<PAGE> 1
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) July 15, 1997
--------------------------------
CKE RESTAURANTS, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-13192 33-0602639
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(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
1200 North Harbor Boulevard, Anaheim, California 92801
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (714) 774-5796
-----------------------------
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1997, CKE Restaurants, Inc., a Delaware corporation (the
"Company"), acquired Hardee's Food Systems, Inc., a North Carolina corporation
("Hardee's"), for $327.0 million (subject to adjustment) in cash from Imasco
Holdings, Inc. ("Imasco Holdings") pursuant to the Stock Purchase Agreement,
dated as of April 27, 1997 (the "Stock Purchase Agreement"), among the Company,
Hardee's and Imasco Holdings (the "Hardee's Acquisition"). Hardee's was founded
in 1961 and is the nation's fourth largest quick-service hamburger restaurant
chain, based on system-wide sales, with a leading market presence in the
Southeastern and Midwestern United States. As of March 31, 1997, the Hardee's
system included 3,152 restaurants, of which 788 were operated by Hardee's and
2,364 were operated by its franchisees and licensees. The Hardee's Acquisition
was financed by (i) a public offering of 8,337,500 shares of Common Stock of the
Company (including 1,087,500 shares issued upon the exercise of over-allotment
options granted to the underwriters), which generated net proceeds (after
underwriting discounts and estimated offering expenses) of $222.2 million (the
"Offering"); and (ii) borrowings of $133.9 million under the Company's New
Credit Facility described below.
Concurrently with the closing of Hardee's Acquisition, the Company
entered into a Credit Agreement with Banque Paribas, as Agent, and the lenders
identified therein (the "New Credit Facility"). The New Credit Facility consists
of a $75.0 million term loan facility and a $225.0 million revolving credit
facility.
Immediately prior to the closing of the Hardee's Acquisition, Hardee's
entered into three Supply Agreements with Fast Food Merchandisers, Inc. ("FFM")
and a Distribution Agreement with FFM, pursuant to which FFM will supply
Hardee's with substantially all of its requirements for certain food and other
products and will distribute such products, together with most other food
products sold or used by Hardee's in its restaurants, to Hardee's. FFM, formerly
a wholly-owned subsidiary of Hardee's, was transferred by Hardee's to Imasco
Holdings immediately prior to the closing of the Hardee's Acquisition.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired. The following financial
statements of Hardee's are incorporated by reference herein from pages F-29
through F-53 of the Company's Prospectus, dated July 9, 1997, a copy of which
was filed with the Commission pursuant to Rule 424(b) under the Securities Act
of 1933, as amended, on July 11, 1997.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.................................................................... F-29
Combined Balance Sheets as of December 31, 1995 and 1996........................................ F-30
Combined Statements of Operations for each of the years in the three-year period ended
December 31, 1996............................................................................. F-31
Combined Statements of Shareholder's Equity for each of the years in the three-year period
ended December 31, 1996....................................................................... F-32
Combined Statements of Cash Flows for each of the years in the three-year period ended
December 31, 1996............................................................................. F-33
Notes to Combined Financial Statements.......................................................... F-35
Combined Balance Sheets as of December 31, 1996 and March 31, 1997 (unaudited).................. F-48
Combined Statements of Operations for the three months ended March 31, 1996 and
March 31, 1997 (unaudited).................................................................... F-49
Combined Statements of Shareholder's Equity for the year ended December 31, 1996 and the
three months ended March 31, 1997 (unaudited)................................................. F-50
Combined Statements of Cash Flows for the three months ended March 31, 1996 and
March 31, 1997 (unaudited).................................................................... F-51
Notes to Combined Financial Statements (unaudited).............................................. F-52
</TABLE>
2
<PAGE> 3
(b) Pro Forma Financial Information.
The following unaudited pro forma combined condensed financial information
is based upon the historical consolidated financial statements of the Company
and has been prepared to illustrate the effects of the Hardee's Acquisition.
The unaudited pro forma combined condensed balance sheet as of May 19, 1997
gives effect to the Hardee's Acquisition and certain related transactions, the
application of the estimated net proceeds from the Offering and borrowings under
the New Credit Facility to finance the Hardee's Acquisition, as if all such
transactions had been completed on May 19, 1997 and was prepared based upon the
consolidated balance sheet of the Company as of May 19, 1997 and the combined
balance sheet of Hardee's as of March 31, 1997. The unaudited pro forma combined
condensed statements of operations for the fiscal year ended January 31, 1997
and for the 16 weeks ended May 19, 1997 give effect to the transactions
described above as if all such transactions had been completed on February 1,
1996. The unaudited pro forma combined condensed statement of operations for the
fiscal year ended January 31, 1997 was prepared based upon the consolidated
statement of income of the Company for the fiscal year ended January 31, 1997
and the combined statement of operations of Hardee's for the year ended December
31, 1996. The unaudited pro forma combined condensed statement of operations for
the 16 weeks ended May 19, 1997 was prepared based upon the consolidated
statement of income of the Company for the 16 weeks ended May 19, 1997 and the
combined statement of operations of Hardee's for the three months ended March
31, 1997.
The unaudited pro forma combined condensed financial information is
provided for comparative purposes only and is not indicative of the results of
operations or financial position of the combined companies that would have
occurred had the Hardee's Acquisition occurred at the beginning of the periods
presented or on the date indicated, nor is it indicative of future operating
results or financial position. The unaudited pro forma adjustments are based
upon currently available information and upon certain assumptions that
management of the Company believes are reasonable under the circumstances. The
unaudited pro forma combined condensed financial information and the related
notes thereto should be read in conjunction with the Company's historical
consolidated financial statements and with the combined financial statements of
Hardee's, and the related notes, listed in Item 7(a) above. In addition, the
unaudited pro forma combined condensed financial information does not reflect
certain cost savings that management believes may be realized following the
Hardee's Acquisition. These savings are expected to be realized primarily
through the rationalization of Hardee's operations and implementation of the
Company's management practices. Additionally, the Company believes the Hardee's
Acquisition will enable it to continue to achieve economies of scale, such as
enhanced purchasing power.
The historical combined statement of operations of Hardee's for the year
ended December 31, 1996 has been adjusted to reflect the continuing operations
of the 808 company-operated Hardee's restaurants open and operating as of
December 31, 1996. The historical combined statement of operations of Hardee's
for the three months ended March 31, 1997 has been adjusted to reflect the
continuing operations of the 788 company-operated Hardee's restaurants open and
operating as of March 31, 1997. The historical combined financial statements of
Hardee's also include (i) promotional costs in the amount of $5.6 million in
1996, which the Company believes will be non-recurring in future periods and
(ii) up to 114 under-performing company-operated restaurants which the Company
intends to sell or franchise to an independent third party. These 114
restaurants generated revenues of $74.2 million and operating losses of $13.0
million in 1996 and revenues of $18.0 million and operating losses of $2.8
million for the three months ended March 31, 1997.
The Hardee's Acquisition will be accounted for using the purchase method of
accounting. Accordingly, the Company's cost to acquire Hardee's will be
allocated to the assets acquired and liabilities assumed according to their
estimated fair values as of the date of acquisition after giving effect to the
purchase price adjustments required by the Stock Purchase Agreement. The
allocation is dependent upon certain valuations and other studies that have not
progressed to a stage where there is sufficient information to make a definitive
allocation. Accordingly, the purchase allocation adjustments made in connection
with the preparation of the unaudited pro forma combined condensed financial
information are preliminary, and have been made solely for the purpose of
preparing such unaudited pro forma combined condensed financial information;
however, no material effect on the statements of operations is anticipated.
3
<PAGE> 4
CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF MAY 19, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------
CKE HARDEE'S
MAY 19, MARCH 31, PRO FORMA PRO FORMA
1997 1997 COMBINED ADJUSTMENTS COMBINED
-------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 28,201 $ 2,867 $ 31,068 $ 29,080 A $ 60,148
Marketable securities............................ 573 0 573 573
Accounts receivable.............................. 6,752 18,406 25,158 (7,300)C 17,858
Related party receivables........................ 2,056 -- 2,056 2,056
Income tax receivables........................... -- 12,472 12,472 (12,472)D --
Inventories...................................... 9,058 12,101 21,159 21,159
Deferred income taxes, net....................... 7,214 -- 7,214 7,214
Other current assets and prepaid expenses........ 11,279 3,058 14,337 125 E 14,462
-------- -------- -------- --------- --------
Total current assets........................... 65,133 48,904 114,037 9,433 123,470
Property and equipment, net........................ 211,256 395,787 607,043 607,043
Property under capital leases, net................. 35,951 4,091 40,042 40,042
Long-term investments.............................. 47,119 -- 47,119 47,119
Notes receivable................................... 6,036 8,733 14,769 14,769
Related party receivables.......................... 6,078 -- 6,078 6,078
Costs in excess of net assets of businesses
acquired, net.................................... 24,331 -- 24,331 51,436 F 75,767
Other assets....................................... 14,077 35,688 49,765 (30,806)E,G 18,959
-------- -------- -------- --------- --------
Total assets.............................. $409,981 $493,203 $903,184 $ 30,063 $933,247
======== ======== ======== ========= ========
Current liabilities:
Current portion of long-term debt................ $ 758 $ 9,066 $ 9,824 $ 6,000 A,I $ 15,824
Current portion of capital lease obligations..... 4,960 561 5,521 5,521
Accounts payable................................. 25,165 16,599 41,764 41,764
Other current liabilities........................ 51,694 74,511 126,205 14,148 E,H,I 140,353
-------- -------- -------- --------- --------
Total current liabilities...................... 82,577 100,737 183,314 20,148 203,462
Long-term debt..................................... 34,055 21,405 55,460 99,164 A,I 154,624
Capital lease obligations.......................... 46,323 6,008 52,331 52,331
Other long-term liabilities........................ 21,610 27,378 48,988 21,225 J,K,L 70,213
Post retirement benefits........................... -- 22,641 22,641 (17,635)M 5,006
-------- -------- -------- --------- --------
Total liabilities......................... 184,565 178,169 362,734 122,902 485,636
Stockholders' equity............................... 225,416 315,034 540,450 (92,839)A,B 447,611
-------- -------- -------- --------- --------
Total liabilities and stockholders'
equity.................................. $409,981 $493,203 $903,184 $ 30,063 $933,247
======== ======== ======== ========= ========
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial information.
4
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
CKE HARDEE'S
FISCAL YEAR -------------------------------------- CKE &
ENDED YEAR ENDED DECEMBER 31, 1996 ADJUSTED
JANUARY 31, -------------------------------------- HARDEE'S PRO FORMA PRO FORMA
1997 HISTORICAL ADJUSTMENTS(Q) ADJUSTED COMBINED ADJUSTMENTS COMBINED
------------ ---------- -------------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.................... $614,080 $806,044 $(60,982) $745,062 $1,359,142 $ $1,359,142
Operating costs and expenses:
Restaurant operations:
Food and packaging............ 167,625 238,359 (18,800) 219,559 387,184 387,184
Payroll and other employee
benefits.................... 149,846 264,195 (26,591) 237,604 387,450 387,450
Occupancy and other
expenses.................... 112,689 175,892 (21,477) 154,415 267,104 267,104
Franchised and licensed
restaurants................... 71,986 34,174 1,001 35,175 107,161 107,161
Advertising expenses............ 28,291 44,075 (7,679) 36,396 64,687 64,687
General and administrative
expenses...................... 41,643 79,735 -- 79,735 121,378 1,285 F 122,663
-------- -------- -------- -------- ---------- --------- ----------
572,080 836,430 (73,546) 762,884 1,334,964 1,285 1,336,249
Operating income (loss)........... 42,000 (30,386) 12,564 (17,822) 24,178 (1,285) 22,893
Interest expense.................. (9,877) (6,981) -- (6,981) (16,858) (10,866)E,N (27,724)
Other income, net................. 4,587 9,508 -- 9,508 14,095 (9,508)O 4,587
-------- -------- -------- -------- ---------- --------- ----------
Income (loss) before income
taxes........................... 36,710 (27,859) 12,564 (15,295) 21,415 (21,659) (244)
Income tax expense (benefit)...... 14,408 -- -- -- 14,408 (14,506)P (98)
-------- -------- -------- -------- ---------- --------- ----------
Net income (loss)................. $ 22,302 $(27,859) $ 12,564 $(15,295) $ 7,007 $ (7,153) $ (146)
======== ======== ======== ======== ========== ========= ==========
Net income (loss) per common and
common equivalent share......... $ 0.73 $ (0.00)
======== ==========
Common and common equivalent
shares used in computing per
share amounts (000's)........... 30,414 37,792
======== ==========
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial information.
5
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CKE RESTAURANTS, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE 16 WEEKS ENDED MAY 19, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
CKE HARDEE'S
SIXTEEN --------------------------------------
WEEKS THREE MONTHS ENDED CKE &
ENDED MARCH 31, 1997 ADJUSTED
MAY 19, -------------------------------------- HARDEE'S PRO FORMA PRO FORMA
1997 HISTORICAL ADJUSTMENTS(Q) ADJUSTED COMBINED ADJUSTMENTS COMBINED
---------- ---------- -------------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues........................ $235,470 $173,089 $ (944) $172,145 $407,615 $ $407,615
Operating costs and expenses:
Restaurant operations:
Food and packaging................ 65,302 50,308 132 50,440 115,742 115,742
Payroll and other employee
benefits........................ 59,606 59,657 (847) 58,810 118,416 118,416
Occupancy and other expenses...... 43,178 38,700 (1,333) 37,367 80,545 80,545
Franchised and licensed
restaurants....................... 22,496 6,218 -- 6,218 28,714 28,714
Advertising expenses................ 10,545 9,095 (953) 8,142 18,687 18,687
General and administrative
expenses.......................... 16,112 19,450 -- 19,450 35,562 396 F 35,958
-------- -------- -------- -------- -------- ------- --------
217,239 183,428 (3,001) 180,427 397,666 396 398,062
Operating income (loss)............... 18,231 (10,339) 2,057 (8,282) 9,949 (396) 9,553
Interest expense...................... (2,871) (823) -- (823) (3,694) (3,344)E,N (7,038)
Other income, net..................... 2,305 2,140 -- 2,140 4,445 (2,140)O 2,305
-------- -------- -------- -------- -------- ------- --------
Income (loss) before income taxes..... 17,665 (9,022) 2,057 (6,965) 10,700 (5,880) 4,820
Income tax expense (benefit).......... 7,079 -- -- -- 7,079 (5,151)P 1,928
-------- -------- -------- -------- -------- ------- --------
Net income (loss)..................... $ 10,586 $ (9,022) $ 2,057 $ (6,965) $ 3,621 $ (729) $ 2,892
======== ======== ======== ======== ======== ======= ========
Net income per common and common
equivalent share.................... $ 0.31 $ 0.07
======== ========
Common and common equivalent shares
used in computing per share amounts
(000's)............................. 34,300 42,638
======== ========
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial information.
6
<PAGE> 7
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
A The unaudited pro forma combined condensed balance sheet has been prepared
to reflect the acquisition of Hardee's by CKE for an aggregate estimated
purchase price of $327,000, which is subject to adjustment and was financed
as follows:
<TABLE>
<S> <C>
Borrowings under New Credit Facility.............................. $133,885
Estimated Net Proceeds of Offering................................ 222,195
--------
Total................................................... $356,080
========
</TABLE>
The excess of the foregoing amounts over the purchase price will be used
for general corporate purposes. The current portion of the New Credit
Facility is $15,000.
B The unaudited pro forma combined condensed balance sheet has been adjusted
to eliminate the shareholder's equity of Hardee's.
C To eliminate $7,300 of receivables not acquired by the Company.
D To eliminate $12,472 of federal and state income taxes receivable not
acquired by the Company.
E To record estimated acquisition costs of $1,875 and $3,500 of debt issuance
costs and $125 annual debt administration fee. The $3,500 debt issuance
costs are capitalized as other assets and amortized over 5 years.
Amortization of debt issuance costs is $700 for the fiscal year ended
January 31, 1997. Amortization for the 16 weeks ended May 19, 1997 for the
annual debt administration fee and for debt issuance costs is $254.
Acquisition costs are included as part of the costs in excess of net assets
of business acquired, net.
F To record $51,436 for the excess of consideration paid over the preliminary
estimate of the fair value of net assets acquired, to be amortized over 40
years, and to record goodwill amortization of $1,285 and $396 for the
fiscal year ended January 31, 1997 and the 16 weeks ended May 19, 1997,
respectively.
G To eliminate deferred income tax assets of $34,306 not available to the
Company.
H To record estimated severance liability of $11,400.
I To eliminate deferred income tax liabilities of $1,166, a deferred gain of
$1,586, short-term borrowings of $9,000 and long-term debt of $19,721 not
assumed by the Company.
J To record estimated store closure reserves, at the net present value of the
anticipated lease subsidy (excess of current rent over estimated sublease
income, discounted at 10%), of $22,200.
K To record a lease subsidy reserve for area offices of $5,000.
L To eliminate other long-term liabilities of $5,975 not assumed by the
Company.
M To eliminate post retirement benefits of $17,635 not assumed by the
Company.
N To record interest expense on borrowings under the New Credit Facility of
$10,041 and $3,090 for the fiscal year ended January 31, 1997 and the 16
weeks ended May 19, 1997, respectively using an estimated 7.5% interest
rate. A 0.125% increase/decrease in the estimated interest rate
incrementally increases/decreases income before income taxes by $167 and
$51 for the fiscal year ended January 31, 1997 and the 16 weeks ended May
19, 1997, respectively.
O To eliminate net management fee income of $9,508 and $2,140 received by
Hardee's from FFM (a related party) during the year ended December 31, 1996
and the three months ended March 31, 1997, respectively, which will not be
recurring.
P To record the income tax effects of the pro forma adjustments and
consolidation of the entities at a pro forma tax rate of 40.0%.
Q During the year ended December 31, 1996 and the three months ended March
31, 1997, Hardee's sold or closed 155 and 31 restaurants, respectively, the
revenues and expenses of which are included in the historical statement of
operations of Hardee's. Adjustments in this column remove the operating
results of these restaurants, as disclosed in Note 21 of Notes to Hardee's
Combined Annual Financial Statements, and Note 4 of Notes to Hardee's
Combined Interim Financial Statements, respectively. In addition, Hardee's
operating results for the year ended December 31, 1996 included a write
down of assets pursuant to Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and the reversal of a 1995 overaccrual relating
to the disposition of restaurants in certain non-core Hardee's markets.
7
<PAGE> 8
(c) Exhibits.
Exhibit Number
--------------
23.1 Consent of Deloitte & Touche LLP.
99.1 Press Release of the Company dated July 16, 1997.
99.2 Credit Agreement, dated as of July 15, 1997, by and among the
Company, Banque Paribas, as agent, and the lenders party
thereto.*
99.3 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Forest City Division).*
99.4 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Monterey Division).*
99.5 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and QVS, Inc.*
99.6 Distribution Agreement, dated as of July 14, 1997, by and
among the Company, Hardee's Food Systems, Inc. and Fast Food
Merchandisers, Inc.*
99.7 Financial Statements of Hardee's Food Systems, Inc. listed in
Item 7(a) above.
- ---------------------
* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CKE RESTAURANTS, INC.
Date: July 28, 1997 By: /s/ CARL A. STRUNK
----------------------------
Carl A. Strunk,
Executive Vice President and
Chief Financial Officer
<PAGE> 10
EXHIBIT INDEX
The following exhibits are attached hereto and incorporated herein by
reference:
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
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<C> <S> <C>
23.1 Consent of Deloitte & Touche LLP.
99.1 Press Release of the Company dated July 16, 1997.
99.2 Credit Agreement, dated as of July 15, 1997, by and among the
Company, Banque Paribas, as agent, and the lenders party
thereto.*
99.3 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Forest City Division).*
99.4 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and Fast Food Merchandisers, Inc.
(Monterey Division).*
99.5 Supply Agreement, dated as of July 14, 1997, by and between
Hardee's Food Systems, Inc. and QVS, Inc.*
99.6 Distribution Agreement, dated as of July 14, 1997, by and
among the Company, Hardee's Food Systems, Inc. and Fast Food
Merchandisers, Inc.*
99.7 Financial Statements of Hardee's Food Systems, Inc. listed in
Item 7(a) above.
</TABLE>
- ----------
* Schedules omitted. The Registrant shall furnish supplementally to the
Securities and Exchange Commission a copy of any omitted schedule upon
request.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
(Nos. 33-56313, 33-55337, 333-12399, 33-53089-01, 2-86142-01, 33-31190-01 and
333-12401) on Forms S-8 of CKE Restaurants, Inc. ("CKE") of our report dated
January 17, 1997, except for Note 20, as to which the date is April 27, 1997
(which expresses an unqualified opinion and includes an explanatory paragraph
relating to the adoption of Statement of Financial Accounting Standards No. 121
in 1996), on the combined balance sheets of Hardee's Food Systems, Inc. as of
December 31, 1995 and 1996 and the related combined statements of operations,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears on page F-29 of the
Prospectus, dated July 9, 1997, of CKE Restaurants, Inc., a copy of which was
filed with the Commission pursuant to Rule 424(b) under the Securities Act of
1933, as amended, on July 11, 1997, and is incorporated by reference in CKE's
Current Report on Form 8-K dated July 15, 1997.
/s/ DELOITTE & TOUCHE LLP
Raleigh, North Carolina
July 28, 1997
<PAGE> 1
EXHIBIT 99.1
NEWS RELEASE
FOR: CKE Restaurants, Inc.
CONTACT: Suzi Brown/CKE Restaurants, Inc.
Sharon Hamilton/Hardee's Food Systems, Inc.
919/450-8978
CKE RESTAURANTS, INC. ANNOUNCES
COMPLETION OF HARDEE'S ACQUISITION
ANAHEIM, Calif. -- July 16, 1997 -- CKE Restaurants, Inc. (NYSE:CKR)
today announced that it has completed the acquisition of Hardee's Food Systems,
Inc. from Montreal-based Imasco Limited for $327 million and is subject to
adjustment upon receipt of an audited balance sheet as of July 15, 1997.
The purchase of Hardee's was financed by $104.1 million in borrowings
under a $300 million bank financing led by Banque Paribas and $222.9 million in
net proceeds (after deducting underwriters' discounts) from a secondary
offering of 8,337,500 shares of CKE common stock, including 1,087,000 shares
that the underwriters elected to purchase pursuant to an over-allotment option
granted in connection with the offering, at $28.00 per share.
"This is an historic day for CKE Restaurants," said William P. Foley
II, CKE's chairman and chief executive officer. "The combination of Hardee's
and Carl's Jr. gives CKE a national presence with nearly 4,000 quick-service
hamburger restaurants stretching from coast to coast."
"We've got out work cut out for us, and a great group assembled to get
the job done," said Rory J. Murphy, Hardee's newly appointed president and
chief operating officer. "I am looking forward to working with the Hardee's
team as well as our franchise partners to help move Hardee's forward."
<PAGE> 2
Initial plans include testing a dual-brand restaurant, incorporating
both brands under one roof, featuring Hardee's breakfasts and Carl's Jr.'s
charbroiled burgers and chicken sandwiches. Three test markets have been
designated with a conversion target date of November 1.
Hardee's system includes 3,119 restaurants in 40 states and 10
countries, of which 782 are Company operated and 2,337 are operated by Hardee's
franchisees and licensees.
CKE Restaurants, Inc. is the parent of Carl Karcher Enterprises, Inc.,
Casa Bonita Incorporated and Summit Family Restaurants Inc. Carl Karcher
Enterprises, Inc., along with its franchisees and licensees, operates 668
Carl's Jr. and 26 Rally's quick-service restaurants, including 80 Carl's
Jr./Green Burrito dual-brand locations, primarily located in California,
Nevada, Oregon, Arizona, Mexico and the Pacific Rim. Casa Bonita Incorporated
operates 107 Taco Bueno quick-service restaurants in Texas and Oklahoma. Summit
Family Restaurants Inc. has restaurant operations in nine Western states,
including 74 Company-operated and 20 franchised JB's Restaurants, 16 HomeTown
Buffet restaurants and six Galaxy Diner restaurants.
# # #
<PAGE> 1
EXHIBIT 99.2
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
CKE RESTAURANTS, INC.,
THE LENDERS NAMED HEREIN
and
BANQUE PARIBAS
As Agent
Dated as of July 15, 1997
$300,000,000
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SECTION 1. DEFINITIONS............................................................................... 1
Section 1.1 Definitions............................................................... 1
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES..................................................... 24
Section 2.1 Term Loans................................................................ 24
Section 2.2 Revolving Loans........................................................... 24
Section 2.3 Notice of Borrowing....................................................... 25
Section 2.4 Disbursement of Funds..................................................... 25
Section 2.5 Notes..................................................................... 26
Section 2.6 Interest.................................................................. 27
Section 2.7 Interest Periods. ....................................................... 28
Section 2.8 Minimum Amount of Eurodollar Loans. ..................................... 29
Section 2.9 Conversion or Continuation. ............................................. 29
Section 2.10 Voluntary Reduction of Commitments. ..................................... 29
Section 2.11 Voluntary Prepayments. .................................................. 30
Section 2.12 Mandatory Prepayments. .................................................. 30
Section 2.13 Application of Prepayments. ............................................. 32
Section 2.14 Method and Place of Payment. ............................................ 32
Section 2.15 Fees. ................................................................... 33
Section 2.16 Interest Rate Unascertainable, Increased Costs, Illegality. ............. 33
Section 2.17 Funding Losses. ......................................................... 35
Section 2.18 Increased Capital. ...................................................... 36
Section 2.19 Taxes. .................................................................. 36
Section 2.20 Use of Proceeds. ........................................................ 37
Section 2.21 Collateral Security....................................................... 37
Section 2.22 Replacement of Certain Lenders............................................ 39
SECTION 3. LETTERS OF CREDIT......................................................................... 40
Section 3.1 Issuance of Letters of Credit, etc........................................ 40
Section 3.2 Letter of Credit Fees..................................................... 41
Section 3.3 Obligation of Borrower Absolute, etc...................................... 42
SECTION 4. CONDITIONS PRECEDENT...................................................................... 44
Section 4.1 Conditions Precedent to Initial Loans. .................................. 44
Section 4.2 Conditions Precedent to All Loans......................................... 51
SECTION 5. REPRESENTATIONS AND WARRANTIES............................................................ 52
Section 5.1 Corporate Status. ....................................................... 52
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Section 5.2 Corporate Power and Authority. ........................................... 52
Section 5.3 No Violation. ........................................................... 52
Section 5.4 Litigation. ............................................................. 53
Section 5.5 Financial Statements; Financial Condition; etc. ......................... 53
Section 5.6 Solvency. ............................................................... 53
Section 5.7 Projections. ............................................................ 53
Section 5.8 Material Adverse Change. ................................................ 53
Section 5.9 Use of Proceeds; Margin Regulations. .................................... 53
Section 5.10 Governmental and Other Approvals. ....................................... 54
Section 5.11 Security Interests and Liens. ............................................ 54
Section 5.12 Tax Returns and Payments. ............................................... 54
Section 5.13 ERISA..................................................................... 54
Section 5.14 Investment Company Act; Public Utility Holding Company Act. ............. 55
Section 5.15 Closing Date Transactions. .............................................. 55
Section 5.16 Representations and Warranties in Transaction Documents. ................ 55
Section 5.17 True and Complete Disclosure. ........................................... 56
Section 5.18 Corporate Structure; Capitalization....................................... 56
Section 5.19 Environmental Matters. .................................................. 56
Section 5.20 Intellectual Property. .................................................. 57
Section 5.21 Ownership of Property; Restaurants. ..................................... 57
Section 5.22 No Default. ............................................................. 58
Section 5.23 Licenses, etc. .......................................................... 58
Section 5.24 Compliance with Law. .................................................... 58
Section 5.25 No Burdensome Restrictions. ............................................. 58
Section 5.26 Brokers' Fees. .......................................................... 58
Section 5.27 Labor Matters. .......................................................... 58
Section 5.28 Indebtedness of the Borrower and Its Subsidiaries......................... 58
Section 5.29 Other Agreements.......................................................... 59
Section 5.30 Immaterial Subsidiaries................................................... 59
Section 5.31 Franchise Agreements and Franchisees...................................... 59
SECTION 6. AFFIRMATIVE COVENANTS..................................................................... 59
Section 6.1 Information Covenants. ................................................... 59
Section 6.2 Books, Records and Inspections. ......................................... 63
Section 6.3 Maintenance of Insurance. ............................................... 64
Section 6.4 Taxes. .................................................................. 64
Section 6.5 Corporate Franchises. ................................................... 64
Section 6.6 Compliance with Law. .................................................... 64
Section 6.7 Performance of Obligations. ............................................. 64
Section 6.8 Maintenance of Properties. .............................................. 65
Section 6.9 Compliance with Terms of Leaseholds. .................................... 65
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Section 6.10 Compliance with Environmental Laws. ..................................... 65
Section 6.11 Subsidiary Guarantors. .................................................. 65
Section 6.12 Immaterial Subsidiaries................................................... 66
Section 6.13 Environmental Reports..................................................... 66
Section 6.14 Letter of Credit Replacement.............................................. 66
Section 6.15 FFCA Debt................................................................. 66
SECTION 7. NEGATIVE COVENANTS....................................................................... 67
Section 7.1 Financial Covenants. .................................................... 67
Section 7.2 Indebtedness. ........................................................... 69
Section 7.3 Liens. .................................................................. 71
Section 7.4 Restriction on Fundamental Changes........................................ 73
Section 7.5 Sale of Assets. ......................................................... 73
Section 7.6 Contingent Obligations.................................................... 74
Section 7.7 Dividends................................................................. 74
Section 7.8 Advances, Investments and Loans. ......................................... 75
Section 7.9 Transactions with Affiliates. ............................................ 79
Section 7.10 Limitation on Voluntary Payments and Modifications of Certain
Documents. ............................................................... 79
Section 7.11 Changes in Business. ..................................................... 79
Section 7.12 Certain Restrictions. .................................................... 79
Section 7.13 Lease Obligations......................................................... 80
Section 7.14 Hedging Agreements. ..................................................... 80
Section 7.15 Plans. ................................................................... 80
Section 7.16 Fiscal Year; Fiscal Quarter. ............................................. 80
Section 7.17 Partnerships. ............................................................ 81
Section 7.18 Excluded Resales. ........................................................ 81
SECTION 8. EVENTS OF DEFAULT........................................................................ 81
Section 8.1 Events of Default. ....................................................... 81
Section 8.2 Rights and Remedies....................................................... 85
SECTION 9. THE AGENT................................................................................ 85
Section 9.1 Appointment............................................................... 85
Section 9.2 Delegation of Duties...................................................... 86
Section 9.3 Exculpatory Provisions. ................................................. 86
Section 9.4 Reliance by Agent......................................................... 86
Section 9.5 Notice of Default. ...................................................... 87
Section 9.6 Non-Reliance on Agent and Other Lenders. ................................ 87
Section 9.7 Indemnification. ........................................................ 88
Section 9.8 Agent in its Individual Capacity.......................................... 88
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Section 9.9 Successor Agent. ........................................................ 88
SECTION 10. MISCELLANEOUS............................................................................. 89
Section 10.1 Payment of Expenses, Indemnity, etc...................................... 89
Section 10.2 Right of Setoff. ....................................................... 90
Section 10.3 Notices. ............................................................... 90
Section 10.4 Successors and Assigns; Participation; Assignments....................... 91
Section 10.5 Amendments and Waivers. ................................................ 93
Section 10.6 No Waiver; Remedies Cumulative. ......................................... 94
Section 10.7 Sharing of Payments. ................................................... 94
Section 10.8 Application of Collateral Proceeds. .................................... 94
Section 10.9 Governing Law; Submission to Jurisdiction. ............................. 95
Section 10.10 Counterparts. .......................................................... 96
Section 10.11 Effectiveness. ......................................................... 96
Section 10.12 Headings Descriptive. .................................................. 96
Section 10.13 Marshalling; Recapture. ................................................ 96
Section 10.14 Severability. .......................................................... 97
Section 10.15 Independence of Covenants. ............................................. 97
Section 10.16 Survival. .............................................................. 97
Section 10.17 Domicile of Loans. ..................................................... 97
Section 10.18 Limitation of Liability. ............................................... 97
Section 10.19 Calculations; Computations. ............................................ 97
Section 10.20 WAIVER OF TRIAL BY JURY. ............................................... 97
Schedule 1.1 -- Lenders and Commitments
Schedule 1.2 -- Excluded Hardee's Sales
Schedule 5.10 -- Governmental and Other Approvals
Schedule 5.11 -- Security Interests and Liens
Schedule 5.13 -- ERISA Plans
Schedule 5.18 -- Subsidiaries; Capital Stock
Schedule 5.19 -- Environmental Matters
Schedule 5.21 -- Owned and Leased Properties; Owned or Operated Restaurants
Schedule 5.26 -- Brokers' Fees
Schedule 5.27 -- Labor Matters
Schedule 5.28 -- Indebtedness of the Borrower and Its Subsidiaries Being Repaid
Schedule 5.29 -- Other Agreements
Schedule 5.30 -- Immaterial Subsidiaries
Schedule 5.31 -- Franchisees and Licensees
Schedule 7.2 -- Existing Indebtedness
Schedule 7.3 -- Existing Liens
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Schedule 7.6 -- Existing Contingent Obligations
Schedule 7.8 -- Investments
Schedule 7.17 -- Permitted Partnerships
Annex 1 -- Domestic and Eurodollar Lending Offices
Exhibit A -- Form of Term Note
Exhibit B -- Form of Revolving Note
Exhibit C -- Form of Borrower Pledge Agreement
Exhibit D -- Form of Borrower Security Agreement
Exhibit E -- Form of Guaranty
Exhibit F -- Form of Subsidiary Pledge Agreement
Exhibit G -- Form of Subsidiary Security Agreement
Exhibit H -- Form of Opinion of Stradling, Yocca, Carlson & Rauth, counsel to
the Loan Parties
Exhibit I -- Form of Assignment Agreement
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CREDIT AGREEMENT, dated as of July 15, 1997, among CKE Restaurants,
Inc., a Delaware corporation (the "Borrower"), the Lenders (as hereinafter
defined) and Banque Paribas, acting in its capacity as agent for the Lenders.
SECTION 1. DEFINITIONS.
Section 1.1 Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural number the singular.
"Acquisition" means any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (i) acquires any going business or assets of
any Person or division thereof (other than assets acquired by the Borrower or
any of its Subsidiaries in the ordinary course of its business), whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of related
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors or a
majority (by percentage or voting power) of the outstanding partnership
interests of a partnership or of the outstanding equity interests of a limited
liability company.
"Acquisition Documents" shall mean the Purchase Agreement and all
agreements and instruments executed and delivered in connection therewith
including, without limitation, the Seller Agreements.
"Adjusted Consolidated EBITDA" shall mean, with respect to the
Borrower for any period, Consolidated EBITDA of the Borrower for such period, as
adjusted to give effect to (i) the Consolidated EBITDA for such period
attributable to any business or Person acquired by the Borrower or any
Subsidiary during such period pursuant to a Permitted Acquisition with respect
to which the conditions set forth in Section 7.8(f) have been satisfied as if
such business or Person had been so acquired on the first day of such period and
(ii) the Consolidated EBITDA for such period attributable to any business or
Person disposed of by the Borrower or any Subsidiary during such period as if
such business or Person had been so disposed of on the first day of such period;
provided that the adjustments described in the foregoing clauses (i) and (ii)
shall be made only in such amounts as are agreed to by the Agent and the
Borrower and only if the Lenders have received audited financial statements for
such business or Person being acquired or disposed of for such period or for the
most recent fiscal year of such business or Person which financial statements
are audited by independent certified public accountants acceptable to the Agent
prior to such adjustment.
"Affected Lender" shall have the meaning provided in Section 2.22.
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"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control another Person if
such Person possesses, directly or indirectly, the power to (i) vote 10% or more
of the Voting Stock of such other Person or (ii) direct or cause the direction
of the management and policies of such other Person, whether through the
ownership of voting securities, by contract or otherwise. No Lender shall be
deemed to be an Affiliate of the Borrower as a result of its being a party to
this Agreement.
"Agent" shall mean Banque Paribas acting in its capacity as agent for
the Lenders and any successor agent appointed in accordance with Section 9.9.
"Agent's Office" shall mean the office of the Agent located at
Chicago, Illinois, or such other office as the Agent may hereafter designate in
writing as such to the other parties hereto.
"Agreement" shall mean this Credit Agreement as the same may from
time to time hereafter be modified, restated, supplemented or amended.
"Applicable Margin" means, with respect to the Commitment Fee and
each Eurodollar Loan, the rate of interest per annum shown below for the range
of Leverage Ratio specified below:
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Leverage Ratio Eurodollar Loans Commitment Fee
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less than 1.50 to 1.00 0.50% 0.20%
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1.50 to 1.00 or greater,
but less than 2.0 .750% 0.25%
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2.0 to 1.00 or greater,
but less than 2.50 1.125% 0.25%
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2.50 to 1.00 or greater 1.375% 0.375%
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For the period commencing on the Closing Date and ending on the date which
occurs three (3) Business Days after the Agent receives the financial statements
and the related Compliance Certificate required to be delivered pursuant to
Section 6.1(a) and Section 6.1(e) with respect to the fiscal quarter of the
Borrower ending November 3, 1997, for purposes of determining the Applicable
Margin, the Leverage Ratio shall be deemed to be greater than or equal to 2.50
to 1.0 at all times during such period. Thereafter, the Leverage Ratio shall be
calculated as of the end of each fiscal quarter, commencing with the fiscal
quarter ending January 26, 1998, and shall be reported to the Agent pursuant to
a Compliance Certificate delivered by the Borrower in accordance with Section
6.1(e) hereof. Not later than two (2) Business Days after
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receipt by the Agent of each Compliance Certificate delivered by the Borrower in
accordance with Section 6.1(e) for each fiscal quarter or fiscal year, as
applicable, the Agent shall determine the Leverage Ratio for the applicable
period and shall promptly notify the Borrower and the Lenders of such
determination and of any change in each Applicable Margin resulting therefrom.
Each Applicable Margin shall be adjusted (upwards or downwards, as appropriate),
if necessary, based on the Leverage Ratio as of the end of the fiscal quarter
immediately preceding the date of determination. The adjustment, if any, to the
Applicable Margin shall be effective as to all Eurodollar Loans and Commitment
Fees commencing on the third (3rd) Business Day after the receipt by the Agent
of such quarterly or annual financial statements delivered in accordance with
Sections 6.1(a) and 6.1(b) and such related Compliance Certificate of the
Borrower delivered in accordance with Section 6.1(e) and shall be effective from
and including the third (3rd) Business Day after the date the Agent receives
such Compliance Certificate to but excluding the third (3rd) Business Day after
the date on which the next Compliance Certificate is required to be delivered
pursuant to Section 6.1(e); provided, however, that, in the event that the
Borrower shall fail at any time to furnish to the Lenders such financial
statements and any such Compliance Certificate required to be delivered pursuant
to Sections 6.1(a), 6.1(b) and 6.1(e), for purposes of determining the
Applicable Margin, the Leverage Ratio shall be deemed to be greater than or
equal to 2.50 to 1.0 at all times until the third (3rd) Business Day after such
time as all such financial statements and each such Compliance Certificate are
so received by the Agent and the Lenders. Each determination of the Leverage
Ratio and each Applicable Margin by the Agent in accordance with this definition
shall be conclusive and binding on the Borrower and the Lenders absent manifest
error.
"Asset Disposition" shall mean any conveyance, sale, lease, license,
transfer or other disposition by the Borrower or any of its Subsidiaries
subsequent to the date hereof of any asset (including by way of (i) a sale and
leaseback transaction, (ii) the sale or other transfer of any of the capital
stock of any Subsidiary of the Borrower or any of its Subsidiaries and (iii) any
total or partial loss, destruction or condemnation of any asset), but excluding
(A) sales of inventory in the ordinary course of business, (B) licenses to
franchisees in the ordinary course of business, (C) the sale or other
disposition of assets with a fair market value not in excess of $1,000,000 in
respect of any transaction or series of related transactions, but only to the
extent that the aggregate fair market value of all assets subject to Asset
Dispositions of the Borrower and its Subsidiaries in any fiscal year does not
exceed $2,000,000 and (D) leases and subleases of real and personal property of
the Borrower or any of its Subsidiaries to any of their respective franchisees
in the ordinary course of business and consistent with past practices.
"Assignee" shall have the meaning provided in Section 10.4(c).
"Assignment Agreement" shall have the meaning provided in Section
10.4(d).
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"Authorized Officer" of any Person shall mean any of the President,
the Chief Executive Officer, the Chief Operating Officer, the Chief Financial
Officer, any Senior Vice President, any Executive Vice President, any Vice
President, the Controller, the Treasurer or Assistant Treasurer of such Person,
acting singly.
"Bankruptcy Code" shall mean Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time, and any successor statute
or statutes.
"Base Rate" shall mean, at any particular date, the highest of (i)
the rate of interest publicly announced by Morgan Guaranty Trust Company of New
York in New York, New York from time to time as its "base rate" changing as and
when such base rate changes and (ii) the Federal Funds Rate plus 0.50%. The base
rate is not intended to be the lowest rate of interest charged by Morgan
Guaranty Trust Company of New York in connection with extensions of credit to
debtors.
"Base Rate Loans" shall mean Loans made and/or being maintained at a
rate of interest based upon the Base Rate.
"Borrower" shall have the meaning provided in the first paragraph of
this Agreement.
"Borrower Pledge Agreement" shall mean a pledge agreement duly
executed and delivered by the Borrower to the Agent substantially in the form
set forth as Exhibit C hereto as the same may be amended, restated, modified or
supplemented from time to time.
"Borrower Security Agreement" shall mean a security agreement
substantially in the form of the Borrower Security Agreement set forth as
Exhibit D hereto executed and delivered to the Agent by the Borrower, as the
same may be amended, restated, modified or supplemented from time to time.
"Borrowing" shall mean the incurrence of one Type of Loan of one
Facility from all the Lenders on a given date (or resulting from conversions or
continuations on a given date) having, in the case of Eurodollar Loans, the same
Interest Period.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in Chicago, Los Angeles or New York City a legal holiday or a day on which
banking institutions are authorized or required by law or other government
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
any day which is a Business Day described in clause (i) and which is also a day
for trading by and between banks for U.S. dollar deposits in the relevant London
interbank Eurodollar market.
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"Capital Expenditures" shall mean, for any period, all expenditures
(whether paid in cash or accrued as a liability, including the portion of
Capitalized Leases of the Borrower and its Subsidiaries originally incurred
during such period that is capitalized on the consolidated balance sheet of the
Borrower and its Subsidiaries) by the Borrower and its Subsidiaries during such
period that, in conformity with GAAP, are included in "capital expenditures",
"additions to property, plant or equipment" or comparable items in the
consolidated financial statements of the Borrower and its Subsidiaries
(excluding any expenditures for assets that would be included in "capital
expenditures," "additions to property, plant or equipment" or in comparable
items in the consolidated financial statements of the Borrower and its
Subsidiaries in conformity with GAAP which assets are acquired in a Permitted
Acquisition).
"Capital Stock" shall mean any and all shares of, or interests or
participations in, corporate stock.
"Capitalized Lease" shall mean with respect to any Person, (i) any
lease of property, real or personal, the obligations under which are capitalized
on the consolidated balance sheet of such Person, and (ii) any other such lease
of such Person to the extent that the then present value of the minimum rental
commitment thereunder should, in accordance with GAAP, be capitalized on a
balance sheet of the lessee.
"Capitalized Lease Obligations" with respect to any Person, shall
mean at any time of determination all obligations of such Person under or in
respect of Capitalized Leases of such Person.
"Casa Bonita Restaurants" shall mean the Casa Bonita Restaurant
located in Tulsa, Oklahoma, and the Casa Bonita Restaurant located in Denver,
Colorado, which are owned and operated by a Subsidiary of the Borrower on the
Closing Date.
"Cash Collateralize" shall mean the pledge and deposit with or
delivery to the Agent, for the benefit of the Agent, the Issuing Bank and the
Lenders, cash or deposit account balances pursuant to documentation in form and
substance reasonably satisfactory to the Agent and the Issuing Bank; such
documentation shall irrevocably authorize the Agent to apply such cash
collateral to reimbursement of the Issuing Bank for draws under Letters of
Credit as and when occurring, and in all cases to payment of other Obligations
as and when due. Cash collateral shall be maintained in blocked deposit accounts
at the Agent or a Lender.
"Cash Equivalents" shall mean (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) having maturities of not more
than 360 days from the date of acquisition, (ii) time deposits and certificates
of deposit of any Lender or any domestic commercial bank of recognized standing
having capital and surplus in excess of $100,000,000 with maturities of
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not more than 180 days from the date of acquisition, (iii) fully secured
repurchase obligations with a term of not more than 7 days for underlying
securities of the types described in clause (i) entered into with any bank
meeting the qualifications specified in clause (ii) above, and (iv) commercial
paper issued by the parent corporation of any Lender or any domestic commercial
bank of recognized standing having capital and surplus in excess of $500,000,000
and commercial paper rated at least A-1 or the equivalent thereof by Standard &
Poor's Ratings Group or at least P-1 or the equivalent thereof by Moody's
Investor Services, Inc. and in each case maturing within 180 days after the date
of acquisition.
"Closing Date" shall mean the date on which the initial Loans are
advanced hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any successor statute.
"Collateral" shall mean all property and interests in property now
owned or hereafter acquired in or upon which a Lien has been or is purported or
intended to have been granted to the Agent or any Lender under any of the
Security Documents.
"Commitment" shall mean, for each Lender at any given time, the sum
of such Lender's Term Loan Commitment and its Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section 2.15(b).
"Company" shall mean Hardee's Food Systems, Inc., a North Carolina
corporation.
"Compliance Certificate" shall have the meaning provided in Section
6.1(e).
"Consents" shall have the meaning provided in Section 4.1(v).
"Consolidated Cash Interest Expense" shall mean, for any period,
Consolidated Interest Expense for such period minus the amount of such
Consolidated Interest Expense for such period not paid or payable in cash.
"Consolidated EBITDA" shall mean, for any Person during any period,
the sum of (i) Consolidated Net Income for such period plus (ii) to the extent
deducted in the calculation of Consolidated Net Income for such period,
Consolidated Interest Expense for such period plus (iii) to the extent deducted
in the calculation of Consolidated Net Income for such period, federal and state
income taxes for such period, plus (iv) to the extent deducted in the
calculation of Consolidated Net Income for such period, depreciation and
amortization expense for such period, all determined on a consolidated basis for
such Person and its Subsidiaries in accordance with GAAP.
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"Consolidated EBITDAR" shall mean, during any period (i) Adjusted
Consolidated EBITDA for the Borrower and its Subsidiaries for such period plus
(ii) to the extent deducted in the calculation of Consolidated Net Income of the
Borrower and its Subsidiaries for such period, Consolidated Rentals for such
period.
"Consolidated Interest Expense" shall mean, for any Person and for
any period, the total interest expense (including, without limitation, interest
expense attributable to Capitalized Leases in accordance with GAAP) of such
Person and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP.
"Consolidated Net Income" shall mean for any Person and for any
period the net income (or loss) of such Person and its Subsidiaries on a
consolidated basis for such period (taken as a single accounting period)
determined in accordance with GAAP.
"Consolidated Rentals" shall mean, for the Borrower and its
Subsidiaries for any period, the aggregate rent expense for the Borrower and its
Subsidiaries for such period, as determined on a consolidated basis in
accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean, at any time, the excess
of (i) the total assets of the Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP minus goodwill and any other items
that are classified as intangibles in accordance with GAAP, over (ii) all
liabilities of the Borrower and its Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Total Debt" shall mean, at any time, all Indebtedness
of the Borrower and its Subsidiaries (other than undrawn amounts under letters
of credit issued for the account of the Borrower or any of its Subsidiaries) as
determined on a consolidated basis.
"Contingent Obligation" as to any Person shall mean any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (iv) otherwise to assure or hold harmless the owner
of such primary obligation against loss in respect thereof; provided, however,
that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary
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<PAGE> 14
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Controlling Stockholders" shall mean (i) William P. Foley II, (ii)
Cannae Limited Partnership, a Nevada Limited Partnership, (iii) Fidelity
National Financial, Inc., a Delaware corporation and (iv) any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with any of the foregoing. For purposes of this definition, the term "control"
(including the terms "controlled by" and "under common control with") of a
Person means the possession, directly or indirect, of (A) the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by contract or otherwise or (B) the power
to vote 51% or more of the Voting Stock of such Person. No Lender shall be
deemed to be a Controlling Stockholder as a result of its being a party to this
Agreement.
"Conversion" shall have the meaning provided in Section 2.21(b).
"Credit Exposure" shall have the meaning provided in Section 10.4(b).
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Default Rate" shall have the meaning provided in Section 2.6(c).
"Dividends" shall have the meaning provided in Section 7.7.
"Domestic Lending Office" shall mean, as to any Lender, the office of
such Lender designated as such on Annex I, or such other office designated by
such Lender from time to time by written notice to the Agent and the Borrower.
"Environmental Affiliate" shall mean, with respect to any Person, any
other Person whose liability for any Environmental Claim such Person has or may
have retained, assumed or otherwise become liable for (contingently or
otherwise), either contractually or by operation of law.
"Environmental Approvals" shall mean any permit, license, approval,
ruling, variance, exemption or other authorization required under applicable
Environmental Laws.
"Environmental Claim" shall mean, with respect to any Person, any
notice, claim, demand or similar communication (written or oral) by any other
Person alleging potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, fines or penalties arising out of, based on or resulting from
(i) the presence, or release into the environment, of any Material of
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<PAGE> 15
Environmental Concern at any location, whether or not owned by such Person or
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law.
"Environmental Laws" shall mean all federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
"Equity Interests" shall mean Capital Stock and warrants, options or
other rights to acquire Capital Stock.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Controlled Group" means a group consisting of any ERISA Person
and all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) under common control with such Person
that, together with such Person, are treated as a single employer under
regulations of the PBGC.
"ERISA Person" shall have the meaning set forth in Section 3(9) of
ERISA for the term "person."
"ERISA Plan" means (i) any Plan that (x) is not a Multiemployer Plan
and (y) has Unfunded Benefit Liabilities in excess of $1,000,000 and (ii) any
Plan that is a Multiemployer Plan.
"Eurocurrency Reserve Requirements" shall mean, with respect to each
day during an Interest Period for Eurodollar Loans, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Federal
Reserve Board or other governmental authority or agency having jurisdiction with
respect thereto for determining the maximum reserves (including, without
limitation, basic, supplemental, marginal and emergency reserves) for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D) maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate" shall mean, with respect to each day during an
Interest Period for Eurodollar Loans, the rate per annum (rounded upwards to the
nearest whole multiple of one-sixteenth of one percent) equal to the rate per
annum at which deposits in U.S.
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<PAGE> 16
dollars are offered by the principal office of each of the Reference Banks in
London, England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest Period in
an amount substantially equal to such Reference Bank's Eurodollar Loan
comprising part of such Borrowing to be outstanding during such Interest Period
and for a period equal to such Interest Period. The Eurodollar Base Rate for any
Interest Period for each Eurodollar Loan comprising part of the same Borrowing
shall be determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks two Business Days before the
first day of such Interest Period, subject, however, to the provisions of
Section 2.7.
"Eurodollar Lending Office" shall mean, as to any Lender, the office
of such Lender designated as such on Annex I, or such other office designated by
such Lender from time to time by written notice to the Agent and the Borrower.
"Eurodollar Loans" shall mean Loans made and/or being maintained at a
rate of interest provided in Section 2.6(b).
"Eurodollar Rate" shall mean with respect to each day during an
Interest Period for Eurodollar Loans, a rate per annum determined for such day
in accordance with the following formula (rounded upwards to the nearest whole
multiple of 1/100th of one percent):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default" shall have the meaning provided in Section 8.
"Excluded Hardee's Sales" shall mean the sale or other disposition of
up to 114 Hardee's Restaurants identified on Schedule 1.2 to a Person who is not
an Affiliate of the Borrower or any of its Subsidiaries substantially on the
terms and conditions previously disclosed to the Agent which terms and
conditions are acceptable to the Agent; provided that Excluded Hardee's Sales
shall only include such Hardee's Restaurants which are sold or otherwise
disposed of on or prior to March 31, 1998.
"Excluded Resales" shall mean any sale by the Borrower or any of its
Subsidiaries of a Restaurant of the Borrower or such Subsidiary so long as (i)
such Restaurant was acquired by the Borrower or such Subsidiary from a
franchisee with the intent of reselling such Restaurant, and (ii) such sale
occurs within twelve (12) months of the acquisition of such Restaurant by the
Borrower or such Subsidiary.
"Existing Debt" shall have the meaning provided in Section
4.1(r)(ii).
"Existing Letter of Credit" shall have the meaning provided in
Section 6.14.
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<PAGE> 17
"Existing Reimbursement Agreement" shall have the meaning provided in
Section 7.10.
"Facility" shall mean either the Term Loans or the Revolving Loans.
"Federal Funds Rate" shall mean, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three (3)
Federal funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System as constituted from time to time.
"Fee Letter" shall mean that certain fee letter entered into between
the Borrower and the Agent dated as of April 24, 1997, as amended, from time to
time.
"Fees" shall mean all amounts payable pursuant to Section 2.15.
"FFCA Debt" shall mean Indebtedness of CBI Restaurants, Inc., a
Delaware corporation ("CBI"), Casa Bonita Incorporated, a Texas corporation
("Casa Bonita") and Casa Bonita Texas, L.P., a Texas limited partnership ("Casa
Bonita Texas") incurred pursuant to that certain Loan Agreement, dated as of
December 18, 1996, by and among CBI, Casa Bonita and FFCA Mortgage Corporation,
a Delaware corporation ("FFCA"), and that certain Loan Agreement, dated as of
December 18, 1996, by and among CBI, Casa Bonita Texas and FFCA.
"Final Maturity Date" shall mean the later of the Revolving Loan
Maturity Date or the Term Loan Maturity Date.
"Fixed Charges" shall mean, without duplication, with respect to the
Borrower and its Subsidiaries for any period, (i) all Consolidated Cash Interest
Expense (excluding in respect of Capitalized Leases of the Borrower and its
Subsidiaries) for such period, plus (ii) scheduled payments due in such period
for principal of the Term Loans and other permitted Indebtedness, plus (iii) all
federal and state income taxes paid in cash by the Borrower or any of its
Subsidiaries for such period, plus (iv) all scheduled amortization during such
period (including principal and interest) of Capitalized Leases under which the
Borrower or any of its Subsidiaries is the lessee, all determined on a
consolidated basis for the Borrower and its Subsidiaries for such period.
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<PAGE> 18
"Franchise Agreements" shall mean any and all agreements that create
a franchise or license to which the Borrower or any of its Subsidiaries is a
party (as franchisee, licensee, franchisor or licensor) relating to the
operation or development of any Restaurant or Restaurants, including such
franchise and/or license agreements to which any of Borrower or any of its
Subsidiaries is a party as of the Closing Date and such franchise and/or license
agreements entered into from time to time after the Closing Date by the Borrower
or any of its Subsidiaries and shall include all other rights under such
agreements regardless of their nature.
"GAAP" shall mean (i) for purposes of determining compliance with the
covenants set forth in Sections 7.1 and 7.2 hereof, United States generally
accepted accounting principles as in effect on the date hereof and consistent
with those utilized in the preparation of the financial statements referred to
in Section 5.5 and (ii) for all other purposes, United States generally accepted
accounting principles as in effect as of the date of determination.
"Guarantor" shall mean each Subsidiary of the Borrower that shall be
required by the terms of this Agreement to enter into a Guaranty from time to
time.
"Guaranty" shall mean a guaranty substantially in the form of the
Guaranty set forth as Exhibit E hereto executed and delivered to the Agent for
itself and the Lenders by each Subsidiary of the Borrower (other than Immaterial
Subsidiaries), as the same may be amended, restated, modified or supplemented
from time to time.
"Hardee's Acquisition" shall mean the consummation of the Purchase
and the other transactions contemplated by the Acquisition Documents.
"Hardee's Subsidiaries" shall mean each Subsidiary which is at any
time on or after the Closing Date, a Subsidiary of Hardee's.
"Hart-Scott-Rodino Act" shall mean the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended.
"Hedging Agreements" shall mean any interest rate protection
agreements (including, without limitation, any interest rate swaps, caps,
floors, collars, options, futures and similar agreements), swaps (including,
without limitation, any caps, floors, collars, options, futures and similar
agreements) relating to currencies, commodities or securities, and similar
agreements.
