EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of July 15, 2007,
among
IHOP CORP.,
CHLH CORP.
and
XXXXXXXX'X INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Certain Defined Terms.....................................................................1
SECTION 1.02. Index of Defined Terms....................................................................3
SECTION 1.03. Interpretation............................................................................6
ARTICLE II
The Merger
SECTION 2.01. The Merger................................................................................6
SECTION 2.02. Closing...................................................................................6
SECTION 2.03. Effective Time............................................................................7
SECTION 2.04. Effects of the Merger.....................................................................7
SECTION 2.05. Certificate of Incorporation and Bylaws...................................................7
SECTION 2.06. Directors.................................................................................7
SECTION 2.07. Officers..................................................................................7
ARTICLE III
Effect of the Merger on the Capital Stock of the Constituent Corporations;
Exchange Fund; Company Equity Awards
SECTION 3.01. Effect on Capital Stock...................................................................8
SECTION 3.02. Exchange Fund.............................................................................9
SECTION 3.03. Company Equity Awards....................................................................11
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the Company............................................12
SECTION 4.02. Representations and Warranties of Parent and Sub.........................................37
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ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business......................................................................40
SECTION 5.02. No Solicitation..........................................................................44
SECTION 5.03. WARN Act.................................................................................46
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Proxy Statement; Stockholders' Meeting................................47
SECTION 6.02. Access to Information; Confidentiality...................................................47
SECTION 6.03. Reasonable Best Efforts..................................................................48
SECTION 6.04. Benefit Plans............................................................................49
SECTION 6.05. Indemnification, Exculpation and Insurance...............................................50
SECTION 6.06. Fees and Expenses........................................................................51
SECTION 6.07. Public Announcements.....................................................................52
SECTION 6.08. Stockholder Litigation...................................................................52
SECTION 6.09. Financing................................................................................52
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger...............................55
SECTION 7.02. Conditions to Obligations of Parent and Sub..............................................55
SECTION 7.03. Conditions to Obligation of the Company..................................................56
SECTION 7.04. Frustration of Closing Conditions........................................................56
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination..............................................................................57
SECTION 8.02. Effect of Termination....................................................................58
SECTION 8.03. Amendment................................................................................58
SECTION 8.04. Extension; Waiver........................................................................58
SECTION 8.05. Procedure for Termination or Amendment...................................................58
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ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties............................................59
SECTION 9.02. Notices..................................................................................59
SECTION 9.03. Consents and Approvals...................................................................60
SECTION 9.04. Counterparts.............................................................................60
SECTION 9.05. Entire Agreement; No Third-Party Beneficiaries...........................................60
SECTION 9.06. GOVERNING LAW............................................................................60
SECTION 9.07. Assignment...............................................................................60
SECTION 9.08. Specific Enforcement; Consent to Jurisdiction............................................60
SECTION 9.09. Severability.............................................................................61
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July
15, 2007, among IHOP CORP., a Delaware corporation ("Parent"), CHLH
CORP., a Delaware corporation and a wholly owned Subsidiary of Parent
("Sub"), and XXXXXXXX'X INTERNATIONAL, INC., a Delaware corporation
(the "Company").
WHEREAS, the Board of Directors of each of the Company and Sub has approved
and declared advisable, and the Board of Directors of Parent has approved, this
Agreement and the merger of Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of common stock, par value $0.01 per share, of
the Company ("Company Common Stock"), other than (a) shares of Company Common
Stock held by the Company, as treasury stock, or otherwise owned by Parent, Sub
or any subsidiary of the Company and (b) the Appraisal Shares (as defined
herein), will be converted into the right to receive $25.50 in cash; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and subject to the
conditions set forth herein, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" of any person means another person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such first person.
"business day" means any day on which banks are not required or authorized
to be closed in the City of New York.
"Company Disclosure Letter" means the letter dated as of the date of this
Agreement delivered by the Company to Parent and Sub.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Intellectual Property Rights" shall mean all intellectual property rights
of any kind or nature throughout the world, including all (i) U.S. and foreign
patents, patent applications, patent disclosures, and all continuations,
continuations-in-part, divisionals, reissues, re-examinations, substitutions,
and extensions thereof ("Patents"), (ii) U.S. and foreign trademarks, service
marks, company names, trade names, Internet domain names, logos, slogans, trade
dress, and other designations of source or origin, together with the goodwill
connected with the use of and symbolized by any of the foregoing ("Trademarks"),
(iii) U.S. and foreign copyrights and copyrighted subject matter (including, to
the extent applicable, Software and databases) ("Copyrights"), (iv) rights of
publicity, (v) trade secrets and other know-how, inventions and proprietary
processes (including proprietary Software and operating procedures), formulae,
models and methodologies ("Trade Secrets") and (vi) applications, registrations,
renewals, and recordings for the foregoing.
"Knowledge" means (i) with respect to the Company, the actual knowledge of
any of the persons set forth in Section 1.01 of the Company Disclosure Letter
and (ii) with respect to Parent or Sub, the actual knowledge of the chief
executive officer, chief financial officer and general counsel of Parent.
"Material Adverse Effect" means any change, effect, event, occurrence or
state of facts that, individually or together with any other change, effect,
event, occurrence or state of facts that is materially adverse to the business,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, other than any change, effect, event or
occurrence resulting from (i) economic, financial market or geopolitical
conditions in general, (ii) changes in Law or applicable accounting regulations
or principles or interpretations thereof, (iii) conditions in the casual dining
or restaurant industries generally, (iv) any change in the Company's stock price
or trading volume, in and of itself, or any failure, in and of itself, by the
Company to meet published revenue or earnings projections, (v) any outbreak or
escalation of hostilities or war or any act of terrorism and (vi) the
announcement of the Company's intention or desire to enter into this Agreement
or a similar agreement or the announcement of this Agreement and the
transactions contemplated hereby and performance of obligations under this
Agreement (including any action or inaction as a result thereof by the Company's
franchisees, employees, vendors or competitors) except, in the case of clauses
(i), (iii) and (v), to the extent the Company and its Subsidiaries, taken as a
whole, are disproportionately affected thereby as compared to other companies in
the casual dining and restaurant industries generally.
"Parent Material Adverse Effect" means any change, effect, event,
occurrence or state of facts that prevents or materially impedes, interferes
with, hinders or delays the consummation by Parent or Sub of the Merger or the
other transactions contemplated by this Agreement.
"person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
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"Software" means computer programs and other software (whether in source
code, object code, or other form) and related documentation, other than in each
case "shrink wrap," "click wrap," and other "off the shelf" software
commercially available to the public generally.
"Subsidiary" of any person means another person, an amount of the voting
securities, other voting rights or voting partnership interests of which is
sufficient to elect at least a majority of its board of directors or other
governing body (or, if there are no such voting interests, more than 50% of the
equity interests of which) is owned directly or indirectly by such first person.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act
of 1988, as amended.
SECTION 1.02. Index of Defined Terms. Each of the following defined terms
is defined in the corresponding Section of this Agreement listed in the
following index:
Adverse Recommendation Change................................................. Section 5.02(b)
Affiliate..................................................................... Section 1.01
Agreement..................................................................... Preamble
Annual Amount................................................................. Section 6.05(c)
Appraisal Shares.............................................................. Section 3.01(d)
Bridge Financing.............................................................. Section 4.02(d)
Bridge Marketing Period....................................................... Section 6.09(b)
Business day.................................................................. Section 1.01
Certificate................................................................... Section 3.01(c)
Certificate of Merger......................................................... Section 2.03
Claim......................................................................... Section 6.05(b)
Closing....................................................................... Section 2.02
Closing Date.................................................................. Section 2.02
Code.......................................................................... Section 3.02(h)
Commonly Controlled Entity.................................................... Section 4.01(l)(i)
Company....................................................................... Preamble
Company Benefit Agreement..................................................... Section 4.01(l)(i)
Company Benefit Plan.......................................................... Section 4.01(l)(i)
Company Bylaws................................................................ Section 2.05(b)
Company Certificate of Incorporation.......................................... Section 2.05(a)
Company Common Stock.......................................................... Recitals
Company Disclosure Letter..................................................... Section 1.01
Company Employees............................................................. Section 6.04(a)
Company Preferred Stock....................................................... Section 4.01(c)(i)
Company Restricted Stock...................................................... Section 4.01(c)(i)
Company RSU................................................................... Section 4.01(c)
Company SARs.................................................................. Section 4.01(c)(i)
Company Stock Options......................................................... Section 4.01(c)(i)
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Company Stock Plans........................................................... Section 4.01(c)(i)
Confidentiality Agreement..................................................... Section 6.02
Contract...................................................................... Section 4.01(d)
Copyrights.................................................................... Section 1.01
Corporation................................................................... Section 2.05(a)
Current IFOC.................................................................. Section 4.01(s)(xvi)
Current Offering Period....................................................... Section 3.03(c)
Current UFOC.................................................................. Section 4.01(s)(xvi)
DGCL.......................................................................... Section 2.01
Debt Financing................................................................ Section 4.02(d)
Earnings Claims............................................................... Section 4.01(s)(vi)
Effective Time................................................................ Section 2.03
Environmental Claims.......................................................... Section 4.01(j)(ii)(B)
Environmental Law............................................................. Section 4.01(j)(ii)(B)
Equity Financing.............................................................. Section 4.02(d)
ERISA......................................................................... Section 1.01
ESPP Termination Date......................................................... Section 3.03(c)
ESPPs......................................................................... Section 4.01(c)(i)
Exchange Act.................................................................. Section 4.01(d)
Exchange Fund................................................................. Section 3.02(a)
Filed Exhibits................................................................ Section 4.01(i)
Filed SEC Documents........................................................... Section 4.01
Financing..................................................................... Section 4.02(d)
Financing Commitments......................................................... Section 4.02(d)
Foreign Franchises............................................................ Section 4.01(s)(iv)
Franchise..................................................................... Section 4.01(s)(i)
Franchise Agreements.......................................................... Section 4.01(s)(i)
Franchised Restaurant......................................................... Section 4.01(s)(i)
Franchisee.................................................................... Section 4.01(s)(xvi)
FTC Rule...................................................................... Section 4.01(s)(xvi)
GAAP.......................................................................... Section 4.01(e)
Governmental Entity........................................................... Section 4.01(d)
Hazardous Materials........................................................... Section 4.01(j)(ii)(B)
HSR Act....................................................................... Section 4.01(d)
Indebtedness.................................................................. Section 4.01(c)(iv)
Indemnified Party............................................................. Section 6.05(a)
Intellectual Property Rights.................................................. Section 1.01
Judgment...................................................................... Section 4.01(d)
Knowledge..................................................................... Section 1.01
Law........................................................................... Section 4.01(d)
Leased Real Property.......................................................... Section 4.01(n)(ii)
Liens......................................................................... Section 4.01(b)
Material Adverse Effect....................................................... Section 1.01
Merger........................................................................ Recitals
Merger Consideration.......................................................... Section 3.01(c)
Multiemployer Plan............................................................ Section 4.01(l)(vi)
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Notice of Superior Proposal................................................... Section 5.02(b)
Offering Period Last Day...................................................... Section 3.03(c)
Option/SAR Amount............................................................. Section 3.03(a)
Outside Date.................................................................. Section 8.01(b)(i)
Owned Real Property........................................................... Section 4.01(n)(i)
Parent........................................................................ Preamble
Parent Material Adverse Effect................................................ Section 1.01
Paying Agent.................................................................. Section 3.02(a)
Patents....................................................................... Section 1.01
Permits....................................................................... Section 4.01(j)(i)
Permitted Liens............................................................... Section 4.01(n)(iii)
Person........................................................................ Section 1.01
Proxy Statement............................................................... Section 4.01(d)
Real Property Leases.......................................................... Section 4.01(n)(ii)
Real Property Subleases....................................................... Section 4.01(n)(v)
Rebates....................................................................... Section 4.01(s)(xvi)
Recommendation................................................................ Section 4.01(d)
Registered Intellectual Property Rights....................................... Section 4.01(o)
Registration Laws............................................................. Section 4.01(s)(xvi)
Relationship Laws............................................................. Section 4.01(s)(xiv)
Release....................................................................... Section 4.01(j)(ii)(B)
Representatives............................................................... Section 5.02(a)
Restraints.................................................................... Section 7.01(c)
RSU Amount.................................................................... Section 3.03(b)
SEC........................................................................... Section 4.01
SEC Documents................................................................. Section 4.01(e)
Section 262................................................................... Section 3.01(d)
Securities Act................................................................ Section 4.01(e)
Securitization................................................................ Section 4.02(d)
Software...................................................................... Section 1.01
SPD........................................................................... Section 4.01(l)(i)
Specified Contract............................................................ Section 4.01(i)
Stockholder Approval.......................................................... Section 4.01(q)
Stockholders' Meeting......................................................... Section 6.01(b)
Sub........................................................................... Preamble
Subsidiary.................................................................... Section 1.01
Superior Proposal............................................................. Section 5.02(a)
Surviving Corporation......................................................... Section 2.01
Takeover Proposal............................................................. Section 5.02(a)
Tax return.................................................................... Section 4.01(m)(viii)
Taxes......................................................................... Section 4.01(m)(viii)
Termination Fee............................................................... Section 6.06(b)
Trademarks.................................................................... Section 1.01
Trade Secrets................................................................. Section 1.01
UFOC.......................................................................... Section 4.01(s)(xvi)
UFOC Guidelines Section 4.01(s)(xvi)
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United States Jurisdictions................................................... Section 4.01(s)(xvi)
Voting Company Debt........................................................... Section 4.01(c)(i)
WARN Act...................................................................... Section 1.01
SECTION 1.03. Interpretation. When a reference is made in this Agreement to
an Article, a Section or Exhibit, such reference shall be to an Article or a
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. The word "or" when used in
this Agreement is not exclusive. All terms defined in this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and
assigns.
ARTICLE II
The Merger
SECTION 2.01. The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the "DGCL"), Sub shall be merged with and into the
Company at the Effective Time. Following the Effective Time, the separate
corporate existence of Sub shall cease, and the Company shall continue as the
surviving corporation in the Merger (the "Surviving Corporation").
SECTION 2.02. Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York time, on the second business day after the later
to occur of (i) satisfaction or, to the extent permitted by Law, waiver of the
conditions set forth in Article VII (other than those conditions that by their
terms are to be satisfied at the Closing, but subject to the satisfaction or, to
the extent permitted by Law, waiver of those conditions) and (ii) the date of
completion of the Bridge Marketing Period (or, if Parent so notifies the
Company, a date during the Bridge Marketing Period not less than three business
days following such notice to the Company), at the offices of Skadden, Arps,
Slate, Xxxxxxx & Xxxx LLP, Xxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, unless
another time, date or place is agreed to in writing by Parent and the Company.
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date."
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SECTION 2.03. Effective Time. Subject to the provisions of this Agreement,
as promptly as practicable on the Closing Date, the parties shall file a
certificate of merger (the "Certificate of Merger") in such form as is required
by, and executed and acknowledged in accordance with, the relevant provisions of
the DGCL and shall make all other filings and recordings required under the
DGCL. The Merger shall become effective at such date and time as the Certificate
of Merger is filed with the Secretary of State of the State of Delaware or at
such subsequent date and time as Parent and the Company shall agree and specify
in the Certificate of Merger. The date and time at which the Merger becomes
effective is referred to in this Agreement as the "Effective Time".
SECTION 2.04. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 2.05. Certificate of Incorporation and Bylaws. (a) The Certificate
of Incorporation of the Company, as amended (as in effect on the date hereof,
the "Company Certificate of Incorporation"), shall be amended at the Effective
Time to read the same as the certificate of incorporation of Sub as in effect
immediately prior to the Effective Time, and shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable Law; provided, however, that Article First
thereof shall read as follows: "The name of the Corporation is Xxxxxxxx'x
International, Inc. (hereinafter, the "Corporation")."
