SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 30, 2003
KRISPY KREME DOUGHNUTS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 001-16485 56-2169715
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
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370 Knollwood Street
Winston-Salem, North Carolina 27103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (336) 725-2981
Item 2. Acquisition or Disposition of Assets.
On June 30, 2003, Krispy Kreme Doughnuts, Inc. ("Krispy Kreme"), through
its wholly owned subsidiary Krispy Kreme Doughnut Corporation ("KKDC"),
completed its previously announced acquisition of the development rights to, and
assets of, the Dallas, Texas and Shreveport, Louisiana markets from its
franchisees that operated these markets prior to the acquisition. Joseph A.
McAleer, a former officer and director of Krispy Kreme, and Steven D. Smith, an
emeritus director, were affiliated with the Dallas, Texas and Shreveport,
Louisiana franchises.
The purchase price was approximately $67 million. Krispy Kreme funded the
acquisition through a combination of cash and a $55 million promissory note with
Wachovia Bank, National Association (the "Bank"), subject to the terms and
conditions contained in KKDC's existing Credit Agreement dated as of March 21,
2002 between KKDC and the Bank. Krispy Kreme anticipates this promissory note
will be converted into long-term financing following the restructuring of KKDC's
existing credit facilities.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit No. Description
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2.1 Asset Purchase Agreement among Krispy Kreme Doughnut Corporation,
North Texas Doughnuts, L.P., Greater DFW Doughnuts, Inc., Greater
DFW Doughnuts, LLP, Arlington Doughnut Company, LLP, Grapevine
Doughnut Company, LLP, Frisco Doughnut Company, LLP, Euless
Doughnut Company, LLP, Old Towne Doughnut Company, LLP, Hulen St.
Doughnut Company, LLP, Joseph A. McAleer, Jr., Steven D. Smith
and John Orrell dated as of June 27, 2003.
10.1 Promissory Note between Krispy Kreme Doughnut Corporation and
Wachovia Bank, National Association dated as of June 30, 2003.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
KRISPY KREME DOUGHNUTS, INC.
Dated: July 10, 2003 By: /s/ Randy S. Casstevens
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Name: Randy S. Casstevens
Title: Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
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2.1 Asset Purchase Agreement among Krispy Kreme Doughnut Corporation,
North Texas Doughnuts, L.P., Greater DFW Doughnuts, Inc., Greater DFW
Doughnuts, LLP, Arlington Doughnut Company, LLP, Grapevine Doughnut
Company, LLP, Frisco Doughnut Company, LLP, Euless Doughnut Company,
LLP, Old Towne Doughnut Company, LLP, Hulen St. Doughnut Company, LLP,
Joseph A. McAleer, Jr., Steven D. Smith and John Orrell dated as of
June 27, 2003.
10.1 Promissory Note between Krispy Kreme Doughnut Corporation and Wachovia
Bank, National Association dated as of June 30, 2003.
Exhibit 2.1
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ASSET PURCHASE AGREEMENT
among
KRISPY KREME DOUGHNUT CORPORATION,
NORTH TEXAS DOUGHNUTS, L.P.,
GREATER DFW DOUGHNUTS, INC.,
GREATER DFW DOUGHNUTS, LLP,
ARLINGTON DOUGHNUT COMPANY, LLP,
GRAPEVINE DOUGHNUT COMPANY, LLP,
FRISCO DOUGHNUT COMPANY, LLP,
EULESS DOUGHNUT COMPANY, LLP,
OLD TOWNE DOUGHNUT COMPANY, LLP,
HULEN ST. DOUGHNUT COMPANY, LLP,
JOSEPH A. McALEER, JR.,
STEVEN D. SMITH,
and
JOHN ORRELL
Dated as of June 27, 2003
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TABLE OF CONTENTS
Page
ARTICLE 1.
SALE AND PURCHASE OF ASSETS
1.1. Sale and Purchase of Assets..........................................4
1.2. Excluded Assets......................................................6
1.3. Closing..............................................................6
1.4. Purchase Price.......................................................6
1.5. Assumption of Liabilities............................................7
1.6. Closing Date Deliveries by Sellers...................................9
1.7. Closing Date Deliveries by Krispy Kreme..............................9
1.8. Escrow for Receivables..............................................10
1.9. Further Assurances..................................................10
1.10. Allocation of Purchase Price........................................11
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties as to Sellers........................11
2.2. Representations and Warranties of Krispy Kreme......................20
ARTICLE 3.
CERTAIN COVENANTS
3.1. Access and Information..............................................21
3.2. Conduct of the Business.............................................21
3.3. Efforts to Consummate Transaction...................................22
3.4. Consents and Approvals; Releases....................................22
3.5. Discharge of Excluded Liabilities...................................22
3.6. Employee Matters....................................................22
3.7. Tax Matters.........................................................24
3.8. Transactional Tax Undertakings......................................24
3.9. Property Taxes......................................................24
3.10. Noncompetition......................................................24
3.11. Confidentiality.....................................................26
3.12. Krispy Kreme Payables...............................................27
3.13. SCAP Program and Brand Fund.........................................27
3.14. Acquisition of Additional Property..................................27
ARTICLE 4.
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Krispy Kreme...........................27
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4.2. Conditions to Obligations of Sellers................................29
ARTICLE 5.
TERMINATION
5.1. Grounds for Termination.............................................30
5.2. Effect of Termination...............................................31
ARTICLE 6.
INDEMNIFICATION
6.1. Indemnification by Sellers..........................................31
6.2. Indemnification by Krispy Kreme.....................................32
6.3. Survival Period.....................................................32
6.4. Notice of Claims....................................................33
6.5. Third Party Claims..................................................33
ARTICLE 7.
MISCELLANEOUS
7.1. Survival............................................................34
7.2. Expenses............................................................34
7.3. Assignment; Successors; Parties in Interest.........................34
7.4. Amendment and Modification..........................................35
7.5. Access After Closing................................................35
7.6. Bulk Sales Law......................................................35
7.7. Notices.............................................................35
7.8. Captions............................................................37
7.9. Entire Agreement....................................................37
7.10. Counterparts........................................................37
7.11. Severability........................................................37
7.12. Arbitration.........................................................37
7.13. Schedules and Exhibits..............................................37
7.14. Definitions.........................................................37
7.15. Governing Law.......................................................42
Exhibits
Exhibit A -.......Escrow Agreement
Exhibit B -.......Bill of Sale, Assignment and Assumption Agreement
Exhibit C -.......Termination Agreement
Exhibit D -.......Opinion of Sellers' Counsel
Exhibit E -.......Opinion of Krispy Kreme's Counsel
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Schedules
Schedule 1.1(n) Development and Franchise Rights
Schedule 1.2(g) Excluded Assets
Schedule 1.4(a)(vi) Accrued Vacation
Schedule 1.4(b) Post-Closing Real Estate Work
Schedule 1.4(c) Allocation to Sellers
Schedule 1.10 Allocation of Purchase Price
Schedule 2.1.3 Conflicts, Consents - Sellers
Schedule 2.1.4 Financial Statements
Schedule 2.1.5(a) Owned Real Property
Schedule 2.1.5(b) Leased Real Property
Schedule 2.1.6 Personal Property
Schedule 2.1.7 Inventories
Schedule 2.1.8 Accounts Receivable
Schedule 2.1.9 Intellectual Property
Schedule 2.1.10 Material Agreements
Schedule 2.1.11 Certain Changes
Schedule 2.1.12 Insurance
Schedule 2.1.13 Litigation
Schedule 2.1.15 Compliance with Laws; Permits
Schedule 2.1.16 Tax Matters
Schedule 2.1.17 ERISA
Schedule 2.1.18 Labor Matters
Schedule 2.1.20 Environmental
Schedule 2.2.3 Conflicts, Consents - Krispy Kreme
Schedule 7.14 Permitted Liens
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of June
27, 2003, by and among Krispy Kreme Doughnut Corporation, a North Carolina
corporation ("KKDC"), North Texas Doughnuts, L.P., a Texas limited partnership
("KKLP") (KKDC and KKLP collectively, "Krispy Kreme"), Greater DFW Doughnuts,
Inc., a Texas corporation ("Greater DFW, Inc."), Greater DFW Doughnuts, LLP, a
Texas limited liability partnership ("Greater DFW, LLP"), Arlington Doughnut
Company, LLP, a Texas limited liability partnership ("Arlington"), Grapevine
Doughnut Company, LLP, a Texas limited liability partnership ("Grapevine"),
Frisco Doughnut Company, LLP, a Texas limited liability partnership ("Frisco"),
Euless Doughnut Company, LLP, a Texas limited liability partnership ("Euless"),
Old Towne Doughnut Company, LLP, a Texas limited liability partnership ("Old
Towne"), Hulen St. Doughnut Company, LLP, a Texas limited liability partnership
("Hulen St."), Joseph A. McAleer, Jr. ("McAleer"), Steven D. Smith ("Smith"),
and John Orrell ("Orrell") (Greater DFW, Inc., Greater DFW, LLP, Arlington,
Grapevine, Frisco, Euless, Old Towne, Hulen St., McAleer, Smith, and Orrell
collectively, the "Sellers").
W I T N E S S E T H :
WHEREAS, Sellers are engaged in the business of producing, distributing,
and selling Krispy Kreme doughnuts and related products in certain markets in
the State of Texas and Shreveport, Louisiana (the "Business"); and
WHEREAS, Krispy Kreme desires to acquire and Sellers desire to sell,
assign, and transfer to Krispy Kreme, substantially all of the assets and
properties of the Business and certain franchise rights held by the Sellers in
the State of Texas and Shreveport, Louisiana in exchange for the payment of cash
and the assumption of certain liabilities by Krispy Kreme, all upon the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises made herein and of
the mutual benefits to be derived herefrom, the parties hereto agree as follows
(certain capitalized terms used in this Agreement are defined in Section 7.14
hereof):
ARTICLE 1.
SALE AND PURCHASE OF ASSETS
1.1. Sale and Purchase of Assets. Subject to all of the terms and
conditions of this Agreement and in reliance upon the representations and
warranties contained herein, at the Effective Time, Sellers shall sell,
transfer, assign, convey, and deliver to Krispy Kreme, free and clear of all
Liens (other than Permitted Liens), all right, title, and interest of Sellers in
and to all of the assets and properties of every nature, kind, and description,
tangible and intangible, whether real, personal, or mixed, whether contingent or
otherwise, whether now existing or hereinafter acquired, whether or not
reflected on Sellers' books, relating to the Business, excluding only the
Excluded Assets, as the same may exist as of the Effective Time, (collectively,
the "Assets"), including, without limitation, all right, title, and interest of
Sellers in, to, and under:
(a) All tangible assets relating to the Business, including all fixed
assets, machinery, equipment, computers, terminals, computer equipment,
telephones, telephone systems, furniture, office equipment, furnishings,
vehicles, trucks, and storage units and any and all assignable warranties
of third parties with respect thereto as set forth on Schedule 2.1.6;
(b) All inventories of raw materials, supplies, work-in-process,
finished products, goods, spare parts, replacement and component parts,
office and other supplies, packaging materials, and similar items relating
to the Business, including all mix, cups, ingredients, basket trays,
display stands, and cleaning supplies;
(c) All accounts receivable attributable to the Business;
(d) All Intellectual Property relating to the Business, all goodwill
associated therewith, and all royalties (or claims relating thereto) due
and owing to Sellers with regard thereto;
(e) All computer hardware and, to the extent transferable by Sellers
without payment of additional royalties or fees, software owned, used, or
held for use in the conduct of the Business and any and all files and data
relating to the Business contained on such software;
(f) All customer lists, customer data, e-mail directories, and other
customer information relating to the Business;
(g) All contracts, arrangements, licenses, leases, and other
agreements relating to the Business, including, without limitation, any
right to receive payment pursuant to such contracts, arrangements,
licenses, leases, and other agreements;
(h) All of the personal property leases listed on Schedule 2.1.6;
(i) To the extent transfer is permitted by Applicable Law, all
licenses, permits, and orders issued by any Governmental Authority with
respect to the conduct of the Business, including, without limitation,
those listed on Schedule 2.1.15;
(j) All credits, prepaid rentals, and other prepaid expenses, deferred
charges, advance payments, security deposits, and prepaid items relating to
the Business;
(k) Copies of all books, records, files, invoices, databases, computer
programs (to the extent transferable by Sellers without payment of
additional royalties or fees), manuals and other materials (in any form or
medium) relating to the Business or otherwise necessary to continue the
Business as currently operated, including, without limitation, product
specifications, drawings, distribution lists, sales and promotional
materials, personnel records of Hired Employees, research and development
records, accounting records, sales order files, and supplier lists;
(l) The Petty Cash Reserves at the Sellers' doughnut stores;
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(m) All goodwill of the Business; and
(n) The development and franchise rights from Krispy Kreme for the
territories in the States of Texas and Louisiana as shown on Schedule
1.1(n).
1.2. Excluded Assets. Notwithstanding the foregoing or any other provision
of this Agreement to the contrary, Sellers will retain and not transfer, and
Krispy Kreme will not purchase or acquire, the following (collectively, the
"Excluded Assets"):
(a) The Material Agreements designated by Krispy Kreme on Schedules
2.1.5, 2.1.6 or 2.1.10 or as Excluded Liabilities;
(b) Any of Sellers' claims for any federal, state, or local tax
refunds or credits, including personal property tax refunds or credits
related to the Assets related to periods prior to the Effective Time;
(c) The Plans, the assets related thereto, and any records related
thereto;
(d) All cash and cash equivalents attributable to the Business prior
to the Effective Time, other than Petty Cash Reserves at the Sellers'
doughnut stores;
(e) Sellers' rights and interests under this Agreement;
(f) The minute book and company records of Sellers; and
(g) The items listed on Schedule 1.2(g).
1.3. Closing. Subject to the satisfaction or waiver of all respective
conditions to the parties' obligations to close, the purchase and sale of the
Assets and the assumption of the Assumed Liabilities contemplated hereby (the
"Closing") shall be consummated at the offices of Kilpatrick Stockton LLP in
Winston-Salem, North Carolina on June 27, 2003, or at such other place, time, or
date as the parties hereto may agree in writing (the "Closing Date"), to be
effective as of 12:01 a.m. on June 30, 2003 (the "Effective Time"). In the event
that all conditions to Closing are not satisfied by June 27, 2003, Krispy Kreme
shall have the right to extend the Closing Date until the satisfaction of all
conditions to Closing, but in no event for longer than sixty (60) days. The
parties agree that all risk of loss or damage to the Assets shall be borne by
Sellers prior to the Effective Time, and shall pass to Krispy Kreme at the
Effective Time.
1.4. Purchase Price.
(a) The purchase price to be paid to Sellers for the sale, transfer, and
conveyance of the Assets (the "Purchase Price") shall be:
(i) Sixty-Five Million Eight Hundred Thousand Dollars ($65,800,000)
payable in cash or other immediately available funds (the "Cash Purchase
Price"); plus
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(ii) An amount equal to the book value as of the Effective Time of
Seller's accounts receivable, payable in cash or other immediately
available funds (the "Accounts Receivable Amount"); plus
(iii) An amount equal to the book value as of the Effective Time of
Seller's inventory, payable in cash or other immediately available funds,
as reduced for any items of inventory which are obsolete or unusable as
determined by Krispy Kreme in its reasonable discretion consistent with
Krispy Kreme's historical inventory accounting practices (the "Inventory
Amount"); plus
(iv) The amount of Petty Cash Reserves, payable in cash or other
immediately available funds (the "Petty Cash Amount"); plus
(v) The assumption of the Assumed Liabilities.