"Immaterial Investment" shall mean any Investment owned by the
Borrower or any Subsidiary consisting of Capital Stock of any Person which, when
added to all other Investments held by the Borrower and/or its Subsidiaries
consisting of Capital Stock of such Person does not exceed $1,000,000 at any one
time outstanding.
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"Immaterial Subsidiaries" shall mean any Subsidiary of the Borrower
with assets of less than $1,000,000 (as determined in accordance with GAAP),
which is designated by the Borrower as an Immaterial Subsidiary on Schedule 5.30
or pursuant to Section 6.12; provided that the aggregate amount of assets of all
Subsidiaries designated as Immaterial Subsidiaries shall not at any time exceed
$7,000,000 (as determined in accordance with GAAP).
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade payables on terms of 90 days or
less incurred in the ordinary course of business of such Person), (ii) all
indebtedness of such Person evidenced by a note, bond, debenture, acceptance or
similar instrument, (iii) the principal component of all Capitalized Lease
Obligations of such Person, (iv) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all unreimbursed
amounts drawn thereunder, (v) all indebtedness of any other Person secured by
any Lien on any property owned by such Person, whether or not such indebtedness
has been assumed in an amount equal to the lesser of the fair market value at
such date of such property subject to such Lien securing such Indebtedness and
the amount of the Indebtedness secured by such Lien, (vi) all indebtedness of
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even if
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), (vii)
all Contingent Obligations of such Person, (viii) all payment obligations,
whether absolute or contingent, matured or unmatured, present or future, due or
to become due, now existing or hereafter arising, of such Person under any
Hedging Agreements, (ix) all Redeemable Stock and (x) all indebtedness and other
obligations of the types specified in clauses (i) through (ix) above of any
joint venture or partnership for which such Person is liable.
"Initial Equity Issuance" shall have the meaning provided in Section
4.1(q).
"INS" shall mean the United States Immigration and Naturalization
Service or any governmental body succeeding to its functions.
"Interest Period" shall have the meaning provided in Section 2.7.
"Interest Rate Agreements" shall mean any and all interest rate
protection agreements, including, without limitation, any interest rate swaps,
caps, collars, floors and similar agreements.
"Interest Rate Hedge Providers" shall mean any Lender that provides
an Interest Rate Agreement to the Borrower as permitted pursuant to Section
7.14(a) and that executes and delivers an agency agreement, in form and
substance satisfactory to the Agent.
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<PAGE> 20
"Investment" of a Person shall mean any loan, advance, extension of
credit or commitment to make any such loan, advance or extension of credit
(other than accounts receivable arising in the ordinary course of business),
deposit account or contribution of capital by such Person to any other Person or
any investment in, or purchase or other acquisition (whether by purchase,
merger, consolidation or otherwise) of, the stock, partnership interests, notes,
bonds, debentures or other securities, including options and warrants, of, or
other ownership interests in, any other Person made by such Person (whether for
cash, property, services, securities or otherwise).
"Issue" shall mean, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" shall mean Banque Paribas in its capacity as issuer of
one or more Letters of Credit hereunder.
"L/C Amendment Application" shall mean an application form for
amendment of outstanding Letters of Credit as shall at any time be in use at the
Issuing Bank, as the Issuing Bank shall request.
"L/C Application" shall mean an application form for issuance of
Standby Letters of Credit or Trade Letters of Credit, as appropriate, as shall
at any time be in use at the Issuing Bank, as the Issuing Bank shall request.
"L/C Commitment" shall mean the commitment of the Issuing Bank to
Issue, and the commitment of the Lenders severally to participate in, Letters of
Credit from time to time Issued or outstanding under Section 3, in an aggregate
amount not to exceed on any date the amount of $55,000,000, provided, that the
L/C Commitment is part of the combined Revolving Loan Commitments, rather than a
separate, independent commitment.
"L/C Obligations" shall mean at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of
all unreimbursed drawings under all Letters of Credit.
"L/C Related Documents" shall mean the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Issuing Bank's standard form
documents for standby or commercial letter of credit issuances, as appropriate.
"Lenders" shall mean the persons listed on Schedule 1.1 hereto and
the persons which from time to time become a party hereto in accordance with
Section 10.4(d).
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<PAGE> 21
"Letters of Credit" shall mean any letters of credit Issued by the
Issuing Bank pursuant to Section 3.
"Leverage Ratio" shall mean, with respect to the Borrower on a
consolidated basis with its Subsidiaries, at any date, the ratio of (a)
Consolidated Total Debt of the Borrower and its Subsidiaries to (b) Adjusted
Consolidated EBITDA of the Borrower and its Subsidiaries for the period of four
(4) consecutive fiscal quarters most recently ended on or prior to such date.
"Lien" shall mean any mortgage, deed of trust, pledge, charge,
security interest, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), or preference, priority or other security agreement
of any kind or nature whatsoever, whether or not filed, recorded or otherwise
perfected under applicable law, including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same effect as any of the foregoing and the filing of any
financing statement or similar instrument under the Uniform Commercial Code or
comparable law of any jurisdiction, domestic or foreign.
"Liquidating Distribution" shall mean any extraordinary, liquidating
or other distribution in return of capital with respect to any Equity Interest
of any Person owned by a Loan Party which Equity Interest is pledged pursuant to
any of the Security Documents.
"Loan Documents" shall mean this Agreement, the Notes, the Guaranty,
each Letter of Credit, each L/C Related Document, the Fee Letter, the Security
Documents, each Interest Rate Agreement permitted to be entered into pursuant to
Section 7.14(a) and all other documents, instruments and agreements executed
and/or delivered in connection herewith or therewith or required or contemplated
hereunder or thereunder, as the same may be amended, restated, modified or
supplemented and in effect from time to time.
"Loan Party" shall mean and include the Borrower and each Guarantor.
"Loans" shall mean and include the Term Loans and the Revolving
Loans.
"Margin Stock" shall have the meaning provided such term in
Regulation U and Regulation G of the Federal Reserve Board.
"Material Adverse Effect" shall mean a material adverse effect upon
(i) the business, operations, properties, assets, performance, prospects or
condition (financial or otherwise) of the Borrower and its Subsidiaries (after
giving effect to the Hardee's Acquisition), taken as a whole, or (ii) the
ability of any Loan Party to perform, or of the Agent or any of the Lenders to
enforce, any of such Loan Party's material Obligations under any Loan Document
to which it is or is to be a party.
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<PAGE> 22
"Material Leases" shall have the meaning provided in Section 6.9.
"Materials of Environmental Concern" shall mean and include
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products, asbestos and radioactive materials.
"Multiemployer Plan" shall mean a Plan which is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
"Net Debt Proceeds" means all cash proceeds received by the Borrower
or any of its Subsidiaries from the incurrence of, or the issuance of any
instruments relating to, any Indebtedness (other than (i) Indebtedness borrowed
by the Borrower under this Agreement, (ii) Indebtedness permitted to be incurred
pursuant to Section 7.2(g), (iii) Indebtedness of Star Buffet incurred by Star
Buffet simultaneously with an issuance of Equity Interests of Star Buffet if,
immediately after giving effect to any such issuance and as a result of such
issuance, Star Buffet is no longer a Subsidiary of the Borrower, but only if
Star Buffet receives and retains such cash proceeds from such issuance of Equity
Interests and from the incurrence or issuance of such Indebtedness and (iv)
Indebtedness of Star Buffet permitted to be incurred pursuant to Section
7.2(i)), in each case net of reasonable and customary underwriting fees and
discounts, brokerage commissions and other similar reasonable and customary
costs and expenses directly attributable to such issuance or incurrence.
"Net Equity Proceeds" shall mean all cash proceeds received by the
Borrower or any of its Subsidiaries from any capital contribution or the
issuance of any Equity Interests or other equity securities of the Borrower or
any of its Subsidiaries (other than (i) the issuance of common stock (A) of the
Borrower upon exercise of stock options issued to employees, consultants or
directors of the Borrower or any of its Subsidiaries pursuant to an employee
stock option or purchase plan approved by the Board of Directors of the Borrower
or (B) of any Subsidiary of the Borrower to the Borrower or any wholly-owned
Subsidiary of the Borrower or (C) as part of the Initial Equity Issuance or the
Subsequent Equity Issuance and (ii) the issuance of any (A) Equity Interests of
Star Buffet if, immediately after giving effect to any such issuance and as a
result of such issuance, Star Buffet is no longer a Subsidiary of the Borrower
and if Star Buffet receives and retains such cash proceeds from such issuance
and (B) other Equity Interests of Star Buffet; provided that the aggregate
amount of cash proceeds not included in Net Equity Proceeds pursuant to this
clause (ii)(B), when added to the aggregate amount of cash proceeds received by
the Borrower and its Subsidiaries from all or part of the Summit Asset Sale,
which cash proceeds are not included in Net Sale Proceeds pursuant to clause (A)
of the proviso at the end of the definition thereof, shall not in any event
exceed $25,000,000, net of any reasonable and customary brokerage commissions,
underwriting fees and discounts and any other similar reasonable and customary
costs or expenses directly attributable to such issuance.
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<PAGE> 23
"Net Sale Proceeds" shall mean, with respect to (a) any Asset
Disposition, all cash proceeds received by the Borrower or any of its
Subsidiaries from or in respect of such Asset Disposition (including any cash
proceeds received as income or other proceeds of any noncash proceeds of such
Asset Disposition and including any insurance payment or condemnation award in
respect of any assets of the Borrower or any of its Subsidiaries) and (b) any
Liquidating Distribution, all cash proceeds received by the Borrower or any of
its Subsidiaries from or in respect of any Liquidating Distribution, in the case
of the foregoing clauses (a) and (b), net of (i) reasonable and customary
expenses incurred or reasonably expected to be incurred in connection with such
Asset Disposition or Liquidating Distribution, (ii) any income, franchise,
transfer or other tax payable by the Borrower or such Subsidiary in connection
with such Asset Disposition or Liquidating Distribution and (iii) any
Indebtedness secured by a Lien on such property or assets and required to be
repaid as a result of such Asset Disposition, in each case with respect to the
foregoing clause (i) to the extent, but only to the extent, that the amounts so
deducted are, at the time of receipt of such cash, actually paid to a Person
that is not an Affiliate and are properly attributable to such transaction or to
the asset that is the subject thereof; provided, however, that Net Sale Proceeds
shall not include (A) any such proceeds from or in respect of all or any part of
the Summit Asset Sale; provided that the aggregate amount of cash proceeds not
included in Net Sale Proceeds pursuant to this clause (A), when added to the
aggregate amount of cash proceeds received by the Borrower and its Subsidiaries
from the issuance of any Equity Interests of Star Buffet which are not included
in Net Equity Proceeds pursuant to clause (ii)(B) of the parenthetical of the
definition thereof, shall not in any event exceed $25,000,000, (B) any such
proceeds from Excluded Resales and (C) any such proceeds from Excluded Hardee's
Sales.
"Non-Summit Subsidiary" shall mean any Subsidiary of the Borrower
other than a Summit Subsidiary.
"Notes" shall mean and include each Revolving Note and each Term
Note.
"Notice of Borrowing" shall have the meaning provided in Section
2.3(a).
"Notice of Conversion or Continuation" shall have the meaning
provided in Section 2.9(b).
"Obligations" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description of the Borrower and the other
Loan Parties from time to time owing to the Agent or any Lender or any
Indemnitee under or in connection with this Agreement or any other Loan
Document, whether direct or indirect, primary or secondary, joint or several,
absolute or contingent, due or to become due, now existing or hereafter arising
and however acquired and shall include, without limitation, all principal and
interest on the Loans and, to the extent chargeable under any Loan Document, all
charges, expenses, fees and attorney's fees.
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<PAGE> 24
"Participant" shall have the meaning provided in Section 10.4(b).
"Payment Date" shall mean the fifteenth day of each October, January,
April and July of each year.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.
"Permitted Acquisition" shall mean any Acquisition by the Borrower or
any of its Subsidiaries that has been approved by the board of directors (or
other governing body, if applicable) of the Person which is the subject of such
Acquisition so long as the Person acquired in connection therewith is engaged
primarily in, or the assets or business acquired in connection therewith relate
primarily to, the food service business.
"Permitted Subordinated Debt" shall mean Indebtedness of the Borrower
or any Subsidiary of the Borrower incurred after the date hereof (A) with
respect to which no principal payments are due prior to the date which is one
year and one day after the Final Maturity Date and (B) which is subordinated as
to exercise of remedies and in right of payment to the Borrower's Obligations
under the Loan Documents on, and is otherwise subject to, terms and conditions
(including, without limitation, terms in respect of maturities, covenants,
defaults and remedies and interest rates) approved in writing by the Agent.
"Person" shall mean and include any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or agency,
department or instrumentality thereof.
"Plan" means any employee benefit plan covered by Title IV of ERISA,
the funding requirements of which:
(i) were the responsibility of the Borrower or a member of its
ERISA Controlled Group at any time within the six years immediately
preceding the date hereof,
(ii) are currently the responsibility of the Borrower or a
member of its ERISA Controlled Group, or
(iii) hereafter become the responsibility of the Borrower or a
member of its ERISA Controlled Group,
including any such plans as may have been, or may hereafter be, terminated for
whatever reason.
"Prepayment" shall have the meaning provided in Section 7.10.
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<PAGE> 25
"Pro Rata Share" as to any Lender shall mean:
(i) with respect to all payments, computations and
determinations relating to the Term Loan Commitment or the Term Loan of
any Lender, the percentage obtained by dividing (A) the outstanding
principal balance of such Lender's Term Loan (or the amount of such
Lender's Term Loan Commitment, if the Term Loan has not been made) by (B)
the aggregate outstanding principal balance of the Term Loan (or the
Total Term Loan Commitment, if the Term Loan has not been made);
(ii) with respect to all payments, computations and
determinations relating to the Revolving Loan Commitment or the Revolving
Loans of any Lender, or such Lender's interest in Letters of Credit
(including without limitation determinations of the commitment fee under
Section 2.15(b) and Letter of Credit fees under Section 3.2), the
percentage obtained by dividing (A) such Lender's Revolving Loan
Commitment (or the aggregate outstanding principal balance of such
Lender's Revolving Loans and all L/C Obligations in which such Lender has
an interest, if the Revolving Loan Commitments have been terminated
pursuant to the terms of this Agreement) by (B) the Total Revolving Loan
Commitment (or the aggregate outstanding principal balance of the
Revolving Loans and all L/C Obligations, if the Revolving Loan
Commitments have been terminated pursuant to the terms of this
Agreement); and
(iii) for all other purposes with respect to each Lender, the
percentage obtained by dividing (A) the sum of (1) the outstanding
principal balance of such Lender's Term Loan (or such Lender's Term Loan
Commitment if the Term Loan has not been made) and (2) such Lender's
Revolving Loan Commitment (or the aggregate outstanding principal balance
of such Lender's Revolving Loans and all L/C Obligations in which such
Lender has an interest, if the Revolving Loan Commitments have been
terminated pursuant to the terms of this Agreement) by (B) the sum of (1)
the aggregate outstanding principal balance of the Term Loan (or the
Total Term Loan Commitment if the Term Loan has not been made) and (2)
the Total Revolving Loan Commitment (or the aggregate outstanding
principal balance of the Revolving Loans and all L/C Obligations, if the
Revolving Loan Commitments have been terminated pursuant to the terms of
this Agreement).
"Purchase Agreement" shall mean the Stock Purchase Agreement among
the Seller, the Company and the Borrower, dated April 27, 1997, together with
all schedules and exhibits referred to therein, each in the form delivered to
the Agent and the Lenders on the Closing Date, without giving effect to any
amendment, modification or waiver of any material term thereof effected without
the written consent of the Required Lenders.
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<PAGE> 26
"Purchasing Lenders" shall have the meaning provided in Section
10.4(d).
"Rate Hedging Obligations" shall mean any and all obligations of any
Loan Party to any Interest Rate Hedge Provider under Interest Rate Agreements
permitted pursuant to Section 7.14(a).
"Redeemable Stock" means any Equity Interest which, by its terms, or
upon the happening of any event matures, is mandatorily redeemable or
repurchaseable (other than for Capital Stock not constituting Redeemable Stock),
in whole or in part, prior to one year and one day after the Final Maturity
Date, or is, by its terms or upon the happening of any event, required to be
redeemed or repurchased, redeemable or repurchaseable at the option of the
holder thereof, in whole or in part, at any time prior to one year and one day
after the Final Maturity Date.
"Reference Banks" shall mean Banque Paribas, The Sakura Bank,
Limited, Los Angeles Agency and Bank of Montreal.
"Regulation D" shall mean Regulation D of the Federal Reserve Board
as from time to time in effect and any successor to all or any portion thereof.
"Related Businesses" shall mean any Persons (other than individuals)
engaged primarily in, or the assets or business of which relate primarily to,
the food service business.
"Replacement Lender" shall have the meaning provided in Section 2.22.
"Reportable Event" has the meaning set forth in Section 4043(b) of
ERISA (other than a Reportable Event as to which the provision of 30 days notice
to the PBGC is waived under applicable regulations), or is the occurrence of any
of the events described in Section 4068(f) or 4063(a) of ERISA.
"Required Holders" shall mean William P. Foley II, C. Thomas Thompson
and Robert E. Wheaton.
"Required Lenders" shall mean all Lenders whose Pro Rata Shares, in
the aggregate, are greater than 50%.
"Restaurant" shall mean any quick service restaurant.
"Revolving Loan Commitment" shall mean at any time, for any Lender,
the amount set forth opposite such Lender's name on Schedule 1.1 hereto under
the heading "Revolving Loan Commitment," as such amount may be reduced from time
to time pursuant to the terms of this Agreement.
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"Revolving Loan Maturity Date" shall mean July 15, 2002.
"Revolving Loans" shall have the meaning provided in Section 2.2(a).
"Revolving Note" shall have the meaning provided in Section 2.5(a).
"Secured Parties" shall have the meaning provided in the Borrower
Security Agreement and the Subsidiary Security Agreement.
"Security Documents" shall mean and include the Borrower Security
Agreement, the Subsidiary Security Agreement, the Guaranty, the Borrower Pledge
Agreement, the Subsidiary Pledge Agreements and all other security agreements,
pledge agreements, assignments and similar agreements executed in connection
with the Loan Documents.
"Seller" shall mean IMASCO Holdings, Inc., a Delaware corporation.
"Seller Agreements" shall mean (i) that certain agreement dated as of
April 27, 1997 between the Seller and the Borrower and (ii) that certain
Indemnification Agreement dated as of July 14, 1997 between the Seller and the
Borrower, each as amended, in accordance with Section 7.10(b)(i).
"Solvent" as to any Person shall mean that (i) the sum of the assets
of such Person, both at a fair valuation and at present fair salable value, will
exceed its liabilities, including contingent liabilities, (ii) such Person will
have sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (iii) such Person has not incurred
debts, and does not intend to incur debts, beyond its ability to pay such debts
as they mature. For purposes of this definition, "debt" means any liability on a
claim, and "claim" means (x) a right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y)
a right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed at the amount which, in light of all the facts and
circumstances existing at the time, represents the amount which can reasonably
be expected to become an actual or matured liability.
"Standby Letter of Credit" shall mean any standby letter of credit
issued by the Issuing Bank pursuant to Section 3 and which is not a Trade Letter
of Credit.
"Star Buffet" shall mean a Person (other than an individual) to be
formed by the Borrower after the Closing Date which will initially upon
formation be a Subsidiary of the Borrower organized under the laws of the United
States or any state thereof and which will
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own and operate, directly or indirectly through one or more of its Subsidiaries,
the buffet style restaurant operating division of the Borrower and the Capital
Stock (or other equity interest, if such Person is not a corporation) of which,
to the extent such Capital Stock (or other equity interest) is owned by the
Borrower or any Subsidiary of the Borrower, is pledged to the Agent pursuant to
the Security Documents.
"Subsequent Equity Issuance" shall mean the issuance of any shares of
Capital Stock of the Borrower (other than Redeemable Stock) within 30 days after
the Closing Date as a result of the exercise by the underwriters of an
overallotment option with respect to the Initial Equity Issuance.
"Subsidiary" of any Person shall mean and include (i) any corporation
50% or more of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, is either a general partner or has a 50% or more equity interest
at the time.
"Subsidiary Pledge Agreement" shall mean each pledge agreement
substantially in the form of the Subsidiary Pledge Agreement set forth as
Exhibit F hereto executed and delivered to the Agent by each Subsidiary of the
Borrower which owns any equity interest of any Person, as the same may be
amended, restated, modified or supplemented from time to time.
"Subsidiary Security Agreement" shall mean a security agreement
substantially in the form of the Subsidiary Security Agreement set forth as
Exhibit G hereto executed and delivered to the Agent by each Subsidiary of the
Borrower (other than Immaterial Subsidiaries), as the same may be amended,
restated, modified or supplemented from time to time.
"Summit" shall mean Summit Family Restaurants, Inc., a Delaware
corporation, and its successors and assigns to the extent not prohibited by the
terms of this Agreement.
"Summit Asset Sale" shall mean (i) the sale, transfer or other
disposition of all or any part of the assets of any Summit Subsidiary and (ii)
the sale, transfer or other disposition of any Capital Stock of any Summit
Subsidiary (or other equity interest if such Summit Subsidiary is not a
corporation) owned by the Borrower or any Subsidiary of the Borrower; provided
that Summit Asset Sale shall only include the sale, transfer or other
disposition of assets or Capital Stock (or other equity interest) described in
the foregoing clauses (i) and (ii) which are sold, transferred or otherwise
disposed of on or prior to March 31, 1998.
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"Summit Subsidiary" shall mean Summit, Star Buffet and any Subsidiary
of the Borrower which is a Subsidiary of Summit or Star Buffet on the Closing
Date or thereafter.
"Surviving Debt" shall have the meaning provided in Section 4.1(r).
"Term Loan" shall have the meaning provided in Section 2.1.
"Term Loan Commitment" shall mean at any time, for any Lender, the
amount set forth opposite such Lender's name in Schedule 1.1 hereto under the
heading "Term Loan Commitment", as the same may be reduced from time to time
pursuant to the terms of this Agreement.
"Term Loan Maturity Date" shall mean July 15, 2002.
"Term Note" shall have the meaning provided in Section 2.5(a).
"Termination Event" shall mean (i) a Reportable Event, or (ii) the
initiation of any action by the Borrower, any member of the Borrower's ERISA
Controlled Group or any ERISA Plan fiduciary to terminate an ERISA Plan or the
treatment of an amendment to an ERISA Plan as a termination under ERISA, or
(iii) the institution of proceedings by the PBGC under Section 4042 of ERISA to
terminate an ERISA Plan or to appoint a trustee to administer any ERISA Plan.
"Total Commitment" shall mean, at any time, the sum of the
Commitments of all of the Lenders at such time.
"Total Revolving Loan Commitment" shall have the meaning set forth in
Section 2.2(a).
"Total Term Loan Commitment" shall have the meaning set forth in
Section 2.1.
"Trade Letter of Credit" shall mean any Letter of Credit that is
issued pursuant to Section 3 for the benefit of a supplier of inventory to the
Borrower or any of its Subsidiaries to effect payment for such inventory.
"Transaction Costs" shall mean all costs and expenses paid or payable
by any Loan Party relating to the Transactions including, without limitation,
investment banking fees, financing fees, advisory fees, appraisal fees, legal
fees and accounting fees.
"Transaction Documents" shall mean the Loan Documents and the
Acquisition Documents.
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"Transactions" shall mean the Initial Equity Issuance and each of the
transactions contemplated by the Transaction Documents.
"Transferee" shall have the meaning provided in Section 10.4(e).
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
"Unfunded Benefit Liabilities" means with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefit
liabilities under such Plan as defined in Section 4001(a)(16) of ERISA, exceeds
(ii) the fair market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan (on the basis
of assumptions prescribed by the PBGC for the purpose of Section 4044 of ERISA).
"Unused Portion" shall mean at any time with respect to the Revolving
Loans, the amount by which the Total Revolving Loan Commitment in effect at such
time exceeds the sum of (i) the aggregate principal amount outstanding of the
Revolving Loans outstanding at such time and (ii) the aggregate amount of L/C
Obligations outstanding at such time.
"Voting Stock" shall mean capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency.
SECTION 2. AMOUNT AND TERMS OF CREDIT FACILITIES.
Section 2.1 Term Loans. Subject to and upon the terms and conditions
herein set forth, each Lender severally and not jointly agrees to make a single
loan to the Borrower on the Closing Date of a sum not to exceed the Term Loan
Commitment of such Lender (each such loan, a "Term Loan"). The aggregate
principal amount of the Term Loan Commitments (the "Total Term Loan Commitment")
shall not exceed $75,000,000. All unutilized Term Loan Commitments shall expire
simultaneously with the making of the Term Loans on the Closing Date. The Term
Loan of each Lender made on the Closing Date shall be initially made as a Base
Rate Loan or a Eurodollar Loan (subject to the other terms of this Agreement,
including without limitation, Section 2.3 and Section 2.17) and may thereafter
be maintained at the option of the Borrower as a Base Rate Loan or a Eurodollar
Loan, in accordance with the provisions hereof. Once repaid, Term Loans may not
be reborrowed. The Term Loans shall mature on the Term Loan Maturity Date and
shall be repaid, without premium or penalty, by the Borrower, in twenty (20)
consecutive quarterly installments of $3,750,000, payable on each Payment Date,
commencing on October 15, 1997, except for the last installment which shall be
due and payable on the Term Loan Maturity Date; provided however, that the last
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such installment due on the Term Loan Maturity Date shall be in the amount
necessary to repay in full the aggregate unpaid principal balance of the Term
Loans.
Section 2.2 Revolving Loans. (a) Subject to and upon the terms and
conditions herein set forth, each Lender severally and not jointly agrees, at
any time and from time to time on and after the Closing Date and prior to the
Revolving Loan Maturity Date, to make revolving loans (collectively, "Revolving
Loans") to the Borrower, which Revolving Loans shall not exceed in aggregate
principal amount at any time outstanding (i) the Revolving Loan Commitment of
such Lender at such time minus (ii) such Lender's Pro Rata Share of the L/C
Obligations at such time; provided that at no time shall the aggregate
outstanding principal amount of the Revolving Loans of all of the Lenders plus
the L/C Obligations of all of the Lenders exceed the Total Revolving Loan
Commitment. The sum of the Revolving Loan Commitments of all of the Lenders (the
"Total Revolving Loan Commitment") on the Closing Date shall be $225,000,000.
The Revolving Loan Commitments shall expire on October 31, 1997 if the Closing
Date has not occurred on or prior to such date. The Revolving Loans of each
Lender made on the Closing Date shall be initially made as a Base Rate Loan or a
Eurodollar Loan (subject to the other terms of this Agreement, including without
limitation, Section 2.3 and Section 2.17) and may thereafter be maintained at
the option of the Borrower as a Base Rate Loan or a Eurodollar Loan, in
accordance with the provisions hereof.
(b) Revolving Loans may be voluntarily prepaid pursuant to
Section 2.11, and, subject to the other provisions of this Agreement, any
amounts so prepaid may be reborrowed. Each Lender's Revolving Loan Commitment
shall expire, and each Revolving Loan shall mature on, the Revolving Loan
Maturity Date, without further action on the part of the Lenders or the Agent.
(c) Each Borrowing of Revolving Loans shall be in the
aggregate minimum amount of $1,000,000 or any integral multiple of $500,000 in
excess thereof.
Section 2.3 Notice of Borrowing. (a) Whenever the Borrower desires to
borrow Revolving Loans or Term Loans hereunder, it shall give the Agent at the
Agent's Office prior to 12:00 Noon, Chicago time, on the Business Day of such
borrowing by telex, facsimile or telephonic notice (promptly confirmed in
writing) of each Base Rate Loan, and at least three Business Days' prior telex,
facsimile or telephonic notice (promptly confirmed in writing) of each
Eurodollar Loan to be made hereunder. Each such notice (a "Notice of Borrowing")
shall be irrevocable and shall specify (i) the aggregate principal amount of the
requested Loans, (ii) whether such Loans shall be Term Loans or Revolving Loans,
(iii) the date of Borrowing (which shall be a Business Day), and (iv) whether
such Loans shall consist of Base Rate Loans or Eurodollar Loans and, if
Eurodollar Loans, the initial Interest Period to be applicable thereto
(provided, that no Eurodollar Loans may be requested or made when any Default or
Event of Default has occurred and is continuing).
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(b) Promptly after receipt of a Notice of Borrowing, the Agent
shall provide each Lender with a copy thereof and inform each Lender as to its
Pro Rata Share of the Loans requested thereunder.
Section 2.4 Disbursement of Funds. (a) No later than 2:00 P.M.,
Chicago time, on the date specified in each Notice of Borrowing, each Lender
will make available its Pro Rata Share of the Loans requested to be made on such
date, in U.S. dollars and immediately available funds, at the Agent's Office.
After the Agent's receipt of the proceeds of such Loans, the Agent will make
available to the Borrower by depositing in the Borrower's account at the Agent's
Office the aggregate of the amounts so made available in the type of funds
actually received.
(b) Unless the Agent shall have been notified by any Lender
prior to the date of a Borrowing that such Lender does not intend to make
available to the Agent its portion of the Loans to be made on such date, the
Agent may assume that such Lender has made such amount available to the Agent on
such date and the Agent in its sole discretion may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent by such Lender
and the Agent has made such amount available to the Borrower, the Agent shall be
entitled to recover such corresponding amount on demand from such Lender. If
such Lender does not pay such corresponding amount forthwith upon the Agent's
demand therefor, the Agent shall promptly notify the Borrower and the Borrower
shall immediately repay such corresponding amount to the Agent. The Agent shall
also be entitled to recover from such Lender or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Agent to the Borrower to the
date such corresponding amount is recovered by the Agent, at a rate per annum
equal to the then applicable rate of interest, calculated in accordance with
Section 2.6, for the respective Loans. Nothing herein shall be deemed to relieve
any Lender from its obligation to fulfill its commitments hereunder or to
prejudice any rights which the Borrower may have against any Lender as a result
of any default by such Lender hereunder. Notwithstanding anything contained
herein or in any other Loan Document to the contrary, the Agent may apply all
funds and proceeds of Collateral available for the payment of any Obligations
first to repay any amount owing by any Lender to the Agent as a result of such
Lender's failure to fund its Loans hereunder.
Section 2.5 Notes. (a) The Borrower's obligation to pay the principal
of, and interest on, each Lender's Loans shall be evidenced by (i) in the case
of such Lender's Term Loans, a promissory note (as the same may be amended,
restated, supplemented or otherwise modified from time to time, a "Term Note")
duly executed
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and delivered by the Borrower substantially in the form of Exhibit A hereto in a
principal amount equal to such Lender's Term Loan with blanks appropriately
completed in conformity herewith and (ii) in the case of such Lender's Revolving
Loans, a promissory note (as the same may be amended, restated, supplemented or
otherwise modified from time to time, a "Revolving Note") duly executed and
delivered by the Borrower substantially in the form of Exhibit B hereto in a
principal amount equal to such Lender's Revolving Loan Commitment, with blanks
appropriately completed in conformity herewith. Each Note issued to a Lender
shall (x) be payable to the order of such Lender, (y) be dated the Closing Date
or the date such Note was issued, and (z) mature on the Term Loan Maturity Date
or the Revolving Loan Maturity Date, as the case may be.
(b) Each Lender is hereby authorized, at its option, either
(i) to endorse on the schedule attached to its Revolving Note (or on a
continuation of such schedule attached to such Note and made a part thereof) an
appropriate notation evidencing the date and amount of each Revolving Loan
evidenced thereby and the date and amount of each principal and interest payment
in respect thereof, or (ii) to record such Revolving Loans and such payments in
its books and records. Such schedule or such books and records, as the case may
be, shall constitute prima facie evidence of the accuracy of the information
contained therein.
Section 2.6 Interest. (a) The Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base Rate Loan from the date of
the making of such Loan until such Loan shall be paid in full at a rate per
annum which shall be equal to the Base Rate in effect from time to time, such
rate to change as and when the Base Rate changes, such interest to be computed
on the basis of a 365 or 366-day year, as the case may be, and paid for the
actual number of days elapsed.
(b) The Borrower agrees to pay interest in respect of the
unpaid principal amount of each Eurodollar Loan from the date of the making of
such Loan until such Loan shall be paid in full at a rate per annum which shall
be equal to the sum of (i) the Applicable Margin plus (ii) the relevant
Eurodollar Rate, such interest to be computed on the basis of a 360-day year and
paid for the actual number of days elapsed.
(c) In the event that, and for so long as, any Event of
Default shall have occurred and be continuing, the outstanding principal amount
of all Loans and, to the extent permitted by law, overdue interest in respect of
all Loans, shall bear interest at a rate per annum (the "Default Rate") equal to
the sum of two percent (2%) plus the Base Rate in effect from time to time, and
shall be payable on demand.
(d) Interest on each Loan shall accrue from and including the
date of the Borrowing thereof to but excluding the date of any repayment thereof
(provided that any Loan borrowed and repaid on the same day shall accrue one
day's interest) and shall be payable (i) in respect of each Base Rate Loan,
quarterly in arrears on each Payment Date, (ii) in respect of each Eurodollar
Loan, on the last day of each Interest Period applicable to such Loan and, in
the case of an Interest Period of six months, on the date occurring three months
from the first day of such Interest Period and on the last day of such Interest
Period, and (iii) in the case of all Loans, on any prepayment or conversion (on
the amount prepaid or converted), at maturity (whether by acceleration or
otherwise) and, after such maturity, on demand. Each
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determination by the Agent of an interest rate hereunder shall, except for
manifest error, be final, conclusive and binding for all purposes.
(e) Each Reference Bank agrees to furnish to the Agent timely
information for the purpose of determining each Eurodollar Base Rate. If any one
or more of the Reference Banks shall not furnish such timely information to the
Agent for the purpose of determining any such interest rate, the Agent shall
determine such interest rate on the basis of timely information furnished by the
remaining Reference Banks. The Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the Agent for
purposes of Section 2.6(b), and the rate, if any, furnished by each Reference
Bank for the purpose of determining the interest rate under Section 2.6(b).
(f) If fewer than two Reference Banks furnish timely
information to the Agent for determining the Eurodollar Base Rate for any
Eurodollar Loan,
(i) the Agent shall forthwith notify the Borrower
and the Lenders that the interest rate cannot be determined for such
Eurodollar Loan,
(ii) each such Eurodollar Loan will automatically,
on the last day of the then existing Interest Period therefor, convert
into a Base Rate Loan (or if such Loan is then a Base Rate Loan, will
continue as a Base Rate Loan), and
(iii) the obligation of the Lenders to make, or to
convert Loans into, Eurodollar Loans shall be suspended until the Agent
shall notify the Borrower and the Lenders that the circumstances causing
suspension no longer exist.
Section 2.7 Interest Periods. (a) The Borrower shall, in each Notice
of Borrowing or Notice of Conversion or Continuation in respect of the making
of, conversion into or continuation of a Eurodollar Loan, select the interest
period (each an "Interest Period") applicable to such Eurodollar Loan, which
Interest Period shall, at the option of the Borrower, be either a one-month,
two-month, three-month or six-month period, provided that:
(i) the initial Interest Period for any Eurodollar
Loan shall commence on the date of the making of such Loan (including the
date of any conversion from a Base Rate Loan) and each Interest Period
occurring thereafter in respect of such Loan shall commence on the date
on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire
on a day which is not a Business Day, such Interest Period shall expire
on the next succeeding Business Day, provided, however, that if any
Interest Period would
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otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iii) if any Interest Period begins on a day for
which there is no numerically corresponding day in the calendar month at
the end of such Interest Period, such Interest Period shall end on the
last Business Day of such calendar month;
(iv) no Interest Period in respect of any Revolving
Loan or Term Loan shall extend beyond the Revolving Maturity Date or the
Term Loan Maturity Date, as the case may be; and
(v) no Interest Period in respect of a Term Loan
shall extend beyond any date upon which a repayment of the Term Loans is
required to be made pursuant to Section 2.1 unless the aggregate
principal amount of Term Loans which are Base Rate Loans or which have
Interest Periods which will expire on or before such date is equal to or
in excess of the amount of the Term Loan repayment required to be made on
such date.
(b) If upon the expiration of any Interest Period, the
Borrower has failed to elect a new Interest Period to be applicable to the
respective Eurodollar Loan as provided above, the Borrower shall be deemed to
have elected to convert such Eurodollar Loans into Base Rate Loans effective as
of the expiration date of such current Interest Period.
Section 2.8 Minimum Amount of Eurodollar Loans. All borrowings,
conversions, continuations, payments, prepayments and selection of Interest
Periods hereunder shall be made or selected so that, after giving effect
thereto, (i) the aggregate principal amount of any Borrowing comprised of
Eurodollar Loans shall not be less than $1,500,000 or an integral multiple of
$500,000 in excess thereof, and (ii) there shall be no more than eight (8)
Borrowings comprised of Eurodollar Loans outstanding at any time.
Section 2.9 Conversion or Continuation. (a) Subject to the other
provisions hereof, the Borrower shall have the option (i) to convert at any time
all or any part of outstanding Base Rate Loans which comprise part of the same
Borrowing to Eurodollar Loans, (ii) to convert all or any part of outstanding
Eurodollar Loans which comprise part of the same Borrowing to Base Rate Loans,
on the expiration date of the Interest Period applicable thereto, or (iii) to
continue all or any part of outstanding Eurodollar Loans which comprise part of
the same Borrowing as Eurodollar Loans for an additional Interest Period, on the
expiration of the Interest Period applicable thereto; provided that no Loan may
be continued as, or converted into, a Eurodollar Loan when any Default or Event
of Default has occurred and is continuing.
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(b) In order to elect to convert or continue a Loan under this
Section 2.9, the Borrower shall deliver an irrevocable notice thereof (a "Notice
of Conversion or Continuation") to the Agent no later than 12:00 Noon, Chicago
time, (i) on the Business Day of the proposed conversion date in the case of a
conversion to a Base Rate Loan and (ii) at least three Business Days in advance
of the proposed conversion or continuation date in the case of a conversion to,
or a continuation of, a Eurodollar Loan. A Notice of Conversion or Continuation
shall specify (w) the requested conversion or continuation date (which shall be
a Business Day), (x) the amount and Facility of the Loan to be converted or
continued, (y) whether a conversion or continuation is requested, and (z) in the
case of a conversion to, or a continuation of, a Eurodollar Loan, the requested
Interest Period. Promptly after receipt of a Notice of Conversion or
Continuation under this Section 2.9(b), the Agent shall provide each Lender with
a copy thereof.
Section 2.10 Voluntary Reduction of Commitments. Upon at least three
Business Day's prior irrevocable written notice (or telephonic notice promptly
confirmed in writing) to the Agent (which notice the Agent shall promptly
transmit to each of the Lenders), the Borrower shall have the right, without
premium or penalty, to permanently reduce each Lender's Pro Rata Share of all or
part of the Total Revolving Loan Commitment, provided that any such partial
reduction shall be in the minimum aggregate amount of $1,000,000 or any integral
multiple of $500,000 in excess thereof.
Section 2.11 Voluntary Prepayments. The Borrower shall have the right
to prepay the Loans in whole or in part from time to time on the following terms
and conditions: (i) the Borrower shall give the Agent written notice (or
telephonic notice promptly confirmed in writing), which notice shall be
irrevocable, of its intent to prepay the Loans, at least three Business Days
prior to a prepayment of Eurodollar Loans and on the Business Day of a
prepayment of Base Rate Loans, which notice shall specify the amount of such
prepayment and what Types of Loans and which Facilities are to be prepaid and,
in the case of Eurodollar Loans, the specific Borrowing(s) pursuant to which
made, and which notice the Agent shall promptly transmit to each of the Lenders,
(ii) each prepayment shall be in an aggregate principal amount of $1,000,000 or
any integral multiple of $500,000 in excess thereof and (iii) partial
prepayments of the Term Loans shall be applied to the scheduled installments of
principal thereof in the inverse order of maturity; provided that if any
prepayment of Eurodollar Loans is made pursuant to this Section 2.11 on a day
which is not the last day of the Interest Period applicable thereto, the
Borrower shall pay to each Lender all amounts due in connection with such
prepayment pursuant to Section 2.17.
Section 2.12 Mandatory Prepayments. (a) Upon the consummation of any
Asset Disposition after the Closing Date or upon receipt by any Loan Party of
any Liquidating Distribution after the Closing Date, in each case within one
hundred and eighty (180) days after the Borrower or any of its Subsidiaries
receives any Net Sale Proceeds, the Borrower shall prepay the outstanding Loans
in an amount equal to 100% of the amount of such Net Sale Proceeds, in
accordance with the provisions of Section 2.13; provided, however, that such Net
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Sale Proceeds which the Borrower or such Subsidiary shall, within one hundred
and eighty (180) days after the receipt thereof, use to reinvest in the business
of the Borrower or its Subsidiaries, shall not be included in determining the
aggregate Net Sale Proceeds for such period; provided further that, if an Event
of Default shall have occurred and be continuing on the date such Net Sale
Proceeds are received by the Borrower or any of its Subsidiaries or at any time
during such applicable one hundred and eighty day period, then the Borrower
shall prepay the outstanding Loans in an amount equal to 100% of such Net Sale
Proceeds (or, if any portion of such proceeds shall have been reinvested prior
to the occurrence of such Event of Default, 100% of such remaining amount of Net
Sale Proceeds not so reinvested) on the later of the date such Net Sale Proceeds
are received by the Borrower or any of its Subsidiaries or the date of the
occurrence of such Event of Default.
(b) On each date after the Closing Date on which the Borrower
or any of its Subsidiaries receives any Net Equity Proceeds, the Borrower shall
prepay the outstanding Loans in an amount equal to (i) 50% of such Net Equity
Proceeds if both (A) the Leverage Ratio as of the end of the fiscal quarter
immediately preceding such date as to which financial statements are required to
have been delivered pursuant to Section 6.1(a) and 6.1(b), as applicable, on a
pro forma basis after giving effect to any prepayment made by the Borrower
pursuant to clause (ii)(A) of this Section 2.12(b), is less than 2.0 and (B) no
Default has occurred or is continuing as a result of the Borrower's failure to
deliver any financial statement or Compliance Certificate as and when required
pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as applicable and (ii) 75% of such
Net Equity Proceeds if either (A) the Leverage Ratio as of the end of the fiscal
quarter immediately preceding such date as to which financial statements are
required to have been delivered pursuant to Section 6.1(a) or 6.1(b), as
applicable, is greater than or equal to 2.0 (but only until the Leverage Ratio
is less than 2.0, at which time clause (i) of this Section 2.12(b) shall apply
(unless clause (ii)(B) of this Section 2.12(b) shall then be applicable)) or (B)
any Default has occurred and is continuing as a result of the Borrower's failure
to deliver any financial statement or Compliance Certificate as and when
required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as applicable, in each
case in accordance with the provisions of Section 2.13.
(c) On each date after the Closing Date on which the Borrower
or any of its Subsidiaries receives any Net Debt Proceeds, becomes or remains
liable with respect to Indebtedness with respect to Capitalized Leases in excess
of $80,000,000 in the aggregate at any one time outstanding for the Borrower and
its Subsidiaries, or assumes any Indebtedness in connection with a Permitted
Acquisition pursuant to Section 7.2(l), the Borrower shall prepay the
outstanding Loans in an amount equal to 100% of such Net Debt Proceeds, 100% of
the amount by which the aggregate amount of Indebtedness of the Borrower and its
Subsidiaries with respect to Capitalized Leases exceeds $80,000,000 on such date
or 100% of the aggregate principal amount of any such Indebtedness assumed in
connection with a Permitted Acquisition, respectively, in accordance with the
provisions of Section 2.13.
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(d) On each date after the Closing Date on which the Borrower
or any of its Subsidiaries receives any indemnity payments under any of the
Acquisition Documents, the Borrower shall prepay the outstanding Loans in an
amount equal to 100% of such payments, in accordance with the provisions of
Section 2.13.
(e) On each day on which the Total Revolving Loan Commitment
is reduced pursuant to Section 2.10, the Borrower shall prepay the Revolving
Loans to the extent, if any, that the outstanding principal amount of the
Revolving Loans exceeds such reduced Total Revolving Loan Commitment.
(f) If at any time and for any reason the aggregate principal
amount of Revolving Loans plus the L/C Obligations then outstanding are greater
than the Total Revolving Loan Commitment, the Borrower shall immediately prepay
the Revolving Loans in an amount equal to such excess. In addition, to the
extent at any time and for any reason, the Total Revolving Loan Commitment minus
the aggregate principal amount of Revolving Loans then outstanding, is less than
the amount of L/C Obligations outstanding at such time, the Borrower shall Cash
Collateralize the L/C Obligations in an amount equal to the amount by which such
L/C Obligations exceed the amount equal to the difference between the Total
Revolving Loan Commitment and such aggregate principal amount of Revolving
Loans.
(g) Nothing in this Section 2.12 shall be construed to
constitute the Lenders' consent to any transactions referred to in Sections
2.12(a), 2.12(b) or 2.12(c) above which transaction is not expressly permitted
by the terms of this Agreement.
Section 2.13 Application of Prepayments. All prepayments of the Loans
required by clauses (a) through (d) of Section 2.12 shall be applied first, to
prepay the Term Loans until such Term Loans shall have been repaid in full,
together with accrued and unpaid interest thereon, second, to prepay the
Revolving Loans until such Revolving Loans shall have been repaid in full,
together with accrued and unpaid interest thereon, and third, to Cash
Collateralize the then outstanding Letters of Credit and, fourth, to all other
outstanding Obligations. If (i) at the time of any prepayment of the principal
amount of the Revolving Loans pursuant to the preceding sentence, either (A) the
Leverage Ratio as of the end of the fiscal quarter immediately preceding such
date as to which financial statements are required to have been delivered
pursuant to Section 6.1(a) or 6.1(b), as applicable, is greater than or equal to
2.0 or (B) any Default has occurred and is continuing as a result of the
Borrower's failure to deliver any financial statement or Compliance Certificate
as and when required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as
applicable, then simultaneously with any prepayment of the principal amount of
the Revolving Loans pursuant to the preceding sentence, each Lender's Revolving
Loan Commitment shall be permanently reduced by such Lender's Pro Rata Share of
such prepayment and (ii) at the time of any prepayment of the principal amount
of the Revolving Loans pursuant to the preceding sentence, both (A) the Leverage
Ratio as of the end of the fiscal quarter immediately preceding such date as to
which financial statements are required to have been delivered pursuant to
Section 6.1(a) and 6.1(b), as applicable, is less
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than 2.0 and (B) no Default has occurred or is continuing as a result of the
Borrower's failure to deliver any financial statement or Compliance Certificate
as and when required pursuant to Section 6.1(a), 6.1(b) or 6.1(e), as
applicable, then, any Revolving Loans repaid pursuant to the preceding sentence
may be reborrowed, subject to the other terms of this Agreement. All prepayments
of the Term Loans required by clauses (a) through (d) of Section 2.12 shall be
applied pro rata to the scheduled installments of principal thereof.
Section 2.14 Method and Place of Payment. (a) Except as otherwise
specifically provided herein, all payments and prepayments under this Agreement
and the Notes shall be made to the Agent for the account of the Lenders entitled
thereto not later than 2:00 P.M., Chicago time, on the date when due and shall
be made in lawful money of the United States of America in immediately available
funds at the Agent's Office, and any funds received by the Agent after such time
shall, for all purposes hereof (including the following sentence), be deemed to
have been paid on the next succeeding Business Day. Except as otherwise
specifically provided herein, the Agent shall thereafter cause to be distributed
on the date of receipt thereof to each Lender in like funds its Pro Rata Share
of payments so received.
(b) Whenever any payment to be made hereunder or under any
Note shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable at the applicable
rate during such extension.
(c) All payments made by the Borrower hereunder and under the
other Loan Documents shall be made irrespective of, and without any reduction
for, any setoff or counterclaims.
Section 2.15 Fees. (a) The Borrower agrees to pay the fees in the
amounts and on the dates specified in the Fee Letter.
(b) The Borrower agrees to pay to the Agent for the account of
each Lender a commitment fee (the "Commitment Fee") for each day computed at the
per annum rate equal to the Applicable Margin (determined for the Commitment Fee
in accordance with the definition of Applicable Margin) multiplied by each such
Lender's Pro Rata Share of the average daily Unused Portion, from and including
the date of this Agreement to the Revolving Loan Maturity Date. The Commitment
Fee shall accrue from and including the date of this Agreement to but excluding
the Revolving Loan Maturity Date. Accrued fees under this Section 2.15 shall be
payable on the Closing Date and payable quarterly in arrears on each Payment
Date, commencing October 15, 1997, and on the Revolving Loan Maturity Date or
such earlier date, if any, on which the Revolving Loan Commitment shall
terminate in accordance with the terms hereof. The Commitment Fee and all other
fees due under the Loan Documents (collectively the "Fees") shall be calculated
on the basis of a 360-day year for the actual number of days elapsed.
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Section 2.16 Interest Rate Unascertainable, Increased Costs,
Illegality. (a) In the event that the Agent, in the case of clause (i) below, or
any Lender, in the case of clauses (ii) and (iii) below, shall have determined
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for
any Interest Period, that by reason of any changes arising after the date
of this Agreement affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of the Eurodollar Rate; or
(ii) at any time, that the relevant Eurodollar Rate
applicable to any of its Loans shall not represent the effective pricing
to such Lender for funding or maintaining a Eurodollar Loan, or such
Lender shall incur increased costs or reductions in the amounts received
or receivable hereunder in respect of any Eurodollar Loan, in any such
case because of (x) any change since the date of this Agreement in any
applicable law or governmental rule, regulation, guideline or order or
any interpretation thereof and including the introduction of any new law
or governmental rule, regulation, guideline or order (such as for example
but not limited to a change in official reserve requirements, but, in all
events, excluding reserves required under Regulation D of the Federal
Reserve Board to the extent included in the computation of the Eurodollar
Rate), whether or not having the force of law and whether or not failure
to comply therewith would be unlawful, and/or (y) other circumstances
affecting such Lender or the interbank Eurodollar market or the position
of such Lender in such market; or
(iii) at any time, that the making or continuance by it
of any Eurodollar Loan has become unlawful by compliance by such Lender
in good faith with any law or governmental rule, regulation, guideline or
order (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) or has become impracticable as a
result of a contingency occurring after the date of this Agreement which
materially and adversely affects the interbank Eurodollar market;
then, and in any such event, the Agent or such Lender shall, promptly after
making such determination, give notice (by telephone promptly confirmed in
writing) to the Borrower and (if applicable) the Agent of such determination
(which notice the Agent shall promptly transmit to each of the other Lenders).
Thereafter (x) in the case of clause (i) above, the Borrower's right to request
Eurodollar Loans shall be suspended, and any Notice of Borrowing or Notice of
Conversion or Continuation given by the Borrower with respect to any Borrowing
of Eurodollar Loans which has not yet been made shall be deemed cancelled and
rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower
shall pay to such Lender, upon
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such Lender's delivery of a written demand therefor to the Borrower with a copy
to the Agent, such additional amounts (in the form of an increased rate of
interest, or a different method of calculating interest, or otherwise, as such
Lender in its sole discretion shall determine) as shall be required to
compensate such Lender for such increased costs or reduction in amounts received
or receivable hereunder and (z) in the case of clause (iii) above, the Borrower
shall take one of the actions specified in clause (b) below as promptly as
possible and, in any event, within the time period required by law. The written
demand provided for in clause (y) shall demonstrate in reasonable detail the
calculation of the amounts demanded and shall, absent manifest error, be final
and conclusive and binding upon all of the parties hereto.
(b) In the case of any Eurodollar Loan or requested Eurodollar
Loan affected by the circumstances described in clause (a)(ii) above, the
Borrower may, and in the case of any Eurodollar Loan affected by the
circumstances described in clause (a)(iii) above the Borrower shall, either (i)
if any such Eurodollar Loan has not yet been made but is then the subject of a
Notice of Borrowing or a Notice of Conversion or Continuation, be deemed to have
cancelled and rescinded such notice, or (ii) if any such Eurodollar Loan is then
outstanding, require the affected Lender to convert each such Eurodollar Loan
into a Base Rate Loan at the end of the applicable Interest Period or such
earlier time as may be required by law, in each case by giving the Agent notice
(by telephone promptly confirmed in writing) thereof on the Business Day that
the Borrower was notified by the Lender pursuant to clause (a) above; provided,
however, that all Lenders whose Eurodollar Loans are affected by the
circumstances described in clause (a) above shall be treated in the same manner
under this clause (b).
(c) In the event that the Agent determines at any time
following its giving of notice based on the conditions described in clause
(a)(i) above that none of such conditions exist, the Agent shall promptly give
notice thereof to the Borrower and the Lenders, whereupon the Borrower's right
to request Eurodollar Loans from the Lenders and the Lenders' obligation to make
Eurodollar Loans shall be restored.
(d) In the event that a Lender determines at any time
following its giving of a notice based on the conditions described in clause
(a)(iii) above that none of such conditions exist, such Lender shall promptly
give notice thereof to the Borrower and the Agent, whereupon the Borrower's
right to request Eurodollar Loans from such Lender and such Lender's obligation
to make Eurodollar Loans shall be restored.
Section 2.17 Funding Losses. The Borrower shall compensate each
Lender, upon such Lender's delivery of a written demand therefor to the
Borrower, with a copy to the Agent (which demand shall set forth the basis for
requesting such amounts and shall, absent manifest error, be final and
conclusive and binding upon all of the parties hereto), for all reasonable
losses, expenses and liabilities (including, without limitation, any loss,
expense or liability incurred by such Lender in connection with the liquidation
or reemployment of deposits or funds required by it to make or carry its
Eurodollar Loans), that such Lender
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sustains: (i) if for any reason (other than a default by such Lender) a
Borrowing of, or conversion from or into, or a continuation of, Eurodollar Loans
does not occur on a date specified therefor in a Notice of Borrowing or Notice
of Conversion or Continuation (whether or not rescinded, cancelled or withdrawn
or deemed rescinded, cancelled or withdrawn, pursuant to Section 2.16(a) or
2.16(b) or otherwise), (ii) if any repayment (including, without limitation,
payment after acceleration) or conversion of any of its Eurodollar Loans occurs
on a date which is not the last day of the Interest Period applicable thereto,
(iii) if any prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower, or (iv) as a
consequence of any default by the Borrower in repaying its Eurodollar Loans or
any other amounts owing hereunder in respect of its Eurodollar Loans when
required by the terms of this Agreement. Calculation of all amounts payable to a
Lender under this Section 2.17 shall be made on the assumption that such Lender
has funded its relevant Eurodollar Loan through the purchase of a Eurodollar
deposit bearing interest at the Eurodollar Rate in an amount equal to the amount
of such Eurodollar Loan with a maturity equivalent to the Interest Period
applicable to such Eurodollar Loan, and through the transfer of such Eurodollar
deposit from an offshore office of such Lender to a domestic office of such
Lender in the United States of America, provided that each Lender may fund its
Eurodollar Loans in any manner that it in its sole discretion chooses and the
foregoing assumption shall only be made in order to calculate amounts payable
under this Section 2.17.
Section 2.18 Increased Capital. If any Lender shall have determined
that compliance with any applicable law, rule, regulation, guideline, request or
directive (whether or not having the force of law) of any governmental
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital or assets of such Lender or any
Person controlling such Lender as a consequence of its commitments or
obligations hereunder, then from time to time, upon such Lender's delivering a
written demand therefor to the Agent and the Borrower (with a copy to the
Agent), the Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender or Person for such reduction.
