover laws, or filings,
authorizations, consents or approvals the failure to make or obtain which, in
the aggregate, would not have a material adverse effect on the business,
financial condition or results of operations of Parent and Sub taken as a whole
or prevent consummation of the transactions contemplated hereby.
(d) Financing. Parent and Sub have received a written commitment (the
"Commitment") from Global Alliance Finance Company, L.L.C. dated as of October
17, 1997, to provide debt financing on or prior to the Closing Date of an amount
not less than $180 million (the "Financing"). Parent has accepted the
Commitment, which, to the knowledge of Parent and Sub, is valid and in full
force and effect. A true and correct copy of the Commitment is attached as
Exhibit 3.2(d) hereto.
(e) No Undisclosed Material Developments; Sale of the Company. Parent is
unaware of any information or plans relating to the Company, its business,
assets, financial condition or prospects, which would have a material positive
effect on the value of the Company or the Company Shares and which have not been
disclosed either in any filings of the Company, Parent or Sub under the Exchange
Act or to the Board of Directors of the Company. Parent does not have any
present plan or present intention to sell, dispose of or otherwise transfer,
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or cause to be sold, disposed of or otherwise transferred, directly or
indirectly, (i) more than 50% of the beneficial ownership of the outstanding
voting capital stock of the Surviving Corporation or (ii) assets constituting
more than 50% of the earning power of the Company and its subsidiaries or with a
book value in excess of 50% of the book value of all assets of the Company and
its subsidiaries.
(f) Schedule 13E-3 and Proxy Materials. All of the information to be
furnished by Parent or Sub for inclusion in the Schedule 13E-3 and the
Definitive Proxy Statement (or any amendment or supplement thereto) will not, in
the case of the Schedule 13E-3, on the date it is first filed, and in the case
of the Definitive Proxy Statement, on the date it is first mailed to the
Company's shareholders, and in the case of the Schedule 13E-3 and the Definitive
Proxy Statement, as then amended or supplemented, on the date of the Company's
stockholders' meeting referred to in Section 5.1 hereof or on the Closing Date,
contain any statement which is false or misleading with respect to any material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Notwithstanding the foregoing,
Parent and Sub make no representation or warranty regarding information
furnished by the Company for inclusion in the Schedule 13E-3 (or any amendment
or supplement thereto). The Schedule 13E-3 will comply as to form and, with
respect to information supplied or to be supplied in writing by or on behalf of
Parent or Sub for inclusion in the Schedule 13E-3, substance in all material
respects with the requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder.
(g) Brokers. No broker, investment banker, financial advisor or other
person, the fees and expenses of which will be paid by Parent of Sub, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
PRIOR TO MERGER
SECTION 4.1. Conduct of Business of the Company. (a) Except as contemplated
by this Agreement, during the period from the date of this Agreement to the
Effective Time, the Company shall operate, and shall cause each Subsidiary to
operate, its business in the ordinary course of business. Without limiting the
generality of the foregoing, during the
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period from the date of this Agreement to the Effective Time, except as
expressly contemplated by this Agreement, the Company shall not, without the
prior written consent of Parent:
(i) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
the Company's outstanding capital stock, except for the Company's regular
dividend to stockholders (y) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (z) purchase, redeem or otherwise acquire any
shares of outstanding capital stock or any rights, warrants or options to
acquire any such shares;
(ii) issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, except for the
issuance of shares of Common Stock upon exercise of Warrants outstanding
prior to the date of this Agreement and disclosed in Section 3.1(c), or
take any action that would make the Company's representations and
warranties set forth in Section 3.1(c) not true and correct in all material
respects;
(iii) amend its Restated Certificate of Incorporation or By-laws or
other comparable charter or organizational documents;
(iv) acquire any business or any corporation, partnership, joint
venture, association or other business organization or division thereof (or
any interest therein), or form any subsidiaries;
(v) sell or otherwise dispose of any of its substantial assets, except
in the ordinary course of business, or as disclosed in Section 4.1(a)(v) of
the Disclosure Schedule;
(vi) make any capital expenditures or commitments with respect
thereto, except capital expenditures or commitments not exceeding
$20,000,000 in the aggregate as the Company may, in its discretion, deem
appropriate;
(vii) (x) incur any indebtedness for borrowed money or guaranty any
such indebtedness of another person, other than (A) borrowings in the
ordinary course under
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existing lines of credit (or under any refinancing of such existing lines),
(B) indebtedness owing to, or guaranties of indebtedness owing to, the
Company or (C) in connection with the Financing, or (y) make any loans or
advances to any other person, other than to the Company and other than
routine advances to employees, except in the case of either (x) or (y) as
disclosed in Section 4.1(a)(vii) of the Disclosure Schedule;
(viii) grant or agree to grant to any employee any increase in wages
or bonus, severance, profit sharing, retirement, deferred compensation,
insurance or other compensation or benefits, or establish any new
compensation or benefit plans or arrangements, or amend or agree to amend
any existing Company Plans, except as may be required under existing
agreements or in the ordinary course of business consistent with past
practices;
(ix) merge, amalgamate or consolidate with any other entity in any
transaction, sell all or substantially all of its business or assets, or
acquire all or substantially all of the business or assets of any other
Person;
(x) enter into or amend any employment, consulting, severance or
similar agreement with any individual;
(xi) change its accounting policies in any material respect, except as
required by generally accepted accounting principals; or
(xii) commit or agree to take any of the foregoing actions.
