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EXHIBIT 99.2
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STOCK PURCHASE AGREEMENT
AMONG
ADVANTICA RESTAURANT GROUP, INC.,
SPARTAN HOLDINGS, INC.,
FLAGSTAR ENTERPRISES, INC.
AND
CKE RESTAURANTS, INC.
DATED AS OF FEBRUARY 18, 1998
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions.....................................................................................1
Section 1.2. Other Terms.....................................................................................9
Section 1.3. Other Definitional Provisions...................................................................9
ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1. Purchase and Sale of Shares....................................................................10
Section 2.2. Closing; Delivery and Payment..................................................................10
Section 2.3. Post-Closing Adjustment........................................................................11
Section 2.4. Certain Asset Dispositions.....................................................................13
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
Section 3.1. Organization and Authority of Seller Parties; No Conflicts.....................................13
Section 3.2. Organization, Authority and Qualification of the Company; No Conflicts.........................14
Section 3.3. Capitalization of the Company..................................................................14
Section 3.4. Subsidiaries of the Company....................................................................14
Section 3.5. Financial Statements; Certain Financial Information............................................15
Section 3.6. Absence of Certain Changes or Events...........................................................15
Section 3.7. Title to Properties; Absence of Liens and Encumbrances, Etc....................................16
Section 3.8. Litigation.....................................................................................17
Section 3.9. Compliance with Law............................................................................17
Section 3.10. Contracts......................................................................................17
Section 3.11. Consents and Approvals.........................................................................18
Section 3.12. Tax Matters....................................................................................18
Section 3.13. Intellectual Property..........................................................................19
Section 3.14. Labor Matters..................................................................................19
Section 3.15. Employee Benefits..............................................................................20
Section 3.16. Environmental Matters..........................................................................21
Section 3.17. Insurance......................................................................................21
Section 3.18. Brokers and Finders............................................................................21
Section 3.19. Government Regulations.........................................................................22
Section 3.20. Books and Records..............................................................................22
Section 3.21. Disclosure.....................................................................................22
Section 3.22. Seller Parties' Investigation..................................................................22
Section 3.23. No Other Representations or Warranties.........................................................22
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1. Organization and Authority of Buyer; No Conflicts..............................................23
Section 4.2. Brokers and Finders............................................................................23
Section 4.3. Securities Act.................................................................................23
Section 4.4. Consents and Approvals.........................................................................23
Section 4.5. Disclosure.....................................................................................23
Section 4.6. Buyer's Investigation..........................................................................24
Section 4.7. No Other Representations or Warranties.........................................................24
ARTICLE V
TAX MATTERS
Section 5.1. Cooperation With Respect to Tax Matters........................................................24
Section 5.2. Tax Related Agreements.........................................................................30
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF SELLER PARTIES AND BUYER
Section 6.1. Access and Information.........................................................................30
Section 6.2. Consents.......................................................................................31
Section 6.3. Conduct of Business............................................................................31
Section 6.4. Related Transactions...........................................................................33
Section 6.5. Certain Buyer and Seller Obligations and Agreements............................................34
Section 6.6. Employee Benefit Plans.........................................................................34
Section 6.7. Retention of Books and Records.................................................................36
Section 6.8. Closing Date Financial Statements..............................................................36
Section 6.9. Environmental Investigations...................................................................36
Section 6.10. Covenant Not to Compete; Non-solicitation......................................................37
Section 6.11. Exclusivity....................................................................................38
Section 6.12. Limitation of Liabilities......................................................................38
Section 6.13. Cash Sweeps....................................................................................40
Section 6.14. New Bank Accounts..............................................................................40
Section 6.15. Further Assurances.............................................................................40
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1. Conditions to Obligations of Buyer.............................................................40
Section 7.2. Conditions to Obligations of Seller............................................................41
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ARTICLE VIII
TERMINATION
Section 8.1. Termination....................................................................................42
Section 8.2. Effect of Termination..........................................................................43
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section 9.1. Limited Survival of Representations, Warranties, Covenants and Agreements;
Knowledge of Breach..........................................................................43
Section 9.2. Indemnification by Buyer.......................................................................45
Section 9.3. Indemnification by Seller......................................................................45
Section 9.4. Indemnification as Sole Remedy.................................................................45
Section 9.5. Method of Asserting Claims, Etc................................................................45
ARTICLE X
MISCELLANEOUS
Section 10.1. Amendment and Waiver...........................................................................47
Section 10.2. Expenses.......................................................................................47
Section 10.3. Public Disclosure..............................................................................47
Section 10.4. Assignment.....................................................................................47
Section 10.5. Entire Agreement...............................................................................47
Section 10.6. Fulfillment of Obligations.....................................................................47
Section 10.7. Parties in Interest; No Third Party Beneficiaries..............................................47
Section 10.8. Schedules......................................................................................48
Section 10.9. Counterparts...................................................................................48
Section 10.10. Section Headings...............................................................................48
Section 10.11. Notices........................................................................................48
Section 10.12. Governing Law; Submission To Jurisdiction; Selection of Forum..................................49
Section 10.13. Severability...................................................................................49
Section 10.14. Attorneys' Fees................................................................................49
EXHIBIT A -- Balance Sheet and Statement of Net Operating Liabilities
EXHIBIT B -- List of Capital Leases
EXHIBIT C -- Statement of Assets Held for Resale
EXHIBIT D -- Territory
EXHIBIT E -- Management Employees
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of February 18, 1998,
among ADVANTICA RESTAURANT GROUP, INC., a Delaware corporation formerly known as
Flagstar Companies, Inc. ("Advantica"), SPARTAN HOLDINGS, INC., a New York
corporation and wholly-owned subsidiary of Advantica (the "Seller"), FLAGSTAR
ENTERPRISES, INC., an Alabama corporation formerly known as Spardee's
Restaurants, Inc. (the "Company"), and CKE RESTAURANTS, INC., a Delaware
corporation (the "Buyer").
R E C I T A L S:
A. The Company operates 557 Hardee's quick-service restaurants (the
"Restaurants"), as a licensee of Hardee's Food Systems, Inc., a North Carolina
corporation and wholly-owned subsidiary of Buyer ("Hardee's");
B. Seller owns all of the issued and outstanding shares of capital stock
of the Company; and
C. Seller desires to sell and transfer to Buyer, and Buyer desires to
purchase from Seller, all of the issued and outstanding shares of capital stock
of the Company, as more specifically provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and subject to and on the terms and conditions herein set
forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following terms
shall have the meanings set forth or referenced below:
"Acquisition Proposal" shall have the meaning set forth in Section 6.11.
"Advantica" shall have the meaning set forth in the Preamble.
"Advantica Credit Agreement" shall mean that certain Credit Agreement,
dated as of January 7, 1998, by and among Advantica, as guarantor, the Company
and other indirect subsidiaries of Advantica, as borrowers, the Lenders named
therein, and The Chase Manhattan Bank, as administrative agent, as may be
amended from time to time.
"Affiliate" shall mean, as applied to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person.
"Agreement" shall mean this Agreement and all Exhibits and Schedules
hereto.
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"Antitrust Division" shall mean the Antitrust Division of the United
States Department of Justice.
"Applicable Rate" shall mean the prime rate of The Chase Manhattan Bank on
the Closing Date.
"Asset Adjustment Amount" shall mean, with respect to any asset the sale
or other disposition of which by the Company Group requires an adjustment to the
Purchase Price pursuant to Section 2.4 hereof, an amount equal to the greater of
(a) the net book value of such asset, as determined in accordance with GAAP, as
of the date of sale or disposition, or (b) the proceeds received by the Company
Group as a result of such sale or disposition.
"Assets Held for Resale" shall mean the assets of the Company, with an
aggregate net book value of $1,075,539 as of December 31, 1997 as determined in
accordance with GAAP, which are reflected as "Assets Held for Resale" in the
Balance Sheet and are described in the Statement of Assets Held for Resale.
"Balance Sheet" shall mean the consolidated balance sheet of the Company
as of November 26, 1997, a copy of which is attached hereto as Exhibit A.
"Bankruptcy Code" shall mean Title 11 of the United States Code.
"Base Value" shall mean the sum of (a) $45,646,033, representing the
aggregate amount of the Retained Liabilities as of the date of the Balance
Sheet, plus (b) $25,364,679, representing the aggregate amount of the Net
Operating Liabilities as of the date of the Balance Sheet, as reflected in the
Statement of Net Operating Liabilities.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
on which banks in the City of New York are authorized or obligated by law or
executive order to close.
"Buyer" shall have the meaning set forth in the Preamble.
"Capital Leases" shall mean the leases set forth on Exhibit B attached
hereto, the capitalized amount of the obligations of which as of the date of the
Balance Sheet are $45.6 million.
"Chosen Courts" shall have the meaning set forth in Section 10.12.
"Claim Notice" shall have the meaning set forth in Section 9.5.
"Closing" shall have the meaning set forth in Section 2.2(a).
"Closing Date" shall have the meaning set forth in Section 2.2(a).
"Closing Date Balance Sheet" shall mean a balance sheet of the Company as
of the Closing Date prepared in accordance with GAAP.
"Closing Date Value" shall mean the sum of (a) the aggregate amount of the
Retained Liabilities as of the Closing Date, plus (b) the aggregate amount of
the Net Operating Liabilities as of the Closing Date.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the Preamble.
"Company Group" shall mean, individually or together, as the context
permits or implies, the Company and Spardee's Realty.
"Company Plans" shall have the meaning set forth in Section 3.15.
"Competitive Action" shall have the meaning set forth in Section 6.10.
"Confidentiality Agreement" shall mean that certain Confidentiality and
Nondisclosure Agreement, dated as of July 30, 1997, by and among Advantica, the
Company and Carl Karcher Enterprises, Inc.
"Contract" shall mean any agreement, commitment, lease, contract, note,
mortgage, indenture or other obligation.
"CPA Firm" shall have the meaning set forth in Section 2.3(d).
"DLJ" shall mean Donaldson, Lufkin & Jenrette Securities Corporation.
"Deductible" shall mean the amount of $4,500,000.
"Disclosure Schedule" shall mean the disclosure schedule document executed
by the parties hereto as of the date hereof.
"Encumbrance" shall mean any lien, pledge, security interest, claim or
other encumbrance.
"Environmental Law" means any law, regulation, code, license, permit,
order, judgment, decree or injunction of the United States or any State or
political subdivision thereof (including any court thereof and any Governmental
Entity) relating primarily to the protection of the environment (including air,
water, soil and natural resources) or the use, storage, handling, release or
disposal of any hazardous or toxic substance as in effect on the date hereof.
"Environmental Losses" shall mean all Losses actually sustained or
incurred by the Company Group or Buyer in connection with any remedial,
response, removal, corrective, abatement or compliance action, any activity to
cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous
Substance or to prevent, cure or mitigate any release of Hazardous Substance, or
any investigation, assessment, sampling and testing or evaluation relating to
any Hazardous Substance or any other action (including, without limitation,
fines, payments or penalties to any Governmental Entity, contributions, payments
or awards or damages to other Persons, and attorneys' and consulting fees)
required in any such case in order to comply with any applicable Environmental
Law with respect to the Existing Conditions.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning set forth in Section 3.15.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Excluded Liabilities" shall mean (a) all liabilities and obligations of
the Company Group which are listed in or described in Section 6.12(b) of the
Disclosure Schedule, and (b) all liabilities and obligations which do not relate
to the business or assets of any member of the Company Group, whether or not
required by GAAP to be reflected on a balance sheet or disclosed in the
footnotes thereto. The Excluded Liabilities include, but are not limited to, all
liabilities and obligations of the Company Group, whether for principal,
interest, fees, expenses, charges or otherwise, under or incurred pursuant to
the Advantica Credit Agreement or the Spardee's Loan Agreement.
"Existing Concept" shall mean any Person which, as of the date of this
Agreement, is an Affiliate of Advantica (other than the Company Group) engaged
in the business of owning or operating restaurants, other than restaurants for
which the primary menu items offered to customers and promoted by such Person
are hamburger products.
"Existing Conditions" shall mean all environmental contaminations,
emissions, discharges, dispositions or other environmental conditions at or from
any of the Leased Real Property and Owned Real Property which are identified,
referred to or described in Section 3.16 of the Disclosure Schedule.
"Financial Statements" shall have the meaning set forth in Section 3.5.
"FTC" shall mean the United States Federal Trade Commission.
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Entity" shall mean any governmental or regulatory authority,
agency, commission, body or other governmental entity of the United States of
America or any State or political subdivision thereof.
"Hardee's" shall have the meaning set forth in the Recitals.
"Hazardous Substance" means any substance listed, defined, designated or
classified as hazardous, toxic or radioactive under any applicable Environmental
Law, including petroleum and any derivative or by-products thereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" shall have the meaning set forth in Section 9.3(a).
"Indemnifying Party" shall have the meaning set forth in Section 9.5.
"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
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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.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to any Person, the actual knowledge
of such Person's executive officers.
"Law" shall mean any law, rule, regulation, judgment, injunction, order,
decree or other restriction of any court or Governmental Entity.
"Leased Real Property" shall have the meaning set forth in Section
3.7(a).
"License Agreements" shall mean the License Agreements between Hardee's,
as licensor, and the Company, as licensee, pursuant to which the Company
operates a Restaurant.
"Loan Documents" shall have the meaning set forth in the Advantica
Credit Agreement.
"Losses" shall have the meaning set forth in Section 9.2(a).
"MADSP" shall have the meaning set forth in Section 5.1(b).
"MBM" shall mean Meadowbrook Meat Company, Inc., a North Carolina
corporation.
"MBM Agreement" shall mean that certain Distribution Agreement dated
September 8, 1995, by and between MBM and the Company.
"Management Employees" shall mean those employees of the Company
identified on Exhibit E attached hereto.
"Material Adverse Effect" shall mean a material adverse effect on the
business, financial condition, assets, or results of operations of the Company
Group, taken as a whole.
"Net Operating Liabilities" shall mean, as of any date of determination,
the excess of Operating Liabilities over the Operating Assets, which shall be
determined in accordance with GAAP, consistently applied and determined on a
basis consistent with the determination of Base Value.
"Notice Period" shall have the meaning set forth in Section 9.5.
"Offering Memorandum" shall mean any offering circular or memorandum which
Buyer may prepare in connection with its obtaining financing for the
transactions contemplated by this Agreement.
"Owned Real Property" shall have the meaning set forth in Section
3.7(a).
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"Operating Assets" shall mean, as of any date of determination, the
aggregate of the net book values of the items listed under the captions "Current
Assets" and "Non-current Assets" set forth in the "CKE Assumed Net Operating
Liabilities" column on the Statement of Net Operating Liabilities (which amounts
shall be based upon and determined on a basis consistent with the same items set
forth on the Statement of Net Operating Liabilities).
"Operating Employees" shall mean all employees of the Company other than
Management Employees. Operating Employees shall include both active employees
and also employees who on the Closing Date are on approved leave or sick leave
under the Company's general policies.
"Operating Liabilities" shall mean, as of any date of determination, the
aggregate of the net book values of the items listed under the captions "Current
Liabilities" and "Non-current Liabilities" set forth in the "CKE Assumed Net
Operating Liabilities" column on the Statement of Net Operating Liabilities
(which amounts shall be based upon and determined on a basis consistent with the
same items set forth on the Statement of Net Operating Liabilities).
"Pending Arbitration" shall mean the arbitration proceedings initiated by
the Company against Hardee's as Case No. 31 Y 114 00043 97 before the American
Arbitration Association pursuant to a Demand for Arbitration dated March 19,
1997.
"Permitted Encumbrances" shall mean (i) any Encumbrances related to
liabilities reflected in the Financial Statements; (ii) any Encumbrances
incurred or created since December 31, 1996 in the ordinary course of business
and which, alone or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect; (iii) any Encumbrances for taxes, assessments and other
governmental charges not yet due and payable or due but not delinquent or being
contested in good faith by appropriate proceedings; (iv) any mechanic's,
workmen's, repairmen's, warehousemen's, carrier's or other like liens and
encumbrances imposed by operation of law arising in the ordinary course of
business with respect to obligations not yet overdue for a period exceeding 45
days or being contested in good faith by appropriate proceedings; (v)
restrictions, easements, covenants, reservations, rights of way or other similar
matters of title to the Leased Real Property and Owned Real Property (a) of
record which are described in, or which are revealed by surveys which are
included in, the Title Documents, or (b) which do not materially affect the
title to, or the use of, such Leased Real Property and Owned Real Property; (vi)
zoning ordinances, restrictions, prohibitions and other requirements imposed by
any Governmental Entity; (vii) rights of others in party walls, if any, relative
to the Owned Real Property or Leased Real Property; and (viii) deposits of cash
or securities with third parties to secure the performance of obligations other
than Excluded Liabilities.