Section 2.19 Taxes. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without reduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any governmental
authority excluding, in the case of the Agent and each Lender, net income and
franchise taxes imposed on the Agent or such Lender by the jurisdiction under
the laws of which the Agent or such Lender is organized or any political
subdivision or taxing authority thereof or therein, or by any jurisdiction in
which such Lender's Domestic Lending Office or Eurodollar Lending Office, as the
case may be, is located or any political subdivision or taxing authority thereof
or therein (all such non-excluded taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any Taxes are required to be
withheld from any amounts payable to the Agent or
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any Lender hereunder or under the Notes, the amounts so payable to the Agent or
such Lender shall be increased to the extent necessary to yield to the Agent or
such Lender (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this Agreement and
the Notes. Whenever any Taxes are payable by the Borrower, as promptly as
possible thereafter, the Borrower shall send to the Agent for its own account or
for the account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof. If
the Borrower fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and the Lenders for
any incremental taxes, interest or penalties that may become payable by the
Agent or any Lender as a result of any such failure. The agreements in this
Section 2.19 shall survive the termination of this Agreement and the payment of
the Notes and all other Obligations.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof (including each Purchasing Lender
that becomes a party to this Agreement pursuant to Section 10.4) agrees that,
prior to the first date on which any payment is due to it hereunder, it will
deliver to the Borrower and the Agent (i) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, certifying in each case that such Lender is entitled to
receive payments under this Agreement and the Notes payable to it, without
deduction or withholding of any United States federal income taxes, and (ii) an
Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the
case may be, to establish an exemption from United States backup withholding
tax. Each Lender which delivers to the Borrower and the Agent a Form 1001 or
4224 and Form W-8 or W-9 pursuant to the preceding sentence further undertakes
to deliver to the Borrower and the Agent two further copies of the said letter
and Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, or
other manner of certification, as the case may be, on or before the date that
any such letter or form expires or becomes obsolete or after the occurrence of
any event requiring a change in the most recent letter and form previously
delivered by it to the Borrower, and such extensions or renewals thereof as may
reasonably be requested by the Borrower, certifying in the case of a Form 1001
or 4224 that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes,
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
letter or form with respect to it and such Lender advises the Borrower that it
is not capable of receiving payments without any deduction or withholding of
United States federal income tax, and in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding tax.
Section 2.20 Use of Proceeds. The proceeds of the Term Loans and the
Revolving Loans shall be used for the Borrower's working capital and general
corporate
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purposes which shall include, but not be limited to Restaurant renovations and
Permitted Acquisitions.
Section 2.21 Collateral Security.
(a) As security for the payment of the Obligations, the
Borrower shall cause to be granted to the Agent, for the ratable benefit of the
Lenders, a first priority perfected Lien on and security interest in all of the
following, whether now or hereafter existing or acquired subject only to the
Liens permitted to be incurred pursuant to Section 7.3 hereof: (i) all of the
shares of capital stock of each Subsidiary of the Borrower now or hereafter
directly or indirectly owned by the Borrower and all proceeds thereof, all as
more specifically described in the Borrower Pledge Agreement and the Subsidiary
Pledge Agreements; (ii) certain of the assets of the Borrower and all proceeds
thereof, all as more specifically described in the Borrower Security Agreement;
and (iii) certain of the assets of each Subsidiary now or hereafter directly or
indirectly owned by the Borrower and all proceeds thereof, all as more
specifically described in the Subsidiary Security Agreement. To the extent the
Agent for the benefit of the Lenders does not have a first priority perfected
security interest in any assets of the Borrower or any other Loan Party required
to be pledged as described above which is of the type described in the Borrower
Security Agreement or the Subsidiary Security Agreement, the Borrower will
grant, and cause each other Loan Party to grant, to the Agent for itself and the
benefit of the Lenders a first priority perfected security interest in such
assets subject only to the Liens permitted pursuant to Section 7.3 hereof. In
connection with any sales of assets permitted under the Credit Agreement, the
Agent will release and terminate the liens and security interests granted under
the Security Documents with respect to such assets and no further consent of the
Lenders will be required with respect to any such release.
(b) Concurrently with the consummation of any Permitted
Acquisition or any other acquisition of any asset which is of the type described
in the Borrower Security Agreement or the Subsidiary Security Agreement by the
Borrower or any Subsidiary of the Borrower (other than a Subsidiary which, after
giving effect to any such acquisition, is an Immaterial Subsidiary) or the
formation of any new Subsidiary (other than a Subsidiary which, after giving
effect to any such acquisition, is an Immaterial Subsidiary) of the Borrower or
upon an Immaterial Subsidiary ceasing to qualify or be designated as an
Immaterial Subsidiary (conversion from the status of an Immaterial Subsidiary to
a Subsidiary which is not an Immaterial Subsidiary is hereinafter referred to as
a "Conversion"), the Borrower shall
(i) in the case of a Permitted Acquisition of stock or any
other acquisition of stock by the Borrower or any such Subsidiary of
the Borrower or the formation of such a new Subsidiary or a Conversion:
(A) deliver or cause to be delivered to the Agent all of the
certificates representing the capital stock (or other instruments or
securities evidencing ownership) of such new Subsidiary which is being
acquired or formed or converted, beneficially
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owned by the Borrower or such Subsidiary, as additional collateral for
the Obligations, to be held by the Agent in accordance with the terms
of the Borrower Pledge Agreement or a Subsidiary Pledge Agreement, as
the case may be; and (B) cause such new Subsidiary which is being
acquired or formed or converted to deliver to the Agent (1) duly
executed counterpart signature pages to each of the Guaranty, and the
Subsidiary Security Agreement, in the forms attached respectively
thereto as Annex I, together with the authorization to the Agent and
the Lenders to attach such signature pages to the Guaranty and the
Subsidiary Security Agreement, respectively, the effect of which shall
be that as of the date set forth on such signature pages such new or
converted Subsidiary shall become a party to each such agreement and be
bound by the terms thereof and any revisions to the schedules to the
Subsidiary Security Agreement necessary in connection therewith, (2) if
such new or converted Subsidiary owns any capital stock of any other
Subsidiary, a Subsidiary Pledge Agreement, or if such new or converted
Subsidiary owns any copyrights, trademarks, patents or other
intellectual property, such additional Security Documents as requested
by the Agent and, (3) such Uniform Commercial Code financing statements
as shall be required to perfect the security interest of the Agent and
the Lenders in the Collateral being pledged by such new Subsidiary
pursuant to the Subsidiary Security Agreement;
(ii) in the case of a Permitted Acquisition of assets or
any other acquisition of assets by the Borrower or any such Subsidiary
which is of the type described in the Borrower Security Agreement or
the Subsidiary Security Agreement, deliver or cause to be delivered by
the Borrower or such Subsidiary acquiring such assets, (A) such Uniform
Commercial Code financing statements as shall be required to perfect
the security interest of the Agent and the Lenders in the assets being
so acquired, (B) if such assets include copyrights, trademarks, patents
or other intellectual property, such additional Security Documents as
requested by the Agent, and (C) any additional instruments or documents
evidencing the security interest of the Agent reasonably required by
the Agent; and
(iii) in any case, provide such other documentation,
including, without limitation, one or more opinions of counsel
reasonably satisfactory to the Agent, articles of incorporation,
by-laws and resolutions, which in the reasonable opinion of the Agent
is necessary or advisable in connection with such Permitted Acquisition
or formation of such new Subsidiary or other acquisition or Conversion.
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Section 2.22 Replacement of Certain Lenders. If a Lender ("Affected
Lender") shall have requested compensation from the Borrower under Sections
2.16, 2.18 or 2.19 to recover Taxes or other additional costs incurred by such
Lender which are not being incurred generally by the other Lenders, or delivered
a notice pursuant to Section 2.16(a)(iii) claiming that such Lender is unable to
extend Eurodollar Loans to the Borrower for reasons not generally applicable to
the other Lenders, then, in any such case, so long as no Default or Event of
Default exists, the Borrower may make written demand on such Affected Lender
(with a copy to the Agent) for the Affected Lender to assign, and such Affected
Lender shall assign pursuant to one or more duly executed assignment and
acceptance agreements in substantially the form of Exhibit I thirty (30)
Business Days after the date of such demand, to one or more financial
institutions that comply with the provisions of Section 10.4(c) and 10.4(d) (and
that are reasonably acceptable to the Agent) which the Borrower shall have
engaged for such purpose ("Replacement Lender"), all of such Affected Lender's
rights and obligations under this Agreement and the other Loan Documents
(including its Revolving Loan Commitment, all Loans owing to it, all of its
participation interests in outstanding Letters of Credit, and its obligation to
participate in additional Letters of Credit hereunder) in accordance with
Section 10.4(c) and 10.4(d). Further, with respect to any such assignment, the
Affected Lender shall have concurrently received, in cash, all amounts due and
owing to such Affected Lender hereunder or under any other Loan Document,
including the aggregate outstanding principal amount of the Loans owed to such
Lender, together with accrued interest thereon through the date of such
assignment from the Replacement Lender, amounts payable under Sections 2.16,
2.18 and 2.19 with respect to such Affected Lender and compensation payable
under Section 2.15; provided that upon such Affected Lender's replacement, such
Affected Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 2.16, 2.17, 2.18, 2.19 and 10.1 accruing
with respect to such Affected Lender prior to the date such Affected Lender is
replaced, as well as to any fees accrued for its account hereunder prior to
being replaced and not yet paid, and shall continue to be obligated under
Section 9.7.
SECTION 3. LETTERS OF CREDIT.
Section 3.1 Issuance of Letters of Credit, etc. (a) Subject to the
terms and conditions hereof, at any time and from time to time from the Closing
Date through the day prior to the Revolving Loan Maturity Date, the Issuing Bank
shall issue such Letters of Credit for the account of the Borrower or any
Subsidiary of the Borrower which is a party to the Guaranty as Borrower may
request by an L/C Application; provided that, giving effect to such Letter of
Credit, (x) the sum of the L/C Obligations then outstanding plus the then
outstanding aggregate principal amount of the Revolving Loans shall not exceed
the Total Revolving Loan Commitment and (y) the aggregate L/C Obligations then
outstanding shall not exceed the L/C Commitment. Unless all the Lenders and the
Issuing Bank otherwise consent in writing, the term of any Letter of Credit
shall not exceed 12 months. No Letter of Credit shall expire by its terms after
the Revolving Loan Maturity Date. No Letter of Credit shall be issued except in
the ordinary course of business of the Borrower or any of its Subsidiaries or in
connection
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with Permitted Acquisitions with respect to which the conditions set forth in
Section 7.8(f) have been satisfied, each Letter of Credit shall be used solely
(a) to support obligations of the Borrower and its Subsidiaries not prohibited
hereunder, other than Indebtedness for borrowed money (except that Letters of
Credit may support the obligations of the Borrower and its Subsidiaries in
respect of the industrial revenue bond identified on Schedule 7.2), and (b) for
the purposes described in the definition of "Trade Letter of Credit".
(b) The Borrower shall submit the L/C Application for the
Issuance of any Letter of Credit to the Issuing Bank at least five Business Days
prior to the date when required. Upon Issuance of a Letter of Credit, the
Issuing Bank shall promptly notify the Lenders of the amount and terms thereof.
(c) Upon the Issuance of a Letter of Credit, each Lender that
has made a Revolving Loan Commitment shall be deemed to have purchased a pro
rata participation, from the Issuing Bank in an amount equal to that Lender's
Pro Rata Share, in the Letter of Credit. Without limiting the scope and nature
of each Lender's participation in any Letter of Credit, to the extent that the
Issuing Bank has not been reimbursed by Borrower for any payment to a
beneficiary of a Letter of Credit in respect of a drawing under such Letter of
Credit made by the Issuing Bank under any Letter of Credit, each Lender shall,
pro rata according to its Pro Rata Share, reimburse the Issuing Bank promptly
upon demand for the amount of such payment. The obligation of each Lender to so
reimburse the Issuing Bank shall be absolute and unconditional and shall not be
affected by the occurrence of a Default, Event of Default or any other
occurrence or event. Any such reimbursement shall not relieve or otherwise
impair the obligation of Borrower to reimburse the Issuing Bank for the amount
of any payment made by the Issuing Bank under any Letter of Credit together with
interest as hereinafter provided.
(d) Upon the making of any payment with respect to any Letter
of Credit by the Issuing Bank, Borrower shall be deemed to have submitted a
Notice of Borrowing for a Revolving Loan consisting of a Base Rate Loan in the
amount of such payment, and the Agent shall without notice to or the consent of
Borrower cause Revolving Loans to be made by the Lenders in an aggregate amount
equal to the amount paid by the Issuing Bank on that Letter of Credit, but not
exceeding the Total Revolving Loan Commitment minus the then outstanding
principal amount of Revolving Loans and minus all other then outstanding L/C
Obligations, and for this purpose, the conditions precedent set forth in Section
4 hereof shall not apply. The proceeds of such Revolving Loans shall be paid to
the Issuing Bank to reimburse it for the payment made by it under the Letter of
Credit. Promptly following any Revolving Loans made under this Section 3.1(d),
the Agent shall notify Borrower thereof.
(e) To the extent that any Loans made pursuant to Section
3.1(d) are insufficient to reimburse the Issuing Bank in full, Borrower agrees
to pay to the Issuing Bank with respect to each Letter of Credit, within one
Business Day after demand therefor, a
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principal amount equal to any payment made by the Issuing Bank under that Letter
of Credit, together with interest on such amount from the date of any payment
made by the Issuing Bank through the date of payment by Borrower at the Default
Rate. The principal amount of any such payment made by Borrower to the Issuing
Bank shall be used to reimburse the Issuing Bank for the payment made by it
under the Letter of Credit. Each Lender that has reimbursed the Issuing Bank
pursuant to Section 3.1(d) for its Pro Rata Share of any payment made by the
Issuing Bank under a Letter of Credit shall thereupon acquire a pro rata
participation, to the extent of such reimbursement, in the claim of the Issuing
Bank against Borrower under this Section 3.1(e).
(f) The Issuance of any supplement, modification, amendment,
renewal or extension to or of any Letter of Credit shall be treated in all
respects the same as the Issuance of a new Letter of Credit.
Section 3.2 Letter of Credit Fees. Borrower shall pay (i) a letter of
credit fee to the Agent equal to a per annum rate equal to the then effective
Applicable Margin for Eurodollar Loans times the stated amount of each Standby
Letter of Credit for the term of each Letter of Credit for the account of the
Lenders who have made Revolving Loan Commitments, according to their respective
Pro Rata Shares, in each case payable quarterly in arrears on each Payment Date,
and (ii) a letter of credit fee to the Agent equal to 0.50% of the stated amount
of each Trade Letter of Credit as of the date of Issuance thereof, payable for
the account of the Lenders who have made Revolving Loan Commitments, according
to their respective Pro Rata Shares, in each case payable quarterly in arrears
on each Payment Date. Upon (A) the issuance of each Letter of Credit, Borrower
shall also pay to the Agent for the account of the Issuing Bank an amount equal
to the greater of (i) $500 or (ii) 0.125% of the stated amount of each Letter of
Credit as an issuance fee; (B) the amendment of each Letter of Credit, Borrower
shall pay to the Agent for the account of the Issuing Bank the amendment fees,
in each case, as the Issuing Bank normally charges in connection with a Letter
of Credit and activity pursuant thereto, in either case which fees shall be
solely for the account of the Issuing Bank; and (C) the incurrence of any
reasonable out-of-pocket costs and expenses in connection with the maintenance
of any Letter of Credit, Borrower shall pay to the Agent for the account of the
Issuing Bank the amount of such out-of-pocket costs and expenses so incurred.
Section 3.3 Obligation of Borrower Absolute, etc. (a) The obligation
of Borrower to pay to the Issuing Bank the amount of any payment made by the
Issuing Bank under any Letter of Credit shall be absolute, unconditional and
irrevocable. Without limiting the foregoing, such obligation of Borrower shall
not be affected by any of the following circumstances:
(1) any lack of validity or enforceability of the Letter
of Credit, this Agreement or any other agreement or instrument relating
thereto;
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(2) any amendment or waiver of or any consent to departure
from the Letter of Credit, this Agreement or any other agreement or
instrument relating thereto;
(3) the existence of any claim, setoff, defense or other
rights which the Borrower or any Subsidiary of the Borrower may have at
any time against the Issuing Bank, any Lender, the Agent, any
beneficiary of the Letter of Credit (or any Persons for whom any such
beneficiary may be acting) or any other Person, whether in connection
with the Letter of Credit, this Agreement or any other agreement or
instrument relating thereto, or any unrelated transactions;
(4) any demand, statement or any other docu- ment
presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever so long as any such
document appeared to comply with the terms of the Letter of Credit;
(5) payment by the Issuing Bank in good faith under the
Letter of Credit against presentation of a draft or any accompanying
document which does not strictly comply with the terms of the Letter of
Credit;
(6) the existence, character, quality, quantity,
condition, packing, value or delivery of any property purported to be
represented by documents presented in connection with any Letter of
Credit or for any difference between any such property and the
character, quality, quantity, condition or value of such property as
described in such documents;
(7) the time, place, manner, order or contents of
shipments or deliveries of property as described in documents presented
in connection with any Letter of Credit or the existence, nature and
extent of any insurance relative thereto;
(8) the solvency or financial responsibility of any party
issuing any documents in connection with a Letter of Credit;
(9) any failure or delay in notice of shipments or arrival
of any property; and
(10) any other circumstances whatsoever.
(b) As among the Borrower, the Lenders, the Issuing Bank and
the Agent, the Borrower assumes all risks of the acts and omissions of, or
misuse of such Letter
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of Credit by, the beneficiary of any Letter of Credit. In furtherance and not in
limitation of the foregoing, subject to the provisions of the Letter of Credit
applications and Letter of Credit reimbursement agreements executed by the
Borrower at the time it requests any Letter of Credit, the Agent, the Issuing
Bank and the Lenders shall not be responsible;
(i) for the form, validity, sufficiency, accuracy, genu-
ineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Letters of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Letter
of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any
reason;
(iii) for the failure of the beneficiary of a Letter of
Credit to comply duly with conditions required in order to draw upon
such Letter of Credit;
(iv) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex, or other similar form of teletransmission or otherwise;
(v) for errors in interpretation of technical trade terms;
(vi) for any loss or delay in the transmission or other-
wise of any document required in order to make a drawing under any
Letter of Credit or of the proceeds thereof;
(vii) for the misapplication by the beneficiary of a
Letter of Credit of the proceeds of any drawing under such Letter of
Credit; and
(viii) for any consequences arising from causes beyond the
control of the Agent, the Issuing Bank and the Lenders including,
without limitation, any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or governmental
authority.
None of the above shall affect, impair, or prevent the vesting of any of the
Issuing Bank's rights or powers hereunder.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Issuing Bank under or in
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connection with Letters of Credit issued by it or any related certificates shall
not, in the absence of gross negligence or willful misconduct, put the Issuing
Bank under any resulting liability to the Borrower or relieve the Borrower of
any of its obligations hereunder to any such Person.
(d) The Issuing Bank shall be entitled to the protection
accorded to the Agent pursuant to Section 9, mutatis mutandis.
SECTION 4. CONDITIONS PRECEDENT.
Section 4.1 Conditions Precedent to Initial Loans. The obligation of
each Lender to make its initial Loans and of the Issuing Bank to Issue any
Letter of Credit on the Closing Date is subject to the satisfaction on the
Closing Date of the following conditions precedent:
(a) Loan Documents.
(i) Credit Agreement. The Borrower shall have executed
and delivered this Agreement to the Agent.
(ii) Notes. The Borrower shall have executed and delivered
to each of the Lenders the appropriate Notes in the amount, maturity
and as otherwise provided herein.
(iii) Borrower Security Agreement. The Borrower shall have
executed and delivered to the Agent the Borrower Security Agreement.
(iv) Subsidiary Security Agreement. Each Subsidiary of the
Borrower (other than any such Subsidiary which is an Immaterial
Subsidiary) shall have duly executed and delivered to the Agent the
Subsidiary Security Agreement.
(v) Borrower Pledge Agreement. The Borrower shall have
executed and delivered to the Agent the Borrower Pledge Agreement.
(vi) Subsidiary Pledge Agreements. Each Subsidiary of the
Borrower that owns any Equity Interest in any Person as of the Closing
Date (other than an equity interest in HTB Restaurants, Inc. or in
Boston West, L.L.C. or in Casa Bonita Incorporated) shall have duly
executed and delivered to the Agent a Subsidiary Pledge Agreement.
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(vii) Guaranty. Each Subsidiary of the Borrower (other
than any such Subsidiary which is an Immaterial Subsidiary) shall have
executed and delivered to the Agent the Guaranty.
(b) Opinions of Counsel. The Agent shall have received (A) a
legal opinion, dated the Closing Date, from Stradling, Yocca, Carlson & Rauth,
counsel to the Loan Parties, substantially in the form set forth as Exhibit H
hereto, (B) legal opinions from Locke Purnell Rain Harrell, special Texas
counsel to the Loan Parties, and Kilpatrick Stockton LLP, special North Carolina
and Georgia counsel to the Loan Parties and (C) such other legal opinions, each
dated the Closing Date, from local counsel to the Loan Parties as requested by
the Agent with respect to such matters as requested by the Agent and in form and
substance satisfactory to the Agent.
(c) Corporate Documents. The Agent shall have received the
Certificate of Incorporation, partnership agreement or other similar
organizational document of each of the Loan Parties as amended, modified or
supplemented to the Closing Date, (other than in the case of a general
partnership) certified to be true, correct and complete by the appropriate
Secretary of State as of a date not more than ten Business Days prior to the
Closing Date, together with a good standing certificate from such Secretary of
State and a good standing certificate from the Secretaries of State (or the
equivalent thereof) of each other State in which each of them is required to be
qualified to transact business, each to be dated a date not more than ten
Business Days prior to the Closing Date and a bring-down good standing
certificate or telephonic confirmation from the appropriate Secretary of State
in each jurisdiction of incorporation of each Loan Party dated the Closing Date.
(d) Certified Resolutions, etc. The Agent shall have received
a certificate of the Secretary or Assistant Secretary of each of the Loan
Parties or of a general partner in the case of each Loan Party which is a
partnership and dated the Closing Date certifying (i) the names and true
signatures of the incumbent officers of such Person authorized to sign the
applicable Loan Documents, (ii) the By-Laws of such Person as in effect on the
Closing Date, (iii) the resolutions of such Person's Board of Directors
approving and authorizing the execution, delivery and performance of all
Transaction Documents executed by such Person, and (iv) that there have been no
changes in the Certificate of Incorporation of such Person since the date of the
most recent certification thereof by the appropriate Secretary of State or, in
the case of a partnership or other similar entity the partnership agreement or
other similar organizational document.
(e) Transaction Documents. The Agent shall have received
copies of the Transaction Documents (other than the Loan Documents) and any
amendments, waivers or supplements thereto, certified as of the Closing Date by
the President or Vice President, of the Borrower to be true, correct and
complete copies of such documents, which documents shall be in form and
substance satisfactory to the Agent. The Agent shall have received copies of all
documents relating to existing Indebtedness for borrowed money or evidenced by a
note,
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bond, debenture, acceptance or similar instrument of the Borrower and its
Subsidiaries that shall be outstanding in each case in a principal amount in
excess of $2,000,000 on and after the Closing Date, including, without
limitation, terms of amortization, interest, premiums, fees, expenses, maturity,
amendments, covenants, events of default and remedies, certified as of the
Closing Date as such by the President or Vice President of the Borrower.
(f) Process Agent. Each Loan Party shall have appointed an
agent satisfactory to the Agent for service of process in connection with any
action or proceeding arising under or relating to the Loan Documents, and such
agent shall have accepted such appointment in writing.
(g) Officer's Certificate. The Agent and the Lenders shall
have received a certificate of the President or Vice President of the Borrower,
dated the Closing Date, certifying that (i) the Transaction Documents (other
than the Loan Documents) are in full force and effect and no material term or
condition thereof has been amended from the form thereof delivered to the Agent,
or waived, except as disclosed to the Agent or its counsel prior to the
execution of this Agreement, (ii) each of the Loan Parties and, to the best of
his or her knowledge, the other parties to the Transaction Documents, have
performed or complied in all material respects with all agreements and
conditions contained in such Transaction Documents and any agreements or
documents referred to therein required to be performed or complied with by each
of them on or before the Closing Date and no material condition to closing by
the Borrower or any of its Subsidiaries and set forth therein has been waived,
(iii) subject to the foregoing, neither any Loan Party nor, to the best of his
or her knowledge, any such other party is in default in the performance or
compliance with any of the material terms or provisions thereof, except to the
extent that performance thereof or compliance therewith or default has been
waived with the prior written consent of the Lenders, (iv) all of the
representations and warranties of the Borrower and each other Loan Party
contained in the Transaction Documents are true and correct, (v) after giving
effect to the execution and delivery of the Transaction Documents by each of the
Loan Parties and consummation of the Transactions thereunder, no Default or
Event of Default shall have occurred and be continuing and (vi) since December
31, 1996, no event or change has occurred that has caused or evidences a
Material Adverse Effect.
(h) Solvency Certificate. The Agent shall have received a
certificate signed by the Chief Financial Officer of the Borrower containing
conclusions that the Borrower and its Subsidiaries are Solvent before and after
giving effect to the Transactions and the incurrence of all other Indebtedness
of the Borrower and its Subsidiaries in connection with the Hardee's
Acquisition.
(i) Insurance. The Agent shall have received a certificate of
insurance demonstrating insurance coverage in respect of each of the Loan
Parties of types, in amounts, with insurers and with other terms reasonably
satisfactory to the Agent.
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(j) Lien Search Reports. The Agent shall have received
satisfactory reports of UCC, tax lien, judgment and litigation searches with
respect to the Borrower and each of the other Loan Parties in each of the
locations requested by the Agent.
(k) UCC-1 Financing Statements. The Agent shall have received
originals of each UCC-1 financing statement (i) duly executed by an Authorized
Officer of the Borrower as debtor naming the Agent as secured party and filed in
the jurisdictions set forth in Schedule I to the Borrower Security Agreement and
(ii) duly executed by an Authorized Officer of each other Loan Party as debtor
naming the Agent as secured party and filed in the appropriate jurisdictions set
forth in Schedule I to the Subsidiary Security Agreement.
(l) Pro Forma Balance Sheet. The Agent shall have received a
pro forma consolidated balance sheet of the Borrower and its Subsidiaries, dated
as of May 19, 1997, giving effect to the Transactions and the payment or accrual
of all Transaction Costs, certified by the chief financial officer of the
Borrower and a pro forma calculation of the Leverage Ratio specified in Section
4.1(m) certified by the chief financial officer of the Borrower.
(m) Pro forma Leverage Ratio. For the twelve-month period
ended May 19, 1997, the Leverage Ratio (on a pro forma consolidated basis after
giving effect to the Transactions and after adding $33,000,000 to clause (b) of
the definition of Leverage Ratio) is less than or equal to 3.0 to 1.0.
(n) Pledged Stock. The Agent shall have received the original
stock certificates evidencing the stock pledged pursuant to the Borrower Pledge
Agreement and each Subsidiary Pledge Agreement, together with undated stock
powers duly executed in blank in connection therewith.
(o) Corporate Structure. The corporate structure of the Loan
Parties after giving effect to the Hardee's Acquisition shall be satisfactory to
the Lenders and the Agent shall have received a corporate structure chart with
respect to the Borrower and all of its Subsidiaries (certified by an Authorized
Officer of the Borrower) after giving effect to the Hardee's Acquisition.
(p) Financial Statements. The Agent shall have received (i)
the audited financial statements of the Company for the fiscal year ended
December 31, 1996 and the unaudited financial statements of the Company for the
fiscal period ended on March 31, 1997 and (ii) the audited financial statements
of the Borrower and its Subsidiaries for the fiscal year ended January 27, 1997
and the unaudited financial statements of the Borrower and its Subsidiaries for
the fiscal period ended on May 19, 1997.
(q) Funded Debt and Capitalization. The aggregate amount of
the Loans borrowed under this Agreement on the Closing Date shall not exceed
$225,000,000,
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and the Total Revolving Loan Commitment minus the aggregate principal amount of
the Revolving Loans outstanding on the Closing Date after the Borrowings of the
initial Loans hereunder minus the amount of any L/C Obligations then outstanding
including any Letters of Credit to be issued on the Closing Date shall equal at
least $10,000,000. The Agent shall have received evidence satisfactory to it
that the Borrower shall have received cash proceeds from the issuance of Capital
Stock of the Borrower (other than Redeemable Stock) on or within 30 days prior
to the Closing Date in an amount not less than $150,000,000 net of all brokerage
commissions, underwriting fees and discounts and all other fees and expenses
related to the issuance thereof (the "Initial Equity Issuance") and that at
least $150,000,000 of such funds have been applied to the consummation of the
Hardee's Acquisition and the payment of the Transaction Costs.
(r) Existing Indebtedness. The Agent shall have received
evidence satisfactory to the Agent and the Lenders that, after giving effect to
the consummation of the Transactions, (i) the Borrower and its Subsidiaries
shall not be liable for or have outstanding any Indebtedness which is of the
type of Indebtedness which would appear as a liability on (or would be required
to appear as a liability on) the consolidated balance sheet of the Borrower (and
not of the type required solely to be included in the footnotes thereto) and
which Indebtedness shall include, without limitation, Indebtedness for borrowed
money and Capitalized Lease Obligations, other than (A) the Loans outstanding
hereunder as contemplated by Section 4.1(q) and (B) Indebtedness set forth on
Schedule 7.2 (collectively, the "Surviving Debt"), the aggregate outstanding
principal amount of which shall not exceed $100,000,000 as of the Closing Date,
and (ii) the Borrower, the Company and each of their respective Subsidiaries
shall have paid in full all other Indebtedness of the Borrower, the Company and
their respective Subsidiaries existing prior to the making of the initial Loans
hereunder (all of the foregoing Indebtedness described in the foregoing clause
(i) and (ii) referred to collectively as "Existing Debt"). The Agent shall be
satisfied that the execution and delivery of, and the performance by each of the
Borrower, the Company and their respective Subsidiaries of its respective
obligations under, each Transaction Document to which it is a party and
consummation of the Transactions does not violate, conflict with or cause a
default under any document or instrument evidencing Existing Debt, other than
Existing Debt being repaid on the Closing Date. The Agent shall have received
(i) payoff and lien termination and release agreements, in form and substance
satisfactory to the Agent, from each creditor of the Borrower, the Company and
their respective Subsidiaries with respect to Existing Debt other than Surviving
Debt, and (ii) such Form UCC-3 (or its equivalent), intellectual property lien
releases in recordable form in all applicable jurisdictions, and other lien and
mortgage release and termination agreements, evidence of release of federal and
state tax liens, all in form and substance satisfactory to the Agent, as the
Agent shall request, duly executed by the appropriate Person in favor of which
such Liens were granted.
(s) Environmental Matters. The Agent shall (i) be satisfied
that neither the Borrower, the Company, any of their respective Subsidiaries nor
any other Loan Party is subject to any present or contingent liability deemed
material by the Agent in its reasonable
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judgment in connection with any past or present treatment, storage, recycling,
disposal or release or threatened release, at any property location regardless
of whether owned or operated by the Borrower, the Company or any of their
respective Subsidiaries or any other Loan Party, of any Materials of
Environmental Concern or in connection with any Environmental Law or other
health or safety laws or regulations, and that their operations taken as a whole
comply in all material respects (in the Agent's reasonable judgment) with all
Environmental Laws or other health or safety laws or regulations, (ii) be
satisfied that neither the Borrower, the Company, any of their respective
Subsidiaries, nor any other Loan Party nor any property owned or operated by any
such Person is the subject of any federal or state investigation evaluating
whether any remedial action, involving a material expenditure (in the opinion of
the Agent) is needed to respond to any release or other presence of Materials of
Environmental Concern and (iii) have received a list of all of the properties
operated, owned or leased by the Borrower, the Company and each of their
respective Subsidiaries as to which Phase I environmental audit reports have
been completed within ten (10) years prior to the Closing Date and have received
copies of those Phase I audit reports which identify, or which recommend a
subsequent Phase II investigation as to, any material environmental health or
safety violations, hazards or potential liabilities relating to the properties
and business of the Borrower, the Company, each of their respective
Subsidiaries, the other Loan Parties (if applicable) and each of their
Environmental Affiliates of which the Borrower, the Company, or any of their
respective Subsidiaries have knowledge.
(t) Funds Flow Instructions. The Agent and the Lenders shall
have received detailed instructions satisfactory to them describing the funds
flow in connection with the Transactions on the Closing Date.
(u) Fees and Expenses. The Agent shall have received, for its
account and for the account of each Lender, as applicable, all Fees and other
fees and expenses due and payable hereunder on or before the Closing Date,
including, without limitation, the reasonable fees and expenses accrued through
the Closing Date, of Skadden, Arps, Slate, Meagher & Flom Illinois and any other
counsel retained by the Agent.
(v) Consents, Licenses, Approvals; Compliance with Laws. All
consents, licenses, orders, permits, authorizations, validations, certificates,
filings and approvals (collectively, "Consents"), if any, required in connection
with the execution, delivery and performance by the Seller, the Borrower, the
Company or any of their respective Subsidiaries, and the validity and
enforceability of the Transaction Documents, or in connection with any of the
transactions related thereto, including, without limitation, all shareholder
Consents and all Consents required by any federal, state, local regulatory or
governmental authority including, without limitation, all Consents required
pursuant to the Hart-Scott-Rodino Act, shall have been obtained or made and
shall be in full force and effect and copies thereof shall in each case have
been delivered to the Agent. The waiting period with respect to the Hardee's
Acquisition under the Hart-Scott-Rodino Act has been terminated or expired. The
Borrower shall have delivered to the Agent such evidence as the Agent shall have
requested, evidencing
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compliance by the Borrower, the Company and the other Loan Parties with all
applicable laws, rules and regulations before and after giving effect to the
Transactions (including, without limitation, all applicable corporate and
securities laws and all ERISA, environmental and health and safety laws, rules
and regulations).
(w) Management Contracts. The Borrower shall deliver to the
Agent and each Lender copies of each written agreement that it, the Company or
any of their respective Subsidiaries has or contemplates entering into with its
officers or other members of management as requested by the Agent certified by
an officer of the Borrower, and each such contract shall be satisfactory in form
and substance to the Agent.
(x) Franchise Agreements. The Borrower shall deliver to the
Agent copies of representative forms of Franchise Agreements, which represent
the various forms of all Franchise Agreements to which the Borrower, the Company
or any of their respective Subsidiaries as of the Closing Date is the franchisor
or licensor in each case certified by the general counsel of the Borrower.
(y) No Material Adverse Change. No event, act or condition
shall have occurred after December 31, 1996 that has had a Material Adverse
Effect.
(z) Consummation of Hardee's Acquisition. The Hardee's
Acquisition shall have been consummated in accordance with the terms of the
Acquisition Documents.
(aa) Projections. The Agent shall have received projections
prepared by the Borrower demonstrating the projected consolidated financial
condition and results of operations of the Borrower and its Subsidiaries after
giving effect to the Transactions, for the period commencing on the Closing Date
and ending on the Final Maturity Date, which projections shall be accompanied by
a written statement of the assumptions underlying the projections, and all of
the foregoing shall be satisfactory to the Lenders.
(bb) Additional Matters. The Agent shall have received such
other certificates, opinions, documents and instruments relating to the
Transactions as may have been reasonably requested by the Agent or any Lender,
and all corporate and other proceedings and all other documents (including,
without limitation, all documents referred to herein and not appearing as
exhibits hereto) and all legal matters in connection with the Transactions shall
be satisfactory in form and substance to the Lenders.
Section 4.2 Conditions Precedent to All Loans. The obligation
of each Lender to make any Loan (including the initial Loans made on the Closing
Date) and of the Issuing Bank to issue any Letter of Credit is subject to the
satisfaction on the date such Loan is made or such Letter of Credit is Issued of
the following conditions precedent:
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(a) Representations and Warranties. The representations and
warran- ties contained herein and in the other Loan Documents (other than
representations and warranties which expressly speak only as of a different
date) shall be true and correct in all material respects on such date both
before and after giving effect to the making of such Loans or the Issuance of
such Letter of Credit.
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date either before or
after giving effect to the making of such Loans or the Issuance of such Letter
of Credit.
(c) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any governmental authority shall have
been issued, and no litigation shall be pending or threatened, which in the
reasonable judgment of the Lenders would enjoin, prohibit or restrain, or impose
or result in the imposition of any material adverse condition upon, the making
or repayment of the Loans, the Issuance of such Letter of Credit or the
reimbursement of any amounts with respect thereto or the consummation of the
Transactions.
(d) No Material Adverse Change. No event, act or condition
shall have occurred after December 31, 1996 which, in the judgment of the
Required Lenders, has had or could have a Material Adverse Effect.
(e) Notice of Borrowing or Issuance. The Agent or the Issuing
Bank shall have received a fully executed Notice of Borrowing or L/C
Application, as appropriate, in respect of the Loans to be made or Letters of
Credit to be Issued, respectively, on such date.
The acceptance of the proceeds of each Loan and of the Issuance of each
Letter of Credit shall constitute a representation and warranty by the Borrower
to the Agent and each of the Lenders that all of the conditions required to be
satisfied under this Section 4 in connection with the making of such Loan or the
Issuance of such Letter of Credit have been satisfied.
All of the Notes, certificates, agreements, legal opinions and other
documents and papers referred to in this Section 4, unless otherwise specified,
shall be delivered to the Agent for the account of each of the Lenders and,
except for the Notes, in sufficient counterparts for each of the Lenders, and
shall be satisfactory in form and substance to the Agent and each Lender in its
sole discretion.
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SECTION 5. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lenders to enter into this Agreement and to
make the Loans and to induce the Issuing Bank to issue Letters of Credit, the
Borrower makes the following representations and warranties, which shall survive
the execution and delivery of this Agreement and the Notes and the making of the
Loans and the Issuance of the Letters of Credit:
Section 5.1 Corporate Status. Each Loan Party (i) is a duly organized
and validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, (ii) has the corporate power and authority to
own its property and assets and to transact the business in which it is engaged
or presently proposes to engage and (iii) has duly qualified and is authorized
to do business and is in good standing as a foreign corporation in every
jurisdiction in which it owns or leases real property or in which the nature of
its business requires it to be so qualified, except in the case of clause (iii),
where the failure to so qualify, individually or in the aggregate, could not
have a Material Adverse Effect.
Section 5.2 Corporate Power and Authority. Each Loan Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of each of the Transaction Documents to which it is a party and has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of such Transaction Documents. Each Loan Party has duly
executed and delivered each such Transaction Document, and each such Transaction
Document constitutes its legal, valid and binding obligation, enforceable in
accordance with its terms.
Section 5.3 No Violation. Neither the execution, delivery or
performance by any Loan Party of the Transaction Documents to which it is a
party, nor compliance by it with the terms and provisions thereof nor the
consummation of the Transactions, (i) will contravene any applicable provision
of any law, statute, rule, regulation, order, writ, injunction or decree of any
court or governmental instrumentality or (ii) will conflict or be inconsistent
with or result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of (or the obligation to create or impose) any Lien (except pursuant
to the Security Documents) upon any of the property or assets of any Loan Party
pursuant to the terms of any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which such Loan Party is a party or by which it
or any of its property or assets is bound or to which it may be subject, or
(iii) will violate any provision of the Certificate of Incorporation or By-Laws
(or other relevant formation documents) of any Loan Party.
Section 5.4 Litigation. There are no actions, suits, governmental
investigations, arbitrations or proceedings pending or threatened (i) with
respect to any of the Transactions or Transaction Documents or (ii) that could,
individually or in the aggregate, result in a Material Adverse Effect.
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Section 5.5 Financial Statements; Financial Condition; etc. Each of
the financial statements delivered pursuant to Sections 4.1(l) and 4.1(p) were
prepared in accordance with GAAP consistently applied and fairly present the
financial condition and the results of operations of the entities covered
thereby on the dates and for the periods covered thereby, except as disclosed in
the notes thereto and, with respect to interim financial statements, subject to
normally recurring year-end adjustments. No Loan Party has any material
liability (contingent or otherwise) not reflected in such financial statements
or in the notes thereto.
Section 5.6 Solvency. On the Closing Date and at all times after the
Closing Date, after giving effect to the Transactions, each Loan Party is and
will be Solvent.
Section 5.7 Projections. The projections delivered pursuant to
Section 4.1(aa) have been prepared on the basis of the assumptions accompanying
them, and such projections and assumptions, as of the date of preparation
thereof and as of the Closing Date, are reasonable and represent the Borrower's
good faith estimate of its future financial performance, it being understood
that nothing contained in this Section shall constitute a representation or
warranty that such future financial performance or results of operations will in
fact be achieved.
Section 5.8 Material Adverse Change. Since December 31, 1996, there
has occurred no event, act, condition or liability which has had, or could have,
a Material Adverse Effect.
Section 5.9 Use of Proceeds; Margin Regulations. All proceeds of each
Loan, and each Letter of Credit, will be used by the Borrower only in accordance
with the provisions of Section 2.20. No part of the proceeds of any Loan, or any
Letter of Credit, will be used by the Borrower to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock. Neither the making of any Loan, nor the Issuance of any Letter
of Credit, nor the use of the proceeds thereof will violate or be inconsistent
with the provisions of Regulations G, T, U or X of the Federal Reserve Board.
Following the application of the proceeds of each Loan, less than 25% of the
value (as determined by any reasonable method) of the assets of the Borrower and
its Subsidiaries (on a consolidated and an unconsolidated basis) have been and
will continue to be, represented by Margin Stock.
Section 5.10 Governmental and Other Approvals. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, or any other Person, is required to
authorize, or is required in connection with (i) the execution, delivery and
performance of any Transaction Document or the consummation of any of the
Transactions or (ii) the legality, validity, binding effect or enforceability of
any Transaction
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Document or the exercise by the Agent or any Lender of any of its rights under
any Loan Document, except those listed on Schedule 5.10 that have already been
duly made or obtained and remain in full force and effect and except for the
filing of financing statements pursuant to the Security Documents. All
applicable waiting periods including, without limitation, those under the
Hart-Scott-Rodino Act in connection with each Permitted Acquisition and the
other transactions contemplated thereby have expired without any action having
been taken by any competent authority restraining, preventing or imposing
materially adverse conditions upon the rights of the Loan Parties or their
Subsidiaries freely to transfer or otherwise dispose of, or to create any Lien
on, any properties now owned or hereafter acquired by any of them.
Section 5.11 Security Interests and Liens. The Security Documents
create, as security for the Obligations, valid and enforceable security
interests in and Liens on all of the Collateral, in favor of the Agent for the
ratable benefit of the Lenders, and subject to no other Liens (other than Liens
expressly permitted by Section 7.3 hereof). Upon the satisfaction of the
conditions precedent described in Sections 4.1(k) and 4.1(n), such security
interests in and Liens on the Collateral shall be superior to and prior to the
rights of all third parties (except as disclosed on Schedule 5.11), and no
further recordings or filings are or will be required in connection with the
creation, perfection or enforcement of such security interests and Liens, other
than the filing of continuation statements in accordance with applicable law.
Section 5.12 Tax Returns and Payments. Each Loan Party has filed all
tax returns required to be filed by it and has paid all taxes and assessments
payable by it which have become due, other than (i) those not yet delinquent or
those that are reserved against in accordance with GAAP which are being
diligently contested in good faith by appropriate proceedings or (ii) where the
failure to so pay has not resulted and could not reasonably be expected to
result in liability in excess of $1,000,000 in the aggregate for all of the Loan
Parties.
Section 5.13 ERISA. Neither the Borrower nor any of its Subsidiaries
have any Plans other than those listed on Schedule 5.13. No accumulated funding
deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) or
Reportable Event has occurred with respect to any Plan. There are no Unfunded
Benefit Liabilities under any Plan. The Borrower and each member of its ERISA
Controlled Group have complied with the requirements of Section 515 of ERISA
with respect to each Multiemployer Plan and is not in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan.
The aggregate potential total withdrawal liability, and the aggregate potential
annual withdrawal liability payments of the Borrower and the members of its
ERISA Controlled Group as determined in accordance with Title IV of ERISA as if
the Borrower and the members of its ERISA Controlled Group had completely
withdrawn from all Multiemployer Plans is not greater than $1,000,000. To the
best knowledge of the Borrower and each member of its ERISA Controlled Group, no
Multiemployer Plan is or is likely to be in reorganization (as defined in
Section 4241 of ERISA or Section 418 of the Code) or is insolvent (as defined in
Section 4245 of ERISA). No material liability to the PBGC (other
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than required premium payments), the Internal Revenue Service, any Plan or any
trust established under Title IV of ERISA has been, or is expected by the
Borrower or any member of its ERISA Controlled Group to be, incurred by the
Borrower or any member of its ERISA Controlled Group. Neither the Borrower nor
any member of its ERISA Controlled Group has any contingent liability with
respect to any post-retirement benefit under any "welfare plan" (as defined in
Section 3(1) of ERISA), other than liability for continuation coverage under
Part 6 of Title I of ERISA and other than contingent liabilities under the
Company's Retiree Medical Insurance Plan, and the aggregate present value of all
post-retirement benefit liabilities of the Borrower and its Subsidiaries under
the Company's Retiree Medical Insurance Plan as of the Closing Date does not
exceed $4,800,000. No lien under Section 412(n) of the Code or 302(f) of ERISA
or requirement to provide security under Section 401(a)(29) of the Code or
Section 307 of ERISA has been or is reasonably expected by the Borrower or any
member of its ERISA Controlled Group to be imposed on the assets of the Borrower
or any member of its ERISA Controlled Group.
Section 5.14 Investment Company Act; Public Utility Holding Company
Act. No Loan Party is (x) an "investment company" or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1940, as amended, (y) a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of either a "holding company" or a
"subsidiary company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or (z) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.
Section 5.15 Closing Date Transactions. On the Closing Date and
immediately prior to the making of the initial Loans hereunder, the Transactions
(other than the making of the Loans) intended to be consummated on the Closing
Date will have been consummated in accordance with the terms of the relevant
Transaction Documents and in accordance with all applicable laws. All consents
and approvals of, and filings and registrations with, and all other actions by,
any Person required in order to make or consummate such Transactions have been
obtained, given, filed or taken and are or will be in full force and effect.
Section 5.16 Representations and Warranties in Transaction Documents.
All representations and warranties made by any Loan Party in the Transaction
Documents (other than the Loan Documents), and, to the best of the Borrower's
knowledge, all representations made by each other Person in such Transaction
Documents, are true and correct in all material respects. None of such
representations and warranties is inconsistent in any material respect with the
representations and warranties of any Loan Party made herein or in any other
Loan Document.
Section 5.17 True and Complete Disclosure. All factual information
(taken as a whole) furnished by or on behalf of any Loan Party in writing to the
Agent or any Lender on or prior to the Closing Date, for purposes of or in
connection with this Agreement or any of the Transactions is, and all other such
factual information (taken as a whole) hereafter
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furnished by or on behalf of any Loan Party in writing to the Agent or any
Lender will be, true and accurate in all material respects on the date as of
which such information is dated or furnished and not incomplete by omitting to
state any material fact necessary to make such information (taken as a whole)
not misleading at such time. As of the Closing Date, there are no facts, events
or conditions known to any Loan Party which, individually or in the aggregate,
have or could be expected to have a Material Adverse Effect.
Section 5.18 Corporate Structure; Capitalization. Schedule 5.18
hereto sets forth as of the Closing Date, both before and after giving effect to
the Transactions to be consummated on the Closing Date, the jurisdiction of
incorporation of the Company, each of its Subsidiaries, each other Loan Party
and each Subsidiary of such Loan Party, the number of authorized and issued
shares of capital stock of the Company and each of its Subsidiaries and of each
other Loan Party and each Subsidiary of such Loan Party, the par value thereof
and the registered owner(s) thereof. All of such stock has been duly and validly
issued and is fully paid and non-assessable and is owned by such Loan Party free
and clear of all Liens. Except as disclosed in Schedule 5.18, neither any Loan
Party nor any such Subsidiary has outstanding any securities convertible into or
exchangeable for its capital stock nor does any Loan Party or any such
Subsidiary have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, warrants or any agreements providing for the
issuance (contingent or otherwise) of, or any calls, commitments or claims of
any character relating to, its capital stock.
Section 5.19 Environmental Matters. (a) Except as set forth in
Schedule 5.19, (i) each of the Loan Parties and their Environmental Affiliates
are in compliance with all applicable Environmental Laws except where
noncompliance, individually or in the aggregate, could not have a Material
Adverse Effect, (ii) each of the Loan Parties and their Environmental Affiliates
have all Environmental Approvals required to operate their businesses as
presently conducted or as reasonably anticipated to be conducted except where
the failure to obtain any such Environmental Approval, individually or in the
aggregate, could not have a Material Adverse Effect, (iii) none of the Loan
Parties nor any of their Environmental Affiliates has received any communication
(written or oral), whether from a governmental authority, citizens group,
employee or otherwise, that alleges that such Loan Party or Environmental
Affiliate is not in full compliance with all Environmental Laws and where such
noncompliance, individually or in the aggregate, could have a Material Adverse
Effect, and (iv) to the Borrower's best knowledge after due inquiry, there are
no circumstances that may prevent or interfere with such full compliance in the
future except where such noncompliance, individually or in the aggregate, could
not have a Material Adverse Effect.
(b) Except as set forth in Schedule 5.19, there is no
Environmental Claim pending or threatened against any Loan Party or its
Environmental Affiliate, which, individually or in the aggregate, could have a
Material Adverse Effect.
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(c) Except as set forth in Schedule 5.19, there are no past or
present actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge or disposal of
any Material of Environmental Concern, that could form the basis of any
Environmental Claims against any of the Loan Parties or any of their
Environmental Affiliates, which Environmental Claims, individually or in the
aggregate, could have a Material Adverse Effect.
(d) Schedule 5.19 sets forth a list of all of the properties
operated, owned or leased by the Borrower, the Company and each of their
respective Subsidiaries as to which Phase I environmental audit reports have
been completed as of the Closing Date and the Borrower has delivered copies of
those Phase I audit reports which identify, or which recommend a subsequent
Phase II investigation as to, any material environmental, health or safety
violations, hazards or potential liabilities relating to the properties and
business of the Borrower, the Company, each of their respective Subsidiaries,
the other Loan Parties (if applicable) and each of their Environmental
Affiliates of which the Borrower, the Company, or any of their respective
Subsidiaries have knowledge.
Section 5.20 Intellectual Property. Each of the Loan Parties owns or
has the valid right to use all patents, trademarks, service marks, trade names,
copyrights, trade secrets and other intangible rights, free and clear of all
Liens, which are used in or necessary for the operation of its business, and
Schedule V to the Borrower Security Agreement and Schedule V to the Subsidiary
Security Agreement together set forth a complete and accurate list thereof with
respect to each Loan Party as of the Closing Date, including all applications
and registrations thereof and all license agreements to or from third parties
relating thereto (the "Intellectual Property"). Each Loan Party is the record
owner of all registrations and applications which it owns and all registrations
for Intellectual Property are valid and enforceable. To the best of each Loan
Party's knowledge, no service, product, process, method, substance, part or
other material presently offered, sold or employed by any Loan Party infringes
upon or dilutes any patent, trademark, service mark, trade name, copyright,
license or other right of any other Person, and no such claims have been made by
any other Person against any Loan Party. There is no pending or, to the best of
each Loan Party's knowledge, threatened claim or litigation against or affecting
any Loan Party contesting its rights to own or use any Intellectual Property or
the validity or enforceability thereof.
Section 5.21 Ownership of Property; Restaurants. Schedule 5.21 sets
forth all the real property owned or leased by the Loan Parties as of the
Closing Date and identifies the street address, the current owner (and current
record owner, if different) and whether such property is leased or owned. The
Loan Parties have good and marketable fee simple title to or valid leasehold
interests in all of such real property and good title to all of their personal
property subject to no Lien of any kind except Liens permitted hereby. Schedule
5.21 also sets forth a list of each Restaurant and the street address thereof
which is owned or operated as of the Closing Date by any Loan Party or any of
its Subsidiaries. The Loan Parties enjoy peaceful and undisturbed possession
under all of their respective leases.
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Section 5.22 No Default. No Loan Party is in default under or
with respect to any Transaction Document or any other agreement, instrument or
undertaking to which it is a party or by which it or any of its property is
bound in any respect which could result in a Material Adverse Effect. No Default
or Event of Default exists.
Section 5.23 Licenses, etc. The Loan Parties have obtained and hold
in full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.
Section 5.24 Compliance with Law. Each Loan Party is in compliance
with all laws, rules, regulations, orders, judgments, writs and decrees except
where such non-compliance, individually or in the aggregate, could not have a
Material Adverse Effect.
Section 5.25 No Burdensome Restrictions. No Loan Party is a party to
any agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which, individually or in the aggregate, could have a Material Adverse Effect.
Section 5.26 Brokers' Fees. Except as set forth on Schedule 5.26,
none of the Loan Parties has any obligation to any Person in respect of any
finder's, brokers, investment banking or other similar fee in connection with
any of the Transactions.
Section 5.27 Labor Matters. Except as set forth on Schedule 5.27,
there are no collective bargaining agreements or Multiemployer Plans covering
the employees of the Company, any of its Subsidiaries or any of the Loan
Parties, and none of such Persons has suffered any strikes, walkouts, work
stoppages or other material labor difficulty within the last five years. No
proceedings are pending against the Borrower or any of its Subsidiaries before
the INS which could reasonably be expected to have a Material Adverse Effect.
Section 5.28 Indebtedness of the Borrower and Its Subsidiaries. Set
forth on Schedule 5.28 hereto is a complete and accurate list of all
Indebtedness of the Borrower, the Company and each of their respective
Subsidiaries existing as of the Closing Date (other than Surviving Debt),
showing the principal amount outstanding thereunder as of the Closing Date.
Section 5.29 Other Agreements. Schedule 5.29 sets forth a complete
and accurate list as of the Closing Date of (i) all joint venture and
partnership agreements to which the Borrower, the Company or any of their
Subsidiaries is a party, and (ii) all covenants not to compete restricting the
Borrower, the Company or any of their Subsidiaries to which the Borrower, the
Company or any of their Subsidiaries is a party or by which the Borrower, the
Company or any of their Subsidiaries is bound.
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Section 5.30 Immaterial Subsidiaries. The Subsidiaries of the
Borrower designated as Immaterial Subsidiaries on the Closing Date are set forth
on Schedule 5.30. The assets of each Subsidiary of the Borrower designated as an
Immaterial Subsidiary by the Borrower do not exceed $1,000,000 and the assets of
all of the Subsidiaries of the Borrower designated as Immaterial Subsidiaries by
the Borrower do not in the aggregate exceed $7,000,000, in each case as
determined in accordance with GAAP.
Section 5.31 Franchise Agreements and Franchisees. None of the
Franchise Agreements to which the Borrower or any of its Subsidiaries is a party
as a franchisor or a licensor prohibit or restrict in any manner the assignment
of such Franchise Agreement to the Agent for the benefit of the Secured Parties
or require any consent of any Person in connection with any such assignment.
Schedule 5.31 sets forth a complete and accurate list of each Person who is a
franchisee or licensee of the Borrower, the Company or any of their respective
Subsidiaries as of the Closing Date.
SECTION 6. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Closing Date
and until all of the Commitments of each of the Lenders have terminated, each of
the Letters of Credit has expired or been terminated, and the Obligations are
paid in full:
Section 6.1 Information Covenants. The Borrower will furnish to the
Agent, with sufficient copies for each Lender:
(a) Quarterly Financial Statements. Within 45 days after the
close of each of the first three (3) quarterly accounting periods in each fiscal
year of the Borrower, the consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such quarterly period and the related consolidated
statements of income and cash flow for such quarterly period and for the elapsed
portion of the fiscal year ended with the last day of such quarterly period, and
in each case setting forth comparative figures for the related periods in the
prior fiscal year.
(b) Annual Financial Statements. Within 90 days after the
close of each fiscal year of the Borrower, the consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income and cash flow for such fiscal year, setting
forth comparative figures for the preceding fiscal year and, with respect to
such consolidated financial statements, certified without qualification by KPMG
Peat Marwick LLP or other independent certified public accountants of recognized
national standing reasonably acceptable to the Agent and the Required Lenders
and indicating that its audit of the consolidated financial statements of the
Borrower was conducted in accordance with generally accepted auditing standards.
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(c) Management Letters. Promptly after the Borrower's receipt
thereof, a copy of any "management letter" or other material report received by
the Borrower from its certified public accountants.
(d) Budgets. Within 60 days after the first day of each fiscal
year of the Borrower, a budget and financial forecast of results of operations
and sources and uses of cash (in form reasonably satisfactory to the Agent)
prepared by the Borrower for such fiscal year, accompanied by a written
statement of the assumptions used in connection therewith, together with a
certificate of the chief financial officer of the Borrower to the effect that
such budget and financial forecast and, to the best of his knowledge,
assumptions, are reasonable and represent the Borrower's good faith estimate of
its future financial requirements and performance. The financial statements
required to be delivered pursuant to clauses (a) and (b) above shall be
accompanied by a comparison of the actual financial results set forth in such
financial statements to those contained in the forecasts delivered pursuant to
this clause (d) together with an explanation of any material variations from the
results anticipated in such forecasts.
