Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
KRISPY KREME DOUGHNUTS, INC.,
XXXXXX ACQUISITION CORP.
AND
MONTANA XXXXX BREAD CO., INC.
DATED AS OF
JANUARY 23, 2003
TABLE OF CONTENTS
PAGE
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ARTICLE I
MERGER
1.1 The Merger........................................................ 1
1.2 Closing........................................................... 2
1.3 Filing............................................................ 2
1.4 Effective Time of the Merger...................................... 2
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation...................................... 2
2.2 By-Laws........................................................... 2
2.3 Directors of the Surviving Corporation............................ 2
ARTICLE III
EFFECT OF THE MERGER; CONVERSION
3.1 Effect on Capital Stock........................................... 3
(a) Newco Common Stock.......................................... 3
(b) Cancellation of Treasury Stock.............................. 3
(c) Conversion of Company Common Stock.......................... 3
(d) Stock Options and Warrants.................................. 3
3.2 Exchange of Certificates.......................................... 4
(a) Exchange Agent.............................................. 4
(b) Exchange Procedures......................................... 4
(c) Exchange of Certificates.................................... 4
(d) Distributions with Respect to Unsurrendered Certificates.... 5
(e) No Fractional Shares........................................ 5
(f) No Liability................................................ 6
(g) Withholding Rights.......................................... 6
(h) Lost Certificates........................................... 6
(i) Anti-Dilution............................................... 6
3.3 Stock Transfer Books.............................................. 6
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ARTICLE IV
CERTAIN EFFECTS OF THE MERGER
4.1 Effect of the Merger.............................................. 7
4.2 Further Assurances................................................ 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1 Organization and Qualification.................................... 7
5.2 Capital Stock of Subsidiaries..................................... 8
5.3 Capitalization.................................................... 8
5.4 Authority Relative to This Agreement.............................. 8
5.5 No Violations, etc................................................ 9
5.6 Commission Filings; Consolidated Financial Statements............. 10
5.7 Absence of Changes or Events...................................... 11
5.8 Form S-4; Information Statement................................... 12
5.9 Litigation........................................................ 13
5.10 Title to and Condition of Properties.............................. 13
5.11 Leases............................................................ 13
5.12 Contracts; Bank Accounts; Indebtedness............................ 14
(a) Contracts and Commitments................................... 14
(b) Employment and Labor Contracts.............................. 14
(c) Bank Accounts............................................... 15
(d) Indebtedness................................................ 15
5.13 Franchise Matters................................................. 15
5.14 Labor Matters..................................................... 16
5.15 Compliance with Law............................................... 16
5.16 Board Recommendation; DGCL Section 203............................ 16
5.17 Intellectual Property............................................. 17
5.18 Taxes............................................................. 17
5.19 Employee Benefit Plans; ERISA..................................... 19
5.20 Environmental Matters............................................. 22
5.21 Absence of Undisclosed Liabilities................................ 24
5.22 Finders or Brokers................................................ 25
5.23 Opinion of Financial Advisor...................................... 25
5.24 Insurance......................................................... 25
5.25 Customers and Suppliers........................................... 25
5.26 Product Warranty.................................................. 25
5.27 Tax Free Reorganization........................................... 25
5.28 Full Disclosure................................................... 26
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
6.1 Organization and Qualification.................................... 26
6.2 Capitalization.................................................... 27
6.3 Authority Relative to This Agreement.............................. 27
6.4 No Violations, etc................................................ 28
6.5 Commission Filings; Consolidated Financial Statements............. 29
6.6 Form S-4; Information Statement................................... 29
6.7 Litigation........................................................ 30
6.8 Board Recommendation.............................................. 30
6.9 Tax Free Reorganization........................................... 30
ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Conduct of Business of the Company Pending the Merger............. 31
7.2 Preparation of the Registration Statement......................... 33
7.3 Letters and Consents of the Company's Accountants................. 34
7.4 Additional Agreements; Cooperation................................ 34
7.5 Publicity......................................................... 34
7.6 No Solicitation................................................... 35
7.7 Access to Information; Confidentiality............................ 35
7.8 Indemnification and Insurance..................................... 35
7.9 Fees and Expenses................................................. 36
7.10 Affiliates........................................................ 36
7.11 Director and Officer Resignations................................. 36
7.12 NYSE Listing...................................................... 36
7.13 AMEX Listing...................................................... 36
7.14 Stockholder Litigation............................................ 37
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Each Party's Obligation to Effect the Merger........ 37
(a) No Injunctions or Restraints................................ 37
(b) Registration Statement...................................... 37
(c) NYSE Listing................................................ 37
(d) Employment and Registration Rights Agreements............... 37
(e) Indemnification Agreement................................... 38
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(f) Consents and Approvals...................................... 38
8.2 Conditions to Obligations of Parent and Newco..................... 38
(a) Company Stockholder Approval Obtained....................... 38
(b) Representations and Warranties.............................. 38
(c) Performance of Obligations of the Company................... 38
(d) No Material Adverse Change.................................. 38
(e) Affiliate Letters........................................... 39
(f) Tax Opinion................................................. 39
(g) Director and Officer Resignations........................... 39
8.3 Conditions to Obligations of the Company.......................... 39
(a) Representations and Warranties.............................. 39
(b) Performance of Obligations of Parent and Newco.............. 39
(c) No Material Adverse Change.................................. 39
(d) Tax Opinion................................................. 40
(e) Warrant Agreement........................................... 40
ARTICLE IX
TERMINATION
9.1 Termination....................................................... 40
9.2 Effect of Termination............................................. 41
ARTICLE X
MISCELLANEOUS
10.1 Nonsurvival of Representations and Warranties..................... 42
10.2 Waiver............................................................ 42
10.3 Notices........................................................... 42
10.4 Counterparts...................................................... 43
10.5 Interpretation.................................................... 43
10.6 Amendment......................................................... 44
10.7 No Third Party Beneficiaries...................................... 44
10.8 Governing Law..................................................... 44
10.9 Enforcement....................................................... 44
10.10 Entire Agreement.................................................. 44
10.11 No Recourse Against Others........................................ 44
10.12 Validity.......................................................... 45
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EXHIBITS
EXHIBIT A - Forms of Employment Agreements
EXHIBIT B - Form of Company Affiliate Letter
EXHIBIT C - Form of Indemnification Agreement
EXHIBIT D - Form of Tax Opinion of Counsel for Parent and Newco
EXHIBIT E - Form of Tax Opinion of Counsel for the Company
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 23, 2003, by and
among Krispy Kreme Doughnuts, Inc., a North Carolina corporation ("Parent"),
Xxxxxx Acquisition Corp., a Delaware corporation and a wholly owned subsidiary
of Parent ("Newco"), and Montana Xxxxx Bread Co., Inc., a Delaware corporation
(the "Company").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of each of Parent, Newco and the
Company have approved the merger (the "Merger") of Newco with and into the
Company, upon the terms and subject to the conditions set forth herein and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"); and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a tax free reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, holders of a majority of the outstanding shares of common
stock, par value $.001 per share, of the Company (the "Company Common Stock")
have indicated to Company that they intend, immediately following the execution
of this Agreement, to consent to the Merger and adopt this Agreement and to
enter into a registration rights agreement (the "Registration Rights Agreement")
with Parent in connection with such consent and related matters; and
WHEREAS, concurrently with the execution of this Agreement, Xxxxxx
X'Xxxxxxx and Xxxxx X'Xxxxxxx shall have entered into employment agreements (the
"Employment Agreements") with Parent, substantially in the form of Exhibit A-1
and A-2, respectively, each to become effective as of the Effective Time (as
hereinafter defined) as provided for therein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound, agree as follows:
ARTICLE I
MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined) and
subject to the terms and conditions of this Agreement and the DGCL, Newco shall
be merged with
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and into the Company as provided herein. Thereupon, the corporate existence of
Newco shall cease and the Company shall continue as the surviving corporation in
the Merger (the "Surviving Corporation") and shall succeed to and assume all the
rights and obligations of Newco in accordance with the DGCL.
1.2 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., New York time, on the date that is no later than the second
business day after satisfaction or waiver of the conditions set forth in Article
VIII, unless another time or date is agreed to in writing by the parties hereto
(the "Closing Date"). The Closing will be held at the offices of Xxxxxx Xxxxxx &
Xxxxxxx, 00 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, unless another place is agreed to
in writing by the parties hereto.
1.3 Filing. Subject to the provisions of this Agreement, on the
Closing Date, the parties hereto will cause to be filed with the office of the
Secretary of State of the State of Delaware a certificate of merger (the
"Certificate of Merger"), in such form as required by, and executed in
accordance with, the relevant provisions of the DGCL.
1.4 Effective Time of the Merger. The Merger shall be effective at
the time of the filing of the Certificate of Merger, or at such later time
specified in such Certificate of Merger, which time is herein sometimes referred
to as the "Effective Time" and the date thereof is herein sometimes referred to
as the "Effective Date."
ARTICLE II
CERTIFICATE OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation
of the Company shall be the Certificate of Incorporation of the Surviving
Corporation.
2.2 By-Laws. The By-Laws of Newco shall be the By-Laws of the
Surviving Corporation until the same shall thereafter be altered, amended or
repealed in accordance with the laws of the State of Delaware, the Certificate
of Incorporation of the Surviving Corporation or said By-Laws.
2.3 Directors and Officers of the Surviving Corporation. The
directors and officers of Newco immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation and until his or her successor is duly elected or appointed and
qualified.
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ARTICLE III
EFFECT OF THE MERGER; CONVERSION
3.1 Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holders of shares of
Company Common Stock or any shares of capital stock of Newco:
(a) Newco Common Stock. Each share of capital stock of Newco issued
and outstanding immediately prior to the Effective Time shall be converted
into one fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Company Common
Stock that is owned by the Company or by any subsidiary of the Company
shall automatically be canceled and shall cease to exist, and no shares of
common stock, no par value, of Parent (including the Rights (as
hereinafter defined) attached thereto, the "Parent Common Stock"), cash or
other consideration shall be delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each issued and outstanding
share of Company Common Stock (other than shares to be canceled in
accordance with Section 3.1(b)) (collectively, the "Exchanging Company
Shares") shall be converted into the right to receive 0.1501 (the
"Exchange Ratio") shares of Parent Common Stock (the "Merger
Consideration").
(d) Stock Options and Warrants. At the Effective Time, except as
provided in Section 8.1(d), all rights with respect to Company Common
Stock pursuant to any Company stock options or Company warrants which are
outstanding at the Effective Time (each of which is set forth in Section
5.3 of the Disclosure Schedule), whether or not then exercisable, shall be
converted into and become rights with respect to Parent Common Stock in
accordance with the terms of any stock option plan under which they were
issued and any stock option agreement or warrant agreement, as the case
may be, by which they are evidenced. It is intended that the foregoing
provisions shall be undertaken in a manner that will not constitute a
"modification" as defined in Section 425 of the Code as to any stock
option which is an "incentive stock option." After the Effective Time,
each Company stock option or warrant set forth in Section 5.3 of the
Disclosure Schedule shall be exercisable for that number of shares of
Parent Common Stock equal to the number of Company Stock subject thereto
multiplied by the Exchange Ratio, and shall have an exercise price per
share equal to the Company exercise price divided by the Exchange Ratio
and, unless provided otherwise under the stock option plan agreement or
warrant agreement, as the case may be, by which it is evidenced, upon
conversion the exercise price of each such stock option or warrant shall
be rounded up to the nearest $0.01 and the number of shares issuable upon
exer-
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cise shall be rounded down to the nearest full share. Parent agrees to
abide by the terms of any registration rights described in Section 5.3 of
the Disclosure Schedule.
3.2 Exchange of Certificates. (a) Exchange Agent. As promptly as
practicable after the Effective Time, Parent shall make available to Branch
Banking and Trust Company or such other bank or trust company designated by
Parent (the "Exchange Agent"), from time to time upon request of the Exchange
Agent, for the benefit of the holders of Company Common Stock immediately prior
to the Effective Time, for exchange in accordance with this Article III through
the Exchange Agent, certificates evidencing shares of Parent Common Stock
issuable to holders of Company Common Stock to satisfy the requirements set
forth in Section 3.1 relating to Merger Consideration and cash necessary to make
requisite Additional Payments (as hereinafter defined).
