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EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
BETWEEN
CASA BONITA HOLDINGS, INC.
AND
CKE RESTAURANTS, INC.
AUGUST 27, 1996
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TABLE OF CONTENTS
Section 1. Definitions.................................................1
Section 2. Purchase and Sale of Company Shares and
Purchase Price Adjustment...................................4
(a) Basic Transaction....................................................4
(b) Purchase Price.......................................................4
(c) Purchase Price Adjustment............................................5
(d) The Closing..........................................................6
(e) Deliveries at the Closing............................................6
(f) Treatment of Intercompany Debt.......................................7
Section 3. Representations and Warranties Concerning
the Transaction.............................................7
(a) Representations and Warranties of Seller.............................7
(b) Representations and Warranties of Buyer..............................8
Section 4. Representations and Warranties Concerning the
Company and its Subsidiaries................................8
(a) Organization, Qualification, and Corporate Power.....................9
(b) Capitalization.......................................................9
(c) Noncontravention.....................................................9
(d) Brokers' Fees.......................................................10
(e) Title to Tangible Assets............................................10
(f) Subsidiaries. ......................................................10
(g) Financial Statements................................................10
(h) Events Subsequent to April 1, 1996..................................11
(i) Legal Compliance....................................................12
(j) Tax Matters.........................................................12
(k) Real Property.......................................................13
(l) Intellectual Property...............................................14
(m) Contracts..........................................................15
(n) Litigation..........................................................15
(o) Employee Benefits...................................................16
(p) Bonds...............................................................16
(q) Environmental Matters...............................................16
(r) Certain Business Relationships With the Company
and its Subsidiaries................................................17
(s) Insurance...........................................................17
(t) Certain Labor Matters...............................................17
(u) No Representation or Warranty Concerning ADA........................17
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Section 5. Pre-Closing Covenants......................................17
(a) General.............................................................17
(b) Notices and Consents................................................18
(c) Operation of Business...............................................18
(d) Exclusivity.........................................................18
(e) Letters of Credit and Comfort Letters...............................18
(f) Assets of Management Corp...........................................19
(g) Training Center.....................................................19
(h) Phase I Audits......................................................19
(i) Notice of Developments..............................................20
Section 6. Additional Covenants and Agreements........................20
(a) General.............................................................20
(b) Litigation Support..................................................20
(c) Transition..........................................................21
(d) Food Purchase and Other Contracts...................................21
(e) Employees and Employee Benefit Plans................................21
(f) Income Tax Returns for Periods Through the Closing Date.............23
(g) Income Tax Audits...................................................23
Section 7. Conditions to Obligation to Close..........................23
(a) Conditions to Obligation of Buyer...................................23
(b) Conditions to Obligation of Seller..................................24
Section 8. Remedies for Breaches of This Agreement....................25
(a) Survival of Representations and Warranties..........................25
(b) Indemnification Provisions for Benefit of Buyer.....................25
(c) Indemnification Provisions for Benefit of Seller....................26
(d) Matters Involving Third Parties.....................................26
(e) Determination of Adverse Consequences...............................27
Section 9. Termination................................................27
(a) Termination of Agreement............................................27
(b) Effect of Termination...............................................28
Section 10. Miscellaneous............................................28
(a) Certain Understandings of Buyer.....................................28
(b) Press Releases and Public Announcements.............................29
(c) No Third Party Beneficiaries........................................29
(d) Entire Agreement....................................................29
(e) Succession and Assignment...........................................29
(f) Counterparts........................................................29
(g) Headings............................................................30
(h) Notices.............................................................30
(ii)
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(i) Governing Law..................................................31
(j) Amendments and Waivers.........................................31
(k) Severability...................................................31
(l) Expenses.......................................................31
(m) Construction...................................................31
(n) Incorporation of Exhibits and Schedules........................31
(o) Specific Performance. .........................................31
(p) Submission to Jurisdiction.....................................32
EXHIBITS
Exhibit A-1 - List of Letters of Credit
Exhibit A-2 - List of Comfort Letters
Exhibit B - List of Phase I Environmental Audit Locations
Exhibit C - Purchase Price Adjustment
Exhibit D - Form of Transition Services Agreement
Exhibit E - Form of Guarantee Agreement
Disclosure Schedule - Exceptions to Representations
and Warranties
(iii)
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STOCK PURCHASE AGREEMENT
AGREEMENT entered into as of August 27, 1996, by and between
CKE Restaurants, Inc., a Delaware corporation ("Buyer"), and Casa Bonita
Holdings, Inc., a Delaware corporation ("Seller"). Buyer and Seller are referred
to herein as the "Parties." Other capitalized terms used herein are defined in
Section 1.
WHEREAS, Seller owns all of the outstanding capital stock of
Casa Bonita Incorporated, a Texas corporation (the "Company");
WHEREAS, subject to the terms and conditions set forth in this
Agreement, Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, all of the outstanding capital stock of the Company; and
WHEREAS, Buyer will pay to Seller an aggregate of $42 million
for the outstanding capital stock of the Company under this Agreement, subject
to adjustment as set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the Parties agree as follows.
Section 1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings,
investigations, charges, complaints, claims, injunctions, judgments, orders,
decrees, rulings, damages, dues, penalties, fines, costs, reasonable amounts
paid in settlement, liabilities, obligations, taxes, liens, losses, expenses,
and fees, including court costs and reasonable attorneys' fees and expenses.
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
Person within the meaning of the Securities Exchange Act.
"Affiliated Group" means an affiliated group within the
meaning of Code Section 1504(a).
"Applicable Rate" means the corporate base rate of interest
announced from time to time by Chemical Bank.
"Buyer" has the meaning set forth in the preface above.
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"Casa Bonita Restaurants" means Casa Bonita Restaurants, Inc.,
a Delaware corporation.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d)
below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preface above.
"Company Shares" means the shares of common stock, par value
$.01 per share, of the Company.
"Confidentiality Agreement" has the meaning set forth in
Section 10(d) below.
"Disclosure Schedule" has the meaning set forth in Section 4
below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan, or (d)
Employee Welfare Benefit Plan.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Financial Statements" has the meaning set forth in Section
4(g) below.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 8(d)
below.
"Indemnifying Party" has the meaning set forth in Section 8(d)
below.
"Intellectual Property" has the meaning set forth in Section
4(l) below.
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"Knowledge" means actual knowledge without independent
investigation.
"Management Corp." means Casa Bonita Management Corp., a South
Dakota corporation.
"Material Adverse Effect" means any effect on the Company or
any of its Subsidiaries that is, or could reasonably be expected to be, either
individually or in the aggregate, materially adverse to the business or
financial condition of the Company and its Subsidiaries, taken as a whole.
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice.
"Party" has the meaning set forth in the preface above.
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall have
been commenced (or, if commenced, which are being contested in good faith): (a)
Security Interests imposed by operation of law, such as materialmen's,
mechanic's, and similar liens, (b) Security Interests for Taxes not yet due and
payable, (c) easements, rights of way and other encumbrances on title to real
property that do not materially affect the title to such real property or
materially adversely affect the use of such property for its intended purposes,
or (d) other Security Interests which are immaterial.
"Person" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Phase I Audits" has the meaning set forth in Section 5(h).
"Securities Act" means the Securities Act of 1933, as amended.
"SEC" means the Securities and Exchange Commission.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest.
"Seller" has the meaning set forth in the preface above.
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"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof.
"Tax" means any federal, state, local, or foreign income,
employment, excise, franchise, sales, use, property, or transfer tax, including
any interest, penalty, or addition thereto.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to any Tax, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 8(d)
below.