(e) Officer's Certificates. At the time of the delivery of the
financial statements under clauses (a) and (b) above, a certificate of the chief
financial officer of the Borrower which certifies (x) that such financial
statements fairly present the financial condition and the results of operations
of the Borrower and its Subsidiaries on the dates and for the periods indicated,
subject, in the case of interim financial statements, to normally recurring
year-end adjustments, and that such financial statements were prepared in
accordance with GAAP and (y) that such officer has reviewed the terms of the
Loan Documents and has made, or caused to be made under his or her supervision,
a review in reasonable detail of the business and condition of the Borrower and
its Subsidiaries during the accounting period covered by such financial
statements, and that as a result of such review such officer has concluded that
no Default or Event of Default has occurred during the period commencing at the
beginning of the accounting period covered by the financial statements
accompanied by such certificate and ending on the date of such certificate or,
if any Default or Event of Default has occurred, specifying the nature and
extent thereof and, if continuing, the action the Borrower proposes to take in
respect thereof (the "Compliance Certificate"). Such certificate shall set forth
the calculations required to establish whether the Borrower was in compliance
with the provisions of Sections 6.11, 6.12, 7.1, 7.2, 7.3, 7.7, 7.8 and 7.18
during and as at the end of the accounting period covered by the financial
statements accompanied by such certificate.
(f) Notice of Default. Promptly and in any event within one
Business Day after any Loan Party obtains knowledge thereof, notice (i) of the
occurrence of any Default or Event of Default together with a certificate of an
Authorized Officer of the Borrower specifying the nature and period of existence
thereof and the Borrower's proposed response thereto and (ii) that any holder of
Indebtedness of the Borrower or any Subsidiary of the Borrower having an
outstanding principal balance exceeding $5,000,000 has given any
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written notice to the Borrower or any Subsidiary of the Borrower or taken any
other action with respect to a claimed default or event or condition of the type
referred to in Section 8.1(d) specifying (A) the nature and period of existence
of any such claimed default, condition or event, (B) the notice given or action
taken by such Person in connection therewith, and (C) the Borrower's proposed
response thereto.
(g) Notice of Litigation. Promptly after (i) the occurrence
thereof, notice of the institution of, or any material development in, any
action, suit, litigation, proceeding, investigation or arbitration, before any
court or arbitrator or any governmental or administrative body, agency or
official, against the Borrower, any of its Subsidiaries or any material property
of any thereof which, individually or in the aggregate, could have a Material
Adverse Effect, or (ii) actual knowledge thereof, notice of the threat of any
such action, suit, proceeding, investigation or arbitration.
(h) ERISA.
(i) As soon as possible and in any event within 10
days after the Borrower or any member of its ERISA Controlled Group
knows, or has reason to know, that:
(A) any Termination Event with respect to a Plan
has occurred or will occur, or
(B) any condition exists with respect to a Plan
which presents a material risk of termination of the Plan or imposition
of an excise tax or other liability on the Borrower or any member of
its ERISA Controlled Group, or
(C) the Borrower or any member of its ERISA
Controlled Group has applied for a waiver of the minimum funding
standard under Section 412 of the Code or Section 302 of ERISA, or
(D) the Borrower or any member of its ERISA
Controlled Group has engaged in a "prohibited transaction," as defined
in Section 4975 of the Code or as described in Section 406 of ERISA,
that is not exempt under Section 4975 of the Code and Section 408 of
ERISA, or
(E) the aggregate present value of the Unfunded
Benefit Liabilities under all Plans has in any year increased by
$500,000 or to an amount in excess of $1,000,000, or
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(F) any condition exists with respect to a
Multiemployer Plan which presents a material risk of a partial or
complete withdrawal (as described in Section 4203 or 4205 of ERISA) by
the Borrower or any member of its ERISA Controlled Group from a
Multiemployer Plan, or
(G) the Borrower or any member of its ERISA
Controlled Group is in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan, or
(H) a Multiemployer Plan is in "reorganization"
(as defined in Section 418 of the Code or Section 4241 of ERISA) or is
"insolvent" (as defined in Section 4245 of ERISA), or
(I) the potential withdrawal liabili- ty (as
determined in accordance with Title IV of ERISA) of the Borrower and
the members of its ERISA Controlled Group with respect to all
Multiemployer Plans has in any year increased by $500,000 or to an
amount in excess of $1,000,000, or
(J) there is an action brought against the
Borrower or any member of its ERISA Controlled Group under Section 502
of ERISA with respect to its failure to comply with Section 515 of
ERISA,
a certificate of the president or chief financial officer of the Borrower
setting forth the details of each of the events described in clauses (A) through
(J) above as applicable and the action which the Borrower or the applicable
member of its ERISA Controlled Group proposes to take with respect thereto,
together with a copy of any notice or filing from the PBGC or which may be
required by the PBGC or other agency of the United States government with
respect to each of the events described in clauses (A) through (J) above, as
applicable.
(ii) As soon as possible and in any event within two
Business Days after the receipt by the Borrower or any member of its
ERISA Controlled Group of a demand letter from the PBGC notifying the
Borrower or such member of its ERISA Controlled Group of its final
decision finding liability and the date by which such liability must be
paid, a copy of such letter, together with a certificate of the
president or chief financial officer of the Borrower setting forth the
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action which the Borrower or such member of its ERISA Controlled Group
proposes to take with respect thereto.
(i) SEC Filings. Promptly upon transmission thereof, copies of all
regular and periodic financial information, proxy materials and other
information, regular, periodic and special reports and registration statements,
if any, which any Loan Party shall file with the Securities and Exchange
Commission or any governmental agencies substituted therefore or which any Loan
Party shall send to its stockholders.
(j) Environmental. Promptly and in any event within two Business Days
after the existence of any of the following conditions, a certificate of an
Authorized Officer of the Borrower specifying in detail the nature of such
condition and the applicable Loan Party's or Environmental Affiliate's proposed
response thereto: (i) the receipt by any Loan Party or any of its Environmental
Affiliates of any communication (written or oral), whether from a governmental
authority, citizens group, employee or otherwise, that alleges that such Loan
Party or Environmental Affiliate is not in compliance with applicable
Environmental Laws and such noncompliance, individually or in the aggregate,
could have a Material Adverse Effect, (ii) any Loan Party or any of its
Environmental Affiliates shall obtain actual knowledge that there exists any
Environmental Claim pending or threatened against such Loan Party or such
Environmental Affiliate, which, individually or in the aggregate, could have a
Material Adverse Effect, or (iii) any release, emission, discharge or disposal
of any Material of Environmental Concern that could form the basis of any
Environmental Claim against any Loan Party or any of their Environmental
Affiliates, which Environmental Claim, individually or in the aggregate could
have a Material Adverse Effect.
(k) Creditor Reports. Promptly after the furnishing thereof, copies
of any statement or report furnished to any other holder of the securities of
any Loan Party or of any of its Subsidiaries pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Lenders pursuant to any other clause of this Section 6.1.
(l) Other Information. From time to time, such other information or
documents (financial or otherwise) as any Lender may reasonably request.
Section 6.2 Books, Records and Inspections. The Borrower shall, and
shall cause each of its Subsidiaries to, keep proper books of record and account
in which full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in relation
to its business and activities. The Borrower shall, and shall cause each of its
Subsidiaries to, permit officers and designated representatives of any Lender to
visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, and to examine the books of record and account of the Borrower or
any of its Subsidiaries, and discuss the affairs, finances and accounts of the
Borrower or any of its Subsidiaries with, and be advised as to the same by, its
and their officers and independent accountants, all upon
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reasonable notice and at such reasonable times as such Lender may desire;
provided that no such prior notice shall be required if an Event of Default has
occurred and is continuing.
Section 6.3 Maintenance of Insurance. The Borrower shall, and shall
cause each of its Subsidiaries to, (a) maintain with financially sound and
reputable insurance companies insurance on itself and its properties in at least
such amounts and against at least such risks as are customarily insured against
in the same general area by companies engaged in the same or a similar business
similarly situated, which insurance shall in any event not provide for
materially less coverage than the insurance in effect on the Closing Date and
(b) furnish to each Lender from time to time, upon written request, the policies
under which such insurance is issued, certificates of insurance and such other
information relating to such insurance as such Lender may request.
Section 6.4 Taxes. (a) The Borrower shall pay or cause to be paid, and
shall cause each of its Subsidiaries to pay or cause to be paid, when due, all
taxes, charges and assessments and all other lawful claims required to be paid
by the Borrower or such Subsidiaries, except as contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves have been
established with respect thereto in accordance with GAAP.
(b) The Borrower shall not, and shall not permit any of its
Subsidiaries to, file or consent to the filing of any consolidated tax return
with any Person (other than the Borrower and its Subsidiaries).
Section 6.5 Corporate Franchises. Except as permitted by Section 7.4
below, the Borrower shall, and shall cause each of its Subsidiaries to, do or
cause to be done, all things necessary to preserve and keep in full force and
effect its existence and its patents, trademarks, servicemarks, tradenames,
copyrights, franchises, licenses, permits, certificates, authorizations,
qualifications, accreditations, easements, rights of way and other rights,
consents and approvals except where the failure to so preserve any of the
foregoing (other than existence) could not, individually or in the aggregate,
result in a Material Adverse Effect.
Section 6.6 Compliance with Law. The Borrower shall, and shall cause
each of its Subsidiaries to, comply in all material respects with all applicable
laws, rules, statutes, regulations, decrees and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of their business and the ownership of their property,
including, without limitation, ERISA and all Environmental Laws.
Section 6.7 Performance of Obligations. The Borrower shall, and shall
cause each of its Subsidiaries to, perform all of its obligations under the
terms of each mortgage, indenture, security agreement, debt instrument, lease,
undertaking and contract by which it or any of its properties is bound or to
which it is a party, except where the failure to perform
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such obligations individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
Section 6.8 Maintenance of Properties. The Borrower shall, and shall
cause each of its Subsidiaries to, ensure that its respective properties useful
in its respective business are kept in good repair, working order and condition,
normal wear and tear excepted.
Section 6.9 Compliance with Terms of Leaseholds. The Borrower shall and
shall cause each of its Subsidiaries to (a) make all payments and otherwise
perform all obligations in respect of all leases of the Borrower and each of its
Subsidiaries of real property, (b) keep all such leases that are useful or
material in the conduct of the business of the Borrower and its Subsidiaries
(such useful or material leases are hereinafter referred to as the "Material
Leases") in full force and effect, (c) not allow such Material Leases to lapse
or be terminated or any rights to renew such leases to be forfeited or
cancelled, and (d) notify the Agent of any default by any party with respect to
such Material Leases and cooperate with the Agent in all respects to cure any
such default.
Section 6.10 Compliance with Environmental Laws. The Borrower shall,
and shall cause each of its Subsidiaries and all lessees and other Persons
occupying its properties to (a) comply in all material respects, with all
Environmental Laws and Environmental Approvals applicable to its respective
operations and properties; (b) obtain and renew all Environmental Approvals
necessary for its respective operations and properties; and (c) conduct any
investigation, study, sampling and testing, and undertake any cleanup, removal,
remedial or other action necessary to remove and clean up all Materials of
Environmental Concern from any of its respective properties, in accordance with
the requirements of all Environmental Laws; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to undertake any such
cleanup, removal, remedial or other action to the extent that its obligation to
do so is being contested in good faith and by proper proceedings and appropriate
reserves are being maintained with respect to such circumstances, unless the
Borrower or any of its Subsidiaries is subject to an order issued by any
governmental authority requiring the Borrower or such Subsidiary to undertake
any such cleanup, removal, remedial or other action, in which case this proviso
shall not apply.
Section 6.11 Subsidiary Guarantors. The Borrower shall cause each of
its Subsidiaries now or hereafter existing, formed or acquired (other than
Immaterial Subsidiaries) to at all times be and remain a party to the Guaranty,
the Subsidiary Security Agreement and, if any such Subsidiary owns any Equity
Interests in any Person (other than in HTB Restaurants, Inc. or Boston West,
L.L.C. and other than in an Immaterial Subsidiary), a Subsidiary Pledge
Agreement.
Section 6.12 Immaterial Subsidiaries. If (i) the assets of any
Subsidiary of the Borrower then designated as an Immaterial Subsidiary shall at
any time exceed $1,000,000, then the Borrower shall immediately provide notice
to the Agent thereof, and such Subsidiary
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shall immediately be deemed automatically to no longer be an Immaterial
Subsidiary or (ii) the aggregate amount of assets of all Subsidiaries of the
Borrower so designated as Immaterial Subsidiaries shall at any time exceed
$7,000,000, then the Borrower shall immediately provide notice to the Agent
thereof and notice of which of such previously designated Immaterial
Subsidiaries shall no longer be deemed to be Immaterial Subsidiaries so that the
aggregate amount of assets of all such Subsidiaries so designated as Immaterial
Subsidiaries does not exceed $7,000,000; provided that the Borrower may from
time to time designate additional Subsidiaries of the Borrower as Immaterial
Subsidiaries so long as the assets of any such Subsidiary do not exceed
$1,000,000 and so long as the aggregate amount of assets of all such
Subsidiaries so designated as Immaterial Subsidiaries does not exceed $7,000,000
(in each case as determined in accordance with GAAP).
Section 6.13 Environmental Reports. The Borrower shall cause to be
completed, within nine (9) months of the Closing Date, Phase I audit reports
with respect to each property owned, operated or leased by the Borrower or any
of its Subsidiaries, upon which a business or operation other than a Restaurant
has been conducted at any time during the five (5) years immediately preceding
the Closing Date and with respect to which a Phase I audit report has not been
completed in the ten (10) year period immediately preceding the Closing Date.
The Borrower shall deliver all such Phase I audit reports to the Agent which are
obtained pursuant to the preceding sentence which identify, or which recommend a
subsequent Phase II investigation as to, any material environmental, health or
safety violations, hazards or potential liabilities relating to the properties
and business of any Loan Party or any of their Environmental Affiliates.
Section 6.14 Letter of Credit Replacement. The Borrower shall use
commercially reasonable efforts to replace the Letter of Credit No. LASB-221686
issued by Bank of America National Trust & Savings Association (the "Existing
Letter of Credit") with a Letter of Credit issued by the Issuing Bank under this
Agreement within three months of the Closing Date and shall simultaneously
therewith cause the Existing Reimbursement Agreement to be terminated and all
other liens and obligations related thereto to be terminated and replaced.
Section 6.15 FFCA Debt. The Borrower shall (i) cause the aggregate
Indebtedness outstanding under that certain Loan Agreement dated as of December
18, 1996 among CBI Restaurants, Inc., Casa Bonita Incorporated and FFCA Mortgage
Corporation (the "CBI Loan Agreement") to be paid in full no later than August
1, 1997 and simultaneously therewith, shall cause all other obligations,
guaranties and liens granted or existing in connection therewith to be
terminated and released and (ii) on the date on which the Indebtedness described
in clause (i) shall be repaid, shall cause the stock certificates representing
all of the issued and outstanding Capital Stock of Casa Bonita Incorporated to
be delivered to the Agent with appropriate stock powers endorsed in blank and
shall cause to be delivered to the Agent such other Collateral Documents
together with opinions with respect thereto as reasonably requested by the
Agent.
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SECTION 7. NEGATIVE COVENANTS.
The Borrower covenants and agrees that on and after the Closing Date
until all of the Commitments of each Lender have terminated, each of the Letters
of Credit has expired or been terminated, and the Obligations are paid in full:
Section 7.1 Financial Covenants.
(a) Leverage Ratio. The Borrower shall not permit the Leverage
Ratio at any time during each fiscal quarter of the Borrower ended during each
period listed below to exceed the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through July 15, 1998 3.00 to 1.00
July 16, 1998 through January 31, 2001 2.75 to 1.00
February 1, 2001 and thereafter 2.50 to 1.00
</TABLE>
(b) Interest Coverage Ratio. The Borrower shall not permit the
ratio of Adjusted Consolidated EBITDA of the Borrower to Consolidated Interest
Expense of the Borrower for the period of four consecutive fiscal quarters of
the Borrower (taken as one accounting period) most recently ended during each
fiscal quarter of the Borrower ended during each period set forth below
(including Consolidated EBITDA and Consolidated Interest Expense of the Company
and its Subsidiaries for such period), to be less than the ratio set forth
opposite such period; provided that (i) for the period ending on November 3,
1997, Consolidated Interest Expense will be the product of (A) actual
Consolidated Interest Expense for the third fiscal quarter of the Borrower
ending November 3, 1997 multiplied by (B) 52/12, (ii) for the period ending on
January 26, 1998, Consolidated Interest Expense will be the product of (A)
actual Consolidated Interest Expense for the period from the first day of the
third fiscal quarter of the Borrower ending November 3, 1997 to the last day of
the fourth fiscal quarter of the Borrower ending January 26, 1998 multiplied by
(B) 52/24 and (iii) for the period ending on May 18, 1998, Consolidated Interest
Expense will be the product of (A) actual Consolidated Interest Expense for the
period from the first day of the third fiscal quarter of the Borrower ending
November 3, 1997 to the last day of the first fiscal quarter of the Borrower
ending May 18, 1998 multiplied by (B) 52/40:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 1997 through July 15, 1998 4.00 to 1.00
July 16, 1998 through January 31, 2001 4.50 to 1.00
February 1, 2001 and thereafter 5.00 to 1.00
</TABLE>
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(c) Fixed Charge Coverage Ratio. The Borrower shall not permit
the ratio of Adjusted Consolidated EBITDA of the Borrower to Fixed Charges of
the Borrower for the period of four consecutive fiscal quarters of the Borrower
(taken as one accounting period) most recently ended during each fiscal quarter
of the Borrower ended during each period set forth below (including Consolidated
EBITDA and Fixed Charges of the Company and its Subsidiaries for such period),
to be less than the ratio set forth opposite such period; provided that (i) for
the period ending on November 3, 1997, Fixed Charges will be the product of (A)
actual Fixed Charges for the third fiscal quarter of the Borrower ending
November 3, 1997 multiplied by (B) 52/12, (ii) for the period ending on January
26, 1998, Fixed Charges will be the product of (A) actual Fixed Charges for the
period from the first day of the third fiscal quarter of the Borrower ending
November 3, 1997 to the last day of the fourth fiscal quarter of the Borrower
ending January 26, 1998 multiplied by (B) 52/24 and (iii) for the period ending
on May 18, 1998, Fixed Charges will be the product of (A) actual Fixed Charges
for the period from the first day of the third fiscal quarter of the Borrower
ending November 3, 1997 to the last day of the first fiscal quarter of the
Borrower ending May 18, 1998 multiplied by (B) 52/40:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
October 1, 1997 through July 15, 1998 1.75 to 1.00
July 16, 1998 through January 31, 2001 2.00 to 1.00
February 1, 2001 and thereafter 2.25 to 1.00
</TABLE>
(d) Minimum Consolidated EBITDA. The Borrower shall not permit
Adjusted Consolidated EBITDA of the Borrower for the period of four consecutive
fiscal quarters of the Borrower (taken as one accounting period) most recently
ended during each period set forth below (including Consolidated EBITDA of the
Company and its Subsidiaries for such period) to be less than the amount set
forth opposite such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Closing Date through January 31, 1998 $100,000,000
February 1, 1998 through January 31, 1999 $125,000,000
February 1, 1999 through January 31, 2000 $140,000,000
February 1, 2000 and thereafter $150,000,000
</TABLE>
(e) Adjusted Leverage Ratio. The Borrower shall not permit the
ratio of (i) Consolidated Total Debt (measured as of the end of each period set
forth below) plus the product of seven multiplied by Consolidated Rentals for
the period of four consecutive fiscal quarters of the Borrower (taken as one
accounting period) most recently ended during each period set forth below to
(ii) Consolidated EBITDAR for the period of four consecutive fiscal quarters of
the Borrower (taken as one accounting period) ended during each period set forth
below (including Consolidated Total Debt, Consolidated Rentals and Consolidated
EBITDAR
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of the Company and its Subsidiaries for such period) to exceed at any time
during each fiscal quarter of the Borrower ended during any period listed below,
the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through July 15, 1998 4.60 to 1.00
July 16, 1998 through January 31, 2001 4.25 to 1.00
February 1, 2001 and thereafter 3.75 to 1.00
</TABLE>
(f) Capital Expenditures. The Borrower shall not make or incur
and shall not permit any of its Subsidiaries to make or incur any Capital
Expenditures, except Capital Expenditures of the Borrower and its Subsidiaries
in any of the periods set forth below in an aggregate amount not in excess of
the maximum amount set forth below opposite such period:
<TABLE>
<CAPTION>
Period Maximum Amount
------ --------------
<S> <C>
Closing Date through January 31, 1998 $80,000,000
Each fiscal year of Borrower thereafter $120,000,000
</TABLE>
provided that if the maximum amount set forth above for any period exceeds the
aggregate amount of Capital Expenditures made or incurred during such period,
then the maximum amount set forth above for the following period (but not any
subsequent periods) shall be increased by the amount of such excess.
(g) Consolidated Tangible Net Worth. The Borrower shall not
permit its Consolidated Tangible Net Worth at any time to be less than the sum
of (i) $300,000,000, plus (ii) 50% of cumulative Consolidated Net Income of the
Borrower and its Subsidiaries for all fiscal quarters of the Borrower ended
since the Closing Date in which Consolidated Net Income is positive (and without
any deduction for any fiscal quarter in which Consolidated Net Income is
negative), plus (iii) 100% of the Net Equity Proceeds of any equity offering by
the Borrower.
Section 7.2 Indebtedness. The Borrower shall not, and shall not permit
any of its Subsidiaries to, create, incur, assume, suffer to exist or otherwise
become or remain directly or indirectly liable with respect to, any Indebtedness
other than:
(a) Indebtedness hereunder and under the other Loan Documents;
(b) Indebtedness outstanding on the Closing Date and set forth
on Schedule 7.2 hereto;
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(c) Indebtedness permitted under Sections 7.6(a) and 7.6(b);
(d) Indebtedness of the Borrower of the type described in
clause (vii) of the definition of Indebtedness to the extent permitted under
Section 7.14;
(e) Indebtedness with respect to (i) purchase money
Indebtedness incurred solely to finance Capital Expenditures permitted under
Section 7.1(f) and any extensions, renewals, refundings or refinancings thereof,
not in excess of $5,000,000 in the aggregate at any one time outstanding for all
such purchase money Indebtedness and all extensions, renewals, refundings and
refinancings thereof and (ii) Capitalized Leases permitted under Section 7.13
and any extensions, renewals, refundings or refinancings thereof so long as the
terms of any such Indebtedness with respect to Capitalized Leases is permitted
under Section 7.13; provided that (i) any such Indebtedness incurred pursuant to
this clause (e) and any such extensions, renewals, refundings or refinancings
thereof shall not exceed 85% of the lesser of the purchase price or the fair
market value of the asset so financed, (ii) at the time of such incurrence, no
Default or Event of Default has occurred and is continuing or would result from
such incurrence, and (iii) such Indebtedness has a scheduled maturity and is not
due on demand;
(f) any extensions, renewals, refundings and refinancings of
the Indebtedness described in clause (b) above, so long as the terms of any such
extension, renewal, refunding or refinancing Indebtedness, and of any agreement
entered into and of any instrument issued in connection therewith, are otherwise
permitted by the Loan Documents; provided further that the principal amount of
such Indebtedness shall not be increased above the principal amount thereof
outstanding immediately prior to such extension, renewal, refunding or
refinancing, and the direct and contingent obligors therefor shall not be
changed, as a result of or in connection with such extension, renewal, refunding
or refinancing;
(g) Indebtedness of any wholly-owned Subsidiary of the
Borrower owed to the Borrower or to any wholly-owned Subsidiary of the Borrower;
(h) (i) unsecured Permitted Subordinated Debt provided that
the aggregate principal amount of such Indebtedness shall not exceed $25,000,000
minus the amount of any Indebtedness incurred by the Borrower or any of its
Subsidiaries pursuant to Section 7.2(h)(ii) at any one time outstanding and (ii)
other Permitted Subordinated Debt in an aggregate principal amount not to exceed
$5,000,000 at any one time outstanding incurred in connection with a Permitted
Acquisition with respect to which all of the conditions set forth in Section
7.8(f) have been satisfied and incurred to pay all or part of the purchase price
thereof which Permitted Subordinated Debt, if secured, is secured only by Liens
permitted pursuant to Section 7.3(i);
(i) Indebtedness of Star Buffet in an aggregate principal
amount not to exceed $15,000,000 at any one time outstanding;
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(j) unsecured Indebtedness of the Borrower or any of its
Subsidiaries consisting of guarantees of not more than 20% of the principal
amount of Indebtedness of a franchisee incurred to finance a remodeling,
construction or purchase of a retail unit of such franchisee or capital
expenditures of such franchisee; provided that the amount of the obligations of
the Borrower and its Subsidiaries under or with respect to such guarantees shall
not exceed $20,000,000 in the aggregate outstanding at any time;
(k) unsecured Indebtedness of the Borrower or any of its
Subsidiaries owing to former franchisees and representing the deferred purchase
price (or a deferred portion of such purchase price) payable by the Borrower or
such Subsidiary to such former franchisee in connection with the purchase by the
Borrower or such Subsidiary of one or more retail outlets from such former
franchisee in an aggregate principal amount for all such Indebtedness not to
exceed $5,000,000 at any one time outstanding; and
(l) Indebtedness of any entity acquired pursuant to a
Permitted Acquisition with respect to which all of the conditions set forth in
Section 7.8(f) have been satisfied, which Indebtedness (i) is existing prior to
such Permitted Acquisition, (ii) is assumed by the Borrower or any Subsidiary of
the Borrower in connection with any such Permitted Acquisition and (iii) is not
incurred in contemplation of such Permitted Acquisition; provided that the
aggregate principal amount of all such Indebtedness shall not exceed $20,000,000
at any time outstanding.
Section 7.3 Liens. The Borrower shall not, and shall not permit any of
its Subsidiaries to, create, incur, assume or suffer to exist, directly or
indirectly, any Lien on any of its property now owned or hereafter acquired,
other than:
(a) Liens existing on the Closing Date and set forth on
Schedule 7.3 hereto;
(b) Liens for taxes not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted and with respect
to which adequate reserves are being maintained in accordance with GAAP;
(c) Statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by Law (other than
any Lien imposed by ERISA or pursuant to any Environmental Law) created in the
ordinary course of business for amounts not yet due or which are being contested
in good faith by appropriate proceedings diligently conducted and with respect
to which adequate bonds have been posted;
(d) Liens (other than any Lien imposed by ERISA or pursuant to
any Environmental Law) incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social
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security, or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money);
(e) Easements, rights-of-way, zoning and similar restrictions
and other similar charges or encumbrances not interfering with the ordinary
conduct of the business of the Borrower or any of its Subsidiaries and which do
not detract materially from the value of the property to which they attach or
impair materially the use thereof by the Borrower or any of its Subsidiaries or
materially adversely affect the security interests of the Agent or the Lenders
therein;
(f) Liens granted to the Agent for the benefit of the Lenders
pursuant to the Security Documents securing the Obligations;
(g) Liens created pursuant to Capitalized Leases and to secure
other purchase-money Indebtedness permitted pursuant to Section 7.2(e), provided
that such Liens are only in respect of the property or assets subject to, and
secure only, the respective Capitalized Lease or other purchase-money
Indebtedness;
(h) Liens arising out of the replacement, extension or renewal
of any Lien permitted by clause (a) above upon or in the same property
theretofore subject thereto in connection with the refunding, refinancing,
extension or renewal (without increase in the amount or change in any direct or
contingent obligor) of the Indebtedness secured thereby permitted pursuant to
Section 7.2(f);
(i) Liens securing Permitted Subordinated Debt permitted
pursuant to Section 7.2(h)(ii) provided that (i) such Liens are only in respect
of the assets acquired in the applicable Permitted Acquisition, (ii) the
Obligations are secured by valid first priority perfected Liens on such assets
and the Liens permitted pursuant to this Section 7.3(i) are second in priority
to the Liens on such assets securing the Obligations and (iii) the rights and
remedies of any holder of such Liens are subordinated to the rights and remedies
of the Agent and the Lenders on terms approved in writing by the Agent;
(j) Liens securing Indebtedness (other than Permitted
Subordinated Debt) of the Borrower and its Subsidiaries in an aggregate
principal amount not to exceed (i) $5,000,000 plus (ii) if the FFCA Debt is
repaid in full, the agreements evidencing the FFCA Debt have been terminated,
all guarantees with respect to the FFCA Debt and all liens securing the FFCA
Debt have been released and evidence satisfactory thereof has been provided to
the Agent the receipt of which the Agent shall have acknowledged in writing,
$20,000,000, at any one time outstanding; and
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(k) Liens only in respect of specific property subject to
operating leases entered into by the Borrower or any of its Subsidiaries as a
lessee in the ordinary course of business.
Section 7.4 Restriction on Fundamental Changes.
(a) The Borrower shall not, and shall not permit any of its
Subsidiaries to, enter into any merger or consolidation, or liquidate, wind-up
or dissolve (or suffer any liquidation or dissolution), discontinue its business
or convey, lease, sell, transfer or otherwise dispose of, in one transaction or
series of transactions, all or any substantial part of its business or property,
whether now or hereafter acquired, except (i) as otherwise permitted under
Section 7.5, (ii) any wholly-owned Non-Summit Subsidiary of the Borrower other
than the Company and any Hardee's Subsidiaries may merge into or convey, sell,
lease or transfer all or substantially all of its assets to, the Borrower or any
other wholly-owned Non-Summit Subsidiary of the Borrower, provided, that in any
such merger involving the Borrower, the Borrower shall be the surviving
corporation and any such Subsidiary merging into the Borrower shall be Solvent,
(iii) any Solvent Person acquired by the Borrower or a Non-Summit Subsidiary in
a Permitted Acquisition permitted hereunder other than the Company and any
Hardee's Subsidiaries may merge with the Borrower or any wholly-owned Non-Summit
Subsidiary of the Borrower, provided, that in any such merger, the Borrower or
such wholly-owned Subsidiary shall be the surviving corporation, (iv) with the
prior written consent of the Agent and the Required Lenders, the Company and any
Hardee's Subsidiaries may merge into or convey, sell, lease or transfer all or
substantially all of its assets to, the Borrower or any other wholly-owned
Non-Summit Subsidiary, provided, that in any such merger involving the Borrower,
the Borrower shall be the surviving corporation and any such Subsidiary merging
into the Borrower shall be Solvent and (v) any Summit Subsidiary may merge into
or convey, sell, lease or transfer all or substantially all of its assets to,
any Summit Subsidiary; provided, that in each case, (A) any such wholly-owned
Subsidiary of the Borrower which is the surviving corporation of any such merger
or to which any business or property is so transferred shall be a party to the
Guaranty and the Subsidiary Security Agreement and (B) no Default or Event of
Default shall have occurred or be continuing or would occur after giving effect
thereto or as a result thereof.
(b) Borrower shall not and shall not permit any of its
Subsidiaries to, amend its certificate of incorporation or by-laws (or other
relevant formation document) in any manner adverse to the interests of the Agent
or the Lenders.
Section 7.5 Sale of Assets. The Borrower shall not, and shall not
permit any of its Subsidiaries to, make, consummate or effect any Asset
Disposition (or agree to do so at any future time) with respect to all or any
part of its property or assets, except:
(a) the sale of any asset by the Borrower or any of its
Subsidiaries (other than a bulk sale of inventory and a sale of receivables
(other than delinquent accounts
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for collection purposes only) and other than a sale of any capital stock of Carl
Karcher Enterprises, Inc. or the Company) so long as (i) the purchase price paid
to the Borrower or such Subsidiary for such asset shall be no less than the fair
market value of such asset at the time of such sale, (ii) the purchase price for
such asset (other than assets of Summit used in the JB's Restaurants or Galaxy
Diner Restaurants as part of the Summit Asset Sale or assets included in
Excluded Hardee's Sales) shall be paid to the Borrower or such Subsidiary solely
in cash (except for non-cash consideration in the form of promissory notes
maturing not later than 2 years after the date of issuance and in an aggregate
principal amount for all such promissory notes not to exceed $5,000,000 at any
one time outstanding) and Cash Equivalents, (iii) the aggregate fair market
value of such asset and all other assets sold by the Borrower and its
Subsidiaries during the same fiscal year of the Borrower pursuant to this clause
(c) shall not exceed 15% of the total assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with GAAP
provided, that the Summit Asset Sale, Excluded Resales and Excluded Hardee's
Sales shall not be included in the calculation of such percentage, (iv) the
Borrower shall prepay the Loans pursuant to, and in accordance with, Section
2.12 in an aggregate principal amount equal to the Net Sale Proceeds received by
the Borrower or such Subsidiary from the sale, transfer or other disposition of
such asset and (v) no Default or Event of Default has occurred and is continuing
or would result from such asset sale; and
(b) so long as no Default or Event of Default shall occur and
be con- tinuing, the grant of any option or other right to purchase any asset in
a transaction which would be permitted under the provisions of the preceding
clause (a).
Section 7.6 Contingent Obligations. The Borrower shall not, and shall
not permit any of its Subsidiaries to, create or become or be liable with
respect to any Contingent Obligation, except:
(a) pursuant to the Guaranty or the Security Documents;
(b) Contingent Obligations which are in existence on the
Closing Date and which are set forth on Schedule 7.6; and
(c) Contingent Obligations permitted pursuant to Section
7.2(j).
Section 7.7 Dividends. The Borrower shall not, and shall not permit any
of its Subsidiaries to, declare or pay any dividends, or return any capital to,
its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase, defease or otherwise acquire, directly or indirectly, any shares of
any class of its capital stock now or hereafter outstanding (or any options,
rights or warrants issued with respect to its capital stock), or set aside any
funds for any of the foregoing purposes (all the foregoing "Dividends"), except
that:
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(a) Dividends may be made to the Borrower or any of its
wholly- owned Subsidiaries by any of its wholly-owned Subsidiaries; and
(b) So long as no Default or Event of Default shall have
occurred and be continuing, the Borrower may:
(i) declare and deliver dividends and distributions
payable only in common stock of the Borrower; and
(ii) declare and pay cash dividends to its stockholders
and purchase, redeem, retire or otherwise acquire shares of its own
outstanding capital stock for cash during any fiscal year of the
Borrower if after giving effect thereto the aggregate amount of such
dividends, purchases, redemptions, retirements and acquisitions paid or
made during such fiscal year would be less than the sum of $5,000,000
plus 50% of Consolidated Net Income of the Borrower for each fiscal
year of the Borrower (commencing with the fiscal year ending January
27, 1997) up to and including the fiscal year immediately preceding the
year in which such dividend, purchase, redemption, retirement or
acquisition is paid or made, minus the aggregate amount of all such
dividends, purchases, redemptions, retirements and acquisitions paid
and made by the Borrower after January 27, 1997 through and including
the end of such immediately preceding fiscal year; and
(c) So long as no Default or Event of Default shall have
occurred and be continuing, any Subsidiary of the Borrower that is not a
wholly-owned Subsidiary of the Borrower may declare and pay cash dividends to
the extent, and only to the extent, of any cumulative positive net income (after
deducting any negative net income) of such Subsidiary arising after the date
such Subsidiary became a Subsidiary of the Borrower so long as such dividends
are payable to all of its equity holders on a ratable basis.
Section 7.8 Advances, Investments and Loans. The Borrower shall not,
and shall not permit any of its Subsidiaries to, make or suffer to exist,
directly or indirectly any Investments (including, without limitation, loans and
advances to the Borrower or any of its Subsidiaries, and other Investments in
Subsidiaries of the Borrower), or commitments therefor, or to create any
Subsidiary or to become or remain a partner in any partnership or joint venture,
or make any Acquisition of any interest in any Person, except that the following
shall be permitted:
(a) Investments set forth on Schedule 7.8;
(b) Investments by the Borrower and its Subsidiaries in
Subsidiaries of the Borrower outstanding on the date hereof, additional
Investments by the Borrower or any Non-Summit Subsidiary of the Borrower in any
Non-Summit Subsidiary of the Borrower
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which Subsidiary is Solvent and is a party to the Guaranty, additional
Investments by any Summit Subsidiary in any other Summit Subsidiary and
additional Investments by the Borrower or any wholly-owned Subsidiary of the
Borrower consisting of loans and advances to wholly-owned Subsidiaries of the
Borrower to the extent permitted by Section 7.2(g);
(c) loans and advances by the Borrower and its Subsidiaries to
their employees in the ordinary course of its business not exceeding $2,000,000
in the aggregate at any one time outstanding;
(d) the Borrower and its Subsidiaries may acquire and hold
Cash Equivalents;
(e) Investments consisting of promissory notes permitted to be
received as consideration in connection with Asset Dispositions permitted under
Section 7.5(a);
(f) Permitted Acquisitions, provided that, in the case of each
Permitted Acquisition, the conditions referred to in clauses (i) through (vii)
below are satisfied on or prior to the date of such Permitted Acquisition (it
being understood that, for purposes of clause (ii) below, the phrase "the
Borrower and its Subsidiaries" and the phrase "Consolidated" shall be deemed to
include the Person (and its Subsidiaries, if any, to be acquired) or assets to
be acquired as though such Person (and its Subsidiaries, if any, to be acquired)
or assets were a Subsidiary of the Borrower):
(i) the Person or assets to be acquired satisfy the
criteria set forth in the definition of "Permitted Acquisition"
contained in Section 1;
(ii) the Borrower shall have delivered to the Agent a
certificate of the chief financial officer of the Borrower, in form and
substance satisfactory to the Agent, demonstrating (A) compliance by
the Borrower and its Subsidiaries with the covenants set forth in
Section 7.1, on a pro forma basis after giving effect to such
Acquisition, for a period of four consecutive fiscal quarters after the
date of such Acquisition, (B) on a pro forma basis after giving effect
to such Acquisition, as at the last day of the fiscal quarter ended
immediately preceding the date of consummation of such Acquisition for
which financial statements have been delivered to the Lenders pursuant
to Section 6.1(a), for the period of four consecutive fiscal quarters
of the Borrower (taken as one accounting period) then ended that (I)
the Leverage Ratio shall be less than 2.5 to 1.0, (II) the ratio of
Consolidated Total Debt plus the product of seven multiplied by
Consolidated Rentals to Consolidated EBITDAR shall be less than 3.75 to
1.0, and (III) the Consolidated EBITDA of the Person and any of its
Subsidiaries, if any, to be acquired, for the twelve-month period most
recently ended shall be a positive number;
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(iii) the representations and warranties contained in each
Loan Document are correct in all material respects on and as of the
date of such Acquisition, after giving effect to such Acquisition, as
though made on and as of such date, other than any such representations
and warranties that by their terms are specifically made as of a date
other than such date;
(iv) no event has occurred and is continuing on the date
of such Acquisition, or would result from such Acquisition, that
constitutes a Default or an Event of Default;
(v) the Total Revolving Loan Commitment minus the
aggregate principal amount of the Revolving Loans outstanding on the
date of such Permitted Acquisition minus the amount of any L/C
Obligations outstanding on the date of such Permitted Acquisition shall
equal at least $10,000,000;
(vi) all Consents and waiting periods described in clause
(vii)(3)(D) below shall have been obtained or expired; and
(vii) the Borrower or such Subsidiary of the Borrower
making such Acquisition shall furnish or cause to be furnished to the
Agent and the Lenders the following:
(1) Certified copies of the resolutions of the Board
of Directors of the Borrower and, if any Subsidiary of the Borrower
will participate in the applicable Acquisition, of such Subsidiary (in
each case, to the extent resolutions of the Board of Directors of the
Borrower or such Subsidiary are required or advisable pursuant to
applicable law or the Borrower's or such Subsidiary's charter
documents) and of all documents evidencing other necessary corporate
action or other Consents, if any, with respect to such Acquisition;
(2) Such other financial, business and other
information regarding the Person or assets to be acquired, as the case
may be, as the Agent or the Required Lenders through the Agent shall
have reasonably requested, including, without limitation, actual and
pro forma financial statements and projections relating to such Person
or assets;
(3) In the case of each Permitted Acquisition, to
the extent that such Acquisition consists of the acquisition by the
Borrower or any of its Subsidiaries of stock, partnership or other
Equity Interests of any Person (or assets in the case of clause (A)
below):
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(A) All documents required to be delivered
pursuant to Section 2.21 and Section 6.11;
(B) A copy of the charter or other
organizational document of such Person and each amendment thereto,
if any, certified by the Secretary of State of its jurisdiction of
organization, as of a date reasonably near the date of such
Borrowing, as being a true and correct copy thereof;
(C) An officer's certificate signed on behalf of
such Person by an appropriate officer of such Person, certifying as
to (i) the absence of any amendment to the charter or other
organizational document of such Person since the date of the
Secretary of State's certificate referred to in clause (B) above,
(ii) a true and correct copy of the by-laws or similar
organizational document of such Person, (iii) a true and correct
copy of the resolutions adopted by the Board of Directors or
equivalent body of such Person approving the documents or
instruments to be delivered under this Section 7.8(f) to which such
Person is a party and the matters contemplated thereby, (iv) the
incumbency and specimen signatures of the officers of such Person
executing the documents and instruments to be delivered under this
Section 7.8(f) to which such Person is a party, and (v) the due
organization and good standing of such Person as a Person organized
under the laws of its jurisdiction of organization; and
(D) Evidence satisfactory to the Agent and the
Lenders that the Borrower, its Subsidiaries and the Person being
acquired has made and obtained all necessary governmental and other
Consents required in order to consummate such Acquisition and that
all applicable waiting periods with respect to such Acquisition
including, without limitation, those under the Hart-Scott-Rodino
Act have expired without any action having been taken by any
competent authority restraining, preventing or imposing materially
adverse conditions upon the rights of the Loan Parties or their
Subsidiaries freely to transfer or otherwise dispose of, or to
create any Lien on, any properties now owned or hereafter acquired
by any of them; and
(g) Investments in Star Buffet provided that any such
Investments made by the Borrower or any Non-Summit Subsidiary after the Closing
Date shall consist only of Capital Stock or assets of Summit Subsidiaries and
the Casa Bonita Restaurants;
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(h) Investments in Related Businesses not to exceed
$20,000,000 individually or $30,000,000 in the aggregate at any time
outstanding;
(i) Investments in an aggregate amount not to exceed
$25,000,000 at any one time outstanding consisting of loans and advances to a
purchaser of assets sold pursuant to the Excluded Hardee's Sale; and
(j) Investments in Capital Stock of Checkers Drive-In
Restaurants, Inc. and Rally's Hamburgers, Inc., in an aggregate amount not to
exceed $11,000,000 after the Closing Date, which Capital Stock is acquired
through the exercise of warrants, options and similar rights owned by the
Borrower or any of its Subsidiaries on the Closing Date.
Section 7.9 Transactions with Affiliates. The Borrower shall not, and
shall not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions, whether or not in the ordinary course of
business, with any Affiliate, other than on terms and conditions substantially
as favorable to the Borrower or such Subsidiary as would be obtainable at the
time in a comparable arm's-length transaction with a Person other than an
Affiliate.
Section 7.10 Limitation on Voluntary Payments and Modifications of
Certain Documents. The Borrower shall not, and shall not permit any of its
Subsidiaries to (a) make any sinking fund payment or voluntary or optional
payment or prepayment on or redemption, defeasance, purchase or acquisition for
value of (including, without limitation, by way of depositing with the trustee
with respect thereto money or securities before due for the purpose of paying
when due) or exchange of any Indebtedness other than (i) the Indebtedness
hereunder and under the other Loan Documents and (ii) regularly scheduled or
required repayments of Indebtedness permitted pursuant to Section 7.2, or (b)
amend, modify or waive, or permit the amendment, modification or waiver of (i)
any provision of either of the Seller Agreements or any material provision of
any other Transaction Document (other than the Loan Documents) or any provision
of the Existing Letter of Credit or the Reimbursement Agreement dated as of
September 23, 1994 between Carl Karcher Enterprises, Inc. and Bank of America
National Trust and Savings Association (the "Existing Reimbursement Agreement")
or (ii) any term or provision of (A) the Surviving Debt in any way that would be
materially adverse to the Lenders or (B) the Permitted Subordinated Debt or (c)
make any payment in violation of any subordination terms of any Indebtedness of
the Borrower or any of its Subsidiaries; provided that the Borrower may, and may
permit any of its Subsidiaries to, prepay, redeem, defease, purchase or acquire
or exchange any (collectively, a "Prepayment") Surviving Debt or Indebtedness
assumed in connection with a Permitted Acquisition which Indebtedness is
permitted pursuant to Section 7.2(l) in each case only if on the date of such
Prepayment (x) no event or condition has occurred and is continuing, or would
result from such Prepayment, that constitutes a Default or an Event of Default,
and (y) after giving effect to such Prepayment, the Total Revolving Loan
Commitment minus the aggregate principal amount of the Revolving
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Loans outstanding on the date of such Prepayment minus the amount of any L/C
Obligations outstanding on the date of such Prepayment shall equal at least
$10,000,000.
Section 7.11 Changes in Business. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into any business which is
substantially different from that conducted by the Borrower or such Loan Party,
as the case may be, on the Closing Date after giving effect to the Transactions.
Section 7.12 Certain Restrictions. The Borrower shall not, and shall
not permit any of its Subsidiaries to, enter into or permit to exist any
agreement, instrument or other document (other than the Transaction Documents as
in effect on the Closing Date) which directly or indirectly restricts the
ability of the Borrower or any of its Subsidiaries to (a) enter into amendments,
modifications or waivers of the Loan Documents, (b) sell, transfer or otherwise
dispose of its assets, (c) create, incur, assume or suffer to exist any Lien
upon any of its property, (d) create, incur, assume, suffer to exist or
otherwise become liable with respect to any Indebtedness, (e) make loans or
advances to the Borrower, or (f) pay any Dividend or repay any Indebtedness owed
to the Borrower or any of its Subsidiaries; provided that Capitalized Leases or
agreements governing purchase money Indebtedness which contain restrictions of
the types referred to in clauses (b) or (c) with respect to the property covered
thereby shall be permitted; provided further that the foregoing shall not apply
to restrictions in effect on the date of this Agreement contained in agreements
governing Surviving Debt and, if such Indebtedness is renewed, extended or
refinanced, restrictions in the agreements governing the renewed, extended or
refinanced Indebtedness (as successive renewals, extensions and refinancings
thereof) if such restrictions are no more restrictive in any material respect
than those contained in the agreements governing the Indebtedness being renewed,
extended or refinanced and if such renewals, extensions and refinancings are
permitted pursuant to Section 7.2(f).
Section 7.13 Lease Obligations. The Borrower shall not, and shall not
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
obligations as lessee (i) for the rental or hire of real or personal property in
connection with any sale and leaseback transaction or (ii) for the rental or
hire of other real or personal property of any kind under leases or agreements
to lease including Capitalized Leases except in the case of this clause (ii) for
leases (including Capitalized Leases) entered into for fair market value in the
ordinary course of business of the Borrower and its Subsidiaries.
Section 7.14 Hedging Agreements. The Borrower shall not, and shall not
permit any of its Subsidiaries to, enter into or remain liable under any Hedging
Agreement, except (a) Interest Rate Agreements with one or more of the Lenders
pursuant to which the Borrower and its Subsidiaries have hedged their reasonably
estimated interest rate exposure and (b) Hedging Agreements relating to
commodities pursuant to which the Borrower and its Subsidiaries have hedged
their reasonably estimated commodity price exposure.
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Section 7.15 Plans. The Borrower shall not, nor shall it permit any
member of its ERISA Controlled Group to, take any action which would increase
the aggregate present value of the Unfunded Benefit Liabilities under all Plans
to an amount in excess of $1,000,000.
Section 7.16 Fiscal Year; Fiscal Quarter. The Borrower shall not, and
shall not permit any of its Subsidiaries to, change its fiscal year or any of
its fiscal quarters (other than, with respect to the Company and its
Subsidiaries, any such changes necessary to conform fiscal periods of the
Company and its Subsidiaries to fiscal periods of the Borrower).
Section 7.17 Partnerships. The Borrower shall not, and shall not
permit any of its Subsidiaries to, become or remain a general partner in any
general or limited partnership, or permit any of its Subsidiaries to do so,
except for any Subsidiary the sole assets of which consist of its interest in
such partnership and except with respect to the partnerships described on
Schedule 7.17.
Section 7.18 Excluded Resales. The Borrower shall not, and shall not
permit any of its Subsidiaries to, acquire, purchase, hold or own any
Restaurants which the Borrower or any such Subsidiaries acquire from a
franchisee with the intent of reselling to the extent the aggregate amount of
Restaurants owned or held by the Borrower and its Subsidiaries would exceed
$20,000,000 at any one time outstanding, such amount to be measured by the
purchase price paid by the Borrower or any such Subsidiaries for such
Restaurants.
SECTION 8. EVENTS OF DEFAULT
Section 8.1 Events of Default. Each of the following events, acts,
occurrences or conditions shall constitute an Event of Default under this
Agreement, regardless of whether such event, act, occurrence or condition is
voluntary or involuntary or results from the operation of law or pursuant to or
as a result of compliance by any Person with any judgment, decree, order, rule
or regulation of any court or administrative or governmental body:
(a) Failure to Make Payments. The Borrower shall (i) default
in the payment when due of any principal of the Loans or (ii) default, and such
default shall continue unremedied for two (2) or more Business Days, in the
payment when due of any interest on the Loans or in the payment when due of any
Fees or any other amounts owing hereunder.
(b) Breach of Representation or Warranty. Any representation
or warranty made by any Loan Party herein or in any other Loan Document or in
any certificate or statement delivered pursuant hereto or thereto shall prove to
be false or misleading in any material respect on the date as of which made or
deemed made.
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(c) Breach of Covenants.
(i) The Borrower shall fail to perform or observe any
agreement, covenant or obligation arising under Section 6.1(f) or
Section 7.
(ii) The Borrower shall fail to perform or observe any
agreement, covenant or obligation arising under this Agreement (except
those described in subsections (a), (b) and (c)(i) above), and such
failure shall continue for thirty (30) days.
(iii) Any Loan Party shall fail to perform or observe any
agreement, covenant or obligation arising under any provision of the
Loan Documents other than this Agreement, which failure shall continue
after the end of the applicable grace period, if any, provided therein.
(d) Default Under Other Agreements. Any Loan Party or any of
its Subsidiaries shall default in the payment when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) of any amount
owing in respect of any Indebtedness of such Loan Party or any of its
Subsidiaries (other than the Obligations) in the aggregate principal amount of
$5,000,000 or more; or any Loan Party or any of its Subsidiaries shall default
in the performance or observance of any obligation or condition with respect to
any such Indebtedness or any other event shall occur or condition shall exist,
if the effect of such default, event or condition is to accelerate the maturity
or cause a mandatory redemption of any such Indebtedness or to permit the holder
or holders thereof, or any trustee or agent for such holders, to accelerate the
maturity or require a redemption or other repurchase thereof of any such
Indebtedness, or any such Indebtedness shall become or be declared to be due and
payable prior to its stated maturity other than as a result of a regularly
scheduled payment; or any such Indebtedness shall be declared to be due and
payable, or shall be required to be prepaid, redeemed, purchased or defeased, or
an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case prior to its stated maturity other than as a
result of a regularly scheduled payment.
(e) Bankruptcy, etc. (i) Any Loan Party or any of its
Subsidiaries shall commence a voluntary case concerning itself under the
Bankruptcy Code; or (ii) an involuntary case is commenced against any Loan Party
or any of its Subsidiaries and the petition is not controverted within 10 days,
or is not dismissed within 60 days, after commencement of the case; or (iii) a
custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge
of, all or substantially all of the property of any Loan Party or any of its
Subsidiaries or any Loan Party or any of its Subsidiaries commences any other
proceedings under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to any Loan Party or
any of its Subsidiaries or there is commenced against any Loan Party or any of
its Subsidiaries any such proceeding which remains undismissed for a period
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of 60 days; or (iv) any order of relief or other order approving any such case
or proceeding is entered; or (v) any Loan Party or any of its Subsidiaries is
adjudicated insolvent or bankrupt; or (vi) any Loan Party or any of its
Subsidiaries suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or (vii) any Loan Party or any of its Subsidiaries makes a
general assignment for the benefit of creditors; or (viii) any Loan Party or any
of its Subsidiaries shall fail to pay, or shall state that it is unable to pay,
or shall be unable to pay, its debts generally as they become due; or (ix) any
Loan Party or any of its Subsidiaries shall call a meeting of its creditors with
a view to arranging a composition or adjustment of its debts; or (x) any Loan
Party or any of its Subsidiaries shall by any act or failure to act consent to,
approve of or acquiesce in any of the foregoing; or (xi) any corporate action is
taken by any Loan Party or any of its Subsidiaries for the purpose of effecting
any of the foregoing.
(f) ERISA. (i) Any Termination Event shall occur, or (ii) any
Plan shall incur an "accumulated funding deficiency" (as defined in Section 412
of the Code or Section 302 of ERISA), whether or not waived, or (iii) the
Borrower or a member of its ERISA Controlled Group shall have engaged in a
transaction which is prohibited under Section 4975 of the Code or Section 406 of
ERISA which could result in the imposition of liability in excess of $1,000,000
on the Borrower or any member of its ERISA Controlled Group, or (iv) the
Borrower or any member of its ERISA Controlled Group shall fail to pay when due
an amount which it shall have become liable to pay to the PBGC, any Plan or a
trust established under Title IV of ERISA, or (v) a condition shall exist by
reason of which the PBGC would be entitled to obtain a decree adjudicating that
an ERISA Plan must be terminated or have a trustee appointed to administer any
ERISA Plan, or (vi) the Borrower or a member of its ERISA Controlled Group
suffers a partial or complete withdrawal from a Multiemployer Plan or is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan, or (vii) a proceeding shall be instituted against the
Borrower or any member of its ERISA Controlled Group to enforce Section 515 of
ERISA and such proceeding shall remain undismissed for 180 days, or (viii) any
other event or condition shall occur or exist with respect to any Plan which
could subject the Borrower or any member of its ERISA Controlled Group to any
tax, penalty or other liability in excess of $1,000,000 or (ix) the aggregate
present value of all post-retirement benefit liabilities of the Borrower and its
Subsidiaries under any "welfare plan" (as defined in Section 3(1) of ERISA),
including, without limitation, the Company's Retiree Medical Insurance Plan,
exceeds $20,000,000.
(g) Security Documents. Any of the Security Documents shall
for any reason cease to be in full force and effect, or shall cease to give the
Agent the Liens, rights, powers and privileges purported to be created thereby
including, without limitation, a perfected first priority security interest in,
and Lien on, any material part of the Collateral in accordance with the terms
thereof or the Borrower or any of the Borrower's Subsidiaries party to any
Security Document seeks to repudiate its respective obligations thereunder and
the Liens created thereby are rendered, or the Borrower or any such Subsidiary
of the Borrower seeks to render such Liens, invalid and unperfected.
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(h) Guaranty. The Guaranty or any provision thereof shall
cease to be in full force and effect, or any Guarantor or any Person acting by
or on behalf of a Guarantor shall deny or disaffirm all or any portion of such
Guarantor's obligations under such Guaranty.
(i) Change of Control. (i) Any Person or two or more Persons
acting in concert other than the Controlling Stockholders shall have acquired
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Voting Stock of the Borrower (or other securities convertible
into such Voting Stock) representing 20% or more of the combined voting power of
all Voting Stock of the Borrower; or (ii) during any period of up to 24
consecutive months, commencing after the date of this Agreement, individuals who
at the beginning of such 24-month period were directors of the Borrower shall
cease for any reason to constitute a majority of the board of directors of the
Borrower; or (iii) any Person or two or more Persons acting in concert other
than the Controlling Stockholders shall have acquired by contract or otherwise,
or shall have entered into a contract or arrangement that, upon consummation,
will result in its or their acquisition of, the power to exercise control over
Voting Stock of the Borrower (or other securities convertible into such
securities representing 20% or more of the combined voting power of all Voting
Stock of the Borrower) or (iv) at any time from and after the Closing Date until
July 15, 1999; the Required Holders shall fail to own and control at least
1,000,000 shares of Voting Stock (as adjusted for stock splits, dividends or
reclassifications); provided that the number of shares of Voting Stock of the
Borrower deemed owned and controlled by William P. Foley II ("Mr. Foley") shall,
for purposes of the preceding clause (iv), include (A) the number of shares of
Voting Stock (as adjusted for stock splits, dividends or reclassifications)
owned and controlled by Cannae Limited Partnership, a Nevada Limited
Partnership, but only to the extent of Mr. Foley's pro rata interest (based on
Mr. Foley's interest in such partnership) in such Voting Stock owned and
controlled by such partnership and (B) the number of shares of Voting Stock of
the Borrower issuable upon the exercise of options then owned and controlled and
exercisable by Mr. Foley.
