Exhibit 99.2
Execution Version
AGREEMENT AND PLAN OF MERGER
AMONG
PANCHO'S FOOD'S, INC.
PANCHO'S RESTAURANTS, INC.
AND
PANCHO'S MEXICAN BUFFET, INC.
Dated as of March 31, 2001
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER...........................................................................................1
Section 1.1 The Merger.......................................................................................1
Section 1.2 Effective Time...................................................................................1
Section 1.3 Effects of the Merger............................................................................2
Section 1.4 Charter and Bylaws; Directors and Officers.......................................................2
Section 1.5 Conversion of Securities.........................................................................2
Section 1.6 Exchange of Certificates.........................................................................3
Section 1.7 Further Assurances...............................................................................5
Section 1.8 Closing..........................................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....................................................5
Section 2.1 Organization.....................................................................................5
Section 2.2 Authority........................................................................................5
Section 2.3 Consents and Approvals; No Violations............................................................6
Section 2.4 Information Supplied.............................................................................7
Section 2.5 Interim Operations of Sub........................................................................7
Section 2.6 Brokers..........................................................................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................7
Section 3.1 Organization, Standing and Power.................................................................7
Section 3.2 Capital Structure................................................................................8
Section 3.3 Authority........................................................................................9
Section 3.4 Consents and Approvals; No Violation.............................................................9
Section 3.5 SEC Documents and Other Reports.................................................................10
Section 3.6 Information Supplied...........................................................................11
Section 3.7 Absence of Certain Changes or Events...........................................................11
Section 3.8 Permits and Compliance.........................................................................12
Section 3.9 Tax Matters....................................................................................13
Section 3.10 Actions and Proceedings........................................................................14
Section 3.11 Compensation Agreements........................................................................14
Section 3.12 Employee Benefits..............................................................................14
Section 3.13 Liabilities....................................................................................16
Section 3.14 Labor Matters..................................................................................16
Section 3.15 Intellectual Property..........................................................................16
Section 3.16 Title to Assets................................................................................17
Section 3.17 State Takeover Statutes........................................................................20
Section 3.18 Required Vote of Company Stockholders..........................................................20
Section 3.19 Transactions with Affiliates...................................................................20
Section 3.20 Brokers........................................................................................21
Section 3.21 Compliance with Worker Safety Laws.............................................................21
Section 3.22 [Reserved].....................................................................................21
Section 3.23 Accounts Receivable............................................................................21
Section 3.24 Certain Agreements.............................................................................22
Section 3.25 Environmental Matters..........................................................................22
Section 3.26 Regulatory Compliance..........................................................................24
Section 3.27 Company Rights Agreement.......................................................................24
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS..........................................................24
Section 4.1 Conduct of Business by the Company Pending the Merger...........................................24
Section 4.2 No Solicitation.................................................................................27
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Section 4.3 Third Party Standstill Agreements..............................................................28
ARTICLE V ADDITIONAL AGREEMENTS...............................................................................28
Section 5.1 Stockholder Meeting............................................................................28
Section 5.2 Access to Information..........................................................................29
Section 5.3 Fees and Expenses..............................................................................29
Section 5.4 Company Stock Options..........................................................................30
Section 5.5 Reasonable Best Efforts........................................................................30
Section 5.6 Public Announcements...........................................................................31
Section 5.7 State Takeover Laws............................................................................31
Section 5.8 Indemnification; Directors and Officers Insurance..............................................31
Section 5.9 Notification of Certain Matters................................................................32
Section 5.10 Employee Benefit Plans.........................................................................32
Section 5.11 Pamex of Texas, Inc............................................................................32
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER.................................................................32
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger......................................33
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................................................33
Section 7.1 Termination.....................................................................................33
Section 7.2 Effect of Termination...........................................................................36
Section 7.3 Amendment.......................................................................................36
Section 7.4 Waiver..........................................................................................36
ARTICLE VIII GENERAL PROVISIONS...............................................................................37
Section 8.1 Non-Survival of Representations and Warranties..................................................37
Section 8.2 Notices.........................................................................................37
Section 8.3 Interpretation; Certain Definitions.............................................................38
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Section 8.4 Counterparts....................................................................................39
Section 8.5 Entire Agreement; No Third-Party Beneficiaries..................................................40
Section 8.6 Governing Law...................................................................................40
Section 8.7 Assignment......................................................................................40
Section 8.8 Severability....................................................................................40
Section 8.9 Enforcement of this Agreement...................................................................40
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 31, 2001 (this
"Agreement"), among Pancho's Foods, Inc., a Nevada corporation ("Parent"),
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Pancho's Restaurants, Inc., a Nevada corporation and a wholly-owned subsidiary
of Parent ("Sub"), and Pancho's Mexican Buffet, Inc., a Delaware corporation
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(the "Company") (Sub and the Company being hereinafter collectively referred to
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as the "Constituent Corporations").
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W I T N E S S E T H:
WHEREAS, the Board of Directors of each of Parent, Sub and the Company
has adopted resolutions approving this Agreement, pursuant to which Sub shall be
merged with and into the Company and the Company shall become a wholly owned
direct subsidiary of Parent (the "Merger"), and the Board of Directors of each
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of Sub and the Company has adopted a resolution recommending the Merger be
approved by the stockholders of Sub and the Stockholders (as defined below),
respectively;
WHEREAS, at a meeting to be called by the Board of Directors, the
holders (the "Stockholders") of Common Stock, $.10 par value, of the Company
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("Company Common Stock") will consider and vote on the Merger and this
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Agreement; and
WHEREAS, through action and consent Parent, as the sole stockholder of
Sub, has approved the Merger and this Agreement:
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
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hereof, and in accordance with the General Corporation Law of the State of
Delaware, as amended (the "DGCL"), Sub shall be merged with and into the Company
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at the Effective Time (as hereinafter defined). Following the Merger, the
separate corporate existence of Sub shall cease and the Company shall continue
as the surviving corporation (the "Surviving Corporation") and shall succeed to
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and assume all the rights and obligations of Sub in accordance with the DGCL.
Notwithstanding anything to the contrary herein, at the election of Parent, any
direct wholly-owned Subsidiary (as hereinafter defined) of Parent may be
substituted for Sub as a constituent corporation in the Merger. In such event,
the parties agree to execute an appropriate amendment to this Agreement, in form
and substance reasonably satisfactory to Parent and the Company, in order to
reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective when the
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certificate of merger (the "Certificate of Merger"), executed in accordance with
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the relevant provisions of
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the DGCL, is filed with the Secretary of State of the State of Delaware;
provided, however, that, upon mutual consent of the Constituent Corporations,
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the Certificate of Merger may provide for a later date of effectiveness of the
Merger. When used in this Agreement, the term "Effective Time" shall mean the
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date and time at which the Certificate of Merger is accepted for record or such
later time established by the Certificate of Merger. The filing of the
Certificate of Merger shall be made on the date of the Closing (as hereinafter
defined).
Section 1.3 Effects of the Merger. The Merger shall have the
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effects set forth in this Agreement and the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers. (a) At the
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Effective Time, the Certificate of Incorporation, as amended, as further amended
to read in its entirety as in a form to be agreed upon by the parties prior to
the Closing, of the Company (the "Company Charter") shall be the Certificate of
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Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable law. At the Effective Time, the Bylaws of
Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Surviving Corporation until thereafter changed or amended as provided
therein or by the Company Charter or applicable law.
(b) The directors of Sub at the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be. The officers of the Company at the Effective Time shall be
the officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Section 1.5 Conversion of Securities. (a) As of the Effective Time,
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by virtue of the Merger and without any action on the part of Sub, the Company
or the holders of any securities of the Constituent Corporations:
(i) Each issued and outstanding share of common stock, par
value $0.005per share, of Sub shall be converted into one validly issued,
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(ii) All issued and outstanding shares of Company Common Stock
("Shares") that are held in the treasury of the Company or by any wholly-
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owned Subsidiary of the Company and any Shares owned by Parent or by any
wholly-owned Subsidiary of Parent shall be canceled, and no capital stock
of Parent or other consideration shall be delivered in exchange therefor.
(iii) Subject to the provisions of Section 1.5(a)(iv), each
Share issued and outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with Section 1.5(a)(ii) and other
than Dissenting Shares (as hereinafter defined)) shall be converted into
the right to receive from the Surviving Corporation in cash, without
interest, $4.60 (the "Merger Consideration"). All such Shares, when so
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converted, shall no longer be outstanding and shall automatically be
canceled and retired
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and each holder of a certificate representing any such Shares shall cease
to have any rights with respect thereto, except the right to receive the
Merger Consideration.
(iv) Notwithstanding any provision of this Agreement to the
contrary, if required by the DGCL but only to the extent required thereby,
Shares which are issued and outstanding immediately prior to the Effective
Time and which are held by holders who have properly exercised appraisal
rights with respect thereto in accordance with Section 262 of the DGCL (the
"Dissenting Shares") will not be exchangeable for the right to receive the
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Merger Consideration, and holders of such Shares will be entitled to
receive payment of the appraised value of such Shares in accordance with
the provisions of such Section 262 unless and until such holders fail to
perfect or effectively withdraw or lose their rights to appraisal and
payment under the DGCL. If, after the Effective Time, any such holder fails
to perfect or effectively withdraws or loses such right, such Shares will
thereupon be treated as if they had been converted into and have become
exchangeable for, at the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company will give Parent
prompt notice of any demands received by the Company for appraisals of
Shares. The Company shall not, except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal or offer
to settle or settle any such demands.
(b) Each Company Stock Option (as hereinafter defined) shall be
treated in accordance with Section 5.4 of this Agreement.
Section 1.6 Exchange of Certificates. (a) Paying Agent. Prior to
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the Effective Time, Parent shall designate a bank or trust company reasonably
acceptable to the Company (or such other person or persons as shall be
reasonably acceptable to Parent and the Company) to act as paying agent in the
Merger (the "Paying Agent"), and, from time to time on, prior to or after the
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Effective Time, Parent shall make available, or cause the Surviving Corporation
to make available, to the Paying Agent cash in amounts and at the times
necessary for the payment of the Merger Consideration upon surrender of
certificates representing Shares as part of the Merger pursuant to Section 1.5.
Any and all interest earned on funds made available to the Paying Agent pursuant
to this Agreement shall be paid over to Parent.
(b) Exchange Procedure. As soon as reasonably practicable after
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the Effective Time, Parent shall cause the Paying Agent to mail to each holder
of record of a certificate or certificates that immediately prior to the
Effective Time represented Shares (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions not inconsistent with this Agreement as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by the
Paying Agent, Parent shall cause the Paying Agent to pay the holder of such
Certificate, in exchange for such Certificate, the Merger Consideration, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, payment may be made to a person other than the person in
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whose name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of such
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 1.6, each Certificate (other than Certificates representing
Dissenting Shares) shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the amount of cash,
without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.5. No interest will
be paid or will accrue on the cash payable upon the surrender of any
Certificate. Parent or the Paying Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares such amounts as Parent or the Paying Agent is required to
deduct and withhold with respect to the making of such payment under the Code
(as hereinafter defined) or under any provisions of state, local or foreign tax
law. To the extent that amounts are so withheld by Parent or the Paying Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the person in respect of which such deduction or withholding
was made by the Parent or the Paying Agent.