(b) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each record
holder of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "Certificates")
(i) a letter of transmittal (which shall be in customary form and 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 Exchange Agent)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration.
(c) Exchange of Certificates. Upon surrender to the Exchange Agent
of a Certificate for cancellation, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock, if any, constituting Merger Consideration to which such
holder is entitled pursuant to this Article III (together with any cash in lieu
of any fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 3.2(e) and any dividends or other distributions to which
such holder is entitled pursuant to Section 3.2(d) (together, the "Additional
Payments")), and the Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of shares of Company Common Stock which is
not registered in the transfer records of the Company, the applicable Merger
Consideration and Additional Payments, if any, may be issued to a transferee if
the Certificate representing such shares of Company Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 3.2, each Certificate
shall be deemed at all times after the Effective Time to represent only the
right to receive upon such surrender the applicable Merger Consideration with
respect to the shares of Company Common Stock formerly represented thereby and
Additional Payments, if any.
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(d) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to Parent
Common Stock the holder thereof is entitled to receive upon surrender thereof,
and no cash payment in lieu of any fractional shares shall be paid to any such
holder pursuant to Section 3.2(e), until the holder of such Certificate shall
surrender such Certificate. Subject to the effect of escheat, tax or other
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 3.2(e) and the amount
of dividends or other distributions with a record date after the Effective Time
and theretofore paid with respect to such whole shares of Parent Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
(e) No Fractional Shares. (i) No certificates representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution of Parent shall relate to
such fractional share interests and such fractional share interests shall not
entitle the owner thereof to vote or to any rights of a shareholder of Parent.
For purposes of this Section 3.2(e), all fractional shares to which a single
record holder of Company Common Stock would otherwise be entitled shall be
aggregated and calculations shall be rounded to three decimal places.
(ii) Each holder of shares of Company Common Stock exchanged pursuant
to the Merger who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock (after taking into account all such shares held by
such holder) shall be entitled to receive cash (without interest) in an amount,
less the amount of any withholding taxes which may be required thereon, equal to
such fractional part of a share of Parent Common Stock multiplied by the closing
sales price for a share of Parent Common Stock on the New York Stock Exchange,
Inc. (the "NYSE") Composite Transactions Tape (as reported by The Wall Street
Journal (Northeast edition), or, if not reported thereby, as reported in another
authoritative source selected by Parent) (the "NYSE Composite Transaction
Tape"), on the Closing Date.
(iii) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Certificates with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, without interest, to such holders subject to and in accordance with the
terms of Section 3.2(d).
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(f) No Liability. None of the Exchange Agent, Parent or the
Surviving Corporation shall be liable to any holder of Certificates for any
shares of Parent Common Stock (or dividends or distributions with respect
thereto), or cash delivered to a public official pursuant to any abandoned
property, escheat or similar law.
(g) Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Certificates such amounts as
they are required to deduct and withhold with respect to the making of such
payment under the Code, or any applicable provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving Corporation
or Parent, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Certificates
in respect of which such deduction and withholding was made by the Surviving
Corporation or Parent, as the case may be.
(h) 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
the Surviving Corporation or Parent, the posting by such person of a bond, in
such reasonable amount as the Surviving Corporation or Parent may direct, as
indemnity against any claim that may be made against them with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration and Additional
Payments, if any.
(i) Anti-Dilution. The Exchange Ratio shall be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Company Common Stock
or Parent Common Stock, as applicable), extraordinary dividend, reorganization,
recapitalization, reclassification or any other like change with respect to
Company Common Stock or Parent Common Stock occurring after the date hereof and
prior to the Effective Time. References to the Exchange Ratio elsewhere in this
Agreement shall be deemed to refer to the Exchange Ratio as it may have been
adjusted pursuant to this Section 3.2(i).
3.3 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and there shall be no further registration
of transfers of Company Common Stock thereafter on the records of the Company.
On or after the Effective Time, any Certificates presented to the Exchange Agent
or Parent for any reason shall be converted into the applicable Merger
Consideration and Additional Payments, if any.
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ARTICLE IV
CERTAIN EFFECTS OF THE MERGER
4.1 Effect of the Merger. The effects and consequences of the Merger
shall be as set forth in Section 259 of the DGCL.
4.2 Further Assurances. If at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
either of Newco or the Company, the officers of such corporation are fully
authorized in the name of their corporation or otherwise to take, and shall
take, all such further action.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth in the Disclosure Schedule (with
specific reference to the particular Section or subsection of this Agreement to
which the information stated in such Disclosure Schedule relates, with such
disclosure to be applicable to other Sections or subsections of this Agreement
to the extent a matter is disclosed in such a way as to make its relevance to
the information called for by such other Sections or subsections readily
apparent) delivered by the Company to Parent and Newco in connection with the
execution of this Agreement, the Company represents and warrants to Parent and
Newco as follows:
5.1 Organization and Qualification. Each of the Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Each of the Company and its
subsidiaries is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned or leased or the nature of its activities makes such qualification
necessary, except for failures to be so qualified or in good standing which
would not, individually or in the aggregate, have a material adverse effect on
the business, assets, liabilities, results of operations, condition (financial
or otherwise) or prospects of the Company and its subsidiaries, taken as a whole
(a "Company Material Adverse Effect"). Section 5.1 of the Disclosure Schedule
sets forth, with respect to the Company and each of its subsidiaries, each of
the jurisdictions in which they are incorporated or qualified or otherwise
licensed as a foreign corporation to do business. Neither the Company nor any of
its subsidiaries is in violation of any of the provisions of its certificate or
articles of incorporation or organization (or other applicable charter document)
or by-laws. The Company has delivered to Parent accurate and complete copies of
the certificate or arti-
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cles of incorporation or organization (or other applicable charter document) and
by-laws, as currently in effect, of each of the Company and its subsidiaries.
5.2 Capital Stock of Subsidiaries. The only direct or indirect
subsidiaries of the Company are those listed in Section 5.2 of the Disclosure
Schedule. The Company is directly or indirectly the record and beneficial owner
of all of the outstanding shares of capital stock of each of its subsidiaries,
there are no proxies with respect to such shares, and no equity securities of
any of such subsidiaries are or may be required to be issued by reason of any
options, warrants, scrip, rights to subscribe for, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any capital stock of any such subsidiary, and there
are no contracts, commitments, understandings or arrangements by which any such
subsidiary is bound to issue additional shares of its capital stock or
securities convertible into or exchangeable for such shares. All of such shares
so owned by the Company are validly issued, fully paid and nonassessable and are
owned by it free and clear of any claim, lien or encumbrance of any kind with
respect thereto. The Company does not directly or indirectly own any interest in
any corporation, partnership, joint venture or other business association or
entity.
5.3 Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock, par value $.001 per share. As of the date hereof, 8,107,835
shares of Company Common Stock are issued and outstanding, no shares are issued
and held as treasury shares and no shares of preferred stock are issued and
outstanding. All of such issued and outstanding shares of Company Common Stock
are validly issued, fully paid and nonassessable and free of preemptive rights.
Section 5.3 of the Disclosure Schedule sets forth all outstanding options,
warrants or other rights, whether or not exercisable, to acquire any shares of
Company Common Stock or any other equitable interest in the Company, and, in the
case of outstanding options, identifies the Company stock plan or other Company
benefit plan or other arrangement under which such options were granted. Other
than the transactions contemplated by this Agreement, neither the Company nor
any of its subsidiaries is a party to any agreement or understanding, oral or
written, which (a) grants an option, warrant or other right to acquire shares of
Company Common Stock or any other equitable interest in the Company, (b) grants
any registration rights with respect to any shares of Company Common Stock,
including shares of Company Common Stock issuable upon the exercise of
outstanding options and warrants, (c) grants a right of first refusal or other
such similar right upon the sale of Company Common Stock, or (d) restricts or
affects the voting rights of Company Common Stock, except as may have been
granted to Parent concurrently herewith. There is no liability for dividends
declared or accumulated but unpaid with respect to any Company Common Stock.
5.4 Authority Relative to This Agreement. The Company has full
corporate power and authority to execute and deliver this Agreement and to
consummate the Merger and other transactions contemplated hereby. The execution
and delivery of this
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Agreement and the consummation of the Merger and other transactions contemplated
hereby have been duly and validly authorized by the Board of Directors of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Merger or other
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by Parent and Newco, constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
or fiduciary principles. Concurrently with the execution of this Agreement, the
Company has received from the holders of a majority of the outstanding shares of
Company Common Stock an irrevocable consent (the "Majority Stockholders
Consent") to the Merger and the adoption of this Agreement; the Majority
Stockholders Consent is in full force and effect and complies in all respects
with the Company's Certificate of Incorporation and By-Laws and the DGCL; and no
other vote of or action by the stockholders of the Company is required to adopt
and approve this Agreement, to consummate the Merger or the other transactions
contemplated hereby. In addition, concurrently with the execution of this
Agreement, the Company has received from Xxxxxx Securities, Inc. ("Xxxxxx") the
release and/or waiver of certain obligations of and restrictions on the Company
and its stockholders under Sections 2.26, 3.22 and 3.23 and the related
provisions of the Underwriting Agreement between the Company and Xxxxxx dated
June 27, 2002 with respect to the matters contemplated hereby.
5.5 No Violations, etc. (a) Assuming that all filings, permits,
authorizations, consents and approvals or waivers thereof have been duly made or
obtained as contemplated by Section 5.5(b) hereof, neither the execution and
delivery of this Agreement by the Company nor the consummation of the Merger or
other transactions contemplated hereby nor compliance by the Company with any of
the provisions hereof will (i) violate, conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or suspension of, or accelerate the performance required by, or
result in a right of termination or acceleration under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company or any of its subsidiaries under, any of the
terms, conditions or provisions of (x) their respective certificate or articles
of incorporation or organization or by-laws, (y) any note, bond, mortgage,
indenture or deed of trust, or (z) any license, lease, agreement or other
instrument or obligation to which the Company or any such subsidiary is a party
or to which they or any of their respective properties or assets may be subject,
or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its subsidiaries or any
of their respective properties or assets, except, in the case of clauses (i)(z)
and (ii) above, for such violations, conflicts, breaches, defaults,
terminations, suspensions, accelerations, rights of termination or acceleration
or creations of liens, security interests, charges or encumbrances which would
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not, individually or in the aggregate, either have a Company Material Adverse
Effect or impair the Company's ability to consummate the Merger or other
transactions contemplated hereby.
(b) No filing or registration with, notification to or permit,
authorization, consent or approval of any governmental entity (including,
without limitation, any federal, state or local regulatory authority or agency)
is required by the Company in connection with the execution and delivery of this
Agreement or the consummation by the Company of the Merger or other transactions
contemplated hereby, except (i) the filing of the Certificate of Merger, (ii)
the Majority Stockholders Consent, (iii) filings with the Securities and
Exchange Commission (the "SEC") necessary to comply with Section 14(c) of the
Securities Act of 1933, as amended (the "Securities Act"), and (iv) filings with
the American Stock Exchange, Inc.
(c) As of the date hereof, none of the Company or any of its
subsidiaries is in violation of or default under (x) its respective certificate
or articles of incorporation or organization or by-laws, (y) any note, bond,
mortgage, indenture or deed of trust, or (z) any license, lease, agreement or
other instrument or obligation to which the Company or any such subsidiary is a
party or to which they or any of their respective properties or assets may be
subject, except, in the case of clauses (y) and (z) above, for such violations
or defaults which would not, individually or in the aggregate, either have a
Company Material Adverse Effect or impair the Company's ability to consummate
the Merger or other transactions contemplated hereby.