SECTION 4.2. Other Actions. The Company and Parent shall not take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of such party set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (iii) any of the conditions of the Merger set forth in
Article VI not being satisfied.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Meeting of Stockholders. The Company will take all action
necessary in accordance with applicable law
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and its Restated Certificate of Incorporation and By-laws to duly call, give
notice of, and convene a meeting of its stockholders (the "Stockholders'
Meeting") to consider and vote upon the adoption and approval of this Agreement
and the Merger and all actions contemplated hereby which require approval and
adoption by the Company's stockholders.
SECTION 5.2. Proxy Statement; Schedule 13E-3. Parent will prepare and file,
and the Company will cooperate with Parent in the preparation and filing of, the
Schedule 13E-3 with the SEC with respect to the transactions contemplated by
this Agreement. The Company shall pay the filing fee for such Schedule 13E-3. In
connection with the Stockholders' Meeting contemplated hereby, the Company will
prepare and file, and Parent will cooperate with the Company in the preparation
and filing of, a preliminary Proxy Statement relating to the transactions
contemplated by this Agreement (the "Preliminary Proxy Statement") with the SEC
and will use its commercially reasonable best efforts to respond to the comments
of the SEC and to cause the Definitive Proxy Statement to be mailed to the
Company's stockholders, in each case as soon as reasonably practicable. Each
party to this Agreement will notify the other parties promptly of the receipt of
the comments of the SEC, if any, and of any request by the SEC for amendments or
supplements to the Schedule 13E-3, the Preliminary Proxy Statement or the
Definitive Proxy Statement or for additional information, and will supply the
others with copies of all correspondence between such party or its
representatives, on the one hand, and the SEC or members of its staff, on the
other hand, with respect to the Schedule 13E-3, the Preliminary Proxy Statement,
the Definitive Proxy Statement or the Merger. If at any time prior to the
Stockholders' Meeting, any event should occur relating to the Company or any of
the Subsidiaries which should be set forth in an amendment of, or a supplement
to, the Schedule 13E-3 or the Definitive Proxy Statement, the Company will
promptly inform Parent. If at any time prior to the Stockholders' Meeting, any
event should occur relating to Parent or Sub or any of their respective
Associates or Affiliates, or relating to the plans of any such persons for the
Surviving Corporation after the Effective Time of the Merger, or relating to the
Financing, that should be set forth in an amendment of, or a supplement to, the
Schedule 13E-3 or the Definitive Proxy Statement, the Company, with the
cooperation of Parent, will, upon learning of such event, promptly prepare, file
and, if required, mail such amendment or supplement to the Company's
stockholders; provided that, prior to such filing or mailing the Company shall
consult with Parent with respect to such amendment or supplement and shall
afford Parent reasonable opportunity to comment thereon. Parent will furnish to
the Company the information relating to Parent and Sub, their respective
Associates and Affiliates and the plans of such persons for the Surviving
Corporation after the Effective Time of the Merger, and relating to the
Financing, which is required to
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be set forth in the Schedule 13E-3, the Preliminary Proxy Statement or the
Definitive Proxy Statement under the Exchange Act and the rules and regulations
of the SEC thereunder.
SECTION 5.3. Access to Information; Confidentiality. From and after the
date hereof, the Company will provide to Parent complete access to the Company's
facilities, books and records and shall cause the directors, employees,
accountants, and other agents and representatives (collectively,
"Representatives") of the Company to cooperate fully with Parent and Parent's
Representatives in connection with Parent's due diligence investigation of the
Company and the Company's assets, contracts, liabilities, operations, records
and other aspects of its business (including any environmental investigation of
the companies facilities). Parent shall keep all information supplied or made
available to Parent hereunder in confidence and shall not disclose the same to
any party other than its employees or advisors on a "need to know" basis and
only for purposes of evaluating the Merger. Parent will not use such information
except for evaluating the Merger, in connection with procurement of the
Financing and in connection with Parent and Sub's filings under the Exchange Act
as contemplated by this Agreement. If the Merger is not consummated and this
Agreement is terminated in accordance with its terms, Parent shall return any
information provided hereunder.
SECTION 5.4. Commercially Reasonable Efforts. Upon the terms and subject to
the conditions and other agreements set forth in this Agreement, each of the
parties agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including the
satisfaction of the respective conditions set forth in Article VI.