(c) No Further Ownership Rights in Shares. All cash paid upon
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the surrender of Certificates in accordance with the terms of this Article I
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Shares theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article I.
(d) Termination of Payment Fund. Any portion of the funds made
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available to the Paying Agent to pay the Merger Consideration which remains
undistributed to the holders of Shares for six months after the Effective Time
shall be delivered to Parent, upon demand, and any holders of Shares who have
not theretofore complied with this Article I and the instructions set forth in
the letter of transmittal mailed to such holders after the Effective Time shall
thereafter look only to Parent for payment of the Merger Consideration to which
they are entitled.
(e) No Liability. None of Parent, Sub, the Company or the Paying
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Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven years after
the Effective Time (or immediately prior to such earlier date on which any
payment pursuant to this Article I would otherwise escheat to or become the
property of any Governmental Entity (as hereinafter defined)), the cash payment
in respect of such Certificate shall, to the extent permitted by applicable law,
become the property of the Surviving Corporation, free and clear of all claims
or interests of any person previously entitled thereto.
(f) Lost Certificates. If any Certificate shall have been lost,
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stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost,
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stolen or destroyed and, if required by Parent or the Paying Agent, the posting
by such person of a bond, in such reasonable amount as Parent or the Paying
Agent may direct as indemnity against any claim that may be made against them
with respect to such Certificate, the Paying Agent will pay in exchange for such
lost, stolen or destroyed Certificate the amount of cash to which the holders
thereof are entitled pursuant to Section 1.5.
Section 1.7 Further Assurances. If at any time after the Effective
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Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.8 Closing. The closing of the Merger (the "Closing"), and
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all actions specified in this Agreement to occur at the Closing, shall take
place at the offices of Xxxxxx and Xxxxx, LLP, 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxx
Xxxxx, Xxxxx 00000, at 5:00 p.m., local time, no later than the second business
day following the day on which the last of the conditions set forth in Article V
shall have been fulfilled or waived (if permissible) or at such other time and
place as Parent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization. Each of Parent and Sub is a corporation
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duly organized, validly existing and in good standing under the laws of the
state of Delaware and has all requisite corporate power and authority to carry
on its business as now being conducted. Each of Parent and Sub is duly qualified
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on Parent or Sub.
Section 2.2 Authority. On or prior to the date of this Agreement,
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the Boards of Directors of Parent and Sub have declared the Merger advisable and
approved and adopted this Agreement in accordance with the DGCL. Each of Parent
and Sub has all requisite corporate power and authority to execute and deliver
this Agreement, and each of Parent and Sub has all requisite corporate power and
authority to consummate the transactions contemplated in this
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Agreement. The execution, delivery and performance by Parent and Sub of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action (including Board action) on
the part of Parent and Sub subject, in the case of this Agreement, to the filing
of the Certificate of Merger as required by the DGCL. Each of Parent and Sub has
duly executed and delivered this Agreement, and (assuming the valid
authorization, execution and delivery of this Agreement by the Company, this
Agreement constitutes the valid and binding obligation of each of Parent and Sub
enforceable against each of them in accordance with its terms, except as limited
by bankruptcy, insolvency, creditor's rights and equitable remedy laws.
Section 2.3 Consents and Approvals; No Violations. Assuming that all
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consents, approvals, authorizations and other actions described in this Section
2.3 have been obtained and all filings and obligations described in this Section
2.3 have been made, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or result in the
loss of a material benefit 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 provision of (i) the Certificate of
Incorporation or the by-laws of Parent or Sub, each as amended to date, (ii) any
provision of the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or (iv) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its Subsidiaries or any of their respective properties or assets,
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent or Sub, materially impair the ability of Parent or Sub to perform their
respective obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby or thereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
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to Parent or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by Parent or Sub or is necessary for the consummation
of the Merger and the other transactions contemplated by this Agreement, except
for (i) in connection, or in compliance, with the provisions of the Xxxx-Xxxxx-
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
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Securities Exchange Act of 1934 (the "Exchange Act"), (ii) the filing of the
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Certificate of Merger with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of other states in which the
Company or any of its Subsidiaries is qualified to do business, (iii) such
filings and consents as may be required under any environmental, health or
safety law or regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or by the transactions contemplated by this
Agreement, (iv) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (v) applicable
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requirements, if any, of state securities or "blue sky" laws ("Blue Sky Laws"),
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(vi) as may be required under foreign laws and (vii) such other consents,
orders, authorizations, registrations, declarations and filings the failure of
which to be obtained or made would not, individually or in the aggregate, have a
Material
6
Adverse Effect on Parent or Sub, materially impair the ability of Parent or Sub
to perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby or thereby.
Section 2.4 Information Supplied. None of the information supplied or
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to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in the proxy statement (together with any amendments or supplements
thereto, the "Proxy Statement") relating to the Stockholder Meeting (as
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hereinafter defined) will, at the time the Proxy Statement is first mailed to
the Company's Stockholders or at the time of the Stockholder Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 2.5 Interim Operations of Sub. Sub was formed solely for the
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purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
Section 2.6 Brokers. No broker, investment banker, financial advisor
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or other person, other than Xxxxx Fargo Xxx Xxxxxx, the fees and expenses of
which will be paid by Company, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has all requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. A list of all Subsidiaries of the Company, together with the
jurisdiction of incorporation of each Subsidiary, the percentage of the
outstanding capital stock of each Subsidiary owned by the Company and each other
Subsidiary and the name of any person other than the Company or another
Subsidiary that owns capital stock of the Subsidiary, is set forth in Section
3.1 of the letter dated the date hereof and delivered on the date
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hereof by the Company to Parent, which relates to this Agreement and is
designated therein as the Company Letter (the "Company Letter").
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Section 3.2 Capital Structure. (a) As of the date hereof, the authorized
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capital stock of the Company consists of 20,000,000 Shares and 500,000 shares of
Preferred Stock, par value $10.00 per share ("Company Preferred Stock").
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(b) At the close of business on the date of this Agreement and on the
Effective Date:
(i) 1,477,119 Shares were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of
preemptive rights;
(ii) no shares of Company Preferred Stock were issued and
outstanding;
(iii) 22,066 Shares were held in the treasury of the Company
or by Subsidiaries of the Company;
(iv) 76,663 Shares were reserved for issuance upon the
exercise of outstanding vested and exercisable stock options issued
under the Company's 1992 Stock Option Plan, as amended, and 1998
Restricted Stock Plan for Non-Employee Directors (the "Company Stock
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Option Plans"); and
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(v) 95,855 Shares were reserved for issuance upon the
exercise of outstanding unvested or unexercisable stock options issued
under the Company Stock Option Plans which options will be cancelled
prior to the Effective Time without incurring any monetary or other
obligation to the Company, the Parent or the Sub to any holder of any
such option;
(c) Section 3.2 of the Company Letter contains a correct and complete
list as of the date of this Agreement of each outstanding option to purchase
Shares issued under any of the Company Option Plans (collectively, the "Company
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Stock Options"), including the holder, date of grant, term, exercise price and
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number of shares of Company Common Stock subject thereto and whether the option
is vested and exercisable or subject to acceleration.
(d) Except for the (i) Company Stock Options (Company Stock Options
to purchase 95,855 shares to be cancelled as indicated above), (ii) the issuance
of Company Common Stock pursuant to the 1998 Restricted Stock Plan for
Directors, and (iii) and the Rights Agreement dated as of January 30, 1996, by
and between the Company and Continental Stock Transfer & Trust Company, as
successor to KeyCorp Shareholder Services, Inc., as Rights Agent (as amended,
the "Company Rights Agreement"), pursuant to which the Company has issued rights
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(the "Company Rights") to purchase shares of the Company's Series A Junior
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Participating Preferred Stock, there are no options, warrants, calls, rights,
contractual rights, or agreements to which the Company or any of its
Subsidiaries is a party or by which any of them is bound obligating the Company
or any of its Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right or agreement;
provided, however, that the right of any stockholder of the Company or any
benefit that any
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stockholder of the Company has under the Company Rights Agreement will not be
triggered as a result of the transactions hereunder as further provided in
Section 3.27. Except as set forth in Section 3.2 of the Company Letter, there
are no outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
any capital stock of or any equity interests in the Company or any Subsidiary.
No additional shares are available to be issued to the Directors pursuant to the
1998 Restricted Stock Option Plan for Directors, and thus, none will be so
issued.
(e) Each outstanding share of capital stock of each Subsidiary of the
Company is duly authorized, validly issued, fully paid and nonassessable and,
except as set forth in Section 3.2 of the Company Letter, each such share is
owned by the Company or another Subsidiary of the Company, free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on voting rights, charges and other encumbrances of any
nature whatsoever.
(f) The Company does not have any outstanding bonds, debentures,
notes or other debt obligations the holders of which have the right to vote (or
which are convertible into or exercisable for securities whether or not having
the right to vote) with the Stockholders of the Company on any matter.
Section 3.3 Authority. On or prior to the date of this Agreement, the
---------
Board of Directors of the Company has unanimously declared the Merger advisable
and fair to and in the best interest of the Company and its Stockholders,
approved and adopted this Agreement and the transactions contemplated hereby in
accordance with the DGCL, and directed that this Agreement be submitted to the
Company's Stockholders for approval. The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to approval by the
Stockholders of the Company of this Agreement and the Merger, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
(including Board action) on the part of the Company, subject to (x) approval and
adoption of this Agreement and the Merger by the Stockholders of the Company and
(y) the filing of the Certificate of Merger as required by the DGCL. This
Agreement has been duly executed and delivered by the Company and (assuming the
valid authorization, execution and delivery of this Agreement by Parent and Sub
and the validity and binding effect of this Agreement on Parent and Sub)
constitutes the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
Section 3.4 Consents and Approvals; No Violation. Except as disclosed in
------------------------------------
Section 3.4 of the Company Letter, assuming that all consents, approvals,
authorizations and other actions described in this Section 3.4 have been
obtained and all filings and obligations described in this Section 3.4 have been
made, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or result in the
loss of a material benefit under, or result in the creation of any lien,
9
security interest, charge or encumbrance upon any of the properties or assets of
the Company or any of its Subsidiaries under, any provision of (i) the Company
Charter or the Bylaws of the Company, (ii) any provision of the comparable
charter or organization documents of any of the Company's Subsidiaries, (iii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license applicable to
the Company or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its Subsidiaries or any of their respective properties or assets, other than, in
the case of clauses (ii), (iii) or (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations hereunder or
prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
the Company or is necessary for the consummation of the Merger and the other
transactions contemplated by this Agreement, except for (i) in connection, or in
compliance, with the provisions of the HSR Act and the Exchange Act, (ii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company or any of its Subsidiaries is qualified to do business,
(iii) such filings and consents as may be required under any environmental,
health or safety law or regulation pertaining to any notification, disclosure or
required approval triggered by the Merger or the transactions contemplated by
this Agreement, (iv) such filings, authorizations, orders and approvals as may
be required to obtain the State Takeover Approvals, (v) applicable requirements,
if any, of Blue Sky Laws or the Nasdaq SmallCap Market, (vi) as may be required
under foreign laws and (vii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 3.5 SEC Documents and Other Reports. The Company has filed all
-------------------------------
required documents (including proxy statements) with the SEC since October 1,
1999 (the "Company SEC Documents"). As of their respective dates, the Company
---------------------
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act,
--------------
as the case may be, and, at the respective times they were filed, none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a 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. The consolidated financial statements (including, in each
case, any notes thereto) of the Company included in the Company SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with United States generally accepted
accounting principles consistently followed ("GAAP") (except, in the case of the
----
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) and fairly presented in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as at the respective dates thereof and the consolidated results of their
operations and their
10
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Company SEC Documents
or as required by GAAP, the Company has not, since October 1, 1999, made any
change in the accounting practices or policies applied in the preparation of
financial statements. Since October 1, 1998, the SEC has not (i) to the
Knowledge of the Company, conducted any investigation of the Company, (ii)
initiated any enforcement action against the Company or (iii) provided to the
Company any comments on any of the Company SEC Documents, and, to the Knowledge
of the Company, no such investigation, enforcement action or comments is pending
or threatened.