(b) The Amended and Restated Bylaws of the Company (as in effect on the
date hereof, the "Company Bylaws") shall be amended at the Effective Time to
read the same as the bylaws of Sub as in effect immediately prior to the
Effective Time, and shall be the bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
SECTION 2.06. Directors. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 2.07. Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
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ARTICLE III
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange Fund;
Company Equity Awards
SECTION 3.01. Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Parent or Sub:
(a) Capital Stock of Sub. Each share of capital stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock,
par value $0.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of
Company Common Stock that is held by the Company, as treasury stock, or
otherwise owned by Parent, Sub or any subsidiary of the Company immediately
prior to the Effective Time shall automatically be canceled and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time or issuable
pursuant to any outstanding options, warrants or other rights (including shares
of Company Restricted Stock, but excluding shares to be canceled in accordance
with Section 3.01(b) and, except as provided in Section 3.01(d), the Appraisal
Shares) shall be converted into the right to receive $25.50 in cash, without
interest (the "Merger Consideration"). At the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented any such shares of Company
Common Stock (each, a "Certificate") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares (the "Appraisal Shares") of Company Common Stock issued and
outstanding immediately prior to the Effective Time that are held by any holder
who is entitled to demand and properly demands appraisal of such shares pursuant
to, and who complies in all respects with, the provisions of Section 262 of the
DGCL ("Section 262") shall not be converted into the right to receive the Merger
Consideration as provided in Section 3.01(c), but instead such holder shall be
entitled to payment of the fair value of such shares in accordance with the
provisions of Section 262. At the Effective Time, the Appraisal Shares shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and each holder of Appraisal Shares shall cease to have any rights with
respect thereto, except the right to receive the fair value of such shares in
accordance with the provisions of Section 262. Notwithstanding the foregoing, if
any such holder shall fail to perfect or otherwise shall waive, withdraw or lose
9
the right to appraisal under Section 262 or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by
Section 262, then the right of such holder to be paid the fair value of such
holder's Appraisal Shares under Section 262 shall cease and such Appraisal
Shares shall be deemed to have been converted at the Effective Time into, and
shall have become, the right to receive the Merger Consideration as provided in
Section 3.01(c). The Company shall give prompt notice to Parent of any demands
for appraisal of any shares of Company Common Stock, withdrawals of such demands
and any other instruments served pursuant to the DGCL received by the Company,
and Parent shall have the right to participate in and direct all negotiations
and proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent, voluntarily make
any payment with respect to, or settle or offer to settle, any such demands, or
agree to do or commit to do any of the foregoing.
SECTION 3.02. Exchange Fund. (a) Paying Agent. Prior to the Closing Date,
Parent shall appoint a bank or trust company reasonably acceptable to the
Company to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration, the Option/SAR Amounts and the RSU Amounts in accordance
with this Article III and, in connection therewith, shall enter into an
agreement with the Paying Agent in a form reasonably acceptable to the Company.
At or prior to the Effective Time, Parent shall deposit, or shall cause the
Surviving Corporation to deposit, with the Paying Agent, cash in an amount
sufficient to pay the aggregate Merger Consideration, the aggregate Option/SAR
Amount and the RSU Amount, in each case as required to be paid pursuant to this
Agreement (such cash being hereinafter referred to as the "Exchange Fund").
(b) Certificate Exchange Procedures. As promptly as practicable after the
Effective Time, but in any event within two business days thereafter, Parent
shall cause the Paying Agent to mail to each holder of record of a Certificate
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent and which shall
otherwise be in customary form) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Each
holder of record of a Certificate shall, upon surrender to the Paying Agent of
such Certificate, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Paying Agent, be
entitled to receive in exchange therefor the amount of cash which the number of
shares of Company Common Stock previously represented by such Certificate shall
have been converted into the right to receive pursuant to Section 3.01(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment of the Merger Consideration may be made
to a person other than the person in whose name the Certificate so surrendered
is registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
fiduciary or surety bonds or any transfer or other similar taxes required by
reason of the payment of the Merger Consideration to a person other than the
registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable. Until
10
surrendered as contemplated by this Section 3.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration which the holder thereof
has the right to receive in respect of such Certificate pursuant to this Article
III. No interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article III.
(c) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock formerly represented by such Certificates.
At the close of business on the day on which the Effective Time occurs, the
stock transfer books of the Company shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificate is presented to the Surviving Corporation for transfer, it shall be
canceled against delivery of cash to the holder thereof as provided in this
Article III.
(d) Termination of the Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for nine months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article III shall
thereafter look only to Parent for, and Parent shall remain liable for, payment
of their claims for the Merger Consideration pursuant to the provisions of this
Article III.
(e) No Liability. None of Parent, Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash from the Exchange Fund delivered to a public official in compliance with
any applicable state, Federal or other abandoned property, escheat or similar
Law. If any Certificate shall not have been surrendered prior to the date on
which the related Merger Consideration would escheat to or become the property
of any Governmental Entity, any such Merger Consideration shall, to the extent
permitted by applicable Law, immediately prior to such time become the property
of Parent, free and clear of all claims or interest of any person previously
entitled thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest the cash in
the Exchange Fund as directed by Parent; provided, however, that such
investments shall be in obligations of or guaranteed by the United States of
America or any agency or instrumentality thereof and backed by the full faith
and credit of the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Xxxxx'x Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$1.0 billion (based on the most recent financial statements of such bank that
are then publicly available). Any interest and other income resulting from such
investments shall be paid solely to Parent. Nothing contained herein and no
investment losses resulting from investment of the Exchange Fund shall diminish
11
the rights of any holder of Certificates to receive the Merger Consideration or
any holder of a Company Stock Option or Company SAR to receive the Option/SAR
Amount or any holder of a Company RSU to receive the RSU Amount, in each case as
provided herein.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond or surety in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent shall deliver in exchange for such
lost, stolen or destroyed Certificate the applicable Merger Consideration with
respect thereto.
(h) Withholding Rights. Parent, the Surviving Corporation or the Paying
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company Common
Stock or any holder of a Company Stock Option, Company SAR or Company RSU such
amounts as Parent, the Surviving Corporation or the Paying Agent are required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax Law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock or the holder of the Company Stock Option, Company SAR or
Company RSU, as the case may be, in respect of which such deduction and
withholding was made by Parent, the Surviving Corporation or the Paying Agent.
SECTION 3.03. Company Equity Awards. (a) As soon as reasonably practicable
following the date of this Agreement the Board of Directors of the Company (or,
if appropriate, any committee administering any Company Stock Plan) shall adopt
such resolutions or take such other actions as may be required to provide that,
at the Effective Time, each unexercised Company Stock Option and each
unexercised Company SAR, whether vested or unvested and whether or not any
applicable performance conditions have been satisfied, in each case that is
outstanding immediately prior to the Effective Time, shall be canceled, with the
holder of each such Company Stock Option or Company SAR becoming entitled to
receive an amount in cash equal to (i) the excess, if any, of (A) the Merger
Consideration over (B) the exercise price per share of Company Common Stock
subject to such Company Stock Option or Company SAR, multiplied by (ii) the
number of shares of Company Common Stock subject to such Company Stock Option or
Company SAR (such amount, the "Option/SAR Amount"). All amounts payable pursuant
to this Section 3.03(a) shall be paid as promptly as practicable following the
Effective Time, without interest.
(b) As soon as reasonably practicable following the date of this Agreement
the Board of Directors of the Company (or, if appropriate, any committee
administering any Company Stock Plan) shall adopt such resolutions or take such
other actions as may be required to provide that, at the Effective Time, each
Company RSU that is outstanding immediately prior to the Effective Time shall
vest in full and shall be converted into the right to receive the Merger
Consideration in accordance with Section 3.01(c) (such amount, the "RSU
Amount").
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(c) With respect to the ESPPs, each share of Company Common Stock purchased
thereunder shall be canceled at the Effective Time and converted into the right
to receive the Merger Consideration pursuant to Section 3.01(c). As soon as
reasonably practicable following the date of this Agreement, the Company shall
take any and all actions with respect to the ESPPs as are necessary to provide
that (i) participants may not increase their payroll deductions from those in
effect on the date of this Agreement, (ii) no offerings shall be commenced after
the date of this Agreement and (iii) the offerings that are in effect on the
date of this Agreement (the "Current Offering Periods") shall continue in
accordance with the applicable terms of the ESPPs, and each share of Company
Common Stock purchased by a participant on the last day of either ESPP's Current
Offering Period (each, an "Offering Period Last Day") shall be converted into
the right to receive the Merger Consideration in accordance with Section
3.01(c); provided that, notwithstanding the foregoing, if the Closing occurs
prior to an ESPP's Offering Period Last Day, each participant's payroll
deductions accumulated as of the Effective Time for the Current Offering Period
of such ESPP shall be applied to the purchase of a number of whole shares of
Company Common Stock, at a purchase price determined as if the Closing Date were
such ESPP's Offering Period Last Day, which number of shares shall be canceled
and converted into the right to receive the Merger Consideration in accordance
with Section 3.01(c). Each ESPP shall terminate immediately following the
earlier of its Offering Period Last Day or the Closing Date (the "ESPP
Termination Date"). Any excess payroll deductions not used to purchase shares or
determine payment amounts pursuant to this Section 3.03(c) as a result of ESPP
share limitations or fractional share limitations shall be distributed to the
applicable participant immediately following the ESPP Termination Date, without
interest.
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the Company. Except as
disclosed in any report, schedule, form, statement or other document filed with,
or furnished to, the Securities and Exchange Commission (the "SEC") by the
Company and publicly available prior to the date of this Agreement
(collectively, the "Filed SEC Documents") or as set forth in the Company
Disclosure Letter (it being understood that any information set forth in one
section or subsection of the Company Disclosure Letter shall be deemed to apply
to and qualify the Section or subsection of this Agreement to which it
corresponds in number and each other Section or subsection of this Agreement to
the extent that it is reasonably apparent that such information is relevant to
such other Section or subsection, the Company represents and warrants to Parent
and Sub as follows:
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(a) Organization, Standing and Corporate Power. Each of the Company and its
Subsidiaries is duly organized and validly existing under the Laws of its
jurisdiction of organization and has all requisite corporate, company or
partnership power and authority to carry on its business as currently conducted.
Each of the Company and its Subsidiaries is duly qualified or licensed to do
business and is in good standing (where such concept is recognized under
applicable Law) in each jurisdiction where the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, other than where the failure to be so qualified, licensed
or in good standing, individually or in the aggregate, has not had or would not
reasonably be expected to have a Material Adverse Effect. The Company has made
available to Parent prior to the execution of this Agreement a true and complete
copy of the Company Certificate of Incorporation and the Company Bylaws and the
comparable organizational documents of each of its Subsidiaries, in each case as
in effect on the date of this Agreement.
(b) Subsidiaries. Section 4.01(b) of the Company Disclosure Letter lists
each Subsidiary of the Company and the jurisdiction of organization thereof. All
outstanding shares of capital stock of, or other equity interests in, each
Subsidiary of the Company are owned by the Company or any Subsidiary of the
Company and have been (to the extent such concepts are relevant with respect to
such ownership interests) validly issued and are fully paid and nonassessable
and are owned, directly or indirectly, by the Company free and clear of all
pledges, liens, charges, mortgages, encumbrances or security interests of any
kind or nature whatsoever (collectively, "Liens"), other than Permitted Liens.
Except for its interests in its Subsidiaries, the Company does not own, directly
or indirectly, any capital stock of, or other equity interests in, any
corporation, partnership, joint venture, association or other entity.
(c) Capital Structure. (i) The authorized capital stock of the Company
consists of 125,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, par value $0.01 per share (the "Company Preferred Stock"). At
the close of business on July 11, 2007, (A) (1) 74,946,095 shares of Company
Common Stock were issued and outstanding (which number includes 771,887 shares
of Company Common Stock subject to vesting or other forfeiture conditions or
repurchase by the Company (such shares, together with any similar shares issued
after July 11, 2007 in accordance with the terms of this Agreement, the "Company
Restricted Stock")) and (2) 33,557,148 shares of Company Common Stock are held
by the Company in its treasury, (B) 11,668,500 shares of Company Common Stock
were reserved and available for issuance pursuant to the Amended and Restated
1995 Equity Incentive Plan, the 1999 Employee Incentive Plan, the Employee Stock
Purchase Plan and the Executive Nonqualified Stock Purchase Plan (such employee
stock purchase plans, the "ESPPs"; the foregoing plans, collectively, the
"Company Stock Plans"), of which (1) 6,369,335 shares of Company Common Stock
were subject to outstanding options (other than rights under the ESPPs) to
acquire shares of Company Common Stock from the Company (such options, together
with any similar options granted after July 11, 2007 in accordance with the
terms of this Agreement, the "Company Stock Options"), (2) 1,362,222 shares of
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Company Common Stock were subject to outstanding stock appreciation rights (such
stock appreciation rights, together with any similar stock appreciation rights
granted after July 11, 2007, the "Company SARs") and (3) 6,595 shares of Company
Common Stock were subject to outstanding restricted stock units (such restricted
stock units, together with any similar restricted stock units granted after July
11, 2007 in accordance with the terms of this Agreement, the "Company RSUs") (4)
no shares of Company Common Stock were subject to outstanding rights under the
ESPPs (assuming that the closing price for the Company Common Stock as reported
on the NASDAQ Stock Market on the last day of the offering periods in effect
under the ESPPs on July 11, 2007 was equal to the Merger Consideration) and (C)
no shares of Company Preferred Stock were issued or outstanding or held by the
Company in its treasury. Except as set forth above, at the close of business on
July 11, 2007, no shares of capital stock or other voting securities of the
Company were issued, reserved for issuance or outstanding. Since July 11, 2007
to the date of this Agreement, (x) there have been no issuances by the Company
of shares of capital stock or other voting securities of the Company, other than
issuances of shares of Company Common Stock pursuant to the exercise of the
Company Stock Options or Company SARs or rights under the ESPPs, in each case
outstanding as of July 11, 2007, and (y) there have been no issuances by the
Company of options, warrants, other rights to acquire shares of capital stock of
the Company or other rights that give the holder thereof any economic interest
of a nature accruing to the holders of Company Common Stock, except for rights
under the ESPPs. All outstanding shares of Company Common Stock are, and all
such shares that may be issued prior to the Effective Time will be when issued,
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of the Company having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which holders of
Company Common Stock may vote ("Voting Company Debt"). Except for any
obligations pursuant to this Agreement or as otherwise set forth above, as of
July 11, 2007, there are no options, warrants, rights, convertible or
exchangeable securities, stock-based performance units, Contracts or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound (1) obligating the Company or any such
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other equity interests in, or any security
convertible or exchangeable for any capital stock of or other equity interest
in, the Company or of any of its Subsidiaries or any Voting Company Debt, (2)
obligating the Company or any such Subsidiary to issue, grant or enter into any
such option, warrant, right, security, unit, Contract or undertaking or (3) that
give any person the right to receive any economic interest of a nature accruing
to the holders of Company Common Stock. As of the date of this Agreement, there
are no outstanding contractual obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any such Subsidiary, other than pursuant to the Company
Stock Plans.
(ii) There are no voting trusts or other agreements to which the
Company is a party with respect to the voting of the Company Common Stock.
15
(iii) Following the Effective Time, no holder of Company Stock Options
will have any right to receive shares of Company Common Stock upon exercise
of Company Stock Options.
(iv) Except as disclosed in Section 4.01(c)(iv) of the Company
Disclosure Letter, no Indebtedness of the Company or any of its
Subsidiaries contains any restriction upon (A) the prepayment of any of
such Indebtedness, (B) the incurrence of Indebtedness by the Company or any
of its Subsidiaries, or (C) the ability of the Company or any of its
Subsidiaries to grant any lien on its properties or assets. As used in this
Agreement, "Indebtedness" means (1) all indebtedness for borrowed money,
(2) any other indebtedness that is evidenced by a note, bond, debenture or
similar instrument, (3) all obligations under capital leases, (4) all
obligations in respect of outstanding letters of credit and (5) all
guarantee obligations.
(v) The Company has made available to Parent a list of all Company
Stock Options, Company RSUs and Company SARs outstanding as of the date
hereof and the name of the holder thereof, the exercise price thereof, and
the number of units, rights or shares of Company Common Stock which are the
subject of each such Company Stock Option, Company RSU and Company SAR, as
applicable.
(vi) Section 4.01(c)(vii) of the Company Disclosure Letter lists all
Indebtedness outstanding as of the date of this Agreement.
(vii) No agreement or understanding requires consent or approval from
the holder of any Company Stock Option to effectuate the terms of this
Agreement.