5.6 Commission Filings; Consolidated Financial Statements. (a) The
Company has filed all required forms, reports and documents with the SEC since
the Company's Registration Statement on Form SB-2 (the "Company IPO Registration
Statement") was declared effective by the SEC on June 27, 2002, including, in
the form filed with the SEC, together with any amendments thereto, (i) the
Company's final prospectus dated June 27, 2002 relating to the initial public
offering of Company Common Stock and warrants to purchase Company Common Stock
filed with the SEC pursuant to Rule 424(b) (the "Company IPO Prospectus") and
(ii) its Quarterly Reports on Form 10-Q for the fiscal quarters ended July 31,
2002 and October 31, 2002 (the "Company 10-Qs" and, together with the Company
IPO Registration Statement and the Company IPO Prospectus, the "Company SEC
Reports"), all of which complied when filed in all material respects with all
applicable requirements of the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act"), the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act") and/or the Xxxxxxxx-Xxxxx Act of 2002 (with
respect to the provisions of such act required to be complied with at the time
such forms, reports and/or documents were required to be filed) and the rules
and regulations promulgated thereunder (the "Xxxxxxxx-Xxxxx Act") and, to the
knowledge of the Company, the statements contained in or accompanying the
Company 10-Qs in accordance
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with Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act are true and correct. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of the Company and its subsidiaries included in such
Company SEC Reports were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto and except, in the
case of such unaudited consolidated interim financial statements, for the
omission of normal year-end adjustments) and present fairly, in all material
respects, the financial position and results of operations and cash flows of the
Company and its subsidiaries on a consolidated basis at the respective dates and
for the respective periods indicated. At the time of effectiveness and/or filing
with the SEC of such Company SEC Reports, none of the Company SEC Reports
contained any untrue statement of a material fact or omitted 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 were made,
not misleading. The Company has provided to Parent copies of all other
correspondence sent to or received from the SEC by the Company and its
subsidiaries or their counsel or accountants since April 25, 2002.
(b) The Company has provided to Parent true and complete copies of
the unaudited consolidated balance sheet of the Company at December 25, 2002
(the "December 2002 Balance Sheet") and the unaudited consolidated statement of
income of the Company for the period from October 31, 2002 through December 25,
2002 (collectively, the "December 2002 Financials"). The December 2002
Financials fairly present, in all material respects, the consolidated financial
position of the Company at December 25, 2002, and the consolidated results of
operations of the Company for the period then ended, and have been prepared in
accordance with GAAP applied on a consistent basis, except that such financial
statements do not include a statement of cash flows or any footnote disclosures
that would otherwise be required to be included by GAAP, and are also subject to
normal non-recurring year-end audit adjustments. The December 2002 Balance Sheet
reflects all liabilities of the Company, whether absolute, accrued or
contingent, as of the date thereof of the type required to be reflected or
disclosed on a balance sheet prepared in accordance with GAAP.
5.7 Absence of Changes or Events. Except as set forth in the Company
SEC Reports, since October 31, 2002:
(a) there has been no material adverse change, or any development
involving a prospective material adverse change, in the business, assets,
liabilities, results of operations, condition (financial or otherwise) or
prospects of the Company and its subsidiaries, taken as a whole;
(b) there has not been any direct or indirect redemption, purchase
or other acquisition of any shares of capital stock of the Company or any
of its subsidiaries, or any declaration, setting aside or payment of any
dividend or other distribution by the Company in respect of its capital
stock;
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(c) except in the ordinary course of its business and consistent
with past practice, neither the Company nor any of its subsidiaries has
incurred any indebtedness for borrowed money, or assumed, guaranteed,
endorsed or otherwise as an accommodation become responsible for the
obligations of any other individual, firm or corporation, or made any
loans or advances to any other individual, firm or corporation;
(d) there has not been any change in the financial or the accounting
methods, principles or practices of the Company or its subsidiaries,
except to the extent required by GAAP or the rules and regulations of the
SEC;
(e) except in the ordinary course of business and for amounts which
are not material, there has not been any revaluation by the Company or any
of its subsidiaries of any of their respective assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivables;
(f) there has not been any damage, destruction or loss, whether
covered by insurance or not, except for such as would not, individually or
in the aggregate, have a Company Material Adverse Effect; and
(g) there has not been any agreement by the Company or any of its
subsidiaries to (i) do any of the things described in the preceding
clauses (a) through (f) other than as expressly contemplated or provided
for in this Agreement or (ii) take, whether in writing or otherwise, any
action which, if taken prior to the date of this Agreement, would have
made any representation or warranty in this Article V untrue or incorrect.
5.8 Form S-4; Information Statement. None of the information
supplied or to be supplied by or on behalf of the Company for inclusion in the
registration statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in connection with
the Merger (the "Registration Statement") will, at the time the Registration
Statement becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion in the Information Statement included therein (the "Information
Statement"), in definitive form, relating to the Merger will, at the dates
mailed to stockholders of the Company and at the Effective Time, 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. The
Company will promptly inform Parent of the happening of any event prior to the
Effective Time which would render such information regarding the Company
incorrect in any material respect or require the amendment of the Information
Statement. The Registration Statement and the Information Statement (except for
information prepared by or
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relating solely to Parent and Newco) will comply as to form in all material
respects with the provisions of the Securities Act and the Exchange Act.
5.9 Litigation. Except as set forth in the Company SEC Reports,
there is no (i) claim, action, suit or proceeding pending or, to the knowledge
of the Company or any of its subsidiaries, threatened against or relating to the
Company or any of its subsidiaries before any court or governmental or
regulatory authority or body or arbitration tribunal, or (ii) outstanding
judgment, order, writ, injunction or decree, or application, request or motion
therefor, of any court, governmental agency or arbitration tribunal in a
proceeding to which the Company, any subsidiary of the Company or any of their
respective assets was or is a party.
5.10 Title to and Condition of Properties. Section 5.10 of the
Disclosure Schedule contains a true and complete list of all real properties
owned or leased by the Company and its subsidiaries. Each of the Company and its
subsidiaries has good title to all of the real property, if any, owned by it and
good leasehold interests in all real property leased by it, and owns outright
all of the personal property (except for leased property or assets) which is
reflected on the December 2002 Balance Sheet except for property since sold or
otherwise disposed of in the ordinary course of business and consistent with
past practice. No such real or personal property is subject to claims, liens or
encumbrances, whether by mortgage, pledge, lien, conditional sale agreement,
charge or otherwise, except for (i) Permitted Encumbrances (as hereinafter
defined) or (ii) those which would not, individually or in the aggregate, have a
Company Material Adverse Effect. For purposes of this Agreement, "Permitted
Encumbrances" shall mean (i) liens for taxes, assessments and other governmental
charges not yet due and payable, (ii) liens for taxes, assessments and other
governmental charges due but not yet delinquent or being contested in good faith
by appropriate proceedings for which adequate reserves have been established by
the Company, (iii) mechanics', carriers', workers', repairmen's, statutory or
common law liens being contested in good faith by appropriate proceedings for
which adequate reserves have been established by the Company and (iv) with
respect to real property, (A) easements, quasi-easements, licenses, covenants,
rights-of-way or other similar restrictions, including any other agreements,
conditions or restrictions that would be shown on a current title, report or
similar listing and which, individually or in the aggregate, would not prevent
such property from being used for the purposes for which it is intended, (B)
zoning, building, subdivision or other similar requirements or restrictions and
(C) the rights and obligations of landlords and tenants contained in any lease
governing such real property.
5.11 Leases. Section 5.11 of the Disclosure Schedule contains a true
and complete list of all leases requiring the payment of rentals aggregating at
least $25,000 per annum pursuant to which real or personal property is held
under lease by either of the Company or any of its subsidiaries, and true and
complete copies of each lease pursuant to which either of the Company or any of
its subsidiaries leases real or personal property to others. All of the leases
so listed are valid and subsisting and in full force and effect and are subject
to no default with respect to either of the Company or its subsidiaries, as the
case may be, and, to
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the knowledge of the Company, are in full force and effect and subject to no
default with respect to any other party thereto, and the leased real property is
in good and satisfactory condition in all material respects. Section 5.11 of the
Disclosure Schedule identifies each existing lease containing an agreement with
respect to any change of control or any indemnification or other contingent
obligations that would be triggered by the Merger.
5.12 Contracts; Bank Accounts; Indebtedness.
(a) Contracts and Commitments. Section 5.12(a) of the Disclosure
Schedule contains a complete and accurate list of all existing outstanding
contracts and commitments, whether written or oral, under which the obligations
of the Company or its subsidiaries exceed $25,000, including, without
limitation, contracts and commitments (i) the terms of which provide for the
payment by the Company and its subsidiaries after the date hereof as the
recipient of goods or services or involve the receipt by the Company or any of
its subsidiaries as the provider of goods or services, (ii) whereby the Company
or any of its subsidiaries leases equipment, (iii) whereby the Company or any of
its subsidiaries has a firm commitment to purchase capital equipment (or lease
in the nature of a conditional purchase of capital equipment), (iv) which
continue for a period of twelve months or more and are not subject to a
unilateral right of termination by the Company without consideration or (v)
which restrict in any material manner or purport to restrict in any material
manner any business activities or freedom of the Company or any of its
subsidiaries (or, to the knowledge of the Company, any of its officers or
employees) to engage in any business or to compete with any person. Section
5.12(a) of the Disclosure Schedule also contains a complete and accurate list of
all existing outstanding contracts and commitments, whether written or oral,
between the Company or any of its subsidiaries, on the one hand, and any
officer, director or affiliate of the Company or any subsidiary, on the other
hand. None of the Company or any of its subsidiaries is in material default (nor
is there any event which with notice or lapse of time or both would constitute a
material default) under any contract or commitment referred to in this Section
5.12(a). Section 5.12(a) of the Disclosure Schedule identifies each existing
contract or commitment containing an agreement with respect to any change of
control or any indemnification or other contingent obligations that would be
triggered by the Merger.
(b) Employment and Labor Contracts. Neither the Company nor any of
its subsidiaries is a party to any employment, management services, consultation
or other similar contract with any past or present officer, director, employee
or other person or, to the knowledge of the Company, any entity affiliated with
any past or present officer, director or employee or other person other than
those included as exhibits in the Company SEC Reports and other than the
agreements executed by employees generally, the forms of which have been
delivered to Parent. Notwithstanding the foregoing, Section 5.12(b) of the
Disclosure Schedule identifies any such agreement containing an agreement with
respect to any change of control, severance or termination benefit or any
obligation on the part of the Company that could be triggered by the Merger.
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(c) Bank Accounts. Section 5.12(c) of the Disclosure Schedule
contains a complete and accurate list of the name of each bank in which the
Company or any of its subsidiaries has an account or safe deposit box (each, a
"Bank Account" and, collectively, the "Bank Accounts"). The Company has
previously provided to Parent the account numbers of each Bank Account and the
names of all persons authorized to draw thereon or to have access thereto.
(d) Indebtedness. Section 5.12(d) of the Disclosure Schedule
contains a complete and accurate list of all indebtedness for borrowed money of
the Company and its subsidiaries showing the aggregate amount by way of
principal and interest which was outstanding as of a date not more than seven
days prior to the date of this Agreement and, by the terms of agreements
governing such indebtedness, is expected to be outstanding on the Closing Date.
Neither this Agreement, the Merger nor the other transactions contemplated
hereby will result in any outstanding loans or borrowings by the Company or any
subsidiary of the Company becoming due, going into default or giving the lenders
or other holders of debt instruments the right to require the Company or any of
its subsidiaries to repay all or a portion of such loans or borrowings.
5.13 Franchise Matters. Except for that certain Development
Agreement between the Company and Bread Partners, LLC relating to the
development of up to seven stores in the Washington, DC area, none of the
Company or any of its subsidiaries is party to any franchise or similar
agreements or arrangements. The Company and its subsidiaries are in compliance
in all material respects with the applicable requirements of the Federal Trade
Commission (the "FTC") rules governing franchising and all applicable provisions
of federal, state, local and other laws or regulations governing the business of
a franchisor. The Company is the exclusive franchisor of the "Montana Xxxxx" and
the "Montana Xxxxx Bread Co." concept for the operation of retail bakeries
utilizing certain of the trademarks and service marks used by the Company and
its subsidiaries. Neither the Company's Uniform Franchise Offering Circular nor
any other franchise disclosure statement of similar import (whether now or
previously existing) nor any statements (whether oral or written) furnished by
the Company and its subsidiaries or by any person acting on their behalf in
connection with the sale, management, administration or termination of a
franchise contains or contained any untrue statement of a material fact or omits
or omitted a material fact necessary to make the statements made or contained
therein or made in connection therewith not misleading. The Company is not aware
of any fact, circumstance or condition related to franchising activities which
could have a Company Material Adverse Effect or impair the Company's ability to
consummate the Merger and the other transactions contemplated hereby. The
Company's Development agreement with Bread Partners, LLC is valid and in full
force and effect, and the Company is not, and to the knowledge of the Company,
Bread Partners, LLC is not, in default with respect to any material term or
condition thereof, nor has any event occurred which, through the passage of time
or the giving of notice, or both, would constitute a default thereunder by the
Company or, to the knowledge of the Company, Bread Partners, LLC, thereunder.