"Person" means any individual, corporation, partnership, firm, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization or Governmental Entity.
"Phase I Reports" means Phase I Environmental Site Assessments which shall
conform to the standards established by the American Society for Testing and
Materials Standard E 1527-93 for Phase I Environmental Site Assessments.
"Plan of Reorganization" shall mean that certain Flagstar Companies, Inc.
and Flagstar Corporation's Amended Joint Plan of Reorganization, dated as of
July 11, 1997 (amended November 7, 1997), as confirmed by the United States
Bankruptcy Court for the District of South Carolina by order entered on November
12, 1997.
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"Post-Closing Adjustment" shall have the meaning set forth in Section
2.3(e).
"Post-Closing Period" shall have the meaning set forth in Section
5.1(e).
"Pre-Closing Period" shall have the meaning set forth in Section 5.1(e).
"Pre-Closing Periods" shall mean all taxable years or periods ending on or
prior to the Closing Date and any portion of a period covered by a Straddle Tax
Return that ends on the Closing Date.
"Purchase Price" shall have the meaning set forth in Section 2.1(b).
"Related Agreements" shall mean the Termination Agreement, the
Transitional Services Agreement and the trademark license agreement described in
Section 6.4(b).
"Related Transactions" shall mean the transactions described in Section
6.4.
"Resolution Period" shall have the meaning set forth in Section 2.3(c).
"Restaurants" shall have the meaning set forth in the Recitals.
"Restricted Period" shall have the meaning set forth in Section 6.10.
"Retained Group" shall mean collectively the Seller Parties and each
Affiliate of any of the Seller Parties other than and expressly excluding
members of the Company Group.
"Retained Liabilities" shall mean all payment obligations of the Company
Group under the Capital Leases, which as of any date of determination shall be
the capitalized amount thereof determined in accordance with GAAP consistently
applied and determined on a basis consistent with the determination of Base
Value.
"SFI" shall mean Simeus Foods International, Inc., formerly known as
Portiontrol Foods, Inc.
"SFI Agreement" shall mean that certain Purchasing Agreement dated
September 27, 1996, by and between the Company and SFI.
"Section 338(h)(10) Elections" shall have the meaning set forth in
Section 5.1(a).
"Schroder" shall mean Schroder & Co., Inc.
"Secured Restaurants Trust" shall mean Secured Restaurants Trust, a
Delaware statutory business trust established by the Seller on August 16, 1990.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Filings" shall mean any public offering by Buyer under or
pursuant to the Securities Act or the Exchange Act.
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"Security Documents" shall have the meaning set forth in the Spartan
Indenture and shall be deemed to include all Contracts to which the Company
Group is a party which evidence or secure the obligations under the Spartan
Indenture or the Spardee's Loan Agreement.
"Seller" shall have the meaning set forth in the Preamble.
"Seller Parties" shall mean Seller and Advantica.
"Seller's Group" shall mean any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes Seller and the Company.
"Shares" shall have the meaning set forth in Section 2.1(a).
"Spardee's Loan Agreement" shall mean the Loan Agreement, dated as of
November 1, 1990, between Secured Restaurants Trust and Spardee's Realty.
"Spardee's Realty" shall mean Spardee's Realty, Inc., an Alabama
corporation and a direct, wholly-owned Subsidiary of the Company.
"Spartan Indenture" shall mean the Indenture, dated as of November 1,
1990, between Secured Restaurants Trust, as issuer, and the Bank of New York
Trust Company of Florida, as successor Trustee.
"Statement of Assets Held for Resale" shall mean the Statement of Assets
Held for Resale attached hereto as Exhibit C.
"Statement of Net Operating Liabilities" shall mean the portion of the
Balance Sheet under the caption "CKE Assumed Net Operating Liabilities" and
descriptions of the line items set forth in such Balance Sheet which are
associated with the data under such caption.
"Straddle Tax Return" shall have the meaning set forth in Section
5.1(e).
"Subsidiary" shall mean, with respect to any Person, each other Person
(other than a natural person) of which the Person owns, beneficially and of
record, securities representing 50% or more of the aggregate voting power.
"Tax Audit" means any audit, assessment of taxes, reassessment of taxes,
or other examination by any taxing authority or any judicial or administrative
proceedings or appeal of such proceedings in respect of any Taxes or Tax
Returns.
"Tax Returns" means all returns, declarations, reports, statements and
other documents required under a Tax Law either (a) to be filed with a
Governmental Entity in respect of Taxes or (b) to be provided to a Person other
than a Governmental Entity.
"Tax Law" means a statute, regulation or administrative rule enacted or
promulgated for the determination, imposition, assessment or collection of any
Taxes.
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"Taxes" means federal, state, local or foreign income, gross receipts,
windfall or excess profits, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes, together
with any interest, additions or penalties with respect thereto and any interest
in respect of such additions or penalties.
"Termination Agreement" shall mean a Termination Agreement and Mutual
General Release, in form and substance reasonably acceptable to the Seller
Parties and Buyer, pursuant to which (a) the Pending Arbitration shall be
terminated and the Seller Parties and their respective Affiliates and the Buyer
and the Company and their respective Affiliates shall grant mutual general
releases with respect to the Pending Arbitration and no payments shall be due
from either party with respect thereto, and (b) the License Agreements shall be
terminated and Seller Parties and their respective subsidiaries and Affiliates
and the Buyer and the Company and their respective subsidiaries and Affiliates
shall grant mutual general releases with respect to all obligations and
liabilities, if any, under the License Agreements.
"Territory" shall mean any or all of the designated market areas listed in
Exhibit D attached hereto.
"Third Party Claim Notice" shall have the meaning set forth in Section
9.5.
"Threshold Amount" shall mean the amount of $25,000.
"Title Documents" shall mean all title insurance policies, surveys and
other documents which relate to or describe the existence of Encumbrances on the
Owned Real Property, and all files and records relating to the Owned Real
Property, in the possession or control of the Seller Parties or the Company
Group.
"Transitional Services Agreement" shall mean a transitional services
agreement consistent with the terms and provisions described in Section 6.5(c)
and Section 6.6, in form and substance reasonably acceptable to the Seller
Parties and Buyer.
"Unresolved Changes" shall have the meaning set forth in Section 2.3(d).
Section 1.2. Other Terms. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
indicated throughout this Agreement.
Section 1.3. Other Definitional Provisions.
(a) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States Dollars.
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ARTICLE II
PURCHASE AND SALE OF SHARES
Section 2.1. Purchase and Sale of Shares.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, Buyer agrees to purchase from Seller, and Seller agrees to sell,
assign, transfer, convey and deliver to Buyer, on the Closing Date, all of the
issued and outstanding shares of Common Stock, par value $.01 per share (the
"Shares"), of the Company.
(b) In consideration for the sale of the Shares, Buyer shall pay to
Seller on the Closing Date an aggregate purchase price of $380,799,679 (the
"Purchase Price"). The Purchase Price shall be payable in cash, by wire transfer
to such account or accounts as Seller shall have designated to Buyer at least
two Business Days prior to the Closing Date, and shall be subject to adjustment
as provided herein.
Section 2.2. Closing; Delivery and Payment.
(a) The delivery of the Shares and payment therefor (the "Closing")
shall take place at the offices of Parker, Poe, Adams & Bernstein L.L.P., 201
South College Street, 2500 Charlotte Plaza, Charlotte, North Carolina 28244 at
10:00 a.m. local time, on April 1, 1998 or at such other date, time and place
upon which the parties hereto shall mutually agree. The date on which the
Closing occurs is called the "Closing Date".
(b) At the Closing:
(i) Seller shall deliver to Buyer (A) certificates
representing the Shares, duly endorsed and in form for transfer to Buyer, (B)
the stock books, stock ledgers, minute books and corporate seals of the Company
Group; and (C) the following documents:
(1) bills of sale, assignments and other
instruments relating to and evidencing the Related Transactions, each in form
and substance reasonably satisfactory to Buyer, duly executed by the Seller
Parties or other members of the Retained Group, as the case may be;
(2) the Related Agreements, duly executed by the
Seller Parties or other members of the Retained Group, as the case may be;
(3) assumption agreements and other instruments
relating to the assumption of the Excluded Liabilities pursuant to Section
6.12(b), each in form and substance reasonably satisfactory to Buyer;
(4) good standing certificates with respect to the
Seller Parties and the Company Group, dated within 15 days of the Closing Date,
of the Secretaries of State of the States in which each of the Seller Parties is
organized and of the States in which each member of the Company Group is
organized or qualified to transact business; and
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(5) the certificates, resignations, consents,
approvals, waivers, forms, evidence, opinions and other documents described in
paragraphs (a), (b), (e), (f), (g) and (h) of Section 7.1; and
(ii) Buyer shall deliver to Seller Parties (A) payment of the
Purchase Price as provided in Section 2.1(b), and (B) the following documents:
(1) the Related Agreements, duly executed on behalf
of Buyer or the Company Group, as the case may be;
(2) good standing certificate with respect to the
Buyer, dated within 15 days of the Closing Date, of the Secretary of State of
the State of Delaware; and
(3) the certificates, consents, approvals, waivers
and opinions described in paragraphs (a), (d) and (e) of Section 7.2.
(c) On the Closing Date, all intercompany accounts between any
member of the Company Group, on the one hand, and any member of the Retained
Group, on the other hand, shall be canceled, and the respective amounts shall be
recorded as contributions to capital.
Section 2.3. Post-Closing Adjustment.
(a) As soon as practicable, but in no event later than 90 days
following the Closing Date, the Seller Parties shall prepare and deliver to the
Company a statement of Closing Date Value, which statement shall be audited and
certified by Deloitte & Touche LLP. Such statement shall exclude any adjustments
related to fresh-start accounting relating to Advantica's bankruptcy. The costs
and expenses of such audit shall be borne equally between the Company and the
Seller Parties. The statement of Closing Date Value shall be set forth in
reasonable detail to permit the calculations required by this Section 2.3.
(b) During the preparation of the statement of Closing Date Value as
provided in Section 2.3(a) and the period of any review or dispute as provided
in this Section 2.3, each of the Seller Parties, the Company and Buyer shall
cooperate fully with each other and provide the other parties and their
respective authorized representatives with full access to the books and records
of the Company Group used in the preparation of such statement, including the
provision on a timely basis of all necessary or useful information.
(c) After receipt of the statement of Closing Date Value from Seller
Parties, Buyer shall have 30 days to review the statement of Closing Date Value,
together with the workpapers used in the preparation thereof. Unless Buyer
delivers written notice to the Seller Parties on or prior to the 30th day after
Buyer's receipt from the Seller Parties of the statement of Closing Date Value
stating that Buyer has objections to the statement of Closing Date Value and
describing any such objections in reasonable detail, Buyer shall be deemed to
have accepted and agreed to the statement of Closing Date Value. If on or prior
to the 30th day after Buyer's receipt from the Seller Parties of the statement
of Closing Date Value, Buyer notifies the Seller Parties of its objections to
the statement of Closing Date Value, Buyer and Seller Parties shall, within 20
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.
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(d) 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, and reasonably
satisfactory to, Seller Parties, Buyer and their respective Affiliates (such
firm being referred to as the "CPA Firm"), within 10 days after the expiration
of the Resolution Period. The parties acknowledge that Ernst & Young is a
mutually acceptable firm to be designated as the CPA Firm, subject to
verification of its independence. Each party agrees to execute, if requested by
the CPA Firm, an engagement letter containing reasonable terms. All fees and
expenses relating to the work, if any, to be performed by the CPA Firm shall be
borne pro rata by Seller Parties and Buyer in proportion to the allocation of
the dollar amount of the Unresolved Changes between Buyer and Seller Parties
made by the CPA Firm, such that the prevailing party shall pay the lesser
proportion of the fees and expenses. The CPA Firm shall act as an arbitrator to
determine, based on the provisions of this Section 2.3, only the Unresolved
Changes and the determination of each amount in the Unresolved Changes shall
made in accordance with GAAP and in any event shall be no less than the lesser
of the amount claimed by either Buyer or Seller Parties and shall be no greater
than the greater amount claimed by either Buyer or Seller Parties. The CPA
Firm's 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 Parties and Buyer and shall be final,
binding and conclusive on the parties for all purposes. Notwithstanding any
provision herein to the contrary, no Unresolved Change shall result in an
adjustment to the Purchase Price or the Closing Date Value unless (i) in the
case of an asset (or contra-liability) line item (as such line items are set
forth on Exhibit A attached hereto), the amount determined by the CPA Firm is
lower than 50% of the corresponding amount reflected in the statement of Closing
Date Value prepared by Seller Parties which is the subject of such Unresolved
Change, in which event the amount of the adjustment shall be the difference
between the amount of such asset (or contra-liability) line item determined by
the CPA Firm and the amount reflected in the statement of Closing Date Value
prepared by Seller Parties, and (ii) in the case of a liability (or
contra-asset) line item (as such line items are set forth on Exhibit A attached
hereto), the amount determined by the CPA Firm is more than 150% of the
corresponding amount reflected in the statement of Closing Date Value prepared
by Seller Parties which is the subject of such Unresolved Change, in which event
the amount of the adjustment shall be the difference between the amount of such
liability (or contra-asset) line item determined by the CPA Firm and the amount
reflected in the statement of Closing Date Value prepare by Seller Parties.
(e) In the event that Buyer and Seller Parties agree to the
statement of Closing Date Value, then within five (5) Business Days following
such agreement (i) Seller Parties shall pay to Buyer the amount, if any, by
which the Closing Date Value exceeds the Base Value, or (ii) Buyer shall pay to
Seller Parties the amount, if any, by which the Base Value exceeds the Closing
Date Value (each, a "Post-Closing Adjustment"). In the event that there are
Unresolved Changes at the end of the Resolution Period, then (1) if Buyer and
Seller Parties agree that a Post-Closing Adjustment is owed to one Party
regardless of the ultimate resolution of any Unresolved Changes, then the
minimum amount which Buyer and Seller Parties agree is owed to such party shall
be paid within five (5) 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 five (5) Business Days after resolution thereof by
the CPA Firm, or (2) in all other cases, any and all payments shall be made
within five (5) Business Days after resolution of the Unresolved Changes by the
CPA Firm.
(f) Any payments made pursuant to this Section 2.3 shall be
accompanied by interest at the Applicable Rate from the Closing Date up to and
including the date of payment.
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(g) Any payments made in respect of the Post-Closing Adjustment or
Unresolved Changes shall be deemed to be adjustments to the Purchase Price for
all Tax purposes.
Section 2.4. Certain Asset Dispositions. Seller Parties shall have the
right to cause the Company to sell or otherwise dispose of all (but not less
than all) of the Assets Held for Resale prior to the Closing, in which case the
Purchase Price shall be reduced by an amount equal to the Asset Adjustment
Amount.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER PARTIES
The Seller Parties jointly and severally represent and warrant to Buyer as
of the date hereof (except that representations and warranties that are made as
of a specific date need be true only as of such date) as follows:
Section 3.1. Organization and Authority of Seller Parties; No Conflicts.
(a) Organization and Authority. Each of the Seller Parties is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, has all requisite corporate power and
authority to carry on its business as it is now being conducted, and has taken
all corporate action necessary in order to execute, deliver and perform its
obligations under this Agreement. This Agreement has been duly executed and
delivered by each of the Seller Parties and is a legal, valid and binding
obligation of each of the Seller Parties, enforceable against the Seller
Parties, as applicable, in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. All conditions to the Effective Date (as defined in the Plan
of Reorganization) have been satisfied or waived and the Plan of Reorganization
has been confirmed and is effective in accordance with the Bankruptcy Code and
the Federal Rules of Bankruptcy Procedure.
(b) No Conflicts. Except as set forth in Section 3.1 of the
Disclosure Schedule, the execution, delivery and performance of this Agreement
by the Seller Parties do not, and the consummation by the Seller Parties of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or by-laws
of the Seller or Advantica, (ii) a breach of, or a default under, the
acceleration of any obligations or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Seller or Advantica (with or
without notice, lapse of time or both) pursuant to, any Contracts binding upon
Seller or Advantica, or (iii) to the Knowledge of the Seller Parties and the
Company, a violation of any applicable Law or any governmental or
non-governmental permit or license to which Seller or Advantica is subject,
except, in the case of clause (ii) or (iii) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, is not reasonably likely to materially delay or impair the ability of
the Seller Parties to consummate the transactions contemplated by this
Agreement.