(d) Authority; Noncontravention. The Company has all requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement, subject, in the case of the Merger,
to receipt of the Stockholder Approval. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of the Merger,
to receipt of the Stockholder Approval. This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by each of the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other Laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The Board of Directors of the Company, at a
meeting duly called and held at which all directors of the Company were present,
duly adopted resolutions (i) approving and declaring advisable this Agreement,
the Merger and the other transactions contemplated by this Agreement, (ii)
declaring that it is in the best interests of the stockholders of the Company
that the Company enter into this Agreement and consummate the Merger and the
16
other transactions contemplated by this Agreement on the terms and subject to
the conditions set forth herein, (iii) directing that the adoption of this
Agreement be submitted to a vote at a meeting of the stockholders of the Company
and (iv) recommending that the stockholders of the Company adopt this Agreement
(the "Recommendation"), which resolutions, as of the date of this Agreement,
have not been rescinded, modified or withdrawn in any way. The execution and
delivery by the Company of this Agreement do not, and the consummation of the
Merger and the other transactions contemplated by this Agreement and compliance
with the provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a benefit under, or result in the creation of
any Lien upon any of the properties or assets of the Company or any of its
Subsidiaries under (other than any such Lien created from any action taken by
Parent or Sub), any provision of (A) the Company Certificate of Incorporation,
the Company Bylaws or the comparable organizational documents of any of its
Subsidiaries or (B) subject to the filings and other matters referred to in the
immediately following sentence, (1) any contract, lease, license agreement,
indenture, note, bond or other agreement (a "Contract") to which the Company or
any of its Subsidiaries is a party or by which any of their respective
properties or assets are bound, other than any lease of real property under
which the Company or any of its Subsidiaries is a tenant or a subtenant, or (2)
any constitution, statute, law, ordinance, rule or regulation of any
Governmental Entity ("Law") or any judgment, order or decree of any Governmental
Entity ("Judgment"), in each case applicable to the Company or any of its
Subsidiaries or their respective properties or assets, other than, in the case
of clause (B) above, any such conflicts, violations, defaults, rights, losses or
Liens that would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. No consent, approval, order or authorization
of, or registration, declaration or filing with, or notice to, any Federal,
state, local or foreign government, any court of competent jurisdiction or any
administrative, regulatory (including any stock exchange) or other governmental
agency, commission or authority (each, a "Governmental Entity") is required to
be obtained or made by or with respect to the Company or any of its Subsidiaries
in connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the Merger or the other transactions
contemplated by this Agreement, except for (I) the filing of a premerger
notification and report form by the Company under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the filings
and receipt, termination or expiration, as applicable, of such other approvals
or waiting periods as may be required under any other applicable competition,
merger control, antitrust or similar Law, (II) the filing with the SEC of (x) a
proxy statement relating to the adoption by the stockholders of the Company of
this Agreement (as amended or supplemented from time to time, the "Proxy
Statement") and (y) such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement and the transactions contemplated by this Agreement, (III) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and of appropriate documents with the relevant authorities of other
jurisdictions in which the Company or any of its Subsidiaries is qualified to do
business, (IV) any filings required under the rules and regulations of the
NASDAQ Stock Market, (V) the consents, approvals, orders, authorizations,
registrations, declarations, filings and notices set forth in Section 4.01(d) of
17
the Company Disclosure Schedule and (VI) such other consents, approvals, orders,
authorizations, registrations, declarations, filings and notices the failure of
which to be obtained or made would not, individually or in the aggregate,
reasonably be expected (x) to have a Material Adverse Effect or (y) to prevent
or materially delay the Company from consummating the Merger or from observing
or performing its material obligations hereunder.
(e) SEC Documents. The Company has filed all reports, schedules, forms,
statements and other documents with the SEC required to be filed by the Company
since January 1, 2005 (the "SEC Documents"). As of their respective dates of
filing, the SEC Documents complied as to form in all material respects with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable thereto, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and the unaudited
quarterly financial statements (including, in each case, the notes thereto) of
the Company included in the SEC Documents when filed complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited quarterly statements, as permitted by Form 10-Q of the SEC or other
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end adjustments). Except for matters reflected or reserved against in the
audited consolidated balance sheet of the Company as of December 31, 2006 (or
the notes thereto) included in the Filed SEC Documents, neither the Company nor
any of its Subsidiaries has any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise) of any nature that would be required
under GAAP, as in effect on the date of this Agreement, to be reflected on a
consolidated balance sheet of the Company (including the notes thereto), except
liabilities and obligations that (i) were incurred since December 31, 2006 in
the ordinary course of business consistent with past practice, (ii) are incurred
in connection with the transactions contemplated by this Agreement or (iii)
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. To the Knowledge of the Company, none of the Company's
Filed SEC Documents is the subject of ongoing SEC review, outstanding SEC
comments or outstanding SEC investigation.
(f) Information Supplied. The Proxy Statement will not, at the date it is
first mailed to the stockholders of the Company and at the time of the
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
18
to make the statements therein, in light of the circumstances under which they
are made, not misleading, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub for inclusion or incorporation by
reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. From December 31, 2006 through
the date of this Agreement, there has not been or would reasonably be expected
to be a Material Adverse Effect, and the Company and its Subsidiaries have
conducted their businesses only in the ordinary course of business consistent
with past practice, and during such period there has not been:
(i) any declaration, setting aside or payment of any dividend on, or
making of any other distribution (whether in cash, stock or property) with
respect to, any capital stock of the Company;
(ii) any split, combination or reclassification of any capital stock
of the Company or any issuance or the authorization of any issuance of any
other securities in lieu of or in substitution for shares of capital stock
of the Company;
(iii) any purchase, redemption or other acquisition by the Company or
any of its Subsidiaries of any shares of capital stock of the Company or
any of its Subsidiaries or any rights, warrants or options to acquire any
such shares, other than (A) the acquisition by the Company of shares of
Company Common Stock in connection with the surrender of shares of Company
Common Stock by holders of Company Stock Options in order to pay the
exercise price thereof, (B) the withholding of shares of Company Common
Stock to satisfy tax obligations with respect to awards granted pursuant to
the Company Stock Plans, and (C) the acquisition by the Company of Company
Stock Options, Company SARs and Company RSUs and shares of Company
Restricted Stock in connection with the forfeiture of such awards;
(iv) any (A) granting to any director or executive officer of the
Company or any of its Subsidiaries of any material increase in
compensation, (B) granting to any director or executive officer of the
Company or any of its Subsidiaries of any increase in severance or
termination pay or (C) entry by the Company or any of its Subsidiaries into
any employment, consulting, severance or termination agreement with any
director, executive officer or employee of the Company or any of its
Subsidiaries pursuant to which the total annual compensation or the
aggregate severance benefits exceed $500,000 per person;
(v) any change in accounting methods, principles or practices by the
Company or any of its Subsidiaries materially affecting the consolidated
assets, liabilities or results of operations of the Company, except as
required (A) by GAAP (or any interpretation thereof), including as may be
required by the Financial Accounting Standards Board or any similar
organization, or (B) by Law, including Regulation S-X under the Securities
Act;
19
(vi) any material tax election by the Company or any of its
Subsidiaries; or
(vii) any sales of real estate or restaurants, or any Contract with
respect to any such sale.
(h) Litigation. There is no suit, action or proceeding pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries that, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or to prevent the Company from
consummating the Merger. There is no Judgment outstanding against the Company or
any of its Subsidiaries that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect or to prevent the Company from
consummating the Merger. This Section 4.01(h) does not relate to environmental
matters, which are the subject of Section 4.01(j)(ii).
(i) Contracts. Except for (A) this Agreement, (B) Contracts filed as
exhibits to the Filed SEC Documents (the "Filed Exhibits") (C) the Franchise
Agreements and (D) purchase orders entered into in the ordinary course of
business, Section 4.01(i) of the Company Disclosure Letter sets forth a true and
complete list, as of the date of this Agreement, and the Company has made
available to Parent true and complete copies, of:
(i) each Contract that would be required to be filed by the Company as
a "material contract" pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act;
(ii) each Franchise Agreement that is a master franchise agreement,
development agreement or market development agreement;
(iii) each loan and credit agreement, note, debenture, bond, indenture
and other similar Contract pursuant to which any Indebtedness of the
Company or any of its Subsidiaries, in each case in excess of $10.0 million
is outstanding or may be incurred, other than any such Contract between or
among any of the Company and any of its Subsidiaries and any letters of
credit; and
(iv) any Contract pursuant to which the Company or any of its
Subsidiaries (A) licensed any material Intellectual Property Rights from
any person, or (B) materially restricted its, or its Affiliates', rights to
own or use, exploit, or license any registered or material unregistered
Intellectual Property Rights owned by the Company or an Affiliate of the
Company.
Each Filed Exhibit, Franchise Agreement and such Contract described in clauses
(i) through (iv) above is referred to herein as a "Specified Contract". Each of
the Specified Contracts is valid and binding on the Company or the Subsidiary of
the Company party thereto and, to the Knowledge of the Company, each other party
thereto, and is in full force and effect, except for such failures to be valid
20
and binding or to be in full force and effect that, individually or in the
aggregate, have not had or would not reasonably be expected to have a Material
Adverse Effect. There is no default under any Specified Contract by the Company
or any of its Subsidiaries or, to the Knowledge of the Company, by any other
party thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by the Company or
any of its Subsidiaries or, to the Knowledge of the Company, by any other party
thereto, in each case except as, individually or in the aggregate, has not had
or would not reasonably be expected to have a Material Adverse Effect. This
Section 4.01(i) does not relate to real property leases, which are the subject
of Section 4.01(n).
(j) Compliance with Laws; Environmental Matters. (i) Each of the Company
and its Subsidiaries is in compliance with all Laws applicable to its business
or operations (including the Xxxxxxxx-Xxxxx Act of 2002), except for instances
of possible noncompliance that, individually or in the aggregate, have not had
or would not reasonably be expected to have a Material Adverse Effect. Each of
the Company and its Subsidiaries has in effect all approvals, authorizations,
certificates, franchises, licenses, permits and consents of Governmental
Entities (collectively, "Permits") necessary for it to conduct its business as
currently conducted, and all such Permits are in full force and effect, except
for such Permits the absence of which, or the failure of which to be in full
force and effect, individually or in the aggregate, has not had or would not
reasonably be expected to have a Material Adverse Effect. This Section
4.01(j)(i) does not relate to environmental matters, which are the subject of
Section 4.01(j)(ii), employee benefit matters, which are the subject of Section
4.01(l), and taxes, which are the subject of Section 4.01(m).
(ii) (A) Except for those matters that, individually or in the
aggregate, have not had or would not reasonably be expected to have a
Material Adverse Effect, (1) each of the Company and its Subsidiaries is in
compliance with all applicable Environmental Laws, and neither the Company
nor any of its Subsidiaries has received any written communication alleging
that the Company is in violation of, or has any liability under, any
Environmental Laws, (2) each of the Company and its Subsidiaries validly
possesses and is in compliance with all Permits required under
Environmental Laws to conduct its business as currently conducted, and all
such Permits are valid and in good standing, (3) there are no Environmental
Claims pending or, to the Knowledge of the Company, threatened against the
Company, any of its Subsidiaries or, to the Knowledge of the Company, any
person whose liability for such Environmental Claim the Company has
retained or assumed either contractually or by operation of Law, (4) none
of the Company or any of its Subsidiaries has Released any Hazardous
Materials at, on, under or from any of the Owned Real Property, the Leased
Real Property or any other property in a manner that would reasonably be
expected to result in an Environmental Claim against the Company, any of
its Subsidiaries or any person whose liability for any Environmental Claim
the Company has retained or assumed either contractually or by operation of
21
Law, and (5) to the Knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence
or disposal of any Hazardous Materials that are reasonably expected to form
the basis of any Environmental Claim against the Company or against any
person whose liability for any Environmental Claim the Company has retained
or assumed either contractually or by operation of Law.
(B) Each of the Company and its Subsidiaries has provided to Parent
all material assessments, reports, data, results of investigations or
audits, and other information that is in the possession of or reasonably
available to the Company and its Subsidiaries regarding environmental
matters pertaining to the business of each of the Company and its
Subsidiaries, or the compliance (or noncompliance) by the Company and its
Subsidiaries with any Environmental Laws.
(C) The Company is not required by virtue of the transactions set
forth herein and contemplated hereby, or as a condition to the
effectiveness of any transactions contemplated hereby, (i) to perform a
site assessment for Hazardous Materials, (ii) to remove or remediate
Hazardous Materials, (iii) to give notice to or receive approval from any
governmental authority under Environmental Laws, or (iv) to record or
deliver to any person or entity any disclosure document or statement
pertaining to environmental matters.
(D) The term "Environmental Claims" means any administrative or
judicial actions, suits, orders, claims, proceedings or written or oral
notices of noncompliance by or from any person alleging liability arising
out of the Release of or exposure to any Hazardous Material or the failure
to comply with any Environmental Law. The term "Environmental Law" means
any Law relating to pollution, the environment or natural resources. The
term "Hazardous Materials" means (1) petroleum and petroleum by-products,
asbestos in any form that is or could reasonably become friable,
radioactive materials, medical or infectious wastes, or polychlorinated
biphenyls, and (2) any other chemical, material, substance or waste that
may have an adverse effect on human health or the environment or is
prohibited, limited or regulated because of its hazardous, toxic or
deleterious properties or characteristics. The term "Release" means any
release, spill, emission, leaking, pumping, emitting, discharging,
injecting, escaping, leaching, dumping, disposing or migrating into or
through the environment.
(k) Labor and Employment Matters.
(i) No employees of the Company or any of its Subsidiaries are
represented by any labor union, labor organization, trade union or works
council with respect to their employment with the Company or any of its
Subsidiaries. The Company, each of its Subsidiaries, and their respective
employees, agents or representatives have not committed any material unfair
22
labor practice as defined in the National Labor Relations Act or other
applicable Law. The Company and each of its Subsidiaries are neither party
to nor bound by (and none of their respective properties or assets is bound
by or subject to) any labor agreement, collective bargaining agreement,
work rules or practices, or any other labor-related agreements or
arrangements with any labor union, labor organization, trade union or works
council. There are no labor agreements, collective bargaining agreements,
work rules or practices, or any other labor-related agreements or
arrangements that pertain to any of the employees of the Company or any of
its Subsidiaries.
(ii) To the knowledge of the Company, (A) no labor union, labor
organization, trade union, works council, or group of employees of the
Company or any of its Subsidiaries has made a pending demand before the
National Labor Relations Board or any other labor relations tribunal or
authority for recognition or certification, and (B) there are no
representation or certification proceedings or petitions seeking a
representation or certification proceeding currently pending or threatened
in writing to be brought or filed with the National Labor Relations Board
or any other labor relations tribunal or authority. To the Knowledge of the
Company, there are no labor union organizing activities with respect to any
employees of the Company or any of its Subsidiaries. There are no actual
or, to the Knowledge of the Company, threatened material arbitrations,
material grievances, material labor disputes, strikes, lockouts, material
slowdowns or material work stoppages against or affecting the Company or
any of its Subsidiaries nor has there been any of the foregoing during the
3-year period immediately preceding the date of this Agreement.
(iii) The Company and each of its Subsidiaries are and have been in
material compliance with all applicable Laws respecting employment and
employment practices, including, without limitation, all Laws respecting
terms and conditions of employment, health and safety, wages and hours,
child labor, immigration, employment discrimination, disability rights or
benefits, equal opportunity, plant closures and layoffs, affirmative
action, workers' compensation, labor relations, employee leave issues and
unemployment insurance. The Company and each of its Subsidiaries are not in
any material respect delinquent in payments to any employees or former
employees for any services or amounts required to be reimbursed or
otherwise paid. Neither the Company nor any of its Subsidiaries is a party
to, or otherwise bound by, any order of any Governmental Entity relating to
employees or employment practices.
(iv) The Company and each of its Subsidiaries have not received notice
of (A) any material unfair labor practice charge or complaint pending or
threatened before the National Labor Relations Board or any other
Governmental Entity against them, (B) any material complaints, material
grievances or material arbitrations against them arising out of any
23
collective bargaining agreement, (C) any material charge or material
complaint with respect to or relating to them pending before the Equal
Employment Opportunity Commission or any other Governmental Entity
responsible for the prevention of unlawful employment practices, (D) the
intent of any Governmental Entity responsible for the enforcement of labor,
employment, wages and hours of work, child labor, immigration, or
occupational safety and health Laws to conduct a material investigation
with respect to or relating to them or notice that such investigation is in
progress, or (E) any material complaint, material lawsuit or other material
proceeding pending or threatened in any forum by or on behalf of any
present or former employee of such entities, any applicant for employment
or classes of the foregoing alleging breach of any express or implied
contract of employment, any applicable Law governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct
in connection with the employment relationship.
(v) Neither the Company nor any of its Subsidiaries is, as of the date
of this Agreement, engaged in any layoffs or employment terminations
sufficient in number to trigger application of the WARN Act or any similar
state, local or foreign Law.
(l) Employee Benefit Matters.