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5.14 Labor Matters. Each of the Company and its subsidiaries is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and neither the Company nor any of its subsidiaries is engaged
in any unfair labor practice. There is no labor strike, slowdown or stoppage
pending (or, to the knowledge of the Company, any labor strike or stoppage
threatened) against or affecting the Company or any of its subsidiaries. To the
knowledge of the Company, no petition for certification has been filed and is
pending before the National Labor Relations Board with respect to any employees
of the Company or any of its subsidiaries who are not currently organized. No
employee of the Company or its subsidiaries is represented by a labor union or
similar organization with respect to his or her employment with the Company or
any of its subsidiaries and, to the knowledge of the Company, there exist no
ongoing discussions between the employees of the Company or its subsidiaries and
any labor union or similar organization relating to the representation of such
employees by such labor union or similar organization.
5.15 Compliance with Law. Neither the Company nor any of its
subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule or order of any foreign, federal, state or local government or
any other governmental department or agency (including, without limitation, any
required by the Food and Drug Administration, the Department of Agriculture, the
Nutrition Labeling and Education Act of 1990, the Organic Foods Production Act
of 1990 or the National Organic Program authorized thereunder), or any judgment,
decree or order of any court, applicable to its business or operations, except
where any such violation or failure to comply would not, individually or in the
aggregate, have a Company Material Adverse Effect or impair the Company's
ability to consummate the Merger or the other transactions contemplated hereby;
the conduct of the business of each of the Company and its subsidiaries is in
conformity with all foreign, federal, state and local requirements, and all
other foreign, federal, state and local governmental and regulatory
requirements, except where such nonconformities would not, individually or in
the aggregate, have a Company Material Adverse Effect or impair the Company's
ability to consummate the Merger or the other transactions contemplated hereby.
The Company and its subsidiaries have all permits, licenses and franchises from
governmental agencies required to conduct their businesses as now being
conducted, except for such permits, licenses and franchises the absence of which
would not, individually or in the aggregate, have a Company Material Adverse
Effect or impair the Company's ability to consummate the Merger or the other
transactions contemplated hereby.
5.16 Board Recommendation; DGCL Section 203. (a) The Board of
Directors of the Company has, by unanimous vote of all directors voting a
meeting of such Board duly held on January 23, 2003, declared the advisability
of, approved and adopted this Agreement and the Merger and determined that
(based in part on the review of the fairness opinion presented to it by
Capitalink, L.C.) the Merger is fair to the stockholders of the Company.
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(b) No "fair price", "moratorium", "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or federal
laws in the United States (with the exception of Section 203 of the DGCL)
applicable to the Company is applicable to the Merger or the other transactions
contemplated hereby. The action of the Board of Directors of the Company in
approving this Agreement, the Registration Rights Agreement and the Majority
Stockholders Consent (and the transactions provided for herein) is sufficient to
render inapplicable to this Agreement, the Registration Rights Agreement and the
Majority Stockholders Consent (and the transactions provided for herein) the
restrictions on "business combinations" (as defined in Section 203 of the DGCL)
as set forth in Section 203 of the DGCL.
5.17 Intellectual Property. Section 5.17 of the Disclosure Schedule
sets forth a complete and accurate list of all of the trademarks (whether or not
registered) and trademark registrations and applications, patent and patent
applications, copyrights and copyright applications, service marks, service xxxx
registrations and applications, trade dress, trade and product names
(collectively, the "Intellectual Property") owned or licensed by the Company and
its subsidiaries and material to the business of the Company and its
subsidiaries, taken as a whole. (i) Each of the Company and its subsidiaries has
or owns, directly or indirectly, all right, title and interest to such
Intellectual Property or has the perpetual right to use such Intellectual
Property without consideration; (ii) none of the rights of the Company and its
subsidiaries in or use of such Intellectual Property has been or is currently
being or, to the knowledge of the Company, is threatened to be infringed or
challenged; (iii) all of the patents, trademark registrations, service xxxx
registrations, trade name registrations and copyright registrations included in
such Intellectual Property have been duly issued and have not been canceled,
abandoned or otherwise terminated; and (iv) all of the patent applications,
trademark applications, service xxxx applications, trade name applications and
copyright applications included in such Intellectual Property have been duly
filed. To the knowledge of the Company, the Company and its subsidiaries own or
have adequate licenses or other rights to use all Intellectual Property,
know-how and technical information required for their operations.
5.18 Taxes. (i) The Company and each of its subsidiaries have timely
filed with the appropriate governmental agencies all federal income and all
other material Tax Returns (as hereinafter defined) required to be filed for any
period, taking into account any extension of time to file granted to or obtained
on behalf of the Company and/or its subsidiaries, and each such Tax Return is
complete and accurate in all material respects; (ii) the Company and each of its
subsidiaries have timely paid all Taxes (as hereinafter defined) due and payable
by them and have made adequate accruals for any Taxes attributable to the
Company and/or its subsidiaries that are not yet due and payable; (iii) all
asserted deficiencies or assessments resulting from examinations of any Tax
Returns filed by or Taxes of the Company or any of its subsidiaries have been
paid or finally settled and no issue asserted in writing in connection with any
such asserted deficiency or assessment reasonably could be expected to
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result in a proposed deficiency or assessment for any prior, parallel or
subsequent period (including periods subsequent to the Effective Date) not
covered by an adequate accrual; (iv) no other deficiency in respect of Taxes has
been asserted in writing or assessed against the Company or any of its
subsidiaries by any taxing authority, and no examination of the Company or any
of its subsidiaries is pending or, to the knowledge of the Company, threatened
by any taxing authority; (v) no extension of the period for assessment or
collection of any Tax of the Company or its subsidiaries is currently in effect
and no extension of time within which to file any Tax Return has been requested,
which Tax Return has not since been filed; (vi) no liens have been filed with
respect to any Taxes of the Company or any of its subsidiaries other than in
respect of property taxes that have accrued but are not yet due and payable;
(vii) neither the Company nor any of its subsidiaries has made, or is or will be
required to make, any adjustment by reason of a change in their accounting
methods for any period (or portion thereof) ending on or before the Effective
Date; (viii) the Company and its subsidiaries have made timely payments of all
Taxes required to be deducted and withheld from the wages paid to their
employees and from all other amounts paid to third parties; (ix) neither the
Company nor any of its subsidiaries is a party to any tax sharing, tax matters,
tax indemnification or similar agreement; (x) neither the Company nor any of its
subsidiaries owns any interest in any "controlled foreign corporation" (within
the meaning of Section 957 of the Code), "passive foreign investment company"
(within the meaning of Section 1296 of the Code) or other entity the income of
which may be required to be included in the income of the Company or such
subsidiary whether or not distributed; (xi) neither the Company nor any of its
subsidiaries has made an election under Section 341(f) of the Code; (xii)
neither the Company nor any of its subsidiaries is a party to any agreement or
arrangement that provides for the payment of any amount, or the provision of any
other benefit, that could constitute an "excess parachute payment" within the
meaning of Section 280G of the Code; (xiii) to the knowledge of the Company, no
claim has ever been made by an authority in a jurisdiction where the Company or
any of its subsidiaries does not file Tax Returns that such entity is or may be
subject to taxation by that jurisdiction; (xiv) neither the Company nor any of
its subsidiaries has any liability for the Taxes of any person under United
States Treasury Regulation ("Treas. Reg.") Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise, except for liability arising under Treas. Reg. Section
1.1502-6 with respect to current members of the Company's "affiliated group" (as
defined in Section 1504 of the Code); (xv) neither the Company nor any of its
subsidiaries has ever had any "undistributed personal holding company income"
(as defined in Section 545 of the Code); (xvi) none of the assets of the Company
or any of its subsidiaries is "tax-exempt use property" (as defined in Section
168(h)(1) of the Code) or may be treated as owned by any other person pursuant
to Section 168(f)(8) of the Internal Revenue Code of 1954 (as in effect
immediately prior to the enactment of the Tax Reform Act of 1986); (xvii)
neither the Company nor any of its subsidiaries has ever been a "United States
real property holding corporation," within the meaning of Section 897 of the
Code; (xviii) neither the Company nor any of its subsidiaries has made any
elections under Sections 108, 168, 338, 441, 472, 1017, 1033 or 4977 of the
Code; (xix) there are no "excess loss accounts" (as defined in Treas. Reg.
Section 1.1502-19) with respect to any
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stock of any subsidiary; (xx) neither the Company nor any of its subsidiaries
has any (a) deferred gain or loss (1) arising from any deferred intercompany
transactions (as described in Treas. Reg. Sections 1.1502-13 and 1.1502-13T
prior to amendment by Treasury Decision 8597 (issued July 12, 1995)) or (2) with
respect to the stock or obligations of any other member of any affiliated group
(as described in Treas. Reg. Sections 1.1502-14 and 1.1502-14T prior to
amendment by Treasury Decision 8597) or (b) any gain subject to Treas. Reg.
Section 1.1502-13, as amended by Treasury Decision 8597; (xxi) neither the
Company nor any of its subsidiaries has requested a ruling from, or entered into
a closing agreement with, the Internal Revenue Service (the "IRS") or any other
taxing authority; and (xxii) the Company has previously delivered to Parent true
and complete copies of (a) all federal, state, local and foreign income or
franchise Tax Returns filed by the Company and/or any of its subsidiaries for
the last three taxable years ending prior to the date hereof and (b) any audit
reports issued within the last three years by the IRS or any other taxing
authority.
For all purposes of this Agreement, "Tax" or "Taxes" means (i) all
federal, state, local, foreign or franchise taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
alternative minimum, gross receipts, capital, sales, use, ad valorem, value
added, transfer, franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment, excise,
severance, stamp, occupation, property and estimated taxes, customs duties,
fees, assessments and charges of any kind whatsoever, (ii) all interest,
penalties, fines, additions to tax or other additional amounts imposed by any
taxing authority in connection with any item described in clause (i) and (iii)
all transferee, successor, joint and several or contractual liability
(including, without limitation, liability pursuant to Treas. Reg. Section
1.1502-6 (or any similar state, local or foreign provision)) in respect of any
items described in clause (i) or (ii).
For all purposes of this Agreement, "Tax Return" means all returns,
declarations, reports, estimates, information returns and statements required to
be filed in respect of any Taxes.
5.19 Employee Benefit Plans; ERISA.
(a) Section 5.19 of the Disclosure Schedule sets forth a complete
and accurate list of all "employee pension benefit plans" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by the Company, any of its subsidiaries
or any other ERISA Affiliates, or with respect to which the Company or any of
its subsidiaries contributes or is obligated to make payments thereunder or
otherwise may have any liability ("Pension Benefits Plans"), "welfare benefit
plans" (as defined in Section 3(1) of ERISA) maintained or contributed to by the
Company or any of its subsidiaries or with respect to which the Company or any
of its subsidiaries otherwise may have any liability ("Welfare Plans"),
multiemployer plans as defined in Section 3(37) of ERISA to which the Company or
any of its subsidiaries is required to make con-
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tributions or otherwise may have any liability, stock bonus, stock option,
restricted stock, stock appreciation right, stock purchase, bonus, incentive,
deferred compensation, severance and vacation or other employee benefit plans,
programs or arrangements that are not Pension Benefit Plans or Welfare Plans
maintained or contributed to by the Company or a subsidiary or with respect to
which the Company or any subsidiary otherwise may have any liability ("Other
Plans"). For purposes of this Agreement, "ERISA Affiliate" shall mean any person
(as defined in Section 3(9) of ERISA) that is or has been a member of any group
of persons described in Section 414(b), (c), (m) or (o) of the Code including
the Company or any of its subsidiaries.