(b) A portion of the Cash Purchase Price equal to $10,000,000 shall be
deposited at Closing in an escrow account and subject to the terms of an escrow
agreement substantially similar to the form attached hereto as Exhibit A (the
"Escrowed Purchase Price"). A portion of the Escrowed Purchase Price equal to
$6,000,000 ("Indemnification Escrow") will be used to reimburse Krispy Kreme for
the satisfaction of any indemnification claims by Krispy Kreme pursuant to the
terms of Article 6. The remaining portion of the Escrowed Purchase Price of
$4,000,000 (the "Real Estate Escrow") shall be used to reimburse Krispy Kreme if
the post-closing real estate work described in Schedule 1.4(b) results in a
breach of Sellers' representations and warranties provided herein and creates a
claim for indemnification by Krispy Kreme pursuant to Article 6. Upon completion
of all real estate work described in Schedule 1.4(b), and payment of any claims
by Krispy Kreme resulting from the post-closing real estate work, any remaining
funds of the Real Estate Escrow will be immediately released and paid to
Sellers. If no indemnification claims are raised by Krispy Kreme, One Million
Dollars ($1,000,000) of the Indemnification Escrow will be disbursed to Sellers
each month following the Effective Time until the entire Indemnification Escrow
has been disbursed, such monthly disbursements being made on the last day of
each month following the Effective Time (or the next business day if such date
is not a business day), beginning on July 31, 2003.
(c) Any payments of the Purchase Price to Sellers shall be allocated among
the Sellers in the manner described in Schedule 1.4(c).
1.5. Assumption of Liabilities.
(a) At the Effective Time, Krispy Kreme shall assume and agree to discharge
all of the following obligations with respect to the Business in accordance with
their respective terms, but only to the extent that such obligations do not
constitute Excluded Liabilities (the "Assumed Liabilities"):
(i) Any and all liabilities, obligations, and commitments arising out
of the Material Agreements, excluding, however, (A) any obligation or
liability for breach thereof occurring prior to the Effective Time; and (B)
any Material Agreements designated by Krispy Kreme on Schedules 2.15, 2.16,
or 2.1.10 as Excluded Liabilities;
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(ii) All obligations and liabilities accruing, arising out of, or
relating to Krispy Kreme's operation and use of the Assets from and after
the Effective Time; and
(iii) Accrued vacation benefits for the Hired Employees as described
on Schedule 1.4(a)(vi).
(b) Notwithstanding any provision of this Agreement to the contrary, Krispy
Kreme will not assume any liabilities, obligations, or commitments of Sellers
relating to or arising out of the operation of the Business or the ownership of
the Assets other than the Assumed Liabilities, and all such other liabilities,
obligations, and commitments shall be retained by Sellers (the "Excluded
Liabilities"). Without limiting the generality of the foregoing, none of the
following shall be Assumed Liabilities for purposes of this Agreement:
(i) All trade accounts payable;
(ii) All accrued payroll, accrued employee benefits, including accrued
vacation and sick leave and accrued post retirement and post employment
benefits, and all other accrued expenses relating to the Business (except
for such portion of accrued vacation assumed by Krispy Kreme pursuant to
Section 1.5(a)(iii));
(iii) Any and all liabilities, obligations, and commitments arising
out of the Material Agreements designated by Krispy Kreme on Schedules
2.15, 2.16, or 2.1.10 as Excluded Liabilities;
(iv) Subject to Section 3.9, any and all Taxes (whether pursuant to
existing laws and regulations or laws and regulations subsequently enacted
by any Governmental Authority) which arise from (A) the operation of the
Business prior to and including the Effective Time; (B) the ownership of
the Assets prior to and including the Effective Time; or (C) the
consummation of the transactions contemplated herein;
(v) Any and all costs, expenses, liabilities, or obligations incurred
by Sellers incident to the negotiation and preparation of this Agreement
and their performance and compliance with the agreements and conditions
contained herein;
(vi) Any and all divisional intergroup or intercompany payables and
other liabilities of the Business to Sellers or any of their affiliates;
(vii) Any liabilities or obligations relating to any Environmental
Damages, whether or not disclosed in any schedule to this Agreement or
otherwise known to Krispy Kreme;
(viii) Any liability for the unpaid Taxes of any Person under Reg.
1.1502-6 of the Code (or any other similar provision of state, local, or
foreign law) as a transferee or successor, by contract, or otherwise;
(ix) Any liabilities or obligations for borrowed money or evidenced by
bonds, debentures, notes, drafts, or similar instruments;
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(x) Any liabilities or obligations relating to employees of the
Business while employed by Sellers;
(xi) Any WARN Act obligations of Sellers with respect to employees of
the Business, whether arising prior to or after the Effective Time as a
result of the consummation of the transactions described herein;
(xii) All liabilities or obligations relating to any claims by
employees of the Business, whether pending as of the Effective Time or
arising after the Effective Time, due to acts, alleged acts, or omissions
of Sellers occurring prior to the Effective Time under any federal labor or
employment laws or state laws relating to or arising out of the employment
relationship or the termination thereof, including, without limitation, any
claims under the National Labor Relations Act, Fair Labor Standards Act,
Family and Medical Leave Act, Title VII of the Civil Rights Act of 1964,
Americans with Disabilities Act, Age Discrimination in Employment Act, and
the Civil Rights Act of 1866 and 1970;
(xiii) All liabilities or obligations relating to any of the Plans;
(xiv) Any liabilities or obligations with respect to any pending or
threatened actions, suits, proceedings, or possible claims in any way
relating to the conduct of the Business prior to the Effective Time,
including any such matters disclosed on Schedule 2.1.13 and without regard
to whether any such actions, suits, proceedings, or possible claims are
described on Schedule 2.1.13;
(xv) Any liabilities, costs, and expenses relating to termination of
any Material Agreement by Sellers in connection with the consummation by
Sellers of the transactions contemplated hereby;
(xvi) Any and all liabilities, obligations, and commitments to
customers relating to Returns; and
(xvii) Any liabilities or obligations relating to the Excluded Assets.
1.6. Closing Date Deliveries by Sellers. On the Closing Date, Sellers shall
deliver or cause to be delivered to Krispy Kreme all of the documents,
instruments, and opinions required to be delivered by Sellers pursuant to
Section 4.1.
1.7. Closing Date Deliveries by Krispy Kreme. On the Closing Date, Krispy
Kreme shall deliver to Sellers all of the documents, instruments and opinions
required to be delivered by Krispy Kreme pursuant to Section 4.2. On the day of
the Effective Time, Krispy Kreme shall pay Sellers the Cash Purchase Price plus
the Petty Cash Amount and less the Escrowed Purchase Price by wire transfer or
some other form of immediately available funds to such accounts as directed by
Sellers and as allocated among the Sellers as indicated on Schedule 1.4(b). The
Escrowed Purchase Price shall be deposited in an escrow account as described in
Section . No later than two (2) business days following the Effective Time, the
parties hereto shall agree on Accounts Receivable Amount and Inventory Amount as
of the Effective Time. The aggregate amount of such Accounts Receivable Amount
and Inventory Amount (less an
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amount equal to 15% of the Accounts Receivable Amount which shall be deposited
in an escrow account as described in Section 1.8) shall be paid to Sellers by
wire transfer or some other form of immediately available funds to such accounts
as directed by Sellers and as allocated among the Sellers as indicated on
Schedule1.4(c). Such payments of the Purchase Price by Krispy Kreme as described
herein may be adjusted as required by the terms of this Agreement, which
adjustments may include, if applicable: (a) reductions to pay in full any and
all amounts due by Sellers to Krispy Kreme as of the Effective Time, as required
by Section 3.12; and (b) adjustments for prorated property taxes and assessments
as of the Effective Time, as required by Section 3.9. If all amounts due by
Sellers to Krispy Kreme are not capable of being determined by the Effective
Time (such as royalties payable), Sellers shall pay such amounts to Krispy Kreme
no later than two (2) days following determination of such amounts.
1.8. Escrow for Receivables. As provided in Section 1.7, a portion of the
Purchase Price equal to 15% of Accounts Receivable Amount as of the Effective
Time shall be deposited in a separate escrow account and subject to the terms of
an escrow agreement substantially similar to the form attached hereto as Exhibit
A. These funds held in the escrow account will be used to reimburse Krispy Kreme
for the amount of any of Sellers' accounts receivable not collected within
ninety (90) days of Closing (the "Collection Deadline"). For any accounts
receivable not collected by the Collection Deadline, Krispy Kreme will first be
reimbursed from the funds held in the escrow account. In the event the amount of
uncollected accounts receivable as of the Collection Deadline exceeds the amount
held in the escrow account, the Sellers shall remit such excess to Krispy Kreme
no later than five (5) business days following the Collection Deadline. In the
event the amount of uncollected accounts receivable as of the Collection
Deadline is less than the amount held in the escrow account, the remaining
balance in the escrow account, after payment of any amount due Krispy Kreme
pursuant to this Section 1.8 shall be remitted to Sellers. Krispy Kreme agrees
to make reasonable commercial efforts to collect the accounts receivable within
the Collection Deadline, but will not be required to institute collection
actions. Any accounts receivable which are not collected by the Collection
Deadline and for which Sellers reimburse Krispy Kreme, from the escrow account
or otherwise, will be assigned by Krispy Kreme to Sellers and Sellers shall have
the right to collect the same.
1.9. Further Assurances. On the Closing Date, Sellers shall deliver to
Krispy Kreme such other bills of sale, deeds, endorsements, assignments, and
other good and sufficient instruments of conveyance and transfer, in form
reasonably satisfactory to Krispy Kreme and its counsel, as Krispy Kreme may
reasonably request or as may be otherwise reasonably necessary to vest in Krispy
Kreme all right, title, and interest of Sellers in, to, or under all of the
Assets. From and after the Effective Time, Sellers shall take all steps as may
be reasonably necessary to put Krispy Kreme in actual possession and control of
all the Assets. From time to time following Closing, the parties shall execute
and deliver, or cause to be executed and delivered, to each other such other
instruments and documents as may be reasonably requested or as may be otherwise
reasonably necessary to consummate the transactions contemplated hereunder.
Notwithstanding anything in this Section 1.9 to the contrary, this Agreement
shall not constitute an agreement to assign any license, certificate, approval,
authorization, agreement, contract, lease, or other commitment included in the
Assets if an attempted assignment thereof without the consent of a third party
thereto or Governmental Authority would constitute a breach thereof or a
violation of Applicable Law. If any such consent shall not be obtained or if any
attempted assignment would be ineffective, Sellers shall cooperate to the extent
permitted by law with Krispy
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Kreme in any other reasonable arrangement designed to provide to Krispy Kreme
the benefits of any such license, certificate, approval, authorization,
agreement, contract, lease, or other commitment.
1.10. Allocation of Purchase Price. The Purchase Price shall be allocated
among the Assets in the manner set forth on Schedule 1.10. The parties agree
that such allocation is a fair and reasonable allocation of the Purchase Price,
and the parties shall file all applicable tax returns and reports (including IRS
Form 8594 issued pursuant to Section 1060 of the Code) in accordance with and
based upon such allocation and shall not take any position in any tax return or
report, or any tax proceeding or audit, that is inconsistent with such
allocation.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties as to Sellers. Sellers, jointly and
severally, represent and warrant to Krispy Kreme as of the date hereof as
follows:
2.1.1 Existence. Greater DFW, Inc., Greater DFW, LLP, Arlington, Grapevine,
Frisco, Euless, Old Towne, and Hulen St. are either corporations or limited
liability partnerships, as applicable, duly organized, validly existing, and in
good standing under the laws of the State of Texas and have all requisite power
and authority to own, lease, and operate their respective properties and to
carry on their respective businesses as presently conducted. Each of Greater
DFW, Inc., Greater DFW, LLP, Arlington, Grapevine, Frisco, Euless, Old Towne,
and Hulen St. is duly qualified and in good standing as a foreign entity duly
authorized to do business in all jurisdictions in which the failure to be so
qualified would have a Material Adverse Effect.
2.1.2 Authorization. Sellers have full power and authority to execute and
deliver this Agreement, to consummate the transactions contemplated hereby, and
to perform their obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite action on the part of Sellers. This Agreement
has been duly executed and delivered by Sellers and constitutes the legal,
valid, and binding obligation of each of them, enforceable against each of them
in accordance with its terms. The other agreements and instruments to be
executed by Sellers in connection with this Agreement, when executed and
delivered by Sellers, will constitute the legal, valid, and binding obligations
of Sellers, enforceable against Sellers in accordance with their respective
terms.
2.1.3 Conflicts, Consents.
(a) Except as set forth on Schedule 2.1.3 and as may be required under
the HSR Act, the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby in the manner
contemplated hereby will not (x) result in the creation of any Lien upon
any of the Assets; or (y) conflict with or result in any violation of or
default under (or any event that, with notice or lapse of time or both,
would constitute a default under), require any consent, notice, or other
action under, or result in the acceleration or required prepayment of any
indebtedness pursuant to the terms of, any provision of (i) the Certificate
of Incorporation, Bylaws, Certificate of Limited Partner-
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ship, Partnership Agreement, or similar governing document of any Seller,
(ii) any mortgage, indenture, loan agreement, note, bond, deed of trust, or
other agreement, commitment, or obligation for the borrowing of money or
the obtaining of credit, lease, or other agreement, contract, license,
franchise, permit, or instrument to which any Seller is a party or by which
any Seller or its properties may be bound, or (iii) any judgment, order,
decree, law, statute, rule, or regulation applicable to any Seller or any
of the Assets.
(b) Except as set forth on Schedule 2.1.3, no consent, approval,
authorization, permit, order, filing, registration, or qualification of or
with any Governmental Authority or third Person is required to be obtained
by Sellers (whether under Applicable Law, pursuant to agreements to which
Sellers are parties, or otherwise) in connection with the execution and
delivery of this Agreement or the consummation by Sellers of the
transactions contemplated hereby in the manner contemplated hereby.
2.1.4 Financial Information, Material Adverse Change, Undisclosed
Liabilities.
(a) Sellers have delivered to Krispy Kreme audited combined balance
sheets, combined statements of income, changes in partners' capital and
cash flows for the Business for the year ended December 31, 2002 (the
"Financial Statements"). The Financial Statements are set forth on Schedule
2.1.4. The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout
the period indicated, are accurate and complete in all material respects,
and present fairly the results of operations of the Business for the period
indicated.
(b) Except as disclosed on Schedule 2.1.4, since December 31, 2002,
there has been no Material Adverse Change.
