EXHIBIT 2.2
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EXECUTION COPY
Triarc Companies, Inc.
Arby's Acquisition Co.
Arby's Restaurant, LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
July 25, 2005
RTM Restaurant Group, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxx XX 00000
Xxxxxxx X. Xxxxxxxxx, Xx.
Xxxxxx X. Xxxxxx
J. Xxxxxxx Xxxxx,
RTM Representatives
0000 Xxxxxxxx Xxxx
Xxxxxxx XX 00000
Re: SIDE LETTER AGREEMENT TO AGREEMENT AND PLAN OF MERGER
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger, dated as of May 27, 2005
(the "MERGER Agreement"), among Triarc Companies, Inc., a Delaware corporation
("TRIARC"), Arby's Acquisition Co., a Georgia corporation and a direct wholly
owned subsidiary of Triarc ("MERGER SUB CORP."), Arby's Restaurant, LLC, a
Delaware limited liability company and a direct wholly owned subsidiary of
Triarc ("MERGER SUB LLC" and, together with Triarc and Merger Sub Corp., the
"TRIARC PARTIES"), RTM Restaurant Group, Inc., a Georgia corporation ("RTMRG"),
and Xxxxxxx X. Xxxxxxxxx, Xx., Xxxxxx X. Xxxxxx and J. Xxxxxxx Xxxxx, as the RTM
Representatives (as defined therein). Capitalized terms used and not otherwise
defined herein shall have the respective meanings assigned to them in the Merger
Agreement.
During the course of preparing for the Closing, the parties to the
Merger Agreement (the "PARTIES") have recognized that certain terms of the
Merger Agreement inaccurately or incompletely expressed the intent of the
Parties. Accordingly, the Parties desire to execute and deliver this Side Letter
to clarify those terms in the Merger Agreement to reflect the intent of the
Parties regarding those terms.
1. An incomplete calculation resulted in the definition of RTM Benchmark
in Section 2.08(c) of the Merger Agreement as $440.1 million rather
than $442.2 million. The
Parties agree that for all purposes the RTM Benchmark will be $442.2
million, not $440.1 million.
2. RTMRG represents and warrants to the Triarc Parties that: (a) the
calculations relating to the RTM Benchmark, delivered by or on behalf
of RTMRG to Triarc, have been prepared in good faith on a reasonable
basis and reflect the best judgment of management of the RTM Parties as
to the projected Net Liabilities of the RTM Parties and their
Subsidiaries as of June 26, 2005; (b) the assumptions on which the RTM
Benchmark are based are consistent with past practices (including
accounting practices reflected in the Restated Combined RTM Financial
Statements) of the RTM Parties and their Subsidiaries and with
historical conditions applicable to the business of the RTM Parties and
their Subsidiaries; and (c) nothing has come to the attention of the
RTM Parties or any of their Subsidiaries to indicate that the RTM
Benchmark or the assumptions upon which it is based are not reasonable.
3. Section 2.08(a) of the Merger Agreement incorrectly defines the terms
ARG Estimated Net Liabilities and RTM Estimated Net Liabilities by
reference to the time "as of immediately prior to the Closing", and
Section 2.09(a) of the Merger Agreement incorrectly defines the terms
ARG Closing Balance Sheet, ARG Closing Net Liabilities, RTM Closing
Balance Sheet and RTM Closing Net Liabilities by reference to the time
"as of immediately prior to the Closing". Accordingly, the Parties
agree that for all purposes all references to "as of immediately prior
to the Closing" in the definitions of such terms in such Sections will
read as follows: "as of the close of business on the Closing Date, but
without giving effect to (a) the Closing, (b) the other transactions
contemplated by the Merger Agreement or the Ancillary Agreements
(including any purchase accounting adjustments resulting therefrom that
are made in accordance with GAAP) or (c) any actions taken by or at the
direction of any of the Triarc Parties on the Closing Date after the
Closing (which, for the avoidance of doubt, shall not be deemed to
include any RTMRG Transactions, RTMMC Transactions or RTMAC
Transactions) which have the effect of increasing or reducing RTM
Estimated Net Liabilities or RTM Closing Net Liabilities".