(b) The Company and each of its subsidiaries are in compliance with
the applicable provisions of ERISA, the Code and other applicable laws, as
applied to each of the Pension Benefit Plans, Welfare Plans and Other Plans
(collectively, the "Plans") except where the failure to comply would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(c) All contributions to, and payments from, the Plans which are
required to have been made in accordance with the Plans and, when applicable,
Section 302 of ERISA or Section 412 of the Code have been timely made except
where the failure to make such contributions or payments on a timely basis would
not, individually or in the aggregate, have a Company Material Adverse Effect.
(d) The Pension Benefit Plans intended to qualify under Section 401
of the Code are so qualified and have been determined by the IRS to be so
qualified and, to the knowledge of the Company, nothing has occurred with
respect to the operation of such Pension Benefit Plans which would cause the
loss of such qualification or exemption or the imposition of any material
liability, penalty or tax under ERISA or the Code.
(e) There are (i) no investigations, audits or examinations pending,
or to the knowledge of the Company, threatened by any governmental entity
(including the Pension Benefit Guaranty Corporation ("PBGC")) involving any of
the Plans, (ii) no termination proceedings involving the Plans, and (iii) no
pending or, to the knowledge of the Company, threatened claims (other than
routine claims for benefits), suits or proceedings against any Plan, against the
assets of any of the trusts under any Plan or against any fiduciary of any Plan
with respect to the operation of such Plan or asserting any rights or claims to
benefits under any Plan or against the assets of any trust under such Plan,
which would, in the case of clause (i), (ii) or (iii) of this paragraph (e),
give rise to any liability which would, individually or in the aggregate, have a
Company Material Adverse Effect, nor, to the knowledge of the Company, are there
any facts which would give rise to any liability which would, individually or in
the aggregate, have a Company Material Adverse Effect in the event of any such
investigation, audit, examination, claim, suit or proceeding.
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(f) None of the Company, any of its subsidiaries or any employee of
the foregoing, nor, to the knowledge of the Company, any trustee, administrator,
other fiduciary or any other "party in interest" or "disqualified person" with
respect to the Pension Benefit Plans or Welfare Plans, has engaged in a
"prohibited transaction" (within the meaning of Section 4975 of the Code or
Section 406 of ERISA) which could result in a tax or penalty on the Company or
any of its subsidiaries under Section 4975 of the Code or Section 502(i) of
ERISA which would, individually or in the aggregate, have a Company Material
Adverse Effect.
(g) None of the Pension Benefit Plans is a plan subject to Title IV
of ERISA or Section 412 of the Code.
(h) Neither the Company nor any subsidiary of the Company nor any
ERISA Affiliate has incurred, or is reasonably likely to incur, any material
liability under Title IV of ERISA.
(i) Neither the Company, any of its subsidiaries nor any of their
ERISA Affiliates has any liability (including any contingent liability under
Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA (a "Multiemployer Plan"), which would,
individually or in the aggregate, have a Company Material Adverse Effect.
(j) With respect to each of the Plans, true, correct and complete
copies of the following documents have been made available to Parent: (i) the
current Plans and related trust documents, including amendments thereto, (ii)
any current summary plan descriptions, (iii) the most recent Forms 5500 (if any)
filed with respect to each such Plan, (iv) the most recent financial statements
and actuarial reports, if applicable, (v) the most recent IRS determination
letter, if applicable, (vi) if any application for an IRS determination letter
is pending, copies of all such applications for determination including
attachments, exhibits and schedules thereto, (vii) all material agreements
(including settlement agreements or other similar agreements relating to any
Plan) and (viii) all material correspondence between the Company and any of its
subsidiaries and the IRS, PBGC, United States Department of Labor or any other
governmental entity relating to any of the Plans.
(k) None of the Welfare Plans maintained by the Company or any of
its subsidiaries are retiree life or retiree health insurance plans which
provide for continuing benefits or coverage for any participant or any
beneficiary of a participant following termination of employment, except as may
be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA"), or except where the full expense of such coverage or benefits
is paid by the participant or the participant's beneficiary. The Company and
each of its subsidiaries which maintain a "group health plan" within the meaning
of Section 5000(b)(1) of the Code have complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regula-
-22-
tions thereunder except where the failure to comply would not, individually or
in the aggregate, have a Company Material Adverse Effect.
(l) Except in the event of a partial termination, as described in
Treas. Reg. Section 1.411(d)-2, the consummation of the transactions
contemplated by this Agreement will not either alone or in connection with an
employee's termination of employment or other event result in an increase in the
amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits or compensation payable to or in respect of any employee
of the Company or any of its subsidiaries.
(m) The consummation of the transactions contemplated by this
Agreement will not result in or satisfy a condition to the payment of
compensation that would, in combination with any other payment, result in an
"excess parachute payment" within the meaning of Section 280G(b) of the Code.
(n) As of the Closing, the Company, its subsidiaries and any entity
with which the Company or its subsidiaries could be considered a single employer
under 29 U.S.C. Section 2101(a)(1) or under any relevant case law has not
incurred any liability or obligation under the Worker Adjustment and Retraining
Notification Act, as it may be amended from time to time, and within the 90-day
period immediately following the Closing, will not incur any such liability or
obligation if, during such 90-day period, only terminations of employment in the
normal course of operations occur.
5.20 Environmental Matters. (a) Each of the Company and its
subsidiaries has obtained (or is capable of obtaining without incurring any
material incremental expense) all Environmental Permits required in connection
with its business and operations, except when the failure to obtain such
Environmental Permits would not, individually or in the aggregate, have a
Company Material Adverse Effect, and has no reason to believe any of them will
be revoked prior to their expiration, modified or will not be renewed, and have
made all registrations and given all notifications that are required under
Environmental Laws.
(b) There is no Environmental Claim pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries under
Environmental Laws.
(c) The Company and its subsidiaries are in material compliance
with, and have no material liability under, Environmental Laws, including,
without limitation, all of their Environmental Permits.
(d) Except as may be contained in any lease agreement set forth in
Section 5.11 of the Disclosure Schedule, copies of which have been delivered to
Parent, neither the Company nor any of its subsidiaries has assumed, by contract
or otherwise, any liabilities or obligations arising under Environmental Laws.
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(e) There are no past or present actions, activities, conditions,
occurrences or events, including, without limitation, the Release or threatened
Release of Hazardous Materials, which could reasonably be expected to prevent
material compliance by the Company or any of its subsidiaries with Environmental
Laws, or to result in any material liability of the Company or any of its
subsidiaries under Environmental Laws.
(f) No lien has been recorded under Environmental Laws with respect
to any property, facility or asset currently owned by the Company or any of its
subsidiaries.
(g) Neither the Company nor any of its subsidiaries has received any
notification that Hazardous Materials that any of them or any of their
respective predecessors in interest has used, generated, stored, treated,
handled, transported or disposed of has been found at any site at which any
person is conducting or plans to conduct any investigation, remediation,
removal, response or other action pursuant to Environmental Laws, and neither
the Company nor any of its subsidiaries is conducting any such action at any
location.
(h) There is no friable asbestos or asbestos containing material in,
on or at any property, facility or equipment owned, operated or leased by the
Company or any of its subsidiaries.
(i) No property now or previously owned, operated or leased by the
Company or any of its subsidiaries, or any of their respective predecessors in
interest, is (i) listed or proposed for listing on the National Priorities List
promulgated pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended ("CERCLA") or (ii) listed on the
Comprehensive Environmental Response, Compensation, and Liability Information
System List promulgated pursuant to CERCLA, or on any comparable list
established under Environmental Laws.
(j) No underground or aboveground storage tank or related piping, or
any surface impoundment, lagoon, landfill or other disposal site containing
Hazardous Materials is located at, under or on any property owned, operated or
leased by the Company or any of its subsidiaries nor has any of them been
removed from or decommissioned or abandoned at any such property.
(k) The execution and delivery of this Agreement and the
consummation by the Company of the Merger and other transactions contemplated
hereby and the exercise by Parent of rights to own and operate the businesses of
each of the Company and its subsidiaries substantially as presently conducted
will not affect the validity or require the transfer of any material
Environmental Permits held by the Company or any of its subsidiaries and will
not require any notification, disclosure, registration, reporting, filing,
investigation, remediation response or other action under Environmental Laws.
-24-
(l) The Company has delivered or otherwise made available for
inspection to Parent copies of any investigations, studies, reports,
assessments, evaluations and audits in its possession, custody or control of
Hazardous Materials at, in, beneath, emanating from or adjacent to any
properties or facilities now or formerly owned, leased, operated or used by it
or any of its subsidiaries or any of their respective predecessors in interest,
or of compliance by any of them with, or liability of any of them under,
Environmental Laws.
For purposes of this Section 5.20:
(i) "Environment" means any surface water, ground water, drinking
water supply, land surface or subsurface strata, ambient air, indoor air
and any indoor location and all natural resources such as flora, fauna and
wetlands;
(ii) "Environmental Claim" means any notice, claim, demand,
complaint, suit or other communication by any person alleging potential
liability (including, without limitation, potential liability for
investigation, remediation, removal, response or corrective action or for
damages to any person, property or natural resources, and any fines or
penalties) arising out of or relating to (1) the Release or threatened
Release of Hazardous Materials or (2) any violation, or alleged violation,
of Environmental Laws;
(iii) "Environmental Laws" means all federal, state, and local laws,
statutes, codes, rules, ordinances, regulations, judgments, orders,
decrees and the common law as now or previously in effect relating to
pollution or protection of human health or the Environment, or
occupational health or safety, including, without limitation, those
relating to the Release or threatened Release of Hazardous Materials;
(iv) "Hazardous Materials" means pollutants, contaminants, hazardous
or toxic substances, constituents, materials or wastes, and any other
waste, substance, material, chemical or constituent subject to regulation,
or which can give rise to liability, under Environmental Laws including,
without limitation, petroleum and petroleum products and wastes, and all
constituents thereof;
(v) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing in or into the Environment; and
(vi) "Environmental Permit" means a permit, identification number,
license, approval, consent or other written authorization issued pursuant
to Environmental Laws.
5.21 Absence of Undisclosed Liabilities. Except as disclosed in the
Company SEC Reports, neither the Company nor any of its subsidiaries has any
liabilities or obli-
-25-
gations of any nature, whether absolute, accrued, unmatured, contingent or
otherwise, or any unsatisfied judgments or any leases of personalty or realty or
unusual or extraordinary commitments, except the liabilities recorded on the
balance sheet as of October 31, 2002 included in the Company SEC Reports and the
notes thereto, and except for liabilities or obligations incurred in the
ordinary course of business and consistent with past practice since October 31,
2002 that would not individually or in the aggregate have a Company Material
Adverse Effect or impair the Company's ability to consummate the Merger or the
other transactions contemplated hereby.
5.22 Finders or Brokers. None of the Company, the subsidiaries of
the Company, the Board of Directors of the Company, any member of the Board of
Directors of the Company or any officer of the Company has employed any
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission in connection with the Merger.
5.23 Opinion of Financial Advisor. The Company has received the
opinion of Capitalink, L.C., dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair from a financial point
of view to the holders of Company Common Stock, a true and complete copy of
which has been delivered to Parent.
5.24 Insurance. Section 5.24 of the Disclosure Schedule lists all
insurance policies in force on the date hereof covering the businesses,
properties and assets of each of the Company and its subsidiaries, and all such
policies are currently in effect.
5.25 Customers and Suppliers. Since the date of the Company SEC
Reports, there has been no termination, cancellation or material curtailment of
the business relationship of the Company with any customer or supplier or group
of affiliated customers or suppliers which would result in a Company Material
Adverse Effect nor, to the knowledge of the Company, has the Company received
any written notice of intent to so terminate, cancel or materially curtail such
business relationships.
5.26 Product Warranty. There are no warranties (express or implied)
outstanding with respect to any products created, manufactured, sold,
distributed or licensed, or any services rendered, by the Company or any of its
subsidiaries, other than any such warranty implied by law pursuant to Sections
2-312, 2-313(b) and 2-314 of the Uniform Commercial Code of the State of New
York, the similar laws of any other state in which the Company's products are
sold, the Company's or any of its subsidiaries' customer purchase order or
contract forms or the Company's or any of its subsidiaries' order information
forms; and such products are nontoxic.