(c) Sellers have no liabilities or obligations arising out of or
relating to the Business, secured or unsecured (whether absolute, accrued,
known or unknown, contingent, or otherwise, and whether due or to become
due) except (x) as disclosed on Schedule 2.1.4, and (y) nonmaterial current
liabilities incurred since December 31, 2002 in the ordinary course of
business consistent with past practice.
2.1.5 Real Property. Sellers own good and marketable title in fee simple to
the underlying land and buildings described on Schedule 2.1.5(a) (the "Owned
Real Property"). Schedule 2.1.5(b) sets forth all leasehold interests in real
property related to the Business held by Sellers at the Closing Date (the
"Leased Real Property"). Sellers have in all material respects performed all
obligations required to be performed by Sellers to the date hereof under such
leases and possess and quietly enjoy the premises under such leases. The Owned
Real Property and the Leased Real Property (Owned Real Property and Leased Real
Property, collectively, the "Real Property"), including the buildings and
operations of Sellers conducted thereon, are in material compliance with all
applicable ordinances, regulations, and zoning laws, do not encroach on the
property of others, are not subject to any Liens of any nature whatsoever, or to
any easements, encroachments, building or use restrictions, exceptions,
reservations, or limitations that in any material respect interfere or impair
the present and continued use thereof in the usual and normal conduct of the
Business. The Real Property is properly zoned for the uses now being made of it,
including the production, distribution, and sale of doughnuts and related
products at
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retail and wholesale. Sellers have not received any notice of any violation or
alleged violation of any applicable zoning regulation, ordinance, or other
Applicable Law relating to the operation of the Business at the Real Property,
and Sellers know of no such violation. Sellers have not received any notice of
any pending or threatened condemnation proceedings related to the Real Property,
and Sellers know of no such pending or threatened proceedings. There are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any Person other than Sellers the right to acquire, use, or occupy
any portion of the Real Property.
2.1.6 Personal Property. Schedule 2.1.6 sets forth all machinery,
equipment, furniture, and all other items of tangible personal property (other
than inventory and Excluded Assets) (the "Personal Property Assets") utilized by
Sellers in connection with the Business as presently conducted and all leases
and agreements associated therewith. Sellers have good and marketable title to,
and own free and clear of any Liens, except for Permitted Liens, all such
Personal Property Assets, including, without limitation, all personal property
reflected on Schedule 2.1.6. The Personal Property Assets comprise all assets,
other than the Excluded Assets, required for the continued conduct of the
Business by Krispy Kreme as presently conducted. Except as disclosed on Schedule
2.1.6, the Personal Property Assets are in all material respects adequate for
the purposes for which such Personal Property Assets are currently used or are
held for use and are in reasonably good repair and operating condition (subject
to normal wear and tear and ordinary routine maintenance and repair needs
consistent with past practice). There are no facts or conditions affecting the
Personal Property Assets that could, individually or in the aggregate, interfere
in any material respect with the continued use thereof in the usual and normal
conduct of the Business. Schedule 2.1.6 sets forth a true and complete list of
all convenience stores, grocery stores, and other locations where doughnut cases
and signs owned by Sellers are located, the street addresses of such stores, and
the number and type of doughnut cases and signs at each store.
2.1.7 Inventories. The inventories of the Business are fit and sufficient
in all material respects for the purposes for which they were purchased or
manufactured, except as set forth on Schedule 2.1.7 and for obsolete items and
below-standard quality items that have been written off or written down to net
realizable value on the books of the Business in accordance with generally
accepted accounting principles applied on a consistent basis. The values shown
for inventories on the books of the Business reflect the normal inventory policy
of Sellers (including the writing down or reserving of the value of slow-moving
or obsolete inventory of below-standard quality to estimated net realizable
market value in accordance with generally accepted accounting principles
consistently applied) at the lower of cost or market and are not in excess of
the value of such inventories computed in accordance with generally accepted
accounting principles applied on a consistent basis. Sellers own the inventories
of the Business free and clear of any Liens.
2.1.8 Accounts Receivable. Sellers have delivered to Krispy Kreme a true
and complete list of all receivables arising out of or relating to the Business
and an aging of such accounts receivable as of the close of business on May 31,
2003. Promptly after the Effective Time, Sellers shall deliver to Krispy Kreme a
true and complete list of all receivables arising out of or relating to the
Business and an aging of such accounts receivable as of the Effective Time.
Except as disclosed on Schedule 2.1.8, all accounts receivable of Sellers
relating to the Business or the Assets (i) arose from bona fide sales of goods
or services in the ordinary course of busi-
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ness and consistent with past practice and are valid claims enforceable against
the account debtor, (ii) are owned free and clear of any Liens, and (iii) are
accurately and fairly reflected on the listing prepared by Sellers and delivered
to Krispy Kreme.
2.1.9 Intellectual Property. Schedule 2.1.9 contains a list of all
Intellectual Property. Except as set forth on Schedule 2.1.9, no third party is
engaged in any activity that constitutes an infringement of any Intellectual
Property. Except as set forth on Schedule 2.1.9, there are no claims or
proceedings pending or, to the Knowledge of Sellers, threatened against Sellers
asserting that Sellers have, are, or were infringing any patent, trademark,
trade name, or other intellectual property rights of any other Person in
connection with the operation of the Business.
2.1.10 Material Agreements.
(a) Except for the contracts, franchises, agreements, plans, leases, and
licenses described on Schedule 2.1.10, Sellers are not a party to or subject to:
(i) any written employment contract or any other written or oral
agreement or arrangement relating to compensation or severance payments
with any Seller Personnel;
(ii) any plan, contract, or arrangement providing for bonuses,
pensions, options, deferred compensation, retirement payments, profit
sharing, or other benefits for any Seller Personnel;
(iii) any contract or agreement with any labor union relating to the
Business;
(iv) any lease relating to the Business which involves annual payments
in excess of $10,000 or any lease which is of more than six months in
duration;
(v) any contract or agreement for the purchase of any materials,
services, or supplies relating to the Business which involves annual
payments in excess of $10,000 or any such contract or agreement of more
than six months in duration;
(vi) any contract or agreement for the purchase of equipment or any
construction or other contract or agreement relating to the Business which
involves annual payments in excess of $10,000 or any such contract or
agreement of more than six months in duration;
(vii) any contract or agreement for the sale of products or services
of the Business, including any contract with any convenience store or
grocery store;
(viii) any contract or agreement with an agent, sales representative,
dealer, or other distributor of products of the Business;
(ix) any contract or agreement relating to the Business containing
covenants materially limiting the freedom of the Business (or any key
employee of the Business) to compete in any line of business or with any
Person;
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(x) any guarantee of the obligations of customers, distributors,
suppliers, Seller Personnel, affiliates, or others with respect to the
Business;
(xi) any contract relating to the Business not made in the ordinary
course of business consistent with past practice; or
(xii) any contract or agreement relating to the Business, not of the
type covered by any of the other items of this Section 2.1.10, which by its
terms does not terminate, or is not terminable, by and without penalty to,
Sellers within thirty (30) days of the date hereof and which involves the
payment or receipt by Sellers of $10,000 in value in any one year.
(b) Except as set forth on Schedule 2.1.10, Sellers have delivered to
Krispy Kreme correct and complete copies of all Material Agreements, all such
Material Agreements are valid and in full force and effect, and neither Sellers,
nor, to the Knowledge of Sellers, any other party to any of the Material
Agreements has breached any material provision of or is in default in any
material respect under the terms of any Material Agreement. Schedule 2.1.10
identifies each Material Agreement which is or might be terminable by any other
party upon the sale of substantially all the Assets or occurrence of any of the
other transactions contemplated by this Agreement.
2.1.11 Absence of Certain Changes. Except as set forth on Schedule 2.1.11,
since December 31, 2002, Sellers have not with respect to the Business:
(a) mortgaged, pledged, or subjected to any Lien any of the Assets, except
for Permitted Liens;
(b) acquired or disposed of any material assets or properties or entered
into any agreement or other arrangement for any such acquisition or disposition,
except for inventory or replacements of obsolete or defective equipment in the
ordinary course of business consistent with past practice;
(c) entered into, amended, or terminated any Material Agreement;
(d) (i) increased the wages, salaries, compensation, pension, or other
benefits payable to any Seller Personnel other than in accordance with the
normal compensation and benefit policies of Sellers consistent with past
practice, (ii) granted any severance or termination pay to any Seller Personnel,
(iii) entered into any employment, severance, or consulting agreement or
arrangement with any Seller Personnel, (iv) changed any benefit plan or labor
agreement relating to any Seller Personnel except to comply with Applicable Law,
or (v) granted, made, or accrued, contingent or otherwise, any bonus, incentive
compensation, service award, or other like benefit to or to the credit of any
Seller Personnel;
(e) suffered any damage, destruction, or loss (whether or not covered by
insurance) affecting the Assets that could reasonably be expected to have a
Material Adverse Effect;
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(f) suffered any strike or other labor trouble affecting the Business;
(g) suffered or experienced any change in relations with or loss of any
Seller Personnel or customers of the Business that could reasonably be expected
to have a Material Adverse Effect;
(h) become aware of any circumstances that might create the potential for
the Business to lose customers (whether off-premises customers or otherwise),
which loss of customers could reasonably be expected to have a Material Adverse
Effect;
(i) changed any pricing practices, method of accounting, or accounting
practice or policy of Sellers;
(j) conducted the Business other than in the ordinary course consistent
with past practice;
(k) settled or compromised any claim, suit, or cause of action involving
more than $10,000;
(l) materially altered its collection practices with respect to accounts
receivable, including any practice which has had the effect of accelerating the
recording and billing of accounts receivable;
(m) made any capital expenditures or commitments therefor outside the
ordinary course of business in excess of $10,000; or
(n) agreed to do any of the foregoing.
2.1.12 Insurance. The Assets are insured under the various policies of
general liability and other forms of insurance set forth on Schedule 2.1.12. No
notice of cancellation or non-renewal with respect to, or disallowance of any
claim under, any such policies has been received by Sellers. Sellers will
maintain such policies through the Effective Time.
2.1.13 Litigation. Except as set forth on Schedule 2.1.13, there is no
action, suit, proceeding, claim, arbitration, grievance, or investigation
pending or, to the Knowledge of Sellers, threatened against or affecting the
Business or the Assets or which would prevent, hinder, or delay the consummation
of the transactions contemplated hereby or which could impose any liability,
cost or expense on Krispy Kreme, nor is any Seller aware of any basis for any
such action, suit, proceeding, claim, arbitration, grievance, or investigation
which would have a Material Adverse Effect or which would prevent, hinder, or
delay the consummation of the transactions contemplated hereby or which could
impose any liability, cost or expense on Krispy Kreme.
2.1.14 No Judgments or Orders. With respect to the Business, Sellers are
not parties to or subject to any judgment, order, or decree entered in any
action or proceeding brought by any Governmental Authority or any other party
either enjoining any of them in respect of any business practice or the conduct
of business in any area or the acquisition of any property or which otherwise
has had or could have a Material Adverse Effect.
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2.1.15 Compliance with Laws, Permits.
(a) The Sellers are not in violation of any Applicable Laws with respect to
the Business, the violation of which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. Except as set forth on
Schedule 2.1.15, Sellers have not received any notice to the effect that, or
otherwise been advised that, Sellers are not in compliance with any Applicable
Law and, to the Knowledge of Sellers, there are no presently existing
circumstances that are likely to result in any violation of any Applicable Law,
which could, in any one case or in the aggregate, be reasonably expected to have
a Material Adverse Effect.
(b) All material permits, governmental licenses, orders, registrations, and
other approvals of all federal, state, local, and foreign governmental and
regulatory bodies with respect to the conduct of the Business have been obtained
by Sellers, are set forth on Schedule 2.1.15, and are in full force and effect,
and there has been neither any material violation, suspension, or cancellation
thereof nor, to the Knowledge of Sellers, any basis for any such claim. Except
as disclosed on Schedule 2.1.15, the consummation of the transactions
contemplated by this Agreement will not result in the revocation, suspension, or
limitation of any such governmental license or permit, nor will there be
required (i) any consent of any issuing authority, or (ii) any fees, expenses,
or Taxes relating to the transfer or assignment of such permits or licenses as a
result of the consummation of the transactions contemplated hereby.
2.1.16 Tax Matters. With respect to the Business, Sellers have correctly
prepared and timely filed all federal, foreign, state, and local tax returns and
other tax reports required to be filed by Sellers and have timely paid, or, with
respect to current taxes not yet due and payable, set up an adequate reserve on
the books of Sellers for the payment of, all federal, foreign, state, and local
income taxes and all other taxes (including, without limitation, all franchise,
gross receipts, license, property, sales, use, excise, intangible, severance,
stamp, occupation, environmental, social security, withholding, employment,
unemployment and payroll taxes, and interest or penalties thereon, and all such
other taxes along with all federal, foreign, state, and local income taxes being
defined collectively as "Taxes") that have become due and payable by them,
whether or not such Taxes are shown on any tax return, and have set up an
adequate reserve on the books of Sellers for the payment of all Taxes payable by
Sellers in respect of the period subsequent to the last of such periods. All
such returns are true, complete, and correct. Sellers are not delinquent in the
payment of any Taxes with respect to the Business, have not waived any statute
of limitations with respect to any such Taxes, and have not requested or agreed
to any extension of time within which to file any tax return or report or with
respect to a tax assessment or deficiency relating to the Business. No
deficiencies for Taxes with respect to the Business have been assessed or
asserted and Sellers do not know of any unresolved questions or claims
concerning the tax liability of Sellers with respect to the Business. There is
no pending or, to the Knowledge of Sellers, threatened examination or audit by
the Internal Revenue Service or any state taxing authorities of any tax returns
relating to the Business. No claim has ever been made by any Governmental
Authority in any jurisdiction where Sellers do not file tax returns that Sellers
are or may be subject to that jurisdiction. Sellers have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any Seller Personnel, creditor, or other third party. Except as set
forth on Schedule 2.1.16, (i) the Business has never been audited by any taxing
authority, (ii) Sellers are not and have not previously been parties to a tax
allocation or sharing agreement and have not otherwise assumed any liability for
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Taxes of any third party, including as a transferee or successor, and (iii)
Sellers have not ever been (nor do they have any liability for unpaid taxes,
whether under Section 1.1502-6 of the Treasury regulations or otherwise, because
they were) members of an affiliated group within the meaning of Section 1504(a)
of the Code or any unitary, affiliated, or similar group for state, local, or
foreign tax purposes. No Liens exist or will exist, immediately following
Closing, on the Assets that relate to or are attributable to any Taxes.
2.1.17 Compliance with ERISA. Schedule 2.1.17 sets forth a complete list of
each "employee benefit plan," as that term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") regardless
of whether such plan is subject to ERISA, and each bonus, deferred, or incentive
compensation, stock purchase, stock option, severance, and termination pay plan
or program that is maintained or contributed to by Sellers for the benefit of
Seller Personnel (the "Plans"). Sellers have delivered to Krispy Kreme correct
and complete copies of each of the Plans. Each Plan has been administered and
operated in compliance with its terms and the applicable requirements of ERISA
and the Code, including the requirement to file an annual report. There are no
pending or, to the Knowledge of Sellers, threatened claims of any Seller
Personnel against or otherwise involving any of the Plans (other than routine
claims for benefits). Schedule 2.1.17 contains a complete and accurate list of
(a) all claims made under any Plan involving hospitalization, medical, or dental
care claims that have exceeded $5,000 per year for an individual since January
1, 2002; and (b) all known illnesses, injuries or conditions that are reasonably
expected to lead to hospitalization, medical, or dental care claims under any
Plan in excess of $5,000 in 2003 or future years.