(j) Judgments. One or more judgments or decrees or awards in
an aggregate amount of $5,000,000 or more shall be entered by a court or courts
of competent jurisdiction or in any arbitration proceeding (other than as set
forth in clause (k) below) against any Loan Party or any of its Subsidiaries and
(i) any such judgments or decrees or awards shall not be stayed, discharged,
paid, bonded or vacated within 30 days or (ii) enforcement proceedings shall be
commenced by any creditor on any such judgment or decree or award.
(k) Flagstar Settlement. Any settlement, arbitration award or
judgment shall be entered into or awarded against the Borrower or the Company in
connection with any arbitration proceeding with Flagstar Enterprises, Inc. which
results in aggregate consideration being payable by the Borrower, the Company or
any of their respective Subsidiaries in excess of $50,000,000.
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(l) Environmental Matters. (i) Any Environmental Claim shall
have been asserted against any Loan Party or any Environmental Affiliate thereof
which, if determined adversely, could have a Material Adverse Effect, (ii) any
release, emission, discharge or disposal of any Material of Environmental
Concern shall have occurred, and such event could form the basis of an
Environmental Claim against any Loan Party or any Environmental Affiliate
thereof which, if determined adversely, could have a Material Adverse Effect, or
(iii) any Loan Party or its Environmental Affiliate shall have failed to obtain
any Environmental Approval necessary for the management, use, control,
ownership, or operation of its business, property or assets or any such
Environmental Approval shall be revoked, terminated, or otherwise cease to be in
full force and effect, in each case, if the existence of such condition could
have a Material Adverse Effect.
(m) Ownership of Certain Subsidiaries. The Borrower shall
cease for any reason to own 100% of the Capital Stock of Carl Karcher
Enterprises, Inc. or the Borrower shall cease for any reason to own 100% of the
Capital Stock of the Company.
Section 8.2 Rights and Remedies. Upon the occurrence of any Event of
Default described in Section 8.1(e), the Commitments shall automatically and
immediately terminate and the unpaid principal amount of and any and all accrued
interest on the Loans and any and all accrued Fees and other Obligations shall
automatically become immediately due and payable, with all additional interest
from time to time accrued thereon and without presentation, demand, or protest
or other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by
Borrower, and the obligation of each Lender to make any Loan hereunder shall
thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, the Agent shall at the request, or may with the consent,
of the Required Lenders, by written notice to Borrower, (i) declare that the
Commitments are terminated, whereupon the Commitments and the obligation of each
Lender to make any Loan hereunder shall immediately terminate, (ii) require the
Borrower to Cash Collateralize the L/C Obligations in an amount equal to the
maximum aggregate amount that is, or at any time thereafter may become,
available for drawing under any outstanding Letters of Credit (whether or not
any beneficiary shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under such Letters of
Credit), and (iii) declare the unpaid principal amount of and any and all
accrued and unpaid interest on the Loans and any and all accrued Fees and other
Obligations to be, and the same shall thereupon be, immediately due and payable
with all additional interest from time to time accrued thereon and without
presentation, demand, or protest or other requirements of any kind (including,
without limitation, valuation and appraisement, diligence, presentment, notice
of intent to demand or accelerate and notice of acceleration), all of which are
hereby expressly waived by Borrower.
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SECTION 9. THE AGENT
Section 9.1 Appointment. Each Lender hereby irrevocably designates
and appoints Banque Paribas as the Agent of such Lender under this Agreement and
each other Loan Document, and each such Lender irrevocably authorizes Banque
Paribas as the Agent for such Lender, to take such action on its behalf under
the provisions of this Agreement and each other Loan Document and to exercise
such powers and perform such duties as are expressly delegated to the Agent by
the terms of this Agreement and each other Loan Document, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Agent
shall be read into this Agreement or otherwise exist against the Agent. The
provisions of this Section 9 are solely for the benefit of the Agent and the
Lenders and no Loan Party shall have any rights as a third party beneficiary or
otherwise under any of the provisions hereof. In performing its functions and
duties hereunder and under the other Loan Documents, the Agent shall act solely
as the agent of the Lenders and does not assume nor shall be deemed to have
assumed any obligation or relationship of trust or agency with or for any Loan
Party or any of their respective successors and assigns. It is agreed that, for
purposes of the Seller Agreements, the role of the Agent hereunder shall subsume
the role of "Administrative Agent" as referred to in the Seller Agreements.
Section 9.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement or the other Loan Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
Section 9.3 Exculpatory Provisions. The Agent shall not be (i) liable
for any action lawfully taken or omitted to be taken by it or any Person
described in Section 9.2 under or in connection with this Agreement or any other
Loan Document (except for its or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any Loan Party
contained in this Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, this Agreement or any other Loan Document or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement, or any other Loan Document or for any failure of any Loan
Party to perform their obligations hereunder or thereunder. The Agent shall not
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of any Loan Party. This Section is intended solely to govern
the relationship between the Agent, on the one hand, and the Lenders, on the
other.
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Section 9.4 Reliance by Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any Note, writing, resolution,
notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to any Loan Party), independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless the
Agent shall have received an executed Transfer Supplement in respect thereof.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Loan Document unless it shall first receive
such advice or concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
other Loan Documents in accordance with a request of the Required Lenders, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Lenders and all future holders of the Notes.
Section 9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has received notice from a Lender or the Borrower referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall promptly give notice thereof to the Lenders. Subject to
the provisions of Section 10.5, the Agent shall take such action with respect to
such Default or Event of Default as shall be directed by the Required Lenders;
provided that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as the
Agent shall deem advisable and in the best interests of the Lenders.
Section 9.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent, nor any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Loan
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Lender represents and warrants to the Agent that it has,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Loan
Parties and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the
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time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, operations, property,
prospects, financial and other condition and creditworthiness of the Loan
Parties. Except for notices, reports and other documents expressly required
under the Loan Documents to be furnished to the Lenders by the Agent, the Agent
shall not have any duty or responsibility to provide any Lender with any credit
or other information concerning the business, operations, property, prospects,
financial and other condition or creditworthiness of the Loan Parties which may
come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
Section 9.7 Indemnification. The Lenders agree to indemnify the Agent
and its officers, directors, employees, representatives and agents (to the
extent not reimbursed by the Loan Parties and without limiting the obligation of
the Loan Parties to do so), ratably according to their Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, the fees and disbursements of
counsel for the Agent or such Person in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
the Agent or such Person shall be designated a party thereto) that may at any
time (including, without limitation, at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against the Agent or such
Person as a result of, or arising out of, or in any way related to or by reason
of, any of the Transactions or the execution, delivery or performance of any
Loan Document or any other Transaction Document (but excluding any such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Agent or such Person as finally determined by a court
of competent jurisdiction); provided that to the extent indemnification payments
made by the Lenders pursuant to this Section 9.7 are subsequently recovered from
or for the account of the Borrower, the Agent shall promptly refund such
previously paid indemnification payments to the Lenders..
Section 9.8 Agent in its Individual Capacity. The Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Loan Parties as though the Agent were not the Agent
hereunder. With respect to Loans made or renewed by it and any Note issued to
it, the Agent shall have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
Section 9.9 Successor Agent. The Agent may resign as Agent upon 30
days' notice to the Borrower and the Lenders. If the Agent shall resign as Agent
under this Agreement, then the Required Lenders during such 30-day period shall
appoint from among the Lenders a successor agent, whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent and the term "Agent"
shall mean such successor agent,
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effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement or any holders
of the Notes. Notwithstanding anything herein to the contrary, so long as no
Event of Default has occurred and is continuing, each such successor agent shall
be subject to approval by the Borrower, which approval shall not be unreasonably
withheld or delayed. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Section 9 and Section 10.1 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 10. MISCELLANEOUS
Section 10.1 Payment of Expenses, Indemnity, etc. The Borrower shall:
(a) whether or not the transactions hereby contemplated are
consum- mated, pay all reasonable out-of-pocket costs and expenses of the Agent
in connection with the negotiation, preparation, execution and delivery of the
Loan Documents, the commitment letter related thereto and the Fee Letter, the
syndication of the Loans and the closing of the Transactions and the documents
and instruments referred to therein, the creation, perfection or protection of
the Agent's Liens in the Collateral (including, without limitation, fees and
expenses for lien searches and filing and recording fees), and any amendment,
waiver or consent relating to any of the Loan Documents (including, without
limitation, as to each of the foregoing, the reasonable fees and disbursements
of Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel to the Agent
and any other attorneys and legal assistants retained by the Agent and allocated
costs of internal counsel and legal assistants) and of the Agent and each Lender
in connection with the preservation of rights under, and enforcement of, the
Loan Documents and the documents and instruments referred to therein or in
connection with any restructuring or rescheduling of the Obligations (including,
without limitation, the reasonable fees and disbursements of counsel for the
Agent and for each of the Lenders);
(b) pay, and hold the Agent and each of the Lenders harmless
from and against, any and all present and future stamp, excise and other similar
taxes with respect to the foregoing matters and hold the Agent and each Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to such
Lender) to pay such taxes; and
(c) indemnify the Agent and each Lender, and each of their
Affiliates and their officers, directors, employees, representatives and agents
(each an "Indemnitee") from, and hold each of them harmless against, any and all
losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel
for such Indemnitee) that may at any time (including, without limitation, at any
time following the payment of the Obligations) be imposed on, asserted against
or incurred by any Indemnitee as a result of, or arising out of, or in any way
related to or by reason of, or in
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connection with the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with (i) any of the
Transactions or the execution, delivery or performance of any Loan Document or
any other Transaction Document (including, without limitation, any actual or
proposed use by the Borrower or any Subsidiary of the Borrower of the proceeds
of any Loan or Letter of Credit), (ii) any violation by any Loan Party or its
Environmental Affiliate of any applicable Environmental Law, (iii) any
Environmental Claim arising out of the management, use, control, ownership or
operation of property or assets by any of the Loan Parties or any of their
Environmental Affiliates, including, without limitation, all on-site and
off-site activities involving Materials of Environmental Concern, (iv) the
breach of any environmental representation or warranty set forth in Section
5.19, (v) the grant to the Agent and the Lenders of any Lien in any property or
assets of any of the Loan Parties or any stock or other equity interest in any
of the Loan Parties, and (vi) the exercise by the Agent and the Lenders of their
rights and remedies (including, without limitation, foreclosure) under any
agreements creating any such Lien (but excluding, as to any Indemnitee, any such
losses, liabilities, claims, damages, expenses, obligations, penalties, actions,
judgments, suits, costs or disbursements incurred solely by reason of the gross
negligence or willful misconduct of such Indemnitee as finally determined by a
court of competent jurisdiction). The Borrower's obligations under this Section
shall survive the termination of this Agreement and the payment of the
Obligations.
Section 10.2 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and during the continuance of
any Event of Default, each Lender is hereby authorized at any time or from time
to time, without presentment, demand, protest or other notice of any kind to any
Loan Party or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness at any
time held or owing by such Lender (including, without limitation, by branches
and agencies of such Lender wherever located) to or for the credit or the
account of any Loan Party against and on account of the Obligations of the Loan
Parties to such Lender under this Agreement or under any of the other Loan
Documents, including, without limitation, all interests in Obligations purchased
by such Lender pursuant to Section 9.7, and all other claims of any nature or
description arising out of or connected with this Agreement or any other Loan
Document, irrespective of whether or not such Lender shall have made any demand
hereunder and although said Obligations, liabilities or claims, or any of them,
shall be contingent or unmatured.
Section 10.3 Notices. Except as otherwise expressly provided herein,
all notices, requests and demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy, telex, or cable
communication), and shall be deemed to have been duly given or made when
delivered by hand, or five days after being deposited in the United States mail,
postage prepaid, or, in the case of telex notice, when sent, answerback
received, or, in the case of telecopy notice, when sent, or, in the case of a
nationally
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recognized overnight courier service, one Business Day after delivery to such
courier service, addressed, in the case of each party hereto, at its address
specified opposite its signature below or on the appropriate Transfer
Supplement, or to such other address as may be designated by any party in a
written notice to the other parties hereto, provided that notices and
communications to the Agent shall not be effective until received by the Agent.
Section 10.4 Successors and Assigns; Participation; Assignments.
(a) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Lenders, the Agent, all
future holders of the Notes and their respective successors and assigns, except
that the Borrower may not assign or transfer any of its rights or obligations
under this Agreement without the prior written consent of each Lender. No Lender
may participate, assign or sell any of its Credit Exposure (as defined in clause
(b) below) except as required by operation of law, in connection with the
merger, consolidation or dissolution of any Lender or as provided in this
Section 10.4.
(b) Participation. Any Lender may at any time sell to one or
more Persons (each a "Participant") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Commitment of such Lender and or
any other interest of such Lender hereunder (in respect of any such Lender, its
"Credit Exposure"). Notwithstanding any such sale by a Lender of participating
interests to a Participant, such Lender's rights and obligations under this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Note for all purposes under this Agreement (except as expressly provided below),
and the Borrower and the Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement. The Borrower agrees that if any Obligations are due and unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence and during the continuance of an Event of Default, each Participant
shall be deemed to have the right of setoff in respect of its participating
interest in amounts owing under this Agreement and any Note to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement or any Note, provided that such right of setoff
shall be subject to the obligations of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
Section 10.7. The Borrower also agrees that each Participant shall be entitled
to the benefits of Sections 2.16, 2.17 and 2.18, provided that no Participant
shall be entitled to receive any greater amount pursuant to such sections than
the transferor Lender would have been entitled to receive in respect of the
amount of the participating interest transferred by such transferor Lender to
such Participant had no such transfer occurred. Each Lender agrees that any
agreement between such Lender and any such Participant in respect of such
participating interest shall not restrict such Lender's right to agree to any
amendment, supplement, waiver or modification to this Agreement or any other
Loan Document, except where the result of any of the foregoing would be to
extend the final maturity of any Obligation or any regularly scheduled
installment thereof or reduce the rate or extend the time of payment of interest
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thereon or reduce the principal amount thereof or release all or substantially
all of the Collateral (except as expressly provided in the Loan Documents).
(c) Assignments. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to any Lender
or any affiliate thereof or, with the consent of the Agent, to any other Person
(each an "Assignee") all or any part of its Credit Exposure; provided, that in
the case of any such assignment to a Person that is not another Lender or an
affiliate of the assigning Lender, each such assignment shall be (i) for a
Credit Exposure not less than $5,000,000 and (ii) to an Assignee approved in
writing by the Agent. Such consent of the Agent shall be substantially in the
form attached as Schedule II to Exhibit I hereto. The Borrower, the Agent and
the Lenders agree that to the extent of any assignment the Assignee shall be
deemed to have the same rights and benefits under the Loan Documents and the
same rights of setoff and obligation to share pursuant to Section 10.7 as it
would have had if it were a Lender hereunder; provided that the Borrower and the
Agent shall be entitled to continue to deal solely and directly with the
assignor Lender in connection with the interests so assigned to the Assignee
unless and until such Assignee becomes a Purchasing Lender pursuant to clause
(d) below.
(d) Assignments to Purchasing Lenders. Any Lender may at any
time and from time to time assign to one or more Persons ("Purchasing Lenders")
all or any part of its Credit Exposure pursuant to a supplement to this
Agreement, substantially in the form of Exhibit I hereto (an "Assignment
Agreement"), executed by such Purchasing Lender, such transferor Lender and the
Agent. Upon (i) such execution of such Transfer Supplement, (ii) delivery to the
Agent of a notice of assignment substantially in the form of Schedule I to
Exhibit I hereto (a "Notice of Assignment") with a copy to the Borrower,
together with any consents required pursuant to Section 10.4(c) above, (iii)
payment by such Purchasing Lender to such transferor Lender of an amount equal
to the purchase price agreed between such transferor Lender and such Purchasing
Lender and (iv) payment of a $4,000 fee to the Agent for processing of such
assignment, such assignment shall become effective on the effective date
specified in such Assignment Agreement, which effective date shall be at least
five (5) Business Days after delivery of such Notice of Assignment to the Agent,
such transferor Lender shall be released from its obligations hereunder to the
extent of such assignment and such Purchasing Lender shall for all purposes be a
Lender party to this Agreement and shall have all the rights and obligations of
a Lender under this Agreement to the same extent as if it were an original party
hereto, and no further consent or action by the Borrower, the Lenders or the
Agent shall be required. Such Assignment Agreement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender as a Lender and the resulting adjustment of
the Commitments, if any, arising from the purchase by such Purchasing Lender of
all or a portion of the Credit Exposure of such transferor Lender. Promptly
after the consummation of any transfer to a Purchasing Lender pursuant hereto,
the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that a replacement Note is issued to such transferor Lender
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and a new Note is issued to such Purchasing Lender, in each case in principal
amounts reflecting such transfer.
(e) Disclosure of Information. The Borrower authorizes each
Lender to disclose to any Participant, Assignee or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all financial and other
information in such Lender's possession concerning the Borrower which has been
delivered to such Lender by the Borrower pursuant to this Agreement or which has
been delivered to such Lender by the Borrower in connection with such Lender's
credit evaluation of the Borrower prior to entering into this Agreement.
Section 10.5 Amendments and Waivers. Neither this Agreement, any
Note, any other Loan Document to which the Borrower is a party nor any terms
hereof or thereof may be amended, supplemented, modified or waived except in
accordance with the provisions of this Section. The Required Lenders and the
Borrower may, from time to time, enter into written amendments, supplements,
modifications or waivers for the purpose of adding, deleting, changing or
waiving any provisions to this Agreement, the Notes, or the other Loan Documents
to which the Borrower is a party, provided, that no such amendment, supplement,
modification or waiver shall (a) extend either the Revolving Loan Maturity Date
or the Term Loan Maturity Date or any installment or required prepayment of any
Obligations or reduce the rate or extend the time of payment of interest on any
Obligations, or reduce the principal amount of any Obligations or reduce any fee
payable to the Lenders hereunder, or release all or substantially all of the
Collateral (except as expressly contemplated by the Loan Documents) or change
the amount of any Commitment of any Lender, or amend, modify or waive any
provision of this Section 10.5 or the definition of Required Lenders, or consent
to or permit the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement or any other Loan Document, in each case
without the written consent of all the Lenders, (b) release (i) Carl Karcher
Enterprises, Inc., the Company or any Subsidiary of the Company (other than any
such Subsidiary which is an Immaterial Subsidiary), from the Guaranty and the
other applicable Security Documents (including the release of such Loan Party's
stock certificates from the Borrower Pledge Agreement or the Subsidiary Pledge
Agreement, as applicable), in each case without the written consent of all of
the Lenders or (ii) any other Subsidiary of the Borrower from the Guaranty and
the other applicable Security Documents (including the release of such Loan
Party's stock certificates from the Borrower Pledge Agreement or the Subsidiary
Pledge Agreement, as applicable) in each case without the written consent of
those Lenders whose Pro Rata Shares, in the aggregate, are greater than 66-2/3%;
provided that the release from the Guaranty and the other applicable Security
Documents (including the release of such Loan Party's stock certificates from
the Borrower Pledge Agreement or the Subsidiary Pledge Agreement, as applicable)
of (A) any Summit Subsidiary, Boston Pacific Inc. and CBI Restaurants, Inc. and
each Subsidiary of CBI Restaurants, Inc. in existence on the Closing Date and
(B) any Subsidiary of the Borrower (other than a Subsidiary of the Company) with
assets of less than $10,000,000 (as determined in accordance with GAAP) shall
not require the consent of any of the Lenders if (x) such Subsidiary (a "Sold
Guarantor") is being released from the Guaranty because all or a portion
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of the Equity Interests of such Sold Guarantor are being sold or otherwise
disposed of or an issuance of Equity Interests of such Sold Guarantor is
commenced, and immediately after giving effect to such sale, other disposition
or issuance of Equity Interests and as a result of such sale, other disposition
or issuance of Equity Interests, such Sold Guarantor is no longer a Subsidiary
of the Borrower and (y) any such sale, other disposition or issuance of Equity
Interests is otherwise permitted and commenced in accordance with the terms of
this Agreement or (c) amend, modify or waive any provision of Section 9 or any
other provision of any Loan Document if the effect thereof is to affect the
rights or duties of the Agent, without the written consent of the then Agent.
Any such amendment, supplement, modification or waiver shall apply to each of
the Lenders equally and shall be binding upon the Borrower, the Lenders, the
Agent and all future holders of the Notes. In the case of any waiver, the
Borrower, the Lenders and the Agent shall be restored to their former position
and rights hereunder and under the outstanding Notes, and any Default or Event
of Default waived shall be deemed to be cured and not continuing, but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
Section 10.6 No Waiver; Remedies Cumulative. No failure or delay on
the part of the Agent or any Lender or any holder of a Note in exercising any
right, power or privilege hereunder or under any other Loan Document and no
course of dealing between any Loan Party and the Agent or any Lender or the
holder of any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Loan Document preclude any other or further exercise thereof of the exercise of
any other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Agent or any Lender or the holder of any Note would
otherwise have. No notice to or demand on any Loan Party in any case shall
entitle any Loan Party to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Agent, the
Lenders or the holder of any Note to any other or further action in any
circumstances without notice or demand.
Section 10.7 Sharing of Payments. Each of the Lenders agrees that if
it should receive any amount hereunder (whether by voluntary payment, by
realization upon security, by the exercise of the right of setoff or banker's
lien, by counterclaim or cross action, by the enforcement of any right under the
Loan Documents, or otherwise) which is applicable to the payment of any
Obligations, of a sum which with respect to the related sum or sums received by
other Lenders is in a greater proportion than the total of such Obligation then
owed and due to such Lender bears to the total of such Obligation then owed and
due to all of the Lenders immediately prior to such receipt, then such Lender
receiving such excess payment shall purchase for cash without recourse or
warranty from the other Lenders an interest in such Obligations owing to such
Lenders in such amount as shall result in a proportional participation by all of
the Lenders in such amount; provided that if all or any portion of such excess
amount is thereafter recovered from such Lender, such purchase shall
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be rescinded and the purchase price restored to the extent of such recovery, but
without interest.
Section 10.8 Application of Collateral Proceeds. The Agent shall,
unless otherwise specified at the direction of the Required Lenders which
direction shall be consistent with the last sentence of this Section 10.8, apply
all proceeds of Collateral in the following order:
(A) first, to pay Obligations in respect of
any fees, expense reimbursements or indemnities then due to the Agent;
(B) second, to pay Obligations in respect of
any fees, expenses, reimbursements or indemnities then due to the
Lenders and the Issuer;
(C) third, to pay interest due in respect of
the Loans and L/C Obligations;
(D) fourth, to the ratable payment of
principal outstanding on the Loans, Obligations for unreimbursed
drawings under all Letters of Credit and net termination amounts
payable in respect of Rate Hedging Obligations (with the order of
application to the installments of any particular Loan, Obligation for
any unreimbursed drawing under any Letter of Credit or net termination
amount payable in respect of Rate Hedging Obligation to be determined
by the Agent in its sole discretion);
(E) fifth, to provide required cash
collateral if any pursuant to Section 8.2; and
(F) sixth, to the ratable payment of all
other Obligations.
The order of priority set forth in this Section 10.8 and the related provisions
of this Agreement are set forth solely to determine the rights and priorities of
the Agent and the Lenders as among themselves. The order of priority set forth
in clauses (B) through (F) of this Section 10.8 may at any time and from time to
time be changed by the Required Lenders without necessity of notice to or
consent of or approval by the Borrower, or any other Person. The order of
priority set forth in clause (A) of this Section 10.8 may be changed only with
the prior written consent of the Agent.
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Section 10.9 Governing Law; Submission to Jurisdiction. (a) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS (WITHOUT GIVING EFFECT TO THE
PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW).
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of
Illinois or of the United States of America for the Northern District of
Illinois, and, by execution and delivery of this Agreement, the Borrower hereby
accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts. The Borrower irrevocably consents to the service of process
out of any of the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid, the
Borrower at its address set forth opposite its signature below. The Borrower
hereby irrevocably waives any objection which it may now or hereafter have to
the laying of venue of any of the aforesaid actions or proceedings arising out
of or in connection with this Agreement or any other Loan Document brought in
the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum. Nothing
herein shall affect the right of the Agent, any Lender or any holder of a Note
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrower in any other jurisdiction.
Section 10.10 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
Section 10.11 Effectiveness. This Agreement shall become effective on
the date on which all of the parties hereto shall have signed a counterpart
hereof and shall have delivered the same to the Agent which delivery, in the
case of the Lenders, may be given to the Agent by telecopy (with the originals
delivered promptly to the Agent via overnight courier service).
Section 10.12 Headings Descriptive. The headings of the several
Sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
Section 10.13 Marshalling; Recapture. Neither the Agent nor any
Lender shall be under any obligation to marshall any assets in favor of any Loan
Party or any other party or against or in payment of any or all of the
Obligations. To the extent any Lender
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<PAGE> 104
receives any payment by or on behalf of any Loan Party, which payment or any
part thereof is subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to such Loan Party or its
estate, trustee, receiver, custodian or any other party under any bankruptcy
law, state or federal law, common law or equitable cause, then to the extent of
such payment or repayment, the obligation or part thereof which has been paid,
reduced or satisfied by the amount so repaid shall be reinstated by the amount
so repaid and shall be included within the liabilities of such Loan Party to
such Lender as of the date such initial payment, reduction or satisfaction
occurred.
Section 10.14 Severability. In case any provision in or obligation
under this Agreement or the Notes or the other Loan Documents shall be invalid,
illegal or unenforce- able in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.
Section 10.15 Independence of Covenants. All covenants hereunder
shall be given independent effect so that if a particular action or condition is
not permitted by any of such covenants, the fact that it would be permitted by
an exception to, or be otherwise within the limitations of, another covenant
shall not avoid the occurrence of a Default or Event of Default if such action
is taken or condition exists.
Section 10.16 Survival. All indemnities set forth herein including,
without limitation, in Sections 2.16, 2.17, 2.18, 2.19, 9.7 and 10.1 shall
survive the execution and delivery of this Agreement and the Notes and the
making and repayment of the Loans hereunder.
Section 10.17 Domicile of Loans. Each Lender may transfer and carry
its Loans at, to or for the account of any branch office, subsidiary or
affiliate of such Lender.
Section 10.18 Limitation of Liability. No claim may be made by any
Loan Party or any other Person against the Agent or any Lender or the
Affiliates, directors, officers, employees, attorneys or agent of any of them
for any special, indirect, consequential or punitive damages in respect of any
claim for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement or any other
Transactions, or any act, omission or event occurring in connection therewith;
and each Loan Party hereby waives, releases and agrees not to sue upon any claim
for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
Section 10.19 Calculations; Computations. The financial statements to
be furnished to the Agent and the Lenders pursuant hereto shall be made and
prepared in accordance with GAAP consistently applied throughout the periods
involved and consistent with GAAP as used in the preparation of the financial
statements referred to in Section 5.5,
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<PAGE> 105
and, except as otherwise specifically provided herein, all computations
determining compliance with Section 7.1 hereof shall utilize GAAP.
Section 10.20 WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT OR ANY MATTER ARISING HEREUNDER OR THEREUNDER.
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<PAGE> 106
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
CKE RESTAURANTS, INC.
By:______________________________________
Print Name:_________________________
Title:______________________________
Address: 1200 N. Harbor Blvd.
Anaheim, CA 92801
Attn: General Counsel
Telephone: (714) 774-5796
Telecopy: (714) 520-4485
<PAGE> 107
BANQUE PARIBAS, as Agent and as a Lender
By:______________________________________
Print Name: Clark C. King, III
Title: Vice President
By:______________________________________
Print Name:_________________________
Title:______________________________
Address: 227 W. Monroe Street
Suite 3300
Chicago, IL 60606
Attn:
Telephone: (312) 853-6000
Telecopy: (312) 853-6020
with a copy to:
Maureen B. Keating
Banque Paribas
787 Seventh Avenue
New York, NY 10019-6016
Telephone: (212) 841-2286
Telecopy: (212) 841-2275
<PAGE> 108
BANK OF MONTREAL
By:______________________________________
Print Name:_________________________
Title:______________________________
Address: 115 South LaSalle Street
Chicago, IL 60603
Attn: Maria A. Chachere
Telephone: (213) 239-0617
Telecopy: (213) 239-0680
NATEXIS BANQUE
(previously Banque Francaise du Commerce
Exterieur)
By:_________________________________________
Print Name:____________________________
Title:_________________________________
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 660 S. Figueroa, Suite 1400
Los Angeles, CA 90017
Attn: Iain Whyte
Telephone: (213) 627-8677
Telecopy: (213) 627-2761
<PAGE> 109
CREDITANSTALT-BANKVEREIN
By:_________________________________________
Print Name:____________________________
Title:_________________________________
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 4 Embarcadero Center
Suite 630
San Francisco, CA 94111
Attn: James F. McCann
Telephone: (415) 788-1371 x227
Telecopy: (415) 781-0622
THE DAI-ICHI KANGYO BANK, LTD.,
LOS ANGELES AGENCY
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 555 W. 5th Street
Fifth Floor
Los Angeles, CA 90013
Attn: David K. Henry
Telephone: (213) 243-4760
Telecopy: (213) 624-5258
<PAGE> 110
DEUTSCHE BANK AG, NEW YORK BRANCH
AND CAYMAN ISLANDS BRANCH
By:_________________________________________
Print Name:____________________________
Title:_________________________________
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 31 W. 52nd Street
New York, NY 10019
Attn: Stephan Wiedemann
Telephone: (212) 469-8663
Telecopy: (212) 474-8212
FIRST BANK & TRUST
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 2400 Michelson Drive
Irvine, CA 92615
Attn: Paul McGraw
Telephone: (714) 476-7897
Telecopy: (714) 476-8445
<PAGE> 111
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., LOS ANGELES AGENCY
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 350 S. Grand Avenue
Suite 3000
Los Angeles, CA 90071
Attn: Bryan P. Reed
Telephone: (213) 689-6314
Telecopy: (213) 626-1067
MANUFACTURERS BANK
By:_________________________________________
Print Name: Gregory J. Hall
Title: Vice President
Address: 515 S. Figueroa Street
Los Angeles, CA 90071
Attn: Gregory J. Hall
Telephone: (213) 489-6291
Telecopy: (213) 489-6252
<PAGE> 112
THE SAKURA BANK, LIMITED,
LOS ANGELES AGENCY
By:_________________________________________
Print Name:____________________________
Title:_________________________________
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 515 S. Figueroa Street
Suite 400
Los Angeles, CA 90071
Attn: Fernando Buesa
Telephone: (213) 489-6295
Telecopy: (213) 623-8692
THE SANWA BANK, LIMITED,
LOS ANGELES BRANCH
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 601 S. Figueroa Street, W5-4
Los Angeles, CA 90017
Attn: Virginia R. Hart
Telephone: (213) 896-7469
Telecopy: (213) 896-7475
<PAGE> 113
SUMITOMO BANK OF CALIFORNIA
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 611 W. 6th Street
Suite 3900
Los Angeles, CA 90017
Attn: Matthew R. Van Steenhuyse
Telephone: (213) 362-5716
Telecopy: (213) 622-1385
THE SUMITOMO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 333 S. Grand Avenue
Suite 5300
Los Angeles, CA 90071
Attn: Karen Ryan
Telephone: (213) 229-2125
Telecopy: (213) 613-1083
<PAGE> 114
UNITED STATES NATIONAL BANK OF
OREGON
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 555 S.W. Oak Street, PL-4
Portland, OR 97204
Attn: Janet E. Jordan
Telephone: (503) 275-5871
Telecopy: (503) 275-5428
WELLS FARGO BANK
By:_________________________________________
Print Name:____________________________
Title:_________________________________
Address: 2030 Main Street
Suite 900
Irvine, CA 92714
Attn: Sandy Martin
Telephone: (714) 251-4156
Telecopy: (714) 261-1830
<PAGE> 1
EXHIBIT 99.3
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (including the Annexes and Schedules
hereto, this "Agreement"), dated as of July 14, 1997, among Hardee's Food
Systems, Inc., a North Carolina corporation (the "Company"), and Fast Food
Merchandisers, a Colorado corporation ("Supplier"), through its Forest City
Division (the "Division"),
W I T N E S S E T H :
WHEREAS, the Company desires to designate Supplier, and
Supplier desires to be designated, an approved supplier (an "Approved Supplier")
of Products (as herein after defined) to the Franchised Restaurants (as
hereinafter defined); and
WHEREAS, the Company desires to purchase, either directly or
through a distributor, Products from Supplier, and Supplier desires to sell and
supply, either directly or through a distributor, Products to the Company; and
WHEREAS, Imasco Holdings, Inc., a Delaware corporation
("Seller"), the Company and CKE Restaurants, Inc., a Delaware corporation
("Buyer"), have entered into that certain Stock Purchase Agreement, dated as of
April 27, 1997 (the "Stock Purchase Agreement"), pursuant to which, inter alia,
Buyer has agreed to purchase, take up and assume from Seller, and Seller has
agreed to sell, transfer and assign to Buyer, each on the terms and conditions
therein stated, all of the outstanding capital stock of the Company; and
WHEREAS, pursuant to and as a condition precedent to the
Closing contemplated by the Stock Purchase Agreement (the "Closing"), Buyer has
agreed to, and Seller has agreed to cause the Company and Supplier to, enter
into this Agreement;
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<PAGE> 2
NOW THEREFORE, in consideration of the premises, and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth or
referenced below:
"Affiliate", with respect to any Person, means any
other Person directly or indirectly controlling, controlled
by or under common control with such Person. With respect to Buyer, the term
"Affiliate" shall not include any Person in which Buyer, directly or indirectly,
is the beneficial owner of less than 50% of such Person's voting securities.
"Agreement" shall have the meaning set forth in
the Preamble.
"Approved Supplier" shall have the meaning set
forth in the Recitals.
"Breach" shall have the meaning set forth in
Section 15.
"Closing" shall have the meaning set forth in the
Recitals.
"Company Restaurants" shall mean, collectively, all
restaurants from time to time during the term of this Agreement operated or
wholly owned by the Company or its subsidiaries which offer to customers
Proprietary Products.
"Discontinued Product" shall mean a Product as to which the
approval for use in the Restaurants has been withdrawn, or as to which the
related "limited time offer", test period or promotional period has terminated.
"Franchised Restaurants" shall mean all restaurants, other
than Company Restaurants, which, either as of the date of this Agreement or from
time to time during the term of this Agreement, are licensed by the Company to
offer to customers any of the Proprietary Products.
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<PAGE> 3
"Franchisees" shall mean, collectively, the several owners
and/or operators of the Franchised Restaurants.
"Intellectual Property" shall mean trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, the goodwill associated with the foregoing and
registrations in the United States of, and applications in the United States to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not in the United States; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in-part
and renewal applications), and any renewals, extensions or reissues thereof, in
the United States; non-public information, trade secrets and confidential
information and rights in the United States to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable or not in
the United States; registrations or applications for registration of copyrights
in the United States, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights; and any claims or causes of action
arising out of or related to any infringement or misappropriation of any of the
foregoing.
"Person" shall mean any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Price" shall have the meaning set forth in
Section 7.
"Proprietary Products" shall mean Products produced according
to the Company's formulations and specifications, other than specifications
relating to the health and safety of the consumer of such Products.
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<PAGE> 4
"Restaurants" shall mean all Franchised
Restaurants and Company Restaurants.
"Seller" shall have the meaning set forth in the
Recitals.
"Stock Purchase Agreement" shall have the meaning
set forth in the Recitals.
"Trademark" shall mean any Hardee's(R) trademark, service
mark, tradename or trade dress.
2. Approved Supplier. (a) The Company hereby
designates Supplier as an Approved Supplier of the Products
to the Franchised Restaurants during the term of this
Agreement.
(b) No provision of this Agreement shall be construed to
require Supplier to sell Products to any Franchised Restaurant or any Franchised
Restaurant to purchase Products from Supplier. Supplier shall extend the pricing
and other terms and conditions offered to the Company under this Agreement to
any Franchised Restaurant which purchases 90% or more of such Franchised
Restaurant's total requirements of the Products in the 12-month period preceding
the date of this Agreement each anniversary of this Agreement, whichever date
shall at any time be the most recent; provided that the related Franchisee meets
Distributor's credit standards as they may from time to time be amended. In no
event shall the Company be responsible for the debts of the Franchisees.
(c) Subject to Sections 14 and 15, no provision of this
Agreement shall be construed to prohibit or restrict Supplier from selling any
Product to any Franchised Restaurant at any time during the term of this
Agreement.
(d) The Company agrees that Supplier shall remain the sole
national Approved Supplier of Products to the Franchised Restaurants in the
United States during the term of this Agreement. No provision of this Agreement
shall be construed to prohibit the Company from designating
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<PAGE> 5
additional Approved Suppliers; provided that in the event the Company decides to
approve more than two Approved Suppliers in any geographic area of the United
States, the Company shall provide notice of such decision to Supplier at least
90 days prior to the implementation of such approval.
(e) The Company shall not hereafter enter into any agreement
(other than with the Supplier) which is in conflict with the rights granted to
the Supplier by this Section 2. Each party agrees that it will not take any
action the sole purpose of which is to evade or circumvent its obligations under
this Agreement.
3. Purchase Agreement. (a) On the terms and subject to the
conditions set forth herein, the Company hereby agrees to purchase exclusively
from Supplier (either directly or through one or more distributors), and
Supplier agrees to supply and sell continuously to the Company (either directly
or through one or more distributors), the manufactured food products listed on
Annex A hereto which have been and remain approved for use in the Restaurants
(the "Products"), in quantities constituting 90%, or such lesser percentage as
is agreed to by the Company and Supplier, of the Company's total requirements
for all Company Restaurants during the term of this Agreement. This Agreement
establishes the terms and provisions under which the Supplier will supply, but
does not authorize Supplier to ship or deliver, Products. Orders to ship and
deliver Products are to be granted by authorized releases, issued by the
Company's authorized ordering personnel (which may include approved
distributors). Upon the approval by the Company of additional manufactured food
products (limited to pork products, dessert items and other manufactured food
products which are similar to manufactured food products which Supplier, at the
time of such approval by the Company, manufactures for other customers), for use
in any Restaurants, the Company shall promptly offer Supplier the right, subject
to agreements concerning pricing and product specifications, to include such
product or products on Annex A hereto and to thereby amend this Agreement to
include such product or products as Products for all purposes of this Agreement.
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<PAGE> 6
(b) All Products will conform to the Company's specifications
and formulations and will be safe for their intended use, and shall be subject
to the Company's inspec tion and acceptance or rejection, notwithstanding any
acceptance of delivery or payments. The foregoing warranties shall survive
acceptance of the Products. If, prior to final acceptance, any Products are
found to be incomplete or not in conformity with the Company's specifi cations
and formulations, the Company may reject them (provided that the Product is
within the code date and has at all times since delivery to the Company been
stored under the proper temperature) and require Supplier to correct them
without charge. If, as a result of any Product being found to be incomplete or
not in conformity with the Company's specifications and formulations, the
Company must purchase replacement products from a secondary supplier at a higher
price than the price provided by this Agreement, the differ ence in cost to the
Company will be passed on to the Supplier by either (a) directly invoicing the
Supplier for the entire differential amount; or (b) requesting that Supplier
reduce the cost of the next order for an amount equal to the difference in cost
for the replacement order from the secondary supplier.
(c) The Company may, upon at least 10 days written notice,
require Supplier to supply and sell the Products to a distributor designated by
the Company rather than to the Company, provided, and for so long as, such
distributor is an approved distributor of Products for the Company Restaurants,
subject to Suppliers' credit policies.
4. Restaurants. Schedule 1 hereto contains a
list of all Restaurants as of the date hereof. During the
term of this Agreement, the Company shall promptly notify
Supplier if any establishment or other unit not set forth on
Schedule 1 shall become a Restaurant.
5. Term and Termination. Subject to Section 14, the term of
this Agreement shall commence at the Closing and shall continue for a period of
five (5) years from the Closing Date. Such term shall automatically be extended
for a single period of two (2) years from the expiration there-
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<PAGE> 7
of, unless Supplier or the Company shall have given, either to the other, not
less than three months prior to such expiration, written notice of its desire to
terminate this Agreement as of such expiration.
6. Products. (a) Supplier shall not sell, supply or otherwise
transfer Proprietary Products to any Person, except (i) pursuant to this
Agreement, (ii) to Franchised Restaurants or approved distributors to the
Franchised Restaurants, (iii) in connection with the destruction or final
disposal of such Proprietary Products, or (iv) with the written consent of the
Company.
(b) In the event a promotional or "limited time offer" Product
is ordered by the Company, the Company shall provide a usage projection for such
promotional or "limited time offer" Products showing finished Product quantities
of such promotional or "limited time offer" Product expected to be ordered by
the Company Restaurants and the Franchised Restaurants, and the Company shall be
obligated to purchase all finished Products, raw materials, packaging
ingredients and supplies which are ordered by Supplier in reliance upon such
usage projection (collectively, the "Reliance Materials"), pursuant to the
fourth sentence of this Section 6(b). If it is necessary for the Supplier to
purchase packaging supplies, raw materials or ingredients in excess of
quantities necessary to produce the quantity of finished Products set forth in
the usage projection, Supplier will notify the Company of such excess and
request written Company approval for such purchase, upon the giving of which
approval the Company shall be obligated to purchase such supplies, raw materials
or ingredients (the "Additional Materials" and, collectively with the Reliance
Materials, the "LTO Materials") pursuant to the fourth sentence of this Section
6(b). Promptly following notice to the Supplier by the Company of the suspension
of approval or termination of the promotional or "limited time offer" period
with respect to a Product, the Supplier shall cease manufacturing such Product.
Within 30 days following the suspension of approval or termination of the
promotional or "limited time offer" period with respect to a Product, the
Company shall purchase from Supplier all related LTO Materials which
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<PAGE> 8
constitute finished Product at Price, less profit margin, plus costs of
disposition, and shall purchase all related LTO Materials which do not
constitute finished Product at Supplier's actual cost, plus costs of
disposition.
(c) Upon notification from the Company to Supplier of the
suspension of approval of any Product for use in the Restaurants, other than
promotional or "limited time offer" Products, Supplier will provide to the
Company complete information concerning (i) finished Product inventory levels
with respect to such Product, (ii) inventory levels of supplies, ingredients and
packaging materials used in the production of such Product, and (iii) amounts on
order for delivery of raw materials supplies, ingredients and packaging
materials used in the production of such Product. With respect to any
Discontinued Product which is not a Proprietary Product, Supplier shall use
commercially reasonable efforts to sell to third parties any such quantities of
such Discontinued Products as remain in its inventory, promptly after the
suspension of approval of such Discontinued Product for use in the Restaurants.
Within 30 days following the suspension of approval of any Discontinued Product
for sue in the Restaurants, the Company shall purchase any remaining inventory
of finished goods, raw materials supplies, ingredients and packaging materials
related to such Discontinued Product, or shall reimburse Supplier for the
difference between the cost and salvage value thereof; provided that the Company
shall not be obligated to purchase a quantity of supplies, ingredients or
packaging materials equivalent to more than ninety (90) days of finished Product
requirements or a quantity of finished goods inventory of such Discontinued
Product (based on total sales of such Discontinued Product to the Company
Restaurants during the immediately preceding 12-month period).
(d) Supplier shall maintain inventory of supplies,
ingredients, and packaging materials for non-promotional and non-"limited time
offer" Products at levels equivalent to less than ninety (90) days of finished
Product requirements. Supplier will notify the Company of any ingredients,
supplies or raw materials requiring lead times
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<PAGE> 9
exceeding ninety (90) days or minimum purchase quantities exceeding ninety (90)
days usage by Company.
(e) No provision of this Agreement shall be construed to
amend, modify or restrict the absolute right of the Company, at its sole
discretion, to add, modify or delete menu items with respect to Restaurants,
whether as a group or on an individual basis, or to approve or disapprove
Products for use in the Restaurants.
(f) No provision of this Agreement shall be construed to
prohibit or restrict Supplier from selling Products other than Proprietary
Products to purchasers other than the Company, the Company Restaurants or the
Franchised Restaurants. No substitution or alteration of any goods, component
parts thereof, sources of noncommodity raw materials, processes or manufacturing
sites may be made without the Company's prior written consent.
(g) Supplier shall maintain at all times during the term of
this Agreement a minimum finished goods inventory of each Product representing
between one and two weeks' typical consumption (based on total sales of each
Product to the Company Restaurants during the immediately preceding 12-month
period).
(h) Supplier shall promptly notify the Company of any
short-term inability or anticipated short-term inability on its part to supply a
particular Product and shall indicate the reason for such inability and the
expected duration. Following receipt of any such notification, the Company may
enter into alternative arrangements as may be reasonably necessary to purchase
from sources other than Supplier any of its requirements of such Product, but
only during the period of such inability to supply; provided, however, that
Supplier shall reimburse the Company for its reasonable out-of-pocket costs
incurred in connection with covering any such inability to supply which is the
proximate result of Supplier's failure to timely order ingredients from
suppliers to fill orders previously placed by Company Restaurants. The Company
shall be obligated to purchase the applicable percentage of its requirements for
such Product
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<PAGE> 10
from Supplier upon advance written notice to the Company that such Product will
thereafter be supplied.
7. Pricing. (a) The prices to be paid by the Company's
approved distributors to Supplier, and the prices to be made available to
approved distributors of the Fran chisees, for each Product shall be determined
in accordance with Schedule 2 hereto (the "Price" and collectively, the
"Prices").
(b) The Prices shall be adjusted annually to reflect (i)
reasonable increases and reasonable decreases, as the case may be, in the cost
components within the prices set forth in Schedule 2, and (ii) competitive
conditions in the market for products of comparable quality and quantity to the
Products, and such increases or decreases in the Prices shall be referred to
collectively as "Price Adjust ments". Within 30 days of every July 1 subsequent
to the Closing Date, other than July 1, 1997, senior executives of Supplier and
the Company shall meet and negotiate in good faith to effect equitable Price
Adjustments. In connection with any such negotiations, Supplier shall afford the
Company reasonable access, upon reasonable notice, to its books and records to
the extent and only to the extent necessary to calculate and verify Supplier's
costs in respect of the cost components within the pricing formulas set forth in
Schedule 2. If, within 15 days of the date of such meeting, Supplier and the
Company have not agreed upon the amount of any Price Adjustment, if any, the
parties shall submit the matter to arbitration in accordance with Section 8(b).
(c) Neither Supplier nor the Company shall, and they shall
cause their respective Affiliates not to, establish or initiate any action, the
primary purpose of which is to subvert or evade the pricing or adjustment
provisions of this Agreement.
(d) Supplier and the Company shall meet on a semiannual basis
and negotiate in good faith to effect equitable Price Adjustments based on
changes in prevailing freight rates over such period.
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<PAGE> 11
(e) Supplier hereby represents and warrants to the Company
that the Prices and price formulas set forth in Schedule 2 hereto are equal to
or less than the prices and price formulas provided by Supplier to the Company
immediately prior to Closing.
8. Examination. (a) The Company shall have the right, at its
own expense, not more frequently than once in any 12-month period, upon giving
30 days' written notice to Supplier, to examine Supplier's books and records
applicable to verifying the proper calculation of the payments due to Supplier
by or on behalf of the Company pursuant to this Agreement during the previous
12-month period. The Company shall be entitled to employ, at its own expense, an
independent auditor to assist it in connection with such examination.
(b) Supplier and the Company agree to work together in good
faith to resolve any discrepancy between the amounts invoiced by Supplier to or
for the account of the Company and the Company's examination. In the event of a
conflict which cannot be resolved, if the amount involved exceeds $100,000, then
the Company or Supplier may give the other written notice (the "Notice of
Dispute") which shall specify in detail the nature of any disagreements so
asserted. All matters specified in any Notice of Dispute shall be submitted for
resolution to and reviewed by an arbitrator mutually appointed by the Company
and Supplier in accordance with the (commercial) rules of the American
Arbitration Association. If within ten (10) days of the Notice of Dispute the
parties are unable to agree upon the selection of an arbitrator, then either
party may request the President of the American Arbitration Association to
select an arbitrator who is willing to perform such services. The arbitrator
selected shall consider only the disputed items set forth in the Notice of
Dispute. The arbitrator shall act promptly to resolve all disputed matters and
its decision shall be final and binding on the parties. The fees and expenses of
the arbitrator shall be shared jointly and equally by the Company and Supplier.
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<PAGE> 12
(c) Within 30 days of the parties' agreement or the
arbitrator's determination, as the case may be, that the amounts paid by or on
behalf of the Company to Supplier with respect to the period for which books and
records were examined pursuant to Section 8(a) either exceeded or were less than
the payments due to Supplier, Supplier shall pay the amount of the excess to the
Company, or the Company shall pay the amount of the deficiency to Supplier, as
the case may be. If Supplier shall become obligated to pay the Company $500,000
or more in respect of any single examination pursuant to Section 8(a), Supplier
shall pay the reasonable fees and disbursements of the Company's independent
auditors incurred in connection with such examination.
(d) The Company and Supplier agree that the rights and
remedies granted to the Company in this Section 8 are in addition to any other
rights and remedies which may be granted in this Agreement or by law.
9. Proprietary Rights and Confidentiality. (a) As between the
parties hereto, the Company shall own the specifications and formulations for
the Products and the related Intellectual Property, Supplier shall own the
manufacturing procedures for the Products and the related Intellectual Property,
and the parties agree to execute all documents and instruments necessary to give
effect to the provisions of this Section 9(a).
(b) The Company and Supplier agree that all information as to
the ingredients, Product specifications and formulations and pricing of the
Products and all other information communicated by the Company to Supplier and
by Supplier to the Company, including but not limited to com munications
relating to the quantity and price of goods and services provided hereunder,
promotional events, marketing and restaurant data, new product introductions and
the like, where such information is either identified to Supplier as
"confidential" or is reasonably identifiable by either party as such, shall be
maintained in confidence by the party receiving such information, except that
such information may be provided by either party to its auditors, consultants
and
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<PAGE> 13
advisors who agree to maintain such confidentiality or are otherwise bound to
restrictions on disclosure and to any prospective purchasers of all or part of
their respective businesses; provided, however, that such prospective purchasers
shall have executed and delivered a confiden tiality agreement in form and
substance approved by the Company, which approval shall not unreasonably be
withheld or delayed. The confidentiality obligations of this Section 9(b) shall
not apply to information:
(i) which either party is compelled to disclose by judicial or
administrative process, or in the opinion of counsel satisfactory to
the other party, by other mandatory requirements of law;
(ii) which can be shown to have been generally available to the
public other than as a result of a breach of this Section or of any act
or omission of the Company or Supplier or any of their respective
Affiliates prior to the Closing;
(iii) which can be shown to have been provided to either party
by a third party who obtained such information after the Closing other
than as a result of a breach of this Section; or
(iv) which can be shown to have been indepen dently acquired by
either party after the Closing without use of any information provided
hereunder or, with respect to Supplier, without use of information
acquired prior to the Closing.
(c) All plans, specifications, formulas, designs, drawings,
patterns, documents, devices, apparatuses, and other property, in any such case
consisting of or containing the Company's Intellectual Property shall (i) be and
remain the sole property of the Company; (ii) be subject to prompt return upon
the request of Company; and (iii) be used only in performing this Agreement.
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<PAGE> 14
10. Testing. (a) Supplier shall promptly submit to the
products testing laboratory of the Company or any other entity designated by the
Company, in accordance with a testing schedule established from time to time or
upon request by the Company, reasonable quantities of samples of any Product
handled by Supplier.
(b) Supplier shall perform its own inspections of the
Products, shall provide the results of such testing to the Company at the
Company's request, and shall maintain all testing records for a minimum period
of two (2) years following delivery. The Company and its authorized repre
sentatives shall have the right to inspect and conduct tests and other
evaluations at the Supplier's manufacturing facilities, which may include
inspections on an unannounced basis, and Supplier shall use reasonable efforts
to grant the Company reasonable access to the facilities of its subcontractors
and suppliers, for the purpose of assessing the Supplier's sanitation and
manufacturing processes; provided, that such inspections shall not unreasonably
disrupt Supplier's operations. Supplier shall provide reasonable assistance and
cooperate with the Company in connection with such inspections and evaluations
at no expense to the Company.
11. Insurance and Indemnity. (a) Supplier agrees to maintain,
during the entire term of the Agreement, insurance coverage against such risks
as may be reasonably specified by the Company and the Buyer, in such minimum
amounts as may be reasonably satisfactory to the Company. Supplier shall provide
the Company with certificates of insurance evidencing such coverage promptly
upon the Company's request therefor.
(b) Supplier shall indemnify, defend and hold harmless the
Company from and against any and all losses, claims, actions, damages, expenses
or liabilities, including defense costs and attorneys' fees, resulting from,
arising out of or connected with any or all claims arising from (i) the use of
the Products supplied by Supplier pursuant to this Agreement, including, but not
limited to, any claim for death or personal injury or damage or loss of property
which
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<PAGE> 15
shall have been caused or alleged to have been caused by any negligence on the
part of Supplier or its agents, any defect in the materials or workmanship used
to manufacture the Products, or any claim under a theory of strict liability, or
(ii) the breach by Supplier of any warranty with respect to the Products made by
Supplier under this Agreement. In the event any third party asserts any claim
with respect to any matter as to which the indemnities in this Section 11(b)
relate, the Company shall give prompt notice to Supplier, and Supplier shall
have the right at its election to take over the defense or settlement of the
third party claim at its own expense by giving prompt notice to the Company. If
Supplier does not give such notice and does not proceed diligently so to defend
the third party claim within 30 days after receipt of the notice of the third
party claim, Supplier shall be bound by any defense or settlement that the
Company may make to such claims and shall reimburse the Company for its expenses
related to the defense or settle ment of the third party claim. The Company and
Supplier shall cooperate in defending against any asserted third party claims.
The parties agree to render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and adequate defense of any
such action, suit or proceeding, including making available to each other and/or
to each other's attorneys its books and records relating to such proceedings or
litigation and making individuals available for the giving of testimony
(including depositions).
12. Product Recalls. In the event it is deemed necessary by
the Company to recall from the Hardee's(R) System any quantity of any Product,
either as a result of failure of such Product to satisfy the proprietary
manufacturing formulations or specifications issued to Supplier by the Company,
or for any other reason bearing on quality and/or safety of such Product,
Supplier shall comply diligently with all Products recall procedures then in
effect, as established from time to time by the Company and applicable law.
Supplier shall bear all
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<PAGE> 16
costs and expenses associated with the recall of any Product unless such recall
is the result of the fault or negligence of the Company or any Franchisee, in
which event the Company shall bear all costs and expenses incurred by it and/or
the Supplier in complying with such recall procedures. In the event Supplier
fails or refuses to comply with the recall of such Products hereunder upon
request by the Company, the Company shall be entitled to take such action as it
deems necessary to recall such Products from the Hardee's(R) System and Supplier
shall reimburse the Company for its out-of-pocket costs and expenses incurred in
such recall procedure to the extent that such recall is not the result of the
fault or negligence of the Company or any Franchisee.
13. Force Majeure. Supplier shall not be responsible for
damages caused by its delay or failure to perform, in whole or in part, its
obligations hereunder or by its non-compliance with any of the terms hereof
where such delay, failure or non-compliance is due or attributable to acts of
God, fires, floods, storms, earthquakes, explo sions, embargoes, acts of or
compliance with requests of governmental authorities, nuclear or atomic
disasters, national emergencies, wars, riots, strikes, civil insur rections, or
similar events beyond Supplier's reasonable control (any such event, a "force
majeure"). In the event of any such force majeure, Supplier shall give the
Company prompt notice thereof, and thereafter Supplier's obligations hereunder
shall be suspended, in whole or in part, for the duration of such force majeure.
Upon expiration, settlement or other resolution of the force majeure, Supplier
shall resume performance in full hereunder but shall not be required to make-up
for any term of this Agreement. In the event Supplier's obligations hereunder
are suspended during any force majeure, the Company may enter into other
reasonable arrangements with other suppliers to satisfy its requirements
hereunder. Such other arrangements shall be reasonable in scope and duration
such that they may be terminated as soon as possible upon the expiration, settle
ment or other resolution of the force majeure. Supplier shall use its best
efforts to terminate or cause the expiration of the force majeure as soon as
practicable following its occurrence.
14. Assignment. (a) Subject to Section 14(b), Supplier may not
assign this Agreement without the prior
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<PAGE> 17
written consent of the Company, which consent shall not be unreasonably withheld
or delayed; provided, however, that nothing in this Section shall preclude
Supplier from employing common carriers, contract carriers, public warehousemen
or other similar parties to temporarily perform its services hereunder.
(b) Notwithstanding Subsection 13(a), Supplier may assign its
rights and obligations under this Agreement without the Company's consent to any
Affiliate of Supplier or to any purchaser of all or substantially all of the
business or assets of the Division; provided that Supplier shall not assign its
rights under this Agreement to (i) any party conducting, directly or indirectly,
a significant restaurant business, or (ii) any party which refuses to commit in
writing to provide the same level of service following the effective date of
such assignment as Supplier provided prior to such assignment, in either such
case described by clause (i) or (ii) without the consent of the Company, which
consent shall not be unreasonably withheld or delayed. For purposes of this
Section 14(b), a change of control or majority ownership of Supplier shall be
deemed to be an assignment of rights under this Agreement.
(c) Any permitted assignment of this Agreement by either party
shall, except as otherwise agreed, be deemed an assignment of all of the
assignor's rights and liabilities under this Agreement accruing, arising or
relating to any period on or after the date of such assignment.
(d) Any assignment made in violation of this
Section shall be null and void.
(e) During the term hereof, (i) if the Company sells 50 or
more Restaurants to any single purchaser or group of purchasers directly or
indirectly controlling, controlled by or under common control with Buyer, the
Company, any Franchisee, Checkers Drive-In Restaurants, Inc. ("Checkers") or
Rally's Hamburgers, Inc. ("Rally's"), (a "Significant Sale"), the Company agrees
to use commercially reasonable efforts to cause such purchaser or group of
purchasers to enter into a purchase agreement on terms
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<PAGE> 18
substantially similar to this Agreement, including Section 3, and (ii) if the
Company sells fewer than 50 Restaurants to any single purchaser or group of
purchasers directly or indirectly controlling, controlled by or under common
control with Buyer, the Company, any Franchisee, Checkers or Rally's, the
Company agrees to use its reasonable commercial efforts to cause such purchaser
to enter into an agreement providing for Supplier to act as its supplier for
Products.
15. Termination and Suspension. (a) Notwithstanding Section 5,
if any party fails or refuses to comply with one or more of its material
obligations hereunder, resulting in a material default which is incapable of
being cured or which is capable of being cured and is not cured within a
reasonable period following its receipt of oral or written notice of such
default from the Company (a "Breach"), the nonbreaching party shall provide the
breaching party written notice thereof, describing the Breach and specifying a
date, not less than thirty (30) days following the breaching party's receipt of
such notice, on which this Agreement shall be terminable at the option of the
nonbreaching party unless the Breach has by that date been substantially cured.
If the Breach has been substan tially cured by the date so specified this
Agreement shall not be terminable as a result of such substantially cured
Breach.
(b) The Company may terminate this Agreement with respect to
its obligation to purchase Products manufactured at a particular manufacturing
plant, but only with respect to such Products and only to the extent that such
Products are manufactured at such plant, if Supplier shall fail to comply with
its obligations under this Agreement with respect to any Product manufactured at
such plant and such failure presents or is likely to present in the immediate
future a danger of imminent harm to consumers or to restaurant employees or is
in material violation of the requirements of applicable government health,
safety or sanitation standards.
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<PAGE> 19
(c) Any party's failure to terminate this Agreement upon the
occurrence of one or more Breaches shall not constitute a waiver or otherwise
affect the right of such party to terminate the Agreement for any subsequent
Breach. Any party's failure to exercise any of its rights or remedies hereunder
or to insist on strict compliance by any other party with any of the terms
hereof shall not constitute a waiver of any of the terms or conditions hereof
with respect to any other or subsequent Breach nor shall it constitute a waiver
by the nonbreaching party of its right at any time thereafter to require
compliance with the terms hereof as provided herein. The rights or remedies
granted to the Company herein are in addition to any other rights or remedies
which may be granted by law.
(d) The obligations of Supplier pursuant to this Agreement
shall be terminable, at Supplier's option, if any of the following events shall
occur and be continuing: (i) if a proceeding is instituted (and not dismissed
within 60 days) by or against the Company under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law to be adjudicated a
bankrupt or insolvent; (ii) the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or similar official of all or
a substantial part of the assets of the Company; (iii) any assignment for the
benefit of creditors of the Company; or (iv) if the Company shall admit in
writing its inability to pay its debts as they become due.
(e) The obligations of the Company pursuant to this Agreement
shall be terminable, at the Company's option, if any of the following events
shall occur and be contin uing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against Supplier under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law to be
adjudicated a bankruptcy or insol vent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of Supplier; (iii) any
assignment for the benefit of creditors of Supplier; or (iv) if Supplier shall
admit in writing its inability to pay its debts as they become due.
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<PAGE> 20
(f) Upon termination or expiration of this Agree ment, (i)
Supplier's designation as an Approved Supplier shall terminate and be of no
further force and effect; (ii) Supplier shall not thereafter identify itself as
an Approved Supplier to the Hardee's(R) System or use any of the Company's trade
secrets, the Confidential Information and/or other proprietary information of
the Company; (iii) Supplier shall cease to use, in any manner whatsoever, any of
the Company's trade secrets, the Confidential Information and for other
proprietary information of the Company, all of which shall be promptly returned
to the Company; and (iv) Supplier shall sell to the Company, and the Company
shall purchase from Supplier, within 30 days of such termination or expiration
(A) all finished goods in Supplier's inventory, at cost, plus applicable freight
F.O.B. Supplier's manufacturing center(s), and (B) all ingredients, packaging
materials and supplies equivalent to a maximum of 90 days of finished product
requirements and any packaging materials, supplies or ingredients in excess of
90 days if previously approved by the Company; provided, however, that the
Company shall not be required to repurchase a finished goods inventory of any
Product of more than one to two weeks, except with respect to Products stocked
in reliance on the Company's sales projection related to "limited time" offers.
16. Compliance With Laws. Supplier hereby covenants that all
Products, including food articles, food ingredients and food packaging
comprising the Products, (i) will be processed in compliance with the Poultry
Products Inspection Act (the "Act"), the Federal Food, Drug and Cosmetic Act,
enacted June 25, 1938, and all acts amending or supplementing the same,
including, without limitation, the Food Additive Amendment of 1958, and all
other federal and state laws regarding poultry and food processing and (ii) that
the products processed by Supplier pursuant to this Agreement shall not be
"adulterated" or "misbranded" within the meaning of said Act at the time of
delivery to the Restaurants or any distributor distributing to the Restaurants.
Upon its receipt of any citation issued by any governmental or other regulatory
authority (or of process or citation issued by any court of law or equity)
related to
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<PAGE> 21
the activities to be performed under this Agreement, Supplier shall promptly
send written notice thereof to the Company and to all Franchised Restaurants
which may be affected thereby. Supplier shall execute, as to all Products
subject to the Federal Food, Drug and Cosmetic Act, the Caustic Poisons Act, the
Insecticide, Fungicide and Rodenticide Act, and the Hazardous Substance Act, and
any other applicable laws or regulations, a General and Continuing Guarantee of
compliance with such laws and regulations.
17. No Partnership. Supplier acknowledges that it is an
independent contractor and no party is or shall be construed as an agent,
partner, joint venturer or employee of another. No party shall have the
authority to bind or otherwise obligate any other party in any manner and no
party shall represent to anyone that it has a right to do so.
18. Waivers. No waiver or waivers by any party of any
provision of this Agreement, whether by conduct or otherwise, shall be deemed to
be a further or continuing waiver of the provision or any other provision of
this Agreement.
19. Attorneys' Fees. If it is necessary for either of the
parties to institute suit to enforce any of the provisions of this Agreement,
then the prevailing party in such suit shall be entitled to collect and receive
reasonable outside attorneys' fees and court Prices through and including
appellate litigation, and the other party shall pay for same.
20. Notices. All notices hereunder shall be deemed given if in
writing and delivered personally or sent by telex or telecopier or by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses as shall be specified by like notice):
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<PAGE> 22
(a) If to the Company, to:
Hardee's Food Systems
1233 Hardee's Boulevard
Rocky Mount, North Carolina 27804
Attention: President
With a copy to:
CKE Restaurants, Inc.
1200 North Harbor Boulevard
Anaheim, California 92803
Attention: General Counsel
(b) If to the Supplier, to:
Fast Food Merchandisers, Inc.
1233 North Church Street
Rocky Mount, North Carolina 27802
Attention: President
Any notice given by mail shall be effective when received. Any notice given by
telecopier shall be effective when the appropriate telecopier confirmation is
printed by the telecopier used to transmit such notice.
21. Captioned Headings. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
22. Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT
IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE
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<PAGE> 23
TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR
CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW
YORK FOR THE COUNTY OF NEW YORK (THE "CHOSEN COURTS") AND (I) IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (II) WAIVES ANY
OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS,
(III) WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR
DO NOT HAVE JURISDICTION OVER ANY PARTY HERETO AND (IV) AGREES THAT SERVICE OF
PROCESS UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF
NOTICE IS GIVEN IN ACCORDANCE WITH SECTION 19 OF THIS AGREEMENT.
23. Amendment and Waiver. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, the Company and Supplier, or in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
24. Counterparts. This Agreement and any amendments hereto may
be executed in one or more coun terparts, each of which shall be deemed to be an
original by the parties executing such counterpart, but all of which shall be
considered one and the same instrument.
25. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
pro vision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and pur pose of such invalid or unenforceable
provision and (b) the
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<PAGE> 24
remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability.
26. Third-Party Rights. Notwithstanding any other provision of
this Agreement, this Agreement shall not create benefits on behalf of any third
party or person other than the parties hereto or their permitted assignees
(including without limitation any broker, finder, supplier or customer), and
this Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns.
27. Entire Agreement. This Agreement (including all Annexes
and Schedules hereto) contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters.
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<PAGE> 25
IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
HARDEE'S FOOD SYSTEMS, INC.
By:
--------------------------------
Name:
Title:
FAST FOOD MERCHANDISERS, INC.,
through its FOREST CITY DIVISION
By:
--------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 99.4
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (including the Annexes and Schedules
hereto, this "Agreement"), dated as of July 14, 1997, among Hardee's Food
Systems, Inc., a North Carolina corporation (the "Company"), and Fast Food
Merchandisers, a Colorado corporation ("Supplier"), through its Monterey
Division (the "Division"),
W I T N E S S E T H :
WHEREAS, the Company desires to designate Supplier, and
Supplier desires to be designated, an approved supplier (an "Approved Supplier")
of Products (as herein after defined) to the Franchised Restaurants (as
hereinafter defined); and
WHEREAS, the Company desires to purchase, either directly or
through a distributor, Products from Supplier, and Supplier desires to sell and
supply, either directly or through a distributor, Products to the Company; and
WHEREAS, Imasco Holdings, Inc., a Delaware corporation
("Seller"), the Company and CKE Restaurants, Inc., a Delaware corporation
("Buyer"), have entered into that certain Stock Purchase Agreement, dated as of
April 27, 1997 (the "Stock Purchase Agreement"), pursuant to which, inter alia,
Buyer has agreed to purchase, take up and assume from Seller, and Seller has
agreed to sell, transfer and assign to Buyer, each on the terms and conditions
therein stated, all of the outstanding capital stock of the Company; and
WHEREAS, pursuant to and as a condition precedent to the
Closing contemplated by the Stock Purchase Agreement (the "Closing"), Buyer has
agreed to, and Seller has agreed to cause the Company and Supplier to, enter
into this Agreement;
<PAGE> 2
NOW THEREFORE, in consideration of the premises, and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth or referenced below:
"Affiliate", with respect to any Person, means any other
Person directly or indirectly controlling, controlled by or under common control
with such Person. With respect to Buyer, the term "Affiliate" shall not include
any Person in which Buyer, directly or indirectly, is the beneficial owner of
less than 50% of such Person's voting securities.
"Agreement" shall have the meaning set forth in the Preamble.
"Approved Supplier" shall have the meaning set forth in the
Recitals.
"Breach" shall have the meaning set forth in Section 15.
"Closing" shall have the meaning set forth in the Recitals.
"Company Restaurants" shall mean, collectively, all
restaurants from time to time during the term of this Agreement operated or
wholly owned by the Company or its subsidiaries which offer to customers
Proprietary Products.
"Discontinued Product" shall mean a Product as to which the
approval for use in the Restaurants has been withdrawn, or as to which the
related "limited time offer", test period or promotional period has terminated.
"Franchised Restaurants" shall mean all restaurants, other
than Company Restaurants, which, either as of the date of this Agreement or from
time to time during the term of this Agreement, are licensed by the Company to
offer to customers any of the Proprietary Products.
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<PAGE> 3
"Franchisees" shall mean, collectively, the several owners
and/or operators of the Franchised Restaurants.
"Intellectual Property" shall mean trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of origin, the goodwill associated with the foregoing and
registrations in the United States of, and applications in the United States to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not in the United States; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in-part
and renewal applications), and any renewals, extensions or reissues thereof, in
the United States; non-public information, trade secrets and confidential
information and rights in the United States to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable or not in
the United States; registrations or applications for registration of copyrights
in the United States, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights; and any claims or causes of action
arising out of or related to any infringement or misappropriation of any of the
foregoing.
"Person" shall mean any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Price" shall have the meaning set forth in Section 7.
"Proprietary Products" shall mean Products produced according
to the Company's formulations and specifications, other than specifications
relating to the health and safety of the consumer of such Products.
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<PAGE> 4
"Restaurants" shall mean all Franchised Restaurants and
Company Restaurants.
"Seller" shall have the meaning set forth in the Recitals.
"Stock Purchase Agreement" shall have the meaning set forth in
the Recitals.
"Trademark" shall mean any Hardee's(R) trademark, service
mark, tradename or trade dress.
2. Approved Supplier. (a) The Company hereby designates
Supplier as an Approved Supplier of the Products to the Franchised Restaurants
during the term of this Agreement.
(b) No provision of this Agreement shall be construed to
require Supplier to sell Products to any Franchised Restaurant or any Franchised
Restaurant to purchase Products from Supplier. Supplier shall extend the pricing
and other terms and conditions offered to the Company under this Agreement to
any Franchised Restaurant which purchases 90% or more of such Franchised
Restaurant's total requirements of the Products in the 12-month period preceding
the date of this Agreement each anniversary of this Agreement, whichever date
shall at any time be the most recent; provided that the related Franchisee meets
Distributor's credit standards as they may from time to time be amended. In no
event shall the Company be responsible for the debts of the Franchisees.
(c) Subject to Sections 14 and 15, no provision of this
Agreement shall be construed to prohibit or restrict Supplier from selling any
Product to any Franchised Restaurant at any time during the term of this
Agreement.
(d) The Company agrees that Supplier shall remain the sole
national Approved Supplier of Products to the Franchised Restaurants in the
United States during the term of this Agreement. No provision of this Agreement
shall be construed to prohibit the Company from designating
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<PAGE> 5
additional Approved Suppliers; provided that in the event the Company decides to
approve more than two Approved Suppliers in any geographic area of the United
States, the Company shall provide notice of such decision to Supplier at least
90 days prior to the implementation of such approval.
(e) The Company shall not hereafter enter into any agreement
(other than with the Supplier) which is in conflict with the rights granted to
the Supplier by this Section 2. Each party agrees that it will not take any
action the sole purpose of which is to evade or circumvent its obligations under
this Agreement.
3. Purchase Agreement. (a) On the terms and subject to the
conditions set forth herein, the Company hereby agrees to purchase exclusively
from Supplier (either directly or through one or more distributors), and
Supplier agrees to supply and sell continuously to the Company (either directly
or through one or more distributors), the manufactured food products listed on
Annex A hereto which have been and remain approved for use in the Restaurants
(the "Products"), in quantities constituting 90%, or such lesser percentage as
is agreed to by the Company and Supplier, of the Company's total requirements
for all Company Restaurants during the term of this Agreement. This Agreement
establishes the terms and provisions under which the Supplier will supply, but
does not authorize Supplier to ship or deliver, Products. Orders to ship and
deliver Products are to be granted by authorized releases, issued by the
Company's authorized ordering personnel (which may include approved
distributors). Upon the approval by the Company of additional manufactured food
products (limited to chicken and beef products, excluding hamburgers and other
manufactured food products which are similar to manufactured food products which
Supplier, at the time of such approval by the Company, manufactures for other
customers) for use in any Restaurants, the Company shall promptly offer Supplier
the right, subject to agreements concerning pricing and product specifications,
to include such product or products on Annex A hereto and to thereby amend this
Agreement to include such product or products as Products for all purposes of
this Agreement.
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<PAGE> 6
(b) All Products will conform to the Company's specifications
and formulations and will be safe for their intended use, and shall be subject
to the Company's inspec tion and acceptance or rejection, notwithstanding any
acceptance of delivery or payments. The foregoing warranties shall survive
acceptance of the Products. If, prior to final acceptance, any Products are
found to be incomplete or not in conformity with the Company's specifi cations
and formulations, the Company may reject them (provided that the Product is
within the code date and has at all times since delivery to the Company been
stored under the proper temperature) and require Supplier to correct them
without charge. If, as a result of any Product being found to be incomplete or
not in conformity with the Company's specifications and formulations, the
Company must purchase replacement products from a secondary supplier at a higher
price than the price provided by this Agreement, the differ ence in cost to the
Company will be passed on to the Supplier by either (a) directly invoicing the
Supplier for the entire differential amount; or (b) requesting that Supplier
reduce the cost of the next order for an amount equal to the difference in cost
for the replacement order from the secondary supplier.
(c) The Company may, upon at least 10 days written notice,
require Supplier to supply and sell the Products to a distributor designated by
the Company rather than to the Company, provided, and for so long as, such
distributor is an approved distributor of Products for the Company Restaurants,
subject to Suppliers' credit policies.
4. Restaurants. Schedule 1 hereto contains a list of all
Restaurants as of the date hereof. During the term of this Agreement, the
Company shall promptly notify Supplier if any establishment or other unit not
set forth on Schedule 1 shall become a Restaurant.
5. Term and Termination. Subject to Section 14, the term of
this Agreement shall commence at the Closing and shall continue for a period of
five (5) years from the Closing Date. Such term shall automatically be extended
for a single period of two (2) years from the expiration there-
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<PAGE> 7
of, unless Supplier or the Company shall have given, either to the other, not
less than three months prior to such expiration, written notice of its desire to
terminate this Agreement as of such expiration.
6. Products. (a) Supplier shall not sell, supply or otherwise
transfer Proprietary Products to any Person, except (i) pursuant to this
Agreement, (ii) to Franchised Restaurants or approved distributors to the
Franchised Restaurants, (iii) in connection with the destruction or final
disposal of such Proprietary Products, or (iv) with the written consent of the
Company.
(b) In the event a promotional or "limited time offer" Product
is ordered by the Company, the Company shall provide a usage projection for such
promotional or "limited time offer" Products showing finished Product quantities
of such promotional or "limited time offer" Product expected to be ordered by
the Company Restaurants and the Franchised Restaurants, and the Company shall be
obligated to purchase all finished Products, raw materials, packaging,
ingredients and supplies which are ordered by Supplier in reliance upon such
usage projection (collectively, the "Reliance Materials"), pursuant to the
fourth sentence of this Section 6(b). If it is necessary for the Supplier to
purchase packaging supplies, raw materials or ingredients in excess of
quantities necessary to produce the quantity of finished Projects set forth in
the usage projection, Supplier will notify the Company of such excess and
request written Company approval for such purchase, upon the giving of which
approval the Company shall be obligated to purchase such supplies, raw materials
or ingredients (the "Additional Materials" and, collectively with the Reliance
Materials, the "LTO Materials") pursuant to the fourth sentence of this Section
6(b). Promptly following notice to the Supplier by the Company of the suspension
of approval or termination of the promotional or "limited time offer" period
with respect to a Product, the Supplier shall cease manufacturing such Product.
Within 30 days following the suspension of approval or termination of the
promotional or "limited time offer" period with respect to a Product, the
Company shall purchase from Supplier all related LTO Materials which
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<PAGE> 8
constitute finished Product at Price, less profit margin, plus costs of
disposition, and shall purchase all related LTO Materials which do not
constitute finished Product at Supplier's actual cost, plus costs of
disposition.
(c) Upon notification from the Company to Supplier of the
suspension of approval of any Product for use in the Restaurants, other than
promotional or "limited time offer" Products, Supplier will provide to the
Company complete information concerning (i) finished Project inventory levels
with respect to such Product, (ii) inventory levels of supplies, ingredients and
packaging materials used in the projection of such Product, and (iii) amounts on
order for delivery of raw materials, supplies, ingredients and packaging
materials used in the production of such Product. With respect to any
Discontinued Product which is not a Proprietary Product, Supplier shall use
commercially reasonable efforts to sell to third parties any such quantities of
such Discontinued Products as remain in its inventory, promptly after the
suspension of approval of such Discontinued Product for use in the Restaurants.
Within 30 days following the suspension of approval of any Discontinued Product
for use in the Restaurants, the Company shall purchase any remaining inventory
of finished goods, raw materials, supplies, ingredients and packaging materials
related to such Discontinued Product, or shall reimburse Supplier for the
difference between the cost and salvage value thereof; provided that the Company
shall not be obligated to purchase a quantity of supplies, ingredients or
packaging materials equivalent to more than ninety (90) days of finished Product
requirements or a quantity of finished goods equivalent to more than two weeks'
finished goods inventory of such Discontinued Product (based on total sales of
such Discontinued Product to the Company Restaurants during the immediately
preceding 12-month period).
(d) Supplier shall maintain inventory of supplies,
ingredients, and packaging materials for non-promotional and non-"limited time
offer" Products at levels equivalent to less than ninety (90) days of finished
Product requirements. Supplier will notify the Company of any ingredients,
supplies or raw materials requiring lead times
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<PAGE> 9
exceeding ninety (90) days or minimum purchase quantities exceeding ninety (90)
days usage by Company.
(e) No provision of this Agreement shall be construed to
amend, modify or restrict the absolute right of the Company, at its sole
discretion, to add, modify or delete menu items with respect to Restaurants,
whether as a group or on an individual basis, or to approve or disapprove
Products for use in the Restaurants.
(f) No provision of this Agreement shall be construed to
prohibit or restrict Supplier from selling Products other than Proprietary
Products to purchasers other than the Company, the Company Restaurants or the
Franchised Restaurants. No substitution or alteration of any goods, component
parts thereof, sources of noncommodity raw materials, processes or manufacturing
sites may be made without the Company's prior written consent.
(g) Supplier shall maintain at all times during the term of
this Agreement a minimum finished goods inventory of each Product representing
between one and two weeks' typical consumption (based on total sales of each
Product to the Company Restaurants during the immediately preceding 12-month
period).
(h) Supplier shall promptly notify the Company of any
short-term inability or anticipated short-term inability on its part to supply a
particular Product and shall indicate the reason for such inability and the
expected duration. Following receipt of any such notification, the Company may
enter into alternative arrangements as may be reasonably necessary to purchase
from sources other than Supplier any of its requirements of such Product, but
only during the period of such inability to supply; provided, however, that
Supplier shall reimburse the Company for its reasonable out-of-pocket costs
incurred in connection with covering any such inability to supply which is the
proximate result of Supplier's failure to timely order ingredients from
suppliers to fill orders previously placed by Company Restaurants. The Company
shall be obligated to purchase the applicable percentage of its requirements for
such Product
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<PAGE> 10
from Supplier upon advance written notice to the Company that such Product will
thereafter be supplied.
7. Pricing. (a) The prices to be paid by the Company's
approved distributors to Supplier, and the prices to be made available to
approved distributors of the Fran chisees, for each Product shall be determined
in accordance with Schedule 2 hereto (the "Price" and collectively, the
"Prices").
(b) The Prices shall be adjusted annually to reflect (i)
reasonable increases and reasonable decreases, as the case may be, in the cost
components within the prices set forth in Schedule 2, and (ii) competitive
conditions in the market for products of comparable quality and quantity to the
Products, and such increases or decreases in the Prices shall be referred to
collectively as "Price Adjust ments". Within 30 days of every July 1 subsequent
to the Closing Date, other than July 1, 1997, senior executives of Supplier and
the Company shall meet and negotiate in good faith to effect equitable Price
Adjustments. In connection with any such negotiations, Supplier shall afford the
Company reasonable access, upon reasonable notice, to its books and records to
the extent and only to the extent necessary to calculate and verify Supplier's
costs in respect of the cost components within the pricing formulas set forth in
Schedule 2. If, within 15 days of the date of such meeting, Supplier and the
Company have not agreed upon the amount of any Price Adjustment, if any, the
parties shall submit the matter to arbitration in accordance with Section 8(b).
(c) Neither Supplier nor the Company shall, and they shall
cause their respective Affiliates not to, establish or initiate any action, the
primary purpose of which is to subvert or evade the pricing or adjustment
provisions of this Agreement.
(d) Supplier and the Company shall meet on a semiannual basis
and negotiate in good faith to effect equitable Price Adjustments based on
changes in prevailing freight rates over such period.
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<PAGE> 11
(e) Supplier hereby represents and warrants to the Company
that the Prices and price formulas set forth in Schedule 2 hereto are equal to
or less than the prices and price formulas provided by Supplier to the Company
immediately prior to Closing.
8. Examination. (a) The Company shall have the right, at its
own expense, not more frequently than once in any 12-month period, upon giving
30 days' written notice to Supplier, to examine Supplier's books and records
applicable to verifying the proper calculation of the payments due to Supplier
by or on behalf of the Company pursuant to this Agreement during the previous
12-month period. The Company shall be entitled to employ, at its own expense, an
independent auditor to assist it in connection with such examination.
(b) Supplier and the Company agree to work together in good
faith to resolve any discrepancy between the amounts invoiced by Supplier to or
for the account of the Company and the Company's examination. In the event of a
conflict which cannot be resolved, if the amount involved exceeds $100,000, then
the Company or Supplier may give the other written notice (the "Notice of
Dispute") which shall specify in detail the nature of any disagreements so
asserted. All matters specified in any Notice of Dispute shall be submitted for
resolution to and reviewed by an arbitrator mutually appointed by the Company
and Supplier in accordance with the (commercial) rules of the American
Arbitration Association. If within ten (10) days of the Notice of Dispute the
parties are unable to agree upon the selection of an arbitrator, then either
party may request the President of the American Arbitration Association to
select an arbitrator who is willing to perform such services. The arbitrator
selected shall consider only the disputed items set forth in the Notice of
Dispute. The arbitrator shall act promptly to resolve all disputed matters and
its decision shall be final and binding on the parties. The fees and expenses of
the arbitrator shall be shared jointly and equally by the Company and Supplier.
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<PAGE> 12
(c) Within 30 days of the parties' agreement or the
arbitrator's determination, as the case may be, that the amounts paid by or on
behalf of the Company to Supplier with respect to the period for which books and
records were examined pursuant to Section 8(a) either exceeded or were less than
the payments due to Supplier, Supplier shall pay the amount of the excess to the
Company, or the Company shall pay the amount of the deficiency to Supplier, as
the case may be. If Supplier shall become obligated to pay the Company $500,000
or more in respect of any single examination pursuant to Section 8(a), Supplier
shall pay the reasonable fees and disbursements of the Company's independent
auditors incurred in connection with such examination.
(d) The Company and Supplier agree that the rights and
remedies granted to the Company in this Section 8 are in addition to any other
rights and remedies which may be granted in this Agreement or by law.
9. Proprietary Rights and Confidentiality. (a) As between the
parties hereto, the Company shall own the specifications and formulations for
the Products and the related Intellectual Property, Supplier shall own the
manufacturing procedures for the Products and the related Intellectual Property,
and the parties agree to execute all documents and instruments necessary to give
effect to the provisions of this Section 9(a).
(b) The Company and Supplier agree that all information as to
the ingredients, Product specifications and formulations and pricing of the
Products and all other information communicated by the Company to Supplier and
by Supplier to the Company, including but not limited to com munications
relating to the quantity and price of goods and services provided hereunder,
promotional events, marketing and restaurant data, new product introductions and
the like, where such information is either identified to Supplier as
"confidential" or is reasonably identifiable by either party as such, shall be
maintained in confidence by the party receiving such information, except that
such information may be provided by either party to its auditors, consultants
and
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<PAGE> 13
advisors who agree to maintain such confidentiality or are otherwise bound to
restrictions on disclosure and to any prospective purchasers of all or part of
their respective businesses; provided, however, that such prospective purchasers
shall have executed and delivered a confiden tiality agreement in form and
substance approved by the Company, which approval shall not unreasonably be
withheld or delayed. The confidentiality obligations of this Section 9(b) shall
not apply to information:
(i) which either party is compelled to disclose by judicial or
administrative process, or in the opinion of counsel satisfactory to
the other party, by other mandatory requirements of law;
(ii) which can be shown to have been generally available to the
public other than as a result of a breach of this Section or of any act
or omission of the Company or Supplier or any of their respective
Affiliates prior to the Closing;
(iii) which can be shown to have been provided to either party
by a third party who obtained such information after the Closing other
than as a result of a breach of this Section; or
(iv) which can be shown to have been indepen dently acquired by
either party after the Closing without use of any information provided
hereunder or, with respect to Supplier, without use of information
acquired prior to the Closing.
(c) All plans, specifications, formulas, designs, drawings,
patterns, documents, devices, apparatuses, and other property, in any such case
consisting of or containing the Company's Intellectual Property shall (i) be and
remain the sole property of the Company; (ii) be subject to prompt return upon
the request of Company; and (iii) be used only in performing this Agreement.
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<PAGE> 14
10. Testing. (a) Supplier shall promptly submit
to the products testing laboratory of the Company or any
other entity designated by the Company, in accordance with a
testing schedule established from time to time or upon
request by the Company, reasonable quantities of samples of
any Product handled by Supplier.
(b) Supplier shall perform its own inspections of the
Products, shall provide the results of such testing to the Company at the
Company's request, and shall maintain all testing records for a minimum period
of two (2) years following delivery. The Company and its authorized repre
sentatives shall have the right to inspect and conduct tests and other
evaluations at the Supplier's manufacturing facilities, which may include
inspections on an unannounced basis, and Supplier shall use reasonable efforts
to grant the Company reasonable access to the facilities of its subcontractors
and suppliers, for the purpose of assessing the Supplier's sanitation and
manufacturing processes; provided, that such inspections shall not unreasonably
disrupt Supplier's operations. Supplier shall provide reasonable assistance and
cooperate with the Company in connection with such inspections and evaluations
at no expense to the Company.
11. Insurance and Indemnity. (a) Supplier agrees to maintain,
during the entire term of the Agreement, insurance coverage against such risks
as may be reasonably specified by the Company and the Buyer, in such minimum
amounts as may be reasonably satisfactory to the Company. Supplier shall provide
the Company with certificates of insurance evidencing such coverage promptly
upon the Company's request therefor.
(b) Supplier shall indemnify, defend and hold harmless the
Company from and against any and all losses, claims, actions, damages, expenses
or liabilities, including defense costs and attorneys' fees, resulting from,
arising out of or connected with any or all claims arising from (i) the use of
the Products supplied by Supplier pursuant to this Agreement, including, but not
limited to, any claim for death or personal injury or damage or loss of property
which
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<PAGE> 15
shall have been caused or alleged to have been caused by any negligence on the
part of Supplier or its agents, any defect in the materials or workmanship used
to manufacture the Products, or any claim under a theory of strict liability, or
(ii) the breach by Supplier of any warranty with respect to the Products made by
Supplier under this Agreement. In the event any third party asserts any claim
with respect to any matter as to which the indemnities in this Section 11(b)
relate, the Company shall give prompt notice to Supplier, and Supplier shall
have the right at its election to take over the defense or settlement of the
third party claim at its own expense by giving prompt notice to the Company. If
Supplier does not give such notice and does not proceed diligently so to defend
the third party claim within 30 days after receipt of the notice of the third
party claim, Supplier shall be bound by any defense or settlement that the
Company may make to such claims and shall reimburse the Company for its expenses
related to the defense or settle ment of the third party claim. The Company and
Supplier shall cooperate in defending against any asserted third party claims.
The parties agree to render to each other such assistance as they may reasonably
require of each other in order to ensure the proper and adequate defense of any
such action, suit or proceeding, including making available to each other and/or
to each other's attorneys its books and records relating to such proceedings or
litigation and making individuals available for the giving of testimony
(including depositions).
12. Product Recalls. In the event it is deemed necessary by
the Company to recall from the Hardee's(R) System any quantity of any Product,
either as a result of failure of such Product to satisfy the proprietary
manufacturing formulations or specifications issued to Supplier by the Company,
or for any other reason bearing on quality and/or safety of such Product,
Supplier shall comply diligently with all Products recall procedures then in
effect, as established from time to time by the Company and applicable law.
Supplier shall bear all
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<PAGE> 16
costs and expenses associated with the recall of any Product unless such recall
is the result of the fault or negligence of the Company or any Franchisee, in
which event the Company shall bear all costs and expenses incurred by it and/or
the Supplier in complying with such recall procedures. In the event Supplier
fails or refuses to comply with the recall of such Products hereunder upon
request by the Company, the Company shall be entitled to take such action as it
deems necessary to recall such Products from the Hardee's(R) System and Supplier
shall reimburse the Company for its out-of-pocket costs and expenses incurred in
such recall procedure to the extent that such recall is not the result of the
fault or negligence of the Company or any Franchisee.
13. Force Majeure. Supplier shall not be responsible for
damages caused by its delay or failure to perform, in whole or in part, its
obligations hereunder or by its non-compliance with any of the terms hereof
where such delay, failure or non-compliance is due or attributable to acts of
God, fires, floods, storms, earthquakes, explo sions, embargoes, acts of or
compliance with requests of governmental authorities, nuclear or atomic
disasters, national emergencies, wars, riots, strikes, civil insur rections, or
similar events beyond Supplier's reasonable control (any such event, a "force
majeure"). In the event of any such force majeure, Supplier shall give the
Company prompt notice thereof, and thereafter Supplier's obligations hereunder
shall be suspended, in whole or in part, for the duration of such force majeure.
Upon expiration, settlement or other resolution of the force majeure, Supplier
shall resume performance in full hereunder but shall not be required to make-up
for any term of this Agreement. In the event Supplier's obligations hereunder
are suspended during any force majeure, the Company may enter into other
reasonable arrangements with other suppliers to satisfy its requirements
hereunder. Such other arrangements shall be reasonable in scope and duration
such that they may be terminated as soon as possible upon the expiration, settle
ment or other resolution of the force majeure. Supplier shall use its best
efforts to terminate or cause the expiration of the force majeure as soon as
practicable following its occurrence.
14. Assignment. (a) Subject to Section 14(b), Supplier may not
assign this Agreement without the prior
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<PAGE> 17
written consent of the Company, which consent shall not be unreasonably withheld
or delayed; provided, however, that nothing in this Section shall preclude
Supplier from employing common carriers, contract carriers, public warehousemen
or other similar parties to temporarily perform its services hereunder.
(b) Notwithstanding Subsection 13(a), Supplier may assign its
rights and obligations under this Agreement without the Company's consent to any
Affiliate of Supplier or to any purchaser of all or substantially all of the
business or assets of the Division; provided that Supplier shall not assign its
rights under this Agreement to (i) any party conducting, directly or indirectly,
a significant restaurant business, or (ii) any party which refuses to commit in
writing to provide the same level of service following the effective date of
such assignment as Supplier provided prior to such assignment, in either such
case described by clause (i) or (ii) without the consent of the Company, which
consent shall not be unreasonably withheld or delayed. For purposes of this
Section 14(b), a change of control or majority ownership of Supplier shall be
deemed to be an assignment of rights under this Agreement.
(c) Any permitted assignment of this Agreement by either party
shall, except as otherwise agreed, be deemed an assignment of all of the
assignor's rights and liabilities under this Agreement accruing, arising or
relating to any period on or after the date of such assignment.
(d) Any assignment made in violation of this Section shall be
null and void.
(e) During the term hereof, (i) if the Company sells 50 or
more Restaurants to any single purchaser or group of purchasers directly or
indirectly controlling, controlled by or under common control with Buyer, the
Company, any Franchisee, Checkers Drive-In Restaurants, Inc. ("Checkers") or
Rally's Hamburgers, Inc. ("Rally's"), (a "Significant Sale"), the Company agrees
to use commercially reasonable efforts to cause such purchaser or group of
purchasers to enter into a purchase agreement on terms
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<PAGE> 18
substantially similar to this Agreement, including Section 3, and (ii) if the
Company sells fewer than 50 Restaurants to any single purchaser or group of
purchasers directly or indirectly controlling, controlled by or under common
control with Buyer, the Company, any Franchisee, Checkers or Rally's, the
Company agrees to use its reasonable commercial efforts to cause such purchaser
to enter into an agreement providing for Supplier to act as its supplier for
Products.
15. Termination and Suspension. (a) Notwithstanding Section 5,
if any party fails or refuses to comply with one or more of its material
obligations hereunder, resulting in a material default which is incapable of
being cured or which is capable of being cured and is not cured within a
reasonable period following its receipt of oral or written notice of such
default from the Company (a "Breach"), the nonbreaching party shall provide the
breaching party written notice thereof, describing the Breach and specifying a
date, not less than thirty (30) days following the breaching party's receipt of
such notice, on which this Agreement shall be terminable at the option of the
nonbreaching party unless the Breach has by that date been substantially cured.
If the Breach has been substan tially cured by the date so specified this
Agreement shall not be terminable as a result of such substantially cured
Breach.
(b) The Company may terminate this Agreement with respect to
its obligation to purchase Products manufactured at a particular manufacturing
plant, but only with respect to such Products and only to the extent that such
Products are manufactured at such plant, if Supplier shall fail to comply with
its obligations under this Agreement with respect to any Product manufactured at
such plant and such failure presents or is likely to present in the immediate
future a danger of imminent harm to consumers or to restaurant employees or is
in material violation of the requirements of applicable government health,
safety or sanitation standards.
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<PAGE> 19
(c) Any party's failure to terminate this Agreement upon the
occurrence of one or more Breaches shall not constitute a waiver or otherwise
affect the right of such party to terminate the Agreement for any subsequent
Breach. Any party's failure to exercise any of its rights or remedies hereunder
or to insist on strict compliance by any other party with any of the terms
hereof shall not constitute a waiver of any of the terms or conditions hereof
with respect to any other or subsequent Breach nor shall it constitute a waiver
by the nonbreaching party of its right at any time thereafter to require
compliance with the terms hereof as provided herein. The rights or remedies
granted to the Company herein are in addition to any other rights or remedies
which may be granted by law.
(d) The obligations of Supplier pursuant to this Agreement
shall be terminable, at Supplier's option, if any of the following events shall
occur and be continuing: (i) if a proceeding is instituted (and not dismissed
within 60 days) by or against the Company under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law to be adjudicated a
bankrupt or insolvent; (ii) the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or similar official of all or
a substantial part of the assets of the Company; (iii) any assignment for the
benefit of creditors of the Company; or (iv) if the Company shall admit in
writing its inability to pay its debts as they become due.
(e) The obligations of the Company pursuant to this Agreement
shall be terminable, at the Company's option, if any of the following events
shall occur and be contin uing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against Supplier under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law to be
adjudicated a bankruptcy or insol vent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of Supplier; (iii) any
assignment for the benefit of creditors of Supplier; or (iv) if Supplier shall
admit in writing its inability to pay its debts as they become due.
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<PAGE> 20
(f) Upon termination or expiration of this Agree ment, (i)
Supplier's designation as an Approved Supplier shall terminate and be of no
further force and effect; (ii) Supplier shall not thereafter identify itself as
an Approved Supplier to the Hardee's(R) System or use any of the Company's trade
secrets, the Confidential Information and/or other proprietary information of
the Company; (iii) Supplier shall cease to use, in any manner whatsoever, any of
the Company's trade secrets, the Confidential Information and for other
proprietary information of the Company, all of which shall be promptly returned
to the Company; and (iv) Supplier shall sell to the Company, and the Company
shall purchase from Supplier, within 30 days of such termination or expiration
(A) all finished goods in Supplier's inventory, at cost, plus applicable freight
F.O.B. Supplier's manufacturing center(s), and (B) all ingredients, packaging
materials and supplies equivalent to a maximum of 90 days of finished product
requirements and any packaging materials, supplies or ingredients in excess of
90 days if previously approved by the Company; provided, however, that the
Company shall not be required to repurchase a finished goods inventory of any
Product of more than one to two weeks, except with respect to Products stocked
in reliance on the Company's sales projection related to "limited time" offers.
16. Compliance With Laws. Supplier hereby covenants that all
Products, including food articles, food ingredients and food packaging
comprising the Products, (i) will be processed in compliance with the Poultry
Products Inspection Act (the "Act"), the Federal Food, Drug and Cosmetic Act,
enacted June 25, 1938, and all acts amending or supplementing the same,
including, without limitation, the Food Additive Amendment of 1958, and all
other federal and state laws regarding poultry and food processing and (ii) that
the products processed by Supplier pursuant to this Agreement shall not be
"adulterated" or "misbranded" within the meaning of said Act at the time of
delivery to the Restaurants or any distributor distributing to the Restaurants.
Upon its receipt of any citation issued by any governmental or other regulatory
authority (or of process or citation issued by any court of law or equity)
related to
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<PAGE> 21
the activities to be performed under this Agreement, Supplier shall promptly
send written notice thereof to the Company and to all Franchised Restaurants
which may be affected thereby. Supplier shall execute, as to all Products
subject to the Federal Food, Drug and Cosmetic Act, the Caustic Poisons Act, the
Insecticide, Fungicide and Rodenticide Act, and the Hazardous Substance Act, and
any other applicable laws or regulations, a General and Continuing Guarantee of
compliance with such laws and regulations.
17. No Partnership. Supplier acknowledges that it is an
independent contractor and no party is or shall be construed as an agent,
partner, joint venturer or employee of another. No party shall have the
authority to bind or otherwise obligate any other party in any manner and no
party shall represent to anyone that it has a right to do so.
18. Waivers. No waiver or waivers by any party of any
provision of this Agreement, whether by conduct or otherwise, shall be deemed to
be a further or continuing waiver of the provision or any other provision of
this Agreement.
19. Attorneys' Fees. If it is necessary for either of the
parties to institute suit to enforce any of the provisions of this Agreement,
then the prevailing party in such suit shall be entitled to collect and receive
reasonable outside attorneys' fees and court Prices through and including
appellate litigation, and the other party shall pay for same.
20. Notices. All notices hereunder shall be deemed given if in
writing and delivered personally or sent by telex or telecopier or by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses as shall be specified by like notice):
(a) If to the Company, to:
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<PAGE> 22
Hardee's Food Systems
1233 Hardee's Boulevard
Rocky Mount, North Carolina 27804
Attention: President
With a copy to:
CKE Restaurants, Inc.
1200 North Harbor Boulevard
Anaheim, California 92803
Attention: General Counsel
(b) If to the Supplier, to:
Fast Food Merchandisers, Inc.
1233 North Church Street
Rocky Mount, North Carolina 27802
Attention: President
Any notice given by mail shall be effective when received. Any notice given by
telecopier shall be effective when the appropriate telecopier confirmation is
printed by the telecopier used to transmit such notice.
21. Captioned Headings. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
22. Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY HERETO AGREES THAT
IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY CLAIM ARISING OUT OF
OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED IN OR CONTEMPLATED BY
THIS AGREEMENT,
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<PAGE> 23
WHETHER IN TORT OR CONTRACT OR AT LAW OR IN EQUITY, EXCLUSIVELY
IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE
SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK (THE "CHOSEN
COURTS") AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN
COURTS, (II) WAIVES ANY OBJECTION TO LAYING VENUE IN ANY SUCH ACTION OR
PROCEEDING IN THE CHOSEN COURTS, (III) WAIVES ANY OBJECTION THAT THE CHOSEN
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 19 OF THIS AGREEMENT.
23. Amendment and Waiver. Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, the Company and Supplier, or in the case of
a waiver, by the party against whom the waiver is to be effective. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
24. Counterparts. This Agreement and any amendments hereto may
be executed in one or more coun terparts, each of which shall be deemed to be an
original by the parties executing such counterpart, but all of which shall be
considered one and the same instrument.
25. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
pro vision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and pur pose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
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<PAGE> 24
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability.
26. Third-Party Rights. Notwithstanding any other provision of
this Agreement, this Agreement shall not create benefits on behalf of any third
party or person other than the parties hereto or their permitted assignees
(including without limitation any broker, finder, supplier or customer), and
this Agreement shall be effective only as between the parties hereto, their
successors and permitted assigns.
27. Entire Agreement. This Agreement (including all Annexes
and Schedules hereto) contains the entire agreement between the parties hereto
with respect to the subject matter hereof and supersedes all prior agreements
and understandings, oral or written, with respect to such matters.
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<PAGE> 25
IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
HARDEE'S FOOD SYSTEMS, INC.
By:
-----------------------------
Name:
Title:
FAST FOOD MERCHANDISERS, INC.,
through its MONTEREY DIVISION
By:
-----------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 99.5
SUPPLY AGREEMENT
This SUPPLY AGREEMENT (including the Annexes and Schedules
hereto, this "Agreement"), dated as of July 14, 1997, among Hardee's Food
Systems, Inc. (the "Company") and QVS, Inc. ("Supplier"),
W I T N E S S E T H :
WHEREAS, the Company desires to designate Supplier, and
Supplier desires to be designated, an approved supplier (an "Approved
Supplier") of Products (as hereinafter defined) to the Franchised Restaurants
(as hereinafter defined); and
WHEREAS, the Company desires to purchase, either directly or
through a distributor, Products from Supplier, and Supplier desires to sell and
supply, either directly or through a distributor, Products to the Company; and
WHEREAS, Imasco Holdings, Inc., a Delaware corporation
("Seller"), the Company and CKE Restaurants, Inc., a Delaware corporation
("Buyer"), have entered into that certain Stock Purchase Agreement, dated as
of April 27, 1997 (the "Stock Purchase Agreement"), pursuant to which, inter
alia, Buyer has agreed to purchase, take up and assume from Seller, and Seller
has agreed to sell, transfer and assign to Buyer, each on the terms and
conditions therein stated, all of the outstanding capital stock of the Company;
and
WHEREAS, pursuant to and as a condition precedent to the
Closing contemplated by the Stock Purchase Agreement (the "Closing"), Buyer has
agreed to, and Seller has agreed to cause the Company and Supplier to, enter
into this Agreement;
NOW THEREFORE, in consideration of the premises, and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
<PAGE> 2
1. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth or referenced below:
"Affiliate", with respect to any Person, means any other
Person directly or indirectly controlling, controlled by or under common
control with such Person. With respect to Buyer, the term "Affiliate" shall
not include any Person in which Buyer, directly or indirectly, is the
beneficial owner of less than 50% of such Person's voting securities.
"Agreement" shall have the meaning set forth in the Preamble.
"Approved Supplier" shall have the meaning set forth in the
Recitals.
"Breach" shall have the meaning set forth in Section 15.
"Closing" shall have the meaning set forth in the Recitals.
"Company Restaurants" shall mean, collectively, all
restaurants from time to time during the term of this Agreement operated or
wholly owned by the Company or its subsidiaries which offer to customers
Proprietary Products.
"Franchised Restaurants" shall mean all restaurants, other
than Company Restaurants, which, either as of the date of this Agreement or
from time to time during the term of this Agreement, are licensed by the
Company to offer to customers any of the Proprietary Products.
"Franchisees" shall mean, collectively, the several owners
and/or operators of the Franchised Restaurants.
"Intellectual Property" shall mean trademarks, service marks,
brand names, certification marks, trade dress, assumed names, trade names and
other indications of
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<PAGE> 3
origin, the goodwill associated with the foregoing and registrations in the
United States of, and applications in the United States to register, the
foregoing, including any extension, modification or renewal of any such
registration or application; inventions, discoveries and ideas, whether
patentable or not in the United States; patents, applications for patents
(including, without limitation, divisions, continuations, continuations in-part
and renewal applications), and any renewals, extensions or reissues thereof, in
the United States; non- public information, trade secrets and confidential
information and rights in the United States to limit the use or disclosure
thereof by any Person; writings and other works, whether copyrightable or not
in the United States; registrations or applications for registration of
copyrights in the United States, and any renewals or extensions thereof; any
similar intellectual property or proprietary rights; and any claims or causes
of action arising out of or related to any infringement or misappropriation of
any of the foregoing.
"Person" shall mean any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Price" shall have the meaning set forth in Section 7.
"Restaurants" shall mean all Franchised Restaurants and
Company Restaurants.
"Seller" shall have the meaning set forth in the Recitals.
"Stock Purchase Agreement" shall have the meaning set forth in
the Recitals.
2. Approved Supplier. (a) The Company hereby designates
Supplier as an Approved Supplier of the Products to the Franchised Restaurants
during the term of this Agreement.
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<PAGE> 4
(b) No provision of this Agreement shall be construed to
require Supplier to sell Products to any Franchised Restaurant or any
Franchised Restaurant to purchase Products from Supplier. Supplier shall
extend the pricing and other terms and conditions offered to the Company under
this Agreement to any Franchised Restaurant which purchases 92% or more of such
Franchised Restaurant's total requirements of the Products in the 12-month
period preceding the date of this Agreement each anniversary of this Agreement,
whichever date shall at any time be the most recent; provided that the related
Franchisee meets Distributor's credit standards as they may from time to time
be amended. In no event shall the Company be responsible for the debts of the
Franchisees.
(c) Subject to Sections 14 and 15, no provision of this
Agreement shall be construed to prohibit or restrict Supplier from selling any
Product to any Franchised Restaurant at any time during the term of this
Agreement.
(d) The Company agrees that Supplier shall remain the
sole national Approved Supplier of Products to the Franchised Restaurants in
the United States during the term of this Agreement. No provision of this
Agreement shall be construed to prohibit the Company from designating
additional Approved Suppliers; provided that in the event the Company decides
to approve more than two Approved Suppliers in any geographic area of the
United States, the Company shall provide notice of such decision to Supplier at
least 90 days prior to the implementation of such approval.
(e) The Company shall not hereafter enter into any agreement
(other than with the Supplier) which is in conflict with the rights granted to
the Supplier by this Section 2. Each party agrees that it will not take any
action the sole purpose of which is to evade or circumvent its obligations
under this Agreement.
3. Purchase Agreement. (a) On the terms and subject to
the conditions set forth herein, the Company hereby agrees to purchase
exclusively from Supplier (either
4
<PAGE> 5
directly or through one or more distributors), and Supplier agrees to supply
and sell continuously to the Company (either directly or through one or more
distributors), the cleaning supply products listed on Annex A hereto which have
been and remain approved for use in the Restaurants (the "Products"), in
quantities constituting 92%, or such lesser percentage as is agreed to by the
Company and Supplier, of the Company's total requirements for all Company
Restaurants during the term of this Agreement. This Agreement establishes the
terms and provisions under which the Supplier will supply, but does not
authorize Supplier to ship or deliver, Products. Orders to ship and deliver
Products are to be granted by authorized releases, issued by the Company's
authorized ordering personnel (which may include approved distributors). Upon
the approval by the Company of additional cleaning supply products for use in
any Restaurants, the Company shall promptly offer Supplier the right, subject
to agreements concerning pricing and product specifications, to include such
product or products on Annex A hereto and to thereby amend this Agreement to
include such product or products as Products for all purposes of this
Agreement.
(b) All Products will be safe for their intended use, and
shall be subject to the Company's inspection and acceptance or rejection,
notwithstanding any acceptance of delivery or payments. The foregoing warranty
shall survive acceptance of the Products. If, prior to final acceptance, any
Products are found to be incomplete or not in conformity with the foregoing
warranty, the Company may reject them and require Supplier to correct them
without charge. If, as a result of any Product being found to be incomplete or
not in conformity with the foregoing warranty, the Company must purchase
replacement products from a secondary supplier at a higher price than the price
provided by this Agreement, the difference in cost to the Company will be
passed on to the Supplier by either (a) directly invoicing the Supplier for the
entire differential amount; or (b) requesting that Supplier reduce the cost of
the next order for an amount equal to the difference in cost for the
replacement order from the secondary supplier.
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<PAGE> 6
(c) The Company may, upon at least 10 days written
notice, require Supplier to supply and sell the Products to a distributor
designated by the Company rather than to the Company, provided, and for so long
as, such distributor is an approved distributor of Products for the Company
Restaurants, subject to Suppliers' credit policies.
4. Restaurants. Schedule 1 hereto contains a list of all
Restaurants as of the date hereof. During the term of this Agreement, the
Company shall promptly notify Supplier if any establishment or other unit not
set forth on Schedule 1 shall become a Restaurant.
5. Term and Termination. Subject to Section 14, the term of
this Agreement shall commence at the Closing and shall continue for a period of
five (5) years from the Closing Date. Such term shall automatically be
extended for a single period of two (2) years from the expiration thereof,
unless Supplier or the Company shall have given, either to the other, not less
than three months prior to such expiration, written notice of its desire to
terminate this Agreement as of such expiration.
6. Products. (a) Supplier shall maintain inventory of
Products at levels equivalent to less than ninety (90) days of finished Product
requirements.
(b) No provision of this Agreement shall be construed to
amend, modify or restrict the absolute right of the Company, at its sole
discretion, to approve or disapprove Products for use in the restaurants.
(c) No provision of this Agreement shall be construed to
prohibit or restrict Supplier from selling Products to purchasers other than
the Company, the Company Restaurants or the Franchised Restaurants. No
substitution or alteration of any goods, component parts thereof, sources of
noncommodity raw materials, processes or manufacturing sites may be made
without the Company's prior written consent.
6
<PAGE> 7
(d) Supplier shall maintain at all times during the term of
this Agreement a minimum finished goods inventory of each Product representing
between one and two weeks' typical consumption (based on total sales of each
Product to the Company Restaurants during the immediately preceding 12-month
period).
(e) Supplier shall promptly notify the Company of any
short-term inability or anticipated short-term inability on its part to supply
a particular Product and shall indicate the reason for such inability and the
expected duration. Following receipt of any such notification, the Company may
enter into alternative arrangements as may be reasonably necessary to purchase
from sources other than Supplier any of its requirements of such Product, but
only during the period of such inability to supply; provided, however, that
Supplier shall reimburse the Company for its reasonable out-of-pocket costs
incurred in connection with covering any such inability to supply which is the
proximate result of Supplier's failure to timely order ingredients from
suppliers to fill orders previously placed by Company Restaurants. The Company
shall be obligated to purchase the applicable percentage of its requirements
for such Product from Supplier upon advance written notice to the Company that
such Product will thereafter be supplied.
7. Pricing. (a) The prices to be paid by the Company's
approved distributors to Supplier, and the prices to be made available to
approved distributors of the Franchisees, for each Product shall be determined
in accordance with Schedule 2 hereto (the "Price" and collectively, the
"Prices").
(b) The Prices shall be adjusted annually to reflect (i)
reasonable increases and reasonable decreases, as the case may be, in the cost
components within the prices set forth in Schedule 2, and (ii) competitive
conditions in the market for products of comparable quality and quantity to the
Products, and such increases or decreases in the Prices shall be referred to
collectively as "Price Adjustments". Within 30 days of every July 1 subsequent
to the Closing Date, other than July 1, 1997, senior executives of
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<PAGE> 8
Supplier and the Company shall meet and negotiate in good faith to effect
equitable Price Adjustments. In connection with any such negotiations,
Supplier shall afford the Company reasonable access, upon reasonable notice, to
its books and records to the extent and only to the extent necessary to
calculate and verify Supplier's costs in respect of the cost components within
the prices set forth in Schedule 2. If, within 15 days of the date of such
meeting, Supplier and the Company have not agreed upon the amount of any Price
Adjustment, if any, the parties shall submit the matter to arbitration in
accordance with Section 8(b).
(c) Neither Supplier nor the Company shall, and they
shall cause their respective Affiliates not to, establish or initiate any
action, the primary purpose of which is to subvert or evade the pricing or
adjustment provisions of this Agreement.
(d) Supplier and the Company shall meet on a semiannual
basis and negotiate in good faith to effect equitable Price Adjustments based
on changes in prevailing freight rates over such period.
(e) Supplier hereby represents and warrants to the
Company that the prices set forth in Schedule 2 hereto are equal to or less
than the prices provided by Supplier to the Company immediately prior to
Closing.
8. Examination. (a) The Company shall have the right,
at its own expense, not more frequently than once in any 12-month period, upon
giving 30 days' written notice to Supplier, to examine Supplier's books and
records applicable to verifying the proper calculation of the payments due to
Supplier by or on behalf of the Company pursuant to this Agreement during the
previous 12-month period. The Company shall be entitled to employ, at its own
expense, an independent auditor to assist it in connection with such
examination.
(b) Supplier and the Company agree to work together in
good faith to resolve any discrepancy between
8
<PAGE> 9
the amounts invoiced by Supplier to or for the account of the Company and the
Company's examination. In the event of a conflict which cannot be resolved, if
the amount involved exceeds $100,000, then the Company or Supplier may give the
other written notice (the "Notice of Dispute") which shall specify in detail
the nature of any disagreements so asserted. All matters specified in any
Notice of Dispute shall be submitted for resolution to and reviewed by an
arbitrator mutually appointed by the Company and Supplier in accordance with
the (commercial) rules of the American Arbitration Association. If within ten
(10) days of the Notice of Dispute the parties are unable to agree upon the
selection of an arbitrator, then either party may request the President of the
American Arbitration Association to select an arbitrator who is willing to
perform such services. The arbitrator selected shall consider only the
disputed items set forth in the Notice of Dispute. The arbitrator shall act
promptly to resolve all disputed matters and its decision shall be final and
binding on the parties. The fees and expenses of the arbitrator shall be
shared jointly and equally by the Company and Supplier.
(c) Within 30 days of the parties' agreement or the
arbitrator's determination, as the case may be, that the amounts paid by or on
behalf of the Company to Supplier with respect to the period for which books
and records were examined pursuant to Section 8(a) either exceeded or were less
than the payments due to Supplier, Supplier shall pay the amount of the excess
to the Company, or the Company shall pay the amount of the deficiency to
Supplier, as the case may be. If Supplier shall become obligated to pay the
Company $250,000 or more in respect of any single examination pursuant to
Section 8(a), Supplier shall pay the reasonable fees and disbursements of the
Company's independent auditors incurred in connection with such examination.
(d) The Company and Supplier agree that the rights and
remedies granted to the Company in this Section 8 are in addition to any other
rights and remedies which may be granted in this Agreement or by law.
9
<PAGE> 10
9. Proprietary Rights and Confidentiality. (a) As
between the parties hereto, the Supplier shall own the specifications and
formulations for the Products, the manufacturing procedures for the Products
and the related Intellectual Property, and the parties agree to execute all
documents and instruments necessary to give effect to the provisions of this
Section 9(a).
(b) The Company and Supplier agree that all information
as to the ingredients, Product specifications and formulations and pricing of
the Products and all other information communicated by the Company to Supplier
and by Supplier to the Company, including but not limited to communications
relating to the quantity and price of goods and services provided hereunder,
promotional events, marketing and restaurant data, new product introductions
and the like, where such information is either identified to Supplier as
"confidential" or is reasonably identifiable by either party as such, shall be
maintained in confidence by the party receiving such information, except that
such information may be provided by either party to its auditors, consultants
and advisors who agree to maintain such confidentiality or are otherwise bound
to restrictions on disclosure and to any prospective purchasers of all or part
of their respective businesses; provided, however, that such prospective
purchasers shall have executed and delivered a confidentiality agreement in
form and substance approved by the Company, which approval shall not
unreasonably be withheld or delayed. The confidentiality obligations of this
Section 9(b) shall not apply to information:
(i) which either party is compelled to disclose by
judicial or administrative process, or in the opinion of counsel
satisfactory to the other party, by other mandatory requirements of
law;
(ii) which can be shown to have been generally available
to the public other than as a result of a breach of this Section or of
any act or omission of the Company or Supplier or any of their
respective Affiliates prior to the Closing;
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<PAGE> 11
(iii) which can be shown to have been provided to either
party by a third party who obtained such information after the Closing
other than as a result of a breach of this Section; or
(iv) which can be shown to have been independently
acquired by either party after the Closing without use of any
information provided hereunder or, with respect to Supplier, without
use of information acquired prior to the Closing.
(c) Any designs, drawings, patterns, documents, devices,
apparatuses, and other property, in any such case consisting of or containing
the Company's Intellectual Property shall (i) be and remain the sole property
of the Company; (ii) be subject to prompt return upon the request of Company;
and (iii) be used only in performing this Agreement.
10. Testing. (a) Supplier shall promptly submit to the
products testing laboratory of the Company or any other entity designated by
the Company, in accordance with a testing schedule established from time to
time or upon request by the Company, reasonable quantities of samples of any
Product handled by Supplier.
(b) Supplier shall perform its own inspections of the
Products, shall provide the results of such testing to the Company at the
Company's request, and shall maintain all testing records for a minimum period
of two (2) years following delivery. The Company and its authorized
representatives shall have the right to inspect and conduct tests and other
evaluations at the Supplier's manufacturing facilities, which may include
inspections on an unannounced basis, and Supplier shall use reasonable efforts
to grant the Company reasonable access to the facilities of its subcontractors
and suppliers, for the purpose of assessing the Supplier's sanitation and
manufacturing processes; provided, that such inspections shall not unreasonably
disrupt Supplier's operations. Supplier shall provide reasonable assistance
and cooperate with the Company in
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<PAGE> 12
connection with such inspections and evaluations at no expense to the Company.
11. Insurance and Indemnity. (a) Supplier agrees to
maintain, during the entire term of the Agreement, insurance coverage against
such risks as may be reasonably specified by the Company and the Buyer, in such
minimum amounts as may be reasonably satisfactory to the Company. Supplier
shall provide the Company with certificates of insurance evidencing such
coverage promptly upon the Company's request therefor.
(b) Supplier shall indemnify, defend and hold harmless the
Company from and against any and all losses, claims, actions, damages, expenses
or liabilities, including defense costs and attorneys' fees, resulting from,
arising out of or connected with any or all claims arising from (i) the use of
the Products supplied by Supplier pursuant to this Agreement, including, but
not limited to, any claim for death or personal injury or damage or loss of
property which shall have been caused or alleged to have been caused by any
negligence on the part of Supplier or its agents, any defect in the materials
or workmanship used to manufacture the Products, or any claim under a theory of
strict liability, or (ii) the breach by Supplier of any warranty with respect
to the Products made by Supplier under this Agreement. In the event any third
party asserts any claim with respect to any matter as to which the indemnities
in this Section 11(b) relate, the Company shall give prompt notice to Supplier,
and Supplier shall have the right at its election to take over the defense or
settlement of the third party claim at its own expense by giving prompt notice
to the Company. If Supplier does not give such notice and does not proceed
diligently so to defend the third party claim within 30 days after receipt of
the notice of the third party claim, Supplier shall be bound by any defense or
settlement that the Company may make to such claims and shall reimburse the
Company for its expenses related to the defense or settlement of the third
party claim. The Company and Supplier shall cooperate in defending against any
asserted third party claims. The parties agree to render to each other such
assistance as they may reasonably require of each other
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<PAGE> 13
in order to ensure the proper and adequate defense of any such action, suit or
proceeding, including making available to each other and/or to each other's
attorneys its books and records relating to such proceedings or litigation and
making individuals available for the giving of testimony (including
depositions).
12. Product Recalls. In the event it is deemed necessary
by the Company to recall from the Hardee's(R) System any quantity of any
Product for any reason bearing on quality and/or safety of such Product,
Supplier shall comply diligently with all Products recall procedures then in
effect, as established from time to time by the Company and applicable law.
Supplier shall bear all costs and expenses associated with the recall of any
Product unless such recall is the result of the fault or negligence of the
Company or any Franchisee, in which event the Company shall bear all costs and
expenses incurred by it and/or the Supplier in complying with such recall
procedures. In the event Supplier fails or refuses to comply with the recall
of such Products hereunder upon request by the Company, the Company shall be
entitled to take such action as it deems necessary to recall such Products from
the Hardee's(R) System and Supplier shall reimburse the Company for its
out-of-pocket costs and expenses incurred in such recall procedure to the
extent that such recall is not the result of the fault or negligence of the
Company or any Franchisee.
13. Force Majeure. Supplier shall not be responsible for
damages caused by its delay or failure to perform, in whole or in part, its
obligations hereunder or by its non-compliance with any of the terms hereof
where such delay, failure or non-compliance is due or attributable to acts of
God, fires, floods, storms, earthquakes, explosions, embargoes, acts of or
compliance with requests of governmental authorities, nuclear or atomic
disasters, national emergencies, wars, riots, strikes, civil insurrections, or
similar events beyond Supplier's reasonable control (any such event, a "force
majeure"). In the event of any such force majeure, Supplier shall give the
Company prompt notice thereof, and thereafter Supplier's obligations hereunder
shall be suspended, in whole or in part, for the
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<PAGE> 14
duration of such force majeure. Upon expiration, settlement or other
resolution of the force majeure, Supplier shall resume performance in full
hereunder but shall not be required to make-up for any term of this Agreement.
In the event Supplier's obligations hereunder are suspended during any force
majeure, the Company may enter into other reasonable arrangements with other
suppliers to satisfy its requirements hereunder. Such other arrangements shall
be reasonable in scope and duration such that they may be terminated as soon as
possible upon the expiration, settlement or other resolution of the force
majeure. Supplier shall use its best efforts to terminate or cause the
expiration of the force majeure as soon as practicable following its
occurrence.
14. Assignment. (a) Subject to Section 14(b), Supplier
may not assign this Agreement without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed; provided, however,
that nothing in this Section shall preclude Supplier from employing common
carriers, contract carriers, public warehousemen or other similar parties to
temporarily perform its services hereunder.
(b) Notwithstanding Subsection 13(a), Supplier may assign
its rights and obligations under this Agreement without the Company's consent
to any Affiliate of Supplier or to any purchaser of all or substantially all of
its business or assets; provided that Supplier shall not assign its rights
under this Agreement to (i) any party conducting, directly or indirectly, a
significant restaurant business, or (ii) any party which refuses to commit in
writing to provide the same level of service following the effective date of
such assignment as Supplier provided prior to such assignment, in either such
case described by clause (i) or (ii) without the consent of the Company, which
consent shall not be unreasonably withheld or delayed. For purposes of this
Section 14(b), a change of control or majority ownership of Supplier shall be
deemed to be an assignment of rights under this Agreement.
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<PAGE> 15
(c) Any permitted assignment of this Agreement by either
party shall, except as otherwise agreed, be deemed an assignment of all of the
assignor's rights and liabilities under this Agreement accruing, arising or
relating to any period on or after the date of such assignment.
(d) Any assignment made in violation of this Section
shall be null and void.
(e) During the term hereof, (i) if the Company sells 50
or more Restaurants to any single purchaser or group of purchasers directly or
indirectly controlling, controlled by or under common control with Buyer, the
Company, any Franchisee, Checkers Drive-In Restaurants, Inc. ("Checkers") or
Rally's Hamburgers, Inc. ("Rally's"), (a "Significant Sale"), the Company
agrees to use commercially reasonable efforts to cause such purchaser or group
of purchasers to enter into a purchase agreement on terms substantially similar
to this Agreement, including Section 3, and (ii) if the Company sells fewer
than 50 Restaurants to any single purchaser or group of purchasers directly or
indirectly controlling, controlled by or under common control with Buyer, the
Company, any Franchisee Checkers or Rally's, the Company agrees to use its
reasonable commercial efforts to cause such purchaser to enter into an
agreement providing for Supplier to act as its supplier for Products.
15. Termination and Suspension. (a) Notwith-standing
Section 5, if any party fails or refuses to comply with one or more of its
material obligations hereunder, resulting in a material default which is
incapable of being cured or which is capable of being cured and is not cured
within a reasonable period following its receipt of oral or written notice of
such default from the Company (a "Breach"), the nonbreaching party shall
provide the breaching party written notice thereof, describing the Breach and
specifying a date, not less than thirty (30) days following the breaching
party's receipt of such notice, on which this Agreement shall be terminable at
the option of the nonbreaching party unless the Breach has by that date been
substantially cured. If the Breach has been substan-
15
<PAGE> 16
tially cured by the date so specified this Agreement shall not be terminable as
a result of such substantially cured Breach.
(b) The Company may terminate this Agreement with respect to
its obligation to purchase Products manufactured at a particular manufacturing
plant, but only with respect to such Products and only to the extent that such
Products are manufactured at such plant, if Supplier shall fail to comply with
its obligations under this Agreement with respect to any Product manufactured
at such plant and such failure presents or is likely to present in the
immediate future a danger of imminent harm to consumers or to restaurant
employees or is in material violation of the requirements of applicable
government health, safety or sanitation standards.
(c) Any party's failure to terminate this Agreement upon the
occurrence of one or more Breaches shall not constitute a waiver or otherwise
affect the right of such party to terminate the Agreement for any subsequent
Breach. Any party's failure to exercise any of its rights or remedies
hereunder or to insist on strict compliance by any other party with any of the
terms hereof shall not constitute a waiver of any of the terms or conditions
hereof with respect to any other or subsequent Breach nor shall it constitute a
waiver by the nonbreaching party of its right at any time thereafter to require
compliance with the terms hereof as provided herein. The rights or remedies
granted to the Company herein are in addition to any other rights or remedies
which may be granted by law.
(d) The obligations of Supplier pursuant to this Agreement
shall be terminable, at Supplier's option, if any of the following events
shall occur and be continuing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against the Company under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law to
be adjudicated a bankrupt or insolvent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of the Company;
16
<PAGE> 17
(iii) any assignment for the benefit of creditors of the Company; or (iv) if
the Company shall admit in writing its inability to pay its debts as they
become due.
(e) The obligations of the Company pursuant to this Agreement
shall be terminable, at the Company's option, if any of the following events
shall occur and be continuing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against Supplier under any applicable federal
or state bankruptcy, insolvency, reorganization or other similar law to be
adjudicated a bankruptcy or insolvent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of Supplier; (iii) any
assignment for the benefit of creditors of Supplier; or (iv) if Supplier shall
admit in writing its inability to pay its debts as they become due.
(f) Upon termination or expiration of this Agreement, (i)
Supplier's designation as an Approved Supplier shall terminate and be of no
further force and effect; (ii) Supplier shall not thereafter identify itself as
an Approved Supplier to the Hardee's(R) System or use any of the Company's
trade secrets, the Confidential Information and/or other proprietary
information of the Company; and (iii) Supplier shall cease to use, in any
manner whatsoever, any of the Company's trade secrets, the Confidential
Information and for other proprietary information of the Company, all of which
shall be promptly returned to the Company.
16. Compliance With Laws. Upon its receipt of any
citation issued by any governmental or other regulatory authority (or of
process or citation issued by any court of law or equity) related to the
activities to be performed under this Agreement, Supplier shall promptly send
written notice thereof to the Company. Supplier shall execute, as to all
Products subject to the Federal Food, Drug and Cosmetic Act, the Caustic
Poisons Act, the Insecticides, Fungicide and Rodenticide Act, and the Hazardous
Substance Act, and any other applicable laws or regulations, a General and
Continuing Guarantee of compliance with such laws and regulations.
17
<PAGE> 18
17. No Partnership. Supplier acknowledges that it is an
independent contractor and no party is or shall be construed as an agent,
partner, joint venturer or employee of another. No party shall have the
authority to bind or otherwise obligate any other party in any manner and no
party shall represent to anyone that it has a right to do so.
18. Waivers. No waiver or waivers by any party of any
provision of this Agreement, whether by conduct or otherwise, shall be deemed
to be a further or continuing waiver of the provision or any other provision of
this Agreement.
19. Attorneys' Fees. If it is necessary for either of
the parties to institute suit to enforce any of the provisions of this
Agreement, then the prevailing party in such suit shall be entitled to collect
and receive reasonable outside attorneys' fees and court Prices through and
including appellate litigation, and the other party shall pay for same.
20. Notices. All notices hereunder shall be deemed given
if in writing and delivered personally or sent by telex or telecopier or by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses as shall be specified by like
notice):
(a) If to the Company, to:
Hardee's Food Systems
1233 Hardee's Boulevard
Rocky Mount, North Carolina 27804
Attention: President
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<PAGE> 19
With a copy to:
CKE Restaurants, Inc.
1200 North Harbor Boulevard
Anaheim, California 92803
Attention: General Counsel
(b) If to the Supplier, to:
Fast Food Merchandisers, Inc.
1233 North Church Street
Rocky Mount, North Carolina 27802
Attention: President
Any notice given by mail shall be effective when received. Any notice given by
telecopier shall be effective when the appropriate telecopier confirmation is
printed by the telecopier used to transmit such notice.
21. Captioned Headings. The section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretation of this Agreement.
22. Governing Law and Venue. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY
HERETO AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY
CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED
IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR
IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE
COUNTY OF NEW YORK (THE "CHOSEN COURTS") AND (I) IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (II) WAIVES ANY OBJECTION TO
LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS, (III)
WAIVES ANY OBJECTION THAT THE CHOSEN
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<PAGE> 20
COURTS ARE AN INCONVENIENT FORUM OR DO NOT HAVE JURISDICTION OVER ANY PARTY
HERETO AND (IV) AGREES THAT SERVICE OF PROCESS UPON SUCH PARTY IN ANY SUCH
ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE IS GIVEN IN ACCORDANCE WITH
SECTION 19 OF THIS AGREEMENT.
23. Amendment and Waiver. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, the Company and Supplier,
or in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
24. Counterparts. This Agreement and any amendments
hereto may be executed in one or more counterparts, each of which shall be
deemed to be an original by the parties executing such counterpart, but all of
which shall be considered one and the same instrument.
25. Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions hereof.
If any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability.
26. Third-Party Rights. Notwithstanding any other
provision of this Agreement, this Agreement shall not create benefits on behalf
of any third party or person other than the parties hereto or their permitted
assignees (including without limitation any broker, finder, supplier
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<PAGE> 21
or customer), and this Agreement shall be effective only as between the parties
hereto, their successors and permitted assigns.
27. Entire Agreement. This Agreement (including all
Annexes and Schedules hereto) contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such matters.
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<PAGE> 22
IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
HARDEE'S FOOD SYSTEMS, INC.
By:
--------------------------
Name:
Title:
QVS, INC.
By:
--------------------------
Name:
Title:
22
<PAGE> 1
EXHIBIT 99.6
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (including the Schedules hereto,
this "Agreement"), dated as of July 14, 1997, among HARDEE'S FOOD SYSTEMS,
INC., a North Carolina corporation (the "Company"), CKE RESTAURANTS, INC., a
Delaware corporation ("Buyer"), and FAST FOOD MERCHANDISERS, INC., a Colorado
corporation ("Distributor"),
W I T N E S S E T H :
WHEREAS, the Company desires to designate Distributor, and
Distributor desires to be designated, an approved non-exclusive distributor (an
"Approved Distribu-tor") of dairy products, meats, frozen and refrigerated
foods, canned and dry goods, beverages, paper and disposables, cleaning
supplies, test products, premium and promotional items and certain other
non-food products requiring frequent replacement, but in any such case
excluding fresh baked goods (such goods, supplies, products and items
collectively, the "Products") to the Franchised Restaurants (as hereinafter
defined); and
WHEREAS, the Company desires to purchase Products from
Distributor, and Distributor desires to sell and supply Products to the
Company, each in quantities constituting the total requirements of all Company
Restaurants (as herein-after defined); and
WHEREAS, Imasco Holdings, Inc., a Delaware corporation
("Seller"), the Company and Buyer have entered into that certain Stock Purchase
Agreement, dated as of April 27, 1997 (the "Stock Purchase Agreement"),
pursuant to which, inter alia, Buyer has agreed to purchase, take up and assume
from Seller, and Seller has agreed to sell, transfer and assign to Buyer, each
on the terms and conditions therein stated, all of the outstanding capital
stock of the Company; and
<PAGE> 2
WHEREAS, pursuant to and as a condition precedent to the
Closing contemplated by the Stock Purchase Agreement (the "Closing"), Buyer has
agreed to, and Seller has agreed to cause the Company and Distributor to, enter
into this Agreement;
NOW THEREFORE, in consideration of the premises, and of the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
terms shall have the meanings set forth or referenced below:
"Affiliate", with respect to any Person, means any other
Person directly or indirectly controlling, controlled by or under common
control with such Person. With respect to Buyer, the term "Affiliate" shall
not include any Person in which Buyer, directly or indirectly, is the
beneficial owner of less than 50% of such Person's voting securities.
"Agreement" shall have the meaning set forth in the Preamble.
"Approved Distributor" shall have the meaning set forth in the
Recitals.
"Branded Products" shall mean Products bearing any Trademark.
"Breach" shall have the meaning set forth in Section 20.
"Closing" shall have the meaning set forth in the Recitals.
"Company Restaurants" shall mean, collectively:
(a) all restaurants owned or operated by the Company or its
subsidiaries on the date of this Agreement; and
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<PAGE> 3
(b) all restaurants from time to time during the term of this
Agreement operated or wholly owned by Buyer or the Company or any of their
respective Affiliates which:
(i) offer to customers any Branded Products; and
(ii) are located east of the Mississippi River and offer to
customers hamburger, chicken or breakfast products, except restaurants
operated or wholly owned by CBI Restaurants, Inc. or Summit Family
Restaurants Inc. and their current subsidiaries;
provided, however, that "Company Restaurants" shall not include restaurants
operated or owned by Persons acquired by, or who become Affiliates of, Buyer or
the Company which are parties to existing contractual distribution
arrange-ments covering products similar to the Products.
"Counted Restaurants" shall mean, for purposes of clause (z)
of Section 10(a), all restaurants, other than the Restaurants, that are both
(a) covered by a distribution agreement or arrangement with Distributor; and
(b) are owned and operated by any Person (other than a Franchisee or its
Affiliates) which participates in a cooperative purchasing distribution program
administered by the Buyer or its Affiliates.
"Discontinued Product" shall mean a Product as to which the
approval for use in the Restaurants has been withdrawn, or as to which the
related "limited time offer", test period or promotional period has terminated.
"Franchised Restaurants" shall mean all restaurants, other
than Company Restaurants, which, either as of the date of this Agreement or
from time to time during the term of this Agreement, are licensed by the
Company to offer to customers any Branded Products.
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<PAGE> 4
"Franchisees" shall mean, collectively, the several owners
and/or operators of the Franchised Restaurants.
"Notice of Dispute" shall have the meaning set forth in
Section 13.
"Overpayment" shall have the meaning set forth in Section 13.
"Person" shall mean any individual, corporation, partnership,
firm, joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization, governmental or regulatory body or
other entity.
"Restaurants" shall mean all Franchised Restaurants and
Company Restaurants.
"Seller" shall have the meaning set forth in the Recitals.
"Similar Product" shall mean, with respect to any particular
Product shipped from a particular distribution center, any product that is both
(a) substantially similar to such Product, and (b) shipped to such distribution
center from the same origination point and on the same shipping terms
(excluding invoice payment terms) as such Product is shipped to such
distribution center.
"Stock Purchase Agreement" shall have the meaning set forth in
the Recitals.
"Suspension" shall have the meaning set forth in Section 20.
"Trademark" shall mean any Hardee's(R) trademark, service
mark, tradename or trade dress.
"Truckload" shall mean a delivery of inbound goods to
Distributor consisting of a gross weight of 40,000 pounds or more or 2,000 or
more cubic feet.
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<PAGE> 5
"Unbranded Products" shall mean Products which are not Branded
Products.
2. Approved Distributor. (a) The Company hereby designates
Distributor as an Approved Distributor of the Products to the Franchised
Restaurants during the term of this Agreement.
(b) No provision of this Agreement shall be construed to
require Distributor to sell Products to any Franchised Restaurant or any
Franchised Restaurant to purchase Products from Distributor. Distributor shall
extend the service, pricing and other terms and conditions offered to the
Company under this Agreement to any Franchised Restaurant which (i) is located
in any geographic market in the contiguous United States in which any Company
Restaurant or Franchised Restaurant is located as of the date of this
Agreement, and (ii) purchases 92% or more of such Franchised Restaurant's total
requirements of the Products in the 12-month period preceding the date of this
Agreement or the second, fourth and sixth anniversary of this Agreement,
whichever date shall at any time be the most recent; provided that the related
Franchisee meets Distributor's credit standards as they may from time to time
be amended. In no event shall the Company be responsible for the debts of the
Franchisees.
(c) Subject to Sections 20 and 21, no provision of this
Agreement shall be construed to prohibit or restrict Distributor from selling
any Product to any Franchised Restaurant at any time during the term of this
Agreement.
(d) The Company agrees that Distributor shall remain the sole
national Approved Distributor of Products to the Franchised Restaurants in the
United States during the term of this Agreement. No provision of this Agreement
shall be construed to prohibit the Company from designating additional Approved
Distributors; provided that in the event the Company decides to approve more
than two Approved Distributors in any geographic area of the United States, the
Company shall provide notice of such decision to
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<PAGE> 6
Distributor at least 90 days prior to the implementation of such approval.
(e) The Company shall not hereafter enter into any agreement
(other than with the Distributor) which is in conflict with the rights granted
to Distributor by this Section 2. Each party agrees that it will not take any
action the sole purpose of which is to evade or circumvent its obligations
under this Agreement.
3. Exclusive Requirements Purchase Agreement. On the terms
and subject to the conditions set forth herein, the Company hereby agrees to
purchase exclusively from Distributor, and Distributor agrees to supply and
sell continuously to the Company, in quantities constituting the total
requirements of all Company Restaurants during the term of this Agreement, all
Products, other than certain premium and promotional products.
4. Restaurants. Schedule 1 hereto contains a list of all
Restaurants as of the date hereof. During the term of this Agreement, the
Company shall promptly notify Distributor if any establishment or other unit
not set forth on Schedule 1 shall become a Restaurant.
5. Term and Termination. Subject to Section 20, the term of
this Agreement shall commence at the Closing and shall continue for a period of
seven (7) years from the Closing Date. Such term shall automatically be
extended for consecutive periods of two (2) years from the expiration thereof
and from the expiration of each subsequent extension period, as the case may
be, unless Distributor or the Company shall have given, either to the other,
not less than three months prior to such expiration, written notice of its
desire to terminate this Agreement as of such expiration.
6. Products. (a) The Company shall give Distributor prompt
written notice of its approval or suspension of approval of any Product for use
in the Restaurants and shall provide Distributor with a written list of
approved Products from time to time upon the reasonable request by Distributor
therefor.
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<PAGE> 7
(b) Distributor shall not sell, supply, distribute or
otherwise transfer Branded Products to any Person, except (i) pursuant to this
Agreement, (ii) Franchisees or Franchised Restaurants, (iii) in connection with
the destruction or final disposal of such Branded Products, or (iv) with the
written consent of the Company.
(c) Distributor shall use commercially reasonable efforts
to sell to third parties any Discontinued Products which are Unbranded Products
promptly after the suspension of approval of such Discontinued Products for use
in the Restaurants or the termination of the related "limited time offer", test
period or promotional period, as the case may be. Within 30 days following the
suspension of approval or termination of the "limited time offer", test period
or promotional period with a respect to any Discontinued Product which is an
Unbranded Product, the Company shall (a) reimburse Distributor for the excess,
if any, of the Cost of such quantity of such Discontinued Product as has been
sold to third parties over the net proceeds of such sale, and (b) purchase
Distributor's entire remaining stock of such Discontinued Product at Cost, plus
applicable freight F.O.B. Distributor's distribution center(s). Within 30 days
following the suspension of approval or termination of the "limited time
offer", test period or promotional period with respect to any Discontinued
Product which is a Branded Product, the Company shall purchase Distributor's
entire stock of such Discontinued Product at Cost, plus applicable freight
F.O.B. Distributor's distribution center(s). Notwithstanding the previous two
sentences, in no event shall the Company be required to purchase the amount of
Distributor's stock of any Discontinued Product or to reimburse Distributor for
the excess of the Cost of the amount of Discontinued Product sold to third
parties over the net proceeds of such sale which, in the aggregate, exceeds
three (3) weeks inventory of such Product (based on total sales of such Product
to the Company Restaurants during the immediately preceding 12-month period) if
such stock as exceeds such three (3) weeks' inventory was not purchased to fill
orders placed by the Company Restaurants; provided, however, that this sentence
shall not apply to Discontinued Products purchased by Distributor in reliance
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<PAGE> 8
on the Company's sales projections with respect to "limited time offers."
Distributor and the Company shall also negotiate in good faith an equitable
arrangement concerning Distributor's remaining stock of such Discontinued
Product based on an agreed level of inventory for sales to the Franchised
Restaurants.
(d) With respect to any Product which, in the course of
its ordinary or intended use, is not likely to be noticed or come to the
attention of customers of the Restaurants, the Company will use commercially
reasonable efforts either to ensure that such Product is an Unbranded Product
or to approve for use in the Restaurants a replacement or substitute Product
that is an Unbranded Product; provided, however, that the Company shall not be
required to ensure that such Product is an Unbranded Product or to approve any
such replacement or substitute Product if the Company is able to purchase the
same Product, as a Branded Product, at a reduced cost.
(e) No provision of this Agreement shall be construed to
amend, modify or restrict the absolute right of the Company, at its sole
discretion, to add, modify or delete menu items with respect to Restaurants,
whether as a group or on an individual basis, or to approve or disapprove
Products for use in the Restaurants.
(f) No provision of this Agreement shall be construed to
prohibit or restrict Distributor from selling Unbranded Products to purchasers
other than the Company, the Company Restaurants or the Franchised Restaurants.
7. Shortages. (a) Distributor shall promptly notify the
Company of any short-term inability on its part or anticipated short-term
inability on its part to supply a particular Product in any or all geographic
area or areas and shall indicate the reason for such inability and the expected
duration. Following receipt of any such notification, the Company may enter
into alternative arrangements as may be reasonably necessary to purchase from
sources other than Distributor any of its requirements of such Product in such
geographic area or areas, but only during the period of
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<PAGE> 9
such inability to supply; provided, however, that Distributor shall reimburse
the Company for its reasonable out-of-pocket costs incurred in connection with
covering any such inability to supply which is the proximate result of
Distributor's failure to timely order Products from suppliers to fill orders
previously placed by Company Restaurants. The Company shall be obligated to
purchase all of its requirements for such Product in any such geographic area
or areas from Distributor upon advance written notice to the Company that such
Product will thereafter be supplied in such geographic area or areas.
Notwithstanding the foregoing, Distributor's obligation to supply Restaurants
shall be subject to its right, during any emergency shortage of any Product, to
allocate sales of such Product among the Restaurants in any affected geographic
area or areas based upon the relative percentages of Distributor's total sales
of such Product to them during the immediately preceding 12-month period, or
such shorter period for which Distributor has historical sales data.
(b) From and after the Closing, the Company shall use its
best efforts to secure and maintain suppliers with respect to all of the
Products. The Company shall give Distributor prompt written notice of the
termination of any material purchase order or the termination of any material
supply relationship with the supplier of any Product. Distributor agrees to
assign all of Distributor's rights and obligations under all purchasing
contracts with other Persons to which Distributor or its Affiliates is a party
and pursuant to which Distributor currently purchases products solely for
distribution to the Restaurants. To the extent that the assignment of any such
purchasing contract is prohibited by the terms thereof, the parties shall not
effect any such assignment or assumption, and Distributor shall instead make
the benefits of such purchasing contract available to the Company during the
term thereof. The Company agrees to indemnify, defend and hold harmless
Distributor and its Affiliates against any losses, damages, liabilities, costs
and expenses (including reasonable attorneys fees and expenses) sustained or
incurred arising out of or relating to Distributor's performance of its
obligations pursuant to the previous sentence.
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<PAGE> 10
8. Delivery. (a) Distributor shall comply with the delivery
standards set forth in Schedule 2 (the "Delivery Standards"); provided,
however, that promptly following each of the second, fourth and sixth
anniversaries of the Closing, on a date mutually agreeable to the Company and
Distributor, the Company and Distributor shall meet and negotiate in good faith
any adjustments to the Delivery Standards as may be equitable under the
circumstances.
(b) Distributor shall maintain a sufficient inventory to
provide reasonably timely delivery of Products to each Restaurant as required;
provided, however, that, with respect to any particular Product, Distributor
shall not in any event be required to order more than the lesser of (i) three
(3) weeks' inventory of such Product, based on total sales of such Product to
the Restaurants during the immediately preceding 12-month period and (ii) a
quantity of such Product equivalent to one full Truckload of such Product.
(c) All items shall be delivered by Distributor's employees
or agents on a "tailgate" basis, with delivery vehicles parked in the parking
lot adjacent to or alongside the sidewalk fronting the premises of each
Restaurant. Distributor shall use its reasonable best efforts to place the
tailgate as close to the door of each Restaurant as is permitted by restaurant
management.
9. Ordering and Invoicing Facilities. (a) Dis-tributor shall
continue to provide such ordering and invoicing facilities, systems and
functions as were provided by Distributor to the Company and the Restaurants
prior to the Closing, in the manner and with the same level of service and
efficiency provided by Distributor to the Company and the Restaurants prior to
the Closing.
(b) The Company shall maintain the Company's current data
processing system, or a successor electronics system which provides services to
the Restaurants of the same degree. Distributor shall continue to provide to
the Company, in electronic format, without charge to the Company, such summary
cost and usage data concerning the
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<PAGE> 11
Company Restaurants as was provided to the Company prior to the Closing,
including the reports specified in Schedule 3, in a manner and with the same
frequency provided by Distributor to the Company prior to the Closing.
(c) The Company shall provide to Distributor the reports
and notifications specified in Schedule 4.
(d) In the event that the Company should make available
or cause to be put into general use by the Restaurants or the Company any
ordering, payment, data processing, inventory management or information
technology systems that would require capital expenditures on the part of
Distributor, Distributor and the Company shall promptly meet and negotiate in
good faith to effect an equitable reimbursement of Distributor for its
out-of-pocket costs incurred in connection with its interface to and
interconnection with such systems, giving due regard to any reductions in
Distributor's general and administrative expenses expected to be realized as a
result of the implementation of such systems. In any such event, the Company
shall afford Distributor a reasonable period of time in which to adapt to,
interface to or interconnect with any such system prior to the final
implementation thereof.
(e) In the event that Distributor should make available or
cause to be put into general use by the Restaurants or Distributor any
ordering, payment, data processing, inventory management or information
technology systems that would require capital expenditures on the part of the
Company, Distributor and the Company shall promptly meet and negotiate in good
faith to effect an equitable reimbursement of the Company for its out-of-pocket
costs incurred in connection with its interface to and interconnection with
such systems, giving due regard to any reductions in the Company's general and
administrative expenses expected to be realized as a result of the
implementation of such systems. In any such event, Distributor shall afford
the Company a reasonable period of time in which to adapt to, interface to or
interconnect with any such system prior to the final implementation thereof.
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<PAGE> 12
10. Pricing. (a) The prices to be paid by the Company to
Distributor and the prices to be made available by Distributor to the
Franchisees for each Product (other than soft drink Products) shall be the Cost
of such Product, as defined below, plus the Delivery Fee for such Product set
forth on Schedule 5 (each, a "Delivery Fee" and, collectively, the "Delivery
Fees"). The prices to be paid and made available for each softdrink Product
shall be as set forth on Schedule 5. "Cost" as used herein shall mean (x) the
supplier's actual invoice price for the quantity of the Product purchased and
sold by Distributor (or, in the case of a distributor "buy in" in advance of a
price increase announced by the supplier thereto, the price paid by Distributor
(applied to the quantity so delivered) for the quantity of such Product which
is the lesser of (i) three (3) weeks' inventory of such Product, based on total
sales of such Product to the Restaurants during the 12-month period immediately
preceding Distributor's delivery of the Product, and (ii) a quantity of such
Product equivalent to one full Truckload of such Product); less (y) all vendor
discounts or concessions applicable to purchases of such Product so purchased
and sold for the Restaurants, including but not limited to volume discounts and
promotional discounts, made available by the supplier of such Product to
Distributor, excluding from this Clause (y) any early payment, prompt payment,
cash and similar discounts and any other discounts or concessions allowed by
suppliers in respect of the prompt payment of invoices, regardless of the
characterization or nomenclature used to describe such discounts or
concessions; plus (z) freight costs based on the cost to ship a quantity of
such Product equivalent to the lesser of (i) a quantity of products equivalent
to the sum of (A) three weeks' inventory of such Product at the applicable
distribution center attributable to the Restaurants and the Counted Restaurants
(based on the
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<PAGE> 13
aggregate actual usage of such Product by the Restaurants and the Counted
Restaurants in such distribution center's service area during the 12- month
period immediately preceding Distributor's delivery of the Product), and (B)
three (3) weeks' inventory of each Similar Product at the applicable
distribution center attributable to the Restaurants and the Counted Restaurants
(based on the aggregate actual usage of such Similar Product by the Restaurants
and the Counted Restaurants in such distribution center's service area during
the 12-month period immediately preceding Distributor's delivery of the Similar
Product), and (ii) one full Truckload of such Product, at the lowest published
freight rate of national common carriers that would be applicable to the
transportation of such Product from such Product's supplier to the applicable
distribution center, notwithstanding whether such common carrier is used or
utilized. Any contrary provision in this Agreement notwithstanding,
Distributor shall not be required to stock or supply the Products or any other
products (including Similar Products) in or from any particular distribution
center or centers.
(b) The Delivery Fees shall be adjusted in accordance with
Section 10(c) to reflect reasonable increases or reasonable decreases, as the
case may be, in (i) the wages and benefits provided by Distributor to its
employees, (ii) Distributor's energy costs, (iii) the costs of funds used by
Distributor (iv) any substantial changes in the nature of a Product, a material
alteration in the Product mix, or a substantial change in the geographic mix of
the Company Restaurants that, in any such case, materially alters the
distribution handling costs associated with such Product, and (v) any other
items that materially alter the distribution handling costs associated with
such Product. Such increases and decreases in the Delivery Fees shall be
referred to collectively as "Delivery Fee Adjustments". The parties
acknowledge that any change in the number or product mix of the Restaurants may
materially alter the distribution handling costs associated with the Products.
The parties agree that (i) changes in the number or product mix of Franchised
Restaurants shall be grounds for effecting a Delivery Fee Adjustment only in
respect of deliveries made to the Franchised Restaurants, and (ii) changes in
the number or product mix of Company Restaurants shall be grounds for effecting
a Delivery Fee Adjustment only in respect of deliveries made to the Company
Restaurants.
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<PAGE> 14
(c) Within 30 days of the second, fourth and sixth
anniversaries of the Closing, senior executives of Distributor and the Company
shall meet and negotiate in good faith to effect an equitable Delivery Fee
Adjustment; provided that at any time during the term of this Agreement, in the
event of an increase or decrease in Distributor's costs in respect of the items
enumerated in Section 10(b) equivalent to or greater than one quarter of one
percent (0.25%) of Distributor's total sales to the Restaurants during the
previous 12-month period which results from events or occurrences beyond the
reasonable control of Distributor, such executives shall meet and so negotiate
within 15 days following the Company's receipt of written request by
Distributor therefor. In connection with any such negotiations, Distributor
shall afford the Company reasonable access, upon reasonable notice, to its
books and records to the extent and only to the extent necessary to calculate
and verify Distributor's costs in respect of the items enumerated in Section
10(b). If, within 15 days of the date of such meeting, Distributor and the
Company have not agreed upon the amount of the Delivery Fee Adjustment, if any,
the parties shall submit the matter to arbitration in accordance with Section
13(b).
(d) Distributor shall prepare and distribute to the
Company and the Franchised Restaurants, on a monthly basis, by the first Sunday
of each month, price lists showing the prices of all Products regularly
supplied under this Agreement, which prices shall be calculated in accordance
with this Agreement and shall be in effect as of such first Sunday.
Distributor shall prepare and distribute to the Company and the Franchised
Restaurants, on a weekly basis by each Sunday, written notice of any price
changes, which shall be in effect as of such Sunday.
(e) Neither Buyer nor the Company shall, and they shall
cause their respective Affiliates not to, establish or initiate any action, the
primary purpose of which is to subvert or evade the pricing or adjustment
provisions of this Agreement (including, without limitation, arrangements with
suppliers that subvert or evade the nondeduction
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<PAGE> 15
from Cost of early payment, prompt payment, cash and similar discounts pursuant
to Section 10(a)(ii) hereof).
(f) Distributor shall not, and shall cause its Affiliates not
to, establish or initiate any action, the primary purpose of which is to
subvert or evade the pricing or adjustment provisions of this Agreement
(including, without limitation, arrangements with suppliers that subvert or
evade the deduction from Cost of vendor discounts pursuant to Section 10(a)(ii)
hereof.
11. Prompt Payment. (a) Distributor shall periodically
invoice the Company (which may be effected by electronic transmission of the
invoice to the Company) at the address of its corporate headquarters,
Attention: Director of Cash Management, following delivery to the Company
Restaurants for all Products supplied by Distributor and accepted by the
Company Restaurants hereunder. The prices on invoices for all Products
supplied by Distributor and accepted by the Company Restaurants shall be in
accordance with Section 10 hereof. The terms of payment of each such invoice
shall be "1%/10 days - net 21 days, cash in hand." All payments made by the
Company to Distributor pursuant to this Agreement shall be made by wire
transfer of immediately available funds to a bank account designated by
Distributor not fewer than two days prior to such payment, or the last bank
account used for any such transfer, as the case may be.
(b) Distributor shall periodically invoice the operator
of each Franchised Restaurant in accordance with its usual practices.
12. Title and Risk of Loss. Except in the case of night
deliveries or so-called "key drop" deliveries, title to all Products shall pass
upon a Restaurant's acceptance, subject to the rejection of certain items by
notation on the delivery ticket, of such Products for delivery. With respect
to "key drop" deliveries, title to all goods shall pass at the close of
business on the immediately succeeding business day, unless rejected by the
Restaurant prior thereto. Distributor shall provide credits
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<PAGE> 16
for Products within seven (7) days of notice and shall ensure that subsequent
billings reflect all shortages and damaged or rejected goods noted on delivery
tickets. The Company shall make arrangements through Distributor's order
department for the return of any goods not accepted by the Company consistent
with the reasonable policies of Distributor with respect to the return of
goods. Distributor shall promptly issue a receipt to the Company for any goods
picked up for return and ensure that the Company receives a proper credit
therefor within seven (7) days of pickup. Distributor shall bear all risk of
loss, damage, or destruction until title passes to the Company.
13. Examination.
(a) The Company shall have the right, at its own expense,
not more frequently than once in any 12-month period, upon giving 30 days'
written notice to Distributor, to examine Distributor's books and records
applicable to verifying the proper calculation of the payments due to
Distributor by the Company pursuant to this Agreement during the previous
12-month period. The Company shall be entitled to employ, at its own expense,
an independent auditor to assist it in connection with such examination.
(b) Distributor and the Company agree to work together in
good faith to resolve any discrepancy between the amounts invoiced by
Distributor to the Company and the Company's examination. In the event of a
conflict which cannot be resolved, if the amount involved exceeds $100,000.00,
then the Company or Distributor may give the other written notice (the "Notice
of Dispute") which shall specify in detail the nature of any disagreements so
asserted. All matters specified in any Notice of Dispute shall be submitted
for resolution to and reviewed by an arbitrator mutually appointed by the
Company and Distributor in accordance with the (commercial) rules of the
American Arbitration Association. If within ten (10) days of the Notice of
Dispute the parties are unable to agree upon the selection of an arbitrator,
then either party may request the President of the American Arbitration
Association to select an arbitrator who is willing to perform such
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<PAGE> 17
services. The arbitrator selected shall consider only the disputed items set
forth in the Notice of Dispute. The arbitrator shall act promptly to resolve
all disputed matters and its decision shall be final and binding on the
parties. The fees and expenses of the arbitrator shall be shared jointly and
equally by the Company and Distributor.
(c) Within 30 days of the parties' agreement or the
arbitrator's determination, as the case may be, that the amounts paid by the
Company to Distributor with respect to the period for which books and records
were examined pursuant to Section 13(a) either exceeded or were less than the
payments due to Distributor, Distributor shall pay the amount of the excess to
the Company, or the Company shall pay the amount of the deficiency to
Distributor, as the case may be. If Distributor shall become obligated to pay
the Company $500,000.00 or more in respect of any single examination pursuant
to Section 13(a), Distributor shall pay the reasonable fees and disbursements
of the Company's independent auditors incurred in connection with such
examination.
(d) The Company and Distributor agree that the rights and
remedies granted to the Company in this Section 13 are in addition to any other
rights and remedies which may be granted in this Agreement or by law.
14. Trademarks and Confidentiality. (a) Distributor
shall not use, without the prior written consent of the Company, any Trademarks
in any manner whatsoever. Under no circumstances shall the use of any
Trademark be permitted for use as a part of Distributor's trade name. The
delivery vehicles used by Distributor to distribute Products under this
Agreement shall not bear the trademark, trade dress or logo of any restaurant
chain other than the Company.
(b) The Company and Distributor agree that all
information communicated by the Company to Distributor and by Distributor to
the Company, including but not limited to communications relating to the
quantity and price of goods and services provided hereunder, the Products,
Product
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<PAGE> 18
specifications and formulations, promotional events, marketing and restaurant
data, new product introductions and the like, where such information is either
identified to Distributor as "confidential" or is reasonably identifiable by
either party as such, shall be maintained in confidence by the party receiving
such information, except that such information may be provided by either party
to its auditors, consultants and advisors who agree to maintain such
confidentiality or are otherwise bound to restrictions on disclosure and to any
prospective purchasers of all or part of their respective businesses; provided,
however, that such prospective purchasers shall have executed and delivered a
confidentiality agreement in form and substance approved by the Company, which
approval shall not unreasonably be withheld or delayed. The confidentiality
obligations of this Section shall not apply to information:
(i) which either party is compelled to disclose by
judicial or administrative process, or in the opinion of counsel
satisfactory to the other party, by other mandatory requirements of
law;
(ii) which can be shown to have been generally available
to the public other than as a result of a breach of this Section or of
any act or omission of the Company or Distributor or any of their
respective Affiliates prior to the Closing;
(iii) which can be shown to have been provided to either
party by a third party who obtained such information after the Closing
other than as a result of a breach of this Section; or
(iv) which can be shown to have been independently acquired by
either party after the Closing without use of any information provided
hereunder or, with respect to Distributor, without use of information
acquired prior to the Closing.
15. Testing. Distributor shall promptly submit to the
products testing laboratory of the Company or any
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<PAGE> 19
other entity designated by the Company, in accordance with a testing schedule
established from time to time or upon request by the Company, samples of any
Product handled by Distributor. The Company shall reimburse Distributor for
the Cost of such samples plus applicable freight F.O.B. Distributor's
distribution center(s) promptly upon request by Distributor therefor.
16. Insurance. Distributor agrees to maintain, during
the entire term of the Agreement, insurance coverage against such risks as may
be reasonably specified by the Company, in such minimum amounts as may be
reasonably satisfactory to the Company. Distributor shall provide the Company
with certificates of insurance evidencing such coverage promptly upon the
Company's request therefor.
17. Product Recalls. In the event it is deemed necessary
by either the Company or any suppliers of any Product to recall from any
Approved Distributor and/or from the Hardee's(R) System any quantity of any
Product, either as a result of failure of such Product to satisfy the
proprietary manufacturing specifications issued to suppliers by the Company, or
for any other reason bearing on quality and/or safety of such Product,
Distributor shall comply diligently with all Products recall procedures then in
effect, as established from time to time by the Company and applicable law.
The Company shall bear all costs associated with the recall of any Product, and
shall reimburse Distributor for such costs as are incurred by Distributor,
unless such recall is the result of the gross negligence or intentional
tortuous acts of Distributor, in which event Distributor shall bear all costs
and expenses incurred by it and/or the Company in complying with such recall
procedures. In the event Distributor fails or refuses to comply with the
recall of such Products hereunder upon request by the Company, the Company
shall be entitled to take such action as it deems necessary to recall such
Products from the Hardee's(R) System and Distributor shall reimburse the
Company for its out-of-pocket costs and
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<PAGE> 20
expenses incurred in connection with such recall to the extent and only to the
extent that such costs and expenses exceed the costs and expenses which would
have been incurred by Distributor had it complied with such recall.
18. Force Majeure. Distributor shall not be responsible
for damages caused by its delay or failure to perform, in whole or in part, its
obligations hereunder or by its non-compliance with any of the terms hereof
where such delay, failure or non-compliance is due or attributable to acts of
God, fires, floods, storms, earthquakes, explosions, any inability by
Distributor to obtain timely delivery to Distributor of Products, embargoes,
acts of or compliance with requests of governmental authorities, nuclear or
atomic disasters, national emergencies, wars, riots, strikes, civil
insurrections, or similar events beyond the reasonable control of Distributor
(any such event, a "force majeure". In the event of any such force majeure,
Distributor shall give the Company prompt notice thereof, and thereafter
Distributor's obligations hereunder shall be suspended, in whole or in part,
for the duration of such force majeure. Upon expiration, settlement or other
resolution of the force majeure, Distributor shall resume performance in full
hereunder but shall not be required to make- up for any term of this Agreement.
In the event Distributor's obligations hereunder are suspended during any force
majeure, the Company may enter into other reasonable arrangements with other
distributors to satisfy its requirements hereunder. Such other arrangements
shall be reasonable in scope and duration such that they may be terminated as
soon as possible upon the expiration, settlement or other resolution of the
force majeure. Distributor shall use its best efforts to terminate or cause
the expiration of any force majeure as soon as practicable following its
occurrence.
19. Assignment. (a) Subject to Section 19(b),
Distributor may not assign this Agreement without the prior written consent of
the Company, which consent shall not be unreasonably withheld or delayed;
provided, however, that nothing in this Section shall preclude Distributor from
employing common carriers, contract carriers, public warehousemen or other
similar parties to temporarily perform its services hereunder.
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<PAGE> 21
(b) Notwithstanding Subsection 19(a), Distributor may
assign its rights and obligations under this Agreement without the Company's
consent to any Affiliate of Distributor or to any purchaser of all or
substantially all of its business or assets; provided that neither Distributor
nor any assignee of Distributor's rights hereunder shall assign its rights
under this Agreement to any party conducting, directly or indirectly, a
significant restaurant business without the consent of the Company, which
consent shall not be unreasonably withheld or delayed. For purposes of this
Section 19, a change of control or majority ownership of Distributor shall be
deemed to be an assignment of rights under this Agreement.
(c) Any permitted assignment of this Agreement by either
party shall, except as otherwise agreed, be deemed an assignment of all of the
assignor's rights and liabilities under this Agreement accruing, arising or
relating to any period on or after the date of such assignment.
(d) Any assignment made in violation of this Section
shall be null and void.
(e) During the term hereof, (i) if the Company sells 50
or more Restaurants to any single purchaser or group of purchasers directly or
indirectly controlling, controlled by or under common control with Buyer, the
Company or any Franchisee (a "Significant Sale"), the Company agrees to use
commercially reasonable efforts to cause such purchaser or group of purchasers
to enter into an exclusive requirements purchase agreement on terms
substantially similar to this Agreement, including Section 3, and (ii) if the
Company sells fewer than 50 Restaurants to any single purchaser or group of
purchasers directly or indirectly controlling, controlled by or under common
control with Buyer, the Company or any Franchisee, the Company agrees to use
its reasonable commercial efforts to cause such purchaser to enter into an
agreement providing for Distributor to act as its distributor for Products.
20. Termination and Suspension. (a) Notwith-standing
Section 5, if any party fails or refuses to comply
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<PAGE> 22
with one or more of its material obligations hereunder, resulting in a material
default which is incapable of being cured or which is capable of being cured
and is not cured within a reasonable period following its receipt of oral or
written notice of such default from the Company (a "Breach"), the nonbreaching
party shall provide the breaching party written notice thereof, describing the
Breach and specifying a date, not less than thirty (30) days following the
breaching party's receipt of such notice, on which this Agreement shall be
terminable at the option of the nonbreaching party unless the Breach has by
that date been substantially cured. If the Breach has been substantially cured
by the date so specified this Agreement shall not be terminable as a result of
such substantially cured Breach.
(b) The Company may temporarily suspend Distributor's
designation as an Approved Distributor and the Company's obligations pursuant
to Section 3 with respect to a particular Product (each such temporary
suspension, a "Suspension") if, but only so long as, Distributor shall fail to
comply with its obligations under this Agreement with respect to such Product
and such failure presents or is likely to present in the immediate future a
danger of imminent harm to consumers or to restaurant employees or is in
material violation of the requirements of applicable government health, safety
or sanitation standards.
(c) Any party's failure to terminate this Agreement upon the
occurrence of one or more Breaches shall not constitute a waiver or otherwise
affect the right of such party to terminate the Agreement for any subsequent
Breach. Any party's failure to exercise any of its rights or remedies
hereunder or to insist on strict compliance by any other party with any of the
terms hereof shall not constitute a waiver of any of the terms or conditions
hereof with respect to any other or subsequent Breach nor shall it constitute a
waiver by such party of its right at any time thereafter to require compliance
with the terms hereof as provided herein. The rights or remedies granted to
the parties herein are in addition to any other rights or remedies which may be
granted by law.
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<PAGE> 23
(d) The obligations of Distributor pursuant to this Agreement
shall be terminable, at Distributor's option, if any of the following events
shall occur and be continuing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against the Company under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law to
be adjudicated a bankrupt or insolvent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of the Company; (iii) any
assignment for the benefit of creditors of the Company; or (iv) if the Company
shall admit in writing its inability to pay its debts as they become due.
(e) The obligations of the Company pursuant to this Agreement
shall be terminable, at the Company's option, if any of the following events
shall occur and be continuing: (i) if a proceeding is instituted (and not
dismissed within 60 days) by or against Distributor under any applicable
federal or state bankruptcy, insolvency, reorganization or other similar law to
be adjudicated a bankruptcy or insolvent; (ii) the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or similar
official of all or a substantial part of the assets of Distributor; (iii) any
assignment for the benefit of creditors of Distributor; or (iv) if Distributor
shall admit in writing its inability to pay its debts as they become due.
(f) Upon termination or expiration of this Agreement, (i)
Distributor's designation as an Approved Distributor shall terminate and be of
no further force and effect; (ii) Distributor shall not thereafter identify
itself as an Approved Distributor to the Hardee's(R) System or use any of the
Company's trade secrets, the Confidential Information and/or other proprietary
information of the Company; (iii) Distributor shall cease to use, in any manner
whatsoever, any of the Trademarks; and (iv) Distributor shall sell to the
Company, and the Company shall purchase from Distributor, within 30 days of
such termination or expiration, all Products in Distributor's inventory, at the
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<PAGE> 24
Cost of such Products, plus applicable freight F.O.B. Distributor's
distribution center(s); provided, however, that the Company shall not be
required to purchase the amount of Distributor's stock which exceeds three (3)
weeks' inventory of such Product (based on total sales of such Product to the
Restaurants during the immediately preceding 12-month period) if such stock as
exceeds such three (3) weeks' inventory was not purchased to fill orders placed
by the Company Restaurants.
21. Compliance With Laws. Distributor warrants that all
Products distributed by it to the Restaurants shall be received, handled,
stored, shipped, delivered and sold by Distributor in compliance with all
applicable (a) federal and state laws, (b) rules and regulations of all
governmental and quasi-governmental agencies having jurisdiction, and (c)
municipal ordinances. Upon its receipt of any citation issued by any
governmental or other regulatory authority (or of process or citation issued by
any court of law or equity) which might result in any interruption in service
to any Restaurant, Distributor shall promptly send written notice thereof to
the Company and to all Franchised Restaurants which may be affected thereby.
22. No Partnership. Distributor acknowledges that it is
an independent contractor and no party is or shall be construed as an agent,
partner, joint venturer or employee of another. No party shall have the
authority to bind or otherwise obligate any other party in any manner and no
party shall represent to anyone that it has a right to do so.
23. Waivers. No waiver or waivers by any party of any
provision of this Agreement, whether by conduct or otherwise, shall be deemed
to be a further or continuing waiver of the provision or any other provision of
this Agreement.
24. Attorneys' Fees. If it is necessary for either of
the parties to institute suit to enforce any of the provisions of this
Agreement, then the prevailing party in such suit shall be entitled to collect
and receive
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<PAGE> 25
reasonable outside attorneys' fees and court costs through and including
appellate litigation, and the other party shall pay for same.
25. Notices. All notices hereunder shall be deemed given
if in writing and delivered personally or sent by telex or telecopier or by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses as shall be specified by like
notice):
(a) If to the Company or Buyer, to:
Hardee's Food Systems, Inc.
1233 Hardee's Boulevard
Rocky Mount, North Carolina 27804
Attention: President
With copies to:
CKE Restaurants, Inc.
1200 North Harbor Boulevard
Anaheim, California 92803
Attention: General Counsel
(b) If to the Distributor, to:
Fast Food Merchandisers, Inc.
1233 North Church Street
Rocky Mount, North Carolina 27802
Attention: President
Any notice given by mail shall be effective when received.
Any notice given by telecopier shall be effective when the appropriate
telecopier confirmation is printed by the telecopier used to transmit such
notice.
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<PAGE> 26
26. Captioned Headings. The section headings contained
in this Agreement are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.