"UK GAAP" means United Kingdom generally accepted accounting
principles as in effect from time to time.
"Unigate PLC" means Unigate PLC, a company organized under the
laws of England and Wales and the indirect parent of Seller.
"US GAAP" means United States generally accepted accounting
principles as in effect from time to time.
Section 2. Purchase and Sale of Company Shares and Purchase
Price Adjustment.
(a) Basic Transaction. On and subject to the terms and conditions of this
Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell to
Buyer, free and clear of all Security Interests, all of the outstanding Company
Shares for the consideration specified in Section 2(b).
(b) Purchase Price. At the Closing, Buyer shall pay to Seller $42
million by wire transfer of immediately available funds as the purchase price
for the Company Shares.
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(c) Purchase Price Adjustment.
(i) As soon as practicable, but in no event later than
30 days following the Closing Date, Seller, shall prepare a balance sheet
as of the Closing Date for the Company and its Subsidiaries (the "Closing
Date Balance Sheet"). The Closing Date Balance Sheet shall be prepared on a
basis consistent with the methods, principles, practices and policies
employed in the preparation and presentation of the Latest Balance Sheet
and in accordance with UK GAAP; provided, however, that in any instance
where such methods, principles, practices or policies are not in accordance
with UK GAAP, UK GAAP shall control. Seller shall also prepare and deliver
its calculation of the purchase price adjustment in accordance with Exhibit
C attached hereto (the "PPA") based on the Closing Date Balance Sheet.
(ii) During the preparation of the Closing Date Balance
Sheet, the calculation of the PPA and the period of any review or dispute
within the contemplation of this section, Buyer shall, and shall cause the
Company to, (1) provide Seller and Seller's authorized representatives with
full access to the books, records, facilities and employees of the Company
and its Subsidiaries, and (2) cooperate fully with Seller and Seller's
authorized representatives, including the provision on a timely basis of
all information necessary or useful.
(iii) Seller shall deliver copies of the Closing Date
Balance Sheet and its calculation of the PPA to Buyer promptly after they
have been prepared. After receipt of the Closing Date Balance Sheet, Buyer
shall have 14 days to review the Closing Date Balance Sheet, together with
the workpapers used in the preparation thereof. Buyer and its authorized
representatives shall have full access to (1) all relevant books, records
and employees of Seller and (2) Seller's accountants and their relevant
supporting workpapers. Unless Buyer delivers written notice to Seller on or
prior to the 14th day after Buyer's receipt of the Closing Date Balance
Sheet stating that Buyer has objections to the Closing Date Balance Sheet
or the calculation of the PPA, Buyer shall be deemed to have accepted and
agreed to the Closing Date Balance Sheet and the PPA. If Buyer notifies
Seller of its objections to the Closing Date Balance Sheet or the
calculation of the PPA, Buyer and Seller shall, within 10 days (or such
longer period as the parties may agree) following such notice (the
"Resolution Period"), attempt to resolve their differences and any
resolution by them as to any disputed amounts shall be final, binding and
conclusive.
(iv) Any amounts remaining in dispute at the conclusion
of the Resolution Period ("Unresolved Changes") shall be submitted to a
nationally recognized firm of independent accountants independent of
Seller, Buyer and their respective Affiliates (such firm being referred to
as the "Neutral Auditors"), within 10
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days after the expiration of the Resolution Period. Each party agrees to
execute, if requested by the Neutral Auditors, a reasonable engagement
letter. All fees and expenses relating to the work, if any, to be performed
by the Neutral Auditors shall be borne pro rata by Seller and Buyer in
proportion to the allocation of the dollar amount of the Unresolved Changes
between Buyer and Seller made by the Neutral Auditors such that the
prevailing party pays a lesser proportion of the fees and expenses. The
Neutral Auditors shall act as an arbitrator to determine, based on the
provisions of this Section, only the Unresolved Changes. The Neutral
Auditors' determination of the Unresolved Changes shall be made within 30
days of the submission of the Unresolved Changes thereto, shall be set
forth in a written statement delivered to Seller and Buyer and shall be
final, binding and conclusive.
(v) In the event that Buyer and Seller agree to the
PPA, any amounts due shall be paid within seven business days thereafter.
In the event that there are Unresolved Changes at the end of the Resolution
Period, then (1) if Buyer and Seller agree that a purchase price adjustment
is owed to one Party regardless of the ultimate resolution of any
Unresolved Changes, then the minimum amount which Buyer and Seller agree is
owed to such Party shall be paid within seven business days after the end
of the Resolution Period and any additional amounts owing to such Party
with respect to the Unresolved Changes shall be paid within seven business
days after resolution thereof by the Neutral Auditors or (2) in all other
cases, any and all payments shall be made within seven business days after
resolution of the Unresolved Changes by the Neutral Auditors.
(vi) Any payments made pursuant to the PPA shall be
accompanied by interest at the Applicable Rate from the Closing Date up to
and including the date of payment.
(d) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Kirkland & Ellis in
Chicago, Illinois, commencing at 9:00 a.m. local time on October 1, 1996 (or, if
later, the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself)) (the "Closing Date").
(e) Deliveries at the Closing. At the Closing, (i) Seller will deliver to
Buyer the various instruments and documents referred to in Section 7(a) below,
(ii) Buyer will deliver to Seller the various instruments and documents referred
to in Section 7(b) below, (iii) Seller will deliver to Buyer stock certificates
representing all of the outstanding Company Shares, endorsed in blank or
accompanied by duly executed assignment documents, (iv) Buyer will deliver to
Seller the consideration specified in Section 2(b) above for the outstanding
Company Shares, (v) the Parties will execute and deliver the Transition Services
Agreement, attached hereto as Exhibit D and (vi) Seller's Affiliate,
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Unigate Holdings, N.V., and Buyer will execute and deliver the Guarantee
Agreement, attached hereto as Exhibit E.
(f) Treatment of Intercompany Debt. Immediately prior to the Closing, all
outstanding intercompany balances and promissory notes between the Company and
its Subsidiaries, on the one hand, and Seller and its Affiliates (other than the
Company and its Subsidiaries), on the other hand, shall be combined and netted.
Any net amount owing by the Company and its Subsidiaries shall be contributed to
the capital of the Company. Any net amount owing to the Company and its
Subsidiaries shall be forgiven. Seller shall deliver written evidence of the
consummation of such transactions at the Closing.
Section 3. Representations and Warranties Concerning the
Transaction.
(a) Representations and Warranties of Seller. Seller represents and
warrants to Buyer that the statements contained in this Section 3(a) are true
and correct as of the date of this Agreement.
(i) Organization. Seller is a corporation, duly
organized and validly existing and in good standing under the laws of the
State of Delaware.
(ii) Authorization of Transaction. Seller has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly executed
and delivered by Seller, has been authorized by all necessary corporate
action on behalf of Seller and constitutes the valid and legally binding
obligation of Seller, enforceable in accordance with its terms and
conditions. Seller does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement, except (i) pursuant to state or local laws governing
liquor licenses and health code permits, (ii) under the HSR Act and (iii)
authorizations, consents or approvals which are immaterial.
(iii) Brokers' Fees. Seller does not have any liability
or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for
which Buyer, the Company or its Subsidiaries could become liable or
obligated. Seller shall be solely responsible for the fees, expenses and
commissions of Schroder Wertheim & Co. Incorporated and shall indemnify,
defend and hold the Buyer, the Company and its Subsidiaries harmless from
and against the payment of any such fees, expenses and commissions payable
to Schroder Wertheim & Co. Incorporated in connection with the transactions
contemplated hereby.