2.1.18 Labor Matters.
(a) Sellers have delivered to Krispy Kreme a complete and current list of
all present employees, consultants, and sales representatives employed or
engaged by Sellers in the Business, and Schedule 2.1.18 sets forth a complete
and current list of each such employee who earns $50,000 or more in base salary,
setting forth each such employee's base salary, any bonus received by him or her
in the past twelve (12) months ended December 31, 2002, his or her current
remuneration, the amount of any increase in salary, perquisite, fringe benefit,
or other compensation since December 31, 2002, and a description of all
perquisite and fringe benefits he or she receives or is eligible to receive.
(b) No Seller is a party to any collective bargaining agreement with any
labor union or similar organization relating to the Business, nor does any
Seller have Knowledge of any such organization that represents or claims to
represent any employees of the Business or is currently seeking to represent or
organize the employees of the Business. There has not occurred any strike,
slowdown, picketing, work stoppage, concerted refusal to work overtime, or other
labor difficulty relating to the Business. There are no labor disputes currently
subject to any grievance procedure, arbitration, or litigation and there is no
representation petition pending or threatened with respect to any employee of
the Business. Sellers have complied with all Applicable Law pertaining to the
employment of employees of the Business, including, without limitation, all such
laws relating to labor relations, equal employment, fair employment practices,
entitlements, prohibited discrimination, and other similar employment practices
and acts, except for any failure to comply that, individually or together with
all such other failures, has not had or resulted in and could not reasonably be
expected to have or result in a Material Adverse Effect.
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2.1.19 Questionable Payments. Neither any Seller or, to the Knowledge of
Sellers, any Seller Personnel or other Persons associated with or acting on
behalf of Sellers has with respect to the Business (a) used any company funds
for unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity, (b) made any direct or indirect unlawful
payments to government officials or employees from company funds, (c)
established or maintained any unlawful or unrecorded fund of company moneys or
other assets, (d) made any false or fictitious entries on the books of account
of Sellers, (e) made or received any bribe, rebate, payoff, influence payment,
kickback, or other unlawful payment, or (f) made any other material payment,
favor, or gift related to the assets or operations of the Business that is
illegal.
2.1.20 Environmental. Except as disclosed on Schedule 2.1.20:
(a) Sellers are in compliance, and Sellers at all times have complied
in all material respects, with all Environmental, Health, and Safety
Requirements of Law applicable to the operation of the Business and the
Real Property, including, without limitation, the treatment, remediation,
removal, transport, storage, and disposal of any Contaminant;
(b) To the Knowledge of Sellers, all Real Property is in compliance,
and has at all times been in compliance in all material respects, with all
Environmental, Health, and Safety Requirements of Law applicable to it;
(c) Sellers have obtained, as required by Environmental, Health, or
Safety Requirements of Law to obtain, all environmental, health, and safety
permits, consents, licenses, and other authorizations (collectively, "EHS
Permits") necessary for the operation of the Business, all such EHS Permits
are in good standing, and Sellers are currently in compliance in all
material respects with all terms and conditions of such EHS Permits. No
material change in the facts or circumstances reported or assumed in the
applications for or the granting of such EHS Permits exists. To the
Knowledge of Sellers, there are no proceedings threatened that would
jeopardize the validity of any EHS Permit;
(d) Sellers are not subject to any judicial or administrative
proceeding, notice, order, judgment, decree, or settlement or, to the
Knowledge of Sellers, any investigation alleging or addressing in
connection with the Business: (i) any violation of any Environmental,
Health, or Safety Requirements of Law, (ii) any Remedial Action, or (iii)
any claims, liabilities, or costs arising from the Release or threatened
Release of any Contaminant;
(e) Sellers have not transported or arranged for the transport of any
Contaminant to any site in connection with the Business which is not in
material compliance with the applicable Environmental, Health, and Safety
Requirements of Law;
(f) Sellers have no liability, have not received, and are not
otherwise aware of any notice, claim, or other communication alleging
liability on the part of Sellers for the material violation of any
Environmental, Health, or Safety Requirements of Law, for Environmental
Damages, or for the Release or threatened Release of any Contaminant in
connection with the Business, whether or not corrected to the satisfaction
of the appropriate authority; and
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(g) Sellers have delivered to Krispy Kreme true and correct copies of
each environmental report, audit, test, investigation, study, review,
assessment and analyses (collectively, the "Environmental Reports")
prepared by, or on behalf of or that is in the possession of Sellers with
respect to the Business or the Real Property.
2.1.21 Brokers, Finders. Sellers have not retained any broker or finder in
connection with the transactions contemplated hereby so as to give rise to any
claim against Krispy Kreme for any brokerage or finder's commission, fee, or
similar compensation.
2.1.22 Disclosure. This Agreement, the schedules hereto, and the
certificates and other documents furnished by Sellers to Krispy Kreme pursuant
hereto, taken as a whole, do not as of their respective dates contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained herein and therein not misleading.
2.2. Representations and Warranties of Krispy Kreme. Krispy Kreme
represents and warrants to Sellers as of the Closing Date and as of the date
hereof as follows:
2.2.1 Corporate Status. KKDC is a corporation duly organized, validly
existing, and in good standing under the laws of the State of North Carolina and
has all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as presently conducted and as will be
conducted following the consummation of the transactions contemplated by this
Agreement. KKLP is a newly formed Texas limited partnership, formed solely for
the purpose of acquiring certain of the Assets.
2.2.2 Authorization. Krispy Kreme has full power and authority to execute
and deliver this Agreement, to consummate the transactions contemplated hereby,
and to perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all requisite action on the part of Krispy Kreme. This
Agreement has been duly executed and delivered by Krispy Kreme and constitutes
the legal, valid, and binding obligation of Krispy Kreme enforceable against it
in accordance with its terms. The other agreements and instruments to be
executed by Krispy Kreme in connection with this Agreement, when executed and
delivered by Krispy Kreme, will constitute the legal, valid, and binding
obligations of Krispy Kreme, enforceable against Krispy Kreme in accordance with
their respective terms.
2.2.3 Conflicts, Consents.
(a) Except as set forth on Schedule 2.2.3, the execution and delivery of
this Agreement by Krispy Kreme and the consummation by Krispy Kreme of the
transactions contemplated hereby in the manner contemplated hereby do not and
will not conflict with or result in any violation of, or default under (or any
event that, with notice or lapse of time or both, would constitute a default
under), require any consent, notice, or other action under, or result in the
acceleration or required prepayment of any indebtedness pursuant to the terms
of, any provision of (i) the Articles of Incorporation or Bylaws of KKDC and the
Certificate of Limited Partnership or Partnership Agreement of KKLP, (ii) any
mortgage, indenture, loan agreement, note, bond, deed of trust, or other
agreement, commitment, or obligation for the borrowing of money or the obtaining
of credit, material lease, or other material agreement, contract, license,
franchise, per-
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mit, or instrument to which Krispy Kreme is a party or by which Krispy Kreme may
be bound, or (iii) any judgment, order, decree, law, statute, rule, or
regulation applicable to Krispy Kreme.
(b) Except as set forth on Schedule 2.2.3 and as may be required under the
HSR Act, no consent, approval, authorization, permit, order, filing,
registration, or qualification of or with any Governmental Authority or third
Person is required to be obtained by Krispy Kreme (whether under Applicable Law,
pursuant to agreements to which Krispy Kreme is a party, or otherwise) in
connection with the execution and delivery by Krispy Kreme of this Agreement or
the consummation by Krispy Kreme of the transactions contemplated hereby in the
manner contemplated hereby.
2.2.4 Brokers, Finders. Krispy Kreme has not retained any broker or finder
in connection with the transactions contemplated hereby so as to give rise to
any valid claim against Sellers for any brokerage or finder's commission, fee,
or similar compensation.
ARTICLE 3. CERTAIN COVENANTS
3.1. Access and Information. Prior to Closing, Sellers will with respect to
the Business (i) give to Krispy Kreme and its representatives full access to
Sellers' properties, books, records, contracts, and commitments relating to the
Business upon reasonable notice during normal business hours, in a manner so as
not to interfere with Sellers' normal business operations, (ii) furnish all such
information and documents relating to the Assets and the Business as Krispy
Kreme may reasonably request, (iii) allow Krispy Kreme to discuss matters
relating to the Business with Sellers' outside auditors, attorneys, and such
other representatives for Sellers as are reasonably requested by Krispy Kreme,
and (iv) permit such other reasonable investigations, valuations, or testing
(including environmental investigations and testing) as may be deemed reasonably
necessary by Krispy Kreme.
3.2. Conduct of the Business. From the date hereof to the Closing, Sellers
will, with respect to the Business (a) conduct their businesses only in the
ordinary course in substantially the same manner as heretofore conducted, (b)
subject to hazards, catastrophes, and other circumstances beyond Sellers'
reasonable control, maintain and keep the Assets in such repair, working order,
and condition as is sufficient for the operation of their businesses in the
ordinary course, (c) keep in full force and effect insurance comparable in
amount and scope of coverage to that now maintained by them (to the extent
available on commercially reasonable terms in the case of any renewal or
replacement policies), (d) perform in all material respects all of their
obligations under all material contracts and commitments applicable to their
businesses or properties, (e) maintain and preserve their organizational
structures intact, and use their best efforts to maintain satisfactory
relationships with officers, employees, suppliers, distributors, and customers
consistent with past practice, (f) maintain their books of account and records
in the usual and regular manner, (g) comply in all material respects with all
laws and regulations applicable to them and to the conduct of their businesses
and operations, (h) not make any material commitments or expenditures, other
than those previously disclosed to Krispy Kreme, and not enter into any
transaction with any affiliate of Sellers not consistent with past practice, (i)
promptly advise Krispy Kreme in writing of any emergency or other change in the
normal course of business or in the operations of their properties and of any
governmental or any other third party complaints,
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investigations or hearings (or communications indicatinFg that the same may be
contemplated), (j) promptly advise Krispy Kreme of any Material Adverse Change
in the operations or financial condition of the Business, (k) use their best
efforts to insure that the representations and warranties contained in Article 2
hereof or elsewhere in this Agreement shall be true and correct as of the
Closing Date and the Effective Time and (l) not take any action described in
Section 2.1.11 hereof.
3.3. Efforts to Consummate Transaction. Subject to the terms and conditions
herein provided, the parties agree to use their best efforts (without obligation
to make any payment to any third party except as expressly provided herein) to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper, or advisable under Applicable Law to consummate and
make effective the transactions contemplated hereby in accordance with the terms
of this Agreement including, but not limited to any filings and reports required
by the HSR Act.
3.4. Consents and Approvals; Releases. Sellers shall use their best efforts
(without obligation to make any payment to any third party) promptly to obtain
all consents and amendments from parties to the Material Agreements and from
Governmental Authorities that are required by the terms thereof, this Agreement,
or otherwise for the due and punctual consummation of the transactions
contemplated by this Agreement. Krispy Kreme will cooperate (without the
obligation to make any payment or concession to any third party) with Sellers in
obtaining such consents and approvals.
3.5. Discharge of Excluded Liabilities. Sellers agree that they will,
jointly and severally, hold Krispy Kreme harmless from, and indemnify Krispy
Kreme against, the Excluded Liabilities, including each and every liability and
obligation of Sellers with respect to the Business or the Assets arising from
events occurring at or prior to the Effective Time, except only those
obligations expressly assumed by Krispy Kreme at the Effective Time pursuant to
Section 1.5(a), it being understood and agreed that Krispy Kreme is not assuming
any liabilities or obligations of Sellers other than the Assumed Liabilities.
3.6. Employee Matters.
(a) Sellers will cooperate with Krispy Kreme in Krispy Kreme's efforts to
negotiate an employment agreement with Todd West. As a condition to Krispy Kreme
entering into an employment agreement with Todd West, Sellers agree to set aside
One Million Dollars ($1,000,000) of the Purchase Price to pay Mr. West over a
four-year period in conjunction with such employment agreement. The employment
agreement with Todd West will be in such form acceptable to Krispy Kreme.
(b) Except as otherwise provided herein, Krispy Kreme shall not be
obligated to employ any Person currently employed by Sellers (or any employees
of the Business provided by an outside leasing company) or to assume any
obligations relating to the employment of any Person. Sellers shall be liable
and responsible for any obligations under the Worker Adjustment and Retraining
Notification Act, as amended (the "WARN Act") with respect to employees of
Sellers, whether arising prior to or after the Closing Date.
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(c) As of the Effective Time, any employees hired by Krispy Kreme (the
"Hired Employees") shall cease to be active participants in the Plans in
accordance with the terms of the Plans and Applicable Law, including ERISA and
the Code and, as applicable, shall become participants in and covered by the
employee welfare plans maintained by Krispy Kreme in accordance with the terms
of such plans; provided that Krispy Kreme shall waive all limitations as to
pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Hired Employees under
any welfare benefit plans that such employees may be eligible to participate in
after the Effective Time, other than limitations or waiting periods that are in
effect immediately prior to the Effective Time with respect to such employees
and that have not been satisfied as of the Effective Time. Sellers shall retain
liability for all claims incurred by employees of Sellers (and their enrolled
dependents) under the Plans prior to the Effective Time. Krispy Kreme shall be
liable for all claims incurred by Hired Employees (and their enrolled
dependents) under the employee welfare benefit plans of Krispy Kreme or its
affiliates at or after the Effective Time. For purposes of this Section 3.6(c),
a claim shall be deemed to have been incurred on the date on which each medical
or other treatment or service was rendered and not the date of the inception of
the related illness or injury or the date of submission of a claim related
thereto. The inception date of workers compensation claims shall be determined
by applicable state laws.
(d) Sellers shall be responsible for ensuring compliance with any
continuation health care coverage requirements of section 4980B of the Code
("COBRA") with respect to any individual who became a "qualified beneficiary" at
or prior to the Effective Time. Sellers will offer employees of the Business who
are not Hired Employees (and their enrolled dependents) the opportunity to elect
continued health coverage under COBRA. Krispy Kreme shall be responsible for
complying with all requirements of COBRA with respect to any Hired Employee (or
enrolled dependent) who becomes a "qualified beneficiary" after the Effective
Time.
(e) Sellers shall be responsible for payment of all short and long-term
disability claims arising from disabilities of employees of the Business that
occurred at or prior to the Effective Time to the extent required by the Plans.
Krispy Kreme shall be responsible for payment of all short and long-term
disability claims arising from disabilities incurred by Hired Employees that
occur after the Effective Time to the extent required by Krispy Kreme's benefits
plans.
(f) Sellers shall pay any severance costs payable pursuant to any severance
policies or plans, if applicable, maintained by Sellers that are incurred with
respect to any employees of Sellers due to the consummation of the transactions
contemplated by this Agreement, including any claim by a Hired Employee that
transfer of employment from Sellers to Krispy Kreme constitutes a termination of
employment which entitles him or her to severance benefits.
