Exhibit 2.3
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS SECOND AMENDMENT (the "Second Amendment") is made and entered into
as of the 4th day of November, 2004, by and between AFC Enterprises, Inc.
("AFC"), a Minnesota corporation, and Focus Brands Inc. ("Buyer"), a Delaware
corporation.
W I T N E S S E T H:
WHEREAS, AFC and Focus are parties to that certain Stock Purchase
Agreement dated as of September 3, 2004, as amended by First Amendment thereto
dated November 1, 2004 (the "Agreement"); and
WHEREAS, AFC and Focus desire to amend the Agreement, as hereinafter
more particularly set forth;
NOW, THEREFORE, for and in consideration of the premises, the mutual
covenants contained herein and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, AFC and
Focus hereby covenant and agree as follows:
1. All capitalized terms used in this Second Amendment which are
not otherwise defined in this Second Amendment are used with the same meaning
attributed to such capitalized terms in the Agreement.
2. Section 1 is hereby amended by deleting the definition of
"Base Working Capital" and "Working Capital" in their entirety and inserting the
following definitions in lieu thereof.
"BASE WORKING CAPITAL" means One Million Three Hundred Nine
Thousand Dollars ($1,309,000).
"WORKING CAPITAL" means, as of any date of determination, the
amount that is determined consistent with the calculation reflected on
Exhibit 2.6 hereto.
3. Section 2.6 is hereby amended by deleting the entire text
thereof and replacing such deleted text with the following:
2.6 WORKING CAPITAL ADJUSTMENT. Not later than three (3)
business days prior to the Closing Date, AFC and the Buyer shall agree
on an estimate of the Company's Working Capital (the "ESTIMATED WORKING
CAPITAL"), as of 12:01 a.m. on November 1, 2004 (the "ACCOUNTING
EFFECTIVE TIME") which shall be calculated and presented in the same
manner as set forth on Exhibit 2.6. If the Estimated Working Capital is
less than the Base Working Capital (the "Deficit"), the Purchase Price
shall be reduced by the amount of the Deficit; and if the
Estimated Working Capital exceeds the Base Working Capital (the
"Excess"), the Purchase Price shall be increased by the amount of the
Excess.
4. Section 2.7(a) is hereby amended by deleting the entire text
thereof and replacing such deleted text with the following:
2.7 POST CLOSING ADJUSTMENT.
(a) Within sixty (60) calendar days after the
Closing Date, the Buyer will conduct a review of the Working Capital as
of the Accounting Effective Time (the "CLOSING WORKING CAPITAL") and
will prepare and deliver to AFC a balance sheet of the Company as of
the Accounting Effective Time (the "CLOSING DATE BALANCE SHEET") and a
computation of the Closing Working Capital shown thereon. Buyer will
make available to AFC all records and work papers used in preparing the
Closing Date Balance Sheet. If AFC disagrees with the computation of
the Closing Working Capital or the items reflected on the Closing Date
Balance Sheet, AFC may, within thirty (30) calendar days after receipt
of the Closing Date Balance Sheet, deliver a notice (an "OBJECTION
NOTICE") to Buyer setting forth AFC's calculation of the Closing
Working Capital. If AFC does not deliver an Objection Notice within
such thirty (30) calendar day period, then the Closing Working Capital
as shown on the Closing Date Balance Sheet shall be deemed to be
finally determined. If AFC timely delivers an Objection Notice to
Buyer, AFC and Buyer will use reasonable efforts to resolve any
disagreement as to the computation of the Closing Working Capital as
soon as practicable, but if they can not reach a final resolution
within thirty (30) calendar days after Buyer has received the Objection
Notice, Buyer and AFC will jointly retain an independent accounting
firm of recognized national standing (the "FIRM") to resolve their
disagreement. If Buyer and AFC are unable to agree on the choice of the
Firm, then the Firm will be an independent accounting firm of
recognized national standing selected by lot (after excluding one firm
designated by Buyer and one firm designated by AFC). Buyer and AFC will
direct the Firm to render a determination within thirty (30) calendar
days of its retention and Buyer and AFC and their Representatives will
cooperate with the Firm during its engagement. The Firm will consider
only those items and amounts in the Closing Date Balance Sheet set
forth in the Objection Notice which Buyer and AFC are unable to
resolve. In resolving any disputed item, the Firm may not assign a
value to any item greater than the greatest value for such item claimed
by either party or less than the smallest value for such item claimed
by either party. The Firm's determination will be based on such review
as the Firm deems necessary to make its determination, and on the
definition of the Working Capital included herein. The determination of
the Closing Working Capital by the Firm will be conclusive and binding
upon the Buyer and AFC. Buyer and AFC shall bear the costs and expenses
of the Firm based on the percentage which the portion of the contested
amount not awarded to each party bears to the amount actually contested
by or on behalf of such party. The Closing Working Capital, as finally
determined pursuant to this Section 2.7(a), is referred
-2-
to herein as the "FINAL NET WORKING CAPITAL." The balance sheet that
reflects the computation of the Final Net Working Capital is referred
to herein as the "FINAL CLOSING DATE BALANCE SHEET."
5. Section 2.8 is hereby amended by deleting the entire text
thereof and replacing such deleted text with the following:
2.8 CASH BALANCE. Not later than thirty (30) days following
the Closing Date, Buyer shall notify AFC in writing of the aggregate
amount of cash and cash equivalents of the Company and the Subsidiary
(the "CASH") on hand or on deposit as of the Accounting Effective Time
(the "CASH NOTICE"). Not later than five (5) days following its receipt
of the Cash Notice, AFC shall pay to the Company the amount, if any, by
which the Cash is less than the amount set forth on Exhibit 2.8, as the
same may be amended as provided in Section 5.10; and the Company shall
pay to AFC the amount, if any, by which the Cash is greater than the
amount set forth on Exhibit 2.8, as the same may be amended as provided
in Section 5.10.