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(iv) Company Shares. Seller has good and valid title to,
and holds of record and owns beneficially, all of the issued and
outstanding Company Shares free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities
laws), taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. Seller is not party
to any option, warrant, purchase right, or other contract or commitment
that could require it to sell, transfer, or otherwise dispose of any
capital stock of the Company. Seller is not party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of
any capital stock of the Company.
(b) Representations and Warranties of Buyer. Buyer represents and
warrants to Seller that the statements contained in this Section 3(b) are true
and correct as of the date of this Agreement.
(i) Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware.
(ii) Authorization of Transaction. Buyer has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Buyer, enforceable in accordance with its
terms and conditions. Buyer need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement, except as required pursuant to the HSR Act.
(iii) Sufficient Funds. Buyer has cash available,
and/or has obtained commitments from financial institutions, in amounts
sufficient to pay at the Closing the purchase price for the Company Shares
as provided in Section 2(b) above.
(iv) Brokers' Fees. Buyer has no liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
Seller or any of its Affiliates could become liable or obligated.
(v) Investment. Buyer is not acquiring the Company
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
Section 4. Representations and Warranties Concerning the
Company and its Subsidiaries. Subject to the limitations set forth in Section 8,
Seller represents and warrants to Buyer that the statements contained in this
Section 4 are true and correct as of the date of this Agreement except as set
forth in or apparent from information contained in the disclosure schedule
delivered by Seller to Buyer on the date hereof (the "Disclosure Schedule").
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(a) Organization, Qualification, and Corporate Power. Each of the
Company and its Subsidiaries is a corporation or partnership duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization. Each of the Company and its Subsidiaries is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect. Each of the Company and
its Subsidiaries has full power and authority under its corporate or partnership
documents to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) Capitalization. The entire authorized capital stock of the Company
consists of 10,000,000 shares of common stock, par value $.01 per share, of
which 434,480 shares are issued and outstanding. All of the issued and
outstanding Company Shares have been duly authorized, are validly issued, fully
paid, and nonassessable, and are held of record by Seller. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock or any securities or other instruments
convertible into or exchangeable for shares of capital stock or any other equity
interest of or in the Company. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement by Seller, nor the consummation of the transactions contemplated
hereby, will (i) to the Knowledge of Seller, violate any statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of Seller, the
Company or its Subsidiaries is subject, (ii) violate any provision of the
charter or bylaws of any of Seller, the Company or its Subsidiaries or (iii)
result in a breach of, constitute a default under, result in the acceleration or
termination of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any material agreement, contract, lease,
license, instrument, or other arrangement to which any of Seller, the Company or
its Subsidiaries is a party or by which it is bound or to which any of its
assets is subject (or result in the imposition of any Security Interest upon any
of its assets). None of Seller, the Company or its Subsidiaries needs to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except (i) pursuant
to state or local laws governing liquor licenses or health code permits, (ii)
under the HSR Act, and (iii) authorizations, consents or approvals which are
immaterial.
(d) Brokers' Fees. None of the Company or its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
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(e) Title to Tangible Assets. The Company and its Subsidiaries have
good and marketable title to and own, or have a valid leasehold interest in or
other valid right to use, the material tangible assets they use regularly in the
conduct of their businesses, free and clear of all Security Interests other than
Permitted Liens.
(f) Subsidiaries. Section 4(f) of the Disclosure Schedule sets forth
for each Subsidiary of the Company (i) if such Subsidiary is a corporation (A)
its name and jurisdiction of incorporation, (B) the number of shares of
authorized capital stock of each class of its capital stock, (C) the number of
issued and outstanding shares of each class of its capital stock, (D) the names
of the holders of shares of each class of its capital stock, and (E) the number
of shares held by each such holder; and (ii) if such Subsidiary is a partnership
(A) its name and jurisdiction of organization, (B) the names of the holders of
its general and limited partner interests and (C) the percentage general or
limited partner interest held by each such holder. All of the issued and
outstanding shares of capital stock of each corporate Subsidiary of the Company
have been duly authorized and are validly issued, fully paid and nonassessable.
All of the outstanding general and limited partner interests of each partnership
Subsidiary of the Company have been duly authorized and are validly issued and
fully paid. One of the Company and its Subsidiaries holds of record and owns
beneficially all of the outstanding shares of each corporate Subsidiary of the
Company and one of the Company and its Subsidiaries owns each outstanding
partner interest of each partnership Subsidiary of the Company, in each case
free and clear of all Security Interests.
(g) Financial Statements. The following financial statements are
included in the Disclosure Schedule (collectively the "Financial Statements"):
(i) the consolidated balance sheet of the Company and
its Subsidiaries as of April 1, 1996, which has been prepared in
accordance with US GAAP (but has not been audited or reviewed);
(ii) the interim consolidated balance sheet of the
Company and its Subsidiaries as of June 24, 1996 (the "Latest Balance
Sheet"), which has been prepared in accordance with UK GAAP (but has
not been audited or reviewed); and
(iii) selected consolidated earnings information for the
Company and its Subsidiaries for the fiscal year ended April 1, 1996
and the three periods ended June 24, 1996, which has been prepared in
accordance with UK GAAP (but has not been audited or reviewed).
The Financial Statements in clauses (i) and (ii) above have been prepared in
accordance with US GAAP or UK GAAP, as the case may be, and present fairly the
financial condition of the Company and its Subsidiaries for such periods;
provided, however, that such Financial Statements do not include footnotes. The
Financial Statements in clause (iii) above have been derived from the books and
records of Casa Bonita Restaurants and its Subsidiaries and have been prepared
in accordance with UK GAAP applied on a consistent
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basis throughout the periods covered thereby; provided, however, that such
Financial Statements do not include footnotes. Except for (i) liabilities which
are not required to be disclosed in the Latest Balance Sheet under UK GAAP and
(ii) liabilities incurred in the Ordinary Course of Business by the Company or
its Subsidiaries since June 24, 1996, none of the Company or its Subsidiaries
has any liability not disclosed, reserved for or otherwise reflected in the
Latest Balance Sheet that has had, or would reasonably be expected to have, a
Material Adverse Effect (after giving effect to any unrecorded assets).
(h) Events Subsequent to April 1, 1996.
(i) Since April 1, 1996, there has not been any
material adverse change in the business or financial condition of the
Company and its Subsidiaries taken as a whole.
(ii) Since April 1, 1996, none of the Company or its
Subsidiaries has engaged in any material practice, taken any material
action or entered into any material transaction outside the Ordinary
Course of Business (other than the transactions contemplated by this
Agreement). Without limiting the generality of the foregoing, since
that date:
(A) there has been no change made or
authorized in the charter or bylaws of the Company or any of
its Subsidiaries;
(B) none of the Company or its Subsidiaries
has issued, sold or otherwise disposed of any of its capital
stock, or granted any options, warrants or other rights to
purchase or obtain (including upon conversion, exchange or
exercise) any of its capital stock;
(C) none of the Company or its Subsidiaries
has declared, set aside or paid any dividend or made any
distribution with respect to its capital stock (whether in
cash or in kind), or redeemed, purchased or otherwise acquired
any of its capital stock;
(D) the Company and its Subsidiaries have not
created, incurred, assumed or guaranteed more than $100,000 in
aggregate indebtedness for borrowed money and capitalized
lease obligations;
(E) none of the Company or its Subsidiaries
has sold, leased, transferred or assigned any material assets,
tangible or intangible, outside the Ordinary Course of
Business;
(F) none of the Company or its Subsidiaries
has experienced any material damage, destruction or loss
(whether or not covered by insurance) to any material item of
property;
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(G) none of the Company or its Subsidiaries
has materially changed any accounting methods, principles or
practices, except as required by law or by changes in US GAAP
or UK GAAP, as the case may be;
(H) none of the Company or its Subsidiaries
has, other than in the Ordinary Course of Business, entered
into any material contract, transaction or commitment,
including any loan, lease, purchase or sale of assets,
borrowing or capital expenditure, or any commitment therefor,
and no material agreement, contract or commitment to which the
Company or any of its Subsidiaries was a party at April 1,
1996 has been amended or modified in any material way, or
terminated, in each case, other than in the Ordinary Course of
Business;
(I) none of the Company or its Subsidiaries
has granted any increase in the compensation or employee
benefits payable to or to become payable to any officer,
director or employee of the Company or its Subsidiaries, other
than increases required by law or in the Ordinary Course of
Business; and
(J) none of the Company or its Subsidiaries
has committed to any of the foregoing.