4. Similarly, the definition of Net Liabilities set forth in Section 12.01
of the Merger Agreement incorrectly contains references to "at the
Closing", "prior to the Closing", "at Closing", "after the Closing" and
"at or prior to the Closing". The Parties therefore agree that for all
purposes each reference to "the Closing" contained in each such
reference will read as follows: "the close of business on the Closing
Date, but without giving effect to (a) the Closing, (b) the other
transactions contemplated by the Merger Agreement or the Ancillary
Agreements (including any purchase accounting adjustments resulting
therefrom that are made in accordance with GAAP) or (c) any actions
taken by or at the direction of any of the Triarc Parties on the
Closing Date after the Closing (which, for the avoidance of doubt,
shall not be deemed to include any RTMRG Transactions, RTMMC
Transactions or RTMAC Transactions) which have the effect of increasing
or reducing Net Liabilities".
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5. Section 6.02(b)(i) of the Merger Agreement permits RTMRG and its
Subsidiaries to make pre-Closing cash dividends and distributions to
the extent the RTM Representatives demonstrate to the reasonable
satisfaction of Triarc (based on reasonably detailed information
provided by the RTM Representatives to Triarc) that each such dividend
or distribution will not result in the Net Liabilities of the RTM
Parties and their Subsidiaries being more than the RTM Benchmark. The
definition of Net Liabilities excludes certain current assets, which
excludes the amount or value of those assets in determining whether the
Net Liabilities of the RTM Parties and their Subsidiaries are at, above
or below the RTM Benchmark for purposes of the pre-Closing adjustment
(if applicable) to the Aggregate Merger Consideration provided for in
Section 2.08 of the Merger Agreement, and the post-Closing adjustment
to the Aggregate Merger Consideration provided for in Section 2.09 of
the Merger Agreement. The Parties did not intend that certain current
assets of the RTM Parties and their Subsidiaries which are excluded
from the definition of Net Liabilities be available for distribution as
a dividend prior to the Closing. Accordingly, the Parties agree that
for all purposes Section 6.02(b)(i) of the Merger Agreement will read
as follows in lieu of the text thereof:
"(i) cash dividends or distributions in an amount that the RTM
Representatives have demonstrated to the reasonable satisfaction of
Triarc (based upon reasonably detailed information provided by the RTM
Representatives to Triarc) would not reasonably be expected to result
in the sum of (x) the absolute value of the Net Liabilities of the RTM
Parties and their Subsidiaries as of the close of business on the
Closing Date PLUS (y) the aggregate amount of cash received by any RTM
Party or their Subsidiaries after the date hereof and on or prior to
the Closing Date that would be excluded from current assets under
paragraph (c)(y)(I), (V) or (VI) under the definition of Net
Liabilities if such cash were an asset of any RTM Party or their
Subsidiaries as of the close of business on the Closing Date (the
"EXCLUDED RTM CASH AMOUNT") being more than the sum of (A) the absolute
value of the RTM Benchmark PLUS (B) the Excluded RTM Cash Amount,".
6. The ARG Benchmark is to be calculated in a manner similar to the RTM
Benchmark under the Merger Agreement. Accordingly, the Parties agree
that for all purposes Section 6.01(b)(ii)(x) of the Merger Agreement
will read as follows in lieu of the text thereof:
"(x) cash dividends or distributions in an amount that Triarc has
demonstrated to the reasonable satisfaction of the RTM Representatives
(based upon reasonably detailed information provided by Triarc to the
RTM Representatives) would not reasonably be expected to result in the
sum of (I) the absolute value of the Net Liabilities of ARG and its
Subsidiaries as of the close of business on the Closing Date plus (II)
the aggregate amount of cash received by ARG or any of its Subsidiaries
after the date hereof and on or prior to the Closing Date that would be
excluded from current assets under paragraph (c)(y)(I) or (V) under the
definition of Net Liabilities if such cash were an asset of ARG or any
of its Subsidiaries as of the close of business on the Closing Date
(the "EXCLUDED ARG CASH AMOUNT") being more than the sum of (A) the
absolute value of the ARG Benchmark PLUS (B) the Excluded ARG Cash
Amount,".