SECTION 5.5. Financing. Each of Parent and Sub shall use their commercially
reasonable efforts to obtain the Financing on terms satisfactory to them and to
deliver to the Company true and correct copies of the fully executed and
delivered Definitive Financing Agreements with respect thereto on or before the
Closing Date. Parent and Sub shall use their best efforts to satisfy on or
before the Closing Date all requirements of the Definitive Financing Agreements
which are conditions to closing the transactions constituting the Financing and
to drawing the cash proceeds thereunder. The obligations contained herein are
not intended, nor shall they be construed, to benefit or confer any rights upon
any person, firm or entity other than the Company.
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SECTION 5.6. Indemnification; Directors' and Officers' Insurance. (a) From
and after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, indemnify and hold harmless each person who is now, at any time
has been or who becomes prior to the Effective Time a director, officer,
employee or agent of the Company or any of its subsidiaries (the "Indemnified
Parties") against any and all losses, claims, damages, liabilities, costs,
expenses (including reasonable fees and expenses of legal counsel), judgments,
fines or amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation (each a "Claim") arising out of the or pertaining to
any action or omission occurring prior to the Effective Time (including, without
limitation, any which arise out of or relate to the transactions contemplated by
this Agreement), regardless of whether such Claim is asserted or claimed prior
to, at or after the Effective Time, to the full extent permitted under Delaware
law or the Surviving Corporation's Certificate of Incorporation or By-laws in
effect as of the Effective Date or under any indemnification agreement in effect
as of the date of this Agreement. Without limiting the generality of the
preceding sentence, in the event any Indemnified Party becomes involved in any
Claim, after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, periodically advance to such Indemnified Party its legal and
other expenses (including the cost of any investigation and preparation incurred
in connection therewith), subject to the provisions of paragraph (b) of this
Section 5.6, and subject to the providing by such Indemnified Party of an
undertaking to reimburse all amounts so advanced in the event of a final and
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto.
(b) The Indemnified Party shall control the defense of any Claim with
counsel selected by the Indemnified Party, which counsel shall be reasonably
acceptable to Parent, provided that Parent and the Surviving Corporation shall
be permitted to participate in the defense of such Claim at their own expense,
and provided further that if any D&O Insurance (as defined in paragraph (c) of
this Section 5.6) in effect at the time shall require the insurance company to
control such defense in order to obtain the full benefits of such insurance and
such provision is consistent with the provisions of the Company's D&O Insurance
existing as of the date of this Agreement, then the provisions of such policy
shall govern. Neither Parent nor the Surviving Corporation shall be liable for
any settlement effected without its written consent, which consent shall not be
withheld unreasonably.
(c) For a period of six years after the Effective Time, Parent or the
Surviving Corporation shall provide officers' and directors' liability insurance
("D&O Insurance") covering each Indemnified Party who is presently covered by
the Company's
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officers' and directors' liability insurance or will be so covered at the
Effective Time with respect to actions or omissions occurring prior to the
Effective Time, on terms no less favorable than such insurance maintained in
effect by the Company as of the date hereof in terms of coverage and amounts,
provided that Parent and the Surviving Corporation shall not be required to pay
in the aggregate an annual premium for D&O Insurance in excess of 200% of the
last annual premium paid prior to the date hereof, but in such case shall
purchase as much coverage as possible for such amount.
(d) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Certificate of Incorporation and By-laws of the Surviving
Corporation as of the Effective Date, which provisions shall not be amended,
repealed or otherwise modified after the Effective Time in any manner that would
adversely affect the rights thereunder of the Indemnified Parties in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by law. Parent, Sub and the Company agree that all
rights existing in favor of any Indemnified Party under any indemnification
agreement in effect as of the date hereof shall survive the Merger and shall
continue in full force and effect, without any amendment thereto. In the event
any Claim is asserted or made, any determination required to be made with
respect to whether an Indemnified Party's conduct complies with standards set
forth under such provisions of the Certificate of Incorporation or By-laws or
under the DGCL or any indemnification agreement, as the case may be, shall be
made by independent legal counsel selected by such Indemnified Party and
reasonably acceptable to Parent; and provided that nothing in this Section 5.6
shall impair any rights or obligations of any current or former director or
officer of the Company or any of its subsidiaries, including pursuant to the
respective certificates of incorporation or bylaws of Parent, the Surviving
Corporation or the Company, or their respective subsidiaries, under the DGCL or
otherwise.
(e) The provisions of this Section 5.6 are intended to be for the benefit
of, and shall be enforceable by, each of the Indemnified Parties, his or her
heirs and his or her personal representatives and shall be binding on all
successors and assigns of Parent, Sub, the Company and the Surviving
Corporation.
SECTION 5.7. Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions
- 22 -
<PAGE>
contemplated by this Agreement, including the Merger, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable law, court process or by obligations
pursuant to any listing agreement with any national securities exchange.