(g) As to any Hired Employee, Sellers agree to cause the release of such
Hired Employee from any contractual provision with Sellers that would impair the
utility of such Hired Employee's services to Krispy Kreme or that would impose
upon such Hired Employee any monetary or other obligation to Sellers that
otherwise would be occasioned by the transfer of such Hired Employee's
employment to Krispy Kreme, including, without limitation, any agreements of
noncompetition or confidentiality owed to Sellers.
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(h) Prior to the Effective Time, Sellers shall pay to the employees of the
Business (or will cause an outside leasing company to pay such employees) all
accrued vacation (with the exception of such accrued vacation assumed by Krispy
Kreme pursuant to Section 1.5(a)(iii)), sick leave, bonuses, and all other
accrued employment benefits with respect to such employees as required under any
applicable policies, benefit plans, laws or regulations.
3.7. Tax Matters.
(a) Sellers and Krispy Kreme shall (i) provide each other with such
assistance as may be reasonably requested in connection with the preparation of
any tax return, audit, or other examination by any taxing authority or judicial
or administrative proceedings relating to liability for Taxes, (ii) retain and
provide each other with any records or other information that may be relevant to
such tax return, audit, examination, proceeding, or determination, and (iii)
provide each other with any final determination of any such audit, examination,
proceeding, or determination that affects any amount required to be shown on any
tax return of the Business for any period. Without limiting the generality of
the foregoing, Krispy Kreme and Sellers shall retain, until the applicable
statutes of limitations (including any extensions) have expired, copies of all
tax returns, supporting work schedules, and other records and information that
is relevant to such returns for all tax periods or portions thereof ending on or
before the Closing Date.
(b) Notwithstanding any provision of state or local law or this Agreement
to the contrary, Sellers will pay any sales, use, transfer, stamp, documentary,
and similar Taxes and recording and filing fees (and file any tax returns
relating to such Taxes) applicable to the transactions contemplated by this
Agreement, it being agreed that none of such payments shall be borne directly or
indirectly by Krispy Kreme.
3.8. Transactional Tax Undertakings. The parties hereto shall cooperate to
make any necessary filings with federal, state, and local taxing authorities and
to furnish any required supplemental information to any foreign, federal, state,
or local governmental or taxing authorities resulting from the consummation of
the transaction contemplated by this Agreement.
3.9. Property Taxes. Real and personal property taxes and assessments with
respect to the Assets, if any, shall be prorated as of the Effective Time on the
basis of the calendar year in which Closing occurs, regardless of when such
taxes become a lien or are payable. If the rate of any such taxes is not fixed
prior to the Effective Time, the proration thereof at the Effective Time shall
be upon the basis of the rate for the preceding calendar year applied to the
latest assessed valuation and shall be appropriately and promptly adjusted, if
necessary, between the parties when the rate is fixed for the calendar year
during which Closing occurs.
3.10. Noncompetition.
(a) Sellers covenant and agree that for a period of two (2) years from and
after the Closing Date, Sellers (with respect to the Business, directly or
indirectly, through their respective partners, managers, directors, officers,
employees, agents, or through the agency of any Person) will not:
(i) have any interest as a disclosed or beneficial owner in any
Competitive Business located or operating in the Territory; or
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(ii) perform services as a director, officer, manager, employee,
consultant, representative, trustee, agent, or otherwise for any
Competitive Business located or operating or under development in the
Territory;
provided, however, that Sellers may own stock or securities in any
publicly-traded corporation or publicly-traded entity if such ownership interest
is not greater than five percent (5%) of the outstanding stock or securities of
such corporation or entity.
(b) Sellers covenant and agree that for a period of two (2) years from and
after the Closing Date, Sellers (with respect to the Business, directly or
indirectly, through their respective partners, managers, officers, employees,
agents, or through the agency of any Person) will not employ or seek to employ
any person who is employed (as an employee or independent contractor) by Krispy
Kreme, any of Krispy Kreme's subsidiaries, or by any other developer or
franchisee of Krispy Kreme stores, nor induce or attempt to induce any such
person to leave his or her employment without the prior written consent of that
person's employer.
(c) For purposes of this Section 3.10, "Competitive Business" shall mean
any business that (i) sells fresh doughnuts (including, among others, yeast
raised doughnuts, cake doughnuts, miniature doughnuts and doughnut holes, which
doughnuts have various types and flavors of fillings, glazes or other coatings),
certain coffee beverages (including, among others, brewed espresso, drip coffee,
frozen espresso drinks or frozen coffee drinks), certain bread and baked goods
(including, among others, cookies, brownies, muffins, rolls, and scones),
certain sandwiches customarily sold in Montana Mills stores, and certain other
food services as identified by us from time to time and which are customarily
sold in Krispy Kreme or Montana Mills stores (the "Products") in any
distribution channels to any customer for consumption or resale, or (ii) grants
or has granted franchises or licenses or has established joint ventures for the
development and/or operation of a business that offers such Products in any
channel of distribution.
(d) For purposes of this Section 3.10, "Territory" shall mean:
(i) within 25 miles of the Sellers' stores;
(ii) within 5 miles of any Krispy Kreme or Montana Mills store in
operation or under construction; or
(iii) within the United States of America.
(e) The parties agree that in the event of a breach by Sellers of the
covenants and restrictions contained in this Section 3.10, Krispy Kreme shall be
entitled, if it so elects, to institute and prosecute proceedings in any court
of competent jurisdiction, either in law or equity, to obtain damages for such
breach, and/or to specifically enforce the performance by Sellers during the
period of the covenants and restrictions and that such remedies shall not be
deemed exclusive of any other remedies available to Krispy Kreme, by judicial
proceedings or otherwise, to enforce the performance of such covenants and
restrictions.
(f) Sellers agree that the geographical, time, and subject matter
limitations of the covenants and restrictions contained in this Section 3.10 are
properly required for the adequate protection of Krispy Kreme and are reasonable
in light of Krispy Kreme's purchase of sub-
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stantially all of the assets of the Business, the legitimate interests of Krispy
Kreme in its relationships with customers of the Business, and other legitimate
interests of Krispy Kreme with respect to the Business. In the event that any
provision of any of the covenants contained in this Section 3.10 shall be
determined by any court to be unenforceable, the covenants contained in this
Section 3.10 shall be interpreted to extend over the maximum time period for
which they may be enforceable, with respect to the maximum geographical area for
which they may be enforceable, and to the maximum extent in any and all other
respects as to which they may be enforceable, all as shall be determined by such
court.
(g) Except as specifically provided in the Termination Agreement, nothing
in this Section 3.10 or elsewhere in this Agreement shall be interpreted to
alter or diminish any rights or obligations of the parties in any development
agreement, franchise agreement or any and all similar agreements, or any and all
schedules or exhibits attached to such agreements, all as they relate to such
development and franchise agreement either now in existence or to be entered
into at any time in the future.
(h) Notwithstanding anything herein to the contrary, Sellers may, without
violating the provisions of this Section 3.10, continue to operate and develop
Krispy Kreme doughnut stores and related businesses (other than Competitive
Business within the territory described on Schedule 1.1(n)) pursuant to any
express written agreements in existence between any Seller and Krispy Kreme as
of the Effective Time or entered into at any time thereafter.
3.11. Confidentiality.
(a) The parties agree that they will treat in confidence all documents,
materials, and other information that they have obtained regarding the other
parties during the course of the negotiations leading to the consummation of the
transactions contemplated hereby and the preparation of this Agreement and other
related documents, except that the parties may disclose such information to
their respective accountants, attorneys, and similar advisors and Krispy Kreme
may disclose such information to franchisees and prospective franchisees (as
long as all such third parties agree to keep such information confidential). The
obligation of each party to treat such documents, materials, and other
information in confidence shall not apply to any information which (i) such
party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by another party, (ii) is known to the public and did not
become so known through any violation of a legal obligation, (iii) became known
to the public through no fault of such party, (iv) is legally compelled by court
or government action to disclose, or (v) is later lawfully acquired by such
party from other sources. In addition, following the Closing, Krispy Kreme shall
have no further obligation to treat in confidence such documents, materials, and
other information.
(b) Each party, on behalf of themselves, their respective shareholders,
partners, directors and officers, agrees not to make any public announcement
with respect to the transactions contemplated by this Agreement, whether prior
to or after the Closing Date, without the prior written approval of the other,
which approval shall not be unreasonably withheld or delayed; provided, however,
no prior approval of Sellers shall be required for any public announcements by
Krispy Kreme required to satisfy Krispy Kreme's disclosure obligations under
applicable securities laws. In addition, each party agrees not to disclose to
any third party (other
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than Sellers' auditors, attorneys, securities brokers and lenders as long as
such third parties agree to keep such information confidential) the Purchase
Price payable for the Assets pursuant to this Agreement, without the prior
written approval of the other, except for such disclosures by Krispy Kreme
required to satisfy Krispy Kreme's disclosure obligations under applicable
securities laws.
3.12. Krispy Kreme Payables. At Closing, Sellers will pay in full all
outstanding amounts payable to Krispy Kreme in cash or, at the option of Krispy
Kreme, as a set off from the Cash Purchase Price pursuant to Section 1.7.
3.13. SCAP Program and Brand Fund. Sellers release Krispy Kreme from any
and all obligations, if any, to pay Sellers any amounts whatsoever with respect
to the SCAP program and the Brand Fund.
3.14. Acquisition of Additional Property. Following the Closing, Sellers
shall use their best efforts to assist Krispy Kreme in acquiring certain parcels
of real estate adjacent to the commissary facility in Euless. Sellers shall not
receive any additional consideration for their assistance.
ARTICLE 4.
CONDITIONS PRECEDENT
4.1. Conditions to Obligations of Krispy Kreme. The obligations of Krispy
Kreme under this Agreement are subject to the fulfillment, at Closing, of the
following conditions, any one or more of which may be waived by Krispy Kreme in
their sole discretion:
4.1.1 Representations, Performance, etc. The representations and warranties
of Sellers contained in this Agreement or in any certificate or document
delivered in connection herewith that are not conditioned as to materiality
shall be true and correct when made and true and correct in all material
respects at and as of the Closing Date with the same effect as though made at
and as of the Closing Date, except as modified by transactions permitted by this
Agreement, and all representations and warranties of Sellers that are so
qualified as to materiality shall be true and correct when made and at and as of
the Closing Date with the same effect as though made at and as of the Closing
Date. Sellers shall have duly performed and complied with all agreements,
covenants, and conditions required by this Agreement or in any other agreement,
instrument, or document contemplated hereby to be performed or complied with by
Sellers prior to or at the Closing Date. Greater DFW, Inc., Greater DFW, LLP,
Arlington, Grapevine, Frisco, Euless, Old Towne, and Hulen St. shall each have
delivered to Krispy Kreme a certificate of Greater DFW, Inc., Greater DFW, LLP,
Arlington, Grapevine, Frisco, Euless, Old Towne, and Hulen St., respectively,
signed by an officer or general partner, as the case may be, familiar with the
transactions contemplated by this Agreement dated the Closing Date, to the
effect set forth above in this Section 4.1.1.
4.1.2 Certain Approvals. All consents and approvals from Governmental
Authorities and third Persons required to be obtained by Sellers to consummate
the transactions contemplated hereby, including all such consents set forth on
Schedule 2.1.3 and the expiration or termination of all applicable waiting
periods under the HSR Act, shall have been obtained,
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other than any consents and approvals of third parties with respect to any
contract or agreement of Sellers (not involving the borrowing of money) with
respect to which the failure to obtain such consent or approval, either in any
case or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect.
4.1.3 No Litigation or Injunction. There shall not be in effect any
judgment, order, injunction, or decree of any court of competent jurisdiction,
the effect of which is to prohibit or restrain the consummation of the
transactions contemplated by this Agreement, and no claim, action, suit,
investigation, or other proceeding shall be threatened or pending before any
court or administrative agency or by any governmental agency or other Person
challenging or otherwise relating to the transactions provided for herein or
which may have a Material Adverse Effect.
4.1.4 No Material Adverse Change. There shall not have been any Material
Adverse Change since December 31, 2002.
4.1.5 Transfer Documents. Sellers shall have executed and delivered to
Krispy Kreme, all in form and substance reasonably satisfactory to Krispy Kreme,
the following:
(a) a Bill of Sale, Assignment and Assumption Agreement, substantially in
the form of Exhibit B covering all of the Assets and the Assumed Liabilities;
(b) general warranty deeds for all Owned Real Property;
(c) an Assignment and Assumption of Lease Agreements with respect to the
Leased Real Property;
(d) a non-disturbance agreement, executed and in recordable form, from any
lender holding a lien on any Leased Real Property; and
(e) such other documents as Krispy Kreme may reasonably request for the
purpose of (i) evidencing the accuracy of any of the representations and
warranties of Sellers, (ii) evidencing the performance by Sellers of, or the
compliance by Sellers with, any covenant or obligation required to be performed
or complied with by Sellers, (iii) evidencing the satisfaction of any condition
referred to in this Section 4.1, or (iv) otherwise facilitating the consummation
or performance of any of the transactions contemplated by this Agreement.
4.1.6 Termination of Development and Franchise Rights. Sellers shall have
terminated all development and franchise rights from Krispy Kreme for the
territories in the States of Texas and Louisiana as shown on Schedule 1.1(n) by
executing and delivering to Krispy Kreme the Termination Agreement in
substantially the form attached hereto as Exhibit C (the "Termination
Agreement").
4.1.7 Opinion of Counsel. Krispy Kreme shall have received a favorable
opinion, addressed to Krispy Kreme and dated the Closing Date, of Sharon Smith,
Esq., counsel to Sellers, in substantially the form attached hereto as Exhibit
D.
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4.1.8 Company Action. The boards of directors of KKDC and Krispy Kreme
Doughnuts, Inc., a North Carolina corporation, shall have approved the
transactions contemplated by this Agreement. Sellers shall have taken all action
necessary to approve the transactions contemplated by this Agreement and Greater
DFW, Inc., Greater DFW, LLP, Arlington, Grapevine, Frisco, Euless, Old Towne,
and Hulen St. each shall have furnished Krispy Kreme with certified copies of
the resolutions adopted by their respective directors or partners.
4.1.9 Krispy Kreme Payables. Sellers shall have paid in full all amounts
payable to Krispy Kreme as of Closing.
4.1.10 Due Diligence. Krispy Kreme shall have completed its business,
financial and legal due diligence in respect of the Business and the Assets and
shall not have discovered any facts, conditions or circumstances regarding the
Business or Assets that are not acceptable to Krispy Kreme in its sole
discretion.
4.1.11 Title Insurance. Krispy Kreme shall have obtained, at its expense, a
title insurance policy insuring good and marketable title in fee simple to the
Owned Real Property, free and clear of all liens, encumbrances and claims,
except for Permitted Liens.
4.1.12 Employment Agreement with Todd West. Krispy Kreme shall have entered
into an employment agreement with Todd West in such form as is satisfactory to
Krispy Kreme. In connection with the employment agreement with Todd West,
Sellers agree to set aside One Million Dollars ($1,000,000) of the Purchase
Price to pay Todd West over a four-year period in conjunction with such
employment agreement.