Section 3.6 Information Supplied. None of the information supplied or to be
--------------------
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement, at the time the Proxy Statement is first mailed to the
Company's Stockholders or at the time of the Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act, except that no representation or warranty is made by the
Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub specifically for inclusion or
incorporation by reference therein.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed in
-------------------------------------
the Company SEC Documents filed with the SEC prior to the date of this Agreement
or as set forth in Section 3.7 of the Company Letter since October 1, 2000, (i)
the Company and its Subsidiaries have not (A) incurred any material liability or
obligation (indirect, direct or contingent), or entered into any material oral
or written agreement or other transaction, that is not in the ordinary course of
business or that would result in a Material Adverse Effect on the Company, (B)
caused any of their assets to become subject to any pledge, lien or security
interest, other than (y) liens for taxes that are not yet due and payable, and
(z) with respect to real property, minor imperfections of title, if any, none of
which materially detracts from the value of the property, and zoning laws and
other land use restrictions that do not impair the present or anticipated use of
the property subject thereto, or (C) loaned any funds to any third person, other
than accounts receivable of the Company or its Subsidiaries incurred in the
ordinary course of business, (ii) the Company and its Subsidiaries have not
sustained any loss or interference with their business or properties from fire,
flood, windstorm, accident or other calamity (whether or not covered by
insurance) that has had a Material Adverse Effect on the Company, (iii) there
has been no change in the capital stock of the Company, except for the issuance
of shares of the Company Common Stock pursuant to Company Stock Options and the
issuance of Company Common Stock under the Company's 1998 Restricted Stock Plan
for Directors, and no dividend or distribution of any kind declared, paid or
made by the Company on any class of its stock, (iv) there has not been (A) any
adoption of a new Company Plan (as hereinafter defined), (B) any amendment to a
Company Plan increasing benefits thereunder or any repricing, directly or
indirectly of any Company Stock Option or other right to purchase shares of
Company Common Stock, (C) any granting by the Company or any of its Subsidiaries
to any executive officer or other key employee of the Company or any of its
Subsidiaries of any increase in compensation, except as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents filed prior to the
date hereof, (D) any
11
granting by the Company or any of its Subsidiaries to any such executive officer
or other key employee of any increase in severance or termination agreements in
effect as of the date of the most recent audited financial statements included
in the Company SEC Documents filed prior to the date hereof or (E) any entry by
the Company or any of its Subsidiaries into any employment, severance or
termination agreement with any such executive officer or other key employee, (v)
there has not been any material changes in the amount or terms of the
indebtedness of the Company and its Subsidiaries from that described in the
Company SEC Documents filed prior to the date hereof and (vi) there has been no
event causing a Material Adverse Effect on the Company, nor any development that
would reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect on the Company.
Section 3.8 Permits and Compliance. (a) Each of the Company and its
------------------------
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity or other third party necessary
for the Company or any of its Subsidiaries to own, lease and operate its
properties or to carry on its business as it is now being conducted (the
"Company Permits"), except where the failure to have any of the Company Permits
-----------------
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company. No suspension or cancellation of any of the Company Permits is
pending or, to the Knowledge of the Company (as hereinafter defined),
threatened, except where the suspension or cancellation of any of the Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is in
violation of (A) its charter, by-laws or other organizational documents, (B) any
law, ordinance, administrative or governmental rule or regulation, (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
the Company or any of its Subsidiaries, or (D) any Company Permits except, in
the case of clauses (B), (C) or (D), for any violations that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company or other
third party.
(b) Except as disclosed in the Company SEC Documents filed prior to the
date of this Agreement, there are no contracts or agreements of the Company or
its Subsidiaries having terms or conditions which would have a Material Adverse
Effect on the Company or having covenants not to compete that materially impair
the ability of the Company to conduct its business as currently conducted or
purport to bind any stockholder or any Affiliated Person (as defined herein) of
any stockholder of the Company after the Effective Time. Except as set forth in
the Company SEC Documents filed prior to the date of this Agreement, no event of
default or event that, but for the giving of notice or the lapse of time or
both, would constitute an event of default exists or, upon the consummation by
the Company of the transactions contemplated by this Agreement, will exist under
any indenture, mortgage, loan agreement, note or other agreement or instrument
for borrowed money, any guarantee of any agreement or instrument for borrowed
money or any lease, contractual license or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the Company
or any such Subsidiary is bound or to which any of the properties, assets or
operations of the Company or any such Subsidiary is subject, other than any
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company, and the Company has not received written notice
of any such event of default.
12
Section 3.9 Tax Matters. Except as otherwise set forth in Section 3.9 of
-----------
the Company Letter, (i) the Company and each of its Subsidiaries have filed all
Tax Returns (as hereinafter defined) required to have been filed, and such Tax
Returns are correct and complete and disclose all Taxes (as hereinafter defined)
required to be paid by the Company and its Subsidiaries for the periods covered
thereby, except to the extent that any failure to so file or any failure to be
correct and complete or to disclose all Taxes required to be paid would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
(ii) all Taxes shown to be due on such Tax Returns have been timely paid or
extensions for payment have been properly obtained, or such Taxes are being
contested in good faith; (iii) the Company and each of its Subsidiaries have
complied with all rules and regulations relating to the withholding of Taxes and
the remittance of withheld Taxes, except to the extent that any failure or
failures to so comply would not, individually or in the aggregate, have a
Material Adverse Effect on the Company; (iv) neither the Company nor any of its
Subsidiaries has waived any statute of limitations in respect of its Taxes; (v)
the income and franchise Tax Returns filed by or on behalf of the Company and
each of its Subsidiaries for the taxable years ended September 30, 1998,
September 30, 1999, and September 30, 2000, have not been audited by the
Internal Revenue Service ("IRS") or relevant state taxing authorities, and the
-----
statute of limitations with respect assessment of Taxes for taxable years prior
to that time have expired; (vi) no issues that have been raised by the relevant
taxing authority in connection with the examination of Tax Returns required to
have been filed by or with respect to the Company and each of its Subsidiaries
are currently pending; (vii) all deficiencies asserted or assessments made as a
result of any examination of such Tax Returns by any taxing authority have been
paid in full or properly reflected on the books of the Company; and (viii) there
is no action, suit, investigation, audit, claim or assessment pending or, to the
Knowledge of the Company, proposed or threatened with respect to Taxes of the
Company or any Subsidiary; (ix) there are no liens for Taxes upon the assets of
the Company or any Subsidiary except liens relating to current Taxes not yet
due; (x) none of the Company or any Subsidiary has been a member of any group of
corporations filing Tax Returns on a consolidated, combined, unitary or similar
basis other than each such group of which it is currently a member; (xi) no
transaction contemplated by this Agreement is subject to withholding under
Section 1445 of the Code (relating to "FIRPTA") and no stock transfer Taxes,
sales Taxes, use Taxes, real estate transfer Taxes, or other similar Taxes will
be imposed on the transactions contemplated by this Agreement; (xii) no
liability for any state or local Taxes attributable to the transfer of the
beneficial ownership of the Company's and its Subsidiaries' real properties, or
any penalties or interest with respect thereto, will be incurred in connection
with the consummation of the Merger; (xiii) except as may be limited by the
transactions contemplated by this Agreement, the "regular" and, if applicable,
"alternative minimum tax" net operating loss carry forwards of the Company and
its Subsidiaries for each of the taxable years ended on or prior to September
30, 2000 (collectively, the "NOLs") are set forth (for each year) in Section 3.9
----
of the Company Letter and are each available to the Company (or the applicable
Subsidiary) for the period set forth in Section 172(b)(1)(A) of the Code as in
effect for the taxable year in which the applicable NOL was incurred; and (xiv)
except as may be limited as a result of the transactions contemplated by this
Agreement, immediately prior to the Effective Time, none of the NOLs will
constitute separate return limitation year (SRLY) losses, consolidated return
change of ownership (CRCO) losses or "dual consolidated losses" and none of the
NOLs will be limited by sections 382 or 384 of the Code and the regulations
thereunder.
13
Section 3.10 Actions and Proceedings. There are no outstanding orders,
-----------------------
judgments, injunctions, awards or decrees of any Governmental Entity against or
involving the Company or any of its Subsidiaries, or to the Knowledge of the
Company against or involving any of the present or former directors, officers,
employees, consultants, agents or Stockholders of the Company or any of its, any
of the properties, assets or business of the Company or any of its Subsidiaries
or any Company Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder. Except
as set forth in Section 3.10 of the Company Letter, there are no actions, suits
or claims or legal, administrative or arbitrative proceedings or investigations
(including claims for workers' compensation) pending or, to the Knowledge of the
Company, threatened against or involving the Company or any of its Subsidiaries
or to the Knowledge of the Company any of its or their present or former
directors, officers, employees, consultants, agents or Stockholders, or any of
the properties, assets or business of the Company or any of its Subsidiaries or
any Company Plan that, individually or in the aggregate, would have a Material
Adverse Effect on the Company or materially impair the ability of the Company to
perform its obligations hereunder. There are no actions, suits, labor disputes
or other litigation, legal or administrative proceedings or governmental
investigations pending or, to the Knowledge of the Company, threatened against
or affecting the Company or any of its Subsidiaries or to the Knowledge of the
Company any of its or their present or former officers, directors, employees,
consultants, agents or Stockholders, or any of the properties, assets or
business of the Company or any of its Subsidiaries relating to the transactions
contemplated by this Agreement.
Section 3.11 Compensation Agreements. Except as set forth in Section 3.11
-----------------------
of the Company Letter, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan (collectively, the
"Compensation Agreements"), pension plan (as defined in Section 3(2) of ERISA)
-------------------------
or welfare plan (as defined in Section 3(1) of ERISA), any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement. Except as set
forth in Section 3.11 of the Company Letter, no holder of any option to purchase
Shares, or Shares granted in connection with the performance of services for the
Company or its Subsidiaries, is or will be entitled to receive cash from the
Company or any Subsidiary in lieu of or in exchange for such option or shares as
a result of the transactions contemplated by this Agreement. Section 3.11 of the
Company Letter sets forth (i) for each officer, director or employee who is a
party to, or will receive benefits under, any Compensation Agreement as a result
of the transactions contemplated herein, the total amount that each such person
may receive, or is eligible to receive, assuming that the transactions
contemplated by this Agreement are consummated on the date hereof, and (ii) the
total amount of indebtedness owed to the Company or its Subsidiaries from each
officer, director or employee of the Company and its Subsidiaries.