5.27 Tax Free Reorganization. Neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken, has agreed to take or
will take any action that would prevent the Merger from constituting a
reorganization within the meaning of Section
-26-
368(a) of the Code or that would prevent an exchange of Company Common Stock for
Parent Common Stock pursuant to the Merger from qualifying as an exchange
described in Section 354 of the Code (except with respect to any cash received
in lieu of a fractional share). Neither the Company nor, to the knowledge of the
Company, any of its affiliates is aware of any agreement, plan or other
circumstance that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code or that would prevent an
exchange of Company Common Stock for Parent Common Stock pursuant to the Merger
from qualifying as an exchange described in Section 354 of the Code (except with
respect to any cash received in lieu of a fractional share) and, to the
knowledge of the Company, the Merger and each such exchange will so qualify.
5.28 Full Disclosure. As of the date hereof and as of the Closing
Date, as the case may be, all statements contained in any schedule, exhibit,
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement are, or, in respect of any such instrument to be
delivered on or prior to the Closing Date, as of its date and as of the Closing
Date will be, accurate and complete in all material respects, authentic and
incorporated herein by reference and constitute or will constitute the
representations and warranties of the Company. No representation or warranty of
the Company contained in this Agreement contains any untrue statement or omits
to state a fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading in any
material respect.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Except as expressly set forth on the Disclosure Schedule (with
specific reference to the Section or subsection of this Agreement to which the
information stated in such Disclosure Schedule relates, with such disclosure to
be applicable to other Sections or subsections of this Agreement to the extent a
matter is disclosed in such a way as to make its relevance to the information
called for by such other Sections or subsections readily apparent) delivered by
Parent and Newco to the Company in connection with the execution of this
Agreement, Parent and Newco represent and warrant to the Company as follows:
6.1 Organization and Qualification. Each of Parent and Newco is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Parent and Newco is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or leased or the nature
of its activities makes such qualification necessary, except for failures to be
so qualified or in good standing which would not, individually or in the
aggregate, have a material adverse effect on
-27-
the business, assets, liabilities, results of operations, condition (financial
or otherwise) or prospects of Parent and its subsidiaries, taken as a whole (a
"Parent Material Adverse Effect"). Neither Parent nor Newco is in violation of
any of the provisions of its certificate or articles of incorporation or
organization or by-laws. Parent has delivered to the Company accurate and
complete copies of the certificate or articles of incorporation or organization
(or other applicable charter document) and by-laws, as currently in effect, of
each of Parent and Newco.
6.2 Capitalization. (a) The authorized capital stock of Parent
consists of 300,000,000 shares of Parent Common Stock and 10,000,000 shares of
preferred stock, no par value. As of December 6, 2002, 56,207,012 shares of
Parent Common Stock were issued and outstanding and no shares of preferred stock
of Parent were issued and outstanding. The Parent Common Stock, including the
shares of Parent Common Stock to be issued in exchange for Company Common Stock,
have attached thereto rights (the "Rights") to purchase one one-hundredth
(1/100) of a share of Series A Participating Cumulative Preferred Stock (the
"Series A Preferred Stock"). The Rights are issued pursuant to a Rights
Agreement (the "Rights Agreement") dated as of January 18, 2000 between Parent
and Branch Banking and Trust Company. All of such issued and outstanding shares
are, and any shares of Parent Common Stock to be issued in connection with this
Agreement, the Merger and the transactions contemplated hereby will be, validly
issued, fully paid and nonassessable and free of preemptive rights. Parent has
reserved for issuance a sufficient number of shares of Parent Common Stock to
cover the exercise of all outstanding options and warrants of the Company which
shall remain outstanding upon consummation of the Merger as set forth in Section
5.3 of the Disclosure Schedule.
(b) Newco was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement, has engaged in no other business
activities and has conducted its operations only as contemplated by this
Agreement. The authorized capital stock of Newco consists of 1,000 shares of
common stock, par value $0.01 per share, and Parent is directly the record and
beneficial owner of all such shares, and all of such shares so owned by Parent
are validly issued, fully paid and nonassessable and are owned by Parent free
and clear of any claim, lien or encumbrance of any kind with respect thereto.
6.3 Authority Relative to This Agreement. Each of Parent and Newco
has full corporate power and authority to execute and deliver this Agreement and
to consummate the Merger and other transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the Merger and
other transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of each of Parent and Newco and no other corporate
proceedings on the part of Parent or Newco are necessary to authorize this
Agreement or to consummate the Merger or other transactions contemplated hereby
except the approval of Parent, as the sole stockholder of Newco which has been
obtained simultaneously with the execution and delivery hereof. This Agreement
has been duly and validly executed and delivered by Parent and Newco and,
assuming the due authorization, execution
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and delivery hereof by the Company, constitutes a valid and binding agreement of
each of Parent and Newco, enforceable against each of them in accordance with
its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
or fiduciary principles.
6.4 No Violations, etc. (a) Assuming that all filings, permits,
authorizations, consents and approvals or waivers thereof have been duly made or
obtained as contemplated by Section 6.4(b) hereof, neither the execution and
delivery of this Agreement by Parent and Newco nor the consummation of the
Merger or other transactions contemplated hereby nor compliance by Parent or
Newco with any of the provisions hereof will (i) violate, conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or suspension of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Parent or any of its subsidiaries under,
any of the terms, conditions or provisions of (x) their respective certificate
or articles of incorporation or organization or by-laws, (y) any note, bond,
mortgage, indenture or deed of trust, or (z) any license, lease, agreement or
other instrument or obligation to which Parent or any such subsidiary is a party
or to which they or any of their respective properties or assets may be subject,
or (ii) violate any judgment, ruling, order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or any of its subsidiaries or any of
their respective properties or assets, except, in the case of clauses (i)(z) and
(ii) above, for such violations, conflicts, breaches, defaults, terminations,
suspensions, accelerations, rights of termination or acceleration or creations
of liens, security interests, charges or encumbrances which would not,
individually or in the aggregate, either have a Parent Material Adverse Effect
or impair Parent's or Newco's ability to consummate the Merger or other
transactions contemplated hereby.
(b) No filing or registration with, notification to or permit,
authorization, consent or approval of any governmental entity is required by
Parent, Newco or any of Parent's other subsidiaries in connection with the
execution and delivery of this Agreement or the consummation by Newco of the
Merger or other transactions contemplated hereby, except (i) the filing of the
Certificate of Merger, (ii) filings with the NYSE and, if applicable, the
American Stock Exchange, Inc., (iii) filings with the SEC and state securities
administrators, and (iv) such other filings, registrations, notifications,
permits, authorizations, consents or approvals the failure of which to be
obtained, made or given would not, individually or in the aggregate, either have
a Parent Material Adverse Effect or impair Parent's or Newco's ability to
consummate the Merger or other transactions contemplated hereby.
(c) As of the date hereof, Parent and its subsidiaries are not in
violation of or default under (x) their respective certificates or articles of
incorporation or organization or
-29-
by-laws, (y) any note, bond, mortgage, indenture or deed of trust, or (z) any
license, lease, agreement or other instrument or obligation to which Parent or
any such subsidiary is a party or to which they or any of their respective
properties or assets may be subject, except, in the case of clauses (y) and (z)
above, for such violations or defaults which would not, individually or in the
aggregate, either have a Parent Material Adverse Effect or impair Parent's or
Newco's ability to consummate the Merger or other transactions contemplated
hereby.
6.5 Commission Filings; Consolidated Financial Statements. Parent
has filed all required forms, reports and documents with the SEC since Parent's
Registration Statement on Form S-1 relating to its initial public offering was
declared effective by the SEC on April 4, 2000, including, in the form filed
with the SEC together with any amendments thereto, (i) its Annual Report on Form
10-K for the fiscal year ended February 3, 2002 (the "Parent 10-K"), (ii) the
proxy statement relating to Parent's annual meeting of shareholders held on June
5, 2002 (the "Parent Current Proxy"), (iii) its Current Report on Form 8-K dated
August 29, 2002 (the "Parent Current 8-K"), (iv) its Quarterly Reports on Form
10-Q for the fiscal quarters ended May 5, 2002, August 4, 2002 and November 3,
2002 (the "Parent Current 10-Qs" and, together with the Parent 10-K, the Parent
Current Proxy and the Parent Current 8-K, the "Parent Current SEC Reports") and
(iv) all other reports or registration statements filed by Parent with the SEC
since April 4, 2000 (collectively, the "Parent SEC Reports"), all of which
complied when filed in all material respects with all applicable requirements of
the Securities Act, the Exchange Act and/or the Xxxxxxxx-Xxxxx Act (with respect
to the provisions of such act required to be complied with at the time such
forms, reports and/or documents were required to be filed) and, to the knowledge
of Parent, the statements contained in or accompanying the Parent Current SEC
Reports in accordance with Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act are
true and correct. The audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent and its subsidiaries
included in such Parent SEC Reports were prepared in accordance with GAAP during
the periods involved (except as may be indicated in the notes thereto and
except, in the case of such unaudited consolidated interim financial statements,
for the omission of normal year-end adjustments) and present fairly, in all
material respects, the financial position and results of operations and cash
flows of Parent and its subsidiaries on a consolidated basis at the respective
dates and for the respective periods indicated (and in the case of all such
financial statements that are interim financial statements, contain all
adjustments so to present fairly). At the time of effectiveness and/or filing
with the SEC of such Parent SEC Reports, none of the Parent SEC Reports
contained any untrue statement of a material fact or omitted 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 were made,
not misleading. Parent has not received any substantive comments from the SEC
with respect to any of its filings under the Exchange Act.
6.6 Form S-4; Information Statement. None of the information
supplied or to be supplied by or on behalf of Parent and Newco for inclusion or
incorporation by reference
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in the Registration Statement will, at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. None of the information supplied or to be
supplied by or on behalf of Parent and Newco for inclusion or incorporation by
reference in the Information Statement will, at the dates mailed to stockholders
and at the Effective Time, 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. Parent will promptly inform the Company of the
happening of any event prior to the Effective Time which would render such
information regarding Parent or Newco incorrect in any material respect or
require the amendment of the Information Statement. The Registration Statement
and the Information Statement (except for information relating solely to the
Company) will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act.
6.7 Litigation. Except as set forth in the Parent SEC Reports and
except as would not have a Parent Material Adverse Effect, there is no (i)
claim, action, suit or proceeding pending or, to the knowledge of Parent or any
of its subsidiaries, threatened against or relating to Parent or any of its
subsidiaries before any court or governmental or regulatory authority or body or
arbitration tribunal, or (ii) outstanding judgment, order, writ, injunction or
decree, or application, request or motion therefor, of any court, governmental
agency or arbitration tribunal in a proceeding to which Parent, any subsidiary
of Parent or any of their respective assets was or is a party.
6.8 Board Recommendation. The Board of Directors of Parent has, by
unanimous vote at a telephonic meeting of such board duly held on January 23,
2003, approved and adopted this Agreement and the Merger and the other
transactions contemplated hereby (including, without limitation, the issuance of
Parent Common Stock as a result of the Merger). The Board of Directors of Newco
has, by unanimous written consent dated January 23, 2003, declared the
advisability of and approved and adopted this Agreement and the Merger and the
other transactions contemplated hereby.
6.9 Tax Free Reorganization. None of Parent, Newco or any affiliate
of Parent or Newco has taken, agreed to take or will take any action that would
prevent the Merger from constituting a reorganization within the meaning of
Section 368(a) of the Code. None of Parent, Newco or any affiliate of Parent is
aware of any agreement, plan or other circumstance that would prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code and, to the knowledge of Parent, the Merger will so qualify.