(i) Legal Compliance. Each of the Company and its Subsidiaries has
complied with all applicable laws of federal, state and local governments,
except where the failure to comply would not have a Material Adverse Effect. The
Company and its Subsidiaries hold all material permits, certificates, licenses,
approvals and other authorizations (or, where legally permissible, has waivers
thereof or is entitled to exemptions therefrom) of governmental authorities
necessary for the operation of their businesses as presently conducted.
(j) Tax Matters.
(i) Each of the Company and its Subsidiaries has filed
or been included in all Tax Returns (other than federal income Tax
Returns) that it was required to file or to be included in, all Tax
Returns (other than federal income Tax Returns) are true and correct
and all Taxes (other than federal income Taxes) owed by the Company and
its Subsidiaries (whether or not shown on any such Tax Returns) have
been paid, subject to such exceptions as would not have a Material
Adverse Effect. Seller has made available and upon request Seller shall
provide to Buyer correct and complete copies of all U.S. federal income
Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and its
Subsidiaries for taxable periods ended on or after the fiscal year
ended 1991.
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(ii) Section 4(j) of the Disclosure Schedule lists all
income Tax Returns filed with respect to any of the Company and its
Subsidiaries for taxable periods ended on or after the fiscal year
ended 1991, indicates those income Tax Returns that have been audited,
and indicates those income Tax Returns that currently are the subject
of audit.
(iii) None of the Company or its Subsidiaries has waived
any statute of limitations in respect of income Taxes or agreed to any
extension of time with respect to an income Tax assessment or
deficiency.
(iv) None of the Company or its Subsidiaries is a party
to any Tax allocation or sharing agreement.
(v) The Affiliated Group, of which the Company and its
Subsidiaries are members, has filed all federal income Tax Returns that
it was required to file for each taxable period during which any of the
Company and its Subsidiaries was a member of the group, all such
federal income Tax Returns are true and correct and all federal income
Taxes owed by any Affiliated Group (whether or not shown on any such
Tax Return) have been paid for each taxable period during which any of
the Company and its Subsidiaries was a member. None of the Company and
its Subsidiaries has any liability for the federal income Taxes for any
Person other than the Company and its Subsidiaries under Treasury Reg.
Section 1.1502-6 (or any similar provision of state, local or foreign
law).
(k) Real Property.
(i) Section 4(k)(i) of the Disclosure Schedule lists
all real property that any of the Company and its Subsidiaries owns.
With respect to each such parcel of owned real property, except for
matters which would not have a Material Adverse Effect:
(A) the owner has good and marketable title to
the parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent,
recorded easements, covenants, and other restrictions, and
utility easements, building restrictions, zoning restrictions,
and other easements and restrictions existing generally with
respect to properties of a similar character;
(B) there are no leases, subleases, licenses,
concessions, or other agreements granting to any party or
parties the right of use or occupancy of any portion of the
parcel of real property; and
(C) there are no outstanding options or rights
of first refusal to purchase the parcel of real property.
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(ii) Section 4(k)(ii) of the Disclosure Schedule lists all
real property leased or subleased to any of the Company and its
Subsidiaries. Seller has made available to Buyer copies of the leases
and subleases listed in Section 4(k)(ii) of the Disclosure Schedule.
Each lease and sublease listed in Section 4(k)(ii) of the Disclosure
Schedule (a "Lease") is valid, binding, enforceable, and in full force
and effect, except where the invalidity, nonbinding nature,
unenforceability, or ineffectiveness would not have a Material Adverse
Effect. Subject to such exceptions that, individually or in the
aggregate, would not have a Material Adverse Effect, the Company is not
in default under any such Lease and there exists no event of default or
event, occurrence, condition or act which, with the giving of notice or
the lapse of time, would become a default under any such Lease.
(l) Intellectual Property.
(i) Section 4(l) of the Disclosure Schedule identifies the
following owned or used by any of the Company or its Subsidiaries: (A)
patents and pending patent applications; (B) trademark, service mark and
trade name registrations and applications therefor; (C) copyright
registrations and applications therefor; and (D) licenses and similar
agreements for the use of any intellectual property (including, without
limitation, patents, unpatented inventions and technology, trademarks,
service marks and trade names, copyrights and copyrightable works,
know-how and trade secrets, hereinafter collectively referred to as
"Intellectual Property") to which any of the Company or its Subsidiaries
is a party, either as licensee or licensor (other than licenses for the
use of commercially available computer software and related
documentation).
(ii) The Company and its Subsidiaries own and possess all
right, title and interest in and to, or have a valid and enforceable
license to use, the Intellectual Property necessary for the operation of
their respective businesses and, to the Knowledge of Seller, no claim by
any third party contesting the validity, enforceability, use or
ownership of any of the Intellectual Property has been made in the last
three years or is currently outstanding.
(m) Contracts. Section 4(m) of the Disclosure Schedule lists the
following written contracts to which any of the Company and its Subsidiaries is
a party on the date hereof:
(i) any agreement the performance of which is expected to
involve consideration in excess of $100,000;
(ii) any agreement which relates to the granting of a
license to a third party by the Company or any of its Subsidiaries;
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(iii) any agreement which restricts or contains limitations
on the ability of any of the Company or its Subsidiaries to freely
conduct business anywhere in the world;
(iv) any collective bargaining agreement;
(v) any agreement with the Seller or its Affiliates (other
than the Company and its Subsidiaries);
(vi) any written (or, to the Knowledge of the Seller, oral)
agreement (other than "at-will" employment agreements) for the
employment of any individual on a full-time, part-time, consulting or
other basis; and
(vii) any agreement which relates to the borrowing of money
or the guarantee thereof.
Seller has made available to Buyer a correct and complete copy of each contract
or other agreement listed in Section 4(m) of the Disclosure Schedule (the
"Contracts"), together with any and all amendments or modifications thereto.
Subject to such exceptions that, individually or in the aggregate, would not
have a Material Adverse Effect, each of the Contracts is valid, binding,
enforceable, and in full force and effect, the Company is not in breach of or
default under any such Contract and no event has occurred which, with notice or
lapse of time or both, would constitute a breach or default, or permit
termination, modification, or acceleration, under the Contract.
(n) Litigation. Section 4(n) of the Disclosure Schedule sets forth each
instance in which any of the Company and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction.
(o) Employee Benefits. Section 4(o) of the Disclosure Schedule lists
each Employee Benefit Plan that any of the Company and its Subsidiaries
maintains or to which any of them contributes.
(i) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation in
all respects with the applicable requirements of ERISA and the Code,
except where the failure to comply would not have a Material Adverse
Effect.