4.1.13 Financing. Krispy Kreme shall have secured financing, on terms and
conditions satisfactory to Krispy Kreme in its sole discretion, to provide
sufficient funds to purchase the Assets and to otherwise fulfill its financial
obligations set forth herein.
4.2. Conditions to Obligations of Sellers. The obligations of Sellers under
this Agreement are subject to the fulfillment, at Closing, of the following
conditions, any one or more of which may be waived by Sellers in their sole
discretion:
4.2.1 Representations, Performance, etc. The representations and warranties
of Krispy Kreme contained in Section 2.2 that are not conditioned as to
materiality shall be true and correct when made and true and correct in all
material respects at and as of the Closing Date with the same effect as though
made at and as of the Closing Date, except as modified by transactions permitted
by this Agreement, and all representations and warranties of Krispy Kreme that
are so qualified as to materiality shall be true and correct when made and at
and as of the Closing Date with the same effect as though made at and as of the
Closing Date including, without limitation, the payment of the Purchase Price,
or portion thereof, due and payable at Closing. Krispy Kreme shall have duly
performed and complied with all agreements, covenants, and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date. Krispy Kreme shall have delivered to Sellers a certificate of
Krispy Kreme signed by an officer of Krispy Kreme familiar with the transactions
contemplated by this Agreement, dated the Closing Date, to the effect set forth
above in this Section 4.2.1.
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4.2.2 Certain Approvals. All consents and approvals from Governmental
Authorities and third Persons required to be obtained by Krispy Kreme to
consummate the transactions contemplated hereby shall have been obtained,
including the expiration or termination of all applicable waiting periods under
the HSR Act, other than any consents and approvals of third parties with respect
to any contract or agreement of Krispy Kreme (not involving the borrowing of
money) with respect to which the failure to obtain such consent or approval,
either in any case or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect on the transactions contemplated hereby.
4.2.3 No Litigation or Injunction. There shall not be in effect any
judgment, order, injunction, or decree of any court of competent jurisdiction,
the effect of which is to prohibit or restrain the consummation of the
transactions contemplated by this Agreement, and no claim, action, suit,
investigation, or other proceeding shall be threatened or pending before any
court or administrative agency or by any governmental agency or other Person
challenging or otherwise relating to the transactions provided for herein.
4.2.4 Transfer Documents. Krispy Kreme shall have executed and delivered to
Sellers, all in form and substance reasonably satisfactory to Sellers, the
following:
(a) a Bill of Sale, Assignment and Assumption Agreement, substantially in
the form of Exhibit B; and
(b) such other documents as Sellers may reasonably request for the purpose
of (i) evidencing the accuracy of any of the representations and warranties of
Krispy Kreme, (ii) evidencing the performance by Krispy Kreme of, or the
compliance by Krispy Kreme with, any covenant or obligation required to be
performed or complied with by Krispy Kreme, (iii) evidencing the satisfaction of
any condition referred to in this Section 4.2, or (iv) otherwise facilitating
the consummation or performance of any of the transactions contemplated by this
Agreement.
4.2.5 Opinion of Counsel. Sellers shall have received a favorable opinion,
addressed to Sellers and dated the Closing Date, of Kilpatrick Stockton LLP,
counsel to Krispy Kreme, in substantially the form attached hereto as Exhibit E.
4.2.6 Corporate Action. Krispy Kreme shall have taken all action necessary
to approve the transactions contemplated by this Agreement.
ARTICLE 5.
TERMINATION
5.1. Grounds for Termination. This Agreement may be terminated at any time
prior to the Closing Date upon the circumstances set forth in this Section 5.1,
by delivery of written notice of such termination by the terminating parties to
the other parties hereto.
5.1.1 Termination by Sellers. This Agreement may be terminated by Sellers
upon the happening of an occurrence or circumstance which will result in a
failure to satisfy any of the conditions set forth in Section 4.2, and Krispy
Kreme shall have failed to satisfy such a condition within twenty (20) days
after prompt written notice by Sellers.
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5.1.2 Termination by Krispy Kreme. This Agreement may be terminated by
Krispy Kreme (i) upon the happening of an occurrence or circumstance which will
result in the failure to satisfy any of the conditions set forth in Section 4.1,
and Sellers shall have failed to satisfy such a condition within twenty (20)
days after prompt written notice by Krispy Kreme or (ii) in the event that
Sellers amend, modify, or supplement any information disclosed in any of the
Schedules, the effect of which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, unless such changes
have been pre-approved by Krispy Kreme or unless Sellers have eliminated any
Material Adverse Effect of such change to the satisfaction of Krispy Kreme
within twenty (20) days after prompt written notice by Krispy Kreme.
5.1.3 Termination by Either Party. This Agreement may be terminated by
either Krispy Kreme, on the one hand, or Sellers, on the other hand, if (i) the
representations and warranties of the other parties shall prove not to have been
true in all material respects as of the date when made or if any representation
or warranty qualified as to materiality shall prove not to be true and correct
as of the date when made, or (ii) events shall have occurred subsequent to the
date hereof as a result of which the representations and warranties of the other
parties could not be true in all material respects as of the Closing Date or if
any representation or warranty qualified as to materiality shall prove not to be
true and correct as of the date when made, unless the occurrence of such events
shall be due to the failure of the parties seeking to terminate this Agreement
to perform or comply with any of the covenants, agreements, or conditions hereof
to be performed or complied with by such parties prior to the Closing.
5.2. Effect of Termination. If this Agreement is terminated as permitted
under Section 5.1, such termination shall be without liability of or to any
party to this Agreement or any shareholder, director, officer, employee, or
agent of such party, except (i) that the provisions of Sections 3.5 (Discharge
of Excluded Liabilities), 3.11 (Confidentiality), 5.2 (Effect of Termination),
6.1 (Indemnification by Sellers), 7.2 (Expenses), and 7.12 (Arbitration) shall
survive any such termination, (ii) for any liability of any party who has caused
such termination by breaching this Agreement, and (iii) for any liability with
respect to breaches of contractual provisions that by their nature and terms
survive termination of this Agreement.
ARTICLE 6.
INDEMNIFICATION
6.1. Indemnification by Sellers. Sellers, jointly and severally, agree to
indemnify and hold harmless Krispy Kreme, and its officers, directors,
shareholders, agents, employees, affiliates, and their representatives,
successors, and assigns from and against any and all liabilities, losses,
claims, costs, and damages ("Loss") and reasonable attorneys' and accountants'
fees and expenses, court costs, and all other reasonable out-of-pocket expenses,
including expenses of investigation, but excluding loss of profits or other
consequential damages, ("Expense") suffered or incurred by them in connection
with or arising from:
(i) any breach by Sellers of any warranty or the inaccuracy of any
representation of Sellers contained in this Agreement or in any agreement
or instrument contemplated hereby (including any Schedule or Exhibit
hereto);
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(ii) any breach by Sellers of any of their respective obligations or
covenants contained in this Agreement or in any agreement or instrument
contemplated hereby (including any Schedule or Exhibit hereto);
(iii) the Excluded Liabilities; and
(iv) any non-compliance by Sellers with respect to any applicable bulk
sales laws;
provided, however, that the aggregate liability of Sellers for Loss and Expense
with respect to the indemnification described in Section shall not exceed the
Purchase Price (the "Amount Limitation"), and no claim may be asserted against
Sellers hereunder unless and until the aggregate amount of the Loss and Expense
exceeds $10,000 (the "De Minimis Threshold"), at which time all of such claims
(including the first $10,000 thereof) shall be fully indemnifiable.
Notwithstanding the foregoing, neither the Amount Limitation nor the De Minimis
Threshold shall apply to the indemnification described in Section 6.1(i) with
respect to the representations and warranties of Sellers under Sections 2.1.13
(Litigation), 2.1.16 (Tax Matters), 2.1.17 (ERISA), and 2.1.20 (Environmental)
and those representations and warranties of Sellers in regarding title to and
any encumbrances against the Assets.
6.2. Indemnification by Krispy Kreme. Krispy Kreme agrees to indemnify and
hold harmless Sellers and their respective partners, directors, officers,
agents, employees, affiliates, and their representatives, successors, and
assigns from and against any and all Loss and Expense incurred by them in
connection with or arising from:
(i) any breach by Krispy Kreme of any warranty or the inaccuracy of
any representation of Krispy Kreme contained in this Agreement or in any
agreement or instrument contemplated hereby (including any Schedule or
Exhibit hereto);
(ii) any breach by Krispy Kreme of any of its obligations or covenants
contained in this Agreement or in any agreement or instrument contemplated
hereby (including any Schedule or Exhibit hereto); and
(iii) the Assumed Liabilities;
provided, however, that the aggregate liability of Krispy Kreme for Loss and
Expense with respect to the indemnification described in Section 6.2(i) shall
not exceed, on an aggregate basis, the Amount Limitation and no claim may be
asserted against Krispy Kreme hereunder unless and until the De Minimis
Threshold has been reached, at which time all such claims (including the De
Minimis Threshold amount) shall be fully indemnifiable.
6.3. Survival Period. The indemnification provided for in Sections 6.1 and
6.2 shall terminate thirty-six (36) months after the Closing Date (and no claims
shall be made by any party indemnified under this thereafter), provided that:
(x) the indemnification contained in Section 6.1(iii) and Section
6.1(iv) shall survive indefinitely; and
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(y) the representations and warranties of Sellers under Sections
2.1.13 (Litigation), 2.1.16 (Tax Matters), 2.1.17 (ERISA), 2.1.20
(Environmental), those representations and warranties of Sellers in Article
2 regarding title to and any encumbrances against the Assets, and the
indemnification contained in Section 6.1(i) with respect thereto, shall
survive for the applicable statute of limitations, (as the case may be, the
"Survival Period"). Such indemnification obligation shall continue after
the Closing Date without regard to any investigation made at any time by
the indemnified persons as to any Loss or Expense of which the indemnified
persons or their affiliates, successors, or assigns has notified the
indemnifying party in accordance with the requirements of Section 6.4 on or
prior to the expiration of the applicable Survival Period, as to which the
obligation of the indemnifying party shall then continue until the
liability of the indemnifying party shall have been determined pursuant to
this , and the indemnifying party shall have reimbursed the indemnified
persons, their affiliates, successors, and assigns for the full amount of
such Loss and Expense in accordance with this Article 6.
6.4. Notice of Claims. If Krispy Kreme or Sellers believe that any of the
persons indemnified under this has suffered or incurred any Loss or incurred any
Expense, Krispy Kreme or Sellers shall so notify the other parties promptly in
writing describing such Loss or Expense, the amount thereof, if known, and the
method of computation of such Loss or Expense, all with reasonable particularity
and containing a reference to the provisions of this Agreement or other
agreement, instrument, or certificate delivered pursuant hereto in respect of
which such Loss or Expense shall have occurred, except that the failure to so
notify shall not relieve a party of its obligations to indemnify except to the
extent its rights hereunder are materially prejudiced. If any action at law or
suit in equity is instituted by or against a third party with respect to which
any of the indemnified persons intends to claim any liability or expense as Loss
or Expense under this Article 6, such indemnified person shall promptly notify
the indemnifying party of such action or suit.
6.5. Third Party Claims.
(a) In the event of a third party claim giving rise to indemnification
hereunder, the indemnified persons shall promptly notify the indemnifying party
in writing.
(b) The indemnifying party shall have thirty (30) days after receipt of the
notice referred to in Section to notify the indemnified persons that it elects
to conduct and control such action or suit. If the indemnifying party does not
give the foregoing notice, the indemnified persons shall have the right to
defend and contest such action or suit in any manner the indemnified persons
reasonably deem appropriate; provided, however, that the indemnified persons
shall not consent to the entry of any judgment or to any settlement of such
claim without the prior written consent of the indemnifying party, not to be
unreasonably withheld or delayed. If the indemnifying party gives the foregoing
notice, the indemnifying party shall have the right to undertake, conduct, and
control, through counsel of its own choosing and at the sole expense of the
indemnifying party, the conduct and settlement of such action or suit, and the
indemnified persons shall cooperate with the indemnifying party in connection
therewith; provided that (w) the indemnifying party shall not settle or
compromise any such action or suit without the indemnified person's prior
written consent (not to be unreasonably withheld or delayed), unless the terms
of such settlement or compromise release the indemnified person from any and all
liability with
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respect to such action or suit at no cost to the indemnified person, (x) the
indemnifying party shall not thereby permit to exist any lien, encumbrance, or
other adverse charge upon any asset of any indemnified person or permit the
issuance of an injunction or other equitable relief against the indemnified
persons, (y) the indemnifying party shall permit the indemnified persons to
participate in such conduct or settlement through one counsel chosen by the
indemnified persons, and the fees and expenses of such counsel shall be borne by
the indemnified persons, and (z) the indemnifying party shall agree promptly to
reimburse to the extent required under this the indemnified persons for the full
amount of any Loss resulting from such action or suit and all related Expense
incurred by the indemnified persons, except fees and expenses of counsel for the
indemnified persons incurred after the assumption of the conduct and control of
such action or suit by the indemnifying party. So long as the indemnifying party
is contesting any such action or suit in good faith, the indemnified persons
shall not pay or settle any such action or suit. Notwithstanding the foregoing,
the indemnified persons shall have the right to pay or settle any such action or
suit, provided that in such event the indemnified persons shall waive the right
to indemnity therefor by the indemnifying party, and no amount in respect
thereof shall be claimed as Loss or Expense under this unless otherwise agreed
by the parties.
ARTICLE 7.
MISCELLANEOUS
7.1. Survival. Notwithstanding any otherwise applicable statute of limitations,
all agreements, covenants, representations, and warranties of Krispy Kreme and
Sellers in this Agreement and in any other agreement, instrument, or document
delivered in connection herewith shall survive Closing in accordance with their
terms, as specified herein. Except as otherwise provided herein, Krispy Kreme
and Sellers agree that the indemnification provisions set forth in Article 6 are
the exclusive post-closing remedies with respect to the liability of Krispy
Kreme and Sellers for the breach or inaccuracy of a representation or warranty
or the breach of any covenant in this Agreement or in any agreement or
instrument contemplated hereby, provided, however, that (i) nothing herein shall
preclude any party from seeking an equitable remedy or bringing an action for
fraud or intentional misrepresentation; (ii) nothing herein shall preclude
Krispy Kreme from seeking any remedies available to them with respect to any
breach by Sellers of the noncompetition covenants or confidentiality covenants
contained in Sections 3.10 and 3.11, respectively, of this Agreement; and (iii)
nothing herein shall preclude Krispy Kreme from seeking any remedies available
against Sellers in any other agreement with Sellers.
7.2. Expenses. Except as otherwise provided herein, Krispy Kreme and
Sellers shall assume and bear their own expenses, costs, and fees incurred in
the preparation and execution of this Agreement and compliance herewith,
including investment bankers', attorneys', and accountants' fees, whether or not
the purchase and sale provided for herein shall be consummated.