6. Section 2.9 is hereby amended by deleting the entire text
thereof and replacing such deleted text with the following:
2.9 EMPLOYEE AND EMPLOYEE BENEFIT MATTERS. From and after the
Closing, the parties hereto shall comply with the provisions set forth
in APPENDIX A hereto, which APPENDIX A is incorporated herein by
reference and made a part of this Agreement, except as otherwise
provided in Schedule B to the Transition Services Agreement to be
entered into by the Subsidiary and AFC at Closing.
7. Section 2.10(b) is hereby amended by deleting the entire text
thereof and replacing such deleted text with the following:
(b) TAX RETURNS FOR PERIODS THROUGH THE CLOSING DATE. AFC will
include the income of the Company and the Subsidiary (including any
deferred income triggered into income by Treas. Reg. Section 1.1502-13
and Treas. Reg. Section 1.1502-14 and any excess loss accounts taken
into income under Treas. Reg. Section 1.1502-19) on the AFC
consolidated, unitary or combined income Tax Returns for all periods
through the Closing Date and will pay any income Taxes attributable to
such income and will prepare and timely file (or cause to be prepared
and timely filed) all such income Tax Returns. The Company and the
Subsidiary will furnish Tax information to AFC for inclusion in AFC's
consolidated, unitary or combined income Tax Return for the period
which includes the Closing Date in accordance with the Company's and
Subsidiary's past custom and practice. AFC will allow Buyer an
opportunity to review and comment upon such Tax Returns (including any
amended Tax Returns) prior to filing to the extent that they relate to
the Company and the Subsidiary. AFC will take no position on such Tax
Returns that relates to the Company and the
-3-
Subsidiary that would adversely affect the Company or the Subsidiary
after the Closing Date unless such position would be reasonable in the
case of a person or entity that owned the Company and the Subsidiary
both before and after the Closing Date. The income of the Company and
the Subsidiary will be apportioned to the period up to and including
the Closing Date and the period after the Closing Date by closing the
books of the Company and the Subsidiary as of the end of the day upon
which the Closing Date falls.
8. Section 3.9 is hereby amended by deleting the entire text
thereof and replacing such deleted text with the following:
3.9 ACCOUNTS RECEIVABLE. All accounts receivable of the
Subsidiary (the "ACCOUNTS RECEIVABLE") are bona fide accounts
receivable created in the Ordinary Course of Business and are not
subject to any right of set-off. All Accounts Receivable of the
Subsidiary (other than those which have arisen since the Subsidiary
Balance Sheet Date) are accurately reflected on the Subsidiary Balance
Sheet in accordance with GAAP. Unless paid prior to the Closing Date,
the Accounts Receivable are or will be as of the Closing Date current
and collectible net of the respective reserves shown on the Subsidiary
Balance Sheet or on the Closing Date Balance Sheet (which reserves are
adequate and calculated consistent with past practice and, in the case
of the reserves reflected on the Closing Date Balance Sheet, will not
represent a lesser percentage of the Accounts Receivable as of the
Closing Date than the reserves reflected in the Subsidiary Balance
Sheet with respect to the Accounts Receivable reflected therein and
will not represent a material adverse change in the composition of such
Accounts Receivable in terms of aging, except as set forth on Schedule
3.9A hereto). Accounts Receivable in the aggregate amount reflected on
the Closing Date Balance Sheet, net of related reserves, will be
collected in full, without any set-off, on or before February 15, 2005.
Section 3.9 of the Disclosure Schedule contains a complete and accurate
list of all Accounts Receivable as of the Base Working Capital Date,
which list sets forth the aging of such Accounts Receivable.
9 Article 5 is hereby amended by inserting the following new
Sections 5.19 and 5.20:
5.19 ADDITIONAL AGREEMENT. Promptly following the
Closing, AFC shall cause the Coca-Cola Fountain Division of The
Coca-Cola Company to enter into an agreement with the Subsidiary
containing those rights and obligations related to the Business that
are set forth in that certain letter agreement between The Coca-Cola
Company and AFC dated December 8, 1999, as amended.
5.20 CERTAIN TAX OBLIGATIONS. AFC shall be
responsible for the payment of all sales and use tax obligations owing
by the Company and the Subsidiary for all periods ending on or prior to
October 31, 2004."
-4-
10. The Stock Purchase Agreement is hereby amended by attaching
thereto as Exhibit 2.6 and Exhibit 2.8, respectively, the Exhibit 2.6 and the
Exhibit 2.8 attached to this Amendment.
11. Except as expressly set forth herein, the parties make no
other amendment, alteration or modification of the Agreement nor do they, nor
does any of them, by executing this Second Amendment, waive any provision of the
Agreement or any right that they or it may have thereunder.
[SIGNATURES ON FOLLOWING PAGES]
-5-
IN WITNESS WHEREOF, the parties hereto have executed and sealed or have
caused this Second Amendment to be executed and sealed as of the date first
above written by their respective officers thereunto duly authorized.
AFC ENTERPRISES, INC.
By: /s/ Frederick Beilstein
------------------------------
Name: Frederick Beilstein
----------------------------
Title: Chief Financial Officer
---------------------------
FOCUS BRANDS INC.
By: /s/ Steve Romaniello
------------------------------
Name: Steve Romaniello
----------------------------
Title: Chief Executive Officer
and President
---------------------------
-6-