(ii) All contributions (including all employer
contributions and employee salary reduction contributions) which are due
have been reserved for in the accounts of the applicable Company or
Subsidiary or paid to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
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(iii) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan has (A) received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of
Code Sec. 401(a), or (B) an application for such a determination letter
for such plan has been timely filed within the remedial amendment period
(as described in Section 401(b) of the Code) with respect to the Tax
Reform Act of 1986, as amended, and subsequent federal legislation, or
(C) such remedial amendment period for such plan has not yet expired.
(iv) None of the Employee Benefit Plans set forth in
Section 4(n) of the Disclosure Schedule is subject to Title IV of ERISA.
(v) Seller has made available to Buyer true and correct
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust
agreements, insurance contracts, and other funding agreements which
implement each such Employee Benefit Plan.
(p) Bonds. Section 4(p) of the Disclosure Schedule identifies all bonds,
guarantees, comfort letters and similar instruments currently maintained by or
on behalf of the Company and its Subsidiaries.
(q) Environmental Matters. No facts or circumstances exist with respect
to the real property owned or operated by the Company and its Subsidiaries which
give rise to any liability based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment of any pollutant,
contaminant or hazardous substance, except (i) for such exceptions that,
individually or in the aggregate, would not have a Material Adverse Effect and
(ii) for facts or circumstances identified in the Phase I Audits with respect to
the real property owned or operated by the Company and its Subsidiaries.
(r) Certain Business Relationships With the Company and its
Subsidiaries. None of Seller or its Subsidiaries or other Affiliates (excluding
for this purpose the Company and its Subsidiaries) owns any material asset,
tangible or intangible, which is used in the business of, or provides any
material service to, any of the Company or its Subsidiaries (it being
understood, however, that Management Corp. has historically provided the Company
and its Subsidiaries with accounting, tax, legal, personnel, benefits, MIS,
telephone, insurance, advertising, marketing, purchasing and administrative
services, that Management Corp. assets have been used to provide these services
to the Company and its Subsidiaries and that Management Corp. is not included in
the companies being purchased by Buyer under this Agreement).
(s) Insurance. Section 4(s) of the Disclosure Schedule lists all
policies of insurance maintained by or on behalf of the Company and its
Subsidiaries for the prior two fiscal years, including all such policies which
are in effect as of the date of this Agreement. All
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current policies are in full force and effect and all prior year insurance
policies disclosed in Section 4(s) of the Disclosure Schedule were in full force
and effect during the periods indicated.
(t) Certain Labor Matters. None of the Company or its Subsidiaries is
party to any collective bargaining agreement and there is no labor strike or
stoppage actually pending, or to the Knowledge of Seller, threatened against or
involving the Company or its Subsidiaries. Section 4(t) of the Disclosure
Schedule lists each director and officer of the Company and each of its
Subsidiaries, and all employees of the Company or its Subsidiaries, whose annual
base compensation exceeds $50,000. The Company has made available to Buyer a
true and correct copy of its employee policies and procedures manual and
descriptions of all material employment or personnel policies of the Company not
set forth therein.
(u) No Representation or Warranty Concerning ADA. Notwithstanding
anything herein to the contrary, Seller makes no representations or warranties
regarding compliance with or liability under, or associated with, the Americans
with Disabilities Act, including the rules and regulations thereunder, or any
similar state or local law (all of which risks and liabilities are being assumed
by Buyer hereunder).
Section 5. Pre-Closing Covenants. The Parties agree as follows
with respect to the period between the execution of this Agreement and the
Closing.
(a) General. Each of the Parties will use its reasonable efforts to take
all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 7 below).
(b) Notices and Consents. Each of the Parties will (and Seller will
cause each of the Company and its Subsidiaries to) give any notices to third
parties, and each of the Parties will (and Seller will cause each of the Company
and its Subsidiaries to) use its reasonable efforts to obtain any third party
consents that the other Party reasonably may request in connection with the
matters referred to in Section 3(b)(ii) and Section 4(c) above. Each of the
Parties will (and Seller will cause each of the Company and its Subsidiaries to)
give any notices to, make any filings with, and use its reasonable efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section
3(a)(ii), Section 3(b)(ii), and Section 4(c) above. Without limiting the
generality of the foregoing, each of the Parties will file within 3 business
days of the date of this Agreement any Notification and Report Forms and related
material that it may be required to file with the Federal Trade Commission and
the Antitrust Division of the United States Department of Justice under the HSR
Act, will supply promptly any additional information and documentary material
that may be requested in connection therewith, will use its reasonable efforts
to obtain a waiver from the applicable waiting period, and will make any further
filings pursuant thereto that may be necessary, proper, or advisable in
connection therewith.
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(c) Operation of Business. Seller will not cause or permit any of the
Company and its Subsidiaries to engage in any practice, take any material
action, or enter into any material transaction outside the Ordinary Course of
Business.
(d) Exclusivity. Neither Seller nor its Affiliates will solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of all or substantially all of the capital stock or
assets of any of the Company and its Subsidiaries (including any acquisition
structured as a merger, consolidation, or share exchange).
(e) Letters of Credit and Comfort Letters.
(i) The Parties agree and acknowledge that a portion of the
face amount of the Letters of Credit identified on Exhibit A-1 hereto
are attributable to the operations of the Company and its Subsidiaries
and that the balance of the face amount of such Letters of Credit are
attributable to Management Corp. or former operations of Seller and its
Affiliates. Prior to the Closing, (A) Buyer and Seller shall contact the
insurance carriers holding the Letters of Credit identified on Exhibit
A-1 hereto and use best efforts to allocate the face amount thereof
among Seller (with respect to Management Corp.), Buyer (with respect to
the Company and its Subsidiaries) and DenAmerica Corp. (with respect to
former operations of Seller and its Affiliates) in an equitable manner
which is reasonably acceptable to the insurance carriers, (B) each of
Buyer and Seller shall use best efforts to arrange for Letters of Credit
to be posted with the appropriate insurance carriers having face amounts
equal to its allocated portion of the face amount of the Letters of
Credit identified on Exhibit A-1 hereto (such Letters of Credit to be
issued by banks or other financial institutions reasonably acceptable to
such insurance carriers and supported by customary counter-indemnities
or similar arrangements between Buyer and the issuing banks or
institutions) and (C) the Parties shall use best efforts to cause the
insurance carriers holding the Letters of Credit listed on Exhibit A-1
thereto to return such Letters of Credit to Seller or otherwise release
Casa Bonita Restaurants and its Affiliates from liability in connection
therewith.
(ii) Pursuant to the terms of the comfort letters identified
on Exhibit A-2 attached hereto, Unigate PLC will give written notice to
Texas Commerce Bank N.A. of the transactions contemplated by this
Agreement and the allocation of the comfort letters described in Section
5(e)(i) above. Buyer will use best efforts to take such actions as Texas
Commerce Bank N.A. may reasonably request (including furnishing letters
of credit or other security) in order to allocate Unigate PLC's comfort
letters as described in Section 5(e)(i) above and release Unigate PLC
from any liability thereunder.
(f) Assets of Management Corp. The Parties shall cooperate to identify
any assets of Management Corp. that Buyer desires to purchase from Management
Corp. (the
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"Additional Assets"). The Parties shall use reasonable efforts to mutually agree
on the terms and conditions for the purchase and sale of the Additional Assets,
including, but not limited to, the price for each of the Additional Assets and
the time and place for the closing of such purchase and sale.