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7. To clarify that leasehold interests are among the non-current assets
excluded from Net Liabilities under paragraph (c)(y)(I) of the
definition of Net Liabilities set forth in Section 12.01 of the Merger
Agreement, the Parties agree that for all purposes the phrase
"non-current asset" in paragraph (c)(y)(I) of the definition of Net
Liabilities in the Merger Agreement will read as follows: "any asset or
property (including any leasehold interest) that is not a current
asset".
8. To correct certain clerical errors in the RTMRG Disclosure Letter, the
Parties agree that for all purposes:
a. Item 5 of Section 5.26 of the RTMRG Disclosure Letter will
read as provided in SCHEDULE A-1 attached hereto.
b. Item 30 of Section 5.26 of the RTMRG Disclosure Letter read as
provided in SCHEDULE A-2 attached hereto.
c. Item 5 of Section 9.02(i) of the RTMRG Disclosure Letter will
read as provided in SCHEDULE A-3 attached hereto.
d. Item 6 of Section 5.07(c) of the RTMRG Disclosure Letter will
read as provided in SCHEDULE A-4 attached hereto.
e. Item 5 of Section 7.16 of the RTMRG Disclosure Letter will
read as provided in SCHEDULE A-5 attached hereto.
9. Pursuant to Section 2.02(c)(iv) of the Merger Agreement, the Parties
agree that for all purposes the Per Share Merger Consideration will be
reduced to give effect to the in the money value at the time of grant
of the Replacement Options granted pursuant to Section 2.06 of the
Merger Agreement in accordance with SCHEDULE B attached hereto.
10. Section 8.01(a) of the Merger Agreement requires the RTMRG
Shareholders, subject to the specific terms and conditions set forth in
the Merger Agreement, to indemnify the Triarc Indemnified Parties for
Tax Losses arising out of Taxes of RTMRG or its Subsidiaries
attributable to the RTMRG Transactions (which includes any Excluded
Asset Dispositions). Section 7.22 of the Merger Agreement requires
Triarc to cause RTMRG promptly to remit to the RTM Representatives for
distribution to the RTMRG Shareholders any proceeds received by RTMRG
or any of its Subsidiaries after the Closing in respect of any Excluded
Asset Dispositions. To clarify that the RTMRG Shareholders are
responsible for any Taxes of Triarc or its Subsidiaries (including
RTMRG or its Subsidiaries) arising from any proceeds received by Triarc
or its Subsidiaries (including RTMRG or its Subsidiaries), including
any such proceeds received after the Closing, in respect of any
Excluded Asset Dispositions, the Parties agree that for all purposes
the following shall be added at the end of Section 7.22 of the Merger
Agreement:
"In the event that the receipt of any proceeds received by Triarc or
any of its Subsidiaries
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(including RTMRG or any of its Subsidiaries) after the Closing in
respect of any Excluded Asset Dispositions results in the recognition
by Triarc or any of its Subsidiaries (including RTMRG or any of its
Subsidiaries) of gross income in connection therewith, the parties
agree that the Triarc Indemnified Parties shall be entitled to
indemnification pursuant to Section 8.01(a) as a Tax Loss in an amount
equal to (x) such gross income, multiplied by (y) the highest effective
combined federal, state and local tax rate, PROVIDED that the state and
local tax rates shall be computed using the highest effective tax rates
applicable to Triarc or such Subsidiary in the jurisdiction or
jurisdictions in which Triarc or such Subsidiary is subject to
taxation."
11. Pursuant to Sections 8.10 and 9.02(l) of the Merger Agreement, RTMRG
represents and warrants that (i) the information provided by RTMRG to
Triarc and attached hereto as SCHEDULE C is true, complete and correct
in all respects and, with respect to the tax basis balance sheet of
RTMMC as of July 22, 2005 included in SCHEDULE C, no changes (other
than immaterial changes) thereto have occurred from the date thereof
through the Closing Date, (ii) the RTMAC Aggregate Purchase Price,
inclusive of any amounts treated as an adjustment thereto pursuant to
Section 10.08 of the RTMAC Purchase Agreement, does not cause the
aggregate amount allocated to the assets of RTMAC to be other than an
amount within the RTMAC Asset Range, (iii) the sum of (x) the RTMMC
Aggregate Purchase Price, inclusive of any amounts treated as an
adjustment thereto pursuant to Section 10.08 of the RTMMC Purchase
Agreement, and (y) the RTMMC Assumed Liabilities, is an amount within
the RTMMC Asset Range (as the RTMMC Asset Range is properly adjusted
pursuant to the definition thereof contained in the RTMMC Purchase
Agreement), and (iv) pursuant to that Amendment No. 2, dated May 20,
2005, by and between RTMAC and RTM Operating Company ("RTMOC"), RTMAC
and RTMOC have amended that Management and Operating Agreement, dated
December 10, 2001, by and between RTMOC and RTMAC, as amended by that
certain Amendment No. 1, dated May, 26, 2003, as further corrected by
that Release and Correction Agreement, dated March 31, 2005, and the
amendment of the Management and Operating Agreement pursuant to such
Amendment No. 2 fulfills RTMAC's obligations pursuant to Section 8.13
of the Merger Agreement. The Parties agree that the pro forma estimated
May 1, 2005 balance sheet of RTMMC, a copy of which is attached hereto
as SCHEDULE D, was utilized in connection with the determination of the
RTMMC Asset Range as defined in the RTMMC Purchase Agreement.
12. Pursuant to Section 9.03(l) of the Merger Agreement, Triarc agrees that
it will file, and cause its Affiliates to file, all Federal income Tax
Returns in a manner consistent with the Expected Tax Treatment, and to
take no position contrary thereto for any Federal income Tax purposes,
unless otherwise required to do so by a good faith resolution of a
contest or a change in applicable law.
13. To clarify the scope of Section 11.04(e) of the Merger Agreement, the
Parties agree that for all purposes the following shall be added
immediately prior to the word "or" at the end of Section 11.04(e) of
the Merger Agreement:
"for the avoidance of doubt, any Legal Action threatened or commenced
by any RTMRG
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Shareholder alleging that any amounts that had been offset or otherwise
subtracted from the Per Share Merger Consideration otherwise payable to
such RTMRG Shareholder in accordance with the certified instructions
delivered on or prior to the Closing Date by the RTM Representatives to
Triarc and the Exchange Agent were improperly offset or otherwise
subtracted shall be deemed a Legal Action to which the Triarc
Indemnified Parties are entitled to indemnification pursuant to this
Section 11.04(e);"
14. Section 12.09 of the Merger Agreement incorrectly included a provision
as an exception and omitted other provisions as exceptions. The Parties
agree that for all purposes Section 12.09 of the Merger Agreement will
read as follows in lieu of the text thereof:
"NO THIRD-PARTY BENEFICIARIES. Except as provided in Section 7.12,
Article VIII and Article XI, this Agreement is not intended to confer
any rights or remedies upon any Person other than the parties to this
Agreement. Notwithstanding the foregoing, the RTM Representatives shall
be entitled to enforce the covenants contained in Section 7.15(a) and
Section 7.16(c) on behalf of the Excluded RTM Affiliates and the
Related Party Guarantors, respectively."
15. The Parties hereby waive the provision of Section 7.16(a) that states
that at the Closing, RTMRG shall transfer to ARG the RTMMC receivable.
16. The Parties agree that for all purposes: (i) the period after clause
(II) shall be changed to a comma, and the "and" shall be moved from the
end of clause (I) to the end of clause (II); and (ii) the following
shall be added immediately after clause (II) of subparagraph (e) of the
definition of "Net Liabilities" in Section 12.01 of the Merger
Agreement:
"(III) there shall be excluded (x) from current liabilities (i) any
accruals for service bonuses and related payroll taxes and other
related amounts referred to in the Letter Agreement, dated July 25,
2005 (the "XXXXXXXXX LETTER") among Triarc, Xxxxxxx X. Xxxxxxxxx, Xx.,
RTMRG and RTMMC, to the extent such amounts have been paid or
reimbursed by Xxxxxxx X. Xxxxxxxxx, Xx. and (ii) any reduction in
current liabilities for any Tax benefit resulting from the payment of
such service bonuses and related payroll taxes and other related
amounts and (y) from current assets any asset resulting from the
contributions referred to in the Xxxxxxxxx Letter."
17. Each of the Triarc Parties represents and warrants that: (i) it has all
requisite limited liability company or corporate power and authority,
and has taken all limited liability company or corporate action
necessary, in order to execute and deliver this Side Letter; and (ii)
this Side Letter has been duly executed and delivered by each of the
Triarc Parties and constitutes the legal, valid and binding obligation
of each of the Triarc Parties, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general applicability
relating to or affecting creditors' rights, and to general equity
principles.
18. RTMRG represents and warrants that: (i) it has all requisite corporate
power and authority, and has taken all corporate action (including any
requisite shareholder action)
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necessary, in order to execute and deliver this Side Letter; (ii) this
Side Letter has been duly executed and delivered by RTMRG and
constitutes the legal, valid and binding obligation of RTMRG,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
Laws of general applicability relating to or affecting creditors'
rights, and to general equity principles; and (iii) the execution and
delivery of this Side Letter does not give rise to any appraisal or
dissenter's rights to any holder of shares of RTMRG Common Stock.
19. The Parties agree that (x) the Triarc Indemnified Parties shall be
entitled to indemnification under Section 11.04(a) of the Merger
Agreement for any Losses based upon or arising from any breach of or
inaccuracy in the representations and warranties contained in numbered
paragraphs 2 and 18 hereof to the same extent as if such
representations and warranties were made in Section 5.07(a) and Section
5.02, respectively, of the Merger Agreement, and such representations
and warranties shall be deemed to be an RTMRG Basket Exclusion for such
indemnification purposes; (y) the Triarc Indemnified Parties shall be
entitled to indemnification under Section 8.01 of the Merger Agreement
for Tax Losses based upon or arising from any breach of or inaccuracy
in the representations and warranties contained in numbered paragraph
11 hereof to the same extent as if such representations and warranties
were made in Section 5.13 of the Merger Agreement and (z) the RTMRG
Indemnified Parties shall be entitled to indemnification under Section
11.02(a) of the Merger Agreement for any Losses based upon or arising
from any breach of or inaccuracy in the representations and warranties
contained in numbered paragraph 17 hereof to the same extent as if such
representations and warranties were made in Section 3.02 or Section
4.02 of the Merger Agreement, as applicable, and such representations
and warranties shall be deemed to be a Triarc Basket Exclusion for such
indemnification purposes.
20. Except to the extent specifically modified herein, the Parties agree
that the provisions of the Merger Agreement shall remain unmodified.
This Side Letter and the Merger Agreement and the other agreements and
documents referred to therein constitute the entire agreement among the
Parties with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and
written, among the Parties with respect to the subject matter hereof
and thereof.
21. This Side Letter may be executed and delivered (including by facsimile
transmission) in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Side Letter shall become effective
when each Party shall have received a counterpart hereof signed by the
other Parties.
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If you are in agreement with the foregoing, please execute and deliver
a counterpart of this Side Letter as indicated below and return it to us.
Sincerely yours,
TRIARC COMPANIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
Title: Senior Vice President
and Secretary
ARBY'S ACQUISITION CO.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President
ARBY'S RESTAURANT, LLC
By: /s/ Xxxxxxx X. XxXxxxxx
-------------------------------
Name: Xxxxxxx X. XxXxxxxx
Title: Executive Vice President
Accepted and agreed to:
RTM RESTAURANT GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx, Xx.
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxx, Xx.
Title: Chief Executive Officer
By: /s/ J. Xxxxxxx Xxxxx
--------------------------------
Name: J. Xxxxxxx Xxxxx
Title: Senior Vice President
RTM REPRESENTATIVES:
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/s/ XXXXXXX X. XXXXXXXXX, XX.
------------------------------------
XXXXXXX X. XXXXXXXXX, XX.
/s/ XXXXXX X. XXXXXX
------------------------------------
XXXXXX X. XXXXXX
/s/ J. XXXXXXX XXXXX
------------------------------------
J. XXXXXXX XXXXX
* * * * *
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