7.3. Assignment; Successors; Parties in Interest. This Agreement shall not
be assignable by any party hereto without the prior written consent of the other
parties (which consent shall not be unreasonably withheld) and any attempt to
assign this Agreement without such consent shall be void and of no effect;
provided, however, that Krispy Kreme may assign all of its rights and
obligations under this Agreement to one or more affiliates, franchisees or
prospective franchisees of Krispy Kreme so long as Krispy Kreme unconditionally
guarantees the per-
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formance of such permitted assignees in a form reasonably acceptable to Sellers.
This Agreement shall inure to the benefit of, and be binding on and enforceable
against, each party hereto and the permitted successors and assigns of the
respective parties hereto, and nothing in this Agreement, express or implied, is
intended to confer upon any other Person any rights or remedies of any nature
whatsoever under this Agreement.
7.4. Amendment and Modification. Neither this Agreement nor any term hereof
may be changed, waived, discharged, or terminated orally, but only with the
written consent signed by the party against which such change, waiver,
discharge, or termination is sought to be enforced. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent or other breach, whether similar or not.
7.5. Access After Closing. The parties shall retain for a period of six (6)
years following Closing all books and records within their possession or control
that they are permitted hereby to retain and that relate to the operation and
conduct of the Business prior to Closing. The parties shall provide to the other
parties and their representatives reasonable access during normal business hours
to copies of all such books and records upon request.
7.6. Bulk Sales Law. Krispy Kreme hereby waives compliance by Sellers with
any applicable bulk sales law, and Sellers, jointly and severally, agree to
indemnify Krispy Kreme and hold Krispy Kreme harmless from and against any and
all liability thereunder.
7.7. Notices. All notices, consents, requests, instructions, approvals, and
other communications provided for herein and all legal processes in regard
hereto shall be validly given, made, or served, if in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
commercial courier or by telecopy (promptly confirmed in writing) to the
following addresses (or at such other addresses for such party as shall be
specified by like notice):
TO SELLERS:
Greater DFW Doughnuts, Inc.
Greater DFW Doughnuts, LLP
Arlington Doughnut Company, LLP
Grapevine Doughnut Company, LLP
Frisco Doughnut Company, LLP
Euless Doughnut Company, LLP
Old Towne Doughnut Company, LLP
Hulen St. Doughnut Company, LLP
3605 Ira E Woods Avenue
Grapevine, TX 76051-4211
Attention: John Orrell
Telephone: (817) 481-4463
Facsimile: (817) 481-0182
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Joseph A. McAleer, Jr.
3605 Ira E Woods Avenue
Grapevine, TX 76051-4211
Telephone: (817) 481-4463
Facsimile: (817) 481-0182
Steven D. Smith
3605 Ira E Woods Avenue
Grapevine, TX 76051-4211
Telephone: (817) 481-4463
Facsimile: (817) 481-0182
John Orrell
3605 Ira E Woods Avenue
Grapevine, TX 76051-4211
Telephone: (817) 481-4463
Facsimile: (817) 481-0182
With a copy to:
(which copy shall not constitute notice)
Sharon Smith, Esq.
1905 Central Drive, Suite 203
Bedford, Texas 76021
Telephone: (817) 354-7661
Facsimile: (817) 540-1833
TO KRISPY KREME:
Krispy Kreme Doughnuts, Inc.
370 Knollwood Street
Suite 500
Winston-Salem, NC 27102-0083
Attention: Randy S. Casstevens
Telecopy: (336) 733-3730
Telephone: (336) 733-3791
With a copy to:
(which copy shall not constitute notice)
Kilpatrick Stockton LLP
1001 W. Fourth Street
Winston-Salem, NC 27101
Attention: Michael L. Drye, Esq.
Telecopy: (336) 734-2634
Telephone: (336) 607-7313
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7.8. Captions. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
7.9. Entire Agreement. This Agreement (including the Schedules and
Exhibits) and any further agreements entered into by Krispy Kreme and Sellers at
Closing constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
7.10. Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute one and the same instrument.
7.11. Severability. If any term or provision of this Agreement is held by a
court or other authority of competent jurisdiction to be invalid, void, or
unenforceable, the remaining terms and provisions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired, or
invalidated.
7.12. Arbitration. Except for (i) matters relating to specific performance,
injunctive relief, or other equitable remedies, or (ii) indemnifiable third
party claims pursuant to , the parties hereto agree to submit to arbitration any
and all matters in dispute or in controversy among them concerning the terms and
provisions of this Agreement. All such disputes and controversies shall be
determined and adjudged by a panel of three arbitrators, and the hearing shall
be held in Winston-Salem, North Carolina. The selection of the arbitrators and
the procedure shall be in accordance with the commercial arbitration rules then
in effect of the American Arbitration Association. Any award rendered shall be
final and conclusive upon the parties and a judgment thereon may be entered in
the highest court of the forum, state or federal, having jurisdiction. The
expenses of the arbitration shall be borne equally by the parties to the
arbitration, provided that each party pay for and bear the costs of its own
experts, evidence, and counsel's fees, and provided further that in the
discretion of the arbitrators, any award may include the costs of a party's
counsel if the arbitrators expressly determine that the party against whom such
award is entered has caused the dispute, controversy, or claim to be submitted
to arbitration in bad faith.
7.13. Schedules and Exhibits. The Schedules and Exhibits are a part of this
Agreement as if fully set forth herein. All references to Sections, subsections,
Schedules and Exhibits shall be deemed references to such parts of this
Agreement, unless the context shall otherwise require.
7.14. Definitions. Used in this Agreement, the following terms have the
meanings specified or referred to in this Section 7.14:
"Accounts Receivable Amount" shall have the meaning set forth in Section
1.4(a)(ii).
"Agreement" shall have the meaning set forth in the first paragraph of this
Agreement.
"Amount Limitation" shall have the meaning set forth in Section 6.1.
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"Applicable Law" shall mean all applicable provisions of (i) constitutions,
treaties, statutes, laws (including common law), rules, regulations, ordinances,
codes, and orders of any Governmental Authority, (ii) consents of, with, or to
any Governmental Authority, and (iii) orders, decisions, injunctions, writs,
judgments, awards, decrees of, and agreements with any Governmental Authority.
"Arlington" means Arlington Doughnut Company, LLP, a Texas limited
liability partnership.
"Assets" shall have the meaning set forth in Section 1.1.
"Assumed Liabilities" shall have the meaning set forth in Section 1.5(a).
"Business" shall have the meaning set forth on the first page of this
Agreement.
"Cash Purchase Price" shall have the meaning set forth in Section
1.4(a)(1).
"Closing" shall have the meaning set forth in Section 1.3.
"Closing Date" shall have the meaning set forth in Section 1.3.
"COBRA" shall have the meaning set forth in Section 3.6(d).
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Deadline" shall have the meaning set forth in Section 1.8.
"Competitive Business" shall have the meaning set forth in Section 3.10(c).
"Contaminant" means any pollutant, hazardous substance, radioactive
substance, toxic substance, hazardous waste, medical waste, radioactive waste,
special waste, petroleum or petroleum-derived substance or waste, asbestos,
polychlorinated biphenyls, or any hazardous or toxic constituent thereof and
includes, but is not limited to, any substance defined in or regulated under
Environmental, Health, or Safety Requirements of Law.
"De Minimis Threshold" shall have the meaning set forth in Section 6.1.
"Effective Time" shall have the meaning set forth in Section 1.3.
"EHS Permits" shall have the meaning set forth in Section 2.1.20(c).
"Environmental Damages" means all claims, judgments, damages (including
punitive damages), losses, penalties, fines, interest, fees, liabilities
(including strict liability), encumbrances, liens, costs, and expenses of
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement or judgment of whatever kind or
nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including, without limitation, reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time as a
result of the existence of Contaminants or noncompliance
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with Environmental, Health, or Safety Requirements of Law with respect to the
period prior to Effective Time, including without limitation:
(i) Damages related to the Real Property for personal injury or
threatened personal injury (including sickness, disease, or death), or
injury or threatened injury to property or natural resources, foreseeable
or unforeseeable, including, without limitation, the cost of demolition and
rebuilding of any improvements on real property;
(ii) Reasonable fees incurred for the services of attorneys,
consultants, contractors, doctors, experts, laboratories, and all other
reasonable costs incurred in relation to the Real Property in connection
with any damages as described in subparagraph (i) of this definition, and
the investigation or remediation of Contaminants or the suspected presence
of Contaminants or the violation or threatened violation of Environmental,
Health, or Safety Requirements of Law related to the Real Property,
including, but not limited to, the preparation of any feasibility studies
or reports or the performance of any investigations, cleanup, treatment,
remediation, removal, response, abatement, containment, closure, storage,
disposal, transport, restoration, or monitoring work required by any
federal, state, or local governmental agency or political subdivision, or
otherwise expended in connection with such conditions, and including,
without limitation, any reasonable attorneys' fees, costs, and expenses
incurred in enforcing this Agreement or collecting any sums due hereunder;
and
(iii) Liability related to the Real Property to any third Person or
Governmental Authority to indemnify such Person or Governmental Authority
for costs expended in connection with the items referenced in subparagraphs
(i) and (ii) of this definition.
"Environmental, Health, and Safety Requirements of Law" means all federal,
state and local laws, statutes, codes, ordinances, rules, regulations, EHS
Permits, and orders relating to or addressing the environment, health, or safety
in effect and as adopted as of the Effective Time, including, but not limited
to, any law, statute, code, ordinance, rule, regulation, EHS Permit, or order
relating to (x) the use, handling, or disposal of any Contaminant, or (y)
workplace or worker safety and health, as such requirements are promulgated by
the specifically authorized Governmental Authority responsible for administering
such requirements.
"Environmental Reports" shall have the meaning set forth in Section
2.1.20(g).
"Escrowed Purchase Price" shall have the meaning set forth in Section
1.4(b).
"ERISA" shall have the meaning set forth in Section 2.1.17.
"Euless" means Euless Doughnut Company, LLP, a Texas limited liability
partnership.
"Excluded Assets" shall have the meaning set forth in Section 1.2.
"Excluded Liabilities" shall have the meaning set forth in Section 1.5(b).
"Expense" shall have the meaning set forth in Section 6.1.
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"Financial Statements" shall have the meaning set forth in Section
2.1.4(a).
"Frisco" means Frisco Doughnut Company, LLP, a Texas limited liability
partnership.
"GAAP" shall mean generally accepted accounting principles.
"Governmental Authority" means any agency, department, court, or other
administrative, legislative or regulatory authority of any federal, state, or
local governmental body.
"Grapevine" means Grapevine Doughnut Company, LLP, a Texas limited
liability partnership.
"Greater DFW, Inc." means Greater DFW Doughnuts, Inc., a Texas corporation.
"Greater DFW, LLP" means Greater DFW Doughnuts, LLP, a Texas limited
liability partnership.
"Hired Employees" shall have the meaning set forth in Section 3.6(c).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hulen St." means Hulen St. Doughnut Company, LLP, a Texas limited
liability partnership.
"Intellectual Property" shall mean (i) all logos, trade styles, trade
names, trademarks, service marks (and applications therefor) owned by or
assigned to Sellers or in which Sellers have an interest by license, agreement,
shop right, common law, or otherwise relating to the Business, (ii) all
copyrights (and applications therefor), whether registered or not, owned by or
assigned to Sellers or in which Sellers have an interest by license, agreement,
shop right, common law, or otherwise relating to the Business, (iii) all
websites, web pages and applications, and domain names owned by or assigned to
Sellers or in which Sellers have an interest by license, agreement, shop right,
common law, or otherwise relating to the Business, and (iv) all processes,
inventions, trade secrets, know-how, ideas and concepts relating to the
Business.
"Inventory Amount" shall have the meaning set forth in Section 1.4(a)(iii).
"KKDC" shall have the meaning set forth in the first paragraph of this
Agreement.
"KKLP" shall have the meaning set forth in the first paragraph of this
Agreement.
"Knowledge" means the actual knowledge of any individual who is serving as
a shareholder, partner, director or officer of such Person (or in any similar
capacity).
"Krispy Kreme" shall have the meaning set forth in the first paragraph of
this Agreement.
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"Leased Real Property" shall have the meaning set forth in Section 2.1.5.
"Liens" means, with respect to any assets or properties (whether real,
personal or mixed, or tangible or intangible), any mortgage, pledge, option,
escrow, hypothecation, lien, pledge, security interest, financing statement,
lease, charge, preemptive subscription, encumbrance, easement, option,
conditional sale, or other title retention or security agreement or any other
similar restriction, claim, or right of others, on, in, or with respect to such
assets or properties, whether arising by contract, operation of law, or
otherwise.
"Loss" shall have the meaning set forth in Section 6.1.
"Material Adverse Effect" or "Material Adverse Change" shall mean a
material adverse effect on the properties, assets (tangible and intangible),
prospects, liabilities, financial condition, or results of operations of the
Business. To the extent that "Material Adverse Effect" or "Material Adverse
Change" shall be deemed to have a monetary value, it shall be deemed an amount
in excess of $10,000 individually or $25,000 in the aggregate.
"Material Agreements" shall mean all contracts, franchises, agreements,
plans, leases, and licenses described on Schedules 2.1.5, 2.1.6, and 2.1.10.
"McAleer" shall mean Joseph A. McAleer, Jr.
"Old Towne" means Old Towne Doughnut Company, LLP, a Texas limited
liability partnership.
"Orrell" shall mean John Orrell.
"Owned Real Property" shall have the meaning set forth in Section 2.1.5.
"Permitted Liens" means (i) Liens for taxes not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of Sellers in accordance with
generally accepted accounting practices consistently applied in accordance with
past practice; and (ii) those liens or encumbrances described on Schedule 7.14
attached hereto.
"Person" shall mean any individual, partnership, limited liability company,
corporation, trust, unincorporated organization, or any other form of legal
entity.
"Personal Property Assets" shall have the meaning set forth in Section
2.1.6.
"Petty Cash Amount" shall have the meaning set forth in Section 1.4(a)(iv).
"Petty Cash Reserves" means the aggregate amount of currency and coin to be
at the Sellers' doughnut stores on and as of the Effective Time.
"Plans" shall have the meaning set forth in Section 2.1.17.
"Products" shall have the meaning set forth in Section 3.10(c).
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"Purchase Price" shall have the meaning set forth in Section 1.4(a).
"Real Property" shall have the meaning set forth in Section 2.1.5.
"Release" means the release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, or migrating into the indoor
or outdoor environment of any Contaminant through or in the air, soil, surface
water, or groundwater.
"Remedial Action" means actions required to (i) clean up, remove, treat, or
in any other way address Contaminants in the indoor or outdoor environment; (ii)
prevent the Release or threat of Release or minimize the further Release of
Contaminants; or (iii) investigate and determine if a remedial response is
needed and to design such a response and post-remedial investigation,
monitoring, operation, maintenance, and care.
"Returns" shall mean all liabilities and obligations for discounts,
credits, allowances, and refunds to customers issued by Krispy Kreme subsequent
to the Effective Time in the ordinary course of business with respect to
merchandise sold by Sellers prior to the Effective Time.
"Sellers" shall have the meaning set forth in the first paragraph of this
Agreement.