27. Governing Law and Venue. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF. EACH PARTY
HERETO AGREES THAT IT SHALL BRING ANY ACTION OR PROCEEDING IN RESPECT OF ANY
CLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTAINED
IN OR CONTEMPLATED BY THIS AGREEMENT, WHETHER IN TORT OR CONTRACT OR AT LAW OR
IN EQUITY, EXCLUSIVELY IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE
COUNTY OF NEW YORK (THE "CHOSEN COURTS") AND (I) IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE CHOSEN COURTS, (II) WAIVES ANY OBJECTION TO
LAYING VENUE IN ANY SUCH ACTION OR PROCEEDING IN THE CHOSEN COURTS, (III)
WAIVES ANY OBJECTION THAT THE CHOSEN COURTS ARE AN INCONVENIENT FORUM OR DO NOT
HAVE JURISDICTION OVER ANY PARTY HERETO AND (IV) AGREES THAT SERVICE OF PROCESS
UPON SUCH PARTY IN ANY SUCH ACTION OR PROCEEDING SHALL BE EFFECTIVE IF NOTICE
IS GIVEN IN ACCORDANCE WITH SECTION 25 OF THIS AGREEMENT.
28. Amendment and Waiver. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, the Company and
Distributor, or in the case of a waiver, by the party against whom the waiver
is to be effective. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
29. Counterparts. This Agreement and any amendments hereto
may be executed in one or more counterparts, each of which shall be deemed to
be an original by the parties executing such counterpart, but all of which
shall be considered one and the same instrument.
-26-
<PAGE> 27
30. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability.
31. Third-Party Rights. Notwithstanding any other
provision of this Agreement, this Agreement shall not create benefits on behalf
of any third party or person other than the parties hereto or their permitted
assignees (including without limitation any broker, finder, supplier or
customer), and this Agreement shall be effective only as between the parties
hereto, their successors and permitted assigns.
32. Entire Agreement. This Agreement (including all
Annexes and Schedules hereto) contains the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral or written, with respect to such matters.
-27-
<PAGE> 28
IN WITNESS WHEREOF, this Agreement has been signed on behalf
of each of the parties hereto as of the date first written above.
HARDEE'S FOOD SYSTEMS, INC.
By:
--------------------------
Name:
Title:
CKE RESTAURANTS, INC.
By:
--------------------------
Name:
Title:
FAST FOOD MERCHANDISERS, INC.
By:
--------------------------
Name:
Title:
-28-
<PAGE> 1
EXHIBIT 99.7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Hardee's Food Systems, Inc.
We have audited the accompanying combined balance sheets as of December 31,
1996 and 1995 of Hardee's Food Systems, Inc. (the "Company"), as defined in Note
1, consisting of the Restaurant and Equipment Divisions, to be acquired by CKE
Restaurants, Inc. ("CKE"), and the related combined statements of operations,
shareholder's equity and cash flows for each of the three years in the period
ended December 31, 1996. These combined financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying financial statements were prepared to present the
financial position and related results of operations and cash flows of the
Company, which is to be acquired by CKE, and may not necessarily reflect the
financial position, results of operations and cash flows of the Company that
might have resulted had they operated as a stand-alone company.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Company
as of December 31, 1996 and 1995 and its results of operations and cash flows
for each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.
As discussed in Note 2 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 121 in 1996.
DELOITTE & TOUCHE LLP
Raleigh, North Carolina
January 17, 1997, except for Note 20,
as to which the date is April 27, 1997
F-29
<PAGE> 2
HARDEE'S FOOD SYSTEMS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................................... $ 26,112 $ --
Receivables......................................................................... 27,897 22,277
Federal and state income taxes receivable........................................... 18,225 11,237
Inventories......................................................................... 13,936 10,906
Prepaid expenses and other current assets........................................... 2,957 3,016
Deferred income taxes............................................................... 18,561 --
-------- --------
Total current assets......................................................... 107,688 47,436
-------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land................................................................................ 118,067 93,065
Buildings, including improvements to leased properties.............................. 402,915 388,757
Equipment, vehicles and fixtures.................................................... 239,415 240,145
Construction in progress............................................................ 2,828 1,722
Leased property under capital leases................................................ 12,615 10,518
-------- --------
775,840 734,207
Less accumulated depreciation and amortization...................................... 345,729 336,883
-------- --------
Total property, plant and equipment, net..................................... 430,111 397,324
-------- --------
OTHER ASSETS:
Notes receivable due after one year................................................. 13,412 10,607
Intangible assets................................................................... 323 299
Deferred charges.................................................................... 1,138 627
Deferred income taxes............................................................... 23,511 34,306
Other............................................................................... 486 21
-------- --------
Total other assets........................................................... 38,870 45,860
-------- --------
TOTAL ASSETS.......................................................................... $576,669 $490,620
======== ========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Bank overdraft...................................................................... $ -- $ 5,359
Short-term borrowings............................................................... -- 10,000
Trade accounts payable.............................................................. 7,778 10,317
Trade accounts payable -- affiliate................................................. 6,708 5,851
Other accounts payable and accrued expenses......................................... 90,909 75,956
Deferred income..................................................................... 2,448 1,569
Current maturities of long-term debt................................................ 114 46
Current maturities of obligations under capital leases.............................. 730 606
Deferred income taxes............................................................... -- 1,166
-------- --------
Total current liabilities.................................................... 108,687 110,870
-------- --------
POSTRETIREMENT BENEFITS............................................................... 16,910 20,440
-------- --------
ESTIMATED FUTURE COST OF EXCESS PROPERTIES............................................ 14,738 21,403
-------- --------
LONG-TERM DEBT TO PARENT.............................................................. 131,777 --
-------- --------
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES.......................................... 1,690 1,709
-------- --------
OBLIGATIONS UNDER CAPITAL LEASES, EXCLUDING CURRENT MATURITIES........................ 7,006 6,124
-------- --------
DEFERRED CREDITS -- OTHER............................................................. 6,959 6,018
-------- --------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock of no par value.
Authorized 10,000,000 shares;
155 and 225 shares issued at stated value of $.50 per share in 1995 and 1996,
respectively...................................................................... 1 1
Additional paid-in capital.......................................................... 253,583 316,596
Retained earnings................................................................... 35,318 7,459
-------- --------
Total Shareholder's Equity................................................... 288,902 324,056
-------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................................ $576,669 $490,620
======== ========
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-30
<PAGE> 3
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Company-operated restaurants............................. $711,979 $702,693 $706,391
Franchised and licensed restaurants and other............ 126,662 118,137 99,653
-------- -------- --------
Total revenues........................................ 838,641 820,830 806,044
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Restaurant operations:
Food and packaging.................................... 234,251 240,074 238,359
Payroll and other employee benefits................... 234,596 255,942 264,195
Occupancy and other operating expenses................ 174,982 185,829 175,892
-------- -------- --------
643,829 681,845 678,446
Franchised and licensed restaurants and other............ 34,010 35,451 34,174
Advertising expenses..................................... 35,744 43,734 44,075
General and administrative expenses...................... 56,766 74,912 79,735
-------- -------- --------
Total operating costs and expenses............... 770,349 835,942 836,430
-------- -------- --------
OPERATING INCOME (LOSS).................................... 68,292 (15,112) (30,386)
INTEREST EXPENSE........................................... 12,155 13,985 6,981
OTHER EXPENSES (INCOME), NET............................... 500 500 (9,508)
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY LOSS... 55,637 (29,597) (27,859)
INCOME TAX EXPENSE (BENEFIT)............................... 22,255 (11,839) --
-------- -------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.................... 33,382 (17,758) (27,859)
EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT, NET OF
INCOME TAX BENEFIT OF $4,097............................. (6,146) -- --
-------- -------- --------
NET INCOME (LOSS).......................................... $ 27,236 $(17,758) $(27,859)
======== ======== ========
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-31
<PAGE> 4
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
COMMON STOCK AT BEGINNING AND END OF YEAR.................. $ 1 $ 1 $ 1
ADDITIONAL PAID-IN CAPITAL:
Amount at beginning of year.............................. 142,074 153,583 253,583
Capital contributions.................................... 11,509 100,000 63,013
-------- -------- --------
Amount at end of year............................ 153,583 253,583 316,596
-------- -------- --------
RETAINED EARNINGS:
Amount at beginning of year.............................. 56,009 63,076 35,318
Net income (loss)........................................ 27,236 (17,758) (27,859)
Dividends paid........................................... (20,169) (10,000) --
-------- -------- --------
Amount at end of year............................ 63,076 35,318 7,459
-------- -------- --------
TOTAL SHAREHOLDER'S EQUITY................................. $216,660 $288,902 $324,056
======== ======== ========
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-32
<PAGE> 5
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)............................................... $ 27,236 $ (17,758) $ (27,859)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation (including amortization of leased property under
capital leases)............................................. 43,044 43,939 49,400
Amortization of intangible assets............................ 200 251 180
Loss (gain) on disposition of property, plant and
equipment................................................... 1,939 4,376 (222)
Provision for postretirement benefits........................ 642 1,331 3,530
Amortization of gain on sale of real estate.................. (1,995) (886) (941)
Provision (benefit) for (from) excess properties expense..... (2,018) (3,204) 6,665
Provision (benefit) for (from) deferred income taxes......... (1,867) 7,172 8,932
Provision for bad debts...................................... 6,986 16,575 6,800
Loss on early extinguishment of debt......................... 10,243 -- --
Changes in assets and liabilities:
Receivables................................................ 4,124 (17,573) 4,266
Inventories................................................ 1,381 1,167 3,030
Prepaid expenses and other current assets.................. 215 230 (59)
Trade accounts payable..................................... (6,418) (2,531) 1,682
Other accounts payable and accrued expenses................ 1,300 7,456 (2,790)
Federal and state income taxes............................. 8,479 (19,276) 6,988
Deferred income............................................ 237 (1,632) (879)
--------- --------- ---------
Net cash provided by operating activities.................... 93,728 19,637 58,723
--------- --------- ---------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment...................... (32,720) (83,550) (68,262)
Proceeds from disposition of property, plant and equipment...... 42,093 2,177 42,019
Decrease in intangibles and other assets........................ 127 335 820
Issuance of notes receivable.................................... (24,479) (932) (7,298)
Collection on notes receivable and direct financing leases...... 14,987 2,597 2,346
Purchase of investment.......................................... (4,000) -- --
Purchase of joint venture, net of cash acquired................. (20,400) -- --
--------- --------- ---------
Net cash used in investing activities........................ (24,392) (79,373) (30,375)
--------- --------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayment of long-term debt..................................... (6,978) (3) (49)
Proceeds from short-term borrowings............................. 5,934 -- 10,000
Repayment of short-term borrowings.............................. -- (5,934) --
Proceeds (repayment) of notes payable to parent................. 95,213 24,144 (181,777)
Bank overdrafts................................................. -- -- 5,359
Repayment of obligations under capital leases................... (928) (1,515) (1,006)
Repurchase of long-term debt.................................... (155,161) -- --
Net transfers from (to) parent.................................. (20,169) 40,000 113,013
--------- --------- ---------
Net cash provided by (used in) financing activities.......... (82,089) 56,692 (54,460)
--------- --------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS......................... (12,753) (3,044) (26,112)
CASH AND CASH EQUIVALENTS -- BEGINNING OF YEAR.................... 41,909 29,156 26,112
--------- --------- ---------
CASH AND CASH EQUIVALENTS -- END OF YEAR.......................... $ 29,156 $ 26,112 $ --
========= ========= =========
See Accompanying Notes to Combined Financial Statements
</TABLE>
F-33
<PAGE> 6
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF CASH FLOWS (CONCLUDED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized amount)......................... $ 16,919 $ 18,479 $ 13,657
Income taxes................................................. 10,274 10,440 2,938
Purchase of joint venture, net of cash acquired:
Working capital, other than cash............................. $ (712) $ -- $ --
Property, plant and equipment................................ (101,541) -- --
Long-term debt............................................... 80,855 -- --
Noncurrent liabilities....................................... 998 -- --
--------- --------- ---------
Net cash used to acquire joint venture.................. $ (20,400) $ -- $ --
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Exchange of accounts receivable for notes receivable............ $ -- $ -- $ 377
Property, plant and equipment, net has been written down against
a provision for impairment of long-lived assets.............. $ -- $ -- $ 12,163
In conjunction with the acquisition/sale of restaurants to
franchisees, the Company exchanged notes receivable in the
amount of.................................................... $ 1,717 $ 151 $ 2,311
In conjunction with the sale of restaurants to a third party,
the Company recorded the following losses against a reserve
in other accounts payable:
Property, plant and equipment................................ $ 16,831 $ -- $ --
Intangible assets............................................ 2,054 -- --
In conjunction with the contribution of joint venture interest
by the parent company, the Company received or reclassed the
following assets and liabilities:
Working capital.............................................. $ (1,328) $ -- $ --
Property, plant and equipment................................ (82,432) -- --
Investment in joint venture.................................. 250 -- --
Other assets................................................. (1,066) -- --
Long-term debt............................................... 72,337 -- --
Noncurrent liabilities....................................... 730 -- --
Additional paid-in capital................................... 11,509 -- --
In conjunction with the sale of 20 shares of Hardee's common
stock to Imasco Holdings, the Company received a note which
is included as a reduction in long-term debt in the amount
of........................................................... $ -- $ 50,000 $ --
The following amounts have been recorded against a reserve in
other accounts payable:
Receivables.................................................. $ -- $ 18,489 $ --
Inventories.................................................. -- (377) --
Prepaid expenses and other current assets.................... -- (49) --
Property, plant and equipment, net........................... -- (9,442) --
Equity investment............................................ -- 4,000 --
Other accounts payable and accrued expenses.................. -- 14,053 --
The Company reduced the basis in the fixed assets acquired
through a sale and leaseback real estate transaction by the
related unamortized deferred gain............................ $ 45,472 $ -- $ --
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-34
<PAGE> 7
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements include the accounts of Hardee's Food
Systems, Inc. (the "Company") a North Carolina Corporation and wholly-owned
subsidiary of Imasco Holdings, Inc. ("Imasco Holdings"), a Delaware Corporation.
Imasco Holdings is a wholly-owned subsidiary of Imasco Limited, a Canadian
Corporation.
The accounts of Hardee's Food Systems, Inc. include the Restaurant and
Equipment Divisions, however, they do not include the accounts of Fast Food
Merchandisers, Inc. ("FFM") and MRO Mid-Atlantic ("MRO"), two directly owned
subsidiaries.
The common stock of Hardee's Food Systems, Inc. will be sold to CKE
Restaurants, Inc. under a stock purchase agreement dated April 27, 1997. See
Note 20. FMM and MRO will be spun off to Imasco Holdings or one of its
affiliates.
The Restaurant Division operates a system of approximately 3,200 company
and franchise quick-service restaurants under the Hardee's trademark in 37
states and 10 foreign countries. The Equipment Division is engaged in the
business of selling equipment and small wares to Hardee's and other restaurant
businesses.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventories. Inventories are carried at the lower of cost (first-in,
first-out) or replacement market.
Property, Plant and Equipment. Property, plant and equipment ("PP&E") are
stated at cost, except for PP&E that have been impaired, for which the carrying
amount is reduced to estimated fair value. For financial reporting purposes,
depreciation is provided on a straight-line basis. Various accelerated methods
are used for income tax reporting. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Restaurant buildings.......................... 25 years primarily
Building upgrades and leasehold
improvements................................ 3 to 10 years
Restaurant equipment and signs................ 3 to 7 years
Furniture, fixtures and other equipment....... 3 to 7 years
Office and warehouse buildings................ 20 to 40 years
Leased property under capital leases and
leasehold improvements...................... Lesser of useful life of
asset or term of lease
</TABLE>
Interest costs for construction projects are capitalized during the
construction period by applying current interest rates paid by the Company to
the amount of funds expended on a daily basis until the project is completed.
Expenses incurred in locating sites for new restaurants and supervising
construction of new and remodeled restaurant buildings are capitalized and
included in the cost of the related assets.
Leases. Leases which meet certain criteria are designated as capital leases
and are recorded as if the Company had acquired the related assets through debt
financing. The assets are classified on the balance sheets as "Leased property
under capital leases" and the related liabilities as "Obligations under capital
leases." This accounting method results in the recording of interest expense and
depreciation rather than rental expense for such leases for financial reporting
purposes. This accounting method is not utilized for income tax purposes. The
land element of the Company's capital leases and other leases which do not meet
the criteria of capital leases are classified as operating leases; accordingly,
the rental expense related to the land element and other leases is recorded in
the period in which such rental expense occurs.
The Company leases some restaurant locations and equipment to others and
treats those which meet the requirements for capitalization as direct financing
or sales-type leases.
F-35
<PAGE> 8
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Amortization of Intangible Assets. Intangible assets are amortized
straight-line over forty years or less.
Pre-operating Expenses. Pre-operating expenses of new restaurants are
charged to expense as incurred.
Federal and State Income Taxes. The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." This Statement requires the use of the asset and liability
approach for financial accounting and reporting for income taxes.
License Fee Income. The Company's current standard initial license fee for
license holders as of December 31, 1995 is $15,000. For first time license
holders subsequent to December 31, 1995, the current standard initial license
fee is $35,000 for the first restaurant and $30,000 thereafter. The license
agreement requires a monthly service fee equal to 3 1/2% of gross sales for the
first five years of operations and 4% thereafter. Licenses currently are granted
for initial terms of 20 years. Initial license fee income is recognized when the
licensed restaurant opens. The Company is generally obligated to provide site
selection counseling, building and equipment plans and specifications, training,
preopening and operating assistance, advertising and marketing assistance,
continual individual and group counseling, accounting forms and an operating
manual.
Excess Properties. At the time decisions are made to close restaurants,
earnings are charged and a provision is established, subject to periodic review
and adjustment, for asset disposal costs and for estimated future expenditures
for rents, real estate taxes and other occupancy costs, net of estimated
sublease income and other recoveries from the properties. Such amounts are
recorded at the present value of the future payments.
Retirement Plans. Prior to January 1, 1995, the Company and its
subsidiaries had defined benefit pension plans covering employees between the
ages of 21 and 70 with at least 1,000 hours of service annually. Employees were
eligible to participate in the plans after one year of service and became vested
after five years of service. There were no contributions by employees.
Effective December 31, 1994, the Company curtailed its qualified defined
benefit pension plans and implemented a 401(k) defined contribution plan on
January 1, 1995.
On January 1, 1995, the Company amended and restated its qualified
after-tax savings plan and implemented a 401(k) defined contribution Retirement
Savings Plan ("RSP"). The plan obtained its latest determination letter on
February 2, 1996, in which the Internal Revenue Service stated that the plan, as
then designed, was in compliance with the applicable requirements of the
Internal Revenue Code. The RSP covers non-highly compensated employees that have
reached age 21 with at least one year of service. Restaurant hourly employees
are not eligible to participate in the RSP.
Effective January 3, 1995, the Company also amended its non-qualified
savings plan and implemented the Management Savings Plan ("MSP"), a
non-qualified deferred annuity arrangement for its highly compensated employees.
Both the RSP and the MSP permit voluntary employee contributions and provide for
service-related matching and profit-sharing contributions by the Company.
The Company has a non-qualified defined benefit pension plan for officers.
The plan is unfunded. The officer must have five years of credited service and
five years as an officer to receive full benefits.
Postemployment Benefits. Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Post-employment Benefits," requires employers
who provide benefits to former or inactive employees after employment but before
retirement to recognize the liability for these benefits on an accrual basis
rather than as paid. Such benefits provided by the Company are immaterial and do
not require any additional accruals.
Postretirement Benefits Other Than Pensions. The Company provides an
unfunded retiree medical benefit plan for substantially all employees (except
restaurant hourly employees) who retire on or after age 55
F-36
<PAGE> 9
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
with at least 5 years of service. The retiree pays the actual costs of the plan
with a Company subsidy provided for retirees with 10 or more years of credited
service. The dollar amount of this subsidy will be capped in 2003.
Accounting Changes. The Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" in the fourth quarter of
1996. SFAS 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment and written down to fair value whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
Pervasiveness of Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Statement of Cash Flows. For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Reclassifications. Certain prior year amounts have been reclassified to
conform with 1996 presentations.
NOTE 3 -- IMPAIRMENT OF LONG-LIVED ASSETS
As noted above, the Company adopted SFAS 121 in 1996 for purposes of
determining and measuring impairment of certain long-lived assets to be held and
used in the business. The Company deems an asset to be impaired if a forecast of
undiscounted future operating cash flows directly related to the asset,
including disposal value if any, is less than its carrying amount. SFAS 121
stipulates that when evaluating and measuring impairment, assets shall be
grouped at the lowest level for which there are identifiable, largely
independent cash flows. The Company has identified the appropriate grouping of
assets to be designated market areas for the restaurant division. Factors
leading to impairment were a combination of historical losses and anticipated
future losses. If an asset is determined to be impaired, the loss is measured as
the amount by which the carrying amount of the asset exceeds its fair value.
Fair value is based on quoted market prices in active markets, if available. If
quoted market prices are not available, an estimate of fair value is based on
the best information available, including prices for similar assets or the
results of valuation techniques.
Adoption of SFAS 121 resulted in a non-cash pre-tax charge of $12.2 million
related to restaurants located in designated market areas for which a forecast
of undiscounted future operating cash flows is less than their carrying value.
Considerable management judgment is necessary to estimate future cash flows.
Accordingly, actual results could vary significantly from such estimates.
NOTE 4 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and Cash Equivalents
The carrying amount approximates fair value because of the short maturity
of those instruments.
Notes Receivable
The fair value of notes receivable is estimated by discounting their future
cash flows using an interest rate being used in current transactions, reduced by
an estimate of doubtful accounts. The carrying value of notes receivable, net of
allowance for doubtful accounts, approximates the estimated fair market value.
F-37
<PAGE> 10
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Long-Term Debt
The carrying amount approximates fair value because the debt is primarily
with related parties and rates paid are based on market rates negotiated
annually.
NOTE 5 -- RECEIVABLES
Receivables consist of the following at December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Trade accounts................................... $23,093 $28,539
Notes............................................ 26,918 23,183
Other accounts................................... 12,420 9,022
------- -------
Total.................................. 62,431 60,744
Less allowance for doubtful accounts............. 21,122 27,860
------- -------
Receivables, net....................... $41,309 $32,884
======= =======
</TABLE>
The receivables are presented in the balance sheets as follows:
<TABLE>
<S> <C> <C>
Current assets................................... $27,897 $22,277
======= =======
Other assets..................................... $13,412 $10,607
======= =======
</TABLE>
NOTE 6 -- INVENTORIES
Inventories consist of the following at December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Restaurant inventories........................... $ 7,110 $ 6,182
Equipment for sale............................... 6,563 4,382
Supplies and promotional items................... 263 342
------- -------
Total inventories...................... $13,936 $10,906
======= =======
</TABLE>
NOTE 7 -- DEFERRED CREDITS -- OTHER AND SALE AND LEASEBACK OF RESTAURANTS
In 1988, the Company entered into a real estate transaction in which the
commercial real property and improvements of 279 of its restaurants were
contributed to a joint venture formed by the Company and an unrelated third
party and subsequently leased back for a period of 15 years. In 1988, the
Company sold 98% of its 50% interest in the joint venture to an affiliated
company. On April 6, 1994, the Company exercised its buyout option pursuant to
the joint venture agreement and purchased 96% of the unrelated third party
interest in the joint venture for a cash consideration of approximately $19.6
million. On April 7, 1994, the joint venture liquidated the third party's
remaining 2% interest for approximately $817,000. Prior to the buyout on April
6, 1994, the Company accounted for its investment in the joint venture under the
equity method. Its share of joint venture earnings for the year ended December
31, 1994 was $9,000.
Also in 1988, the Company entered into a real estate transaction in which
it sold commercial real property and improvements of 101 restaurant locations to
an unaffiliated third party and leased the properties back for a period of
fifteen and one-half years. The lease is being accounted for as an operating
lease.
The gain that the Company realized on both of the above real estate
transactions was deferred and classified in the accompanying balance sheets as
Deferred Credits -- Other. At the date of the joint venture buyout, the basis in
the fixed assets acquired was reduced by the related unamortized deferred gain
of
F-38
<PAGE> 11
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
$45,472,000. The gain on the sale of the 101 restaurant locations is being
amortized over the life of the lease which expires in June 2004.
The remaining lease transaction contains certain covenants which requires
maintenance of a minimum amount of shareholder's equity and a minimum amount of
combined shareholder's equity and affiliated indebtedness. The Company is in
compliance with these covenants as of December 31, 1996.
NOTE 8 -- PROPERTY, PLANT, AND EQUIPMENT
Property, plant and equipment, at cost, consist of the following at
December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Land............................................. $116,188 $ 92,171
Buildings and leasehold improvements............. 394,156 381,291
Restaurant equipment............................. 119,178 122,662
Other equipment and signs........................ 93,011 89,386
Automotive and aircraft.......................... 3,493 3,493
Furniture, fixtures and other.................... 23,493 24,471
Construction in progress......................... 2,828 1,722
Capital leases................................... 12,615 10,518
Leased to licensees and others:
Land........................................... 1,879 894
Buildings and leasehold improvements........... 8,759 7,466
Equipment and signs............................ 240 133
-------- --------
Total.................................. $775,840 $734,207
======== ========
</TABLE>
NOTE 9 -- INTANGIBLE ASSETS AND DEFERRED CHARGES
Intangible assets and deferred charges are stated at cost, net of
accumulated amortization of $816,000 and $3,149,000 at December 31, 1995 and
1996, respectively.
NOTE 10 -- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Other accounts payable and accrued expenses consist of the following at
December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Salaries and wages............................... $ 8,459 $ 5,630
Rent............................................. 12,220 12,447
Taxes, other than income......................... 12,184 11,439
Insurance........................................ 28,273 28,604
Savings plan contributions....................... 5,516 4,332
Utilities........................................ 2,048 2,167
Other............................................ 22,209 11,337
------- -------
Total.................................. $90,909 $75,956
======= =======
</TABLE>
F-39
<PAGE> 12
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
NOTE 11 -- LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
-------- ------
<S> <C> <C>
Unsecured credit facility with Imasco Finance LLC
(formerly Imasco B.V.)................................. $221,162 $ --
Advances to Imasco Holdings.............................. (58,126) --
Advances from ITL........................................ 4,132 --
Advances to Genstar Land................................. (8,680) --
Advances to Fast Food Merchandisers, Inc................. (26,711) --
Other.................................................... 1,804 1,755
-------- ------
133,581 1,755
Less current maturities.................................. 114 46
-------- ------
Portion payable after one year........................... $133,467 $1,709
======== ======
</TABLE>
The aggregate principal maturities of other long-term debt are as follows
(in thousands):
<TABLE>
<S> <C>
1997.............................................. $ 46
1998.............................................. 176
1999.............................................. 30
2000.............................................. 30
2001 and thereafter............................... 1,473
</TABLE>
At December 31, 1996, the Company had an unsecured credit facility with
Imasco Finance, LLC for an amount of $750 million. The ten-year facility expires
December 31, 2004, and is to be used by the Company as needed. Interest is
negotiated annually with the average rates being 8.4%, 8.5%, and 8.5% for the
years ended December 31, 1994, 1995, and 1996, respectively.
In 1994, the Company had various credit facilities with Imasco B.V.
(Amsterdam and Luxembourg Branches), a Netherlands corporation and wholly-owned
subsidiary of Imasco Limited. On January 2, 1995, Imasco B.V. sold the Company's
existing outstanding credit facility (in the aggregate amount of $511 million)
to Imasco Finance, LLC.
The Company advances and borrows funds to and from Imasco Holdings and
subsidiaries of Imasco Limited at negotiated rates. The Company considers Imasco
Limited's subsidiaries as one group for financing purposes.
In 1994, the Company purchased at a premium $138.3 million of its 10.5%
mortgage notes. The purchase resulted in an extraordinary charge of $9.8
million. On January 5, 1995, the Company purchased at a premium its remaining
10.5% mortgage notes. The purchase resulted in an extraordinary charge of
approximately $350,000 for which a reserve was established in December 1994.
The Company has a line of credit with a commercial bank for an amount of
$15 million of which $0 and $10 million was utilized at December 31, 1995 and
1996, respectively.
NOTE 12 -- LEASES
The Company is a party to a number of noncancelable lease agreements
primarily involving restaurant land and buildings expiring on various dates
through 2018. The leases generally have initial terms of 10 to 25 years with
renewal options ranging from one five-year period to four five-year periods and
provide for
F-40
<PAGE> 13
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
minimum rents or a rent based on a percentage of sales, whichever is greater.
The Company is also responsible for executory costs.
The following is a schedule of future minimum payments under capital leases
and operating leases and obligations under capital leases (present value of
future minimum rentals) as of December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- -----------
REAL REAL
PERIODS ESTATE ESTATE TOTAL
---------------------------------------- ------- ----------- --------
<S> <C> <C> <C>
1997.................................... $ 1,617 $ 41,723 $ 43,340
1998.................................... 1,524 37,454 38,978
1999.................................... 1,468 32,851 34,319
2000.................................... 1,434 27,560 28,994
2001.................................... 1,406 24,177 25,583
2002 and thereafter..................... 5,355 77,852 83,207
------- -------- --------
Total minimum lease payments............ 12,804 $ 241,617 $254,421
======== ========
Less amount representing interest....... 6,074
-------
Total obligations under capital
leases................................ 6,730
Less current maturities of obligations
under capital leases.................. 606
-------
Obligations under capital leases payable
after one year........................ $ 6,124
=======
</TABLE>
The Company is contingently liable on leases which have been assigned to
unaffiliated companies with aggregate minimum annual rentals of $1,072,000
expiring in various years through 2011.
The following is a schedule of future minimum rentals receivable under
operating leases and subleases at December 31, 1996 (in thousands):
<TABLE>
<CAPTION>
PERIODS
---------------------------------------------------
<S> <C>
1997............................................... $ 6,597
1998............................................... 6,264
1999............................................... 5,666
2000............................................... 4,914
2001............................................... 4,260
2002 and thereafter................................ 29,463
-------
Total minimum rentals receivable................... $57,164
=======
</TABLE>
Rent expense entering into the determination of net earnings follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1994 1995 1996
------- -------- -------
<S> <C> <C> <C>
Minimum rent on operating leases......................... $37,101 $ 29,821 $30,225
Contingent rent based on sales for:
Capital leases......................................... 309 265 142
Operating leases....................................... 4,579 3,629 3,862
Rent income from subleases............................... (13,972) (12,288) (8,901)
Transportation equipment rent............................ 2,021 1,866 1,980
------- -------- -------
Net rent expense......................................... $30,038 $ 23,293 $27,308
======= ======== =======
</TABLE>
F-41
<PAGE> 14
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
NOTE 13 -- RESTAURANTS IN OPERATION
The following table sets forth the total number of restaurants in operation
at December 31, 1994, 1995, and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Hardee's Company............................................ 805 864 808
Hardee's Franchise.......................................... 2,711 2,600 2,417
----- ----- -----
Total..................................................... 3,516 3,464 3,225
===== ===== =====
</TABLE>
NOTE 14 -- RETIREMENT AND SAVINGS PLANS
Effective December 31, 1994, the Company curtailed its qualified defined
benefit pension plans and implemented a qualified defined contribution plan
beginning January 1, 1995. As a result of the curtailment of the defined benefit
plan, the Company realized a gain of $7.0 million.
The Company's funding policy for its qualified defined benefit plans is to
contribute amounts determined in accordance with the minimum contribution
requirements of the Internal Revenue Service regulations. The Company made a
cash contribution of $712,000 for the plan year ended December 31, 1994 and
$984,000 for the plan year ended December 31, 1995, and will make no cash
contributions for the plan year ended December 31, 1996.
Additionally, the Company funds non-qualified defined benefit plan benefits
on a current basis. These cash contributions were $1,048,000 in 1994, $1,029,000
in 1995 and $1,077,000 in 1996.
The net periodic pension (benefit) cost for 1994, 1995, and 1996 includes
the following components (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Curtailment gain...................................... $(7,046) $ -- $ --
Service cost -- benefits earned during the period..... 2,622 192 386
Interest cost on projected benefit obligation......... 4,310 3,694 3,885
Actual return on assets............................... (3,414) (3,646) (3,179)
Amortization of prior service cost.................... 129 157 157
Amortization of (gains) losses........................ 86 (516) 162
Amortization of unrecognized net asset at January 1,
1985................................................ (407) (407) (407)
------- ------- -------
Net periodic pension (benefit) cost................... $(3,720) $ (526) $ 1,004
======= ======= =======
</TABLE>
The net periodic pension (benefit) cost was determined for the Company's
fiscal year using the pension plan year of January 1 through December 31. The
plans' funded status was determined as of December 31, 1995 and 1996 using the
following assumptions:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Discount rates....................................................... 7.75% 7.75%
Rates of increase in compensation levels............................. 4.75% 4.75%
Expected long-term rate of return on assets.......................... 7.75% 7.75%
</TABLE>
The discount rates are interest rates at which it is estimated that the
obligations of the plans could be settled through purchase of annuities as of
the dates shown.
F-42
<PAGE> 15
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
The following table sets forth the plans' funded status and the amounts
recognized in the Company's combined balance sheets at December 31, 1995 and
1996 (in thousands).
<TABLE>
<CAPTION>
1995 1996
----------------------------- -----------------------------
NON-QUALIFIED NON-QUALIFIED
QUALIFIED UNFUNDED QUALIFIED UNFUNDED
PLANS PLANS PLANS PLANS
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation............... $ (34,439) $(11,738) $ (37,922) $(11,622)
======== ======== ======== ========
Accumulated benefit obligation.......... $ (35,472) $(11,797) $ (38,936) $(11,699)
======== ======== ======== ========
Projected benefit obligation.............. $ (35,472) $(14,053) $ (38,936) $(13,404)
Plan assets at fair value................. 44,848 -- 48,199 --
-------- -------- -------- --------
Projected benefit obligation less plan
assets.................................. 9,376 (14,053) 9,263 (13,404)
Unrecognized net (gain) loss.............. (2,998) 1,124 (3,900) (46)
Prior service (benefit) cost not yet
recognized in net periodic pension
cost.................................... 12 1,408 11 1,272
Unrecognized net (asset) obligation at
January 1, 1985......................... (2,019) 357 (1,544) 289
Additional minimum liability.............. -- (633) -- --
-------- -------- -------- --------
Pension asset (liability) recognized in
the combined balance sheets............. $ 4,371 $(11,797) $ 3,830 $(11,889)
======== ======== ======== ========
</TABLE>
Prior to January 1, 1995, the Company had a qualified savings plan which
provided for basic and supplemental employee contributions and for the Company
to match up to 25% of the employee's basic contributions not to exceed 6% of the
employee's earnings. Prior to January 3, 1995, the Company had a non-qualified
savings plan in which it matched up to 30% of the employee's basic
contributions. The expense to the Company for the savings plans was
approximately $1,686,000 for the year ended December 31, 1994.
The RSP permits voluntary employee contributions on a pre-tax or after-tax
basis, and provides for the Company to match from 25%-60%, depending upon years
of service, of the first 6% of the employee's contributions. The MSP permits
voluntary employee contributions on an after-tax basis and provides for the
Company to match from 31.25%-75% of the first 6% of the employee's
contributions. The RSP and MSP provide for profit-sharing contributions from
2%-6% and 2.5%-7.5%, respectively, of the employee's earnings, based on years of
service. The expense to the Company for the RSP and MSP was approximately
$6,162,000 and $4,224,000 for the years ended December 31, 1995 and 1996,
respectively.
NOTE 15 -- POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides an unfunded retiree medical benefit plan for
substantially all employees (except restaurant hourly employees) who retire on
or after age 55 with at least 5 years of service. The retiree pays the actual
costs of the plan with a Company subsidy provided for retirees with 10 or more
years of credited service. The dollar amount of this subsidy will be capped in
2003.
The total postretirement benefit cost for 1994, 1995, and 1996 includes the
following components (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost -- benefits attributed to service during the
period...................................................... $170 $114 $112
Interest cost on accumulated postretirement benefit
obligation.................................................. 258 222 208
Amortization of (gains) losses................................ 2 (42) (49)
---- ---- ----
Net periodic postretirement benefit cost...................... $430 $294 $271
==== ==== ====
</TABLE>
F-43
<PAGE> 16
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
The following sets forth the components of the accumulated postretirement
benefit obligation of the plan and the amounts recognized in the Company's
combined balance sheets at December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Fully eligible active plan participants........................ $ (96) $ (82)
Other active participants...................................... (1,794) (1,608)
Retirees....................................................... (1,425) (1,249)
------- -------
Total.................................................. (3,315) (2,939)
Unrecognized net gain............................................ (831) (1,477)
------- -------
Postretirement benefit obligation recognized in the combined
balance sheets................................................. $(4,146) $(4,416)
======= =======
</TABLE>
The assumed health care cost trend rates used to measure the expected cost
of benefits was 12.5% for the current year decreasing 0.5% per year to an
ultimate rate of 7% due to capping the Company subsidy at that time.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996, by $540,000 and would
increase the service and cost components of net periodic postretirement benefit
cost for 1996 by $53,000.
The weighted-average assumed discount rate used to measure the accumulated
postretirement benefit obligation for the years 1995 and 1996 was 7.75%.
NOTE 16 -- FEDERAL AND STATE INCOME TAXES
The provision (benefit) for income taxes consists of the following for the
years ended December 31, 1994, 1995, and 1996 (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- -------- -------
<S> <C> <C> <C>
Current:
Federal............................................ $22,382 $(18,311) $(9,478)
State and local.................................... 1,740 (700) 546
------- -------- -------
Total........................................... 24,122 (19,011) (8,932)
------- -------- -------
Deferred:
Federal............................................ (1,634) 6,275 7,816
State and local.................................... (233) 897 1,116
------- -------- -------
Total........................................... (1,867) 7,172 8,932
------- -------- -------
Provision (benefit) before extraordinary item........ 22,255 (11,839) --
Benefit of extraordinary item........................ (4,097) -- --
------- -------- -------
Provision (benefit) for income taxes................. $18,158 $(11,839) $ --
======= ======== =======
</TABLE>
F-44
<PAGE> 17
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Significant components of the Company's deferred income tax assets and
liabilities at December 31, 1995 and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Current deferred tax assets (liabilities):
Receivables.................................................. $ 4,486 $ 7,141
Inventories.................................................. 180 255
Accrued expenses............................................. 9,301 12,449
Closed store reserve......................................... 12,906 16,945
Other........................................................ 652 (16,610)
Valuation allowance.......................................... (8,964) (21,346)
-------- --------
Total current deferred tax assets.................... 18,561 (1,166)
-------- --------
Noncurrent deferred tax assets (liabilities):
Depreciation................................................. 18,246 15,273
Receivables.................................................. 3,930 3,810
Deferred gain -- real estate................................. (12,115) (12,538)
Estimated future cost of excess properties................... 10,756 --
Postretirement benefits...................................... 7,599 7,754
Credit carryforward.......................................... -- 9,858
AMT carryforward............................................. -- 6,539
Other........................................................ (141) 20,135
Valuation allowance.......................................... (4,764) (16,525)
-------- --------
Total noncurrent deferred tax assets................. 23,511 34,306
-------- --------
Net deferred tax assets........................................ $ 42,072 $ 33,140
======== ========
</TABLE>
The credit carryforwards are principally comprised of targeted jobs tax
credits and other credits of $9.9 million which expire from 2005 through 2007
and alternative minimum tax credits of $6.5 million which have indefinite
carryover periods.
A valuation allowance has been recognized, based on the weight of available
evidence, as it is more likely than not that some portion or all of the deferred
tax asset will not be realized.
A reconciliation of the provision for income taxes to income tax expense
(benefit) computed by applying the statutory federal income tax rate to pre-tax
earnings, is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
--------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income tax.............. $ 19,473 35.0% $(10,359) 35.0% $(9,751) 35.0%
Creditable minimum tax.................... -- -- -- -- 1,583 (5.7)
State and local income taxes, net of
federal income tax benefits............. 2,782 5.0 (1,480) 5.0 (1,393) 5.0
Valuation reserve......................... -- -- 13,728 (46.3) 24,143 (86.6)
Other permanent differences and
miscellaneous........................... -- -- (13,728) 46.3 (14,582) 52.3
----
-
-------- -------- ----- ------- ----
Provision (benefit) before extraordinary
item and accounting change.............. $ 22,255 40.0% $(11,839) 40.0% $ -- --%
======== ===== ======== ===== ======= ====
</TABLE>
The Company is a wholly-owned subsidiary of Imasco Holdings and is included
in its consolidated federal income tax returns. Imasco Holdings allocates income
tax expense or benefit as if the Company were filing separate federal income tax
returns. The amount of federal income taxes due to (from) Imasco Holdings for
1994, 1995, and 1996 was $6,177,000, ($12,614,000), and ($14,188,000),
respectively.
F-45
<PAGE> 18
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
The Internal Revenue Service is currently examining Imasco Holdings' 1993
and 1994 income tax returns. As of December 31, 1996, no adjustments have been
assessed. The Company believes that it has made adequate provision for income
taxes that may become payable with respect to this examination.
NOTE 17 -- LITIGATION
In the ordinary course of its business the Company is a party to a number
of legal proceedings as a plaintiff or defendant; however, management does not
believe that the ultimate disposition of any or all of these proceedings will
have a material effect on the financial statements of the Company.
NOTE 18 -- COMMITMENTS AND CONTINGENCIES
At December 31, 1996, the Company had outstanding capital commitments of
approximately $23,720,000.
NOTE 19 -- RELATED PARTY TRANSACTIONS
In addition to the Company, the following companies are controlled directly
or indirectly by Imasco Limited:
Imasco Finance, LLC ("Imasco LLC")
ITL (USA) Limited ("ITL")
Genstar Land Company ("Genstar Land")
During the years ended December 31, 1994, 1995, and 1996, the Company had
the following transactions with affiliates (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Payment of management fee to Imasco
Holdings................................... $ 500 $ 500 $ 860
Receipt of management fee from FFM........... -- -- (10,368)
Payment of interest to Imasco Holdings....... 112 389 205
Payment of interest to Imasco LLC............ 13,902 15,757 11,337
Payment of interest to ITL................... 729 839 515
Receipt of interest from Genstar Land........ (931) (840) (2,619)
Receipt of interest from FFM................. (4,332) (3,654) (2,725)
</TABLE>
On December 18, 1995, the Company issued 20 shares of its no par value,
$.50 per share stated value common stock to Imasco Holdings in exchange for
$50,000,000 cash and a $50,000,000 note. The note was paid on March 1, 1996. On
April 19, 1996, the Company issued 30 shares of its no par value, $.50 per share
stated value common stock to Imasco Holdings in exchange for $100,000,000. On
October 16, 1996, the Company issued an additional 40 shares of its no par
value, $.50 per share stated value common stock to Imasco Holdings in exchange
for $100,000,000. A return of capital of $136,987 has been offset against the
1996 capital contributions.
NOTE 20 -- SUBSEQUENT EVENTS
On March 19, 1997, Flagstar Enterprises, Inc. ("Flagstar"), which operates
approximately 580 Hardee's restaurants, commenced an arbitration proceeding
against Hardee's pursuant to provisions of its license agreements. The Demand
for Arbitration, which contains six claims, (i) alleges that Hardee's has
breached certain contractual, fiduciary, and statutory duties allegedly owed to
Flagstar, (ii) seeks a declaration relieving Flagstar from its obligations under
the post-termination covenants against competition contained in its license
agreements, and (iii) seeks an award of monetary damages in excess of $500
million (subject to trebling
F-46
<PAGE> 19
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
pursuant to the statutory claim). The proceeding is in its early stages. Based
on currently available information, Hardee's believes that these claims are
without merit and intends to defend against them vigorously. Therefore, no
estimate of any possible loss to Hardee's can be made at this time.
On April 27, 1997, an agreement was reached for the sale of the Company to
CKE Restaurants, Inc. ("CKE"). FFM, a wholly owned subsidiary of the Company
engaged in the food processing and distribution business and MRO, are not
included in the transaction. The purchase price is $327 million, subject to
post-closing adjustments. Up to $50 million of the consideration may be in the
form of a CKE convertible note. The transaction is subject to certain
conditions, including the completion of an equity issue by CKE and is expected
to close within the third quarter of 1997.
NOTE 21 -- SUPPLEMENTAL INFORMATION
The following results of operations for the three years ended December 31,
1996 represent the continuing operations of Hardee's Food Systems, Inc. after
the sale to CKE Restaurants, Inc. as discussed in Note 1. Included are the
results for the 808 restaurants open and operating as of December 31, 1996, the
franchising operations and the Equipment Division.
<TABLE>
<CAPTION>
(THOUSANDS)
----------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
REVENUES:
Company-operated restaurants............................. $593,391 $596,593 $645,409
Franchised and licensed restaurant and other............. 126,757 118,137 99,653
-------- -------- --------
Total revenues................................... 720,148 714,730 745,062
-------- -------- --------
OPERATING COSTS AND EXPENSES:
Restaurant operations:
Food and packaging.................................... 192,971 204,125 219,559
Payroll and other employee benefits................... 190,907 213,302 237,604
Occupancy and other operating expenses................ 124,934 134,241 154,415
-------- -------- --------
508,812 551,668 611,578
Franchised and licensed restaurants and other............ 34,010 35,451 35,175
Advertising expenses..................................... 28,985 33,121 36,396
General and administrative expenses...................... 56,766 74,912 79,735
-------- -------- --------
Total operating costs and expenses............... 628,573 695,152 762,884
-------- -------- --------
OPERATING INCOME (LOSS).................................... $ 91,575 $ 19,578 $(17,822)
======== ======== ========
Number of Units............................................ 692 733 808
</TABLE>
Total general and administrative expenses for each year have been included
in operating results with no allocation to non-operating units.
F-47
<PAGE> 20
HARDEE'S FOOD SYSTEMS, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND MARCH 31, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ -- $ 2,867
Receivables....................................................................... 22,277 18,406
Federal and state income taxes receivable......................................... 11,237 12,472
Inventories....................................................................... 10,906 12,101
Prepaid expenses and other current assets......................................... 3,016 3,058
--------- ---------
Total current assets............................................................ 47,436 48,904
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land.............................................................................. 93,065 92,035
Buildings, including improvements to leased properties............................ 388,757 393,281
Equipment, vehicles and fixtures.................................................. 240,145 246,496
Construction in progress.......................................................... 1,722 1,629
Leased property under capital leases.............................................. 10,518 10,645
--------- ---------
734,207 744,086
Less accumulated depreciation and amortization.................................... (336,883) (344,208)
--------- ---------
Total property, plant and equipment, net........................................ 397,324 399,878
--------- ---------
OTHER ASSETS:
Notes receivable due after one year............................................... 10,607 8,733
Intangible assets................................................................. 299 294
Deferred charges.................................................................. 627 595
Deferred income taxes............................................................. 34,306 34,306
Other............................................................................. 21 493
--------- ---------
Total other assets.............................................................. 45,860 44,421
--------- ---------
TOTAL ASSETS........................................................................ $ 490,620 $ 493,203
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Bank overdrafts................................................................... $ 5,359 $ --
Short-term borrowings............................................................. 10,000 9,000
Trade accounts payable............................................................ 10,317 10,281
Trade accounts payable -- affiliate............................................... 5,851 6,318
Other accounts payable and accrued expenses....................................... 75,956 71,759
Deferred income................................................................... 1,569 1,586
Current maturities of long-term debt.............................................. 46 66
Current maturities of obligations under capital leases............................ 606 561
Deferred income taxes............................................................. 1,166 1,166
--------- ---------
Total current liabilities......................................................... 110,870 100,737
--------- ---------
POSTRETIREMENT BENEFITS............................................................. 20,440 22,641
--------- ---------
ESTIMATED FUTURE COST OF EXCESS PROPERTIES.......................................... 21,403 21,403
--------- ---------
LONG-TERM DEBT TO PARENT............................................................ -- 19,721
--------- ---------
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES........................................ 1,709 1,684
--------- ---------
OBLIGATIONS UNDER CAPITAL LEASES, EXCLUDING CURRENT MATURITIES...................... 6,124 6,008
--------- ---------
DEFERRED CREDITS -- OTHER........................................................... 6,018 5,975
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock of no par value...................................................... -- --
Authorized 10,000,000 shares; 155 and 225 shares issued at stated value of $.50
per share in 1996 and 1997, respectively........................................ 1 1
Additional paid-in capital........................................................ 316,596 316,596
(Accumulated deficit) Retained earnings........................................... 7,459 (1,563)
--------- ---------
Total shareholder's equity...................................................... 324,056 315,034
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.......................................... $ 490,620 $ 493,203
========= =========
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-48
<PAGE> 21
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
REVENUES:
Company-operated restaurants......................................... $168,976 $151,019
Franchised and licensed restaurants and other........................ 23,712 22,070
-------- --------
Total revenues............................................... 192,688 173,089
-------- --------
OPERATING COSTS AND EXPENSES:
Restaurant operations:
Food and packaging................................................ 58,779 50,308
Payroll and other employee benefits............................... 66,081 59,657
Occupancy and other operating expenses............................ 43,739 38,700
-------- --------
168,599 148,665
Franchised and licensed restaurants and other........................ 7,495 6,218
Advertising expenses................................................. 10,215 9,095
General and administrative expenses.................................. 17,923 19,450
-------- --------
Total operating costs and expenses........................... 204,232 183,428
-------- --------
OPERATING LOSS......................................................... (11,544) (10,339)
INTEREST EXPENSE....................................................... 2,932 823
OTHER EXPENSES (INCOME), NET........................................... 215 (2,140)
-------- --------
LOSS BEFORE INCOME TAXES............................................... (14,691) (9,022)
INCOME TAX............................................................. -- --
-------- --------
NET LOSS............................................................... $(14,691) $ (9,022)
======== ========
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-49
<PAGE> 22
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
COMMON STOCK AT BEGINNING AND END OF PERIOD............................ $ 1 $ 1
-------- --------
ADDITIONAL PAID-IN CAPITAL:
Amount at beginning of period........................................ 253,583 316,596
Capital contributions................................................ 63,013 --
-------- --------
Amount at end of period........................................... 316,596 316,596
-------- --------
(ACCUMULATED DEFICIT) RETAINED EARNINGS:
Amount at beginning of period........................................ 35,318 7,459
Net loss............................................................. (27,859) (9,022)
-------- --------
Amount at end of period........................................... 7,459 (1,563)
-------- --------
TOTAL SHAREHOLDER'S EQUITY............................................. $324,056 $315,034
======== ========
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-50
<PAGE> 23
HARDEE'S FOOD SYSTEMS, INC.
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997 (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................................... $(14,691) $ (9,022)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation (including amortization of leased property under capital
leases)..................................................................... 12,094 11,947
Amortization of intangible assets............................................ 61 37
Loss (gain) on disposition of property, plant and equipment.................. (83) 1,867
Provision for postretirement benefits........................................ 4,241 2,201
Amortization of gain on sale of real estate.................................. (288) (43)
Provision for excess properties expense...................................... 3,002 --
Provision for deferred income taxes.......................................... 666 --
Provision for bad debts...................................................... 272 1,704
Changes in assets and liabilities:
Receivables................................................................ (307) 3,890
Inventories................................................................ 1,151 (1,195)
Prepaid expenses and other current assets.................................. 428 (42)
Trade accounts payable..................................................... 3,530 431
Other accounts payable and accrued expenses................................ 2,852 (4,197)
Federal and state income taxes............................................. (1,238) (1,235)
Deferred income............................................................ 1,132 17
--------- ---------
Net cash provided by (used in) operating activities.......................... 12,822 6,360
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment..................................... (13,918) (20,807)
Proceeds from disposition of property, plant and equipment..................... 3,655 4,778
Increase in intangibles and other assets....................................... (972) (472)
Issuance of notes receivable................................................... -- (893)
Collection on notes receivable and direct financing leases..................... 2,247 705
--------- ---------
Net cash used in investing activities........................................ (8,988) (16,689)
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Repayment of long-term debt.................................................... (13) (5)
Repayment of short-term borrowings............................................. -- (1,000)
Proceeds from notes payable to parent.......................................... 17,919 19,721
Bank overdrafts................................................................ -- (5,359)
Repayment of obligations under capital leases.................................. (185) (161)
--------- ---------
Net cash provided by financing activities.................................... 17,721 13,196
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS........................................ 21,555 2,867
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD................................... 26,112 --
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD......................................... $ 47,667 $ 2,867
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of capitalized amount)......................................... $ (14) $ 326
Income taxes (net of refunds)................................................ (6,094) 1,701
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with the acquisition/sale of restaurants to franchisees, the
Company exchanged notes receivable in the amount of......................... $ -- $ 339
--------- ---------
</TABLE>
See Accompanying Notes to Combined Financial Statements.
F-51
<PAGE> 24
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
The combined financial statements include the accounts of Hardee's Food
Systems, Inc. (the "Company") a North Carolina Corporation and wholly-owned
subsidiary of Imasco Holdings, Inc. ("Imasco Holdings"), a Delaware corporation.
Imasco Holdings is a wholly-owned subsidiary of Imasco Limited, a Canadian
Corporation.
The accounts of Hardee's Food Systems, Inc. include the Restaurant and
Equipment Divisions, however, they do not include the accounts of Fast Food
Merchandisers, Inc. ("FFM") and MRO Mid-Atlantic, ("MRO") two directly owned
subsidiaries.
The common stock of Hardee's Food Systems, Inc. will be sold to CKE
Restaurants, Inc. under a stock purchase agreement dated April 27, 1997 (See
Note 3). FFM and MRO will be spun off to Imasco Holdings or one of its
affiliates.
The Restaurant Division operates a system of approximately 3,200 company
and franchise quick service restaurants under the Hardee's trademark in 37
states and 10 foreign countries. The Equipment Division is engaged in the
business of selling equipment and small wares to Hardee's and other restaurant
businesses.
NOTE 2 -- COMMITMENTS AND CONTINGENCIES
On March 19, 1997, Flagstar Enterprises, Inc. ("Flagstar"), which operates
approximately 580 Hardee's restaurants, commenced an arbitration proceeding
against Hardee's pursuant to provisions of its license agreements. The Demand
for Arbitration, which contains six claims, (i) alleges that Hardee's has
breached certain contractual, fiduciary and statutory duties allegedly owed to
Flagstar, (ii) seeks a declaration relieving Flagstar from its obligations under
the post-termination covenants against competition contained in its license
agreements, and (iii) seeks an award of monetary damages in excess of $500
million (subject to trebling pursuant to the statutory claim). The proceeding is
in its early stages. Based on currently available information, Hardee's believes
that these claims are without merit and intends to defend against them
vigorously. Therefore, no estimate of any possible loss to Hardee's can be made
at this time.
NOTE 3 -- SUBSEQUENT EVENTS
On April 27, 1997, an agreement was reached for the sale of the Company to
CKE Restaurants, Inc. ("CKE"). FFM, a wholly owned subsidiary of the Company
engaged in the food processing and distribution business, and MRO are not
included in the transaction. The purchase price is $327 million, subject to
post-closing adjustments. Up to $50 million of the consideration may be in the
form of a CKE convertible note. The transaction is subject to certain
conditions, including the completion of an equity issue by CKE and is expected
to close within the third quarter of 1997.
F-52
<PAGE> 25
HARDEE'S FOOD SYSTEMS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
(UNAUDITED)
NOTE 4 - SUPPLEMENTAL INFORMATION
The following results of operations for the three months ended March 31,
1996 and 1997 represent the continuing operations of Hardee's Food Systems, Inc.
after the sale to CKE Restaurants, Inc. as discussed in Note 1. Included are the
results for the 788 restaurants open and operating as of March 31, 1997, the
franchising operations and the Equipment Division.
<TABLE>
<CAPTION>
(THOUSANDS)
---------------------
1996 1997
-------- --------
<S> <C> <C>
REVENUES:
Company-operated restaurants................................. $141,208 $150,075
Franchised and licensed restaurants and other................ 23,712 22,070
-------- --------
Total revenues....................................... 164,920 172,145
-------- --------
OPERATING COSTS AND EXPENSES:
Restaurant operations:
Food and packaging........................................ 49,061 50,440
Payroll and other employee benefits....................... 54,193 58,810
Occupancy and other operating expenses.................... 33,812 37,367
-------- --------
137,066 146,617
Franchised and licensed restaurants and other................ 7,495 6,218
Advertising expenses......................................... 8,070 8,142
General and administrative expenses.......................... 17,923 19,450
-------- --------
Total operating costs and expenses................... 170,554 180,427
-------- --------
OPERATING LOSS................................................. $ (5,634) $ (8,282)
======== ========
Number of Units................................................ 730 788
</TABLE>
Total general and administrative expenses for each period have been
included in operating results with no allocation to non-operating units.
F-53