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Section 3.2. Organization, Authority and Qualification of the Company; No
Conflicts.
(a) Organization and Authority. The Company (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Alabama, (ii) has all requisite corporate power and authority to carry
on its business as it is now being conducted, and (iii) has taken all corporate
action necessary in order to execute, deliver and perform its obligations under
this Agreement. This Agreement has been duly executed and delivered by the
Company and is a legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(b) No Conflicts and Qualification. Except as set forth in Section
3.2 of the Disclosure Schedule, the execution, delivery and performance of this
Agreement by the Company do not, and the consummation by the Company of the
transactions contemplated hereby will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or by-laws
of the Company, (ii) a breach of, or a default under, the acceleration of any
obligations or the creation of a lien, pledge, security interest or other
encumbrance on the assets of the Company Group (with or without notice, lapse of
time or both) pursuant to, any Contracts binding upon the Company Group, or any
change in the rights or obligations of any party thereunder, or (iii) to the
Knowledge of the Seller Parties and the Company, a violation of any applicable
Law or governmental or non-governmental permit or license to which the Company
Group is subject, except, in the case of clause (ii) or (iii) above, for any
breach, violation, default, acceleration, creation or change that, individually
or in the aggregate, is not reasonably likely to materially delay or impair the
ability of the Company to consummate the transactions contemplated by this
Agreement. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the conduct of its business or the
ownership or leasing of its assets makes such qualification or licensing
necessary, other than in jurisdictions where the failure to be qualified or
licensed, individually or in the aggregate, is not reasonably likely to have a
Material Adverse Effect.
Section 3.3. Capitalization of the Company. The authorized capital stock
of the Company consists of 20,000 shares of Common Stock, par value $.01 per
share, of which 20,000 Shares are issued and outstanding. The Shares have been
duly authorized and validly issued, are fully paid and nonassessable and are
owned by Seller free and clear of any Encumbrances, other than pursuant to this
Agreement and Encumbrances that will be fully released at or prior to the
Closing. There are no preemptive or other outstanding rights, options, warrants,
conversion rights, stock appreciation rights, redemption rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of the Company Group or any securities or obligations
convertible or exchangeable into or exercisable for, or giving any Person a
right to subscribe for or acquire, any securities of the Company Group, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding. The Company does not have outstanding any bonds, debentures, notes
or other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company on any matter.
Section 3.4. Subsidiaries of the Company. All shares of capital stock of
Spardee's Realty are owned by the Company free and clear of all Encumbrances
other than pursuant to this Agreement and Encumbrances that will be fully
released at or prior to the Closing, and all such capital stock is duly
authorized, validly issued, fully paid and nonassessable. Spardee's Realty is
(i) a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Alabama, (ii) has all requisite power and authority to carry on its business as
it is now being conducted and (iii) is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the conduct of its
business or the ownership or leasing of its assets makes such qualification or
licensing necessary, other than in jurisdictions where the failure to be
qualified or licensed, individually or in the aggregate, is not reasonably
likely to have a Material Adverse Effect. The Company does not own, directly or
indirectly, an equity or other ownership interest in any Person other than
Spardee's Realty.
Section 3.5. Financial Statements; Certain Financial Information. Attached
hereto as Section 3.5 of the Disclosure Schedule are copies of the audited
balance sheets of the Company and its consolidated Subsidiaries as of December
31, 1995 and 1996 and the audited statements of operations, stockholder's equity
and cash flows of the Company and its consolidated Subsidiaries for each of the
fiscal years ended December 31, 1994, 1995 and 1996, together with the unaudited
balance sheets and statement of operations, stockholder's equity and cash flows
of the Company and its consolidated Subsidiaries as of and for the eleven month
period ended November 26, 1997 (collectively, with the notes thereto, the
"Financial Statements"). Except as set forth in Section 3.5 of the Disclosure
Schedule, the Financial Statements have been prepared in accordance with GAAP
(except as may be noted therein), and present fairly, in all material respects,
the financial position of the Company and its consolidated Subsidiaries as of
December 31, 1995, December 31, 1996 and November 26, 1997, respectively, and
the results of operations of the Company and its consolidated Subsidiaries for
each of the periods then ended. Except as set forth in Section 3.5 of the
Disclosure Schedule, except as disclosed in the Financial Statements and except
for liabilities incurred in the ordinary course of business by the Company Group
after December 31, 1996, the Company Group has not incurred any liability
(contingent or otherwise) that would be required by GAAP to be reflected on a
balance sheet of the Company or described in the notes thereto. The Statement of
Net Operating Liabilities was prepared in accordance with GAAP consistently
applied and presents fairly the amounts of the Company's Operating Liabilities
and Operating Assets as of the date of the Balance Sheet. The Operating
Liabilities set forth in the Statement of Net Operating Liabilities were, and
the Operating Liabilities to be set forth in the statement of Closing Date Value
will have been, incurred in the ordinary course of business and represent the
amounts payable in respect thereof as of the respective dates presented.
Section 3.6. Absence of Certain Changes or Events. Except as set forth in
Section 3.6 of the Disclosure Schedule, since November 26, 1997 the Company
Group has conducted its businesses only in, and has not engaged in any
transaction other than according to, the ordinary course of such businesses and
there has not been: (i) any change in the financial condition, properties,
assets, business or results of operations of the Company Group, except those
changes that, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect; (ii) any material damage,
destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by the Company Group, whether or not
covered by insurance; (iii) any declaration, setting aside or payment of any
dividend or other distribution in respect of the capital stock of the Company;
(iv) any material change by the Company in accounting principles, practices or
methods or change in depreciation or amortization policies or rates theretofore
adopted, in each case for financial reporting purposes, unless otherwise
required by GAAP; (v) any labor dispute other than routine matters which have
not had and are not reasonably likely to have a Material Adverse Effect; (vi)
except for increases or amendments in the ordinary course of business consistent
with past practice or as required by law, any material increase in the
compensation payable or to become payable by the
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Company Group to any of their directors, officers or employees or any increase
in the benefits under, or adoption or amendment of, any bonus, insurance,
pension or other employee benefit plan, payment or arrangement, for or with any
such directors, officers or employees; (vii) any amendment or termination of any
material Contract to which the Company Group is a party; (viii) any amendment of
the certificate of incorporation or by-laws of the Company Group; (ix) any
mortgage, pledge or other encumbering of any material property of any of the
Company Group (except for the incurrence of Permitted Encumbrances); (x) any
material indebtedness or liability incurred by the Company Group (except
liabilities incurred in the ordinary course of business), or any cancellation or
compromise by the Company Group of any material debt or claim owed to or held by
it; (xi) any sale, transfer, lease, abandonment or other disposal of any
properties or assets of the Company Group (real, personal or mixed, tangible or
intangible), other than sales of Operating Assets in the ordinary course of
business; (xii) any transfer, disposal or grant of any material rights under any
patent, trademark, trade name, copyright, service mark, invention or license
owned by the Company Group, or any disclosure to any Person of any material
trade secret, formula, process or know-how owned by the Company Group not
theretofore a matter of public knowledge; in each case except in the ordinary
course of business; (xiii) any single capital expenditure made, or any
commitment to make any capital expenditure, by the Company Group in excess of
$100,000 for any tangible or intangible capital assets, additions or
improvements; (xiv) any entry by the Company Group into any binding agreement,
whether in writing or otherwise, to take any action described in this Section
3.6; or (xv) any transactions between any member of the Retained Group and any
member of the Company Group, other than in the ordinary course of business
consistent with past practices.
Section 3.7. Title to Properties; Absence of Liens and Encumbrances, Etc.
(a) Section 3.7(a)(i) of the Disclosure Schedule lists all leases
and subleases of real property entered into by the Company Group at the
locations described thereon (the "Leased Real Property") as tenant thereunder.
Section 3.7(a)(ii) of the Disclosure Schedule hereto lists all real property
owned by the Company Group (the "Owned Real Property"). Except as set forth in
Section 3.7(a)(iii) of the Disclosure Schedule, the Company Group has good and
marketable title to all of the Owned Real Property, free and clear of any
Encumbrances, except for Permitted Encumbrances. Except as set forth in Section
3.7(a)(iv) of the Disclosure Schedule, the Company Group has a valid leasehold
interest in all of the Leased Real Property free and clear of any Encumbrances,
except for Permitted Encumbrances. Except as set forth in Section 3.7(a)(v) of
the Disclosure Schedule, no member of the Retained Group owns or controls any
interest in any assets or properties used in the operations of the businesses of
the Company Group or the operations of the Restaurants.
(b) The Company Group operates 557 Hardee's Restaurants at the
locations listed in Section 3.7(b) of the Disclosure Schedule, and Section
3.7(b) of the Disclosure Schedule describes the nature of the Company Group's
interest in the applicable real property for each such Restaurant.
(c) Neither the Company nor Spardee's Realty is in default under any
leases under which the Company Group is the lessee of real or personal property,
except defaults (other than payment defaults) which, alone or in the aggregate,
would not have a Material Adverse Effect.
(d) Seller Parties have provided or made available to Buyer true and
correct copies of all Title Documents.
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Section 3.8. Litigation. Except as set forth in Section 3.8 of the
Disclosure Schedule, there are no claims, actions, suits, arbitrations,
proceedings or investigations pending or, to the Knowledge of the Seller Parties
and the Company, threatened against the Company Group at law, in equity or
otherwise, in, before, or by, any court or Governmental Entity or authority.
None of the Company Group or their respective assets or properties is subject to
any order, writ, judgment, injunction, decree or award that would have a
Material Adverse Effect.
Section 3.9. Compliance with Law. Except as set forth in Section 3.9 of
the Disclosure Schedule, (i) the Company Group is not in violation of any
applicable Law, except for any violations which, alone or in the aggregate, do
not and would not have a Material Adverse Effect, and (ii) the Company Group has
all governmental permits and licenses required for the operation of its
businesses, except for any permits and licenses the absence of which, alone or
in the aggregate does not and would not have a Material Adverse Effect, and has
not received written notice of any material violation of the terms under which
it holds any such permit or license or of any enforcement action that would
result in the suspension or termination of any such permit or license.
Section 3.10. Contracts.
(a) Except for the Contracts listed in Section 3.10 of the
Disclosure Schedule, as of the date hereof, none of the Company Group is a party
to:
(i) any Contract relating to indebtedness of, or to the
borrowing or lending of, $100,000 or more by the Company Group or
the guarantee by the Company Group of the obligations or
indebtedness of any other Person;
(ii) any Contract the performance of which is expected to
involve consideration in excess of $50,000 per annum or total future
payments in excess of $100,000, other than those terminable without
payment or penalty upon no more than 30 days' notice;
(iii) any Contract which materially restricts or contains
material limitations on the ability of the Company Group to freely
conduct business in the United States;
(iv) any employment agreement or collective bargaining
agreement;
(v) any Contract between or among any member of the Company
Group, on the one hand, and any member of the Retained Group, on the
other hand, including, without limitation, any Contract relating to
or providing for the use of property or equipment, the provision of
services or resources or the allocation of expenses;
(vi) any Contract for the sale of any assets of the Company
Group or the grant of any rights to purchase any of the assets of
the Company Group, other than Contracts for sales or other
dispositions of assets in the ordinary course of business or which
are permitted by Section 6.3(e) or for Related Transactions;
(vii) any Contract that is otherwise material to the Company
Group and is terminable by the other party thereto upon the
occurrence of the transactions
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contemplated by this Agreement and, if terminated, would have a
Material Adverse Effect; or
(viii) any Contract providing for or relating to the supply or
distribution of food products and other products to the Company.
(b) Seller has made available to Buyer a correct and complete copy
of each Contract listed in Section 3.10 of the Disclosure Schedule, together
with any and all amendments or modifications thereto. Subject to such exceptions
(other than exceptions for payment defaults) that, individually or in the
aggregate, would not have a Material Adverse Effect, (i) each such Contract is
valid, binding, enforceable, and in full force and effect, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles, (ii) none of the Company Group nor, to the
Knowledge of the Seller Parties and the Company, any third party, is in breach
or default in any respect under any such Contract, and (iii) 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 such
Contract by the Company Group.
Section 3.11. Consents and Approvals. Other than the filings and/or
notices (i) set forth in Section 3.11 of the Disclosure Schedule or (ii) under
the HSR Act, no notices, reports or other filings are required to be made by
Seller, Advantica or the Company Group with, nor are any consents, registrations
or approvals required to be obtained by Seller, Advantica or the Company Group
from, any Person, in connection with the execution and delivery of this
Agreement by the Seller Parties and the Company and the consummation by the
Seller Parties and the Company of the transactions contemplated hereby.
Section 3.12. Tax Matters.
(a) Except as set forth in Section 3.12 to the Disclosure Schedule,
insofar as is relevant to the Company Group, the Seller Parties have (i) filed
all federal income Tax Returns and all other material Tax Returns required to be
filed in respect of any Taxes and each such Tax Return is true, complete and
accurate in all material respects, and (ii) paid all Taxes due and payable in
respect of periods for which such Tax Returns were due.
(b) Except as set forth in Section 3.12 of the Disclosure Schedule
insofar as is related to the Company Group, (i) no written notice of any
material proposed deficiency, claim, assessment or levy with respect to Taxes
has been received by the Seller Parties or the Company Group, (ii) to the
Knowledge of the Seller Parties and the Company, there is no claim or assessment
threatened against the Company Group, (iii) none of the Seller Parties or the
Company Group has been since 1992 or is currently the subject of a Tax Audit or
any examination of any Tax Return and none of them has received a written notice
that it is being or will be audited by a relevant taxing authority, (iv) all
deficiencies asserted or assessments made as a result of any Tax Audit have been
paid in full, (v) no issues that have been raised by the relevant taxing
authority in connection with any Tax Audit are currently pending, and (vi) none
of the Seller Parties or the Company Group has agreed to any extensions of time
or waivers of any applicable statute of limitations periods.
(c) The Company Group has duly withheld from each payment from which
such withholding is required by Law (including, without limitation, income,
social security and employment
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tax withholding) all material Taxes so required to be withheld and has paid the
same, to the extent due, together with the employer's share of the same, if any,
to the proper taxing authority.
(d) Since January 1, 1990, the Company Group has been a member of an
"affiliated group" as that term is described under Section 1504 of the Code,
filing a consolidated federal income Tax Return, the common parent of which is
Advantica and has not been a member of any other affiliated group.
(e) There is no ruling issued to the Company Group (or closing
agreement or gain recognition agreement to which the Company Group is a party)
nor are any contemplated concerning Taxes from or with any Governmental Entity
which will have an effect on the Company Group after the Closing Date.
(f) The Company Group has not made any payments, and is not a party
to any agreement that obligates it to make any payments, that would not be
deductible, in whole or in part, under Sections 280G or 162(m) of the Code.
(g) Seller is not a foreign person subject to withholding under
Section 1445 of the Code.
Section 3.13. Intellectual Property.
(a) Section 3.13(a) of the Disclosure Schedule sets forth a list and
brief description (including, where applicable, the country of registration) of
(i) all patents, patent applications, registered trademarks, trademark
applications, registered copyrights, copyright applications, trade names,
service marks and other intellectual property rights that are owned, or licensed
for use, by the Company Group and (ii) all agreements under which the Company
Group is licensed or otherwise permitted to use Intellectual Property. Except as
set forth in Section 3.13(a) of the Disclosure Schedule, at the Closing Date the
Company Group will have valid and subsisting rights to all Intellectual Property
used in the operation of the Restaurants.
(b) Except as set forth in Section 3.13(b) of the Disclosure
Schedule, with respect to Intellectual Property of the Company Group, (i) no
product (or component thereof or process) used, sold or manufactured by the
Company Group infringes on or otherwise violates the Intellectual Property of
any other Person or any confidentiality obligation enforceable against the
Company Group, (ii) there are no restrictions that would materially impair the
use of the Company's Intellectual Property in connection with the business of
the Company Group and (iii) to the Knowledge of the Company and the Seller
Parties, no Person is challenging the ownership or rights to use, or infringing
or otherwise violating, the Intellectual Property of the Company Group.
Section 3.14. Labor Matters. No member of the Company Group is a party to
any collective bargaining agreement respecting its employees, nor is there
pending, or to the Knowledge of the Company and the Seller Parties threatened,
any strike, walkout or other work stoppage, or any union organizing effort by or
respecting the employees of the Company Group.