(g) Training Center. The Parties shall use reasonable efforts to cancel
the rights and obligations of DenAmerica Corp., a Georgia corporation, under the
lease for the Training Center Facility. The Parties shall cooperate to identify
any assets located on the premises of the Training Center Facility which Buyer
desires to purchase (it being understood that DenAmerica Corp. may also have a
right to certain of such assets). The Parties shall use reasonable efforts to
mutually agree on the terms and conditions for the purchase and sale of such
assets, including, but not limited to, the price for each of the assets and the
time and place for the closing of such purchase and sale. The Parties shall also
cooperate in efforts to cause DenAmerica Corp. to release any claims it may have
regarding ownership of Training Center assets. Seller shall not be required to
pay any amounts or offer or give any other consideration to DenAmerica Corp. in
order to obtain any consent or release under this Section 5(g).
(h) Phase I Audits. Within two business days of the date hereof, Buyer
shall commence Phase I environmental audits customary in scope and nature (the
"Phase I Audits") on the real property locations of the Company and its
Subsidiaries identified on Exhibit B attached hereto and shall use reasonable
efforts to ensure completion of the Phase I Audits as soon as practicable. In
any event, CKE shall obtain the results of the Phase I Audits no later than
September 23, 1996. Buyer shall provide copies of the results of the Phase I
Audits to Seller promptly after receipt thereof.
(i) Notice of Developments.
(i) Seller may elect at any time to notify Buyer in writing
of any development which would cause a breach of (or would be required
to be disclosed in response to) any of its representations and
warranties in Section 4 above. Unless Buyer has the right to terminate
this Agreement pursuant to Section 9(a)(ii) below by reason of the
development and exercises that right within the period of 10 business
days referred to in Section 9(a)(ii) below, the written notice pursuant
to this Section 5(i)(i) will be deemed to have amended the Disclosure
Schedule, to have qualified the representations and warranties contained
in Section 4 above, and to have cured any misrepresentation or breach of
warranty that otherwise might have existed hereunder by reason of the
development, in each case to the extent of the disclosure contained in
such written notice.
(ii) Each Party will give prompt written notice to the other
of any development causing a breach of any of its own representations
and warranties in Section 3 above. No disclosure by any Party pursuant
to this Section 5(i)(ii), however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any
misrepresentation or breach of warranty.
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Section 6. Additional Covenants and Agreements.
(a) General. In case at any time after the Closing any further
reasonable action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below).
(b) Litigation Support. After the Closing, in the event and for so long
as any Party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of the Company and its Subsidiaries, each of
the other Parties shall cooperate with such Party or its counsel in the defense
or contest, make available their personnel, and provide such testimony and
access to their books and records as shall be necessary in connection with the
defense or contest, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to
indemnification therefor under Section 8 below).
(c) Transition. After the Closing, neither Seller nor its Affiliates
will take any action that is designed or intended to have the effect of
discouraging any lessor, licensor, customer, supplier, or other business
associate of any of the Company and its Subsidiaries from maintaining the same
business relationships after the Closing as it maintained with the Company and
its Subsidiaries prior to the Closing.
(d) Food Purchase and Other Contracts. The Parties acknowledge and agree
that certain food purchase contracts entered into in the Ordinary Course of
Business, other contracts listed in Section 4(m) of the Disclosure Schedule
(other than item 4 thereof) and other immaterial contracts and commitments (the
"Management Corp. Contracts") are in the name of Management Corp., but are for
the benefit of the Company and its Subsidiaries. Except in the case of
Management Corp. Contracts which by their terms prohibit assignment, at the
Closing, Seller shall cause Management Corp. to assign, transfer and convey to
the Company all of its rights in, and obligations under, the Management Corp.
Contracts and Seller shall cause the Company to accept all such rights and shall
discharge all such obligations of Management Corp. under such contracts. In the
event that the terms and conditions of any of the Management Corp. Contracts
prohibit assignment, the Seller and the Company shall work together to make the
benefits thereof available to the Company and the Company shall be responsible
for discharging all of the obligations of Management Corp. thereunder.
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(e) Employees and Employee Benefit Plans.
(i) Effective as of the Closing Date, those employees of
Management Corp. which Buyer and Seller mutually identify and agree
prior to the Closing shall cease to be employed by Seller and its
Affiliates, and Buyer shall offer employment effective as of the Closing
Date to each such employee on terms and conditions to be agreed to
between Buyer and such employee, subject to the provisions of Section
6(e)(iii) below. Each such employee who becomes an employee of Buyer or
its Affiliates on or immediately following the Closing Date shall be
hereinafter referred to as a "Transferred Employee."
(ii) Effective as of the Closing Date, each Transferred
Employee and each employee and former employee of the Company and its
Subsidiaries shall cease participation in all Employee Benefit Plans of
the Company, Seller or any Affiliate of Seller (the "Seller Plans")
subject to the terms of each such Seller Plan.
(iii) Effective as of the Closing Date, Buyer shall cover
each employee and former employee of the Company and its Subsidiaries,
and each Transferred Employee, who is covered under the Seller Plans
immediately prior to the Closing Date, under new or existing Employee
Benefit Plans of Buyer (the "Buyer Plans") that provide substantially
similar benefits in the aggregate to those benefits provided under the
Seller Plans as in effect immediately prior to the Closing Date,
including but not limited to 401(k), health, disability, and life
insurance plans. With respect to each Buyer Plan, employment with the
Company, Seller and each Affiliate of Seller prior to the Closing Date
shall be considered as employment with Buyer for all purposes, including
for purposes of eligibility to participate, benefit accruals,
eligibility to receive benefits, waiting and elimination periods, and
preexisting condition limitation periods. Each Buyer Plan that is an
Employee Welfare Benefit Plan shall credit employee and former employees
of the Company and its Subsidiaries, and Transferred Employees, with
their deductibles and co-payments paid as of the Closing Date for the
current calendar year under the Seller Plans that are Employee Welfare
Benefit Plans. Buyer shall assume, bear and discharge all liabilities
with respect to covered eligible welfare expenses that are incurred by
each such employee, former employee and Transferred Employee and his
covered dependents with respect to Incidents occurring prior to, on and
after the Closing Date. For purposes of this Section 6(e)(iii),
"Incident" includes, without limitation, death, accident, disability,
illness, injury and disease. To fulfill Buyer's obligations described in
this Section 6(e)(iii), Buyer shall, as of the Closing Date, enter into
an administrative services agreement with the third-party claims
administrator that administers claims under the Seller Plans that the
Employee Welfare Benefit Plans. Buyer shall cause such administration to
be responsible for the current and reasonably prompt administration of
all claims with respect to the employees and former employees of the
Company and its Subsidiaries, and the Transferred Employees (and their
dependents) and Buyer shall be responsible for paying all such claims,
and all related costs and other expenses, directly to the
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administrator. Seller shall cooperate with Buyer and the administrator
to the extent reasonably necessary to administer such claims.
(iv) Seller and Buyer agree that on or as soon as
reasonably practicable after the Closing Date, Seller shall transfer to
a new or existing trust of Buyer that meets the requirements of Section
501(c)(9) of the Code ("Buyer's VEBA") 80 percent of the assets from the
trust (the "Transferred Amount") of Seller that meets the requirements
of Section 501(c)(9) of the Code ("Seller's VEBA"), with the objective
of making available to the Company and its Subsidiaries after the
Closing Date such assets for the purpose of paying, during the
four-month period commencing on the Closing Date, qualifying medical
benefit claims that are incurred, but not yet paid, prior to the Closing
Date, liability for which Buyer has assumed pursuant to Section
6(e)(iii). All assets in Buyer's VEBA attributable to the Transferred
Amount shall, during such four-month period, be used exclusively to pay
the foregoing incurred-but-not-paid medical claims with respect to
employees and former employees of the Company and its Subsidiaries and
the Transferred Employees (and their respective covered dependents) and
related claims administration costs and expenses (the "Pre-Closing
Claims"). Promptly after the last day of such four-month period, Buyer
shall make payment to Seller in cash of an amount equal to the excess,
if any, of the Transferred Amount over the Pre-Closing Claims as of the
last day of such four-month period.
