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) January , 1998
DavCo Restaurants, Inc.
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(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
Incorporation No.)
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
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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. entered into an Agreement, dated as of January
7, 1998 (the "Agreement") with Wendy's International, Inc. ("Wendy's"), Citicorp
Venture Capital, Ltd. ("CVC"), DAC Acquisition Holding, LLC (as successor in
interest to DavCo Acquisition Holding Inc., "DAC"), Southern Hospitality
Corporation, Ronald D. Kirstien and Harvey Rothstein, with respect to, among
other things, the proposed merger transaction (the "Merger") among DAC, DavCo
Merger Sub Inc. ("Merger Sub") and the Company. As previously disclosed, the
Company, DAC and Merger Sub entered into an Agreement and Plan of Merger dated
as of October 21, 1997, pursuant to which DAC would acquire through merger all
of the Company's outstanding shares (other than shares held by DAC) for $20 in
cash per share.
Pursuant to the Agreement, DAC, CVC, Mr. Kirstien and Mr. Rothstein
agreed with Wendy's that, in exchange for Wendy's consent to the proposed Merger
and upon the effectiveness of the Merger, they would comply with and be bound by
certain provisions of the Company's Development Agreement and Franchise
Agreements with Wendy's and certain Wendy's policies, including with respect to
future acquisitions of Wendy's franchises, future transfers by CVC, Mr. Kirstien
and Mr. Rothstein of equity interests in DAC and future operations of DAC.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Not applicable
(b) Not applicable
(c) Exhibits.
10.61 Agreement, by and among Wendy's International, Inc., DAC
Acquisition Holdings, LLC, DavCo Restaurants, Inc.,
Southern Hospitality Corporation, Citicorp Venture Capital
Ltd., Ronald Kirstien, and Harvey Rothstein, dated as of
January 7, 1998.
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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: January 7, 1998 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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10.61 Agreement, by and among Wendy's International,
Inc., DAC Acquisition Holdings, LLC, DavCo
Restaurants, Inc., Southern Hospitality
Corporation, Citicorp Venture Capital Ltd., Ronald
Kirstien, and Harvey Rothstein, dated as of
January 7, 1998.
Exhibit 10.61
AGREEMENT
This Agreement (the "Agreement") is made as of January 7, 1998, by and
among Wendy's International, Inc., an Ohio corporation ("Wendy's"), DAC
Acquisition Holding, LLC, a Delaware limited liability company ("DAC"), DavCo
Restaurants, Inc., a Delaware corporation ("DavCo"), Southern Hospitality
Corporation, a Tennessee corporation ("SHC"), Citicorp Venture Capital Ltd., a
New York corporation ("CVC"), Ronald Kirstien ("Kirstien"), and Harvey Rothstein
("Rothstein"). DAC, DavCo, SHC, CVC, Kirstien, and Rothstein are collectively
referred to herein as the "DavCo Parties".
Preliminary Statement
A. Wendy's and DavCo are parties to development agreements, each dated June
19, 1978 granting DavCo development rights to establish Wendy's Old
Fashioned Hamburgers Restaurants ("Restaurants"), which development
agreements were subsequently combined into a single development agreement
by an Addendum Agreement, dated November 14, 1980 (the "1978 Development
Agreement") and later amended by an Agreement and Consent to Assignment,
dated as of December 4, 1987 (the "1987 Consent"); an Agreement and
Consent to Recapitalization dated as of February 10, 1993 (the "1993
Consent"); a Consent and Waiver Agreement dated as of August 3, 1993 (the
"Consent and Waiver"); and a Letter of Intent, dated April 28, 1997 (the
"Letter of Intent"). The 1978 Development Agreement as amended is referred
to herein as the "Development Agreement." The 1987 Consent, the 1993
Consent, the Consent and Waiver, and the Letter of Intent are referred to
herein as the "DavCo Documents."
B. Wendy's and DavCo are parties to certain unit franchise agreements, each
for the operation of a single Restaurant, executed at various times
pursuant to the Development Agreement (the "DavCo Franchise Agreements");
and Wendy's and SHC, which is a wholly-owned subsidiary of DavCo are
parties to certain restaurant franchise agreements and certain unit
franchise agreements (the "SHC Franchise Agreements") each for the
operation of a single Restaurant, executed at various times.
C. Each of the DavCo Franchise Agreements and each of the SHC Franchise
Agreements has been amended by the DavCo Documents. The SHC Franchise
Agreements and the DavCo Franchise Agreements, as amended, are referred to
herein collectively, as the "Franchise Agreements".
D. In addition to amendments to the Development Agreement and the Franchise
Agreements, the DavCo Documents contain
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provisions related to the ownership and transfer of securities of DavCo
and the operations of DavCo.
E. A special meeting of the DavCo shareholders has been called to vote on a
merger between DavCo and DavCo Merger Sub, Inc., a wholly-owned subsidiary
of DAC ("DAC Sub"). DavCo will continue as the surviving corporation and a
wholly- owned subsidiary of DAC. Kirstien, Rothstein, and CVC will own in
excess of 80% of the outstanding voting stock of DAC. In connection with
this transaction the DavCo Parties wish to receive Wendy's consent and
waiver of any right of first refusal.