(i) Section 4.01(l)(i)(A) of the Company Disclosure Letter sets forth
a complete and accurate list of each (A) pension plan (as defined in
Section 3(2) of ERISA) or post-retirement or employment health or medical
plan, program, policy or arrangement, (B) bonus, incentive or deferred
compensation or equity or equity-based compensation plan, program, policy
or arrangement, (C) severance, change in control, retention or termination
plan, program, policy or arrangement or (D) other material compensation or
benefit plan, program, policy or arrangement, in each case, sponsored,
maintained, contributed to or required to be maintained or contributed to
by the Company, any of its Subsidiaries or any other person or entity that,
together with the Company, is treated as a single employer under Section
414 of the Code (each, a "Commonly Controlled Entity") for the benefit of
any current or former director, officer, employee or independent contractor
of the Company or any of its Subsidiaries, other than any plan, program,
policy or arrangement mandated by applicable Law (each, a "Company Benefit
Plan"). Section 4.01(l)(i)(B) of the Company Disclosure Letter sets forth a
complete and accurate list of each employment, consulting, bonus, incentive
or deferred compensation, equity or equity-based compensation, severance,
change in control, retention, termination or other Contract between the
Company or any of its Subsidiaries, on the one hand, and any current or
former director, officer, employee or independent contractor of the Company
or any of its Subsidiaries, on the other hand, other than any Contract
mandated by applicable Law (each, a "Company Benefit Agreement"). With
24
respect to each Company Benefit Plan and each Company Benefit Agreement,
the Company has provided to Parent complete and accurate copies of each of
the following documents, as applicable (A) such Company Benefit Plan or
Company Benefit Agreement (including all amendments thereto) for each any
such Company Benefit Plan or Company Benefit Agreement that is written or a
written description of any such Company Benefit Plan or Company Benefit
Agreement that is not otherwise in writing; (B) a copy of the annual
reports or Internal Revenue Service Form 5500 Series, if required under
ERISA, for the last three plan years ending prior to the date of this
Agreement for which such a report was filed; (C) a copy of the actuarial
report, if required under ERISA, for the last three plan years ending prior
to the date of this Agreement; (D) a copy of the most recent Summary Plan
Description ("SPD"), together with all Summaries of Material Modification
issued with respect to such SPD, if required under ERISA, and all other
material employee communications relating to each Company Benefit Plan and
Company Benefit Agreement; (E) if such Company Benefit Plan or Company
Benefit Agreement is funded through a trust or any other funding vehicle, a
copy of the trust or other funding agreement (including all amendments
thereto) and the latest financial statements thereof, if any; (F) all
contracts relating to such Company Benefit Plans or Company Benefit
Agreements with respect to which the Company, any of its Subsidiaries or
any Commonly Controlled Entity may have any liability, including insurance
contracts, investment management agreements, subscription and participation
agreements and record keeping agreements; and (G) the most recent
determination letter received from the Internal Revenue Service with
respect to any such Company Benefit Plan that is intended to be qualified
under Section 401(a) of the Code.
(ii) Each Company Benefit Plan and Company Benefit Agreement (and any
related trust or other funding vehicle) has been administered in accordance
with its terms and is in compliance with ERISA, the Code and all other
applicable Laws, other than instances of noncompliance that, individually
or in the aggregate, have not had or would not reasonably be expected to
have a Material Adverse Effect. Each of the Company and its Subsidiaries is
in compliance with ERISA, the Code and all other Laws applicable to Company
Benefit Plans and Company Benefit Agreements, other than instances of
noncompliance that, individually or in the aggregate, have not had or would
not reasonably be expected to have a Material Adverse Effect.
(iii) None of the Company, any of its Subsidiaries or any Commonly
Controlled Entity has sponsored, maintained, contributed to or been
required to maintain or contribute to, or has any actual or contingent
liability under, any Company Benefit Plan that is subject to Section 302 or
Title IV of ERISA or Section 412 of the Code or is otherwise a defined
benefit plan. No Company Benefit Plan or Company Benefit Agreement provides
health, medical or other welfare benefits after retirement or other
termination of employment (other than for continuation coverage required
under Section 4980(B)(f) of the Code or other similar applicable Law), and
no circumstances exist that could result in the Company or any of its
Subsidiaries becoming obligated to provide any such benefits.
25
(iv) None of the execution and delivery of this Agreement, the
obtaining of the Stockholder Approval or the consummation of the Merger or
any other transaction contemplated by this Agreement (alone or in
conjunction with any other event, including any termination of employment
on or following the Effective Time) will (A) entitle any current or former
director, officer, employee or independent contractor of the Company or any
of its Subsidiaries to any compensation or benefits, (B) accelerate the
time of payment or vesting, or trigger any payment or funding, of any
compensation or benefits or trigger any other material obligation under any
Company Benefit Plan or Company Benefit Agreement or (C) result in any
breach or violation of or default under, or limit the Company's right to
amend, modify or terminate, any collective bargaining agreement, Company
Benefit Plan or Company Benefit Agreement.
(v) No amounts payable under any of the Company Benefit Plans, Company
Benefit Agreements, or any other contract, agreement or arrangement with
respect to which the Company or any of its Subsidiaries may have liability
could fail to be deductible for federal income tax purposes by virtue of
Section 162(m) or Section 280G of the Code.
(vi) None of the Company, any of its Subsidiaries or any Commonly
Controlled Entity has ever maintained, administered, contributed to or is
currently required to contribute to any "multiemployer plan" as defined in
sections 4001(a)(3) and 3(37) of ERISA that covers one or more employees
(each a "Multiemployer Plan"). None of the Company, any of its
Subsidiaries, or any Commonly Controlled Entity has, at any time, withdrawn
from a Multiemployer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205 of ERISA, respectively, so
as to result in a liability of the Company or any of its Subsidiaries. All
contributions required to be made by the Company, any of its Subsidiaries
or any Commonly Controlled Entity to each Multiemployer Plan on behalf of
one or more current or former employees have been made when due in all
material respects. The Company has received no written notice that: (A) a
Multiemployer Plan has been terminated or has been in reorganization under
ERISA so as to result in any liability of the Company or any of its
Subsidiaries under Title IV of ERISA; or (B) any proceeding has been
initiated by any person (including the Pension Benefit Guaranty
Corporation) to terminate any Multiemployer Plan.
(vii) Each Company Benefit Plan and Company Benefit Agreement that is
a "nonqualified deferred compensation plan" (as defined in Code Section
409A(d)(1)) subject to Code Section 409A has been operated since January 1,
2005 in good faith compliance with Code Section 409A, the regulations and
guidance promulgated thereunder.
26
(viii) No Company Benefit Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect
to current or former employees of the Company, its Subsidiaries or any
Commonly Controlled Entity after retirement or other termination of service
(other than (A) coverage mandated by applicable Laws, (B) death benefits or
retirement benefits under any "employee pension plan," as such term is
defined in Section 3(2) of ERISA, (C) deferred compensation benefits
accrued as liabilities on the books of the Company, any of its Subsidiaries
or a Commonly Controlled Entity, or (D) benefits the full direct cost of
which is borne by the current or former employee (or beneficiary thereof)).
(ix) To the Knowledge of the Company, there are no pending or
threatened material claims, individually or in the aggregate, by or on
behalf of any Company Benefit Plan, by any employee or beneficiary under
any Company Benefit Plan or otherwise involving any such Company Benefit
Plan (other than routine claims for benefits).
(m) Taxes. (i) Each of the Company and its Subsidiaries has filed or has
caused to be filed all material tax returns required to be filed by it (or
requests for extensions, which requests have been granted and have not expired),
and all such returns are complete and accurate in all material respects. Each of
the Company and its Subsidiaries has either paid or caused to be paid all
material taxes due and owing by the Company and its Subsidiaries to any
Governmental Entity, or the most recent financial statements contained in the
Filed SEC Documents reflect an adequate reserve (excluding any reserves for
deferred taxes), if such a reserve is required by GAAP, for all material taxes
payable by the Company and its Subsidiaries, for all taxable periods and
portions thereof ending on or before the date of such financial statements.
(ii) No deficiencies, audit examinations, refund litigation, proposed
adjustments or matters in controversy for any material taxes (other than
taxes that are not yet due and payable or for amounts being contested in
good faith) have been proposed, asserted or assessed in writing against the
Company or any of its Subsidiaries which have not been settled and paid.
All assessments for material taxes due and owing by the Company or any of
its Subsidiaries with respect to completed and settled examinations or
concluded litigation have been paid. There is no currently effective
agreement or other document with respect to the Company or any of its
Subsidiaries extending the period of assessment or collection of any
material taxes.
(iii) Neither the Company nor any of its Subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying for tax-free treatment under Section 355
of the Code (A) in the two years prior to the date of this Agreement or (B)
which could otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
27
(iv) None of the Company or any of its Subsidiaries has entered into
any transaction defined in Treasury Regulation Sections 1.6011-4(b)(2),
-4(b)(3) or -4(b)(4), or has entered into a "potentially abusive tax
shelter" (as defined in Treasury Regulation Section 301.6112-1(b)).
(v) Neither the Company nor any of its Subsidiaries is party to any
material tax sharing, tax allocation or similar agreement with any other
party except each other.
(vi) None of the Company nor any of its Subsidiaries is or has been a
member of a consolidated, combined, unitary or similar group with any party
except the other since January 1, 2004.
(vii) Neither the Company nor any of its Subsidiaries is bound by any
closing agreement, offer in compromise or other agreement with any
Governmental Entity, in each case, involving a material amount of taxes.
(viii) The Company has made available to Parent and Sub complete and
correct copies of all United States federal tax returns and material state
income or franchise tax returns filed by or on behalf of the Company or any
of its Subsidiaries for all taxable periods beginning on or after January
1, 2004.
(ix) The term "taxes" means all income, profits, capital gains, goods
and services, branch, payroll, unemployment, customs duties, premium,
compensation, windfall profits, franchise, gross receipts, capital, net
worth, sales, use, withholding, turnover, value added, ad valorem,
registration, general business, employment, social security, disability,
occupation, real property, personal property (tangible and intangible),
stamp, transfer (including real property transfer or gains), conveyance,
severance, production, excise, withholdings, duties, levies, imposts,
license, registration and other taxes (including any and all fines,
penalties and additions attributable to or otherwise imposed on or with
respect to any such taxes and interest thereon) imposed by or on behalf of
any Governmental Entity. The term "tax return" means any return, statement,
report, form, filing, customs entry, customs reconciliation and any other
entry or reconciliation, including in each case any amendments, schedules
or attachments thereto, required to be filed with any Governmental Entity
or with respect to taxes of the Company or its Subsidiaries.
(n) Title to Properties. (i) Section 4.01(n)(i) of the Company Disclosure
Letter sets forth, as of the date of this Agreement, a true and complete list of
all real property owned by the Company and its Subsidiaries (individually, an
"Owned Real Property"), including whether any Owned Real Properties are
currently on the market for sale.
(ii) Section 4.01(n)(ii) of the Company Disclosure Letter sets forth,
as of the date of this Agreement, a true and complete list of all leases of
28
real property (the "Real Property Leases") under which the Company or any
of its Subsidiaries is a tenant or a subtenant and has annual rent
obligations in excess of $50,000 (individually, a "Leased Real Property").
(iii) (A) the Company or a Subsidiary of the Company has good and
valid fee simple title to each Owned Real Property, in each case free and
clear of all Liens and defects in title, except for (1) mechanics',
carriers', workmen's, warehousemen's, repairmen's or other like Liens
arising or incurred in the ordinary course of business, (2) Liens for
taxes, assessments and other governmental charges and levies that are not
due and payable or that may thereafter be paid without interest or penalty,
(3) Liens affecting the interest of the grantor of any easements benefiting
Owned Real Property, (4) Liens (other than liens securing indebtedness for
borrowed money), minor defects or irregularities in title, easements,
rights-of-way, covenants, restrictions, and other, similar matters which
would have been disclosed by a current title report that would not,
individually or in the aggregate, reasonably be expected to materially
impair or materially interfere with the continued use and operation of the
assets to which they relate in the business of the Company and its
Subsidiaries as currently conducted, or materially detract from the value
or marketability of the Owned Real Property for substantially similar uses
and operations, (5) zoning, building and other similar codes and
regulations and (6) any conditions that would be disclosed by a current,
accurate survey and which do not materially interfere with the continued
use and operation of the assets to which they relate in the business of the
Company and its Subsidiaries as currently conducted (collectively,
"Permitted Liens"); (B) the Owned Real Property is not subject to any
leases or tenancies of any kind other than the Real Property Subleases and
leases or tenancies that do not provide for annual rent obligations in
excess of $50,000; and (C) each Owned Real Property is not subject to any
rights of purchase, offer or first refusal that are not recorded.
(iv) (A) the Company or a Subsidiary of the Company has a good and
valid title to a leasehold estate in each Leased Real Property, in each
case free and clear of all Liens and defects in title, other than Permitted
Liens, pursuant to the Real Property Leases, true and complete copies of
which have been made available to Parent, (B) all Real Property Leases are
in full force and effect, (C) neither the Company nor any of its
Subsidiaries that is party to such Real Property Leases has received or
given any written notice of any material default thereunder which default
continues on the date of this Agreement, (D) there is no material default
under any Real Property Lease by the Company or any of its Subsidiaries or,
to the Knowledge of the Company, by any other party thereto, and no event
has occurred that with the lapse of time or the giving of notice or both
could reasonably be expected to constitute a material default, result in a
loss of any material rights or result in the creation of any Lien
thereunder or pursuant thereto, (E) the Leased Real Property is not subject
to any leases or tenancies of any kind, other than the Real Property
Leases, the Real Property Subleases and leases or subleases that do not
29
provide for annual rent obligations in excess of $50,000, (F) each Real
Property Lease is valid and binding on the Company or the Subsidiary of the
Company party thereto and, to the Knowledge of the Company, each other
party thereto, and is in full force and effect and (G) the execution and
delivery by the Company of this Agreement do not, and the consummation of
the Merger and the other transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict with,
or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to the loss of a benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its Subsidiaries under (other than any such
Lien created from any action taken by Parent or Sub), any provision of any
Real Property Lease.
(v) Section 4.01(n)(v) of the Company Disclosure Letter sets forth, as
of the date of this Agreement, a true and complete list of all leases,
subleases or similar agreements under which the Company or any of its
Subsidiaries is the landlord or the sublandlord other than leases,
subleases and similar agreements that do not provide for annual rent in
excess of $50,000 (such leases, subleases and similar agreements,
collectively, the "Real Property Subleases"). Each Real Property Sublease
is valid and binding on the Company or the Subsidiary of the Company party
thereto.
(vi) The Owned Real Property and the Leased Real Property are used in
a manner permitted by applicable zoning ordinances and planning laws and
constitute all of the real property owned and leased by the Company and its
Subsidiaries to operate its business as currently conducted.
(vii) There is no tax assessment pending or, to the Knowledge of the
Company, threatened with respect to any portion of the Owned Real Property
or the Leased Real Property. There are no condemnation or compulsory
purchase proceedings pending or, to the Knowledge of the Company,
threatened with respect to any portion of the Owned Real Property or Leased
Real Property that would reasonably be expected to materially impair or
materially interfere with the continued use and operation of Leased Real
Property in the business of the Company and its Subsidiaries as currently
conducted, or materially detract from the value or marketability of the
Leased Real Property for substantially similar uses and operations
(o) Intellectual Property. (i) Section 4.01(o) of the Company Disclosure
Letter sets forth, as of the date of this Agreement, a true and complete list of
all (A) issued Patents, Patent applications, registered Trademarks (including
internet domain names) and applications therefor, and registered Copyrights and
applications therefor (collectively, "Registered Intellectual Property Rights")
and (B) Software that are material to the conduct of the business of the Company
and its Subsidiaries as currently conducted, in each case, that are owned by the
30
Company or its Subsidiaries. The Company or a Subsidiary of the Company is the
sole beneficial and record owner of the Registered Intellectual Property Rights,
all Registered Intellectual Property Rights are subsisting and in full force and
effect, and, to the Company's Knowledge, all material Intellectual Property
Rights owned by the Company are valid and enforceable.
(ii) Except as, individually or in the aggregate, has not had or would
not reasonably be expected to have a Material Adverse Effect, the Company
or a Subsidiary of the Company owns, or is licensed or otherwise has the
right to use free and clear of Liens each Intellectual Property Right that
is used or held for use in the conduct of the business of the Company and
its Subsidiaries as currently conducted. Except for the Specified
Contracts, neither the Company, nor any Subsidiary thereof, has licensed or
sublicensed to any person any material Intellectual Property Rights.
(iii) To the Knowledge of the Company, the conduct of the business of
the Company and its Subsidiaries as currently conducted (including the use
of Intellectual Property Rights by the Company, its Subsidiaries' and their
licensees in the manner authorized under their respective agreements with
the Company and Subsidiaries), does not infringe or otherwise violate in
any material respect any person's Intellectual Property Rights. No claims
are pending or, to the Knowledge of the Company, threatened that (A) the
Company or any of its Subsidiaries is infringing or otherwise violating the
rights of any person with regard to any Intellectual Property Right or (B)
seeks to limit, cancel, or question the validity of any Intellectual
Property Rights of the Company or its Subsidiaries, in each case, which
claims, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(iv) To the Knowledge of the Company, there is no jurisdiction in
which the XXXXXXXX'X xxxx is not available for use and registration by the
Company and its Subsidiaries in connection with the operation of
restaurants.
(v) To the Knowledge of the Company, no person is infringing or
otherwise violating the rights of the Company or any of its Subsidiaries
with respect to any Intellectual Property Right, and no such claims have
been asserted or threatened by the Company or any of its Subsidiaries
against any person within the last three (3) years which remain unresolved,
in each case in a manner that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(vi) To the Knowledge of the Company, there has not been any
unauthorized use or disclosure of its or its Subsidiaries' material Trade
Secrets.