Section 3.12 Employee Benefits. (a) Each Company Plan (as hereinafter
-----------------
defined), is listed in Section 3.12(a) of the Company Letter. With respect to
each Company Plan, the Company has provided to Parent a true and correct copy of
(i) the three most recent annual reports (Form 5500) filed with the IRS, if
applicable, (ii) each such Company Plan that has been
14
reduced to writing and all amendments thereto, (iii) each trust agreement,
insurance contract or administration agreement relating to each such Company
Plan, (iv) a written summary of each unwritten Company Plan, (v) the most recent
summary plan description or other written explanation of each Company Plan
provided to participants, (vi) the most recent determination letter and request
therefor, if any, issued by the IRS with respect to any Company Plan intended to
be qualified under Section 401(a) of the Code, (vii) any request for a
determination currently pending before the IRS and (viii) all correspondence
with the IRS, the Department of Labor, or the SEC relating to any outstanding
controversy. Each Company Plan complies in all material respects with ERISA, the
Code and all other applicable Statutes and governmental rules and regulations.
Neither the Company nor any ERISA Affiliate currently maintains, contributes to
or has any liability under, or at any time during the past six years has
maintained or contributed to, any pension plan which is subject to Section 412
of the Code, Section 302 of ERISA or Title IV of ERISA. Neither the Company nor
any ERISA Affiliate currently maintains, contributes to or has any liability
under, or at any time during the past six years has maintained or contributed
to, any "multiemployer Plan" (as defined in Section 4001(a)(3) of ERISA).
(b) Except as listed in Section 3.12(b) of the Company
Letter, with respect to the Company Plans, no event has occurred and there
exists no condition or set of circumstances in connection with which the Company
or any Subsidiary or ERISA Affiliate or Company Plan fiduciary could be subject
to any material liability under the terms of such Company Plans, ERISA, the Code
or any other applicable law. All Company Plans that are intended to be qualified
under Section 401(a) of the Code have been determined by the IRS to be so
qualified, or a timely application for such determination is now pending and the
Company is not aware of any reason why any such Company Plan is not so qualified
in operation. Except as disclosed in Section 3.12(b) of the Company Letter,
neither the Company nor any of its ERISA Affiliates has any liability or
obligation under any welfare plan to provide benefits after termination of
employment to any employee or dependent other than as required by Section 4980B
of the Code.
(c) As used herein, (i) "Company Plan" means a "pension plan"
------------
(as defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), or any other written or
oral bonus, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, restricted stock, stock
appreciation right, holiday pay, vacation, severance, medical, dental, vision,
disability, death benefit, sick leave, fringe benefit, personnel policy,
insurance or other plan, arrangement or understanding, in each case established
or maintained by the Company or any of its ERISA Affiliates or as to which the
Company or any of its ERISA Affiliates has contributed or otherwise may have any
liability, and (ii) "ERISA Affiliate" means any trade or business (whether or
-----------------
not incorporated) which would be considered a single employer with the Company
or any of its Subsidiaries pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to Section
4001(b) of ERISA and the regulations promulgated thereunder.
(d) Section 3.12(d) of the Company Letter contains a list of
all (i) severance and employment agreements with employees of the Company and
each of its Subsidiaries, (ii) severance programs and policies of the Company
and each of its Subsidiaries with or relating to its employees and (iii) plans,
programs, agreements and other arrangements of the Company and
15
each of its Subsidiaries with or relating to its employees containing change of
control or similar provisions.
(e) Except as set forth in Section 3.12(e) of the Company
Letter, neither the Company nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that could result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(f) No Company Plan is subject to laws outside of the United
States.
Section 3.13 Liabilities. Except as set forth in Section 3.13 of the
-----------
Company Letter or as fully reflected or reserved against in the financial
statements included in the Company SEC Documents filed prior to the date hereof,
or disclosed in the footnotes thereto, since September 30, 2000, the Company and
its Subsidiaries have incurred no liabilities (including Tax liabilities) or
obligations of any nature, absolute or contingent, other than liabilities or
obligations that (i) would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or (ii) that would not be required by
GAAP to be reflected or reserved in the financial statements of the Company or
in the footnotes thereto, prepared in accordance with GAAP consistent with past
practices, or (iii) that arise in the ordinary course of business consistent
with past practices. Except as set forth in Section 3.13 of the Company Letter,
as of the date hereof, none of the Company or its Subsidiaries has any
indebtedness for borrowed money (other than advances from the Company to such
Subsidiaries).
Section 3.14 Labor Matters. Except as set forth in Section 3.14 of the
-------------
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor contract. Neither the Company nor
any of its Subsidiaries has engaged in any unfair labor practice with respect to
any persons employed by or otherwise performing services primarily for the
Company or any of its Subsidiaries (the "Company Business Personnel"), and there
--------------------------
is no unfair labor practice complaint or grievance against the Company or any of
its Subsidiaries by any person pursuant to the National Labor Relations Act or
any comparable state or foreign law pending or threatened in writing with
respect to the Company Business Personnel, except where such unfair labor
practice, complaint or grievance would not have a Material Adverse Effect on the
Company. There is no union-organizing activity, labor strike, dispute, slowdown
or stoppage pending or, to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries which may interfere with the
respective business activities of the Company or any of its Subsidiaries, except
where such union-organizing activity, labor strike, dispute, slowdown or
stoppage would not have a Material Adverse Effect on the Company.
Section 3.15 Intellectual Property. (a) As used herein, "Company
--------------------- -------
Intellectual Property" means all trademarks, trademark registrations, trademark
------------
rights and renewals thereof, trade names, trade name rights, patents, patent
rights, patent applications, industrial models, inventions, invention
disclosures, designs, utility models, inventor rights, software, computer
programs, computer systems, modules and related data and materials, copyrights,
copyright registrations and renewals thereof, servicemarks, servicemark
registrations and renewals thereof, servicemark rights, trade secrets,
applications for trademark and servicemark registrations, know-how, confidential
information and other proprietary rights, and any data and information
16
of any nature or form used or held for use in connection with the businesses of
the Company and/or the Subsidiaries as currently conducted or as currently
contemplated by the Company, together with all applications currently pending or
in process for any of the foregoing.
(b) The Company and the Subsidiaries own, or possess adequate
licenses or other valid rights to use (including the right to sublicense to
customers, suppliers or others as needed), all of the Company Intellectual
Property that is necessary for the conduct or contemplated conduct of the
Company's or Subsidiaries' businesses, except for such failures to own or
possess as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Section 3.15 of the Company Letter lists each material
license or other agreement pursuant to which the Company or any Subsidiary has
the right to use Company Intellectual Property utilized in connection with any
product of, or service provided by, the Company and the Subsidiaries, the
cancellation or expiration of which would have a Material Adverse Effect on the
Company (the "Company Licenses"). There are no pending, or, to the Knowledge of
----------------
the Company, threatened interferences, re-examinations, oppositions or
cancellation proceedings involving any patents or patent rights, trademarks or
trademark rights, or applications therefor, of the Company or any Subsidiary,
except such as would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. There is no breach or violation by the Company or
by any Subsidiary under, and, to the Knowledge of the Company, there is no
breach or violation by any other party to, any Company License that is
reasonably likely to give rise to any termination or any loss of rights
thereunder. To the Knowledge of the Company, there has been no unauthorized
disclosure or use of confidential information, trade secret rights, processes
and formulas, research and development results and other know-how of the Company
or any Subsidiary, except where such disclosure or use of such information would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company. The conduct of the business of the Company and the Subsidiaries as
currently conducted or contemplated does not and will not infringe upon or
conflict with, in any way, any license, trademark, trademark right, trade name,
trade name right, patent issued as of the date hereof, patent right, industrial
model, invention, service xxxx, service xxxx right, copyright or trade secret of
any third party that, individually or in the aggregate, would have a Material
Adverse Effect on the Company. Except as disclosed in the Company SEC Documents
filed with the SEC prior to the date hereof, to the Knowledge of the Company,
there are no infringements of, or conflicts with, any Company Intellectual
Property which, individually or in the aggregate, would have a Material Adverse
Effect on the Company. Except as set forth in Section 3.15 of the Company
Letter, neither the Company nor any Subsidiary has licensed or otherwise
permitted the use by any third party of any proprietary information or Company
Intellectual Property on terms or in a manner which, individually or in the
aggregate, would have a Material Adverse Effect on the Company.
(c) Except as set forth in Section 3.15(c) of the Company
Letter, the Company has no franchise or license agreements in regard to its
restaurants with any third parties.
Section 3.16 Title to Assets. (a) As of the date hereof, the
---------------
Company and the Subsidiaries own, and as of the Effective Time the Company and
the Subsidiaries will own, good and marketable title to all of their assets
material to their business (excluding, for purposes of this sentence, assets
held under leases), free and clear of any and all mortgages, except as set forth
in Section 3.16 of the Company Letter.
17
(b). All real property owned by the Company or its Subsidiaries
is described in detail (street and legal description) in Section 3.16 of the
Company Letter. With respect to each such parcel of real property:
(i) The Company has good and marketable title to the parcel of
real property, free and clear of any mortgages, except as set forth in
Section 3.16 of the Company Letter;
(ii) The Company is not a foreign Person as contemplated by
(S).1445 of the Code, and at the Closing will deliver to the Transitory
Subsidiary a certificate so stating, in form complying with the Code
and applicable regulations;
(iii) There are no pending or, to the Knowledge of the Company,
threatened , or has the Company received written notice of any,
condemnation proceedings, lawsuits, or administrative actions relating
to such property or other matters affecting adversely the current use,
occupancy or value thereof;
(iv) The legal description for such property contained in the
attached description thereof describes the parcel fully and adequately,
except as provided in the title commitment and the surveys relating
thereto, the buildings and improvements are located within the boundary
lines of the described parcels of land, are not in violation of
applicable setback requirements, zoning laws and ordinances (and none
of the properties or buildings or improvements thereon are subject to
"permitted non-conforming use" or "permitted non-conforming structure"
classifications), and, except as provided in the title commitment and
the surveys relating thereto, do not encroach on any easement which may
burden the land, the land does not serve any adjoining property for any
purpose inconsistent with the use of the land, and the property, except
as described in Section 3.16 of the Company Letter, is not located
within any designated flood plain, does not contain any wetlands and is
not subject to any similar type restriction for which any permits or
licenses necessary to the use thereof have not been obtained;
(v) All facilities (including all improvements thereon) have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the ownership or operation
thereof, are in compliance with all provisions of all planning, zoning,
subdivision, wetland (if any), air pollution, disposable fluid waste,
fire and building codes, and occupational safety and health act laws,
rules and regulations, and have been operated and maintained (and the
improvements thereon are) in accordance with all applicable laws,
rules, and regulations in all material respects.
(vi) Except as described in Section 3.16 of the Company Letter,
there are no leases, subleases, licenses, concessions, or other
agreements, written or oral, granting to any party or parties the right
of use or occupancy of any portion of the parcel of real property;
(vii) There are no outstanding options or rights of first refusal
to purchase the parcel of real property, or any portion thereof or
interest therein;
18
(viii) There are no parties (other than the Company or
Subsidiary) in possession of the parcel of real property, other than
tenants under any leases disclosed in Section 3.16 (c) of the Company
Letter, who are in possession of space to which they are entitled;
(ix) The structural components of the facilities (including
all improvements thereon), and the heating, air conditioning, plumbing
and electrical systems (and other utilities and mechanical systems) (A)
are free from defects (patent and, to the Knowledge of the Company,
latent), (B) have been maintained in accordance with normal industry
practice, (C) are in good operating condition and repair (reasonable
wear and tear excepted), and (D) are suitable for the purposes for
which presently used and presently proposed to be used;
(x) All facilities located on the parcel of real property are
supplied with utilities and other services necessary for the operation
of such facilities, including gas, electricity, water, telephone,
sanitary sewer, and storm sewer, all of which services are adequate in
accordance with all applicable laws, ordinances, rules and regulations,
and are provided via public roads or via permanent, irrevocable,
appurtenant easements benefiting the parcel of real property; and
(xi) Each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the parcel of
real property, and access to the property is provided by paved public
right-of-way with adequate curb cuts available.