F. In exchange for Wendy's consent and waiver of any right of first refusal,
Wendy's and the DavCo Parties wish to apply certain of the provisions of
the DavCo Documents, the Development Agreement, and of the Franchise
Agreements to the ownership and transfer of securities of DAC and the
operations of DAC.
1. Acquisition of Additional Wendy's Franchises
1.1. Section 2.1.A of the Letter of Intent shall apply to DAC and any
entity DAC controls.
1.2. CVC shall comply with Wendy's then-current policies in any direct or
indirect acquisition of any voting interest or equity interest in a Wendy's
franchisee. CVC's interest in DAC, DavCo, or SHC shall not create any
presumption of an exception to such policies.
2. Status of DAC
Notwithstanding any provision to the contrary, DAC shall be a co-Franchise
Owner under the Development Agreement, each Franchise Agreement, as amended and
any Wendy's franchise agreement executed by any of DAC's direct or indirect
subsidiaries subsequent to the effective date of this Agreement.
3. Transfer of DAC Securities
3.1. Section 4.2B(ii) of the Letter of Intent shall apply to any offering
of the securities of DAC.
3.2. Section 4.2B(iii) shall apply to any transfer by CVC of ten percent
(10%) or more of the equity or voting interest of DAC, as described therein.
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4. Ownership of DAC Securities
4.1. The limitations of ownership of DavCo Common Stock and equity by
persons or entities other than CVC, Kirstien, and Rothstein set forth in
Paragraph 6.4 of the Consent and Waiver shall apply to the ownership of the
common stock and equity of DAC.
4.2. The obligations of Kirstien and Rothstein pursuant to Paragraph 6.4
of the Consent and Waiver, as amended by Paragraph 4.1.B. of the Letter of
Intent, shall apply to ownership of a voting or equity interest in DAC by
Kirstien and Rothstein.
4.3. Paragraph 4.3 of the 1993 Consent is amended to also refer to an
equity interest (to be resolved in accordance with Paragraph 4.2.2 of the Letter
of Intent).
5. Limitations on Competition
5.1. The provisions of Paragraph 5.A and Paragraph 5.B of the Letter of
Intent shall apply to DAC and its affiliates.
6. Consolidation Agreement
6.1. Immediately following the Effective Date of this Agreement, Wendy's
and each of the DavCo Parties shall enter into negotiations in good faith of an
agreement (the "Consolidation Agreement") which will terminate all agreements
between Wendy's and any DavCo party except the Development Agreement and the
Franchise Agreements. The Consolidation Agreement shall incorporate all of the
current rights and obligations of Wendy's and each DavCo Party under this
Agreement, the DavCo Documents and all current modifications of the Development
Agreement and Franchise Agreements as amended by the DavCo Documents.
7. Miscellaneous
7.1. The provisions of this Agreement shall apply on and after the
Effective Date. The Effective Date of this Agreement shall be the date on which
the Certificate of Merger of DAC Sub into DavCo is filed with the Secretary of
State of Delaware. If the Effective Date of this Agreement has not occurred
prior to June 30, 1998, this Agreement shall terminate, and no party to this
Agreement shall have any claim against any other party resulting from such
termination.
7.2. Any default or breach of this Agreement by a DavCo Party will
constitute a default and breach of each of the DavCo Documents, the Development
Agreement, and each franchise agreement between DavCo and Wendy's and SHC and
Wendy's, including the Franchise Agreements.
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7.3. The laws of the state of Ohio shall apply to any claim or controversy
regarding the making, entering into, performance, or interpretation of this
Agreement, without giving effect to any conflict-of-law rules of Ohio. Any
action brought by any party to this Agreement against any other party with
respect to any such claim shall be brought in either federal or state court
within the state of Delaware, and the parties each hereby waive all questions of
personal jurisdiction or venue for the purpose of carrying out this section of
the Agreement.
7.4. To the extent the DavCo Parties elect to proceed with this structure
using an entity other than DAC or DAC Sub, the parties shall enter into
appropriate documentation to reflect the applicability of this Agreement to that
entity.
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IN WITNESS WHEREOF, the parties have executed this Agreement, on the
date(s) indicated below.
Wendy's International, Inc. DAC Acquisition Holding, Inc.
By: /s/ Fritz Reed By: /s/ Ronald D. Kirstien
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Name: Fritz Reed Name: Ronald D. Kirstien
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Title: Chief Financial Officer Title: Chairman and President
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Date: January 7, 199 Date: January 7, 1997
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DavCo Restaurants, Inc. Citicorp Venture Capital Ltd.
By: /s/ Ronald D. Kirstien By: /s/ Byron L. Knief
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Name: Ronald D. Kirstien Name: Byron L. Knief
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Title: Chairman and President Title: Senior Vice President
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Date: January 7, 1997 Date: January 7, 1997
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Southern Hospitality Corporation
By: /s/ Ronald D. Kirstien /s/ Ronald D. Kirstien
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Ronald Kirstien
Name: Ronald D. Kirstien
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Date: January 7, 1997
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Title: Chairman and President
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Date: January 7, 1997 /s/ Harvey Rothstein
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Harvey Rothstein
Date: January 7, 1997
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