(vii) To the Knowledge of the Company, the Company and each of its
Subsidiaries has complied with all applicable Laws, as well as its own
rules, policies, and procedures relating to the collection and use of
personal information collected and used by the Company or its Subsidiaries.
No material claim is pending, or to the Knowledge of the Company,
threatened with respect to the Company's or any Subsidiaries' use of
personal information.
31
(viii) The Company and its Subsidiaries have not entered into, or are
not otherwise bound by, any orders, judgments or Contracts with third
parties (other than Franchise Agreements) which impose any material
restriction on the Company's or any of its Affiliates' right to use,
exploit, enforce, or license any Registered Intellectual Property Rights or
material unregistered Intellectual Property Rights.
(p) Insurance. Section 4.01(p) of the Company Disclosure Letter sets forth,
as of the date hereof, a true and complete list of the insurance policies held
by, or for the benefit of, the Company or any of its Subsidiaries, including the
underwriter of such policies and the amount of coverage thereunder. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, (i) the Company and its Subsidiaries maintain insurance
in such amounts and against such risks as is sufficient to comply with
applicable Law, (ii) all material insurance policies of the Company and its
Subsidiaries are in full force and effect, except for any expiration thereof in
accordance with the terms thereof, (iii) neither the Company nor any of its
Subsidiaries is in breach of, or default under, any such material insurance
policy and (iv) no written notice of cancellation or termination has been
received with respect to any such material insurance policy, other than in
connection with ordinary renewals.
(q) Voting Requirements. The affirmative vote of holders of a majority of
the outstanding shares of Company Common Stock entitled to vote thereon at the
Stockholders' Meeting or any adjournment or postponement thereof to adopt this
Agreement (the "Stockholder Approval") is the only vote of the holders of any
class or series of capital stock of the Company necessary for the Company to
adopt this Agreement and approve the transactions contemplated hereby.
(r) State Takeover Statutes. The approval of the Board of Directors of the
Company of this Agreement, the Merger and the other transactions contemplated by
this Agreement represents all the action necessary to render inapplicable to
this Agreement, the Merger and the other transactions contemplated by this
Agreement, the provisions of Section 203 of the DGCL to the extent, if any, such
Section would otherwise be applicable to this Agreement, the Merger and the
other transactions contemplated by this Agreement, and no other state takeover
statute applies to this Agreement, the Merger or the other transactions
contemplated by this Agreement.
(s) Franchise Matters.
(i) Section 4.01(s)(i) of the Company Disclosure Letter sets forth a
true and complete list of all franchise agreements, license agreements,
subfranchise agreements, sublicense agreements, master franchise
agreements, development agreements, market development agreements, and
reserved area agreements (each a "Franchise Agreement" and, collectively,
32
the "Franchise Agreements") that are effective as of the date of this
Agreement to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or its or their properties is
bound (other than any such agreements between a person and its Subsidiaries
or among its Subsidiaries) and which grant or purport to grant to a
Franchisee the right to operate or license others to operate or to develop
within a specific geographic area or at a specific location any of the
following (each a "Franchise"): "Xxxxxxxx'x Neighborhood Grill & Bar"
restaurants, "Xxxxxxxx'x Grill & Bar" restaurants, "Applebee's Grill"
restaurants, "X.X. Xxxxxxxx'x" restaurants, "X.X. Xxxxxxxx'x Grill & Bar"
restaurants, "X.X. Xxxxxxxx'x Rx for Edibles & Elixirs" restaurants, and
"X.X. Xxxxxxxx'x Edibles & Elixirs" restaurants (each a "Franchised
Restaurant"). True, correct and complete copies of all Franchise Agreements
(or documents purporting to contain substantially the content of each such
Franchise Agreement (except as to the date of the Franchise Agreement and
location of the Franchised Restaurant)) have been made available to Parent.
(ii) All the Franchise Agreements are in full force and effect and are
valid and binding obligations of the Company and its Subsidiaries and
enforceable against the Company and its Subsidiaries and the other parties
thereto in accordance with their respective terms, subject, as to
enforceability, to bankruptcy, insolvency and other Laws of general
applicability relating to or affecting creditors' rights and to general
equity principles. All Franchise Agreements comply in all material respects
with all applicable Laws. The execution and delivery by the Company of this
Agreement do not, and the consummation of the Merger and the other
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to the loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of the Company or
any of its Subsidiaries under (other than any such Lien created from any
action taken by Parent or Sub) or any right of rescission or set-off under,
any provision of any Franchise Agreement other than any such conflicts,
violations, defaults, rights, losses or Liens that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect. Except by operation of Law, no Franchise Agreement expressly grants
any Franchisee any right of rescission or set-off; and no Franchisee has
asserted in writing any such right of rescission or set-off. There is no
default under any Franchise Agreement by the Company or any of its
Subsidiaries or, to the Knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the
giving of notice or both would constitute a default thereunder by the
Company or any of its Subsidiaries or, to the Knowledge of the Company, by
any other party thereto, in each case except as, individually or in the
aggregate, has not had or would not reasonably be expected to have a
Material Adverse Effect.
33
(iii) Section 4.01(s)(iii) of the Company Disclosure Letter sets forth
a true and correct list of: (i) the United States Jurisdictions in which
the Company and its Subsidiaries since March 31, 2002, have been, and are
currently, registered or authorized to offer and sell franchises (under a
Registration Law) and the jurisdictions in which the Company or any of its
Subsidiaries sold a Franchise since March 31, 2002 under a Registration Law
and under the FTC Rule and (ii) the non-United States Jurisdictions in
which the Company or any of its Subsidiaries has sold or entered into, or
since January 1, 2004, offered, Franchise Agreements.
(iv) Since March 31, 2002, (i) the Company and its Subsidiaries have
prepared and maintained each UFOC in compliance, in all material respects,
with: (A) the UFOC Guidelines; (B) the FTC Rule; and (C) the Registration
Laws; and (ii) the Company and its Subsidiaries have offered and sold each
Franchise Agreement for a Franchised Restaurant to be located in any
non-United States Jurisdiction (the "Foreign Franchises") in compliance, in
all material respects, with applicable Laws, including pre-sale
registration and disclosure laws.
(v) Since March 31, 2002, the Company and its Subsidiaries have not,
in any UFOC, other franchise disclosure document, in applications and/or
filings with states under the Registration Laws, or in any applications or
filings with any non-United States Jurisdictions, made any untrue statement
of a material fact, omitted to state a material fact required to be stated
therein, or omitted to state any fact necessary to make the statements made
therein, taken as a whole, not misleading.
(vi) The Company and its Subsidiaries have not, and have not
authorized any Person to furnish: (i) to prospective franchisees in any
United States Jurisdiction any materials or information that could be
construed as "earnings claim" information in violation of the requirements
specified in Item 19 of the UFOC Guidelines and/or 16 CFR ss. 436.1(b)
(together, "Earnings Claim(s)"), and no Earnings Claim has been made since
March 31, 2002 to any prospective Franchisee in any United States
Jurisdiction; or (ii) to prospective franchisees in any non-United States
Jurisdiction any materials or information from which a specific level or
range of actual or potential sales, costs, income or profit from franchised
or non-franchised units may be easily ascertained, except as set forth in
Section 4.01(s)(vi)(ii) of the Company Disclosure Letter.
(vii) Neither the Company nor any of its Subsidiaries or Affiliates is
a party to any Contract pursuant to which the Company or any of its
Subsidiaries or Affiliates receives Rebates as a result of transactions
between the Franchisees and suppliers selling products or services to the
Franchisees. When the Company or any of its Subsidiaries or Affiliates buys
products, goods and services from a supplier, such supplier charges the
Company or its Subsidiaries or Affiliates for these items on the same basis
as the supplier charges a Franchisee operating a Franchised Restaurant in
the United States for similar products, goods and services purchased for
use in connection with such Franchised Restaurant. No Contract pursuant to
which the Company or its Subsidiaries or Affiliates receives a Rebate is
(i) prohibited by any Franchise Agreement, (ii) not disclosed in accordance
with the UFOC Guidelines in the relevant UFOC, if applicable or (iii) not
disclosed in accordance with applicable Law with respect to Foreign
Franchises.
34
(viii) Since March 31, 2002, the Company and its Subsidiaries have
made on a timely and accurate basis all required additional filings under
the Registration Laws, including filings with respect to material changes,
advertising, broker and salesperson registrations, amendments, and
renewals, and the Company and its Subsidiaries have not offered or executed
a Franchise Agreement or offered or sold the rights granted therein in any
jurisdiction in which such offer and sale was not duly registered (if
registration was required by a Registration Law) or exempt from
registration at the time the offer was made and the sale occurred, and the
Company and its Subsidiaries have otherwise complied with all applicable
franchise offering circular and Franchise Agreement delivery requirements
under applicable United States Jurisdiction Laws (including, the
Registration Laws), and, in each case, obtained receipts evidencing
delivery and receipt thereof. Since March 31, 2002, the Company and its
Subsidiaries have not otherwise engaged in the offer, sale, or execution of
Franchise Agreements in violation of applicable Registration Laws, or
unfair or deceptive trade practices law or regulation or similar Law or
regulation.
(ix) Except as disclosed in the Current UFOC or the Current IFOC,
neither the Company nor any of its Subsidiaries is subject to any currently
effective order, injunction, or similar mandate with respect to the offer
or sale of Franchise Agreements in any jurisdiction. There are no
proceedings pending (or to the Knowledge of the Company, threatened)
against the Company or any of its Subsidiaries alleging failure to comply
with any Registration Laws or Relationship Laws, or any similar Law of any
other jurisdiction, foreign or domestic.
(x) The Franchise Agreements grant exclusive development territories
to Franchisees that have development rights, and protected radiuses to
Franchisees; except for those grants and except as provided by operation of
Law, no Franchisee has a protected territory, exclusive territory, right of
first refusal, option, or other similar arrangement with respect to a
Franchised Restaurant and no person currently holds any right or option to
operate, develop, or locate a Franchised Restaurant, or to exclude the
Company, any of its Subsidiaries or Affiliates, or others from operating or
licensing a third party to operate a Franchised Restaurant, in any
geographic area or at any location.
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(xi) Except as disclosed in the Current UFOC or Current IFOC, none of
Company's Subsidiaries or Affiliates presently offer or sell franchises or
business opportunities in any line of business, and no Subsidiary or
Affiliate of Company that has offered or sold franchises or business
opportunities in any line of business (other than Franchises) is obligated
or liable in any respect under or in connection with such franchises or
business opportunities.
(xii) Section 4.01(s)(xii) of the Company Disclosure Letter lists the
Contracts that are in effect as of the date hereof with any formal or
informal franchisee association or group of Franchisees regarding any
Franchise Agreement or franchise operational matter.
(xiii) Section 4.01(s)(xiii) of the Company Disclosure Letter lists
the Franchisees, if any, that to the Knowledge of the Company are currently
the subject of a bankruptcy or similar proceeding.
(xiv) With respect to all expirations, terminations and non-renewals
of Franchisees and/or Franchise Agreements since March 31, 2002, the
Company and its Subsidiaries have complied in all material respects with
all applicable franchise termination, non-renewal, unfair practices, and/or
relationship Laws, including those Laws' requirements with respect to the
proper notice of default, time to cure, and the actual termination of any
Franchisee or business opportunity operator ("Relationship Laws").
(xv) Neither the Company nor any of its Subsidiaries operates a
restaurant within any protected territory, exclusive territory or reserved
area granted to any Franchisee. No Franchisee has a right of first refusal,
right of first negotiation or similar right to acquire any restaurant from
the Company or any of its Subsidiaries.
(xvi) For purposes of this Agreement:
"Current IFOC" means the Franchise Offering Circulars in use in connection
with the offer or sale of franchises in non-United States Jurisdictions as of
the date of this Agreement.
"Current UFOC" means the Uniform Franchise Offering Circular in use in
connection with the offer or sale of franchises in a United States Jurisdiction
(or to a person domiciled in a United States Jurisdiction) as of the date of
this Agreement.
"Franchisee" means a person other than the Company or any of its
Subsidiaries that is granted a right (whether directly by the Company or any of
its Subsidiaries or by another Franchisee) to develop or operate, and/or is
granted a right to license others to develop or operate a Franchised Restaurant
within a specific geographic area or at a specific location.
36
"FTC Rule" means the Trade Regulation Rule on Disclosure Requirements and
Prohibitions Concerning Franchising and Business Opportunity Ventures
promulgated by the Federal Trade Commission, 16 CFR Part 436.
"IFOC" means a Franchise Offering Circular for use in connection with the
offer or sale of franchises in non-United States Jurisdictions.
"Rebates" means "rebates" as defined for purposes of the UFOC and
applicable United States Jurisdiction Law with respect to Franchises in United
States Jurisdictions and rebates and similar payments regulated or required to
be disclosed under applicable non-United States Jurisdiction Law with respect to
non-United States Jurisdictions, as applicable.
"Registration Laws" means any and all Laws of the various states of the
United States that require disclosure and/or registration before a company may
offer and/or sell franchises or business opportunities.
"UFOC" means a Franchise Offering Circular for use in connection with the
offer or sale of a franchise in a United States Jurisdiction (or to a person
domiciled in a United States Jurisdiction)
"UFOC Guidelines" means the Uniform Franchise Offering Circular Guidelines
adopted by the North American Securities Administrators Association on April 25,
1993.
"United States Jurisdictions" means the United States of America, its
territories and possessions.
(t) Brokers and Other Advisors. No broker, investment banker, financial
advisor or other person, other than Banc of America Securities LLC and Citigroup
Global Markets Inc., the fees and expenses of which will be paid by the Company,
is entitled to any broker's, finder's or financial advisor's fee or commission
in connection with the Merger and the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company.
(u) Opinion of Financial Advisor. The Board of Directors of the Company has
received the opinion of Citigroup Global Markets Inc., dated the date of this
Agreement, to the effect that, as of the date of such opinion, the Merger
Consideration is fair, from a financial point of view, to the holders of shares
of Company Common Stock, a signed copy of which opinion will promptly be
delivered to Parent, solely for informational purposes, after receipt thereof by
the Board of Directors of the Company.
(v) No Other Representations or Warranties. Except for the representations
and warranties contained in this Section 4.01, each of Parent and Sub
acknowledges that neither the Company nor any person on behalf of the Company
makes any other express or implied representation or warranty with respect to
37
the Company or any of its Subsidiaries or with respect to any other information
provided to Parent or Sub in connection with the transactions contemplated by
this Agreement. Neither the Company nor any other person will have or be subject
to any liability or indemnification obligation to Parent, Sub or any other
person resulting from the distribution to Parent or Sub, or Parent's or Sub's
use of, any such information, including any information, documents, projections,
forecasts or other material made available to Parent or Sub in certain "data
rooms" or management presentations in expectation of the transactions
contemplated by this Agreement, unless and then only to the extent that any such
information is expressly included in a representation or warranty contained in
this Section 4.01.
SECTION 4.02. Representations and Warranties of Parent and Sub. Parent and
Sub jointly and severally represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and Sub is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization and has all requisite corporate power and authority
to carry on its business as currently conducted.