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Section 3.15. Employee Benefits.
(a) Section 3.15 of the Disclosure Schedule contains a list of each
material employee benefit, stock purchase, stock option, severance,
change-in-control, fringe benefit, bonus, incentive and deferred compensation
plan, agreement, program, policy or other arrangement for current or former
employees of the Company Group which is maintained, sponsored or contributed to
by the Seller Parties or the Company Group. All such plans, agreements,
programs, policies and arrangements shall be collectively referred to as the
"Company Plans." The Company has furnished to Buyer all employment agreements
covering Operating Employees maintained by the Company Group.
(b) There is no "multiemployer plan", within the meaning of Section
3(37) of ERISA, covering employees of the Company Group.
(c) With respect to each Company Plan, the Company has delivered or
made available to Buyer a complete copy (or, to the extent no such copy exists,
a summary description) thereof and, to the extent applicable: (i) any related
trust agreement or other funding instrument; (ii) the most recent determination
letter; (iii) any summary plan description; and for the most recent plan year;
(iv) the Form 5500 and attached schedules; (v) audited financial statements; and
(vi) actuarial valuation reports.
(d) All Company Plans are in compliance in all material respects
with the Code and ERISA. The Company has received a favorable determination
letter from the IRS with respect to the qualified status of each Company Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Pension Plan") and which is intended to be qualified under Section
401(a) of the Code and the Company is not aware of any circumstances which would
adversely affect such determination letter. There is no pending, threatened or
anticipated action, suit or claim relating to the Company Plans. No member of
the Company Group has engaged in any transactions with respect to any Company
Plan that, assuming the "taxable period" (as defined in Section 4975(f) of the
Code) with respect to such transaction expired as of the date hereof, could
subject the Company Group to a material tax or penalty imposed by Section 4975
of the Code.
(e) As of the date hereof, no liability under Title IV of ERISA has
been or is expected to be incurred by the Company Group with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"), other than the payment of premiums to the Pension Benefit Guaranty
Corporation contributed to by the Company Group or any ERISA Affiliate. No
member of the Company Group has contributed, or been obligated to contribute, to
a "multiemployer plan" (within the meaning of Section 3(37) of ERISA) at any
time during the six-year period prior to the date hereof.
(f) All contributions required to be made by the Company Group under
the terms of any Company Plan have been timely made or have been reflected in
the Financial Statements. Neither any Pension Plan nor any single employer plan
of an ERISA Affiliate has an "accumulated funding deficiency" (within the
meaning of Section 412 of the Code or Section 302 of ERISA) whether or not
waived. No member of the Company Group has provided, or is required to provide,
security to any Pension Plan or to any single-employer plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
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(g) Except as set forth in Section 3.15 of the Disclosure Schedule,
no member of the Company Group has any obligations for retiree health and life
benefits under any Company Plan.
(h) Except as set forth in Section 3.15 of the Disclosure Schedule,
no member of the Company Group is a party to any litigation relating to or
seeking benefits under any of the Company Plans.
(i) To the Knowledge of the Company, none of the Company Plans holds
as an asset any interest in any annuity contract, guaranteed investment contract
or any other investment or insurance contract issued by an insurance company
that is the subject of bankruptcy, conservatorship or rehabilitation
proceedings.
(j) Except as set forth in Section 3.15 of the Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not (i)
entitle any of the Operating Employees of the Company Group to severance pay or
(ii) accelerate or provide any other rights or credits under, or increase the
amount payable or trigger any other obligation pursuant to, any of the Company
Plans.
Section 3.16. Environmental Matters. Except as disclosed in Section 3.16
of the Disclosure Schedule, the Company Group: (i) is in compliance with
applicable Environmental Laws, except where any failure to comply, individually
or in the aggregate, would not have a Material Adverse Effect; (ii) has not
received any written notices from any Government Entity alleging the material
violation of any applicable Environmental Law which has not been resolved and no
allegations reflected in such notices are pending or, to the Knowledge of Seller
Parties and the Company, threatened by any Person; (iii) is not the subject of
any court order, administrative order or decree arising under any Environmental
Law; (iv) is not the subject of any environmental site investigations or
remediation activities by a Person that is not a Governmental Entity; and (v)
has not generated, stored, used, emitted, discharged or disposed of any
Hazardous Substance except as permitted under applicable Environmental Laws.
Except as disclosed in Schedule 3.16, during or, to the Knowledge of the Seller
Parties and the Company, prior to the period of (i) the Company Group's
ownership or operation of the Owned Real Property or the Leased Real Property,
or (ii) the Company Group's participation in the management of any of the Owned
Real Property or Leased Real Property, there has been no release or threatened
release of any Hazardous Substance in, on, or affecting any such property in
excess of a reportable quantity for which the Company Group could reasonably be
expected to have a liability which would have a Material Adverse Effect.
Section 3.17. Insurance. Section 3.17 of the Disclosure Schedule lists all
insurance policies and self-insurance programs maintained by or on behalf of the
Company Group, true and correct copies of which have been provided to Buyer.
Such policies and programs provide coverage for the businesses of the Company
Group in amounts and against risks consistent with past practice. Except as set
forth in Section 3.17 of the Disclosure Schedule, the Company has insured
against the same risks covered by the policies listed in Section 3.17 of the
Disclosure Schedule at all times during the four-year period prior to the date
of this Agreement, in policy amounts and with policy limits substantially
similar, in the aggregate, to the policies listed in Section 3.17 of the
Disclosure Schedule.
Section 3.18. Brokers and Finders. Other than DLJ, neither the Seller
Parties nor the Company Group have employed any broker, finder, consultant or
intermediary in connection with the transactions contemplated by this Agreement
who would be entitled to a broker's, finder's or similar fee
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or commission in connection therewith or upon the consummation thereof. The
Seller Parties are solely responsible for the payment of any fee, commission or
reimbursement that may be due to or become payable to DLJ in connection with the
transactions contemplated by this Agreement.
Section 3.19. Government Regulations. No member of the Company Group is
subject to regulation under the Investment Company Act of 1940, as amended, the
Public Utility Holding Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act, the Commodity Exchange Act or any Law limiting its
ability to incur or assume indebtedness for borrowed money.
Section 3.20. Books and Records. Subject to the prior destruction of
certain documents consistent with the Company's document retention program, the
Seller Parties have furnished or made available to the Buyer true and correct
copies of all minute books, all accounting books and records and other similar
records of the Company Group, all of which have been maintained in all material
respects in accordance with applicable Law.
Section 3.21. Disclosure. No representation or warranty of any of the
Seller Parties contained in this Agreement contains any untrue statement of
material fact or omits to state any material fact necessary to make the
statements herein, taken as a whole and in light of the circumstances under
which they were made, not misleading.
Section 3.22. Seller Parties' Investigation. The Seller Parties are
informed and sophisticated sellers and are experienced in the sale of companies
such as the Company and Spardee's Realty. The Seller Parties acknowledge that
the Buyer (and any of its agents, officers, directors, employees, Affiliates or
representatives) has not made any representation or warranty as to the Buyer or
this Agreement except as expressly set forth in this Agreement, and the Seller
Parties agree, to the fullest extent permitted by Law, that, except as expressly
provided for herein or pursuant to the express provisions hereof, none of the
Buyer or the Company Group (and any of their respective agents, officers,
directors, employees, Affiliates or representatives) shall have any liability to
the Seller Parties (or any of their respective agents, officers, directors,
employees, Affiliates or representatives) on any basis based upon any
information made available or statements made to the Seller Parties (or any of
their respective agents, officers, directors, employees, Affiliates or
representatives).
Section 3.23. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article III, none of the Seller
Parties nor any other Person makes any other express or implied representation
or warranty on behalf of any of the Seller Parties or any member of the Company
Group.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Seller Parties as of the date hereof
(except that representations and warranties that are made as of a specific date
need be true only as of such date) as follows:
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Section 4.1. Organization and Authority of Buyer; No Conflicts.
(a) Organization and Authority. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to carry on its
business as it is now being conducted, and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly executed and delivered by Buyer and is a
legal, valid and binding obligation of Buyer, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditor's rights and to general equity principles.
(b) No Conflicts. Except as set forth in Section 4.4 of the
Disclosure Schedule, the execution, delivery and performance of this Agreement
by Buyer do not, and the consummation by Buyer of the transactions contemplated
hereby will not, constitute or result in (i) a breach or violation of, or a
default under, the certificate of incorporation or by-laws of Buyer, (ii) a
breach of, or a default under, the acceleration of any obligations or the
creation of a lien, pledge, security interest or other encumbrance on the assets
of Buyer (with or without notice, lapse of time or both) pursuant to, any
Contracts binding upon Buyer, (iii) to the Knowledge of Buyer, a violation of
any applicable Law or governmental or non-governmental permit or license to
which Buyer is subject, except, in the case of clause (ii) or (iii) above, for
any breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to materially delay
or materially impair the ability of Buyer to consummate the transactions
contemplated by this Agreement.
Section 4.2. Brokers and Finders. Other than Schroder, Buyer has not
employed any broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement who would be entitled to a broker's,
finder's or similar fee or commission in connection therewith or upon the
consummation thereof. Buyer is solely responsible for the payment of any fee,
commission or reimbursement that may be due to or become payable to Schroder in
connection with the transactions contemplated by this Agreement.
Section 4.3. Securities Act. Buyer is acquiring the Shares solely for the
purpose of investment and not with a view to, or for sale in connection with,
any distribution thereof in violation of the Securities Act. Buyer acknowledges
that the Shares are not registered under the Securities Act or any applicable
state securities law, and that such Shares may not be transferred or sold except
pursuant to the registration provisions of the Securities Act or pursuant to an
applicable exemption therefrom and pursuant to state securities laws and
regulations as applicable.
Section 4.4. Consents and Approvals. Other than the filings and/or notices
(i) set forth in Section 4.4 of the Disclosure Schedule and (ii) under the HSR
Act, no notices, reports or other filings are required to be made by Buyer with,
nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by Buyer from, any Person, in connection with the
execution and delivery of this Agreement by Buyer and the consummation by Buyer
of the transactions contemplated hereby except those that the failure to make or
obtain are not, individually or in the aggregate, reasonably likely to prevent,
materially delay or materially impair the ability of Buyer to consummate the
transactions contemplated by this Agreement.
Section 4.5. Disclosure. No representation or warranty of the Buyer
contained in this Agreement contains any untrue statement of material fact or
omits to state any material fact necessary
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to make the statements herein, taken as whole and in light of the circumstances
under which they were made, not misleading.
Section 4.6. Buyer's Investigation. Buyer is an informed and sophisticated
purchaser and is experienced in the evaluation and purchase of companies such as
the Company and Spardee's Realty. Except for the environmental investigations
described in Section 6.9 below, Buyer has undertaken such investigation as it
has deemed necessary to enable it to make an informed and intelligent decision
with respect to this Agreement, and Buyer acknowledges that the Seller Parties
and the Company Group have allowed Buyer such access as has been reasonably
requested by Buyer to the personnel, properties, premises and records of the
Company Group for this purpose. To the extent expressly permitted hereafter
under this Agreement, Buyer will undertake such further investigation as it
deems necessary. Buyer acknowledges that in entering this Agreement, in
acquiring the Shares and in consummating the other transactions contemplated
herein, Buyer has relied solely upon its own investigation and analysis and, to
the extent expressly permitted by this Agreement, the representations and
warranties contained in this Agreement, and that none of the Seller Parties and
the Company Group (and any of their respective agents, officers, directors,
employees, Affiliates or representatives) has made any representation or
warranty as to the Seller Parties, the Company Group, the Shares, this Agreement
or the business of the Company Group except as expressly set forth in this
Agreement, and Buyer agrees, to the fullest extent permitted by Law, that,
except as expressly provided for herein or pursuant to the express provisions
hereof, none of the Seller Parties (and any of their respective agents,
officers, directors, employees, Affiliates or representatives) shall have any
liability to Buyer (or any of its agents, officers, directors, employees,
Affiliates or representatives) on any basis based upon any information made
available or statements made to Buyer (or any of its agents, officers,
directors, employees, Affiliates or representatives).
Section 4.7. No Other Representations or Warranties. Except for the
representations and warranties contained in this Article IV, neither Buyer nor
any other Person makes any other express or implied representation or warranty
on behalf of Buyer.
ARTICLE V
TAX MATTERS
Section 5.1. Cooperation With Respect to Tax Matters.
(a) Seller and Buyer agree that it is their mutual intention that
the purchase of the Shares shall be treated for federal income tax purposes, as
well as for all relevant state, local and foreign income tax purposes, as a
purchase and sale of the assets of the Company Group. Advantica and Buyer shall
jointly make timely Section 338(h)(10) Elections (the "Section 338(h)(10)
Elections") in accordance with the Code (and any corresponding elections under
state, local and foreign tax law where applicable) with respect to the purchase
and sale of the Shares and with respect to the deemed purchase and sale of the
assets of the Company Group. The Seller Parties represent that its sale of the
Shares is eligible for, and Buyer represents that it is qualified to make, such
elections. The Seller Parties and the Company Group shall report, for federal
income tax purposes (and for state, local and foreign income tax purposes where
permitted by applicable law), the transaction under this Agreement consistent
with the Section 338(h)(10) Elections; and none of the Seller Parties, the
Company Group or Buyer will take a position under the Code contrary thereto
unless required to do so by applicable Tax
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Laws pursuant to a determination as defined in Section 1313(a) of the Code.
Except for the Share purchase and Section 338(h)(10) Elections contemplated by
this Agreement, Buyer shall not cause or permit the Company Group to engage, on
the Closing Date, in any transaction outside the ordinary course of business
that could affect the federal taxable income or loss of the Company Group
included in Advantica's federal consolidated income Tax Return.
(b) Within a reasonable time following the determination of the
Post-Closing Adjustment of the Purchase Price pursuant to Section 2.3 hereof
(but, in any event, not less than sixty (60) days prior to the due date
(including extensions) for the filing of any Tax Return with respect to which
such allocation shall be applicable), Buyer and Seller shall agree concerning
the computation of the Modified Aggregate Deemed Sale Price (as defined under
applicable treasury regulations) ("MADSP") of the assets of the Company Group
and the allocation of MADSP among such assets. The Seller Parties shall use
their reasonable efforts to obtain the maximum extensions of time to file any
Tax Returns with respect to which such allocation is applicable. If there is a
dispute as to the computation of the MADSP or its allocation among such assets,
the fair market value of the assets of the Company Group shall be determined by
an appraisal conducted by the CPA Firm and based on such appraisal, such firm
shall determine MADSP and its allocation among the assets. The fees and expenses
of such appraisal and determination shall be paid one-half by Seller and
one-half by Buyer. Advantica's consolidated federal income Tax Return (and where
permitted by law, all state, local and foreign income Tax Returns of Advantica
and Seller for such jurisdictions that compute Tax on a unitary or consolidated
basis) and all filings for which Buyer is responsible under (c) below shall,
when required to reflect MADSP or its allocations, reflect such items as
determined pursuant to this paragraph (b).
(c) Seller (or Advantica) and Buyer agree to take all action and
file all necessary Tax Returns, forms and reports to validly elect to treat the
transaction as a sale of assets as opposed to a sale of the Shares for tax
purposes. Seller (or Advantica) and Buyer shall file all such Tax Returns, forms
and reports in a timely manner and shall provide assurance to the other party
that it has done so. Buyer shall be responsible for the preparation and timely
filing of all documents, Tax Returns and other forms and schedules required to
be submitted to the IRS (and, where applicable, all state, local and foreign
taxing authorities) in connection with the Section 338(h)(10) Elections in
accordance with the Code (or similar provisions of state, local or foreign law)
and the terms of this Agreement, including the IRS Form 8023 (but excluding
Advantica and Seller for such jurisdictions that compute Tax on a unitary
basis), which documents, Tax Returns, forms and schedules shall reflect MADSP
and its allocation. If any changes are required to these forms subsequent to
their filing, the parties shall promptly agree and cooperate with respect to
such changes. To the extent not executed and completed as of the date hereof,
Advantica shall execute and deliver to Buyer such documents or forms, including
any amended or replacement Forms 8023, as are reasonably requested by Buyer and
as are required by the Code, or under similar provisions of state, local or
foreign law, in order to properly complete these Section 338 forms and schedules
at least twenty (20) days prior to the date such forms are required to be filed.