(v) Effective as of the Closing Date, Buyer shall cover
each employee and former employee of the Company and its Subsidiaries,
and each Transferred Employee, under new or existing workers'
compensation programs and/or policies of Buyer. Buyer shall assume, bear
and discharge all liabilities for, and administration of, workers'
compensation benefits in connection with all claims of, or attributable
to, employees and former employees of the Company and its Subsidiaries,
and Transferred Employees, whether such claims arise or arose prior to,
on or after the Closing Date.
(f) Income Tax Returns for Periods Through the Closing Date. Casa Bonita
Restaurants will include the income of the Company and its Subsidiaries
(including any deferred income triggered into income by Reg. Section 1.1502-13
and any excess loss accounts taken into income under Reg. Section 1.1502-19) on
Casa Bonita Restaurants's consolidated federal income tax returns for all
periods through the Closing Date and pay any federal income taxes attributable
to such income. The Company and its Subsidiaries will make its books and records
available to Casa Bonita Restaurants and will furnish tax information to Casa
Bonita Restaurants for inclusion in Casa Bonita Restaurants's federal
consolidated income tax return for the period which includes the Closing Date in
accordance with the Company's past custom and practice. The income of the
Company and its Subsidiaries will be apportioned to Seller for the period up to
and including the Closing Date and to Buyer for the period after the Closing
Date by closing the books of the Company and its Subsidiaries as of the end of
the Closing Date.
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(g) Income Tax Audits. Seller or one of its Affiliates shall be
responsible for handling the pending U.S. income Tax audits of Casa Bonita
Restaurants and all costs associated therewith (including any penalties,
interest or additional Taxes due thereunder). Buyer, the Company and its
Subsidiaries will cooperate fully with Seller in connection with Seller's
defense of any audit, proceeding or litigation with respect to any income Tax
Returns files pursuant to Section 6(f). Such cooperation shall include the
retention and (upon Seller's request) the provision of records and information
which are reasonably relevant to any such audit, proceeding or litigation and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder.
Section 7. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(a) and Section 4 above shall be true and correct in all
material respects at and as of the date of this Agreement and as of the
Closing Date and Seller shall have delivered to Buyer a certificate to
such effect (provided that the representation and warranty contained in
Section 4(h)(i) shall not be deemed to be breached by reason of any
material adverse change between the date of this Agreement and the
Closing which arises from or relates to changes in the United States
economy in general, the restaurant business in general, actions taken by
Buyer prior to the Closing that have an effect on the Company or the
Subsidiaries or events or actions arising from or associated with the
announcement or consummation of the transactions contemplated by this
Agreement (all of which risks are being assumed by Buyer hereunder));
(ii) in the reasonable good faith judgment of Buyer, the
Phase I Audits shall not identify facts or circumstances that
individually, or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
(iii) Seller shall have performed and complied with all of
its pre- Closing covenants hereunder (other than the covenants in
Sections 5(f) and (g) hereof) in all material respects through the
Closing, and Seller shall have delivered to Buyer a certificate to such
effect;
(iv) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing, or any action, suit or
proceeding pending which seeks to restrain or prohibit, consummation of
any of the transactions contemplated by this Agreement; and
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(v) all applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been
terminated without the imposition of any condition, requirement or
restriction which is or could reasonably be expected to be materially
burdensome to Buyer or the Company and its Subsidiaries.
Buyer may waive any condition specified in this Section 7(a).
(b) Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in
Section 3(b) above shall be true and correct in all material respects at
and as of the date of this Agreement and as of the Closing Date, and
Buyer shall have delivered to Seller a certificate to such effect;
(ii) Buyer shall have performed and complied with all of
its pre-Closing covenants hereunder (other than the covenants in
Sections 5(f) and (g) hereof) in all material respects through the
Closing, and Buyer shall have delivered to Seller a certificate to such
effect;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing, or any action, suit or
proceeding pending which seeks to restrain or prohibit, consummation of
any of the transactions contemplated by this Agreement; and
(iv) all applicable waiting periods (and any extensions
thereof) under the HSR Act shall have expired or otherwise been
terminated.
Seller may waive any condition specified in this Section 7(b).
Section 8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
(i) All of the representations and warranties of Seller
contained in Section 4 above (other than subsections (j) and (q)
thereof) shall survive the Closing Date and shall continue in full force
and effect for a period of one year thereafter.
(ii) The representations and warranties of Seller contained
in Section 4(j) shall survive the Closing Date and shall continue in
full force and effect thereafter until the expiration of the applicable
statute of limitations.
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(iii) The representations and warranties of Seller contained
in Section 4(q) shall survive the Closing Date and shall continue in
full force and effect for a period of two years thereafter.
(iv) All of the representations and warranties of the
Parties contained in Section 3 above shall survive the Closing Date and
continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of Buyer.
(i) In the event that (A) Seller breaches any of its
representations, warranties, and covenants contained herein (other than
the representations and warranties in Sections 3(a) and 4(j)(v) above)
and (B) Buyer makes a written claim for indemnification against Seller
with respect thereto within the applicable survival period set forth in
Section 8(a) above (which written claim shall specify in reasonable
detail the basis of the breach being asserted and, to the extent then
determinable, a calculation of any Adverse Consequences which Buyer
claims to suffer as a result thereof), then Seller agrees to indemnify
Buyer from and against any Adverse Consequences Buyer suffers which are
proximately caused by the breach; provided, however, that Seller shall
not have any obligation to indemnify Buyer from and against any Adverse
Consequences caused by the breach of any representation or warranty of
Seller contained in Section 4 above (other than Section 4(j)(v)): (A)
unless and until Buyer has suffered Adverse Consequences by reason of
all such breaches in excess of a $1,125,000 aggregate deductible (after
which point Seller will be obligated only to indemnify Buyer from and
against further such Adverse Consequences) or thereafter (B) to the
extent the Adverse Consequences Buyer has suffered by reason of all such
breaches exceeds a $12,000,000 aggregate ceiling (after which point
Seller will have no obligation to indemnify Buyer from and against
further such Adverse Consequences).
(ii) In the event Seller breaches any of its
representations and warranties in Section 3(a) or 4(j)(v) above, then
Seller agrees to indemnify Buyer from and against any Adverse
Consequences Buyer suffers through and after the date of the claim for
indemnification caused proximately by the breach.
(c) Indemnification Provisions for Benefit of Seller. In the event Buyer
breaches any of its representations, warranties, and covenants contained herein,
then Buyer agrees to indemnify Seller from and against any Adverse Consequences
Seller suffers through and after the date of the claim for indemnification
proximately caused by the breach (including, but not limited to, any and all
Adverse Consequences that Seller (or any of its Affiliates) suffers as a result
of (a) any failure of Buyer to discharge its obligations in accordance with
Section 6(e) (including any such failure of Buyer's claims administrator or any
other party engaged by Buyer to assist it in connection with the proper
discharge of Buyer's obligations therein), or (b) any welfare benefit claim
subject to the provisions
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of Section 6(e)(iii), or any workers' compensation or other benefit claim
subject to Section 6(e)(v)).
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly (and in any event within 5 business
days after receiving notice of the Third Party Claim) notify each
Indemnifying Party thereof in writing; provided, however, that failure
to provide such notice on a timely basis shall not release the
Indemnifying Party from any of its obligations under this Section 8
except to the extent the Indemnifying Party is materially prejudiced by
such failure.
(ii) The Indemnifying Party will have the right at any time
to assume and thereafter conduct the defense of the Third Party Claim
with counsel of its choice; provided, however, that the Indemnifying
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be unreasonably
withheld or delayed) unless the judgment or proposed settlement involves
only the payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(iii) Unless and until the Indemnifying Party assumes the
defense of the Third Party Claim as provided in Section 8(d)(ii) above,
the Indemnified Party may defend against the Third Party Claim in any
manner it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying
Party (not to be unreasonably withheld or delayed).
(v) In the event that any Party suffers damage or loss in
respect of which it has or makes a valid claim against another Party for
indemnification, it must take reasonable steps to mitigate its loss or
damage.
(e) Determination of Adverse Consequences. The Parties shall make
appropriate adjustments for tax benefits and insurance coverage, and take into
account the time cost of money (using the Applicable Rate as the discount rate),
in determining Adverse Consequences for purposes of this Section 8. All
indemnification payments under this Section 8 shall be deemed adjustments to the
Purchase Price.
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Section 9. Termination.
(a) Termination of Agreement. This Agreement may be terminated as
provided below:
(i) Buyer and Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing in the event that (A)
Seller has within the previous 10 business days given the Buyer any
notice pursuant to Section 5(i)(i) above and (B) the development that is
the subject of the notice (taken together with developments, which were
the subject of any previous notices pursuant to Section 5(i)(i)) has had
a Material Adverse Effect (other than any Material Adverse Effect
resulting from or relating to changes in the United States economy in
general, the restaurant business in general, actions taken by Buyer
prior to the Closing that have an effect on the Company or the
Subsidiaries or events or actions arising from or associated with the
announcement or consummation of the transactions contemplated by this
Agreement).
(iii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event that
(1) Seller has breached any material representation, warranty or
covenant in any material respect contained in this Agreement and (2)
Buyer has notified Seller of such breach and (3) such breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
October 31, 1996 by reason of the failure of any condition precedent
under Section 7(a) hereof (other than Section 7(a)(v), in which case
such date shall be extended to November 30, 1996), unless the failure
results primarily from Buyer breaching any representation, warranty or
covenant contained in this Agreement; and
(iv) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event that
Buyer has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, Seller has notified
Buyer of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall
not have occurred on or before October 31, 1996 by reason of the failure
of any condition precedent under Section 7(b) hereof (other than Section
7(b)(iv), in which case such date shall be extended to November 30,
1996), unless the failure results primarily from Seller breaching any
representation, warranty or covenant contained in this Agreement.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party
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which has committed a willful breach hereof or any Party which fails to
consummate the Closing notwithstanding the fact that (1) all of the conditions
running in its favor under Section 7 hereof have been satisfied and (2) all of
the conditions running in the favor of the other Party under Section 7 have been
satisfied or waived); provided, however, that the Confidentiality Agreement
shall survive termination.
Section 10. Miscellaneous.
(a) Certain Understandings of Buyer. Buyer acknowledges and agrees that,
EXCEPT TO THE EXTENT OF THE EXPRESS REPRESENTATIONS, WARRANTIES, AGREEMENTS AND
COVENANTS CONTAINED IN THIS AGREEMENT, AND SUBJECT TO THE DISCLOSURE SCHEDULE,
BUYER IS ACQUIRING THE COMPANY SHARES (AND INDIRECTLY THE ASSETS AND LIABILITIES
OF THE COMPANY) IN RELIANCE UPON ITS OWN INVESTIGATION AND WITHOUT ANY
REPRESENTATION OR WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PARTICULAR
PURPOSE OR ANY OTHER IMPLIED WARRANTIES WHATSOEVER. Buyer acknowledges (i) that
in the course of its independent investigation of the Company, it examined the
information contained in the draft Confidential Offering Memorandum (the
"Offering Memorandum") and attended presentations conducted by management of the
Company (the "Presentations"), (ii) that because of its investigation, Buyer is
not relying on the information contained in the Offering Memorandum or the
statements made and information furnished in connection with the Presentations
in its decision to enter into this Agreement and purchase the Company Shares
hereunder, and (iii) that Seller makes no representation or warranty concerning
the information contained in the Offering Memorandum or the statements made and
information furnished in connection with the Presentations.
(b) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law, the regulations of the
London Stock Exchange or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its
reasonable efforts to consult the other Party prior to making the disclosure).
(c) No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof; provided, however,
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that the letter agreement between Buyer and Schroder Wertheim & Co. Incorporated
concerning confidentiality (the "Confidentiality Agreement") shall continue in
effect.
(e) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that any Party may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases the assigning Party nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then five
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Seller: Copy to:
Casa Bonita Holdings, Inc. Kirkland & Ellis
8115 Preston Road 200 East Randolph Drive
Dallas, TX 75225 Chicago, IL 60601
Attn: President Attn: Carter W. Emerson
With a copy to Unigate PLC: Copy to:
Unigate House Kirkland & Ellis
Wood Lane 200 East Randolph Drive
London W12 7RP Chicago, IL 60601
England Attn: Carter W. Emerson
Attn: Secretary
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If to Buyer: Copy to:
CKE Restaurants, Inc. Stradling, Yocca, Carlson & Rauth
1200 North Harbor Boulevard 660 Newport Center Drive, Suite 1600
Anaheim, California 92801 Newport Beach, California 92660
Attn: President Attn: C. Craig Carlson
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(j) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by duly
authorized representatives of Buyer and Seller. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(k) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of Buyer and Seller will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any
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federal, state, local, or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context requires
otherwise. The word "including" shall mean including without limitation.
(n) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(o) Specific Performance. Each of the Parties recognize and affirm that
in the event of breach by any of them of any of the provisions of this
Agreement, money damages would be inadequate and no adequate remedy at law would
exist. Accordingly, each of the Parties agrees that any party shall have the
right, in addition to any other rights and remedies existing in its favor, to
enforce its rights and the obligations of any other Party under this Agreement
not only by an action or actions for damages, but also by an action or action
for specific performance, injunctive and/or other equitable relief in order to
enforce or prevent any violations of the provision of this Agreement.
(p) Submission to Jurisdiction. Each of the Parties consents to the
exclusive jurisdiction of the federal courts in the State of Delaware for any
legal action, suit, or proceeding arising out of or in connection with this
Agreement, and agree that any such action, suit, or proceeding may be brought
only in such courts. Each of the Parties further waives any objection to the
laying of venue for any such suit, action, or proceeding in such courts. Each
Party agrees to accept and acknowledge service of any and all process that may
be served in any suit, action, or proceeding. Each Party agrees that any service
of process upon it mailed by registered or certified mail, return receipt
requested to such Party at the address provided in Section 10(h) above shall be
deemed in every respect effective service of process upon such Party in any such
suit, action, or proceeding. Each Party agrees to waive any right it might have
to a trial by jury in any such suit, action or proceeding.
* * * * *
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IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
CKE RESTAURANTS, INC.
By: /s/ JOSEPH N. STEIN
-----------------------------------
Title: Senior Vice President and C.F.O.
CASA BONITA HOLDINGS, INC.
By: /s/ CLIVE WALDRON
-----------------------------------
Title: Authorized Signatory