(c) All real property leased or subleased to the Company or
any of its Subsidiaries is described in detail (street and legal
description) in Section 3.16 of the Company Letter. With respect to
each lease and sublease:
(i) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) The lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated under this
Agreement;
(iii) To the Knowledge of the Company, no party to the lease or
sublease is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iv) No party to the lease or sublease has repudiated any
provision thereof;
(v) There are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(vi) With respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
19
(vii) none of Company or any of its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold;
(viii) To the Knowledge of the Company, all facilities
(including all improvements thereon) leased or subleased thereunder
have received all approvals of governmental authorities (including
licenses and permits) required in connection with the ownership or
operation thereof, are in compliance with all provisions of all
planning, zoning, subdivision, wetland (if any), air pollution,
disposable fluid waste, fire and building codes, and occupational
safety and health act laws, rules and regulations, and have been
operated and maintained (and the improvements thereon are) in
accordance with all applicable laws, rules, and regulations;
(ix) The structural components of the facilities (including
all improvements thereon) leased or subleased thereunder, and the
heating, air conditioning, plumbing and electrical systems (and other
utilities and mechanical systems) (A) are, to the Knowledge of the
Company, free from defects (patent and latent), (B) have been
maintained in accordance with normal industry practice, (C) are in good
operating condition and repair (reasonable wear and tear excepted), and
(D) are suitable for the purposes for which presently used and
presently proposed to be used; and
(x) All facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of such facilities.
Section 3.17 State Takeover Statutes. The Board of Directors of the
-----------------------
Company has, to the extent such statute is applicable, taken all action so to
render the provisions of Section 203 of the DGCL inapplicable to the Merger and
the consummation of the transactions contemplated by this Agreement. No other
state takeover statute is applicable to the Merger, this Agreement and the
transactions contemplated hereby.
Section 3.18 Required Vote of Company Stockholders. The affirmative
-------------------------------------
vote of the holders of at least a majority of Shares entitled to vote is
required to adopt this Agreement. No other vote of the security holders of the
Company is required by law, the Company's charter or the Bylaws of the Company
or otherwise in order for the Company to consummate the Merger and the
transactions contemplated hereby.
Section 3.19 Transactions with Affiliates. (a) For purposes of this
----------------------------
Agreement, "Affiliated Person" means (i) any holder of 2% or more of the Company
-----------------
Common Stock, (ii) any director, officer or senior executive of the Company or
any Subsidiary, (iii) any person, firm or corporation that directly or
indirectly controls, is controlled by, or is under common control with, any of
the Company or any subsidiary or (iv) any member of the immediate family or any
of such persons, in each case other than Parent or its Subsidiaries.
(b) Except as set forth in Section 3.19 of the Company Letter,
since September 30, 2000, the Company and the Subsidiaries have not, in the
ordinary course of business or otherwise, (i) purchased, leased or otherwise
acquired any material property or assets or obtained any material services from,
(ii) sold, leased or otherwise disposed of any material property or
20
assets or provided any material services to (except with respect to remuneration
for services rendered in the ordinary course of business as director, officer or
employee of the Company or any Subsidiary), (iii) entered into or modified in
any manner any contract with, or (iv) borrowed any money from, or made or
forgiven any loan or other advance (other than expenses or similar advances made
in the ordinary course of business) to, any Affiliated Person.
(c) Except as set forth in Section 3.19 of the Company Letter,
(i) the contracts of the Company and the Subsidiaries do not include any
material obligation or commitment between the Company or any Subsidiary and any
Affiliated Person, (ii) the assets of the Company or any Subsidiary do not
include any receivable or other obligation or commitment from an Affiliated
Person to the Company or any Subsidiary and (iii) the liabilities of the Company
and the Subsidiaries do not include any payable or other obligation or
commitment from the Company or any Subsidiary to any Affiliated Person.
(d) To the Knowledge of the Company and except as set forth in
Section 3.19 of the Company Letter, no Affiliated Person of any of the Company
or any Subsidiary is a party to any contract with any supplier of the Company or
any Subsidiary that affects in any material manner the business, financial
condition or results of operation of the Company or any Subsidiary.
Section 3.20 Brokers. No broker, investment banker, financial advisor
-------
or other person, other than Xxxxx Fargo Xxx Xxxxxx, the fees and expenses of
which will be paid by the Company (as reflected in an agreement between Xxxxx
Fargo and the Company, a copy of which has been furnished to Parent), is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 3.21 Compliance with Worker Safety Laws. The properties,
----------------------------------
assets and operations of the Company and its Subsidiaries are in compliance with
all applicable federal, state, local and foreign laws, rules and regulations,
orders, decrees, judgments, permits and licenses relating to public and worker
health and safety (collectively, "Worker Safety Laws"), except for any
------------------
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company. With respect to such properties, assets and
operations, including any previously owned, leased or operated properties,
assets or operations, there are no past, present or reasonably anticipated
future events, conditions, circumstances, activities, practices, incidents,
actions or plans (other than those taken by subsequent owners of such
properties, assets or operations) of the Company or any of its Subsidiaries that
may interfere with or prevent compliance or continued compliance with applicable
Worker Safety Laws, other than any such interference or prevention as would not,
individually or in the aggregate with any such other interference or prevention,
have a Material Adverse Effect on the Company.
Section 3.22 [Reserved]
----------
Section 3.23 Accounts Receivable. All of the accounts and notes
-------------------
receivable of the Company and its Subsidiaries set forth on the books and
records of the Company (net of the applicable reserves, which such reserves are
adequate notwithstanding the items set forth in the Company Letter, reflected on
the books and records of the Company and in the financial
21
statements included in the Company SEC Documents) (i) represent sales actually
made or transactions actually effected in the ordinary course of business for
goods or services delivered or rendered to unaffiliated customers in bona fide
arm's length transactions, (ii) except as set forth in Section 3.23(ii) of the
Company Letter, constitute valid claims, and (iii) except as set forth on
Section 3.23(iii) of the Company Letter, are good and collectible at the
aggregate recorded amounts thereof (net of such reserves, which such reserves
are adequate notwithstanding the items set forth in the Company Letter,) without
right of recourse, defense, deduction, return of goods, counterclaim, or offset
and have been or will be collected in the ordinary course of business and
consistent with past experience, except for such failures of accounts and notes
receivable to satisfy the conditions set forth in clauses (i), (ii) and (iii) of
this Section 3.23 as would not have a Material Adverse Effect on the Company.
Section 3.24 Certain Agreements.
------------------
(a) Set forth in Section 3.24(a) of the Company Letter is a list
of all contracts (except for contracts that have been filed, prior to the date
hereof, with Company SEC Documents) that are material to the business of the
Company and its Subsidiaries taken as a whole (whether oral or written),
including all distribution contracts, sole-source supply contracts, national
accounts contracts, any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any material lease, contractual license or
other agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which the Company or any such Subsidiary is bound or to which any
of the properties, assets or operations of the Company or any such Subsidiary is
subject (collectively, "Significant Contracts"). Prior to the date hereof, the
---------------------
Company has provided true and complete copies of all such contracts to Parent.
(b) Except as set forth in Section 3.24(b) of the Company Letter,
each Significant Contract is a legal, valid and binding agreement of the Company
or its Subsidiaries, neither the Company nor any of its Subsidiaries (or to the
Knowledge of the Company, any other party thereto) is in default under any
Significant Contract, and none of such Significant Contracts has been canceled
by the other party thereto; each Significant Contract is in full force and
effect and no event has occurred which, with the passage of time or the giving
of notice or both, would constitute a default, event of default or other breach
by the Company or any Subsidiary party thereto which would entitle the other
party to such Significant Contract to terminate the same or declare a default or
event of default thereunder; the Company and the Subsidiaries are not in receipt
of any claim of default under any such agreement, and the Company has not
received written notice that any such event has occurred; in each instance,
except where it would not have a Material Adverse Effect on the Company.
Section 3.25 Environmental Matters. (a) For purposes of this
---------------------
Agreement, the following terms shall have the following meanings: (i) "Hazardous
---------
Substances" means (A) petroleum and petroleum products, by-products or breakdown
----------
products, radioactive materials, asbestos-containing materials and
polychlorinated biphenyls, and (B) any other chemicals, materials or substances
regulated as toxic or hazardous or as a pollutant, contaminant or waste under
any applicable Environmental Law; (ii) "Environmental Law" means any federal or
-----------------
applicable state law where the property of the Company is located, past, present
or future (up until the Effective Time) and as amended, and any judicial or
administrative interpretation
22
thereof, including any judicial or administrative order, consent decree or
judgment, or common law, relating to pollution or protection of the environment,
health or safety or natural resources, including those relating to the use,
handling, transportation, treatment, storage, disposal, release, or discharge of
Hazardous Substances; and (iii) "Environmental Permit" means any permit,
--------------------
approval, identification number, license or other authorization required under
any applicable Environmental Law.
(b) The Company and the Subsidiaries are and have been in material
compliance with all applicable Environmental Laws, have obtained all
Environmental Permits and are in material compliance with their requirements,
and have resolved all past non-compliance with Environmental Laws and
Environmental Permits without any pending, on-going or future obligation, cost
or liability, except as set forth in Section 3.25 of the Company Letter.
(c) Except as set forth in Section 3.25 of the Company Letter (i)
neither the Company nor any of its Subsidiaries has placed, held, located,
released, transported or disposed of any Hazardous Substances on, under, from or
at any of the Company's or any of its Subsidiaries' properties or any other
properties, other than in a manner that would not, in all such cases taken
individually or in the aggregate, result in a Material Adverse Effect on the
Company, (ii) to the Knowledge of the Company there are no Hazardous Substances
on, under, emanating from, or at any of the Company's or any of its
Subsidiaries' properties or any other property but arising from the Company's or
any of its Subsidiaries' current or former properties or operations, other than
in a manner that would not result in a Material Adverse Effect on the Company,
or (iii) to the Knowledge of the Company, neither the Company nor any of its
Subsidiaries has any reason to know, or has received any written notice, (A) of
any violation of or liability under any Environmental Laws, (B) of the
institution or pendency of any suit, action, claim, proceeding or investigation
by any Governmental Entity or any third party in connection with any such
violation or liability, (C) requiring the investigation of, response to or
remediation of Hazardous Substances at or arising from any of the Company's or
any of its Subsidiaries' current or former properties or operations or any other
properties, (D) alleging noncompliance by the Company or any of its Subsidiaries
with the terms of any Environmental Permit in any manner reasonably likely to
require material expenditures or to result in material liability or (E)
demanding payment for response to or remediation of Hazardous Substances at or
arising from any of the Company's or any of its Subsidiaries' current or former
properties or operations or any other properties, except in each case for the
notices or matters set forth in Section 3.25 of the Company Letter.