"Seller Personnel" shall mean current and former officers, directors,
employees, consultants, sales representatives, and agents of the Business.
"Smith" shall mean Steven D. Smith.
"Survival Period" shall have the meaning set forth in Section 6.3.
"Taxes" shall have the meaning set forth in Section 2.1.16.
"Termination Agreement" shall have the meaning set forth in Section 4.1.6.
"Territory" shall have the meaning set forth in Section 3.10(d).
"WARN Act" shall have the meaning set forth in Section 3.6(a).
7.15. Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation, and effect, by the laws of the State of
North Carolina, without giving effect to the conflict of laws rules thereof.
Subject to the provisions of Section 7.12, Krispy Kreme and Sellers hereby
consent to the jurisdiction of any State or Federal court located within the
State of North Carolina and each irrevocably agrees that all actions or
proceedings relating to this Agreement may be litigated in such courts and
hereby waives any objection which each may have based on improper venue or forum
non conveniens to the conduct of any proceeding in any such court.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
BUYERS:
KRISPY KREME
DOUGHNUT CORPORATION
By: -----------------------------------------
Name: Randy S. Casstevens
Title: Senior Vice President and
Chief Financial Officer
NORTH TEXAS DOUGHNUTS, L.P.
By: -----------------------------------------
Name: Krispy Kreme Doughnut
Corporation
By: Randy S. Casstevens, Senior Vice
President and Chief Financial Officer
Title: General Partner
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SELLERS:
GREATER DFW DOUGHNUTS, INC. FRISCO DOUGHNUT COMPANY, LLP
By: ---------------------- By:
Name: John Orrell Name: Greater DFW Doughnuts, Inc.,
Title: President by John Orrell, President
Title: General Partner
GREATER DFW DOUGHNUTS, LLP EULESS DOUGHNUT COMPANY, LLP
By: --------------------------------------- By: --------------------------------------
Name: Greater DFW Doughnuts, Inc., Name: Greater DFW Doughnuts, Inc.,
by John Orrell, President by John Orrell, President
Title: General Partner Title: General Partner
ARLINGTON DOUGHNUT COMPANY, LLP OLD TOWNE DOUGHNUT COMPANY, LLP
By: --------------------------------------- By: --------------------------------------
Name: Greater DFW Doughnuts, Inc., Name: Greater DFW Doughnuts, Inc.,
by John Orrell, President by John Orrell, President
Title: General Partner Title: General Partner
GRAPEVINE DOUGHNUT COMPANY, LLP HULEN ST. DOUGHNUT COMPANY, LLP
By: -------------------------------------- By: --------------------------------------
Name: Greater DFW Doughnuts, Inc., Name: Greater DFW Doughnuts, Inc.,
by John Orrell, President by John Orrell, President
Title: General Partner Title: General Partner
By: --------------------------------------
Joseph A. McAleer, Individually
By: --------------------------------------
Steven D. Smith, Individually
By: --------------------------------------
John Orrell, Individually
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Exhibit 10.1
PROMISSORY NOTE
$55,000,000.00
June 30, 2003
KRISPY KREME DOUGHNUT CORPORATION 370 Knollwood Street, Suite 500 Winston-Salem,
North Carolina 27103 Attention: General Counsel (hereinafter referred to as
"Borrower")
WACHOVIA BANK, NATIONAL ASSOCIATION 301 South Tryon Street Charlotte, North
Carolina 28202 (hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Fifty-Five Million and No/100 Dollars ($55,000,000.00) or
such sum as may be advanced and outstanding from time to time, with interest on
the unpaid principal balance at the rate and on the terms provided in this
Promissory Note (including all renewals, extensions or modifications hereof,
this "Note").
CREDIT AGREEMENT. The terms and conditions contained in a Credit Agreement dated
as of March 21, 2002, as modified from time to time, between the Borrower and
Bank (the "Credit Agreement") are hereby incorporated herein by reference and
shall be considered parts hereof to the same extent as if written herein, and
upon the occurrence of any event which constitutes, or which upon notice or
lapse of time, or both, would constitute an Event of Default (as defined in the
Credit Agreement), whether or not the parties to the Credit Agreement shall
waive any such default, then this Note and all Obligations will, at the option
of Bank, at once and without notice become due and payable. The Borrower shall
continue to comply with and perform for the benefit of the Bank with respect to
this Note the covenants contained in the Credit Agreement, whether or not the
Loan (as therein defined) is or remains outstanding thereunder.
USE OF PROCEEDS. Borrower shall use the proceeds of the loan evidenced by this
Note for the commercial purposes of Borrower, as follows: to finance an
acquisition by Borrower.
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INTEREST RATE. Interest shall accrue on the unpaid principal balance of each
loan advance hereunder ("Advance") during each Interest Period from the date of
such Advance at a rate per annum equal to 1-month LIBOR plus 1.0% ("Interest
Rate"). The Interest Rate for each Interest Period shall accrue each day during
such Interest Period, commencing on and including the first day to but excluding
the last day. "Interest Period" means, in respect of each Advance, each period
commencing on the first day of the calendar month and ending on the first day of
the next succeeding calendar month; provided (i) the first Interest Period shall
commence on the date of such Advance and (ii) any Interest Period that would
otherwise extend past the maturity date of this Note shall end on the maturity
date of this Note. "LIBOR" means, with respect to each Interest Period, the rate
for U.S. dollar deposits with a maturity equal to the number of months specified
above, as reported on Telerate page 3750 as of 11:00 a.m., London time, on the
second London business day before such Interest Period begins, or, in the case
of the first Interest Period, the second London business day before the first
day of the calendar month during which such Interest Period begins (or if not so
reported, then as determined by the Bank from another recognized source or
interbank quotation).
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 2%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations (or any judgment thereon) are paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest shall be computed on the
basis of a 360-day year for the actual number of days in the applicable period
("Actual/360 Computation"). The Actual/360 Computation determines the annual
effective interest yield by taking the stated (nominal) rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate to be
applied for each day in the applicable period. Application of the Actual/360
Computation produces an annualized effective rate exceeding the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only, commencing on July 15, 2003, and continuing
on the same day of each month thereafter until fully paid. In any event, all
principal and accrued interest shall be due and payable on October 15, 2003.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
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DEFINITIONS. Loan Documents. The term "Loan Documents", as used in this Note and
the other Loan Documents, refers to all documents executed in connection with or
related to the loan evidenced by this Note, and may include, without limitation,
a commitment letter that survives closing, a loan agreement, this Note, guaranty
agreements, security agreements, security instruments, financing statements,
mortgage instruments, any renewals or modifications, whenever any of the
foregoing are executed, but does not include swap agreements (as defined in 11
U.S.C. ss. 101). Obligations. The term "Obligations", as used in this Note and
the other Loan Documents, refers to any and all indebtedness and other
obligations under this Note, all other obligations under any other Loan
Document(s), and all obligations under any swap agreements (as defined in 11
U.S.C. ss. 101) between Borrower and Bank whenever executed. Certain Other
Terms. All terms that are used but not otherwise defined in any of the Loan
Documents shall have the definitions provided in the Uniform Commercial Code.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 4% of each payment past due for 15 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
INDEMNIFICATION. Borrower shall indemnify Bank and each Affiliate (as defined in
the Credit Agreement) thereof and their respective directors, officers and
employees from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject, insofar
as such losses, liabilities, claims or damages arise out of or result from any
transaction contemplated by this Note or any other Loan Document or any actual
or proposed use by Borrower of the proceeds of any extension of credit by Bank
hereunder or breach by Borrower of this Note or any other Loan Document or from
any investigation, litigation (including, without limitation, any actions taken
by Bank to enforce this Note or any of the other Loan Documents) or other
proceeding (including, without limitation, any threatened investigation or
proceeding) relating to the foregoing, and Borrower shall reimburse Bank and
each Affiliate thereof and their respective directors, officers and employees,
upon demand, for any expenses (including, without limitation, reasonable legal
fees) incurred in connection with any such investigation or proceeding; but
excluding any such losses, liabilities, claims, damages or expenses which are
determined by a final, non-appealable judgment of a court to have been incurred
by reason of the gross negligence or willful misconduct of the person to be
indemnified. Such indemnity shall be effective as to
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any such investigation, litigation or proceeding brought by Borrower or any
Subsidiary or Affiliate (as such terms are defined in the Credit Agreement)
thereof, or any of their respective directors, shareholders, or creditors, and
whether or not any transaction contemplated by this Note or any other Loan
Document is consummated but only if, in any investigation, litigation or
proceeding brought by Borrower or a Subsidiary or Affiliate of Borrower, the
Bank or person(s) indemnified pursuant to this paragraph is the prevailing
party(ies) therein. Borrower agrees, on its own behalf and on behalf of each of
its Subsidiaries and Affiliates, not to assert any claim against Bank, any of
its Affiliates, or any of their respective directors, officers, employees,
attorneys, agents and advisors, on any theory of liability, for special,
indirect, consequential or punitive damages arising out of otherwise relating to
this Agreement or any of the other Loan Documents, any of the transactions
contemplated herein or the actual or proposed use of the proceeds of this Note.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. False Warranty. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under the Credit Agreement or under any other
loans, contracts or agreements of Borrower, any Subsidiary or Affiliate of
Borrower, any general partner of or the holder(s) of the majority ownership
interests of Borrower with Bank or its affiliates ("Affiliate" shall have the
meaning as defined in 11 U.S.C. ss. 101, except that the term "Borrower" shall
be substituted for the term "Debtor" therein; "Subsidiary" shall mean any
business in which Borrower holds, directly or indirectly, a controlling
interest).
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions:
Acceleration Upon Default. Accelerate the maturity of this Note and, at Bank's
option, any or all other Obligations, other than Obligations under any swap
agreements (as defined in 11 U.S.C. ss. 101) between Borrower and Bank, which
shall be governed by the default and termination provisions of said swap
agreements; whereupon this Note and the accelerated Obligations shall be
immediately due and payable; provided, however, if the Default is based upon a
bankruptcy or insolvency proceeding commenced by or against Borrower or any
guarantor or endorser of this Note, all Obligations (other than Obligations
under any swap agreement as referenced above) shall automatically and
immediately be due and payable. Cumulative. Exercise any rights and
-5-
remedies as provided under the Note and other Loan Documents, or as provided by
law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
The Borrower and any other person liable under this Note waives presentment,
protest, notice of dishonor, demand for payment, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of sale and all
other notices of any kind. Further, each agrees that Bank may extend, modify or
renew this Note or make a novation of the loan evidenced by this Note for any
period, and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any other Borrower or any
other person liable under this Note or other Loan Documents, all without notice
to or consent of each Borrower or each person who may be liable under this Note
or any other Loan Document and without affecting the liability of Borrower or
any person who may be liable under this Note or any other Loan Document.
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective successors and assigns. Bank's interests in and rights under this
Note and the other Loan Documents are freely assignable, in whole or in part, by
Bank. In addition, nothing in this Note or any of the other Loan Documents shall
prohibit Bank from pledging or assigning this Note or any of the other Loan
Documents or any interest therein to any Federal Reserve Bank. Borrower shall
not assign its rights and interest hereunder without the prior written consent
of Bank, and any attempt by Borrower to assign without Bank's prior written
consent is null and void. Any assignment shall not release Borrower from the
Obligations. Organization; Powers. Borrower represents that Borrower (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its state of organization, and is authorized to do business in each other
jurisdiction wherein its ownership of property or conduct of business legally
requires such organization (ii) has the power and authority to own its
properties and assets and to carry on its business as now being conducted and as
now contemplated; and (iii) has the power and authority to execute, deliver and
perform, and by all necessary action has
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authorized the execution, delivery and performance of, all of its obligations
under this Note and any other Loan Document to which it is a party. Applicable
Law; Conflict Between Documents. This Note and, unless otherwise provided in any
other Loan Document, the other Loan Documents shall be governed by and construed
under the laws of the state named in Bank's address on the first page hereof
without regard to that state's conflict of laws principles. If the terms of this
Note should conflict with the terms of any loan agreement or any commitment
letter that survives closing, the terms of this Note shall control.
Jurisdiction. Borrower irrevocably agrees to non-exclusive personal jurisdiction
in the state named in Bank's address on the first page hereof. Severability. If
any provision of this Note or of the other Loan Documents shall be prohibited or
invalid under applicable law, such provision shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Note or other such
document. Notices. Any notices to Borrower shall be sufficiently given, if in
writing and mailed or delivered to the Borrower's address shown herein or such
other address as provided hereunder, and to Bank, if in writing and mailed or
delivered to Wachovia Bank, National Association, Mail Code VA7391, P. O. Box
13327, Roanoke, VA 24040 or Wachovia Bank, National Association, Mail Code
VA7391, 10 South Jefferson Street, Roanoke, VA 24011 or such other address as
Bank may specify in writing from time to time. Notices to Bank must include the
mail code. In the event that Borrower changes Borrower's address at any time
prior to the date the Obligations are paid in full, Borrower agrees to promptly
give written notice of said change of address by registered or certified mail,
return receipt requested, all charges prepaid. Plural; Captions. All references
in the Loan Documents to Borrower, guarantor, person, document or other nouns of
reference mean both the singular and plural form, as the case may be, and the
term "person" shall mean any individual, person or entity. The captions
contained in the Loan Documents are inserted for convenience only and shall not
affect the meaning or interpretation of the Loan Documents. Posting of Payments.
All payments received during normal banking hours after 2:00 p.m. local time at
the office of Bank first shown above shall be deemed received at the opening of
the next banking day. Joint and Several Obligations. Each person who signs this
Note as a Borrower (as defined herein) is jointly and severally obligated. Fees
and Taxes. Borrower shall promptly pay all documentary, intangible, recordation
and/or similar taxes on this transaction whether assessed at closing or arising
from time to time.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, claims brought as class actions, or
claims arising from documents executed in the future. A judgment upon the award
may be entered in any court having jurisdiction. Notwithstanding the foregoing,
this arbitration provision does not
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apply to disputes under or related to swap agreements. Special Rules. All
arbitration hearings shall be conducted in the city named in the address of Bank
first stated above. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall conclude within 120 days of demand for
arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law
except as provided herein. Preservation and Limitation of Remedies.
Notwithstanding the preceding binding arbitration provisions, the parties agree
to preserve, without diminution, certain remedies that any party may exercise
before or after an arbitration proceeding is brought. The parties shall have the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale or under applicable law by judicial foreclosure including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with
regard to any party's entitlement to such remedies is a Dispute. Waiver of
Exemplary Damages. The parties agree that they shall not have a remedy of
punitive or exemplary damages against other parties in any Dispute and hereby
waive any right or claim to punitive or exemplary damages they have now or which
may arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially. Waiver of Jury Trial. THE PARTIES
ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY WAIVED
ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A DISPUTE.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
PLACE OF EXECUTION AND DELIVERY. Borrower hereby certifies that this Note and
the Loan Documents were executed in the State of North Carolina and delivered to
Bank in the State of North Carolina.
KRISPY KREME DOUGHNUT CORPORATION (SEAL)
Taxpayer Identification Number: 56-1318322
By: _______________________________ (SEAL)
Name: ____________________
Title: ____________________