(b) Authority; Noncontravention. Each of Parent and Sub has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement, including the
Merger. The execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement, including the Merger, have been
duly authorized by all necessary corporate action on the part of each of Parent
and Sub, and no other corporate proceedings (including no shareholder action) on
the part of Parent or Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, including the Merger. This
Agreement has been duly executed and delivered by each of Parent and Sub and,
assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other Laws of
general applicability relating to or affecting creditors' rights and to general
equity principles. The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement, and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien upon any of the properties
or assets of Parent or Sub under, any provision of (i) the certificate of
incorporation or bylaws of Parent or the certificate of incorporation or bylaws
of Sub or (ii) subject to the filings and other matters referred to in the
immediately following sentence, (A) any Contract to which Parent or Sub is a
party or by which any of their respective properties or assets are bound or (B)
any Law or Judgment, in each case applicable to Parent or Sub or their
respective properties or assets, other than, in the case of clause (ii), any
such conflicts, violations, breaches, defaults, rights, losses or Liens that
would not, individually or in the aggregate, reasonably be expected to have a
38
Parent Material Adverse Effect. No consent, approval, order or authorization of,
registration, declaration or filing with, or notice to, any Governmental Entity
is required to be obtained or made by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent and Sub
or the consummation by Parent and Sub of the Merger or the other transactions
contemplated by this Agreement, except for (I) the filing of a premerger
notification and report form by Parent and Sub under the HSR Act and the filings
and receipt, termination or expiration, as applicable, of such other approvals
or waiting periods as may be required under any other applicable competition,
merger control, antitrust or similar Law, (II) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and (III) such other
consents, approvals, orders, authorizations, registrations, declarations,
filings and notices the failure of which to be obtained or made would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
(c) Information Supplied. None of the information supplied or to be
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date it is first mailed to the stockholders of the
Company and at the time of the Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(d) Available Funds. The financing of the transactions contemplated hereby
will consist of a combination of equity financing (the "Equity Financing") to be
funded at Closing and debt financing (the "Debt Financing" and, together with
the Equity Financing, the "Financing"). The Debt Financing includes a commitment
from a financial institution with respect to bridge financing (the "Bridge
Financing") and a commitment from a syndicate of bond insurers to provide surety
policies for asset backed securities issued in respect of a whole company
securitization financing (the "Securitization") that will either be in place at
Closing or be used to refinance the Bridge Financing after Closing (it being
understood and agreed that for purposes hereof the "transactions contemplated by
this Agreement" and phrases of similar import shall be deemed to include the
Equity Financing and Bridge Financing but not the Securitization). Parent has
delivered to the Company true and complete copies of all agreements pursuant to
which the parties thereto have committed to provide Parent and Sub with the
Financing (such agreements, as modified pursuant to Section 6.09(a), the
"Financing Commitments"). Each of the Financing Commitments, in the form so
delivered, is in full force and effect and is a legal, valid and binding
obligation of each of Parent and Sub and, to the Knowledge of Parent, the other
parties thereto. The Financing Commitments have not been amended, supplemented
or otherwise modified in any respect, except, in each case, in a manner that is
in compliance with Section 6.09(a), and the financing commitments thereunder
have not been withdrawn or terminated. As of the date of this Agreement, no
event has occurred that, with or without notice, lapse of time or both, would
constitute a default or breach on the part of Parent or Sub under any term or
condition of the Financing Commitments, and, to the Knowledge of Parent, (i)
39
Parent and Sub will be able to satisfy on a timely basis all terms and
conditions of closing to be satisfied by them or their Affiliates set forth in
the Financing Commitments, and (ii) the Financing to be made thereunder will
otherwise be available to Parent and Sub on a timely basis to consummate the
Merger and the other transactions contemplated by the Financing Commitments. As
of the date of this Agreement, Parent and Sub have fully paid any and all
commitment fees or other fees required by the Financing Commitments to be paid
by them on or prior to the date of this Agreement. The Financing, when funded in
accordance with the Financing Commitments, will provide Parent and Sub with
funds sufficient to satisfy all of Parent's and Sub's obligations under this
Agreement, including the payment of the Merger Consideration, the Option/SAR
Amounts, the RSU Amounts and all associated costs and expenses. The obligations
to make the Financing available to Parent and Sub pursuant to the terms of the
Financing Commitments are not subject to any conditions other than the
conditions set forth in the Financing Commitments. No vote of any holders of the
capital stock of Parent is required under any Law or the rules of the New York
Stock Exchange to consummate the Equity Financing on the terms set forth in the
Financing Commitments or to otherwise approve the transactions contemplated
hereby.
(e) Operations and Assets of Sub. Sub has been formed solely for the
purpose of engaging in the transactions contemplated hereby and, prior to the
Effective Time, will not have incurred liabilities or obligations of any nature,
other than pursuant to or in connection with this Agreement and the Merger and
the other transactions contemplated by this Agreement. Parent owns, beneficially
and of record, all of the outstanding shares of capital stock of Sub, free and
clear of all Liens.
(f) Ownership of Company Common Stock. Neither Parent nor Sub beneficially
own (within the meaning of Section 13 of the Exchange Act and the rules and
regulations promulgated thereunder), or will prior to the Closing Date
beneficially own, any shares of Company Common Stock, or is a party, or will
prior to the Closing Date become a party, to any Contract, arrangement or
understanding (other than this Agreement) for the purpose of acquiring, holding,
voting or disposing of any shares of Company Common Stock.
(g) Brokers and Other Advisors. No broker, investment banker, financial
advisor or other person, other than Xxxxxxxxx & Co., LLC, the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's or
financial advisor's fee or commission in connection with the Merger and the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
(h) No Other Representations or Warranties. Except for the representations
and warranties contained in this Section 4.02, the Company acknowledges that
none of Parent, Sub or any other person on behalf of Parent or Sub makes any
other express or implied representation or warranty with respect to Parent or
Sub or with respect to any other information provided to the Company in
connection with the transactions contemplated hereby.
40
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Except as set forth in Section 5.01
of the Company Disclosure Letter, required by or specifically provided in this
Agreement, required by Law or consented to in writing by Parent (such consent
not to be unreasonably withheld or delayed), during the period from the date of
this Agreement to the Effective Time, the Company shall, and shall cause each of
its Subsidiaries to, carry on its business in the ordinary course and, to the
extent consistent therewith, use reasonable best efforts to preserve
substantially intact its current business organizations, to keep available the
services of its current officers and employees and to preserve its relationships
with significant franchisees, customers, suppliers, licensors, licensees,
distributors, wholesalers, lessors and others having significant business
dealings with it. Without limiting the generality of the foregoing, except as
set forth in Section 5.01 of the Company Disclosure Letter, required by or
specifically provided in this Agreement, required by Law, required in order to
comply with Section 409A of the Code or consented to in writing by Parent (such
consent not to be unreasonably withheld or delayed), during the period from the
date of this Agreement to the Effective Time, the Company shall not, and shall
not permit any of its Subsidiaries to:
(i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
its capital stock, other than dividends or distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent;
(ii) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in lieu of or in
substitution for shares of its capital stock;
(iii) purchase, redeem or otherwise acquire any shares of its capital
stock or any rights, warrants or options to acquire any such shares, other
than (A) the acquisition by the Company of shares of Company Common Stock
in connection with the surrender of shares of Company Common Stock by
holders of Company Stock Options in order to pay the exercise price of the
Company Stock Options, (B) the withholding of shares of Company Common
Stock to satisfy tax obligations with respect to awards granted pursuant to
the Company Stock Plans, and (C) the acquisition by the Company of Company
Stock Options, Company SARs and Company RSUs and shares of Company
Restricted Stock in connection with the forfeiture of such awards;
(iv) issue, deliver or sell any shares of its capital stock, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities, or any "phantom" stock, "phantom" stock rights,
stock appreciation rights or stock based performance units, other than (A)
upon the exercise of Company Stock Options and Company SARs and rights
under the ESPPs and upon the vesting of Company RSUs, in each case
outstanding on the date of this Agreement and in accordance with their
present terms, and (B) as required to comply with any grants or awards as
in effect on the date of this Agreement under any Company Benefit Plan or
Company Benefit Agreement;
41
(v) amend the Company Certificate of Incorporation or the Company
Bylaws or the comparable organizational documents of any Subsidiary of the
Company;
(vi) merge or consolidate with, or purchase an equity interest in or a
substantial portion of the assets of, any person or any division or
business thereof, other than any such action solely between or among the
Company and its Subsidiaries, or adopt a plan of liquidation, dissolution,
recapitalization or reorganization of the Company;
(vii) sell, lease, license or otherwise dispose of any of its
properties or assets (tangible or intangible, including capital stock of
any Subsidiary of the Company), other than sales or other dispositions of
inventory and other assets in the ordinary course of business, including in
connection with store relocations and closings set forth on Section
5.01(a)(vii) of the Company Disclosure Letter and store remodels,
refurbishments and resets;
(viii) abandon, fail to maintain and renew, or otherwise let lapse,
any material Intellectual Property Rights;
(ix) pledge, encumber or otherwise subject to a Lien (other than a
Permitted Lien) any of its properties or assets (including capital stock of
any Subsidiary of the Company);
(x) (A) incur any Indebtedness other than Indebtedness incurred,
assumed or otherwise entered into in the ordinary course of business
(including any borrowings under the Company's existing revolving credit
facility, any letters of credit and guarantees of loans to franchisees
pursuant to the Master Agreement and Limited Guaranty, dated as of May 27,
2004, from the Company, as Guarantor, in favor of Citicorp Leasing, Inc.)
or (B) make any loans or capital contributions to, or investments in, any
other person, other than (1) to any of the Subsidiaries of the Company or
(2) to Franchisees upon the default of such Franchisee in making a required
payment to the Company or any of its Subsidiaries, provided that no cash is
loaned or contributed to or invested in such Franchisee in connection
therewith;
(xi) make any capital expenditures, other than (A) in accordance with
the Company's capital expenditures plan previously provided to Parent in
writing, (B) in connection with the repair or replacement of facilities
destroyed or damaged due to casualty or accident (whether or not covered by
insurance) and (C) otherwise in an aggregate amount for all such capital
expenditures made pursuant to this clause (C) not to exceed $10.0 million;
42
(xii) settle any claim or litigation, including any employment-related
claim or litigation, in each case made or pending against the Company or
any of its Subsidiaries, other than (A) the settlement of claims or
litigation in the ordinary course of business in an amount not to exceed,
for any such settlement individually, $1.0 million (or, in the case of
employment-related claims or litigation, $100,000) and (B) the settlement
of claims or litigation disclosed, reflected or reserved against in the
most recent financial statements (or the notes thereto) of the Company
included in the Filed SEC Documents for an amount not materially in excess
of the amount so disclosed, reflected and reserved;
(xiii) redeem, repurchase, prepay or cancel any material Indebtedness
of the type described in clauses (1), (2) and (3) of the definition of the
term "Indebtedness" (in each case other than revolving debt of any nature
and other than at the applicable stated maturity or as otherwise required
by the terms of such Indebtedness), or modify in any material respect the
terms thereof; or waive any claims or rights of substantial value, other
than in the ordinary course of business;
(xiv) except (A) in the ordinary course of business or (B) as required
pursuant to the terms of any Company Benefit Plan or Company Benefit
Agreement or other written agreement in effect on the date of this
Agreement, (1) grant to any officer, director or employee of the Company or
any of its Subsidiaries any increase in compensation, (2) grant to any
officer, director or employee of the Company or any of its Subsidiaries any
increase in severance or termination pay, (3) enter into any employment,
consulting, severance or termination agreement with any officer, director
or employee of the Company or any of its Subsidiaries pursuant to which the
total annual compensation or the aggregate severance benefits exceed
$250,000, (4) establish, adopt, enter into or amend in any material respect
any collective bargaining agreement or Company Benefit Plan or (5)
accelerate any rights or benefits under any Company Benefit Plan; provided,
however, that the foregoing clauses (1), (2), and (3) shall not restrict
the Company or any of its Subsidiaries from entering into or making
available to newly hired employees or to employees in the context of
promotions based on job performance or workplace requirements, in each case
in the ordinary course of business, plans, agreements, benefits and
compensation arrangements (including incentive grants other than equity
based grants) that have a value of $300,000 or less per such employee and
that is consistent with the past practice of making compensation and
benefits available to newly hired or promoted employees in similar
positions;
43
(xv) make any change in accounting methods, principles or practices
materially affecting the consolidated assets, liabilities or results of
operations of the Company, other than as required (A) by any changes in
GAAP (or any interpretation thereof) applicable after the date hereof,
including as may be required by the Financial Accounting Standards Board or
any similar organization, or (B) by any changes in Law applicable after the
date hereof, including Regulation S-X under the Securities Act;
(xvi) make any material tax election, file any amended tax return with
respect to any material tax or change any annual tax accounting period;
(xvii) make any modification or amendment to, or waive any term of,
any Specified Contract other than Franchise Agreements (which are the
subject of clause (xix) below);
(xviii) enter into any Franchise Agreement for an individual
Franchised Restaurant, except (A) pursuant to the form Franchise Agreement
attached to the Company's then-current UFOC, (B) substantially in the form
of the form Franchise Agreements attached to the Company's then-current
IFOCs, (C) substantially in the form of a Franchise Agreement previously
signed by such Franchisee and (D) in connection with the transfer of such
Franchised Restaurant from one Franchisee to another Franchisee; enter into
any Franchise Agreement which is an area development agreement; amend its
current UFOC, except in compliance with applicable Law; enter into any
Contract with a franchise broker in any United States Jurisdiction; or
terminate a Franchisee;
(xix) (A) waive, modify, supplement, or otherwise amend any
Franchisee's obligation to develop Franchised Restaurants during any
Initial Development Period or Subsequent Development Period (as such terms
are defined in the Franchise Agreements), (B) waive, modify, supplement, or
otherwise amend any Franchisee's Subsequent Development Schedule (as such
term is defined in the Franchise Agreement), (C) establish the Minimum
Development Potential and/or the Subsequent Development Schedule (as such
terms are defined in the Franchise Agreements) under any Franchise
Agreement, or (D) waive, modify, supplement or otherwise amend any other
material term of any Franchise Agreement;
(xx) (A) subject to any applicable exemptions in any United States
Jurisdiction Law, offer or sell any Franchise in a United States
Jurisdiction unless and until its franchise registrations, current UFOC and
other franchise disclosure documents have been amended to include a
disclosure, in form reasonably acceptable to Parent, disclosing, among
other things, this Agreement, the Merger and the other transactions
contemplated by this Agreement or (B) offer or sell any Franchise in a
non-United States Jurisdiction except in compliance with applicable
disclosure requirements under non-United States Jurisdiction Laws;
44
(xxi) take any action that is intended to or would result in any of
the conditions to effecting the Merger set forth in Section 7.01 and 7.02
becoming incapable of being satisfied; or
(xxii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Advice of Changes. The Company and Parent shall promptly give written
notice to the other party upon becoming aware of any material event, development
or occurrence that would reasonably be expected to give rise to a failure of
condition precedent set forth in Section 7.02 (in the case of the Company) or
Section 7.03 (in the case of Parent).
SECTION 5.02. No Solicitation. (a) The Company shall not, nor shall any of
its Subsidiaries or any of its or their respective directors, officers,
employees, investment bankers, financial advisors, attorneys, accountants or
other advisors, agents or representatives (collectively, "Representatives")
retained by it or any of its Subsidiaries to, directly or indirectly, (i)
solicit, initiate or knowingly encourage, or take any other action to knowingly
facilitate, the making of any proposal that constitutes or is reasonably likely
to lead to a Takeover Proposal or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding or furnish to any
person any confidential information with respect to any Takeover Proposal. The
Company shall, and shall cause its Subsidiaries and direct its Representatives
to, immediately cease and cause to be terminated all existing discussions and
negotiations with any person conducted heretofore with respect to any Takeover
Proposal, and shall request the prompt return or destruction of all confidential
information previously furnished in connection therewith. Notwithstanding the
foregoing or anything else in this Agreement to the contrary, at any time prior
to obtaining the Stockholder Approval, in response to a bona fide written
Takeover Proposal, if the Board of Directors of the Company determines in good
faith, after consultation with its independent financial advisor and outside
counsel, that such Takeover Proposal constitutes or is reasonably likely to lead
to a Superior Proposal and the Company has otherwise complied in all material
respects with its obligations under this Section 5.02, the Company may (and may
authorize and permit its Subsidiaries, directors, officers, employees and
Representatives to), subject to compliance with Section 5.02(c), (A) furnish
information with respect to the Company and its Subsidiaries to the person
making such Takeover Proposal (and its Representatives) pursuant to a
confidentiality agreement containing confidentiality provisions substantially
similar to those set forth in the Confidentiality Agreement and (B) participate
in discussions and negotiations with the person making such Takeover Proposal
(and its Representatives) regarding such Takeover Proposal.
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person or group relating to (a) any direct or indirect acquisition or purchase,
in a single transaction or a series of transactions, of (1) 20% or more (based
on the fair market value thereof, as determined by the Board of Directors of the
Company) of assets (including capital stock of the Subsidiaries of the Company),
45
cash flow, net income or net revenue of the Company and its Subsidiaries, taken
as a whole, or (2) 20% or more of outstanding shares of the Company Common
Stock, (b) any tender offer or exchange offer that, if consummated, would result
in any person or group owning, directly or indirectly, 20% or more of
outstanding shares of the Company Common Stock or (c) any merger, consolidation,
business combination, recapitalization, liquidation, dissolution, binding share
exchange or similar transaction involving the Company pursuant to which any
person or group (or the shareholders of any person) would own, directly or
indirectly, 20% or more of any class of equity securities of the Company or of
the surviving entity in a merger or the resulting direct or indirect parent of
the Company or such surviving entity, other than, in each case, the transactions
contemplated by this Agreement.