Advantica shall provide Buyer with such information as Buyer reasonably requests
in order to prepare any remaining Section 338 forms and schedules within thirty
(30) days of Buyer's request for such further information or within such shorter
period as is necessary to comply with applicable law. Notwithstanding the
foregoing, Buyer shall request any such information as promptly as practicable
following the final determination of the Closing Date Value under Section 2.3.
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(d) In no event shall the Company Group or the Buyer have any
liability directly or indirectly (pursuant to a tax sharing agreement or
otherwise) for state, local or foreign income Taxes resulting from the Section
338(h)(10) Elections, or from an election or deemed election under Section
338(g) of the Code with respect to the purchase and sale of the Shares hereunder
and the deemed purchase and sale of the assets of the Company and Spardee's
Realty, where the state, local or foreign income tax jurisdictions do not
provide or recognize the Section 338(h)(10) Elections or do not apply their
respective provisions corresponding to Section 338(h)(10) of the Code to the
purchase and sale of Shares or the deemed purchase and sale of the assets of the
Company and Spardee's Realty (for example, because the Company Group files a
separate company income Tax Return in such jurisdiction), and any such liability
shall be paid by Advantica and Seller.
(e) Buyer recognizes that the Company Group have joined with Seller,
Advantica, and Advantica's Affiliates in filing unitary, consolidated, or
combined Tax Returns. After the Closing Date, (i) Advantica shall include (to
the extent required by Law) the taxable income or loss, and all other items, of
the Company Group for periods ending before or on the Closing Date, in its
unitary, consolidated or combined Tax Returns, including without limitation
income and loss attributable to the Section 338(h)(10) Elections, (ii) in the
case of those jurisdictions not described in (i) that permit or require a short
period Tax Return ending on the Closing Date, Advantica and the Company Group
and its Affiliates shall include the taxable income or loss, and all other
items, of the Company Group, for periods ending before or on the Closing Date,
on such Tax Returns, including without limitation income and loss attributable
to Section 338(h)(10) Elections, and (iii) with respect to any other Tax Returns
for any taxable period that includes but does not end on the Closing Date (the
"Straddle Tax Return"), Advantica shall in consultation with Buyer prepare a
schedule setting forth, on a basis consistent with the preparation of
Advantica's consolidated federal income Tax Return for the taxable period ending
on the Closing Date, the taxable income or loss, and all other items, of the
Company Group, for the period commencing with the first day of the taxable
period covered by such Straddle Tax Return up to and including the Closing Date
("Pre-Closing Period") and the period commencing with the first day after the
Closing Date and ending with the last day of the taxable period covered by such
Straddle Tax Return (the "Post-Closing Period"). The income and loss of the
Company Group will be allocated to the Pre-Closing Period, to the extent
practicable by closing the books as of the end of the Closing Date. To the
extent an allocation in accordance with the provision of the foregoing sentence
is not practicable, such taxable income and loss shall be allocated on the basis
of the number of days (other than any items specifically allocable to the
Pre-Closing Period or Post-Closing Period) in the Pre-Closing Period compared to
the number of days in the entire applicable period.
(f) Advantica shall pay any and all federal, state, local and
foreign Taxes attributable to the income and operations described in Section
5.1(e)(i) and 5.1(e)(ii) above (net of any Tax refunds received by the Company
Group or Buyer with respect to such Taxes). In no event will Buyer or the
Company Group pay directly or indirectly (pursuant to a tax sharing agreement or
otherwise) or be obligated to pay or have any liability for any amount described
in the first sentence of this Section 5.1(f), including, without limitation, any
Tax liability attributable to the Section 338(h)(10) Elections. In the case of
the Straddle Tax Returns, upon notice from Buyer, Advantica or Seller shall pay
Buyer an amount which reflects the Taxes attributable to the income, operations
and properties of the Company Group for the Pre-Closing Period, including,
without limitation, any Tax liability attributable to the Section 338(h)(10)
Elections. Advantica shall pay Buyer or the Governmental Entity directly the
Taxes which are payable with Tax Returns to be filed by the Company Group
pursuant to
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this Section 5.1(f) within three (3) Business Days prior to the due date for the
filing of such Tax Returns.
(g) Advantica shall be responsible for, and shall have ultimate
discretion with respect to, (i) the preparation and filing of all Tax Returns
required or permitted by applicable Law to be filed by the Company Group (or by
Advantica or its Affiliates on their behalf) with respect to periods that end on
or before the Closing Date (and the payment of all Taxes reported on such Tax
Returns), and (ii) any Tax Audit, including the execution of any waiver of
limitation with respect to any Tax Audit, relating to any such Tax Returns.
Notwithstanding the foregoing, the Seller and Advantica shall not, without the
prior written consent of the Buyer, be entitled to settle either
administratively or after the commencement of litigation any claim for Taxes
which would adversely affect the liability for Taxes of Buyer or the Company
Group for the Post-Closing Period or any subsequent year that result from the
reduction of asset basis or cost adjustments, the lengthening of any
amortization or depreciation periods, the denial of amortization or depreciation
deductions, or the reduction of loss or credit carryforwards. Such consent shall
not be unreasonably withheld and shall not be necessary to the extent the Seller
has indemnified the Buyer against the effect of any such settlement.
(h) Buyer and the Company Group shall be responsible for, and shall
have ultimate discretion with respect to, (i) the preparation and filing of all
Tax Returns required to be filed by the Company Group with respect to periods
that begin after the Closing Date (and the payment of all Taxes reported on any
such Tax Return), and (ii) the preparation and filing of the Straddle Tax
Returns, if any, and (iii) any Tax audit (including the execution of any waiver
of limitation with respect to any Tax Audit) relating to any such Tax Returns;
provided, however, that in the case of any Straddle Tax Return, the preparation
and filing of such Return shall be subject to review and approval of Advantica
(which approval shall not be unreasonably withheld), (iv) filing all employment
Tax Returns including but not limited to IRS forms 940, 941, W-2 and W-3 and all
similar state and local employment Tax Returns for the calendar year ended 1998
including activity required to be reported for the Pre-Closing Period, and (v)
filing all information reporting Tax Returns including but not limited to IRS
forms 1096 and 1099 and all similar state and local information returns for the
calendar year ended 1998 including activity required to be reported for the
Pre-Closing Period. Notwithstanding the foregoing, the Buyer and the Company
Group shall not, without the prior written consent of the Seller, be entitled to
settle either administratively or after the commencement of litigation any claim
for Taxes which would adversely affect the liability for Taxes of Seller and
Advantica for any Pre-Closing Periods or their portion of any Straddle Period
that result from the reduction of asset basis or cost adjustments, the
lengthening of any amortization or depreciation periods, the denial of
amortization or depreciation deductions, or the reduction of loss or credit
carryforwards. Such consent shall not be unreasonably withheld and shall not be
necessary to the extent the Buyer has indemnified the Seller against the effect
of any such settlement.
(i) Advantica and Seller shall be liable for and indemnify, defend
and hold harmless Buyer, and the Company Group from and against any liability
arising for any taxable year or period in the Pre-Closing Periods pursuant to
Treasury Regulation Section 1.1502-6(a) and any similar provision existing under
the Laws of any state with respect to unitary, combined or similar returns.
Advantica and Seller shall be liable for and indemnify, defend and hold harmless
Buyer and the Company Group from and against any and all Taxes attributable to
operations for the periods of time ending on or before the Closing Date,
including any Taxes attributable to the Section 338(h)(10) Elections. In
addition, Advantica and Seller shall indemnify, defend and hold harmless Buyer
and the
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Company Group from and against any liability for Taxes of Advantica (or its
Affiliates) or the Company Group for the periods described in Section 5.1(e)(i)
and for the Pre-Closing Periods. Advantica and Seller shall also indemnify and
hold harmless Buyer and the Company Group from and against all costs and
expenses incurred by them (including reasonable attorneys' fees and expenses) in
connection with any liability to, or claim by, any Governmental Entity, for
Taxes for which Advantica and Seller are required to indemnify Buyer and the
Company Group under this Article V. For purposes of the foregoing, any amounts
paid to Buyer or the Company Group or their respective Affiliates shall be
treated as an adjustment to the Purchase Price of the Shares. Advantica and
Seller shall be entitled to any refunds of Taxes of Advantica (or its
Affiliates) or the Company Group for the periods described in Section 5.1(e)(i);
provided, however, that if the Seller or Advantica becomes entitled to a refund
or credit of Taxes for any Pre-Closing Periods and such Taxes are (i)
attributable solely to the carryback of losses, credits or similar items
attributable to the Company Group from the Post-Closing Period or any subsequent
taxable year, and (ii) relate to a jurisdiction in which the Company Group files
a separate Company Income Tax Return, the Seller or Advantica shall promptly pay
to Buyer an amount of such refund or credit together with any interest thereon.
For purposes of calculating such refund or credit, the amount shall be the
difference between the Taxes of the Company Group for such period with and
without such item, after all other tax attributes of Advantica or its Affiliates
for such period is taken into account. In the event that any refund or credit of
Taxes for which a payment has been made is subsequently reduced or disallowed,
Buyer shall indemnify and hold harmless the Seller and Advantica for any tax
liability, including interest and penalties, assessed against the Seller and
Advantica by reason of the reduction or disallowance.
(j) Buyer and the Company Group shall be liable for and indemnify
the Seller Parties for all Taxes imposed on the Company Group (or for which the
Company Group may otherwise be liable) for any taxable year or period that
begins after the Closing Date and, with respect to that portion of a Straddle
Tax Return relating to the Post-Closing Period. Buyer shall also indemnify and
hold harmless the Seller Parties from and against all costs and expenses
incurred by the Seller Group (including reasonable attorneys' fees and expenses)
in connection with any liability to, or claim by, any Governmental Entity, for
Taxes for which Buyer and the Company Group is required to indemnify the Seller
Parties under this Article V.
(k) Buyer and Advantica shall consult prior to filing their Tax
Returns for the period immediately before and immediately after the Closing Date
and shall agree on the inclusion of items of income and deduction and all other
items consistent with Section 5.1(e) for each of the respective periods pursuant
to the permanent books and records of the Company Group so as to avoid double
inclusion or double exclusion of income and deductions and all other items. In
the event that Buyer and Advantica are unable to agree on the allocation of such
items, then the items of disagreement shall be referred promptly to the CPA
Firm. The CPA Firm shall settle the items of disagreement within 10 days and the
decision of the CPA Firm shall be conclusive on the parties with respect to the
items of dispute. The fees and expenses incurred with respect to these
determinations shall be borne equally by Seller and Buyer.
(l) After the Closing Date, each of Buyer, the Company Group on the
one hand, and Advantica and Seller, on the other shall (i) provide, or cause to
be provided, to each other's respective officers, employees, representatives and
Affiliates, such assistance as may reasonably be requested, including making
available employees and the books and records of the Company, Spardee's Realty,
Advantica or Seller, by any of them in connection with the preparation of any
Tax
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Return or any Tax Audit of the Company Group, Advantica or Seller, in respect of
which any party is responsible pursuant to Section 5.1, and (ii) retain, or
cause to be retained, for so long as any such taxable years or Tax Audits shall
remain open for adjustments, any records or information which may be relevant to
any such Tax Returns or Tax Audits.
(m) Each of Buyer and the Company Group, on the one hand, and
Advantica and Seller, on the other, shall promptly inform, keep regularly
apprised of the progress with respect to, and notify the other party in writing
not later than (i) ten (10) Business Days after the receipt of any notice of any
Tax Audit or (ii) fifteen (15) Business Days prior to the settlement or final
determination of any Tax Audit for which it was responsible pursuant to Section
5.1 which could affect the Taxes of such other party for any taxable year.
Failure by Buyer or the Company Group to timely provide notice to Advantica or
Seller or any of their Affiliates such that administrative remedies to resolve,
protest, appeal or otherwise reduce the Taxes payable are no longer available
will prohibit Buyer from asserting its claim under this Section 5.1; provided
that such failure will prohibit such claim only if such failure materially and
adversely affects Advantica or Seller. Failure by Advantica, Seller or any of
their Affiliates to provide such notice to Buyer or the Company Group such that
administrative remedies to resolve, protest, appeal or otherwise reduce Taxes
payable are no longer available will prohibit Seller from asserting its claim
under this Section 5.1; provided that such failure will prohibit such claim only
if such failure materially and adversely affects the Buyer or the Company Group.
(n) All transfer Taxes (including, but not limited to, sales taxes)
which may be imposed or assessed as a result of Buyer's acquisition shall be
borne by Advantica or the Seller.
(o) Advantica and its Affiliates shall have the sole right to
represent the Company Group's interest in any Tax Audit, administrative or court
proceeding relating to the Pre-Closing Periods and to employ counsel of its
choice at its own expense. Buyer will timely execute all appropriate powers of
attorney to allow Advantica or its Affiliates to represent the Company Group on
all matters pertaining to Taxes for the Pre-Closing Periods.
(p) The Seller Parties, Buyer and the Company Group agree to
cooperate and to share all tax information materials necessary or desirable in
connection with all tax compliance matters.
(q) The Buyer or the Company Group will reimburse Advantica for any
franchise Taxes paid to Alabama, Georgia, Louisiana, Mississippi, North
Carolina, Ohio and South Carolina which may be paid with the Company Group's
Pre-Closing Periods Tax Returns, but are for the privilege of conducting
business for the Post-Closing Period and for any other similar Taxes which are
not reflected on the Closing Date Balance Sheet; provided, that such
reimbursement shall be limited to the amount of such Taxes attributable to the
Post-Closing Period.
(r) Advantica and Seller may retain all original Tax Returns and Tax
Return supporting documentation for the Tax Returns filed for the Pre-Closing
Periods for which Advantica and Seller have responsibility for payments or
refunds under this Article V. Advantica and Seller will also retain all original
invoices, fixed asset records, computer tapes, microfiche, computer optional
records or any other media used to store or record Pre-Closing Periods
information which may be required in connection with a Tax Audit of the Company
Group's Tax Returns or Taxes for Pre-Closing Periods. Any books or records not
retained by Advantica or Seller will be subject to the retention and
availability provisions described in Section 6.7 of this Agreement. Upon request
of the
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Buyer and at the Buyer's expense, Advantica will make copies of any books and
records to be retained by Advantica pursuant to this Section 5.1(r).
(s) The obligations of the parties set forth in this Article V shall
be unconditional and absolute and shall remain in effect without limitation as
to time.
Section 5.2. Tax Related Agreements.
(a) Effective as of the Closing Date, the Company Group shall not
have any obligation or liability in respect of any tax sharing or tax allocation
agreement between Advantica, the Seller or any member of their affiliated group.
(b) Any and all tax sharing agreements, overhead allocation
agreements, cost reimbursement agreements and other intercompany agreements
between the Company Group on the one hand, and Advantica or its Affiliates, on
the other hand, entered into prior to the Closing Date shall be deemed
terminated with respect to the Company Group as of the Closing Date.
ARTICLE VI
CERTAIN COVENANTS AND AGREEMENTS OF SELLER PARTIES AND BUYER
Section 6.1. Access and Information.
(a) The Seller Parties shall permit Buyer and its representatives to
have reasonable access during regular business hours, to all properties owned or
leased by the Company Group and to the officers of the Company Group, and shall
furnish, or cause to be furnished, to Buyer and its representatives any
financial and operating data, books, Contracts and other records and information
with respect to the business and properties of the Company Group as Buyer shall
from time to time reasonably request.
(b) In the event of the termination of this Agreement, Buyer shall
deliver (without retaining any copies thereof) to Seller, or confirm in writing
to Seller that it has destroyed, all information furnished to Buyer or its
representatives by the Seller Parties, the Company Group or any of their
respective agents, employees or representatives as a result hereof or in
connection herewith, whether so obtained before or after the execution hereof,
and all analyses, compilations, forecasts, studies, reports, memos, notes or
other documents prepared by Buyer or its representatives which contain, refer to
or reflect any such information. Buyer shall at all times prior to the Closing
Date, and in the event of termination of this Agreement, cause any information
so obtained to be kept confidential and will not use, or permit the use of, such
information in its business or in any other manner or for any other purpose
except as contemplated hereby.