SECTION 5.8. Acquisition Proposals. The Company shall not, nor shall it
authorize or permit any of its Representatives to, directly or indirectly, (i)
solicit, initiate or encourage the submission of any Acquisition Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal; provided, however, that the foregoing shall not prohibit
the Board of Directors of the Company from furnishing information to, or
entering into discussions or negotiations with, any person in connection with an
unsolicited bona fide Acquisition Proposal by such person if, and to the extent
that, the Board of Directors of the Company, after consultation with independent
legal counsel (which may include its regularly engaged independent legal
counsel), determines in good faith that such action is required for the Board of
Directors of the Company to comply with its fiduciary obligations to
stockholders under applicable law. The Company shall provide prompt written
notice to Parent to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person or entity, such written
notice shall include the material terms and conditions of such Acquisition
Proposal or inquiry, and the identity of the person making any such Acquisition
Proposal or inquiry; provided that the Company shall not be required to provide
such notice of such terms or conditions or identity if the Company's Board of
Directors, after consultation with independent legal counsel (which may include
its regularly engaged independent legal counsel), determines in good faith that
giving such notice would be inconsistent with its fiduciary obligations to
stockholders under applicable law. For purposes of this Agreement, "Acquisition
Proposal" means any proposal with respect to a merger, consolidation, share
exchange or similar transaction involving the Company, or any purchase of all or
any significant portion of the assets of the Company, or any equity interest in
the Company, other than the transactions contemplated hereby.
- 23 -
<PAGE>
SECTION 5.9. Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and its directors relating to the transactions
contemplated by this Agreement; provided, however, that no such settlement shall
be agreed to without Parent's consent, which consent shall not be unreasonably
withheld if such settlement would entail solely the payment of monetary relief.
SECTION 5.10. Board Action Relating to Stock Option Plans and Warrants. As
soon as practicable following the date of this Agreement, the Board of Directors
of the Company (or, if appropriate, any committee administering a Company Stock
Option Plan) shall adopt such resolutions or take such actions as may be
required to adjust the terms of all outstanding Company Stock options in
accordance with Section 2.2 and shall make such other changes to the Company
Stock Option Plans as it deems appropriate to give effect to the Merger. In
addition, prior to the Effective Time, the Board of Directors of the Company
shall adopt such resolutions and take such actions as may be required to amend
the terms of all outstanding Warrants in accordance with Section 2.2 and shall
make such other changes to the Warrants as it deems appropriate to give effect
to the Merger.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
adopted and approved by (i) the affirmative vote of the stockholders of the
Company as required under the laws of the State of Delaware and (ii) the
affirmative vote of holders of a majority of the outstanding shares of Common
Stock that are not beneficially owned by the Affiliated Stockholders or by
persons that are Affiliates or Associates of the Affiliated Stockholders.
(b) Governmental and Regulatory Consents. All filings required to be made
prior to the Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from,
Governmental Entities, including, without limitation, those set forth in Section
3.1(d)(iii) of the Disclosure Schedule, in connection with the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby by the Company, Parent and Sub, and which, either individually or in the
- 24 -
<PAGE>
aggregate, if not obtained would have a Material Adverse Effect or would prevent
consummation of the Merger, will have been made or obtained (as the case may
be).
(c) No Injunctions, Restraints or Litigation. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that the
parties invoking this condition shall use reasonable efforts to have any such
order or injunction vacated. There shall not be threatened, instituted or
pending any action, proceeding, application or counterclaim by any Governmental
Entity before any court or governmental regulatory or administrative agency,
authority or tribunal (i) which if adversely determined would have a material
adverse effect on the Surviving Corporation or the ability of any party to this
Agreement to perform its obligations hereunder or (ii) which challenges or seeks
to challenge, restrain or prohibit the consummation of the Merger.
SECTION 6.2. Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in Section 3.1 that are qualified by materiality shall be
true and correct and such representations and warranties of the Company set
forth in Section 3.1 that are not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except to the extent
such representations and warranties speak as of an earlier date and except for
changes permitted or contemplated by this Agreement, and Parent shall have
received an officers' certificate signed on behalf of Parent to the effect set
forth in this paragraph.
(b) Performance of Obligations of the Company. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date, and Parent shall have
received an officers' certificate signed on behalf of the Company to such
effect.
(c) Financing. On or prior to the Effective Time, Parent and/or Sub shall
have completed their arrangements for the Financing and received the cash
proceeds thereof.
(d) Dissenting Shares. Parent shall have received evidence, in form and
substance reasonably satisfactory to it, that the number of Dissenting Shares
shall constitute no greater than 5% of the total number of shares of Common
Stock
- 25 -
<PAGE>
outstanding immediately prior to the Effective Time, on a fully diluted basis.
SECTION 6.3. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to the following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub set forth in Section 3.2 that are qualified by materiality shall
be true and correct and such representations and warranties of Parent and Sub
set forth in Section 3.2 that are not so qualified shall be true and correct in
all material respects, in each case as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except to the
extent such representations and warranties speak as of an earlier date and
except for changes permitted or contemplated by this Agreement, and the Company
shall have received a certificate signed on behalf of Parent by the chief
executive officer and the chief financial officer of Parent to the effect set
forth in this paragraph.
(b) Performance of Obligations of Parent and Sub. Parent and Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent by the chief executive
officer and the chief financial officer of Parent to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and abandoned at
any time prior to the Effective Time, whether before or after approval of
matters presented in connection with the Merger by the stockholders of the
Company:
(a) by mutual written consent of Parent and the Company; or
(b) by either Parent or the Company:
(i) if, upon a vote at the Stockholders Meeting, or any adjournment
thereof, the adoption and approval of this Agreement and the Merger by the
stockholders of the Company required by Delaware law, the Company's
Restated Certificate of Incorporation or the terms of this Agreement shall
not have been obtained; or
- 26 -
<PAGE>
(ii) if the Merger shall not have been consummated on or before April
1, 1998, provided that the failure to consummate the Merger is not
attributable to the failure of the terminating party to fulfill its
obligations pursuant to this Agreement; or
(iii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(c) by the Company, if the Board of Directors of the Company shall have
approved an Acquisition Proposal after determining, upon the basis of written
advice of outside counsel (who may be the Company's regularly retained outside
counsel) that such approval is necessary in the exercise of its fiduciary
obligations under applicable law; or
(d) by Parent, if the Board of Directors of the Company shall have (i)
withdrawn or modified, in a manner adverse to Parent or Sub, the approval or
recommendation by the Board of Directors of the Company of this Agreement or the
Merger or (ii) approved another Acquisition Proposal; or
(e) by Parent, if any of the conditions set forth in Section 6.2 shall have
become incapable of fulfillment, and shall not have been waived by Parent, or if
the Company shall breach in any material respect any of its representations,
warranties or obligations hereunder and such breach shall not have been cured in
all material respects or waived and the Company shall not have provided
reasonable assurance that such breach will be cured in all material respects on
or before the Closing Date, but only if such breach, singly or together with all
other such breaches, constitutes a failure of the condition contained in Section
6.2 as of the date of such termination; or
(f) by the Company, if any of the conditions set forth in Section 6.3 shall
have become incapable of fulfillment, and shall not have been waived by the
Company, or if Parent or Sub shall breach in any material respect any of their
respective representations, warranties or obligations hereunder and such breach
shall not have been cured in all material respects or waived and Parent or Sub,
as the case may be, shall not have provided reasonable assurance that such
breach will be cured in all material respects on or before the Closing Date, but
only if such breach, singly or together with all other such breaches,
constitutes a failure of the condition contained in Section 6.3 as of the date
of such termination;
- 27 -
<PAGE>
provided, however, that the party seeking termination pursuant to clause (e) or
(f) hereof is not in breach of any of its material representations, warranties,
covenants or agreements contained in this Agreement.
SECTION 7.2. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the last
three sentences of Section 5.3 and Sections 7.2, 7.3 and 8.2. Nothing contained
in this Section shall relieve any party from any liability resulting from any
material breach of the representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 7.3. Expenses. In the event that this Agreement is terminated by
the Company pursuant to subsection 7.1(c) or by Parent pursuant to subsection
7.1(d), Parent and Sub shall be entitled to reimbursement by the Company for
their out-of-pocket expenses incurred in connection with the negotiation,
execution, delivery and performance of this Agreement and the Financing,
provided that such reimbursement for expenses shall not exceed $1,000,000.
SECTION 7.4. Amendment. Subject to the applicable provisions of the DGCL,
at any time prior to the Effective Time, the parties hereto may modify or amend
this Agreement, by written agreement executed and delivered by duly authorized
officers of the respective parties; provided, however, that after approval of
the Merger by the stockholders of the Company, no amendment shall be made which
reduces the consideration payable in the Merger or adversely affects the rights
of the Company's stockholders hereunder without the approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing' signed on behalf of each of the parties.
SECTION 7.5. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to Section 7.3, waive compliance with any of the agreements or conditions of the
other parties contained in this Agreement. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
- 28 -
<PAGE>
SECTION 7.6. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 7.1, an amendment of this
Agreement pursuant to Section 7.3 or an extension or waiver pursuant to Section
7.4 shall, in order to be effective and in addition to requirements of
applicable law, require, in the case of Parent, Sub or the Company, action by
its Board of Directors or the duly authorized designee of its Board of
Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time, including, without
limitation, Section 5.7.
SECTION 8.2. Fees and Expenses. Except as provided otherwise in Sections
5.2 and 7.3, whether or not the Merger shall be consummated, each party hereto
shall pay its own expenses incident to preparing for, entering into and carrying
out this Agreement and the consummation of the transactions contemplated hereby.
SECTION 8.3. Definitions. For purposes of this Agreement:
(a) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act;
(b) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity; and
(c) a "subsidiary" of any person means another person 50% of the equity
securities of which are owned directly or indirectly by such first person;
provided, however, that joint ventures or partnerships engaged in the business
of real estate development, management or ownership shall not be deemed to be
subsidiaries unless such first person owns directly or indirectly 80% of the
equity securities of such joint venture or partnership.
SECTION 8.4. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent
- 29 -
<PAGE>
by overnight courier (providing proof of delivery) or telecopy to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Sub, to
DavCo Acquisition Holding Inc.
1657 Crofton Boulevard
Crofton, Maryland 21114
Attention: Ronald D. Kirstien
with a copy to:
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Kirk A. Radke
(b) if to the Company, to
DavCo Restaurants, Inc.
1657 Crofton Boulevard
Crofton, Maryland 21114
Attention: Board of Directors
with a copy to:
Dechert Price & Rhoads
Bell Atlantic Tower
40th Floor
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: G. Daniel O'Donnell
SECTION 8.5. Interpretation. When a reference is made in this Agreement to
a Section or Schedule, such reference shall be to a Section of, or a Schedule
to, this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
SECTION 8.6. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
- 30 -
<PAGE>
SECTION 8.7. Entire Agreement; Third-Party Beneficiaries. This Agreement
and the other agreements referred to herein constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement. This Agreement
is not intended to confer upon any person, other than the parties hereto and the
third party beneficiaries referred to in the following sentence, any rights or
remedies. The parties hereto expressly intend the provisions of Section 5.6 to
confer a benefit upon and be enforceable by, as third party beneficiaries of
this Agreement, the third persons referred to in, or intended to be benefitted
by, such provisions.
SECTION 8.8. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.9. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any such assignment that is not
consented to shall be null and void, except that Parent may assign this
Agreement (i) to any wholly owned subsidiary of Parent or (ii) together with all
of the outstanding capital stock of Sub, to an entity organized under the
corporate or limited liability laws of a jurisdiction of one of the United
States of America, the ownership interests of which entity are substantially
identical to the ownership interests of Parent and which entity specifically and
expressly assumes by written agreement the obligations of Parent under this
Agreement; in either case without Parent being released from liability
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.10. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
(without requirement to post a bond) the terms and provisions of this Agreement,
this being in addition to any other remedy to which they are entitled at law or
in equity.
SECTION 8.11. Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision
- 31 -
<PAGE>
of this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or portion of
any provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been contained
herein.
- 32 -
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
DAVCO RESTAURANTS, INC.
By: /s/ David J. Norman
-----------------------------
Name: David J. Norman
Title: Secretary
Attest:
/s/ Richard H. Borchers
--------------------------------
Name: Richard H. Borchers
Title: Executive Vice President
DAVCO ACQUISITION HOLDING INC.
By: /s/ Ronald D. Kirstien
-----------------------------
Name: Ronald D. Kirstien
Title: President
Attest:
/s/ Harvey Rothstein
--------------------------------
Name: Harvey Rothstein
Title: Vice President
DAVCO MERGER SUB INC.
By: /s/ Ronald D. Kirstien
-----------------------------
Name: Ronald D. Kirstien
Title: President
Attest:
/s/ Harvey Rothstein
--------------------------------
Name: Harvey Rothstein
Title: Vice President
- 33 -
<PAGE>
DISCLOSURE SCHEDULE
Section 3.1(b) - Subsidiaries
Section 3.1(c) - Capitalization
Section 3.1(d) - Authority
Section 3.1(d)(iii) - Consents
Section 3.1(f) - Absence of Changes
Section 4.1(v) - Conduct of Business: Assets
Section 4.1(vii) - Conduct of Business: Indebtedness
<PAGE>
Section 3.1(b)
Subsidiaries
Name Jurisdiction Capitalization Ownership*
Southern Hospi- Tennessee 100 shares Company
tality Corporation common stock
outstanding
MDF, Inc. Delaware 100 shares Company
common stock
outstanding
FriendCo Rest- Maryland 100 shares Company
aurants, Inc. common stock
outstanding
Heron Realty Maryland 100 shares Company
Corporation common stock
("Heron") outstanding
DavCo Oil Company Maryland 100 shares Heron
common stock
outstanding
- ------------------------
* All shares are owned 100% by the entity shown.
<PAGE>
Section 3.1(c)
Capitalization
See "Stock Option Summary by Individual", attached hereto as Attachment A.
<PAGE>
Attachment A
<TABLE>
<CAPTION>
Stock Option Summary by Individual
Option Price: $16.125 $8.500 $9.875
------- ------ ------
Executives 1994 Pool 1996 Pool 1997 Pool Totals
--------------- --------------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
R. Kirstien * Orig. Issued 0 7,500 7,500 15,000
Cancelled 0 0
--------------- --------------- -------------- --------------- -----------
Remaining 0 7,500 7,500 15,000
H. Rothstein * Orig. Issued 0 7,500 7,500 15,000
Cancelled 0 0
0
--------------- --------------- -------------- --------------- -----------
Remaining 0 7,500 7,500 15,000
J. Cunnane Orig. Issued 5,000 3,000 3,000 11,000
Cancelled 0
0
--------------- --------------- -------------- --------------- -----------
Remaining 5,000 3,000 3,000 11,000
R. Borchers Orig. Issued 5,000 3,000 3,000 11,000
Cancelled 0
0
--------------- --------------- -------------- --------------- -----------
Remaining 5,000 3,000 3,000 11,000
P. Campisi Orig. Issued 0 3,000 0 3,000
Cancelled 4,000 3,000 7,000
Re-Issued 5,000 5,000
---------------- ---------------- -------------- --------------- -----------
Remaining 1,000 0 0 1,000
C. Graham Orig. Issued 5,000 0 0 5,000
Cancelled 5,000 5,000
0
---------------- ---------------- -------------- --------------- -----------
Remaining 0 0 0 0
P. Albright Orig. Issued 5,000 0 0 5,000
Cancelled 3,000 3,000
0
---------------- ---------------- ------------- --------------- -----------
Remaining 2,000 0 0 2,000
C. McGuire Orig. Issued 0 1,000 3,000 4,000
Cancelled 0 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 0 1,000 3,000 4,000
<PAGE>
R. Jacobs Orig. Issued 0 1,500 1,500 3,000
Cancelled 0 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 0 1,500 1,500 3,000
D. Jones Orig. Issued 0 1,500 2,000 3,500
Cancelled 0 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 0 1,500 2,000 3,500
D. Norman Orig. Issued 0 0 2,000 2,000
Cancelled 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 0 0 2,000 2,000
Total Exec.'s Total Issued 20,000 28,000 29,500 77,500
Cancelled 12,000 3,000 0 15,000
Re-Issued 5,000 0 0 5,000
---------------- ---------------- ------------- --------------- -----------
Remaining 13,000 25,000 29,500 67,500
================ ================ ============= =============== ===========
<PAGE>
Directors 1994 Pool 1996 Pool 1997 Pool Totals
---------------- ---------------- ------------- --------------- -----------
B. Winokur Orig. Issued 10,000 10,000 4,000 24,000
Cancelled 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 10,000 10,000 4,000 24,000
G. Marchetti Orig. Issued 5,000 3,000 4,000 12,000
Cancelled 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 5,000 3,000 4,000 12,000
R. Habeck Orig. Issued 2,500 3,000 4,000 9,500
Cancelled 0 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 2,500 3,000 4,000 9,500
E. Chambers Orig. Issued 2,500 3,000 4,000 9,500
Cancelled 0 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 2,500 3,000 4,000 9,500
J. Farley * Orig. Issued 0 1,000 4,000 5,000
Cancelled 0 0 0
Re-Issued 0 0
---------------- ---------------- -------------- ------------- ------------
Remaining 0 1,000 4,000 5,000
H. Rosser Orig. Issued 0 0 4,000 4,000
Cancelled 0 0
0
---------------- ---------------- ------------- --------------- -----------
Remaining 0 0 4,000 4,000
Total Directors Total Issued 20,000 20,000 24,000 64,000
Cancelled 0 0 0 0
Re-Issued 0 0 0 0
---------------- ---------------- -------------- ------------- ------------
Remaining 20,000 20,000 24,000 64,000
================ ================ ============== ============= ============
*********** ********** **************** **************** ************** ************* ************
Combined Total Issued 40,000 48,000 53,500 141,500
Cancelled 12,000 3,000 0 15,000
Re-Issued 5,000 0 0 5,000
---------------- ---------------- -------------- ------------- ------------
Remaining 33,000 45,000 53,500 131,500
---------------- ---------------- ============== ============= ============
</TABLE>
<PAGE>
* Footnote: The above does not include any options received as part of the
Companys' IPO. Those options are as follows:
R. Kirstien 330,769
H. Rothstein 184,274
J. Farley/S. Day 40,575
Warrants: WEP 441,026
----------
Subtotal: 996,644
Per Above 131,500
Total Options/Warrants: 1,128,144
<PAGE>
Section 3.1(d)
Authority
None.
<PAGE>
Section 3.1(d)(iii)
Consents
[Premerger notification and clearance under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.]
<PAGE>
Section 3.1(f)
Absence of Changes
1. The Company has entered into that certain Asset Purchase and Sale
Agreement, dated as of September 24, 1997, by and among the Company, MDF,
and Western and Southern Food Services I, L.L.C., providing for the sale of
certain MDF restaurants.
<PAGE>
Section 4.1(v)
Conduct of Business: Assets
1. The Company has entered into that certain Asset Purchase and Sale
Agreement, dated as of September 24, 1997, by and among the Company, MDF,
and Western and Southern Food Services I, L.L.C., providing for the sale of
certain MDF restaurants.
<PAGE>
Section 4.1(vii)
Conduct of Business: Indebtedness
None.
<PAGE>
Exhibit A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DAVCO RESTAURANTS, INC.
ARTICLE ONE
The name of the corporation is DavCo Restaurants, Inc. (hereinafter called
the "Corporation").