The term "Superior Proposal" means any bona fide Takeover Proposal that if
consummated would result in a person or group (or the shareholders of any
person) owning, directly or indirectly, (a) 50% or more of any class of equity
securities of the Company or of the surviving entity in a merger or the
resulting direct or indirect parent of the Company or such surviving entity or
(b) 50% or more (based on the fair market value thereof, as determined by the
Board of Directors of the Company) of the assets of the Company and its
Subsidiaries, taken as a whole, which the Board of Directors of the Company
determines would be more favorable to the stockholders of the Company from a
financial point of view than the Merger and the other transactions contemplated
by this Agreement (x) after consultation with its independent financial advisor
(who shall be a nationally recognized investment banking firm), (y) after taking
into account the likelihood of consummation of such transaction on the terms set
forth therein, and (z) after taking into account all appropriate legal (after
consultation with its outside counsel), financial (including the financing terms
of any such proposal) or other aspects of such proposal, including, without
limitation the identity of the third party making such proposal and the terms of
any written proposal by Parent to amend or modify the terms of the Merger and
the other transactions contemplated by this Agreement.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall directly or indirectly (i)(A) withdraw (or modify in a manner adverse to
Parent), or publicly propose to withdraw (or modify in a manner adverse to
Parent), the approval, recommendation or declaration of advisability by such
Board of Directors or any such committee of this Agreement or the Merger or (B)
recommend the approval or adoption of, or approve or adopt, or publicly propose
to recommend, approve or adopt, any Takeover Proposal (any action described in
this clause (i) being referred to as an "Adverse Recommendation Change") or (ii)
approve or recommend, or publicly propose to approve or recommend, or cause or
permit the Company or any of its Subsidiaries to execute or enter into, any
letter of intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement or other similar agreement related to any
Takeover Proposal, other than any confidentiality agreement referred to in
Section 5.02(a). Notwithstanding the foregoing or anything else in this
Agreement to the contrary, at any time prior to obtaining the Stockholder
Approval and subject to compliance with Section 6.06(b), if the Company receives
a Takeover Proposal which the Board of Directors of the Company concludes in
good faith constitutes a Superior Proposal, the Board of Directors of the
46
Company may, if it determines (after consultation with outside counsel) that the
failure to take such action would be inconsistent with its fiduciary duties
under applicable Law, (1) make an Adverse Recommendation Change or (2) cause or
permit the Company to terminate this Agreement; provided, however, that the
Board of Directors of the Company shall not make an Adverse Recommendation
Change, and the Company may not terminate this Agreement pursuant to clause (2)
above, until after the second business day following Parent's receipt of written
notice (a "Notice of Superior Proposal") from the Company advising Parent that
the Board of Directors of the Company intends to take such action and specifying
the reasons therefor, including the material terms and conditions of any
Superior Proposal that is the basis of the proposed action by such Board of
Directors and the identity of the person submitting such Superior Proposal (it
being understood and agreed that (I) any amendment to the financial terms of
such Superior Proposal shall require a new Notice of Superior Proposal and a new
two business day period and (II) in determining whether to make an Adverse
Recommendation Change or to cause or permit the Company to so terminate this
Agreement, the Board of Directors of the Company shall take into account any
changes to the financial terms of this Agreement proposed by Parent to the
Company in response to a Notice of Superior Proposal or otherwise).
(c) In addition to the obligations of the Company set forth in Sections
5.02(a) and 5.02(b), the Company shall as promptly as practicable advise Parent
orally and in writing of the receipt of any Takeover Proposal after the date of
this Agreement, the material terms and conditions of any such Takeover Proposal
and the identity of the person making any such Takeover Proposal. The Company
shall keep Parent reasonably informed of any material developments with respect
to any such Takeover Proposal (including any material changes thereto).
(d) Nothing contained in this Section 5.02 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its stockholders a
position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the
Exchange Act or (ii) making any disclosure to its stockholders if the Board of
Directors of the Company determines (after consultation with outside counsel)
that failure to do so would be inconsistent with its fiduciary duties under
applicable Law; provided, any such disclosure made pursuant to clause (i) or
(ii) (other than a "stop, look and listen" letter or similar communication of
the type contemplated by Rule 14d-9(f) under the Exchange Act) shall be deemed
to be an Adverse Recommendation Change unless the Board of Directors of the
Company expressly reaffirms in such disclosure the Recommendation.
SECTION 5.03. WARN Act. The Company shall not, and shall cause each of its
Subsidiaries not to, effectuate (1) a "plant closing" (as defined in the WARN
Act) affecting any single site of employment or one or more facilities or
operating units within any single site of employment of the Company or any of
its Subsidiaries; or (2) a "mass layoff" (as defined in the WARN Act) at any
single site of employment or one or more facilities or operating units within
any single site of employment of the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries shall otherwise terminate or lay off
employees in the United States in such numbers as to give rise to material
liability to the Company under any applicable Laws respecting the payment of
severance pay, separation pay, termination pay, pay in lieu of notice of
termination, redundancy pay, or the payment of any other compensation, premium
or penalty upon termination of employment, reduction of hours, or temporary or
permanent layoffs. For purposes of the WARN Act and this Agreement, the
Effective Time is and shall be the same as the "effective date" within the
meaning of the WARN Act.
47
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Proxy Statement; Stockholders' Meeting.
(a) As promptly as reasonably practicable following the date of this Agreement,
the Company shall prepare (in consultation with Parent) and file with the SEC
the Proxy Statement. Parent shall provide to the Company all information
concerning Parent and Sub as may be reasonably requested by the Company in
connection with the Proxy Statement and shall otherwise assist and cooperate
with the Company in the preparation of the Proxy Statement and resolution of
comments referred to below. The Company shall promptly notify Parent upon the
receipt of any comments from the SEC or the staff of the SEC or any request from
the SEC or the staff of the SEC for amendments or supplements to the Proxy
Statement, and shall provide Parent with copies of all correspondence between
the Company and its Representatives, on the one hand, and the SEC or the staff
of the SEC, on the other hand. The Company shall use its reasonable best efforts
to respond as promptly as practicable to any comments of the SEC or the staff of
the SEC with respect to the Proxy Statement and to cause the Proxy Statement to
be mailed to the stockholders of the Company as promptly as reasonably
practicable following the date of this Agreement. Prior to filing or mailing the
Proxy Statement (or any amendment or supplement thereto) or responding to any
comments of the SEC or the staff of the SEC with respect thereto, the Company
shall provide Parent a reasonable opportunity to review and to propose comments
on such document or response.
(b) The Company shall, as promptly as reasonably practicable following the
date of this Agreement, establish a record date for, duly call, give notice of,
convene and hold a meeting of its stockholders (the "Stockholders' Meeting") for
the purpose of obtaining the Stockholder Approval. Subject to the ability of the
Board of Directors of the Company to make an Adverse Recommendation Change
pursuant to Section 5.02(b), the Company shall, through its Board of Directors
include the Recommendation in the Proxy Statement. Subject to Section 5.02(b),
the Company will use commercially reasonable efforts to solicit from its
stockholders proxies in favor of the Stockholder Approval. The Company shall
keep Parent updated with respect to proxy solicitation results as reasonably
requested by Parent.
SECTION 6.02. Access to Information; Confidentiality. The Company shall
afford to Parent, and to Parent's officers, employees, accountants, counsel,
consultants, financial advisors and other Representatives, reasonable access
during normal business hours during the period prior to the Effective Time or
48
the termination of this Agreement to all of its and its Subsidiaries'
properties, books and records and to those employees of the Company to whom
Parent reasonably requests access, and, during such period, the Company shall
furnish, as promptly as practicable, to Parent all information concerning its
and its Subsidiaries' business, properties and personnel as Parent may
reasonably request (it being agreed, however, that the foregoing shall not
permit Parent or any such Representatives to conduct any soil or groundwater or
other invasive environmental testing or sampling without the Company's consent).
Notwithstanding the foregoing, neither the Company nor any of its Subsidiaries
shall be required to provide access to or disclose information where the Company
reasonably determines that such access or disclosure would jeopardize the
attorney-client privilege of the Company or any of its Subsidiaries or
contravene any Law or any Contract to which the Company or any of its
Subsidiaries is a party. Except for disclosures expressly permitted by the terms
of the confidentiality letter agreement dated as of March 30, 2007, between
Parent and the Company (as it may be amended from time to time, the
"Confidentiality Agreement"), Parent shall hold, and shall cause its officers,
employees, accountants, counsel, consultants, financial advisors and other
Representatives to hold, all information received from the Company or its
Representatives, directly or indirectly, in confidence in accordance with the
Confidentiality Agreement.
SECTION 6.03. Reasonable Best Efforts. (a) Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties hereto agrees to
use its reasonable best efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including using reasonable best
efforts to accomplish the following: (i) the taking of all acts necessary to
cause the conditions to Closing to be satisfied as promptly as practicable, (ii)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all steps as may be necessary to obtain an approval or waiver from, or
to avoid an action or proceeding by, any Governmental Entity, including the
issuance or reissuance of any and all required state, county or licenses or
permits required for the operation of the Company's business as currently
conduct, (iii) the obtaining of consents, approvals and waivers from third
parties reasonably requested by Parent to be obtained in connection with the
Acquisition under any Contracts or leases, provided, however, that in no event
shall the Company or any of its Subsidiaries be required to pay prior to the
Effective Time any fee, penalty or other consideration to any person to obtain
any such consent, approval or waiver other than de minimus amounts or amounts
that are advanced by Parent, and (iv) the execution and delivery of any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. In connection with and
without limiting the foregoing, the Company and its Board of Directors shall (A)
take all action necessary to ensure that no fair price, moratorium, control
share acquisition or other state takeover statute is or becomes applicable to
49
this Agreement, the Merger or any of the other transactions contemplated by this
Agreement and (B) if any fair price, moratorium, control share acquisition or
other state takeover statute becomes applicable to this Agreement, the Merger or
any of the other transactions contemplated by this Agreement, take all action
necessary to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Merger and the other transactions
contemplated by this Agreement.
(b) In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated by this
Agreement as promptly as reasonably practicable after the date hereof and to
supply as promptly as reasonably practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and use its
reasonable best efforts to take or cause to be taken all other actions
necessary, proper or advisable consistent with this Section 6.03 to cause the
expiration or termination of the applicable waiting periods, or receipt of
required authorizations, as applicable, under the HSR Act; provided that in no
event shall Parent be required to divest any stock, partnership, membership or
other ownership interest in any entity, or agree to undertake any divestiture or
restrict its conduct with regard to any business. Without limiting the
foregoing, the parties shall request and shall use their respective reasonable
best efforts to obtain early termination of the waiting period under the HSR
Act. No party shall voluntarily extend any waiting period under the HSR Act or
enter into any agreement with any Governmental Entity to delay or not to
consummate the Merger or any of the other transactions contemplated by this
Agreement except with the prior written consent of the other party (such consent
not to be unreasonably withheld or delayed and which reasonableness shall be
determined in light of each party's obligation to do all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement).
SECTION 6.04. Benefit Plans. (a) The Surviving Corporation shall provide
cash compensation (excluding severance) to each Company Employee that is not
less favorable than the cash compensation provided to such Company Employee
immediately prior to the Effective Time.
(b) With respect to any "employee benefit plan", as defined in Section 3(3)
of ERISA, and any vacation, paid time-off or severance plan maintained by Parent
or any of its Subsidiaries for all purposes, including determining eligibility
to participate, level of benefits, vesting, benefit accruals and early
retirement subsidies, each Company Employee's service with the Company or any of
its Subsidiaries (as well as service with any predecessor employer of the
Company or any such Subsidiary, to the extent service with the predecessor
employer is recognized by the Company or such Subsidiary) shall be treated as
service with Parent or any of its Subsidiaries; provided, however, that such
service need not be recognized to the extent that such recognition would result
in any duplication of benefits.
50
(c) Parent shall waive, or cause to be waived, any pre-existing condition
limitations, exclusions, actively-at-work requirements and waiting periods under
any welfare benefit plan maintained by Parent or any of its Affiliates in which
Company Employees (and their eligible dependents) will be eligible to
participate from and after the Effective Time, except to the extent that such
pre-existing condition limitations, exclusions, actively-at-work requirements
and waiting periods would not have been satisfied or waived under the comparable
Company Benefit Plan immediately prior to the Effective Time. Parent shall
recognize, or cause to be recognized, the dollar amount of all co-payments,
deductibles and similar expenses incurred by each Company Employee (and his or
her eligible dependents) during the calendar year in which the Effective Time
occurs for purposes of satisfying such year's deductible and co-payment
limitations under the relevant welfare benefit plans in which they will be
eligible to participate from and after the Effective Time.
SECTION 6.05. Indemnification, Exculpation and Insurance. (a) All rights to
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time and rights to advancement of expenses relating
thereto now existing in favor of any person who is or prior to the Effective
Time becomes, or has been at any time prior to the date of this Agreement, a
director, officer, employee or agent (including as a fiduciary with respect to
an employee benefit plan) of the Company, any of its Subsidiaries or any of
their respective predecessors (each, an "Indemnified Party") as provided in the
Company Certificate of Incorporation, the Company Bylaws, the organizational
documents of any Subsidiary of the Company or any indemnification agreement
between such Indemnified Party and the Company or any of its Subsidiaries (in
each case, as in effect on the date hereof or, with respect to any
indemnification agreement entered into after the date hereof, to the extent the
terms thereof are no more favorable in any material respect to the Indemnified
Party that is the beneficiary thereof than the terms of any indemnification
agreement included as an exhibit in the Filed SEC Documents) shall survive the
Merger and shall not be amended, repealed or otherwise modified in any manner
that would adversely affect any right thereunder of any such Indemnified Party.
(b) The Company may obtain, at or prior to the Effective Time, prepaid (or
"tail") directors' and officers' liability insurance policies in respect of acts
or omissions occurring at or prior to the Effective Time for six years from the
Effective Time, covering each Indemnified Party on terms with respect to such
coverage and amounts no less favorable than those of such policies in effect on
the date of this Agreement; provided, however, that, without the prior written
consent of Parent, the Company may not expend therefor in excess of 250% of the
amount (the "Annual Amount") paid by the Company for coverage for the period of
12 months beginning on December 15, 2006. In the event the Company does not
obtain such "tail" insurance policies, then, for a period of six years from the
Effective Time, Parent shall cause the Surviving Corporation to maintain in
effect the Company's current directors' and officers' liability insurance
policies in respect of acts or omissions occurring at or prior to the Effective
Time, covering each Indemnified Party on terms with respect to such coverage and
amounts no less favorable than those of such policies in effect on the date of
51
this Agreement; provided, however, that the Surviving Corporation may substitute
therefor policies of a reputable and financially sound insurance company
containing terms, including with respect to coverage and amounts, no less
favorable to any Indemnified Party; provided further, however, that in
satisfying its obligation under this Section 6.05(c) the Surviving Corporation
shall not be obligated to pay for coverage for any 12-month period aggregate
premiums for insurance in excess of 250% of the Annual Amount, it being
understood and agreed that the Surviving Corporation shall nevertheless be
obligated to provide such coverage as may be obtained for the Annual Amount.
(c) In the event that either Parent or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and is not the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or a substantial
portion of its properties and other assets to any person, or if Parent dissolves
the Surviving Corporation, then, and in each such case, Parent shall cause
proper provision to be made so that the applicable successors and assigns or
transferees expressly assume the obligations set forth in this Section 6.05.
(d) The provisions of this Section 6.05 are intended to be for the benefit
of, and will be enforceable by, each Indemnified Party, his or her heirs and his
or her representatives, and are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
SECTION 6.06. Fees and Expenses. (a) Except as provided in Section 6.06(b),
all fees and expenses incurred in connection with this Agreement, the Merger and
the other transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
(b) In the event that (i) this Agreement is terminated by the Company
pursuant to Section 8.01(f), (ii) (A) after the date of this Agreement, a
Takeover Proposal shall have been publicly made to the Company generally or
shall have otherwise become publicly known, (B) thereafter, this Agreement is
terminated by Parent pursuant to Section 8.01(e)(i) or by either Parent or the
Company pursuant to Section 8.01(b)(i) (but only if the Stockholders' Meeting
has not been held) or Section 8.01(b)(iii) and (C) within nine months after such
termination, the Company consummates the transactions contemplated by any
Takeover Proposal, or (iii) this Agreement is terminated by Parent pursuant to
Section 8.01(e)(ii), then the Company shall pay Parent a fee equal to
$60,000,000 (the "Termination Fee") by wire transfer of same-day funds (1) in
the case of a payment required by clause (i) above, on the date of termination
of this Agreement, (2) in the case of a payment required by clause (ii) above,
on the date of the consummation referred to in clause (ii)(C), and (3) in the
case of a payment required by clause (iii) above, as promptly as possible (but
in any event within four business days). For purposes of this Section 6.06(b),
the term "Takeover Proposal" shall have the meaning assigned to such term in
Section 5.02(a), except that all references to 20% therein shall be deemed to be
references to 50%.
52
(c) The Company acknowledges and agrees that the agreements contained in
Section 6.06(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not have entered
into this Agreement; accordingly, if the Company fails promptly to pay the
amount due pursuant to Section 6.06(b), and, in order to obtain such payment,
Parent commences a suit that results in a judgment against the Company for the
Termination Fee, the Company shall pay to Parent its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount of the Termination Fee from the date such payment
was required to be made until the date of payment at the prime rate of Citibank,
N.A. in effect on the date such payment was required to be made.