(c) The Seller Parties shall cause the Company to (i) permit Buyer's
independent public accountants to have access to the books and records of the
Company so that, if required by Buyer, any unaudited historical financial
statements and other financial information of the Company Group, if any, can be
reviewed or audited by Buyer's independent public accountants and (ii) permit
such financial statements, the Financial Statements and other information of or
concerning the Company or its businesses to be disclosed in any Securities
Filings or in any Offering Memorandum to
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the extent Buyer reasonably determines such disclosure is necessary or required
(after the Seller Parties have had a reasonable opportunity to review and
approve the accuracy of and revise, as appropriate, any such disclosure which is
to be filed or used prior to the Closing). In addition, the Seller Parties shall
cooperate with Buyer, and request the Company's independent public accountants
to provide, at the Buyer's expense, such information (including, without
limitation, such accountants' workpapers) and assistance, including the
execution and delivery of opinions and consents, with respect to the Company's
historical consolidated financial statements as may be reasonably required by
Buyer, in connection with the preparation of financial statements for, and their
inclusion in, any such Securities Filings or Offering Memorandum. The Seller
Parties also shall cause the Company to provide to Buyer such reasonable
assistance and information concerning the Company and the Restaurants of the
type and nature that would be required to be included in a Registration
Statement that the Company would be required by the Securities Act to file on
Form S-1 for a public offering of its equity securities, for inclusion in any
Securities Filing or Offering Memorandum. Disclosure of such financial
statements and information furnished hereunder in any Securities Filing or
Offering Memorandum (after the Seller Parties have had a reasonable opportunity
to review and approve the accuracy of and revise, as appropriate, such
disclosure) which is required to be filed or is used prior to the Closing shall
not constitute a breach or violation of the Confidentiality Agreement.
(d) The Seller Parties promptly shall inform Buyer in writing if
either of the Seller Parties becomes aware of any breach of any of their
representations or warranties contained in this Agreement.
(e) The Buyer promptly shall inform the Seller Parties in writing if
the Buyer becomes aware of any breach of any of its representations or
warranties contained in this Agreement.
Section 6.2. Consents. The Seller Parties and Buyer shall each use their
reasonable best efforts whether before or, at the Closing, to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary to
fulfill the conditions precedent to the other party's obligations hereunder and
to consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and to cooperate with each other in connection
with the foregoing. Without limiting the generality of the foregoing, Buyer and
Seller Parties shall each use their reasonable best efforts (i) to secure all
consents, approvals, waivers and authorizations required or necessary from other
parties to Contracts or under applicable Law in order to consummate the
transactions contemplated hereby, (ii) to prevent the entry, enactment or
promulgation of any threatened or pending injunction or order that would
adversely affect the ability of the parties hereto to consummate the
transactions contemplated by this Agreement, (iii) to lift or rescind any
injunction or order adversely affecting the ability of the parties hereto to
consummate the transactions contemplated by this Agreement and (iv) to effect
all necessary registration and filings and submissions of information required
or requested by any Governmental Entity, including those required under the HSR
Act. Buyer and Seller Parties shall use their reasonable best efforts to
promptly take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary, proper or appropriate under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement as soon as practicable.
Section 6.3. Conduct of Business. From the date of this Agreement through
the Closing, and except as otherwise expressly provided for by this Agreement or
consented to or approved by Buyer in writing, the Seller Parties covenant and
agree that the Company Group shall: (i) cause the
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Company Group to operate their businesses in the ordinary course; (ii) use their
reasonable efforts to preserve intact their current business organizations and
preserve their relationships with customers, suppliers, distributors and others
having business dealings with them to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect at or after the
Closing; (iii) cause the Company Group to retain at each of the Restaurants an
adequate supply of good and useable operating inventories consistent with the
Restaurants' reasonably anticipated usage requirements; and (iv) not
deliberately breach any representation, warranty or obligation contained in this
Agreement. Except as otherwise provided herein and except as provided in Section
6.3 of the Disclosure Schedule, Seller agrees that, between the date of this
Agreement and the Closing Date and without the prior written consent of Buyer,
it will not permit any member of the Company Group to:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (ii) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of any member of the Company Group or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(b) authorize for issuance, issue, deliver, sell, pledge or
otherwise encumber any shares of its capital stock, any other voting securities
or any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities or any
other securities or equity equivalents (including without limitation stock
appreciation rights) or contractual obligation valued or measured by the value
or market price of its capital stock;
(c) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(d) except as contemplated by Section 6.4(a) hereof, acquire or
agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other manner, any
business or any Person or division thereof;
(e) sell, lease, license, mortgage or otherwise encumber or subject
to any Encumbrance (other than Permitted Encumbrances) or otherwise dispose of
any of its properties or assets, except for (i) sales of inventory in the
ordinary course of business, (ii) sales or other dispositions of Assets Held for
Resale as contemplated by Section 2.4 hereof, (iii) transfers and assignments
contemplated by Section 6.4 hereof, and (iv) sales or other dispositions in the
ordinary course of business of assets which are no longer necessary for the
operation of the Restaurants (provided, however, that (A) the aggregate net book
value of assets which the Company may sell or otherwise dispose of in reliance
upon clause (iv) above shall not exceed $100,000 for any single item or $500,000
in the aggregate for all such items without the Buyer's prior written consent),
and (B) in no event shall clause (iv) above permit sales or other dispositions
of any Restaurant or any asset the sale or other disposition of which would
cause a material disruption of or disable the operations of any Restaurant);
(f) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another Person, issue or sell any debt securities or
warrants or other rights to acquire any of its debt securities, guarantee any
debt securities of another Person, enter into any agreement to maintain any
financial statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary
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course of business, or (ii) make any loans, advances or capital contributions
to, or investments in, any other Person;
(g) acquire or agree to acquire any assets that are material,
individually or in the aggregate, to the Company Group taken as a whole, or make
or agree to make any capital expenditures, except in the ordinary course of
business;
(h) pay, discharge or satisfy any claims (including claims of
stockholders), liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, of (A) liabilities or obligations in the ordinary course of
business or in accordance with their terms as in effect on the date hereof, (B)
liabilities reflected or reserved against in the most recent consolidated
audited financial statements (or the notes thereof) of the Company, or waive,
release, grant, or transfer any rights of material value or modify or change in
any material respect any existing license, lease, franchise agreement, contract
or other document, other than in the ordinary course of business;
(i) adopt or amend in any material respect (except as may be
required by Law or required or permitted by this Agreement) any Company Plans
for the benefit or welfare of any employee, director or former director or
employee or, other than increases for individuals in the ordinary course of
business, increase the compensation of fringe benefits of any director, employee
or former director or employee; pay any benefit not required by any existing
plan, arrangement or agreement, grant any new or modified severance or
termination arrangement or increase or accelerate any benefits payable under its
severance or termination pay policies in effect on the date hereof, other than
any such increase or acceleration provided for under such policies as in effect
on the date of this Agreement;
(j) change any material accounting method, principle or practice
used by it, except as may be required pursuant to GAAP;
(k) except in the ordinary course of business and consistent with
past practice, settle or compromise any federal, state, local or foreign income
tax liability where the payment will exceed $50,000;
(l) except in the ordinary course of business, effect any
transactions with the Retained Group; or
(m) commit or agree to take any of the foregoing actions.
Section 6.4. Related Transactions.
(a) Transfer of Certain Assets and Restaurants. Prior to or
contemporaneously with the Closing, the Seller Parties shall cause to be
transferred and assigned to the Company valid title, free and clear of all
Encumbrances (other than Permitted Encumbrances), to the assets and properties
listed or described in Section 6.4(a) of the Disclosure Schedule.
(b) Trademarks. Prior to or contemporaneously with the Closing, the
Seller Parties shall cause the Retained Group to permit reasonable and
royalty-free use by Hardee's and the Company of the trademark "ULTIMATE
OMELETTE" (U.S. Registration No. 1,645,411 in Cl. 29)
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for a period of one year from and after the Closing Date, whereupon Hardee's and
the Company may elect to continue such use of such trademark for such royalties
or other consideration and on such other terms and conditions as shall be
reasonably agreed upon by Buyer and Advantica.
(c) Certain Assets. Prior to the Closing, the Seller Parties shall
cause to be transferred and assigned by the Company Group to Seller or another
member of the Retained Group the assets and properties of the Company Group
listed or described in Section 6.4(c) of the Disclosure Schedule.
Section 6.5. Certain Buyer and Seller Obligations and Agreements.
(a) Supply and Distribution Agreements. Buyer acknowledges that the
Company will continue after the Closing to be bound by the supply and
distribution agreements listed in Section 3.10 of the Disclosure Schedule,
including without limitation, the MBM Agreement and the SFI Agreement. Prior to
the Closing, the Company shall not, and the Seller Parties shall not permit the
Company to, extend, renew or otherwise amend any of the supply or distribution
agreements or arrangements to which the Company Group is a party without the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld.
(b) Termination of Pending Arbitration and License Agreements. Upon
the Closing (i) the Seller Parties and Buyer shall cause the Pending Arbitration
to be dismissed with prejudice and terminated, and (ii) Advantica and its
Subsidiaries, on the one hand, and Buyer and its Subsidiaries and the Company
Group, on the other, shall execute and deliver the Termination Agreement.
(c) Transitional Services. Upon the Closing, the Seller Parties and
the Company shall enter into a Transitional Services Agreement, for a term of up
to 60 days from the Closing Date, pursuant to which the Seller or Advantica
shall provide to the Company, at no cost to the Company, accounting, data base,
payroll and related systems support services. Such services shall be provided
with the same quality and frequency and in the same general manner as such
services have been provided to the Company prior to the date of this Agreement.
The Transitional Services Agreement shall not require Seller or Advantica to
withhold or transmit withholdings for HMO's, medical or 401(k) benefit plans or
arrangements, or insurance carriers other than those to which the Seller Parties
currently transmit, nor shall the Transitional Services Agreement otherwise
require Seller or Advantica to modify its current systems in any material
respect.
Section 6.6. Employee Benefit Plans.
(a) Termination of Participation in Company Plans. The Seller
Parties shall cause the Company Group to terminate its participation in all
Company Plans immediately prior to the Closing, with no resulting cost,
liability or expense to the Company except to the extent provided by this
Agreement.
(b) Establishment of New Plans. Concurrently with the Closing, Buyer
shall cause the Company to establish the plans and programs (the "New Plans")
providing the following benefits: medical, dental, vision, long-term disability,
short-term disability, and life insurance. The New Plans' provisions shall
provide for employee participation and benefits identical to those provided by
the Company prior to Closing. The New Plans' benefits shall be on a "no loss/no
gain basis" so that there
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are no new preexisting condition exclusions or waiting periods imposed on, or
evidence of insurability required of participants covered in the comparable
Company Plans prior to Closing (except to the extent those periods, conditions
and other limitations were imposed prior to Closing), and so that benefits paid
prior to Closing by the comparable Company Plans are credited towards
deductibles, co-payment, out-of-pocket, and similar limitations. Notwithstanding
the foregoing, nothing in this Agreement shall prevent the Company or Buyer from
amending or terminating the New Plans after the Transition Period provided for
in the Transitional Services Agreement under Section 6.5 following the Closing.
The foregoing is on the basis that all insurers under the Company Plans will be
insurers under the New Plans and that any such insurer agrees to the foregoing
requirements without any material incremental cost to the Company. If any
insurer will not so do, the parties will mutually and reasonably agree to any
variation from the foregoing requirement.
(c) Handling of Medical and Similar Claims. The Company Plans will
process and pay medical and other benefit claims in the normal course through
the day prior to the Closing. On and after the Closing, the New Plans shall be
liable for any claims of Operating Employees (and eligible spouses and
dependents of Operating Employees, COBRA continuees who would have been
Operating Employees if employed by the Company Group as of the Closing and
"Qualified Beneficiaries" under ERISA of such COBRA continuees) which had not
yet been finally processed and paid by the comparable Company Plans (regardless
of whether those claims were incurred on or before the Closing, and regardless
of whether claims had yet been filed). The Company Plans shall not pay or be
responsible for any such claim which it had not yet processed and paid prior to
the Closing, and shall forward such claims to the New Plans.
(d) Seller Parties' Cooperation Regarding New Plans. The Seller
Parties will cooperate with the Company and Buyer in establishing the New Plans
and utilizing the Company Plans' current third party service providers (to the
extent such third parties agree to do so) during the Transition Period provided
for in the Transitional Services Agreement under Section 6.5. However, the
Seller Parties disclaim any responsibility for enrollment following the Closing
and any undertaking to provide services which could cause the Seller Parties to
become fiduciaries with respect to the New Plans. Nothing in this Agreement or
in any services provided by the Seller Parties shall be construed to imply that,
on or after Closing, the Company is a sponsor or co-sponsor of any Company Plan
or any plan maintained by Advantica or its Affiliates. The Company and Buyer
agree to pay all third party service providers directly to the greatest extent
possible. Additional requirements regarding the New Plans may be specified in
the Transitional Services Agreement, including the Company's and Buyer's
indemnification of the Seller Parties and Advantica.
(e) Management Employees. At or prior to the Closing, the Seller
Parties shall cause the Company to terminate the employment of all Management
Employees. Seller Parties shall be responsible for and shall defend, indemnify
and hold Buyer and the Company harmless from and against all obligations and
liabilities, under the Company Plans or otherwise, with respect to the
termination of employment of the Management Employees. With respect to any
Management Employee (including any beneficiary or dependent thereof), Seller
Parties shall be responsible for and shall defend, indemnify and hold Buyer and
the Company harmless from and against all liabilities and obligations relating
to claims, expenses, illnesses, injuries and any other occurrences on or prior
to the Closing and any liabilities under Company Plans arising out of periods
prior to the Closing. Notwithstanding the foregoing, with respect to any
Management Employee who is terminated by the Company at or prior to the Closing
and not thereafter employed by the Retained Group and who is
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hired by Buyer, the Company Group or any of their Affiliates within six (6)
months immediately after the Closing Date, Buyer or the Company Group shall
reimburse the Seller Parties for any and all obligations incurred by any member
of the Retained Group in connection with such termination of the employment of
such Management Employee.
(f) Operating Employees. From and after the Closing Date, Buyer
agrees that all Operating Employees shall be eligible to participate in the
Buyer's employee benefit plans and programs (including eligibility for vacation
and sick leave) and shall be given credit for past service with the Company for
purposes of eligibility, vesting, deductibles, copayments and pre-existing
conditions as if such employee had been employed by Buyer to the extent
permitted by applicable nondiscrimination rules under the Code and to the extent
permitted by such plans and programs.
(g) No Third Party Beneficiaries. No provision of this Agreement
shall create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of Seller or
the Company in respect of continued employment (or resumed employment) with
either Buyer or the Company or any of Buyer's or Seller's Affiliates and no
provision of this Agreement shall create any such rights in any such employee or
former employee in respect of any benefits that may be provided, directly or
indirectly, under any Company Plan or any plan or arrangement which may be
established by Buyer or the Company. No provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate after the
Closing Date any such plans or arrangements of Seller, Buyer or any of their
respective Affiliates or the Company.
Section 6.7. Retention of Books and Records. Buyer shall cause the Company
Group to retain, until all applicable tax statutes of limitations (including
periods of waiver) have expired, all books, records and other documents
pertaining to the Company Group in existence on the Closing Date that are
required to be retained under current retention policies and to make the same
available after the Closing Date for inspection and copying by Seller or its
agents at Seller's expense, during regular business hours and upon reasonable
request and upon reasonable advance written notice. After the expiration of such
period, no such books and records shall be destroyed by Buyer without first
advising Seller and giving Seller an opportunity to obtain possession thereof.
Seller agrees that the confidentiality of such records will be maintained and
that such records will be used only for tax or other reasonable business
purposes.
Section 6.8. Closing Date Financial Statements. After the Closing Date,
each of Buyer and the Seller Parties shall (i) provide, or cause to be provided,
to each other's respective Subsidiaries, officers, employees, representatives
and affiliates, such assistance as may reasonably be requested, including making
available employees and the books and records of the Company, by any of them in
connection with the preparation of any tax return or any audit of the Company in
respect of which the Buyer, the Company or the Seller, as the case may be, is
responsible and (ii) retain, or cause to be retained, for so long as any such
taxable years or audits shall remain open for adjustments, any records or
information which may be relevant to any such tax returns or audits.
Section 6.9. Environmental Investigations.
(a) The Seller Parties shall conduct Phase I Reports of all of the
Owned Real Property and Leased Real Property. The Phase I Reports shall include
(at the Buyer's discretion) bulk sampling of suspected asbestos containing
materials. The Seller shall use its best efforts to have preliminary drafts of
all Phase I Reports prepared, with copies provided to the Buyer, by March 1,
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1998 and to have copies of all final Phase I Reports provided to the Buyer by
March 15, 1998. Buyer shall reimburse the Seller Parties at the Closing for the
costs of the Phase I Reports.