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ARTICLE VII
COVENANTS AND AGREEMENTS
7.1 Conduct of Business of the Company Pending the Merger. Except as
contemplated by this Agreement or as expressly agreed to in writing by Parent,
during the period from the date of this Agreement to the Effective Time, each of
the Company and its subsidiaries will conduct its respective operations
according to its ordinary course of business consistent with past practice, and
will use all commercially reasonable efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain satisfactory relationships with suppliers, distributors, customers
and others having material business relationships with it, if the loss of such
business relationship would have a Company Material Adverse Effect, and will
take no action which would impair the ability of the parties to consummate the
Merger or the other transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in this Agreement, prior to the Effective Time, the Company will not
nor will it permit any of its subsidiaries to, without the prior written consent
of Parent, which consent shall not be unreasonably withheld:
(a) amend its certificate or articles of incorporation or
organization or by-laws;
(b) authorize for issuance, issue, sell, deliver, grant any options
for or otherwise agree or commit to issue, sell or deliver any shares of
any class of its capital stock or any securities convertible into shares
of any class of its capital stock except for the issuance of capital stock
as may be required pursuant to any outstanding options or warrants of the
Company issued in compliance with applicable securities laws;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock or purchase, redeem or otherwise acquire any shares of its
own capital stock or of any of its subsidiaries, except as otherwise
expressly provided in this Agreement;
(d) (i) create, incur, assume, maintain or permit to exist any debt
for borrowed money; (ii) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except for its wholly owned
subsidiaries in the ordinary course of business and consistent with past
practices; (iii) make any loans, advances or capital contributions to, or
investments in, any other person; or (iv) pledge or otherwise encumber
shares of capital stock of the Company or its subsidiaries;
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(e) (i) increase in any manner the compensation of (x) any
non-officer employee other than in the ordinary course of business
consistent with past practice or (y) any of its directors or officers;
(ii) pay or agree to pay any pension, retirement allowance or other
employee benefit not required, or enter into or agree to enter into any
agreement or arrangement with such director or officer or employee,
whether past or present, relating to any such pension, retirement
allowance or other employee benefit, except as required under currently
existing agreements, plans or arrangements; (iii) grant any severance or
termination pay to (x) any non-officer employee other than in the ordinary
course of business consistent with past practice or (y) any of its
directors or officers; (iv) enter into any employment or severance
agreement with (x) any employee or (y) any of its directors or officers;
or (v) except as may be required to comply with applicable law, become
obligated (other than pursuant to any new or renewed collective bargaining
agreement) under any new pension plan, Welfare Plan, Multiemployer Plan,
employee benefit plan, benefit arrangement, or similar plan or
arrangement, which was not in existence on the date hereof, including any
bonus, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement or
other benefit plan, agreement or arrangement, or employment or consulting
agreement with or for the benefit of any person, or amend any of such
plans or any of such agreements in existence on the date hereof;
(f) except as otherwise expressly contemplated by this Agreement,
enter into any other agreements, commitments or contracts, except
agreements, commitments or contracts for the purchase, sale or lease of
goods or services in the ordinary course of business consistent with past
practice;
(g) except as contemplated by the first sentence of Section 5.13
hereof, enter into any franchise or similar agreement or arrangement;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle
or an agreement with respect to, any plan of liquidation or dissolution,
any acquisition of a material amount of assets or securities, any sale,
transfer, lease, license, pledge, mortgage, or other disposition or
encumbrance of a material amount of assets or securities or any material
change in its capitalization, or any entry into a material contract or any
amendment or modification of any material contract or any release or
relinquishment of any material contract rights;
(i) authorize any new capital expenditure or expenditures in an
amount exceeding $50,000 in the aggregate, except that the foregoing shall
not limit any capital expenditures required pursuant to existing contracts
or capital expenditures in connection with stores that are already under
construction;
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(j) make any change in the accounting methods or accounting
practices followed by the Company, except as may be required by GAAP or
the rules and regulations of the SEC;
(k) settle or compromise any material federal, state, local, foreign
or franchise Tax liability, make any new material Tax election, revoke or
modify in any material manner any existing Tax election, or request or
consent to a material change in any method of Tax accounting;
(l) take, cause or permit to be taken any action that could
reasonably be expected to prevent the Merger from constituting a
"reorganization" within the meaning of Section 368(a) of the Code;
(m) knowingly do any act or omit to do any act that would result in
a breach of any representation by the Company set forth in this Agreement;
or
(n) agree, resolve or otherwise determine to do any of the
foregoing.
7.2 Preparation of the Registration Statement. (a) As soon as
practicable following the date of this Agreement, the Company, Parent and Newco
shall prepare and file with the SEC the Registration Statement, in which the
Information Statement shall be included. Each of the Company, Parent and Newco
shall use commercially reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
such filing. The Information Statement shall disclose that the Board of
Directors of the Company has voted in favor of approval and adoption of this
Agreement and the Merger, and that the Boards of Directors of Parent and Newco
have voted in favor of approval of the issuance of Parent Common Stock in
connection with the Merger. The Company shall use commercially reasonable
efforts to cause the Information Statement to be mailed to its stockholders as
promptly as practicable after the Registration Statement becomes effective.
(b) The Company, Parent and Newco shall make all necessary filings
with respect to the Merger and the transactions contemplated thereby under the
Securities Act and the Exchange Act and applicable state blue sky laws and the
rules and regulations thereunder. Parent shall also take any action required to
be taken under any applicable state securities laws in connection with the
issuance of Parent Common Stock in connection with the Merger. No filing of, or
amendment or supplement to, the Registration Statement will be made by Parent
without providing the Company and its counsel the opportunity to review and
comment thereon and, with respect to any material pertaining to the Company,
without the Company's written consent, which consent shall not be unreasonably
withheld. Parent will advise the Company, immediately after it receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, the issuance of any stop order, the
suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC
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for amendment of the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information. If at any time prior
to the Effective Time any information relating to the Company, Parent or Newco,
or any of their respective affiliates, officers or directors, should be
discovered by the Company, Parent or Newco which should be set forth in an
amendment or supplement to the Registration Statement so that such Registration
Statement would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company.
7.3 Letters and Consents of the Company's Accountants. The Company
shall use all commercially reasonable efforts to cause to be delivered to Parent
all consents required from its independent accountants necessary to effect the
registration of the Parent Common Stock and make any required filing with the
SEC in connection with the Merger and the transactions contemplated thereby.
7.4 Additional Agreements; Cooperation. (a) Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as commercially reasonable the transactions
contemplated by this Agreement, and to reasonably cooperate with each other in
connection with the foregoing, including using commercially reasonable efforts
(i) to obtain all necessary waivers, consents and approvals from other parties
to loan agreements, material leases and other material contracts that are
specified in Section 7.4 to the Disclosure Schedule, (ii) to obtain all
necessary consents, approvals and authorizations as are required to be obtained
under any federal, state or foreign law or regulations, (iii) to defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (iv) to lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the transactions contemplated hereby, (v)
to effect all necessary registrations and filings and submissions of information
requested by governmental authorities, (vi) provide all necessary information
for the Registration Statement and (vii) to fulfill all conditions to this
Agreement.
7.5 Publicity. The Company, on the one hand, and Parent and Newco,
on the other hand, agree to consult with each other in issuing any press release
and with respect to the general content of other public statements with respect
to the transactions contemplated hereby, and shall not issue any such press
release prior to such consultation, except as may be required by law. 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 previously
agreed to by the parties.
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7.6 No Solicitation. The Company agrees that it shall not, nor shall
it permit any of its subsidiaries to, nor shall it authorize or permit any
officer, director or employee or any investment banker, attorney, accountant,
agent or other advisor or representative of the Company or any of its
subsidiaries to, (i) solicit, initiate or knowingly encourage the submission of
any Takeover Proposal (as hereinafter defined), (ii) enter into any agreement
with respect to a Takeover Proposal or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal. For all purposes of this Agreement, "Takeover Proposal" means
any proposal for a merger, consolidation, share exchange, business combination
or other similar transaction involving the Company or any of its Significant
Subsidiaries (as hereinafter defined) or any proposal or offer to acquire,
directly or indirectly, an equity interest in, any voting securities of, or a
substantial portion of the assets of, the Company or any of its Significant
Subsidiaries. The Company immediately shall cease and cause to be terminated all
existing discussions or negotiations with any persons conducted heretofore with
respect to, or that could reasonably be expected to lead to, any Takeover
Proposal. As used herein, a "Significant Subsidiary" means any subsidiary of the
Company that would constitute a "significant subsidiary" within the meaning of
Rule 1-02 of Regulation S-X of the SEC.
7.7 Access to Information; Confidentiality. (a) From the date of
this Agreement until the Effective Time, each of the Company and Parent (on
behalf of Parent and Newco), after reasonable notice, will give the other party
and its authorized representatives (including counsel, environmental and other
consultants, accountants and auditors) reasonable access during normal business
hours to all facilities, personnel and operations and to all books and records
of it and its subsidiaries, will permit the other party to make such inspections
as it may reasonably require and will cause its officers and those of its
subsidiaries, after reasonable notice, to furnish the other party with such
financial and operating data and other information with respect to its business
and properties as such party may from time to time reasonably request. In the
event Parent and/or Newco or their authorized representatives perform testing of
any property owned or leased by the Company, Parent, at Parent's cost and
expense, shall return such property to its previous condition immediately
following the conclusion of such testing. Any such testing may be further
limited by, and must be conducted in conformance with, the provisions of any
applicable lease or other agreement to which the Company or any of its
subsidiaries is a party.
(b) All documents and information furnished pursuant to this
agreement shall be subject to the terms and conditions set forth in the
Confidentiality Agreement dated January 7, 2003 between the Company and Parent
(the "Confidentiality Agreement").
7.8 Indemnification and Insurance. (a) Parent and the Surviving
Corporation shall maintain in effect the current provisions regarding
indemnification of officers and directors contained in the certificate or
articles of incorporation or organization and by-laws of
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the Company and each of its subsidiaries and any directors, officers or
employees indemnification agreements of the Company and its subsidiaries, and
(b) for a period of five years after the Effective Time, Parent and the
Surviving Corporation shall maintain in effect the policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
the Company of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured in
any material respect than the policies currently in effect with respect to
claims arising from facts or events which occurred on or before the Effective
Time.
7.9 Fees and Expenses. Whether or not the Merger is consummated, the
Company and Parent shall bear their respective expenses incurred in connection
with the Merger, including, without limitation, the preparation, execution and
performance of this Agreement and the transactions contemplated hereby, and all
fees and expenses of investment bankers, finders, brokers, agents,
representatives, counsel and accountants, except that Parent shall bear and pay
the costs and expenses incurred in connection with the filing, printing and
mailing of the Registration Statement (including SEC filing fees).
Notwithstanding the foregoing, in the event the Merger is consummated, none of
the Company or its subsidiaries (or, following the consummation of the Merger,
none of Parent, the Surviving Corporation or their respective subsidiaries)
shall be responsible for the following fees, costs and expenses of the Company:
(i) fees and expenses of counsel for the Company in excess of $275,000 and (ii)
any fees of Xxxxxx Securities, Inc. in excess of $200,000.
7.10 Affiliates. As soon as practicable after the date hereof, the
Company shall deliver to Parent a letter identifying all persons who are, at the
date of this Agreement or will be at the Effective Time, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The Company shall use
commercially reasonable efforts to cause each such person to deliver to Parent
as of the Closing Date a written agreement substantially in the form attached as
Exhibit B hereto.
7.11 Director and Officer Resignations. The Company shall use
commercially reasonable efforts to obtain the written resignation of each
individual serving as an officer or director of the Company prior to the
Effective Time, such resignation to take effect at the Effective Time.
7.12 NYSE Listing. Parent shall use commercially reasonable efforts
to cause the Parent Common Stock to be issued in connection with the Merger to
be approved for listing on the NYSE, subject to official notice of issuance, as
promptly as practicable after the date hereof, and in any event prior to the
Closing Date.
7.13 AMEX Listing. Parent shall use commercially reasonable efforts
to cause the publicly traded Company warrants issued pursuant to the warrant
agreement dated as of June 27, 2002 between the Company and Continental Stock &
Trust Company (the
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"Warrant Agreement") to continue to be listed on the American Stock Exchange
after the Merger.
7.14 Stockholder Litigation. Each of the Company, on the one hand,
and Parent and Newco, on the other hand, shall give the other the reasonable
opportunity to participate in the defense of any stockholder litigation against
or in the name of the Company, Parent or Newco, as applicable, and/or their
respective directors relating to the transactions contemplated by this
Agreement.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 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 waiver on or prior to the Closing Date of the following
conditions:
(a) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation entered, enacted, promulgated,
enforced or issued by any court or other governmental entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing the consummation of the
Merger.
(b) Registration Statement. (i) The Registration Statement shall
have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order and no stop
order or similar restraining order shall be threatened or entered by the
SEC or any state securities administration preventing the Merger and (ii)
20 business days shall have elapsed since the Information Statement shall
have been mailed to holders of Company Common Stock.
(c) NYSE Listing. The shares of Parent Common Stock issuable to the
Company's stockholders as contemplated by this Agreement shall have been
approved for listing on the NYSE, subject to official notice of issuance.
(d) Employment and Registration Rights Agreements. Each of the
Registration Rights Agreement and the Employment Agreements shall be in
full force and effect. The Employment Agreements shall provide that the
option agreement between the Company and Xxxxxx X'Xxxxxxx dated June 27,
2002 and the existing employment agreements between the Company and Xxxxxx
X'Xxxxxxx and Xxxxx X'Xxxxxxx, each dated June 27, 2002, shall have been
terminated prior to or concurrently with the Effective Time, in each case
giving no effect to any provision contained therein which may provide for
the receipt by either of them or any third party of
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any payment or other benefit triggered by or in connection with the
execution and delivery of this Agreement, the consummation of the Merger
or any of the other transactions contemplated hereby or thereby.
(e) Indemnification Agreement. Xxxxxx X'Xxxxxxx shall have executed
and delivered an indemnification agreement with Parent, substantially in
the form of Exhibit C.
(f) Consents and Approvals. All necessary consents and approvals of
any federal or any other governmental authority or any other third party
required for the consummation of the Merger and the other transactions
contemplated by this Agreement shall have been obtained, except for such
consents and approvals the failure to obtain which individually or in the
aggregate would not have a material adverse effect on the Surviving
Corporation.
8.2 Conditions to Obligations of Parent and Newco. The obligation of
Parent and Newco to effect the Merger is further subject to satisfaction or
waiver of the following conditions:
(a) Company Stockholder Approval Obtained. The Majority Stockholders
Consent shall be in full force and effect and shall constitute requisite
consent of the stockholders of the Company to the Merger and the adoption
of this Agreement under the DGCL and the Company's Certificate of
Incorporation and By-Laws.
(b) Representations and Warranties. The representations and
warranties of the Company set forth herein, to the extent qualified with
respect to materiality, shall be true and correct in all respects, and to
the extent not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and at and as of
the Effective Time as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date). The
Company shall have delivered to Parent and Newco an officer's certificate,
in form and substance reasonably satisfactory to Parent and its counsel,
to the effect of the matters stated in this Section 8.2(b), Section 8.2(c)
and Section 8.2(d).
(c) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date.
(d) No Material Adverse Change. Except as disclosed in the Company
SEC Reports or in the Company's December 2002 Financials, at any time
after October 31, 2002, there shall not have occurred any material adverse
change in the business, assets, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company and its
subsidiaries, taken as a whole.
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(e) Affiliate Letters. Parent shall have received from each
affiliate of the Company a written agreement substantially in the form
attached as Exhibit B hereto.
(f) Tax Opinion. Parent and Newco shall have received an opinion of
Xxxxxx Xxxxxx & Xxxxxxx, counsel to Parent and Newco, and, together with
the certificates of the Company and Parent attached thereto, substantially
in the form of Exhibit D hereto dated on or about the Closing Date, based
upon such representations and assumptions as counsel may reasonably deem
relevant, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization qualifying under the provisions of
Section 368(a) of the Code; and that each of Parent, Newco and the Company
will be a party to the reorganization within the meaning of Section 368(b)
of the Code; that no gain or loss will be recognized by a stockholder of
the Company on the exchange of Company Common Stock for the Merger
Consideration pursuant to the Merger (except with respect to any cash
received in lieu of a fractional share).
(g) Director and Officer Resignations. Parent and Newco shall have
received the written resignation of each of the individuals serving as
officers and directors of the Company prior to the Effective Time, such
resignation to take effect at the Effective Time.
8.3 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Newco set forth herein, to the extent qualified
with respect to materiality, shall be true and correct in all respects,
and to the extent not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and at
and as of the Effective Time as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
date). Parent and Newco shall have delivered to the Company an officer's
certificate, in form and substance reasonably satisfactory to the Company
and its counsel, to the effect of the matters stated in this Section
8.3(a), Section 8.3(b) and Section 8.3(c).
(b) Performance of Obligations of Parent and Newco. Parent and Newco
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date.
(c) No Material Adverse Change. Except as disclosed in the Parent
Current SEC Reports, at any time after February 3, 2002, there shall not
have occurred any material adverse change in the business, assets,
liabilities, results of operations, condition (financial or otherwise) or
prospects of Parent and its subsidiaries, taken as a whole.
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(d) Tax Opinion. The Company shall have received an opinion of
Company Counsel, dated on or about the Closing Date, together with the
certificates of the Company and Parent attached thereto, and substantially
in the form of Exhibit E hereto, based upon such representations and
assumptions as counsel may reasonably deem relevant, to the effect that
the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the
Code; that each of Parent, Newco and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code; and that
no gain or loss will be recognized by a stockholder of the Company on the
exchange of Company Common Stock for the Merger Consideration pursuant to
the Merger (except with respect to any cash received in lieu of a
fractional share).
(e) Warrant Agreement. Continental Stock & Trust Company shall have
received the written consent of Parent relating to the assumption by
Parent of the Company's obligations and duties under the Warrant
Agreement.
ARTICLE IX
TERMINATION
9.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of the Company, Parent and Newco;
(b) by either the Company or Parent (on behalf of Parent and Newco):
(i) if the Merger shall not have been consummated by June 30,
2003; provided, however, that the right to terminate this Agreement
pursuant to this Section 9.1(b)(i) shall not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by
such time; or
(ii) if any Restraint having any of the effects set forth in
Section 8.1(a) shall be in effect and shall have become final and
nonappealable;
(c) by Parent (on behalf of Parent and Newco), (i) if the Average
Closing Price (as hereinafter defined) of Parent Common Stock exceeds
$39.15 per share; provided, in the event Parent notifies the Company of
its election to terminate this Agreement pursuant to this Section 9.1(c),
this Agreement shall not be terminated in the event the Company agrees in
writing within five business days following the receipt of such notice to
recompute the Exchange Ratio by dividing $5.88 by the Aver-
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age Closing Price, and such recalculated amount shall be deemed to be the
Exchange Ratio for all purposes under this Agreement and any other
document entered into in connection with this transaction which references
the Exchange Ratio;
(d) by Parent (on behalf of Parent and Newco), if the Company shall
have breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in
this Agreement (which breach is not cured within 15 business days after
receipt by the Company of a written notice of such breach from Parent
specifying the breach and requesting that it be cured);
(e) by the Company, if the Average Closing Price is less than $28.93
per share (the "Floor Closing Price"); provided, in the event the Company
notifies Parent and Newco of its election to terminate this Agreement
pursuant to this Section 9.1(e), this Agreement shall not be terminated in
the event Parent and Newco agree in writing within five business days
following the receipt of such notice to recompute the Exchange Ratio by
dividing $4.34 by the Average Closing Price, and such recalculated amount
shall be deemed to be the Exchange Ratio for all purposes under this
Agreement and any other document entered into in connection with this
transaction which references the Exchange Ratio; and
(f) by the Company, if Parent and/or Newco shall have breached or
failed to perform in any material respect any of their representations,
warranties, covenants or other agreements contained in this Agreement
(which breach is not cured within 15 business days after receipt by Parent
of a written notice of such breach from the Company specifying the breach
and requesting that it be cured).
For purposes of this Section 9.1, "Average Closing Price" means the
average of the last reported sale prices of Parent Common Stock as reported on
the NYSE for the five trading day period ending three trading days prior to
Closing.
9.2 Effect of Termination. The termination of this Agreement shall
become effective upon delivery to the other party of written notice thereof. In
the event of the termination of this Agreement pursuant to the foregoing
provisions of this Article IX, this Agreement shall become void and have no
effect, with no liability on the part of any party or its stockholders or
directors or officers in respect thereof except for agreements which survive the
termination of this Agreement and except for liability that Parent, Newco or the
Company might have arising from a breach of this Agreement.
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ARTICLE X
MISCELLANEOUS
10.1 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 10.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
10.2 Waiver. At any time prior to the Effective Date, the Company,
on the one hand, and Parent and Newco, on the other hand, may (i) extend the
time for the performance of any of the obligations or other acts of the Company
or Newco and Parent, as the case may be, (ii) waive any inaccuracies in the
representations and warranties of the Company or Newco and Parent, as the case
may be, contained herein or in any document delivered pursuant hereto, and (iii)
subject to applicable law, waive compliance with any of the agreements of the
Company or Newco and Parent, as the case may be, or with any conditions to their
own obligations contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing duly authorized by and signed on behalf of such party.
10.3 Notices. (a) Any notice or communication to any party hereto
shall be duly given if in writing and delivered in person or mailed by first
class mail (registered or certified, return receipt requested), facsimile or
overnight air courier guaranteeing next day delivery, to such other party's
address.
If to Parent or Newco:
Krispy Kreme Doughnuts, Inc.
000 Xxxxxxxxx Xxxxxx
Xxxxxxx-Xxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Chief Operating Officer
with a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
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If to the Company:
Montana Xxxxx, Inc.
0000 Xxxxxx Xxxxxx, Xxxxx 000X
Xxxxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx X'Xxxxxxx
with a copy to:
Xxxxxx Xxxxxxx & Xxxxx LLP
0000 Xxxxxx & Xxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
(b) All notices and communications will be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three business
days after being deposited in the mail, if mailed; when sent, if sent by
facsimile; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
10.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.5 Interpretation. The headings of articles and sections herein
are for convenience of reference, do not constitute a part of this Agreement,
and shall not be deemed to limit or affect any of the provisions hereof. As used
in this Agreement, "person" means any individual, corporation, limited or
general partnership, joint venture, association, joint stock company, trust,
limited liability company, unincorporated organization or government or any
agency or political subdivision thereof; "subsidiary" of any person means (i) a
corporation more than 50% of the outstanding voting stock of which is owned,
directly or indirectly, by such person or by one or more other subsidiaries of
such person or by such person and one or more subsidiaries thereof or (ii) any
other person (other than a corporation) in which such person, or one or more
other subsidiaries of such person or such person and one or more other
subsidiaries thereof, directly or indirectly, have at least a majority ownership
and voting power relating to the policies, management and affairs thereof; and
"voting stock" of any person means capital stock of such person which ordinarily
has voting power for the election of
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directors (or persons performing similar functions) of such person, whether at
all times or only so long as no senior class of securities has such voting power
by reason of any contingency.
10.6 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties; provided,
however, that any amendment to this Agreement shall be made in compliance with
Section 251(d) of the DGCL.
10.7 No Third Party Beneficiaries. Except for the indemnification
and insurance rights set forth under Section 7.8 which are specifically intended
to benefit the officers and directors of the Company, nothing in this Agreement
shall confer any rights upon any person or entity which is not a party or
permitted assignee of a party to this Agreement.
10.8 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without regard
to principles of conflicts of laws.
10.9 Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
The parties accordingly agree that the parties will 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 United States
located in the State of Delaware, or in Delaware state court, 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 (i) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware if
any dispute arises out of the Agreement or any of the transactions contemplated
by this Agreement, (ii) 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 (iii) agrees that it will not bring any action relating to this Agreement in
any court other than such a federal or state court sitting in the State of
Delaware.
10.10 Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof.
10.11 No Recourse Against Others. To the fullest extent permitted by
law, no director, officer or employee, as such, of Parent, Newco or the Company
or any of their respective subsidiaries shall have any liability for any
obligations of Parent, Newco or the Company, respectively, under this Agreement
for any claim based on, in respect of or by reason of such obligations or their
creation.
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10.12 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Merger
Agreement to be executed by their duly authorized officers all as of the day and
year first above written.
KRISPY KREME DOUGHNUTS, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Chairman, President & CEO
XXXXXX ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President & Treasurer
MONTANA XXXXX BREAD CO., INC.
By: /s/ Xxxxxx X'Xxxxxxx
-----------------------------------
Name: Xxxxxx X'Xxxxxxx
Title: President and CEO