ARTICLE TWO
The address of the Corporation's registered office in the state of Delaware
is 1013 Centre Road, Wilmington, Delaware 19805, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is
Corporation Service Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE FOUR
The total number of shares which the Corporation shall have the authority
to issue is one thousand (1,000) shares, all of which shall be shares of Common
Stock, with a par value of $0.001 per share.
ARTICLE FIVE
The Corporation is to have perpetual existence.
ARTICLE SIX
The directors shall have the power to adopt, amend or repeal By-Laws,
except as may be otherwise be provided in the By-Laws.
ARTICLE SEVEN
The Corporation expressly elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
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ARTICLE EIGHT
Section 1. Nature of Indemnity. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he (or a person of whom
he is the legal representative), is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary, or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys' fees
actually and reasonably incurred by such person in connection with such
proceeding and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, except as provided
in Section 2 of this Article Eight, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding initiated by such
person only if such proceeding was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article Eight shall
be a contract right and, subject to Sections 2 and 5 of this Article Eight,
shall include the right to payment by the Corporation of the expenses incurred
in defending any such proceeding in advance of its final disposition. The
Corporation may, by action of the Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the Corporation under Section 1 of
this Article Eight or advance of expenses under Section 5 of this Article Eight
shall be made promptly, and in any event within 30 days, upon the written
request of the director or officer. If a determination by the Corporation that
the director or officer is entitled to indemnification pursuant to this Article
Eight is required, and the Corporation fails to respond within sixty days to a
written request for indemnity, the Corporation shall be deemed to have approved
the request. If the Corporation denies a written request for indemnification or
advancing of expenses, in whole or in part, or if payment in full pursuant to
such request is not made within 30 days, the right to indemnification or
advances as granted by this Article Eight shall be enforceable by the director
or officer in any court of competent jurisdiction. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to
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enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any, has been tendered
to the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the General Corporation Law of the State of Delaware
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the Corporation. Neither the failure of the
Corporation (including the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination by
the Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 3. Nonexclusivity of Article Eight. The rights to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article Eight shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The Corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the Corporation or was serving at the request
of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such liability under this Article Eight.
Section 5. Expenses. Expenses incurred by any person described in Section 1
of this Article Eight in defending a proceeding shall be paid by the Corporation
in advance of such proceeding's final disposition unless otherwise determined by
the Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation. Such
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article Eight and who are or were employees or
agents of the Corporation, or who are or were serving at the request of the
Corporation as employees or agents of another corporation, partnership, joint
venture, trust or other enterprise, may
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be indemnified to the extent authorized at any time or from time to time by the
Board of Directors.
Section 7. Contract Rights. The provisions of this Article Eight shall be
deemed to be a contract right between the Corporation and each director or
officer who serves in any such capacity at any time while this Article Eight and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article Eight or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
Section 8. Merger or Consolidation. For purposes of this Article Eight,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
Eight with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence had
continued.
ARTICLE NINE
The Corporation reserves the right to amend or repeal any provisions
contained in this Certificate of Incorporation from time to time and at any time
in the manner now or hereafter prescribed by the laws of the State of Delaware,
and all rights conferred upon stockholders and directors are granted subject to
such reservation.
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Exhibit 20.1
FOR IMMEDIATE RELEASE
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DAVCO AGREES TO MERGER
Crofton, MD, October 21, 1997
CROFTON, MD. (October 21, 1997) -- DavCo Restaurants, Inc. (ASE: DVC)
today announced that it has executed a definitive merger agreement with DavCo
Acquisition Holding Inc., for a merger transaction in which DavCo Acquisition
Holding Inc. would acquire all of DavCo's issued and outstanding shares (other
than shares held by DavCo Acquisition Holding Inc.) for $20 cash per share.
As previously disclosed, DavCo Acquisition Holding Inc. is owned by an
investor group that is headed by Ronald D. Kirstien, the Company's President and
Chief Executive Officer, and Harvey Rothstein, Executive Vice President of the
Company, and includes the Company's principal stockholder, Citicorp Venture
Capital, Ltd., which currently holds approximately 48% of the Company's
outstanding shares, and certain affiliates of CVC.
The terms of the merger agreement require approval by a majority of the
Company's stockholders, including approval by a majority of stockholders
unaffiliated with the investor group. In addition, the merger is subject to
certain conditions, including regulatory approvals and the receipt of necessary
financing. The investor group has obtained a commitment from Global Alliance
Finance Company, L.L.C. to provide up to $150 million of debt financing to
complete the merger.
DavCo Restaurants, Inc. is the largest franchisee of Wendy's
International, Inc. The Company operates 229 Wendy's restaurants in Maryland,
Northern Virginia, Washington, D.C., Metropolitan St. Louis, Central Illinois,
and Nashville, Tennessee. The Company also operates 34 Friendly's Restaurants in
the Mid- Atlantic market for a total of 263 restaurants.