(b) The Seller Parties shall reimburse the Company Group for fifty
percent (50%) of Environmental Losses, as and when incurred by Buyer or the
Company Group and invoiced to the Seller Parties; provided, however, that none
of the Seller Parties shall have any liability for Environmental Losses that are
not either (i) actually paid by Buyer or the Company Group no later than the
third anniversary of the Closing or (ii) actually committed to be paid by the
Buyer or the Company Group (with written evidence of such commitment delivered
to the Seller Parties) no later than the third anniversary of the Closing and
actually paid by the Buyer or the Company Group no later than the fourth
anniversary of the Closing. Nothing in this Section 6.9(b) shall affect the
obligations of the Seller Parties under Article IX below with respect to any
breach of the representations and warranties set forth in Section 3.16 above.
Section 6.10. Covenant Not to Compete; Non-solicitation.
(a) Covenant Not to Compete. Each of the Seller Parties covenants
and agrees that, for a period commencing on the Closing Date and expiring on the
second (2nd) anniversary of the Closing Date (the "Restricted Period"), none of
the Seller Parties will, directly or indirectly, own, manage, operate,
franchise, license, control or engage or participate in the ownership,
management, operation, franchising, licensing, or control of, or be connected as
a stockholder, agent, partner, joint venturer, employee, officer, director,
consultant or otherwise with, any Person which engages in the quick-service
hamburger restaurant business in the Territory (a "Competitive Action");
provided, however, that none of the following activities shall constitute a
violation of this Section 6.10:
(i) the acquisition or ownership by the Seller Parties or
their Affiliates of less than two percent (2%) of the outstanding
shares of any Person engaged in the quick-service hamburger
restaurant business whose shares are publicly traded on a national
securities exchange; or
(ii) the offering of hamburger products to customers as a
menu item by any Existing Concept; or
(iii) the operation by the Retained Group of any Hardee's
Restaurant pursuant to a License Agreement with Hardee's.
In the event that the Buyer ascertains the start of a Competitive Action on the
part of any such Persons, Buyer shall be entitled to obtain injunctive relief
without any objection from any of the Seller Parties or their respective
Subsidiaries and Affiliates. The parties hereto further agree that, if a court
of competent jurisdiction determines that this covenant is unenforceable in any
respect, the remainder of this covenant shall not thereby be affected and shall
be given full effect, without regard to any invalid portions, and this covenant
may be modified by such court in any necessary respect in order to render it
enforceable in its least reduced form. If the courts of any one or more
jurisdictions determine that this covenant is unenforceable, it is the intention
of Buyer, on the one hand, and the Seller Parties, on the other hand, that such
determination not bar or in any way affect Buyer's right to the relief provided
above in the courts of any other jurisdiction as to breaches of this covenant in
such other respective jurisdiction, it being the intention of Buyer, on the one
hand, and the Seller Parties, on the other hand,
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that this covenant be considered a separate and independent covenant insofar as
it relates to each such jurisdiction.
(b) Non-solicitation. For a period commencing on the Closing Date
and expiring on the first (1st) anniversary of the Closing Date, none of the
Retained Group, directly or indirectly, will solicit any officer or executive
employee of the Company to leave the employ of the Company or to work for any
member of the Retained Group.
Section 6.11. Exclusivity. The Seller Parties and the Company shall not,
and shall direct their respective officers, directors, financial advisors,
accountants and counsel not to, (i) solicit submissions or proposals or offers
from any Person other than the Buyer relating to any acquisition or purchase of
all or any part of the Shares or all or any part of the assets or properties of
the Company or the sale or issuance of any capital stock of the Company or of
any Person formed by the Seller Parties or an Affiliate of the Seller Parties to
which any assets or properties of the Company is to be contributed, or any
merger or consolidation of the Company or of any Person formed by the Seller
Parties or an Affiliate of the Seller Parties to which any assets or properties
of the Company is to be contributed (each, an "Acquisition Proposal"), (ii)
participate in any negotiations regarding any Acquisition Proposal by any Person
other than the Buyer, or (iii) enter into any Contract or understanding, either
oral or written, that would prevent, hinder or delay the transactions
contemplated hereby. If, notwithstanding the foregoing, the Seller Parties or
the Company shall receive any Acquisition Proposal or any inquiry regarding any
such proposal from any Person, the Seller Parties or the Company, as applicable,
shall promptly give notice thereof to the Buyer.
Section 6.12. Limitation of Liabilities.
(a) From and after the Closing Date, except as expressly provided in
this Agreement (including, without limitation, provisions relating to
Environmental Losses and Excluded Liabilities), no member of the Retained Group
shall have any obligation or liability whatsoever relating to the business or
assets of any member of the Company Group as the same shall exist on the Closing
Date or arise thereafter, including, without limitation, obligations or
liabilities for any deductibles with respect to any insurance policies
(including, without limitation, any arrangement between any member of the
Company Group, on the one hand, and any member of the Retained Group, on the
other hand, with respect to self-insurance) and obligations or liabilities under
any guarantees by any member of the Retained Group of any obligations or
liabilities (other than Excluded Liabilities) of the Company Group. From and
after the Closing Date, the Company shall indemnify and hold the Retained Group
harmless from all such obligations and liabilities (including the cost of
defense thereof and reasonable attorneys' fees and expenses incurred in
litigation or otherwise) that are alleged against or might otherwise be imposed
on any member of the Retained Group. Buyer shall cooperate with Retained Group,
both before and after the Closing Date, by taking, and after Closing, causing
the Company Group to take, all actions which the Seller Parties shall reasonably
request to effect the termination, contingent upon Closing, of any such Retained
Group guarantee, obligation or liability and, both before and after the Closing,
Buyer shall use its reasonable efforts to provide, contingent upon Closing, a
substitute guarantee or other arrangement to release the Retained Group from any
liability or obligation under any such guarantee, obligation or liability. To
the Knowledge of the Company and the Seller Parties, Section 6.12(a) of the
Disclosure Schedule includes a complete list of all guarantees or other
agreements binding upon the members of the Retained Group in respect to
obligations (other than Excluded Liabilities) of the Company Group. In addition,
on or prior to Closing, Buyer will obtain, or
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will cause the Company Group to obtain, one or more insurance policies or other
arrangements covering substantially all liabilities and obligations (other than
Excluded Liabilities) of the Company Group which are currently insured pursuant
to insurance policies or arrangements provided or paid for by any member of the
Retained Group. At Closing, Buyer shall provide to the Seller Parties
certificates of insurance evidencing that substitute coverage has been obtained.
The parties agree that the Company Group will be removed from the insurance
policies maintained or provided by the Retained Group as of the Closing Date.
The elimination of the Company Group from coverage maintained or provided by the
Retained Group shall be without prejudice to the indemnification and
reimbursement obligations of the Company Group.
(b) Prior to or contemporaneously with the Closing, the Seller
Parties shall (i) assume and agree to timely pay and perform or defease, and
cause the Company Group to be released and discharged from, all liabilities,
restrictions and obligations under or incurred pursuant to the Advantica Credit
Agreement, the Loan Documents, the Spartan Indenture, the Spardee's Loan
Agreement and the Security Documents, and cause to be delivered at the Closing
release documents, duly executed by or on behalf of the applicable secured
parties, providing for the release of all Encumbrances on any assets of the
Company Group which secure the payment or performance of such liabilities and
obligations, and (ii) assume and agree to timely pay and perform or defease, and
use best efforts to cause the Company Group to be released and discharged from,
the obligations and liabilities of the Company Group listed or described in
Section 6.12(b) of the Disclosure Schedule (other than those described in the
preceding clause (i)) and use best efforts to cause to be terminated, released
or otherwise removed all Encumbrances on any assets of the Company Group which
secure the payment or performance of such liabilities and obligations, in each
of the foregoing cases in accordance with the terms and provisions of the
instruments evidencing the liabilities and obligations to be so assumed or
defeased or as otherwise agreed by the applicable parties thereto and without
liability, cost or expense to Buyer or the Company Group and without the sale or
other disposition of the assets so encumbered. From and after the Closing Date,
except as expressly provided in this Agreement, no member of the Company Group
shall have any obligation or liability with respect to the Excluded Liabilities
or whatsoever relating to the business or assets of any member of the Retained
Group as the same exist at the Closing Date or arise thereafter, including,
without limitation, obligations or liabilities under any guarantees by any
member of the Company Group of any obligations or liabilities of the Retained
Group. From and after the Closing Date, the Seller Parties shall indemnify and
hold Buyer and the Company Group harmless from the Excluded Liabilities and all
such obligations or liabilities (including the cost of defense thereof and
reasonable attorneys' fees and expenses incurred in litigation or otherwise)
that are alleged against or might otherwise be imposed on the Company Group. The
Seller Parties shall cooperate with Buyer and the Company Group, both before and
after Closing, by taking, and after Closing, causing the Retained Group to take,
all actions necessary or appropriate, or which Buyer or the Company Group shall
reasonably request, to effect the termination, contingent upon Closing, of any
such Company Group guarantee, obligation or liability and, both before and after
the Closing, the Seller Parties shall use their reasonable efforts to provide,
contingent upon Closing, a substitute guarantee or other arrangement to release
the Company Group from any liability or obligation under any such guarantee,
obligation or liability. In addition, on or prior to Closing, Seller Parties
will obtain, or cause the Retained Group to obtain, one or more insurance
policies or other arrangements covering substantially all Excluded Liabilities
which are currently insured pursuant to insurance policies or arrangements
provided or paid for by any member of the Retained Group or the Company Group.
At the Closing, Seller Parties shall provide to the Buyer certificates of
insurance evidencing that substitute coverage has been obtained.
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Section 6.13. Cash Sweeps. Notwithstanding any other provisions of this
Agreement to the contrary, prior to the Closing, the bank accounts of the
Company Group will continue to be swept on a daily basis, consistent with past
practice.
Section 6.14. New Bank Accounts. Buyer acknowledges and agrees that the
bank accounts identified in Section 6.14 of the Disclosure Schedule shall be
transferred to the Retained Group effective upon Closing. Consequently, on or
before the Closing Date, Buyer shall establish, with the cooperation of the
Seller Parties, suitable bank accounts such that, commencing immediately after
the Closing Date, Buyer can utilize such accounts in connection with the
operation of the business of the Company Group and will no longer need to
utilize the bank accounts identified in Section 6.14 of the Disclosure Schedule.
All collections attributable to the operation of the business of the Company
Group up to and including the close of business on the Closing Date shall be for
the benefit of the Retained Group, and all collections attributable to the
operation of the business after the close of business on the Closing Date shall
be for the benefit of the Company Group and Buyer. The Seller Parties and the
Company Group agree to make appropriate payments to reflect such intention.
Section 6.15. Further Assurances. At any time after the Closing Date, the
Seller Parties and Buyer shall, and Buyer shall cause the Company Group to,
promptly execute, acknowledge and deliver any other assurances or documents
reasonably requested by Buyer or Seller Parties, as the case may be, and
necessary for Buyer or Seller Parties, as the case may be, to satisfy its
obligations hereunder or obtain the benefits contemplated hereby.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1. Conditions to Obligations of Buyer. The obligation of Buyer
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver by Buyer in writing on or prior to the Closing
Date of each of the following conditions:
(a) Each of the representations and warranties of the Seller Parties
contained in this Agreement shall be true and correct in all material respects
when made and as of the Closing Date, in each case with the same effect as
though such representations and warranties had been made on and as of the
Closing Date (except that representations and warranties that are made as of a
specific date need be true in all material respects only as of such date); each
of the covenants and agreements of the Seller Parties to be performed on or
prior to the Closing Date shall have been duly performed in all material
respects; and Buyer shall have received at the Closing certificates to the
foregoing effect, dated as of the Closing Date and executed on behalf of each of
Seller Parties by its Chief Executive Officer, its President or any of its Vice
Presidents and its Secretary or any of its Assistant Secretaries.
(b) Seller shall have delivered to Buyer resignations of all
directors of the Company Group and all officers of the Company Group who are not
also employees of the Company Group.
(c) The waiting period under the HSR Act, if applicable to the
purchase and sale of the Shares, and any extensions thereof, shall have expired
or been terminated and there shall have been no conditions to approval of the
Acquisition set by the FTC or the Antitrust Division that are not reasonably
acceptable to the Buyer.
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(d) No court or governmental authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, or non-appealable judgment, decree, injunction or other order which
is in effect on the Closing Date and prohibits the consummation of the Closing.
(e) All consents, approvals and waivers from third parties and any
Governmental Entity and other parties set forth in Section 3.11 of the
Disclosure Schedule which are identified therein as "critical" shall have been
obtained.
(f) The Buyer shall have received from Parker, Poe, Adams &
Bernstein L.L.P., counsel to the Seller Parties, an opinion, dated the Closing
Date, in form and substance reasonably acceptable to Buyer.
(g) The Seller shall have delivered to the Buyer (i) certified
copies of resolutions of its Board of Directors authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated thereby and (ii) a certified charter and a certificate
of good standing of the Secretary of State of the state in which the Seller is
organized.
(h) The Buyer shall have received, in form and substance reasonably
satisfactory to the Buyer, forms of release documents with respect to all
Encumbrances on the assets of the Company Group which are required by this
Agreement to be released upon the Closing, by the filing or recording of
documents with applicable Governmental Entities immediately following the
Closing or otherwise, each duly executed by or on behalf of the applicable
secured party, and evidence, in form and substance reasonably satisfactory by
the Buyer, that the Company Group shall have been (or upon the Closing will be)
discharged from all liabilities, restrictions and obligations (including any
obligations in the nature of a guaranty of the obligations of any member of the
Retained Group) under or incurred pursuant to (i) the Advantica Credit Agreement
and the Loan Documents and (ii) the Spartan Indenture, the Spardee's Loan
Agreement and the Security Documents.
(i) The Buyer shall have had possession of the Phase I Reports for
not less than ten Business Days, and the Phase I Reports shall not have revealed
liabilities under Environmental Laws that, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect.
Section 7.2. Conditions to Obligations of Seller. The obligation of Seller
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction or waiver in writing by Seller on or prior to the Closing
Date of each of the following conditions:
(a) Each of the representations and warranties of Buyer contained in
this Agreement shall be true and correct in all material respects when made and
as of the Closing Date, in each case with the same effect as though such
representations and warranties had been made on and as of the Closing Date
(except that representations and warranties that are made as of a specific date
need be true in all material respects only as of such date); each of the
covenants and agreements of Buyer to be performed on or prior to the Closing
Date shall have been duly performed in all material respects; and Seller shall
have received at the Closing certificates to the foregoing effect, dated as of
the Closing Date and executed on behalf of Buyer by its Chief Executive Officer,
its President or any of its Vice Presidents and its Secretary or any of its
Assistant Secretaries.
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(b) The waiting period under the HSR Act, if applicable to the
purchase and sale of the Shares, and any extensions thereof, shall have expired
or been terminated and there shall have been no conditions to approval of the
Acquisition set by the FTC.
(c) No court or governmental authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, or non-appealable judgment, decree, injunction or other order which
is in effect on the Closing Date and prohibits the consummation of the Closing.
(d) All consents, approvals and waivers from third parties and any
Governmental Entity and other parties set forth in Section 3.11 of the
Disclosure Schedule which are identified therein as "critical" shall have been
obtained.
(e) Seller shall have received from Stradling Yocca Carlson & Rauth,
counsel to Buyer, an opinion, dated as of the Closing Date, in form and
substance reasonably acceptable to the Seller Parties.
ARTICLE VIII
TERMINATION
Section 8.1. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by mutual written consent of the Seller Parties and the Buyer;
(b) by either Buyer or the Seller Parties, by giving written notice
of such termination to the other party, if such other party shall breach any of
its representations, warranties, covenants, obligations or agreements under this
Agreement in any material respect and such breach shall be incapable of cure or
has not been cured within thirty (30) days following the giving of written
notice of such breach to the breaching party;
(c) by either Buyer or the Seller Parties, by giving written notice
of such termination to the other party, if there shall be in effect any law or
regulation that prohibits the consummation of the Closing or if consummation of
the Closing would violate any non-appealable final order, decree or judgment of
any court or governmental body having competent jurisdiction; or
(d) by either Buyer or the Seller Parties, by giving written notice
of such termination to the other party, if the Closing shall not have occurred
on or prior to the date 120 days subsequent to the date hereof, provided that
the failure of the Closing to occur on or before such date is not the result of
a breach of any covenant, obligation, agreement, representation or warranty
hereunder by the Party seeking termination.