SECTION 6.07. Public Announcements. Parent and the Company shall consult
with each other before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement, including the Merger, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable Law, court process or the
rules and regulations of any national securities exchange or national securities
quotation system and except for any matters referred to in Section 5.02. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
SECTION 6.08. Stockholder Litigation. The Company shall give Parent the
opportunity to participate in the defense or settlement of any stockholder
litigation against the Company and/or its directors relating to the transactions
contemplated by this Agreement, and no such settlement shall be agreed to
without Parent's prior written consent (such consent not to be unreasonably
withheld or delayed).
SECTION 6.09. Financing. (a) Prior to the Effective Time, the Company shall
provide, shall cause its Subsidiaries to provide and shall use its reasonable
best efforts to cause its and their Representatives (including legal and
accounting) to provide such reasonable cooperation in connection with the
arrangement of the Debt Financing as may be reasonably requested in writing by
Parent with reasonable notice in connection with the obtaining of the Debt
Financing, including using reasonable best efforts to (i) participate in
meetings, presentations, due diligence sessions, drafting sessions, road shows
and sessions with rating agencies, (ii) assist with the preparation of materials
for rating agency presentations, offering memoranda, private placement memoranda
or similar offering documents required in connection with the Debt Financing,
(iii) reasonably facilitate the pledging of collateral, in each case so long as
not effective until at or after the Effective Time, (iv) furnish Parent and its
Financing sources with (A) readily available historical financial and other
pertinent information that, as of any date, would be required to be contained in
filings by the Company with the SEC on Forms 10 Q and 10 K as of such date, in
each case as may be reasonably requested by Parent (collectively, the "Required
Financial Information"), and (B) any other historical financial statements and
other financial data of the type reasonably requested by Parent, (v) permit the
53
prospective lenders involved in the Debt Financing to evaluate the Company's
current assets, cash management and accounting systems, policies and procedures
relating thereto for the purpose of establishing collateral arrangements, (vi)
establish bank and other accounts and blocked account agreements and lock box
arrangements in connection with the foregoing, and (vii) take corporate actions
reasonably necessary to permit the consummation of the Debt Financing and to
permit the proceeds thereof to be made available to the Company. The Company
shall use commercially reasonable efforts to (1) provide monthly financial
statements (excluding footnotes) within 25 days of the end of each month prior
to the Closing Date, if and in the form currently prepared by the Company, (2)
obtain accountants' comfort letters, legal opinions, surveys and title insurance
as may be requested by Parent or the prospective lenders in the Debt Financing,
(3) cause its officers, in their capacities as officers, to deliver such
customary management representation letters as any audit firm may request in
connection with any comfort letters or similar documents required in connection
with the Debt Financing, (4) obtain the issuance or reissuance of required
state, county or city licenses or permits required for the operation after the
Closing Date of the Company's business and (5) obtain estoppel certificates from
landlords under Real Property Leases and from tenants under Real Property
Subleases. It is understood and agreed that nothing contained in this Section
6.09 shall require such cooperation to the extent that it would interfere
unreasonably with the business or operations of the Company or its Subsidiaries.
The Company hereby consents to the use of its and its Subsidiaries' Trademarks
in connection with the Financing, provided that such Trademarks are used solely
in a manner that is not intended to nor reasonably likely to harm or disparage
the Company or the reputation or goodwill of the Company and its Trademarks.
Neither the Company nor any of its Subsidiaries shall be required, under the
provisions of this Section 6.09 or otherwise in connection with the Financing
(x) to pay any commitment or other similar fee prior to the Effective Time that
is not advanced by Parent or (y) to incur any out-of-pocket expense unless such
expense is advanced by Parent. Parent and Sub shall, on a joint and several
basis, indemnify and hold harmless the Company, its Subsidiaries and their
respective Representatives from and against any and all losses suffered or
incurred by them in connection with (1) any action taken by them in compliance
with this Section 6.09, or at the request of Parent pursuant to this Section
6.09, or otherwise in connection with the arrangement of the Financing or (2)
any information utilized in connection therewith (other than the information
provided by the Company or its Subsidiaries). Nothing contained in this Section
6.09 or otherwise shall require the Company to be an issuer or other obligor
with respect to the Financing prior to the Effective Time. All material,
non-public information regarding the Company and its Subsidiaries provided to
Parent or its Representatives pursuant to this Section 6.09 shall be kept
confidential by them in accordance with the Confidentiality Agreement except for
disclosure to potential investors as required in connection with the Financing
subject to customary confidentiality protection.
(b) For purposes of this Agreement, "Bridge Marketing Period" shall mean
the first period of 15 consecutive business days after the date hereof
throughout which (A) Parent shall have in all material respects the Required
Financial Information that the Company is required to use its reasonable best
efforts to provide to Parent pursuant to this Section 6.09, provided, that the
54
Required Financial Information required to be filed with the SEC must be timely
filed (or must be cured if previously required to be filed) throughout the
Bridge Marketing Period, (B) the conditions set forth in Section 7.01 and
Section 7.02 shall be satisfied (other than those conditions that by their terms
are to be satisfied at the Closing, but subject to the satisfaction or, to the
extent permitted by Law, waiver of those conditions), and (C) the applicable
auditors shall not have withdrawn their audit opinions for any applicable
Required Financial Information; provided, that such 15 business day period shall
commence no earlier than three business days after the condition set forth in
Section 7.01(a) has been satisfied (it being understood and agreed that Parent
will commence such period on an earlier date if reasonably practicable to do so
in its good faith judgment, provided that in such event the period shall not
commence more than 15 business days prior to the date of the Stockholders'
Meeting and the Bridge Marketing Period shall extend until the third business
day after satisfaction of the condition set forth in Section 7.01(a)); and,
provided, further, that notwithstanding the foregoing, the Bridge Marketing
Period shall end on any earlier date that is the date on which the Financing is
consummated.
(c) Each of Parent and Sub shall use, and shall cause their Affiliates to
use, their reasonable best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable to
arrange the Financing on the terms and conditions described in the Financing
Commitments, including using its reasonable best efforts to (i) negotiate and
enter into the definitive agreements with respect thereto on the terms and
conditions contained in the Financing Commitments, (ii) satisfy (or cause its
Affiliates to satisfy) on a timely basis all conditions applicable to Parent or
Sub (or their Affiliates) set forth therein and (iii) to consummate the
Financing contemplated by the Financing Commitments on the date described in
Section 2.02, including using its reasonable best efforts to cause the lenders
and other persons providing such Financing to fund the Bridge Financing and
Equity Financing required to consummate the Merger at such time. In the event
that any portion of the Financing becomes unavailable on the terms and
conditions set forth in the Financing Commitments, Parent and Sub shall promptly
notify the Company and shall use their reasonable best efforts to obtain
alternative financing from alternative sources, on terms not materially less
favorable, taken as a whole, to Parent and Sub (as determined in the reasonable
judgment of Parent), as promptly as practicable following the occurrence of such
event. Parent shall deliver to the Company true and complete copies of all
agreements pursuant to which any such alternative source shall have committed to
provide Parent and Sub with any portion of the Financing. Each of Parent and Sub
shall refrain (and shall use its reasonable best efforts to cause its Affiliates
to refrain) from taking, directly or indirectly, any action that would
reasonably be expected to result in a failure of any of the conditions contained
in the Financing Commitments or in any definitive agreement related to the
Financing. Neither Parent nor Sub shall agree to or permit any amendment,
supplement or other modification of, or waive any of its rights under, any
Financing Commitments or the definitive agreements relating to the Financing, in
each case, without the Company's prior written consent (which consent shall not
be unreasonably withheld or delayed), if such amendment, modification or waiver
would impose new or additional conditions or otherwise amend, modify or waive
any of the conditions to the receipt of the Financing in any manner that would
55
be reasonably likely to cause a material delay in the ability of Parent to
consummate the Financing. In such event, the term "Financing Commitments" as
used herein shall be deemed to include the Financing Commitments that are not so
superseded at the time in question and the new Financing Commitments to the
extent then in effect. Parent and Sub shall keep the Company reasonably informed
of the status of their efforts to obtain the Financing.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or (to the extent permitted by Law) waiver at or prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. The Stockholder Approval shall have been
obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other judgment or order issued by
any Federal or state court of competent jurisdiction (collectively,
"Restraints") or Law shall be in effect enjoining, making illegal or otherwise
prohibiting the consummation of the Merger; provided, however, that the party
claiming such failure of condition shall have used its reasonable best efforts
to prevent the entry of any such injunction or order, including taking such
action as is required to comply with Section 6.03, and to appeal as promptly as
possible any injunction or other order that may be entered.
SECTION 7.02. Conditions to Obligations of Parent and Sub. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or (to the extent permitted by Law) waiver at or prior to the Effective Time of
the following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company set forth in this Agreement shall be true and correct (disregarding
all qualifications or limitations as to "materiality", "Material Adverse Effect"
and words of similar import set forth therein) as of the date of this Agreement
and as of the Closing Date as though made on such dates (except to the extent
such representations and warranties expressly relate to an earlier date, in
which case as of such earlier date), except where the failure of such
representations and warranties to be so true and correct, individually or in the
aggregate, has not had, or would not reasonably be expected to have a Material
Adverse Effect; provided, however, that the representations and warranties of
the Company set forth in Section 4.01(c)(i) with respect to the number of
56
outstanding shares of Company Common Stock and number of shares of Company
Common Stock subject to outstanding Company Stock Options, Company SARs and
ESPPs shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made on such dates (except to the
extent such representations and warranties expressly relate to an earlier date,
in which case as of such earlier date). Parent shall have received a certificate
signed on behalf of the Company by the chief executive officer and chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have, in
all material respects, performed or complied with all obligations required to be
performed or complied with by it under this Agreement by the time of the
Closing, and Parent shall have received a certificate signed on behalf of the
Company by the chief executive officer and chief financial officer of the
Company to such effect.
(c) No Material Adverse Effect. Since the date of this Agreement, there has
not been nor would there reasonably be expected to be a Material Adverse Effect.
SECTION 7.03. Conditions to Obligation of the Company. The obligation of
the Company to effect the Merger is further subject to the satisfaction or (to
the extent permitted by Law) waiver at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent and Sub set forth in this Agreement shall be true and correct
(disregarding all qualifications or limitations as to "materiality", "Parent
Material Adverse Effect" and words of similar import set forth therein) as of
the date of this Agreement and as of the Closing Date as though made on such
dates (except to the extent such representations and warranties expressly relate
to an earlier date, in which case as of such earlier date), except where the
failure of such representations and warranties to be so true and correct,
individually or in the aggregate, has not had, or would not reasonably be
expected to have a Parent Material Adverse Effect. The Company shall have
received a certificate signed on behalf of Parent by the chief executive officer
and chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Each of Parent and Sub
shall have, in all material respects, performed or complied with all obligations
required to be performed or complied with by it under this Agreement by the time
of the Closing, and the Company shall have received a certificate signed on
behalf of Parent by the chief executive officer and chief financial officer of
Parent to such effect.
SECTION 7.04. Frustration of Closing Conditions. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
7.01, 7.02 or 7.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to perform any of its obligations under this
Agreement, to act in good faith or to use its reasonable best efforts to
consummate the Merger and the other transactions contemplated by this Agreement,
as required by and subject to Section 6.03.
57
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the Stockholder
Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or before April
15, 2008 (the "Outside Date"); provided, however, that the right to
terminate this Agreement under this Section 8.01(b)(i) shall not be
available to any party if the failure of such party (or in the case of
Parent, Sub) to perform any of its obligations under this Agreement, the
failure to act in good faith or the failure to use its reasonable best
efforts to consummate the Merger and the other transactions contemplated by
this Agreement, as required by and subject to Section 6.03, has been a
principal cause of or resulted in the failure of the Merger to be
consummated on or before such date;
(ii) if any Restraint having any of the effects set forth in Section
7.01(c) shall have become final and nonappealable; provided that the party
seeking to terminate this Agreement pursuant to this Section 8.01(b)(ii)
shall have used reasonable best efforts to prevent the entry of and to
remove such Restraint; or
(iii) if the Stockholder Approval shall not have been obtained at the
Stockholders' Meeting duly convened therefor or at any adjournment or
postponement thereof;
(c) by Parent, if the Company shall have breached any of its
representations or warranties or failed to perform any of its covenants or
agreements set forth in this Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set forth in Section 7.02(a) or
7.02(b) and (ii) is incapable of being cured or is not cured within 60 days of
written notice of such breach or failure; provided that Parent shall not have
the right to terminate this Agreement pursuant to this Section 8.01(c) if Parent
or Sub is then in material breach of any of its representations, warranties,
covenants or agreements hereunder;
(d) by the Company, if Parent shall have breached any of its
representations or warranties or failed to perform any of its covenants or
agreements set forth in this Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set forth in Section 7.03(a) or
7.03(b) and (ii) is incapable of being cured or is not cured within 60 days of
written notice of such breach or failure; provided that the Company shall not
have the right to terminate this Agreement pursuant to this Section 8.01(d) if
the Company is then in material breach of any of its representations,
warranties, covenants or agreements hereunder;
58
(e) by Parent:
(i) in the event that an Adverse Recommendation Change shall have
occurred; or
(ii) the Company or any of its Representatives shall have willfully
breached Section 5.02 in any respect materially adverse to Parent; or
(f) by the Company, in accordance with Section 5.02(b).
SECTION 8.02. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of the last sentence of Section 6.02, Section 6.06, this Section 8.02
and Article IX, which provisions shall survive such termination; provided,
however that nothing herein shall relieve the Company, Parent or Sub from
liability for any willful and material breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the parties
hereto at any time before or after receipt of the Stockholder Approval;
provided, however, that after such approval has been obtained, there shall be
made no amendment that by Law requires further approval by the stockholders of
the Company without such approval having been obtained. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) to the extent permitted by
Law, waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso to the first sentence of Section 8.03 and to the extent permitted by
Law, waive compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
SECTION 8.05. Procedure for Termination or Amendment. A termination of this
Agreement pursuant to Section 8.01 or an amendment of this Agreement pursuant to
Section 8.03 shall, in order to be effective, require, in the case of Parent or
the Company, action by its Board of Directors or, with respect to any amendment
of this Agreement pursuant to Section 8.03, the duly authorized committee of its
Board of Directors to the extent permitted by Law.
59
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. Notices. Except for notices that are specifically required by
the terms of this Agreement to be delivered orally, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, faxed (with confirmation) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Sub, to:
IHOP CORP.
000 Xxxxx Xxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxx X. Xxxxxx, Xx.
Xxxxxx X. Xxxxxx
if to the Company, to:
Xxxxxxxx'x International, Inc.
0000 Xxxx 000xx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Fax No.: (000) 000-0000
Attention: General Counsel
60
with a copy to:
Cravath, Swaine & Xxxxx LLP
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxx, Esq.
SECTION 9.03. Consents and Approvals. For any matter under this Agreement
requiring the consent or approval of any party to be valid and binding on the
parties hereto, such consent or approval must be in writing.
SECTION 9.04. Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile), all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
SECTION 9.05. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement (a) constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter of this Agreement and the
Confidentiality Agreement, provided that the Confidentiality Agreement shall
survive the execution and delivery of this Agreement, and (b) except for the
provisions of Section 3.02 after the Effective Time and Section 6.05, are not
intended to confer upon any person other than the parties any legal or equitable
rights or remedies.
SECTION 9.06. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAWS THEREOF.
SECTION 9.07. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, and any assignment without such consent shall be
null and void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns. Notwithstanding the foregoing, Parent and Sub
may assign this Agreement or any of its rights, interests or obligations
hereunder to any wholly owned Subsidiary of Parent, provided that any such
assignment shall not relieve Parent or Sub of its obligations hereunder.
SECTION 9.08. Specific Enforcement; Consent to Jurisdiction. The parties
agree that irreparable damage would occur and that the parties would not have
61
any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the State of Delaware or any Federal court sitting in the State of Delaware,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of the Delaware Court of Chancery, any other court
of the State of Delaware and any Federal court sitting in the State of Delaware
in the event any dispute arises out of this Agreement or the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this
Agreement or the transactions contemplated by this Agreement in any court other
than the Delaware Court of Chancery (or, if the Delaware Court of Chancery shall
be unavailable, any other court of the State of Delaware or any Federal court
sitting in the State of Delaware).
SECTION 9.09. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
62
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
IHOP CORP.,
by /s/ Xxxxx Xxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman and
Chief Executive Officer
CHLH CORP.,
by /s/ Xxxxx Xxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxx
Title: President
XXXXXXXX'X INTERNATIONAL, INC.,
by /s/ Xxxxx X. Xxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer and
President