(d) Except as set forth in Section 3.25 of the Company Letter, no
Environmental Law imposes any material obligation upon the Company or any of its
subsidiaries arising out of or as a condition to any transfer or transaction
contemplated by this Agreement, including any requirement to modify or to
transfer any Environmental Permit or license, any requirement to file any notice
or other submission with any Governmental Entity, the placement of any notice,
acknowledgment or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree.
(e) Except as set forth in Schedule 3.25(e) of the Company Letter,
there are no environmental assessments or audit reports or other similar studies
or analyses in the
23
possession or control of the Company or any of its Subsidiaries relating to any
real property currently owned, leased or occupied by the Company or any of its
Subsidiaries.
Section 3.26 Regulatory Compliance. Except as set forth in Section
---------------------
3.26 of the Company Letter, (i) the Company is in compliance with, and has
complied with, all applicable federal and state statutes, laws, ordinances,
decrees, rules and regulations relating to the operation of is restaurant
business and (ii) the Company holds and is in compliance with all licenses,
registrations, permits and other approvals relating to the operation of its
restaurant business for the lawful operation of such business as it is currently
conducted, except, in each case, for such failures as would not have a Material
Adverse Effect on the Company.
Section 3.27 Company Rights Agreement. As of the date hereof and after
------------------------
giving effect to the execution and delivery of this Agreement, each Company
Right is represented by the certificate representing the associated share of
Company Common Stock and is not exercisable or transferable and no additional
consideration need be paid by the Company, the Parent or the Sub apart from the
associated share of Company Common Stock at $4.60 per share, and the Company has
(i) taken all necessary actions so that the execution and delivery of this
Agreement and the consummation of the transactions contemplated (which
transactions shall not be deemed to include any transaction other than the
Merger, as may be amended from time to time, pursuant to which Parent or Sub, or
either of them acting as a group for purposes of Rule 13-d under the Exchange
Act, purchases or otherwise acquires beneficial ownership of 15% or more of any
voting securities of the Company (the "Excluded Transactions")) hereby will not
---------------------
result in a "Distribution Date," a "Trigger Date," or "Shares Acquisition Date"
(as defined in the Company Rights Agreement) and (ii) amended the Company Rights
Agreement to render it inapplicable to this Agreement and the transactions
contemplated by this Agreement (which transactions shall not be deemed to
include any Excluded Transaction).
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Except as expressly permitted by clauses (i) through (xvi) of this Section 4.1,
during the period from the date of this Agreement through the Effective Time,
the Company shall, and shall cause each of its Subsidiaries to, in all material
respects carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement or as set forth in the
Company Letter (with specific reference to the applicable subsection below), the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent:
(i) (A) other than dividends paid by wholly-owned Subsidiaries,
declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions
24
in respect of, any of its capital stock, or otherwise make any payments
to its Stockholders in their capacity as such, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise
acquire any shares of capital stock of the Company or any other
securities thereof or any rights, warrants or options to acquire any
such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities
or equity equivalent or any securities convertible into, or any rights,
warrants or options (including options under the Company Option Plans)
to acquire any such shares, voting securities, equity equivalent or
convertible securities, other than the issuance of shares of Company
Common Stock upon the exercise of Company Stock Options outstanding on
the date of this Agreement in accordance with their current terms and
the issuance of Company Preferred Stock and related Company Common
Stock or Company Rights pursuant to the Company Rights Agreement in
accordance with the terms thereof;
(iii) amend its charter or by-laws;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity
in, or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business
organization or division thereof or, except in the ordinary course of
business consistent with past practice, otherwise acquire or agree to
acquire any assets;
(v) sell, lease or otherwise dispose of, or agree to sell,
lease or otherwise dispose of, any of its significant assets, other
than in the ordinary course of business consistent with past practice,
provided, however, Parent and Sub acknowledge that the lease in respect
-------- -------
of the Company's Abilene, Texas location will expire on April 30, 2001,
and will not be renewed;
(vi) except in regard to draws on the Company's current line of
credit, incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than (A) in the
ordinary course of business consistent with past practices and (B)
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its wholly-owned Subsidiaries or between
any of such wholly-owned Subsidiaries, in each case in the ordinary
course of business consistent with past practices;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company or any Subsidiary;
(viii) except as provided in Section 5.4 or as required by
applicable law, enter into or adopt any, or amend any existing,
severance plan, agreement or arrangement or enter into or amend any
Company Plan or employment or consulting agreement;
(ix) increase the compensation payable or to become payable to
its directors, officers or employees (except for increases in the
ordinary course of business consistent
25
with past practice in salaries or wages of employees of the Company or
any of its Subsidiaries who are not executive officers or directors of
the Company),or grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director or
officer of the Company or any of its Subsidiaries, or establish, adopt,
enter into, or, except as may be required to comply with applicable
law, amend in any material respect or take action to enhance in any
material respect or accelerate any rights or benefits under, any labor,
collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee; it being further agreed that no bonus of
any kind or nature will be paid by the Company to any employee,
officer, or director of the Company prior to the Effective Time and no
such bonus has been paid to any such person on or after December 31,
2000, to the date of this Agreement; provided further, however, this
prohibition against bonus shall not prohibit the Company from paying
monetary bonuses to its restaurant managers and supervisors in the
ordinary course of business in accordance with its Bonus Program
described in Section 3.12(a) of the Company Letter.
(x) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon it or any Subsidiary by any applicable
material federal, state or local law, rule, regulation, guideline or
ordinance ;
(xi) make any change to accounting policies or procedures
(other than actions required to be taken by GAAP);
(xii) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any
election, or adopt any method that is inconsistent with positions
taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods;
(xiii) settle or compromise any Tax liability claim in excess
of $10,000;
(xiv) settle or compromise any claims or litigation in excess
of $10,000, or commence any litigation or proceedings;
(xv) except in regard to the renewal of the Company's
indemnification and insurance policy for its directors and officers,
which is on a claims made basis, enter into or amend any agreement or
contract (i) having a term in excess of 12 months and which is not
terminable by the Company or a Subsidiary without penalty or premium by
notice of 60 days or less or (ii) which involves or is expected to
involve payments of $50,000 or more during the term thereof; enter into
or amend any other agreement or contract material to the Company and
its Subsidiaries, taken as a whole; or purchase any real property, or
make or agree to make any new capital expenditure or expenditures
(other than the purchase of real property) which in the aggregate are
in excess of $50,000 per month;
26
(xvi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any
such claims, liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their
terms;
(xvii) reprice, either directly or indirectly, any Company
Stock Option or other right to purchase shares of Company Common Stock;
or
(viii) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
Section 4.2 No Solicitation. (a) The Company shall not, nor shall
---------------
it permit any of its Subsidiaries to, nor shall it authorize and it shall use
its best efforts not to permit any officer, director or employee of or any
financial advisor, attorney or other advisor or representative of, the Company
or any of its Subsidiaries to, (i) solicit, initiate or encourage the submission
of, any Takeover Proposal (as hereinafter defined), (ii) enter into any
agreement with respect to or approve or recommend any Takeover Proposal or (iii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to the Company or any Subsidiary in
connection with, or take any other action to knowingly facilitate any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Takeover Proposal; provided, however, that nothing contained in
-------- -------
this Agreement shall prohibit the Company or its directors from (i) complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer or (ii) referring a third party to this Section 4.2(a) or making
a copy of this Section 4.2(a) available to any third party; and provided,
--------
further, that prior to approval by the Stockholders of the Merger, if the Board
-------
of Directors of the Company reasonably determines that a Takeover Proposal
constitutes a Superior Proposal (as hereinafter defined), then, to the extent
required by the fiduciary obligations of the Board of Directors of the Company,
as determined in good faith by a majority thereof after consultation with
outside counsel (who may be the Company's regularly engaged outside counsel),
the Company may, in response to an unsolicited request therefor, and subject to
compliance with Section 4.2(b), furnish information with respect to the Company
and its Subsidiaries to any person pursuant to a confidentiality agreement, in
customary form and in any event containing terms, taken as a whole, at least as
stringent as those contained in the Confidentiality Agreement (as hereinafter
defined), and participate in discussions or negotiations with such person.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer or director of
the Company or any of its Subsidiaries or any financial advisor, attorney or
other advisor or representative of the Company or any of its Subsidiaries,
whether or not such person is purporting to act on behalf of the Company or any
of its Subsidiaries or otherwise, shall be deemed to be a breach of this Section
4.2(a) by the Company.
(b) The Company shall advise Parent orally and in writing of
(i) any Takeover Proposal or any inquiry with respect to or which reasonably
could lead to any Takeover Proposal received by any officer or director of the
Company or, to the Knowledge of the Company, any financial advisor, attorney or
other advisor or representative of the Company, (ii) the material terms of such
Takeover Proposal (including a copy of any written proposal), and (iii) the
identity
27
of the person making any such Takeover Proposal or inquiry no later than 24
hours following receipt of such Takeover Proposal or inquiry. If the Company
intends to furnish any Person with any information with respect to any Takeover
Proposal in accordance with Section 4.2(a), the Company shall advise Parent
orally and in writing of such intention not less than two business days in
advance of providing such information. The Company will keep Parent fully
informed of the status and material terms of any such Takeover Proposal or
inquiry.
Section 4.3 Third Party Standstill Agreements. During the period
---------------------------------
from the date of this Agreement through the Effective Time, the Company shall
not terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party.
During such period, the Company agrees to enforce, to the fullest extent
permitted under applicable law, the provisions of any such agreements,
including, but not limited to, obtaining injunctions to prevent any breaches of
such agreements and to enforce specifically the terms and provisions thereof in
any court of the United States or any state thereof having jurisdiction.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meeting. (a) The Company will duly call,
-------------------
give notice of, convene and hold a meeting of Stockholders (the "Stockholder
-----------
Meeting") for the purpose of considering the approval of this Agreement and at
-------
such meeting call for a vote and cause proxies that have been voted in favor of
the transactions contemplated herein to be voted in respect of the approval and
adoption of this Agreement. The Stockholder Meeting shall be held as soon as
practicable, and the Company will, through its Board of Directors, recommend to
its Stockholders the approval of this Agreement, and shall not withdraw or
modify such recommendation.
(b) The Company shall, as soon as practicable after the date hereof,
prepare and file a preliminary Proxy Statement with the SEC and shall use its
reasonable best efforts to respond to any comments of the SEC or its staff and
to cause the Proxy Statement to be mailed to the Company's Stockholders as
promptly as practicable after responding to all such comments to the
satisfaction of the staff. The Company shall notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Stockholder Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its Stockholders such
an amendment or supplement. Parent shall cooperate with the Company in the
preparation of the Proxy Statement or any amendment or supplement thereto,
including the supply of any information required to be included in the Proxy
Statement regarding Parent or Sub.
28
(c) Parent agrees to cause all Shares owned by Parent or any
subsidiary or Affiliate of Parent to be voted in favor of approval of the
Merger.
Section 5.2 Access to Information. Subject to currently existing
---------------------
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors, investment bankers and
other representatives of Parent reasonable access to, and permit them to make
such inspections as they may reasonably require of, during the period from the
date of this Agreement through the Effective Time, all of their respective
properties, books, contracts, commitments and records (including accounting
records and Tax Returns and the work papers of independent accountants, if
available and subject to the consent of such independent accountants) and,
during such period, the Company shall, and shall cause each of its Subsidiaries
to (i) furnish promptly to Parent a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws, (ii) furnish promptly to
Parent all other information concerning its business, properties and personnel
as Parent may reasonably request and (iii) promptly make available to Parent all
personnel of the Company and its Subsidiaries knowledgeable about matters
relevant to such inspections. Parent shall make all reasonable efforts to
minimize any disruption to the businesses of the Company and its Subsidiaries
that may result from any investigation conducted pursuant to this Section 5.2.
No investigation pursuant to this Section 5.2 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto. All information obtained by Parent pursuant
to this Section 5.2 shall be kept confidential in accordance with the
Confidentiality Agreement dated December 5, 2000, between Rockbay Properties II,
Ltd. and the Company (the "Confidentiality Agreement").
-------------------------
Section 5.3 Fees and Expenses. (a) Except as provided in this Section
-----------------
5.3, whether or not the Merger is consummated, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby,
including the fees and disbursements of counsel, financial advisors and
accountants, shall be paid by the party incurring such costs and expenses.
(b) The Company shall pay, or cause to be paid, in same day
funds to Parent the following amounts under the circumstances and at the times
set forth as follows:
(i) if Parent or Sub terminates this Agreement under Section
7.1(e), the Company shall pay the Parent Expenses (not to exceed
$150,000) and the Termination Fee upon demand of Parent; or
(ii) if the Company terminates this Agreement under Section
7.1(f), the Company shall pay the Termination Fee and the Parent
Expenses (not to exceed $150,000) upon demand of Parent.
(c) Parent shall pay, or cause to be paid, in same day funds to
the Company the following amounts under the circumstances and at the times set
forth as follows:
29
(i) if the Company terminates this Agreement under Section 7.1(g)
or (i) after the filing of the definitive Proxy Statement with the SEC
(the "Filing Date"), Parent shall pay the Company Expenses and the
-----------
Termination Fee (in the aggregate not to exceed $250,000) upon demand
of the Company. The definitive Proxy Statement will not be filed prior
to the Company's obtaining the Lender Commitment Letter.
Section 5.4 Company Stock Options. (a) Prior to the consummation of
---------------------
the Merger, the Board of Directors of the Company (or, if appropriate, any
committee thereof) shall adopt appropriate resolutions and take all other
actions necessary or appropriate to cause each Company Stock Option or other
right to acquire any capital stock whether or not under a Company Option Plan
that is outstanding as of the Effective Time to vest in full and become
exercisable immediately prior to the Effective Time with respect to all of the
shares of Company Common Stock at the time subject to such Company Stock Option
or other right to acquire any capital stock whether or not under a Company
Option Plan. Each Company Stock Option or other right to acquire any capital
stock whether or not under a Company Option Plan that is outstanding upon the
Effective Time shall be canceled as of the Effective Time, in consideration for
which the holder thereof (an "Option Holder") shall be entitled to receive from
-------------
the Company an amount equal to (i) the product of (A) the number of shares of
Company Common Stock subject to such Company Stock Option and (B) the excess, if
any, of the Merger Consideration over the exercise price per share for the
purchase of the Company Common Stock subject to such Company Stock Option, minus
(B) all applicable federal, state and local Taxes required to be withheld in
respect of such payment. The amounts payable pursuant to the second sentence of
this Section 5.4 shall be paid within three Business Days following the
Effective Time, with payment being deemed to be made, for the purposes of this
sentence, on the day that the Paying Agent mails such payment to Option Holders.
The surrender of an Option in exchange for the consideration contemplated by the
second sentence of this Section 5.4 shall be deemed a release of any and all
rights the Option Holder had or may have had in respect thereof.
(b) The Company shall take all actions necessary to provide that,
as of the Effective Time, (i) each Company Option Plan and any similar plan or
agreement of the Company shall be terminated, (ii) any rights under any other
plan, program, agreement or arrangement relating to the issuance or grant of any
other interest in respect of the capital stock of the Company or any of its
Subsidiaries shall be terminated, and (iii) no Option Holder or any other person
will have any right to receive any shares of capital stock of the Company or, if
applicable, the Surviving Corporation, upon exercise of any Company Stock Option
or other right to acquire any capital stock whether or not under a Company
Option Plan.
(c) The Company represents and warrants that it has the power and
authority under the terms of each Company Option Plan or option agreement
thereunder to comply with this Section 5.4 without the consent of any Option
Holder.
Section 5.5 Reasonable Best Efforts. (a) Upon the terms and subject
-----------------------
to the conditions set forth in this Agreement, each of the parties agrees to use
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, including: (i) the obtaining of all
necessary
30
actions or non-actions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity (including those in connection with the
HSR Act, any other pre-merger filings and State Takeover Approvals), (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement. No party to this Agreement shall consent to any voluntary delay of
the consummation of the Merger at the behest of any Governmental Entity without
the consent of the other parties to this Agreement, which consent shall not be
unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in connection with any filing or submission required or action to be
taken by either Parent or the Company to effect the Merger and to consummate the
other transactions contemplated hereby, the Company shall not, without Parent's
prior written consent, commit to any divestiture transaction, and neither Parent
nor any of its Affiliates shall be required to divest or hold separate or
otherwise take or commit to take any action that limits its freedom of action
with respect to, or its ability to retain, the Company or any of the businesses
or assets of Parent or any of its Subsidiaries or that otherwise would have a
Material Adverse Effect on Parent.
Section 5.6 Public Announcements. Parent and the Company will not issue any
--------------------
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such transactions
without prior consultation with the other party, except as may be required by
applicable law or by obligations pursuant to the obligations of the Company
pursuant to its listing agreements with the Nasdaq SmallCap Market.
Section 5.7 State Takeover Laws. If any "fair price," "business
-------------------
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby or
the Stockholder Agreements, Parent and the Company and their respective Boards
of Directors shall use their reasonable efforts to grant such approvals and take
such actions as are necessary so that the transactions contemplated hereby may
be consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to minimize the effects of any such statute or regulation on the
transactions contemplated hereby.
Section 5.8 Indemnification; Directors and Officers Insurance. (a) From and
-------------------------------------------------
after the Effective Time, Parent shall cause the Surviving Corporation to
indemnify and hold harmless all past and present officers and directors of the
Company and of its Subsidiaries to the fullest extent permitted by the DGCL for
acts or omissions occurring at or prior to the Effective Time.
31
(b) Parent shall cause the Surviving Corporation to provide, for an
aggregate period of not less than three years from the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring prior to the Effective Time (the
"D&O Insurance") on terms no less favorable to the Company's existing policy,
-------------
which is a claims made policy, or, if such insurance coverage is not available,
the best available coverage; provided, however, that the Surviving Corporation
-------- -------
shall not be required to pay an annual premium for the D&O Insurance in excess
of 150% of the last annual premiums paid prior to the date hereof (which
premiums the Company has disclosed to Parent), but in such case shall purchase
as much coverage as possible for such amount.
Section 5.9 Notification of Certain Matters. Parent shall use its
-------------------------------
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which it is aware and which would be reasonably likely to cause
(x) any representation or warranty contained in this Agreement and made by it to
be untrue or inaccurate in any material respect or (y) any covenant, condition
or agreement contained in this Agreement and made by it not to be complied with
or satisfied in all material respects, (ii) any failure of Parent or the
Company, as the case may be, to comply in a timely manner with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder or (iii) any change or event which would be reasonably likely to have
a Material Adverse Effect on the Company; provided, however, that the delivery
-------- -------
of any notice pursuant to this Section 6.10 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.10 Employee Benefit Plans. For a period of one year immediately
----------------------
following the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, maintain in effect commercially reasonable employee benefit
plans and arrangements. For purposes of determining eligibility to participate,
vesting and accrual or entitlement to benefits where length of service is
relevant under any employee benefit plan or arrangement of the Surviving
Corporation, employees of the Company and its Subsidiaries as of the Effective
Time shall receive service credit for service with the Company and its
Subsidiaries to the same extent such credit was granted under the Company Plans,
subject to offsets for previously accrued benefits and no duplication of
benefits.
Section 5.11 Pamex of Texas, Inc. At the Closing, the Company shall cause
-------------------
the 51% ownership interest of Pamex of Texas, Inc., a Texas corporation
("Pamex"), which is owned by an affiliate or affiliates of the Company, to be
-----
transferred for consideration not to exceed $0.01 to a person or persons
designated in writing not less than five days prior to Closing by Parent or Sub,
and the Company shall cause the resignation of all of the Board of Directors and
officers of Pamex. The parties agree to execute and deliver such documents and
to do such other acts and things, all as the other party may reasonably request
for the purpose of carrying out the intent of this Section 5.11.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
32
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement (including the Merger) shall
--------------------
have been approved and adopted by the affirmative vote of the Stockholders of
the Company as required by the DGCL and the Company Charter.
(b) HSR Act Filings. Any waiting period (and any extension thereof)
---------------
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) No Order. No court or other Governmental Entity having jurisdiction
--------
over the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the Merger illegal.
(d) Commitments. The receipt by the Company of the commitments
-----------
described in Section 7.1(j) herein on or before the time such commitments are
required to be delivered to the Company.
(e) Fairness Opinion. The receipt by the Company of the fairness
----------------
opinion referred to in Section 7.1(j) herein on or before the time such fairness
opinion is required to be delivered to the Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether before or after approval of this Agreement by the
Stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by the Company or by Parent, if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the acceptance for payment
of, or payment for, Shares pursuant to Merger and such order, decree or
ruling or other action shall have become final and nonappealable;
(c) by either the Parent or the Sub if there shall be threatened or
pending by any Governmental Entity any suit, action or proceeding (i)
challenging the acquisition by Parent or Sub of any Shares pursuant to the
Merger, seeking to restrain or prohibit the making or consummation of the
Merger or the performance of any of the other transactions contemplated by
this Agreement or seeking to obtain from the Company, Parent or Sub any
damages relating thereto that are material in relation to the Company
33
and its Subsidiaries taken as a whole, (ii) seeking to prohibit or materially
limit the ownership or operation by the Company, Parent or any of their
respective Subsidiaries of a material portion of the business or assets of the
Company and its Subsidiaries, taken as a whole, or Parent and its Subsidiaries,
taken as a whole, or to compel the Company or Parent to dispose of or hold
separate any material portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a
whole, as a result Merger or any of the other transactions contemplated by this,
or (iii) seeking to prohibit Parent or any of its Subsidiaries from effectively
controlling in any material respect any material portion of the business or
operations of the Company or its Subsidiaries;
(d) by Parent or Sub, if (i) any of the representations or warranties of
the Company set forth in this Agreement that are qualified as to materiality
shall not be true and correct in any respect or any such representations or
warranties that are not so qualified shall not be true and correct in any
material respect, each at the date of this Agreement and at the Closing Date,
unless the inaccuracies (without giving effect to any materiality or Material
Adverse Effect qualifications or exceptions contained therein) under such
representations and warranties, taking all the inaccuracies under all such
representations and warranties together in their entirety, do not, individually
or in the aggregate, result in a Material Adverse Effect on the Company, or (ii)
the Company shall have failed to perform in any material respect any material
obligation or to comply in any material respect with any material agreement or
covenant of the Company to be performed or complied with by it under this
Agreement and such untruth, incorrectness or failure cannot be or has not been
cured within 30 days after the giving of written notice to the Company;
(e) by the Parent or Sub, if (i) the Board of Directors of the Company or
any committee thereof shall have withdrawn or modified in a manner reasonably
deemed by Parent to be adverse to Parent or Sub its approval or recommendation
of the Merger or this Agreement, or approved or recommended any Takeover
Proposal or (ii) the Board of Directors of the Company or any committee thereof
shall have resolved to take any of the foregoing actions;
(f) by the Company if the Board of Directors of the Company reasonably
determines that a Takeover Proposal constitutes a Superior Proposal and a
majority of the members of the Board of Directors determines, in its reasonable
good faith judgment, after consultation with outside counsel, that failing to
terminate this Agreement would constitute a breach of such Board's fiduciary
duties under applicable law, provided that the Company may not terminate this
Agreement pursuant to this Section 7.1 unless (i) the Company has complied with
all provisions of Section 4.2 and Section 5.3, including the notice provisions
therein, (ii) the Company has delivered to Parent a written notice of the
Company's intent to enter into an agreement to effect a Superior Proposal, (iii)
72 hours have elapsed following delivery to Parent of such written notice by the
Company, (iv) during such 72-hour period the Company has reasonably cooperated
with Parent, including informing Parent of the terms and conditions of the
Takeover Proposal and identifying the identity of the person making the Takeover
Proposal, with the intent of enabling Parent to agree to a modification of the
terms and conditions of this Agreement
34
so the transactions contemplated hereby may be effected, and (v) at the end of
such 72-hour period the Board of directors continues reasonably to believe that
the Takeover Proposal constitutes a Superior Proposal when compared to the
Merger (taking into account any such modifications as may be proposed by
Parent);
(g) by the Company, if (i) any of the representations or warranties of
Parent or Sub set forth in this Agreement that are qualified as to materiality
shall not be true and correct in any respect or any such representations or
warranties that are not so qualified shall not be true and correct in any
material respect, or (ii) Parent or Sub shall have failed to perform in any
material respect any material obligation or to comply in any material respect
with any material agreement or covenant of Parent or Sub to be performed or
complied with by it under this Agreement and such untruth, incorrectness or
failure cannot be or has not been cured within 30 days after the giving of
written notice to Parent or Sub, as applicable;
(h) by Parent or Sub, if (i) the working capital of the Company as of the
end of the calendar month immediately prior to the Filing Date, including all
expenses of the Company in connection with the transactions contemplated by this
Agreement, which shall include, but not be limited to, legal and accounting
fees, the costs associated with the Stockholder Meeting and the Proxy Statement,
and the fees of Xxxxx Fargo Xxx Xxxxxx (all such expenses in this sub-paragraph
collectively "Closing Expenses"), is less than - (negative) $3,880,000 (February
working capital of - (negative) $3,370,000, minus $100,000 for a materiality
threshold and minus $410,000, for the Closing Expenses); or (ii) aggregate same
store sales for the period from the beginning of the fiscal year 2001 of the
Company through the end of the calendar month immediately prior to Filing Date
compared with the aggregate same store sales for the corresponding period of the
preceding fiscal year has decreased by more than 10%; or (iii) prior to the
Filing Date, the Parent and Sub are not able to obtain and deliver the Lender
Commitment Letter (as that term is defined in subsection (i) below.
(i) by the Company, if on or prior to May 18, 2001, or such other date that
the parties hereto may agree upon, Parent or Sub (i) has not entered into a
commitment letter a lender ("Lender Commitment Letter"), pursuant to which such
lender has committed, subject to the terms and conditions contained in the
Lender Commitment Letter and no other conditions, to provide an aggregate of up
to $6 million in cash as a senior secured credit facility to Sub, which senior
secured credit facility will contain terms reasonably satisfactory to the
Company and (ii) has not entered into a commitment letter ("Oyster Commitment
-----------------
Letter") with Xxxxxxx Oyster, pursuant to which Xxxxxxx Oyster will have
------
committed to provide an amount equal to the aggregate amount of the Merger
Consideration and all other fees and expenses required to be paid by Parent and
Sub in connection with the transactions contemplated by this Agreement, less the
amount committed by the lender pursuant to the Lender Commitment Letter, in cash
to Sub. The aggregate cash amount committed to be provided under the Lender
Commitment Letter and the Oyster Commitment Letter will be required to be
sufficient to pay the Merger Consideration and to make all other necessary
payments of fees and expenses required to be paid by Parent and Sub in
connection with the transactions contemplated by this
35
Agreement. Parent will provide the Company with true and complete copies of each
of the Lender Commitment Letter and the Oyster Commitment Letter;
(j) by the Company, if the Company has not received the written
opinion of Xxxxx Fargo Xxx Xxxxxx on or before May 18, 2001, or such
other date as the parties hereto may agree upon, to the effect that the
Merger Consideration is fair to the Company's Stockholders from a
financial point of view, a copy of which opinion will be delivered to
Parent; and
(k) by the Parent or Sub, if the holders of more than 5% of the
outstanding shares of Company Common Stock shall have perfected such
holders' right to dissent in accordance with the applicable provisions
of the DGCL and shall not have withdrawn or lost such rights .
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of
---------------------
this Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall immediately become void and there shall be no liability
hereunder on the part of the Company, Parent, Sub or their respective officers
or directors (except for the last sentence of Section 5.2 and the entirety of
Section 5.3, which shall survive the termination); provided, however, that
-------- -------
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any breach of a representation or warranty contained in this
Agreement, the breach of any covenant contained in this Agreement or for fraud.
Section 7.3 Amendment. This Agreement may be amended by the parties
---------
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the Stockholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
Stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
------
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein which may legally be waived. 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 signed on behalf of such
party.
36
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or when telecopied (with a confirmatory
copy sent by overnight courier) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Rockbay Properties II, Ltd.
0000 Xxxx Xxxxxx Xxxx. # 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx Oyster
Facsimile: 512/457-8366
with a copy to:
Xxxxx Xxxxxxx, Attorney at Law
0000 Xxx Xxxxxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Facsimile: 512/474-4547
and
Xxxxxxx X. Ring, Esq.
Xxxxxx X. Xxxxxx, Esq.
Xxxxx & Xxxxxx, P.A.
Suite 1100
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxx, XX 00000
Facsimile: 952/885-5969
(b) if to the Company, to:
Pancho's Mexican Buffet, Inc.
0000 Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile: 817/838-1408
37
with a copy to:
Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Facsimile: 817/347-6650
Section 8.3 Interpretation; Certain Definitions. (a) When a reference is
-----------------------------------
made in this Agreement to a Section, such reference shall be to a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
(b) For purposes of this Agreement, the following terms have the
meaning specified in this Section 8.3:
"Business Day" means any day that is not a Saturday, Sunday or a day
------------
on which the New York Stock Exchange is not open for trading or Banks in Texas
are authorized or required to be closed.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Company Expenses" means documented reasonable out-of-pocket fees and
----------------
expenses incurred or paid by or on behalf of the Company in connection with the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all fees and expenses of is legal counsel, commercial
banks, investment banking firms, accountants, experts, and consultants to the
Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"Knowledge of the Company" means the actual knowledge of the directors
------------------------
and executive officers of the Company.
"Material Adverse Change" or "Material Adverse Effect" means, when
----------------------- -----------------------
used with respect to the Company or Parent, as the case may be, any change or
effect that is or could reasonably be expected (as far as can be foreseen at the
time) to be materially adverse to the business, operations, properties, assets,
liabilities, earnings or results of operations, financial projections or
forecasts, or the business prospects and condition (financial or otherwise),
with all such matters being considered in the aggregate, of the Company and its
Subsidiaries, taken as a whole, or Parent and its Subsidiaries, taken as a
whole, as the case may be.
"Parent Expenses" means documented reasonable out-of-pocket fees and
---------------
expenses incurred or paid by or on behalf of Parent in connection with the
Merger or the consummation of any of the transactions contemplated by this
Agreement, including all fees and
38
expenses of is legal counsel, commercial banks, investment banking, accountants,
experts, and consultants to Parent.
"Real Estate" means, with respect to the Company or any
-----------
Subsidiary, as applicable, all of the fee or leasehold ownership right, title
and interest of such person, in and to all real estate and improvement owned or
leased by any such person and which is used by any such person in connection
with the operation of its business.
"Subsidiary" means any corporation, partnership, limited
----------
liability company, joint venture or other legal entity of which Parent or the
Company, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 5% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other legal entity.
"Superior Proposal" means a bona fide proposal made by a third
-----------------
party to acquire the Company pursuant to a tender or exchange offer, a merger, a
sale of all or substantially all of the Company's assets or otherwise on terms
which a majority of the members of the Board of Directors of the Company
determines, at a duly constituted meeting of the Board of Directors or by
unanimous written consent, in its reasonable good faith judgment to be more
favorable to the Company's Stockholders than the Merger (based on the advice of
the Company's independent financial advisor that the value of the consideration
provided for in such proposal exceeds the value of the consideration provided
for in the Merger) and for which financing, to the extent required, is then
committed.
"Takeover Proposal" means any proposal for (i) a merger or other
-----------------
business combination involving the Company or any of its Subsidiaries, (ii) any
proposal or offer to acquire in any manner, directly or indirectly, an equity
interest in or any voting securities of the Company representing 15% or more of
the Shares or of the total voting securities of the Company outstanding or (iii)
an offer to acquire in any manner, directly or indirectly, a substantial portion
of the assets of the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Taxes" means any federal, state, local or foreign income, gross
-----
receipts, property, sales, use, license, excise, franchise, employment, payroll,
withholding, alternative or add-on minimum, ad valorem, value-added, transfer or
excise tax, or other tax, custom, duty, governmental fee or any other like
assessment or charge of any kind whatsoever, together with any interest or
penalty imposed by any Governmental Entity.
"Tax Return" means any return, report or similar statement
----------
(including the attached schedules) required to be filed with respect to any Tax,
including any information return, claim for refund, amended return or
declaration of estimated Tax.
"Termination Fee" means $100,000.
---------------
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
------------
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
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Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
----------------------------------------------
except as provided in the last sentence of Section 5.2, constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. This
Agreement, except for the provisions of Section 5.8, is not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.7 Assignment. Subject to Section 2.1, neither this Agreement nor
----------
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties.
Section 8.8 Severability. If any term or other provision of this Agreement
------------
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. Each party hereby irrevocably
-----------------------------
submits to the exclusive jurisdiction of the United States District Court for
the District of Delaware in any action, suit or proceeding arising in connection
with this Agreement, and agrees that any such action, suit or proceeding shall
be brought only in such courts (and waives any objection based on forum non
conveniens or any other objection to venue therein). Each party hereto waives
any right to a trial by jury in connection with any such action, suit or
proceeding.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
PANCHO'S FOOD'S, INC.
By: s/Xxxxxxx Oyster
-----------------------------------
Name: Xxxxxxx Oyster
---------------------------
Title: President
--------------------------
PANCHO'S RESTAURANTS, INC.
By: s/Xxxxxxx Oyster
-----------------------------------
Name: Xxxxxxx Oyster
---------------------------
Title: President
--------------------------
PANCHO'S MEXICAN BUFFET, INC.
By: s/Xxxxxx Xxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxx
Title: President and Chief Executive Officer
41