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Section 8.2. Effect of Termination. In the event of the termination of
this Agreement in accordance with Section 8.1 hereof, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to the other party hereto or their respective Affiliates, directors,
officers or employees, except for the obligations of the parties hereto
contained in this Section 8.2 and in Sections 6.1(b), 10.2, 10.3 and 10.11
hereof, and except that nothing herein will relieve any party from liability for
any breach of this Agreement prior to such termination.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
Section 9.1. Limited Survival of Representations, Warranties, Covenants
and Agreements; Knowledge of Breach.
(a) Notwithstanding any otherwise applicable statute of limitations,
the representations and warranties included or provided for herein shall survive
the Closing until one year after the Closing Date; provided, however, that (i)
any representation or warranty contained in Sections 3.12, 3.18 and 4.2 shall
survive the Closing until the expiration of the applicable statute of
limitations (including any waivers or extensions thereof) with respect to such
matters, (ii) the representations and warranties contained in Section 3.16 shall
survive the Closing until two (2) years after the Closing Date and (iii) the
representations and warranties contained in Sections 3.1(a), 3.2(a), 3.3 and
4.1(a) shall survive the Closing indefinitely. The covenants and other
agreements contained in this Agreement to be performed on or after Closing shall
survive the Closing until the date or dates specified therein or the expiration
of the applicable statute of limitations (including any waivers or extensions
thereof) with respect to such matters, whichever is later.
(b) No party hereto shall be deemed to have breached any
representation, warranty, covenant or agreement if (i) such party shall have
notified the other parties hereto in writing, on or prior to the Closing Date,
of the breach of, or inaccuracy in, or of any facts or circumstances
constituting or resulting in the breach of or inaccuracy in, such
representation, warranty, covenant or agreement, specifically referring to the
provisions of this Agreement so breached or rendered inaccurate, and (ii) such
other parties have permitted the Closing to occur and, for purposes of this
Agreement, are thereby deemed to have waived such breach or inaccuracy;
provided, however, that a disclosure pursuant to this Section 9.1(b) shall not
prejudice the rights of the parties pursuant to Article VII hereof not to
consummate the transactions contemplated by this Agreement or to recover damages
incurred as a result of such breach or inaccuracy.
(c) Notwithstanding the foregoing, no party hereto shall have
liability under Section 9.1(a), Section 9.2(a) or Section 9.3(a) hereof with
respect to any Loss unless such Loss exceeds the Threshold Amount; provided,
however, that Losses arising out of a single or related set of facts,
circumstances, or events shall be aggregated for purposes of determining whether
the Losses exceed the Threshold Amount and that in the event such Losses exceed
the Threshold Amount, the entire amount of the obligation shall be indemnifiable
to the extent and as provided in this Agreement.
(d) No party hereto shall have liability under Section 9.1(a),
Section 9.2(a) or Section 9.3(a) hereof for Losses sustained or incurred arising
out of the breach of any representation or warranty or any inadvertent breach of
the covenants described in Section 6.3 hereof which arises or
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results from the occurrence of any circumstance or event which is outside the
control of the Seller Parties, the Company Group or their respective Affiliates,
officers, directors, employees or representatives, unless and until all such
Losses for which damages are recoverable hereunder against such party shall
exceed the Deductible; provided, however, that Buyer or Seller Parties, as the
case may be, shall be liable only for the amount by which all such recoverable
Losses exceed the Deductible.
(e) No party hereto shall have liability under Section 9.1(a),
Section 9.2(a) or Section 9.3(a) hereof in any amount which, when aggregated
with all other recoverable Losses, would exceed $140,000,000.
(f) For purposes of this Section 9.1, any and all Losses relating
to, resulting from or arising out of the matters described in any subparagraph
of paragraph (a) of Section 9.1 which are suffered or incurred by any member of
the Company Group shall be deemed to have been suffered or incurred by Buyer on
a non-duplicative dollar for dollar basis.
(g) For purposes of this Section 9.1, if a representation or
warranty set for the herein has been breached, the amount of recoverable Losses
to which an Indemnified Party is entitled with respect to such breach of
representation or warranty shall be determined without regard to any
qualification as to materiality or the presence of a Material Adverse Effect
which is included in the applicable representation or warranty. Notwithstanding
any provision of this Agreement to the contrary, the limitations set forth in
this Section 9.1 (other than paragraph (i) thereof) shall not apply to the
indemnification provisions of Article V and Section 6.12 hereof, and no
recoverable Losses to which Buyer or Seller Parties, as the case may be, are
entitled by reason of the foregoing shall be applied against or reduce the
Deductible or the maximum amount of Losses recoverable under this Article IX.
Notwithstanding any provision of this Agreement to the contrary, the limitations
set forth in this Section 9.1 (other than paragraphs (a), (f) and (i) thereof)
shall not apply to any breach of the representations or warranties set forth in
Section 3.1(b)(ii) or Section 3.2(b)(ii) arising from the failure to obtain any
consent, waiver or approval which is required by the terms of any lease
agreement for Leased Real Property to be obtained in order to consummate the
transactions expressly contemplated hereby, and no recoverable Losses to which
Buyer or Seller Parties, as the case may be, are entitled by reason of the
foregoing shall be applied against or reduce the Deductible or the maximum
amount of Losses recoverable under this Article IX.
(h) For purposes of this Section 9.1 and Sections 9.2 and 9.3,
Losses shall include, and an Indemnified Party shall be entitled to recover
(subject to limitations set forth in Sections 9.1(c), 9.1(d) and 9.1(e)), all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and reasonable expenses incurred in investigating, preparing or
defending any such claim) sustained or incurred by an Indemnified Party by
reason of its indemnification obligations to its Affiliates and their respective
directors, officers, employees, shareholders, attorneys, accountants and agents.
(i) With respect to each specific claim by an Indemnified Party for
indemnification from an Indemnifying Party hereunder, the indemnification of the
Indemnified Party by the Indemnifying Party shall be net of any recovery of the
Indemnified Party with respect to such specific claim under any third party
insurance policy.
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Section 9.2. Indemnification by Buyer.
(a) For the period commencing on the Closing Date and ending, as the
case may be, upon the expiration of the periods specified in Section 9.1(a)
hereof Buyer shall, subject to the limitations set forth in Section 9.1 hereof,
indemnify, defend and hold harmless Seller Parties against and in respect of all
losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees and reasonable expenses incurred in investigating, preparing or
defending any claims covered hereby) (collectively, "Losses") sustained or
incurred arising out of any breaches of Buyer's representations, warranties,
covenants and agreements set forth in this Agreement (other than
representations, warranties, covenants and agreements set forth in (A) Article
V, as to which the indemnification provisions set forth in Article V shall
govern, or (B) Section 6.12 hereof, as to which the indemnification provisions
set forth in Section 6.12 shall govern).
(b) Any payments pursuant to this Section 9.2 or Article V shall be
treated as an adjustment to the Purchase Price for all Tax purposes.
Section 9.3. Indemnification by Seller.
(a) For the period commencing on the Closing Date and ending, as the
case may be, upon the expiration of the periods specified in Section 9.1(a)
hereof Seller Parties shall, subject to the limitations set forth in Section 9.1
hereof, indemnify, defend and hold harmless Buyer and the Company Group against
and in respect of all Losses sustained or incurred arising out of any breaches
of the Seller Parties' representations, warranties, covenants and agreements set
forth in this Agreement (other than representations, warranties, covenants and
agreements set forth in (A) Article V, as to which the indemnification
provisions set forth in Article V shall govern, or (B) Section 6.12 hereof, as
to which the indemnification provisions set forth in Section 6.12 shall govern).
(b) Any payments pursuant to this Section 9.3 or Article V shall be
treated as an adjustment to the Purchase Price for all Tax purposes.
Section 9.4. Indemnification as Sole Remedy. The indemnity provided herein
and in Section 6.12 and Article V hereof as it relates to this Agreement and the
transactions contemplated by this Agreement shall be the sole and exclusive
remedy of the parties hereto, their successors and assigns with respect to any
and all claims for losses, damages, liabilities, costs and expenses sustained or
incurred arising out of this Agreement and the transactions contemplated by this
Agreement, except for the right of the parties hereto to seek specific
performance of the obligations set forth in Article II and Sections 6.2, 6.5 and
6.6 of this Agreement.
Section 9.5. Method of Asserting Claims, Etc. All claims for
indemnification by the Seller Parties, on the one hand, or the Buyer and the
Company Group, on the other hand (as the case may be, the "Indemnified
Parties"), hereunder shall be asserted and resolved as set forth in this Section
9.5, except for claims pursuant to Article V hereof (as to which the provisions
of Article V shall be applicable). In the event that any written claim or demand
for which Buyer or Seller Parties, as the case may be (the "Indemnifying Party")
would be liable to any Indemnified Party hereunder is asserted against or sought
to be collected from any Indemnified Party by a third party, such Indemnified
Party shall promptly, but in no event more than fifteen (15) days following such
Indemnified Party's receipt of such claim or demand, notify the Indemnifying
Party of such claim or demand and the amount or the estimated amount thereof to
the extent then feasible (which estimate shall not in any manner prejudice
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the right of the Indemnified Party to indemnification to the fullest extent
provided hereunder) (the "Third Party Claim Notice") and in the event that an
Indemnified Party shall assert a claim for indemnity under this Article IX, not
including a third party claim, the Indemnified Party shall notify the
Indemnifying Party promptly following its discovery of the facts or
circumstances giving rise thereto (together, with a Third Party Claim Notice, a
"Claim Notice"); provided, that the failure to notify on the part of the
Indemnified Party in the manner set forth herein shall not foreclose any rights
otherwise available to such Indemnified Party hereunder, except to the extent
that the Indemnifying Party is prejudiced by such failure to notify. The
Indemnifying Party shall have thirty (30) days from the personal delivery or
mailing of the Third Party Claim Notice (except that such a period shall be
decreased to a time ten (10) days before a scheduled appearance date in a
litigated matter) (the "Notice Period") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such claim or demand
and (ii) whether or not it desires to defend the Indemnified Party against such
claim or demand, which it shall not be entitled to do until the Deductible is
exceeded. All costs and expenses incurred by the Indemnifying Party in defending
such claim or demand shall be a liability of, and shall be paid by, the
Indemnifying Party; provided, however, that the amount of such expenses shall be
a liability of the Indemnifying Party hereunder, subject to the limitations set
forth in Section 9.1 hereof. In the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it desires to defend the
Indemnified Party against such claim or demand, which it shall not be entitled
to do until the Deductible is exceeded and except as hereinafter provided, the
Indemnifying Party shall have the right to defend the Indemnified Party by
appropriate proceedings and by counsel reasonably acceptable to the Indemnified
Party. If any Indemnified Party desires to participate in, but not control, any
such defense or settlement it may do so at its sole cost and expense. The
Indemnified Party shall not settle a claim or demand without the consent of the
Indemnifying Party, which shall not be withheld unreasonably. The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party,
settle, compromise or offer to settle or compromise any such claim or demand on
a basis which would result in the imposition of a consent order, injunction or
decree which would restrict the future activity or conduct of, or which would
otherwise have a material adverse effect on, the Indemnified Party or any
Subsidiary or Affiliate thereof. If the Indemnifying Party elects not to defend
the Indemnified Party against such claim or demand, whether by not giving the
Indemnified Party timely notice as provided above or otherwise, then the amount
of any such claim or demand, or, if the same be contested by the Indemnified
Party, then that portion of any such claim or demand as to which such defense is
unsuccessful (and all reasonable costs and expenses pertaining to such defense)
shall be the liability of the Indemnifying Party hereunder, subject to the
limitations set forth in Section 9.1 hereof. To the extent the Indemnifying
Party shall control or participate in the defense or settlement of any third
party claim or demand, the Indemnified Party will give to the Indemnifying Party
and its counsel reasonable access to all business records and other documents
relevant to such defense or settlement, and shall permit them to consult with
the employees and counsel of the Indemnified Party. The Indemnified Party shall
use its reasonable efforts in the defense of all such claims, and in connection
therewith shall be entitled to reimbursement by the Indemnifying Party of
out-of-pocket expenses directly related to efforts undertaken at the specific
request of the Indemnifying Party.
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ARTICLE X
MISCELLANEOUS
Section 10.1. 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, by the Seller Parties and Buyer, 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.
Section 10.2. Expenses. Except as otherwise expressly provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, the parties shall bear their own respective expenses (including,
but not limited to, all compensation and expenses of counsel, financial
advisors, consultants, actuaries and independent accountants) incurred in
connection with this Agreement and the transactions contemplated hereby.
Section 10.3. Public Disclosure. Each of the parties to this Agreement
hereby agrees with the other parties hereto that, except as may be required to
comply with the requirements of applicable law or the rules and regulations of
each stock exchange upon which the securities of one of the parties or its
Affiliates is listed, no press release or similar public announcement or
communication will be made or caused to be made concerning the execution or
performance of this Agreement unless specifically approved in advance by all
parties hereto; provided, however, that to the extent that either party to this
Agreement is required by law or the rules and regulations of any stock exchange
upon which the securities of one of the parties or its Affiliates is listed to
make such a public disclosure, such public disclosure shall only be made after
prior consultation with the other party to this Agreement.
Section 10.4. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written consent of
the other party hereto; provided, however, that Buyer shall have the right to
assign any of its rights under this Agreement to any of its Affiliates, so long
as Buyer remains liable for such Affiliate's obligations hereunder.
Section 10.5. Entire Agreement. This Agreement (including all Exhibits 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, except for the
Confidentiality Agreement which will remain in full force and effect for the
term provided for therein.
Section 10.6. Fulfillment of Obligations. Any obligation of any party to
any other party under this Agreement, which obligation is performed, satisfied
or fulfilled by an Affiliate of such party, shall be deemed to have been
performed, satisfied or fulfilled by such party.
Section 10.7. Parties in Interest; No Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any Person other than
Buyer, the Seller Parties, or their successors or permitted assigns, any rights
or remedies under or by reason of this Agreement.
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Section 10.8. Schedules. The inclusion of any matter in any schedule to
this Agreement shall be deemed to be an inclusion for all purposes of this
Agreement, including each representation and warranty to which it may relate,
but inclusion therein shall expressly not be deemed to constitute an admission
by Seller, or otherwise imply, that any such matter is material or creates a
measure for materiality for the purposes of this Agreement.
Section 10.9. 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.
Section 10.10. Section Headings. The section and paragraph headings and
table of contents contained in this Agreement are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
Section 10.11. Notices. All notices hereunder shall be deemed given if in
writing and delivered personally or sent by facsimile 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 a Seller Party or, prior to Closing, the Company, to:
Advantica Restaurant Group, Inc.
203 East Main Street
Spartanburg, South Carolina 29319-9966
Fax (864) 597-8216
Attention: Rhonda J. Parish
Senior Vice President, General Counsel and
Secretary
With a copy to:
Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Fax (704) 334-4706
Attention: Gary C. Ivey, Esq.
(b) if to Buyer or, after the Closing, the Company, to:
CKE Restaurants, Inc.
3916 State Street, Suite 300
Santa Barbara, California 92803
Fax (805) 898-7149
Attention: Andrew F. Puzder
Executive Vice President and General Counsel
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With a copy to:
Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660
Fax (714) 725-4100
Attention: C. Craig Carlson, Esq.
Any notice given by mail shall be effective when received.
Section 10.12. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF
FORUM. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NORTH CAROLINA, 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 WESTERN DISTRICT OF NORTH CAROLINA OR THE SUPERIOR COURT
OF THE STATE OF NORTH CAROLINA LOCATED IN CHARLOTTE, NORTH CAROLINA (THE "CHOSEN
COURTS") AND (I) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE CHOSEN
COURTS, (II) AGREES THAT VENUE IS PROPER 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 10.11 OF THIS AGREEMENT.
Section 10.13. 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, (i) 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 (ii) 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.
Section 10.14. Attorneys' Fees. In the event that any party to this
Agreement institutes any legal proceeding to enforce any of the provisions of
this Agreement, then the prevailing party in such proceeding shall be entitled
to collect and receive its reasonable attorneys' fees and costs, through and
including all appeals, and the other party shall pay for same.
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IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of
the parties hereto as of the date first written above.
ADVANTICA RESTAURANT GROUP, INC.
By:
---------------------------------------------
Name:
Title:
SPARTAN HOLDINGS, INC.
By:
---------------------------------------------
Name:
Title:
FLAGSTAR ENTERPRISES, INC.
By:
---------------------------------------------
Name:
Title:
CKE RESTAURANTS, INC.
By:
---------------------------------------------
Name:
Title: