EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
AMONG
SBARRO MERGER LLC,
SBARRO, INC.,
Xxxxx Xxxxxx,
Xxxxxx Xxxxxx,
Xxxxxx Xxxxxx (1994) Family Limited Partnership,
Xxxxxxx Xxxxxx
AND
Xxxxx Xxxxxx and Xxxxxxxx Xxxxxxxxxx, not individually but
as trustees under that certain Trust Agreement dated April
28, 1984 for the benefit of
Xxxxxxx Xxxxxx and her descendants
Dated as of January 19, 1999
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
SECTION Page
PARTIES.......................................................................1
PREAMBLE......................................................................1
ARTICLE I
THE MERGER
1.1 The Merger...........................................................1
1.2 Certificate of Incorporation.........................................2
1.3 By-Laws..............................................................2
1.4 Directors and Officers...............................................2
1.5 Effective Time.......................................................2
ARTICLE II
CONVERSION OF SHARES
2.1 Company Common Stock.................................................2
2.2 Mergeco Membership Interests.........................................3
2.3 Exchange of Shares...................................................3
2.4 Stock Option Plans...................................................4
2.5 Withholding Rights...................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization.........................................................5
3.2 Capitalization.......................................................5
3.3 Authorization of this Agreement; Recommendation of Merger............6
3.4 Governmental Filings; No Conflicts...................................6
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGECO
AND THE CONTINUING SHAREHOLDERS
4.1 Organization.........................................................7
4.2 Membership Interests.................................................7
4.3 Authorization of this Agreement......................................8
4.4 Governmental Filings; No Violations..................................8
4.5 Financing Arrangements...............................................8
ARTICLE V
COVENANTS
5.1 Conduct of the Business of the Company...............................9
5.2 Activities of Mergeco................................................9
5.3 Access to Information................................................9
5.4 Financing...........................................................10
5.5 Shareholders' Meeting...............................................10
5.6 Proxy Statement and Schedule 13E-3..................................10
5.7 Best Efforts........................................................11
5.8 Consents............................................................12
5.9 Public Announcements................................................12
5.10 Indemnification.....................................................12
5.11 No Solicitation.....................................................15
5.12 Transfer Taxes......................................................15
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to the Obligations of Each Party.........................16
6.2 Conditions to the Obligations of Mergeco............................16
6.3 Conditions to the Obligations of the Company........................18
ARTICLE VII
CLOSING
7.1 Time and Place......................................................19
7.2 Filings at the Closing..............................................19
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ARTICLE VIII
TERMINATION AND ABANDONMENT
8.1 Termination.........................................................19
8.2 Procedure and Effect of Termination.................................20
ARTICLE IX
MISCELLANEOUS
9.1 Amendment; Modification and Approval of Special Committee...........21
9.2 Waiver of Compliance; Consents......................................21
9.3 Non-Survival of Representations and Warranties......................21
9.4 Notices.............................................................21
9.5 Assignment; Parties in Interest.....................................23
9.6 Costs and Expenses..................................................23
9.7 Specific Performance................................................24
9.8 Governing Law.......................................................24
9.9 Counterparts........................................................24
9.10 Interpretation......................................................24
9.11 Entire Agreement....................................................24
9.12 Severability........................................................25
9.13 Headings............................................................25
SIGNATURES...................................................................26
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
January 19, 1999, among Sbarro Merger LLC, a New York limited liability company
("Mergeco"), Sbarro, Inc., a New York corporation (the "Company"), and Xxxxx
Xxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxxx (1994) Family Limited Partnership, Xxxxxxx
Xxxxxx, and Xxxxx Xxxxxx and Xxxxxxxx Xxxxxxxxxx, not individually but as
trustees under that certain Trust Agreement dated April 28, 1984 for the benefit
of Xxxxxxx Xxxxxx and her descendants (collectively the "Continuing
Shareholders").
WHEREAS, the Continuing Shareholders have proposed to the
Board of Directors of the Company that Mergeco merge with and into the Company
(the "Merger"), with the holders of all of the outstanding shares of Common
Stock, par value $.01 per share, of the Company (the "Common Stock") not
currently owned by the Continuing Shareholders receiving a cash payment in
exchange for their shares of Common Stock;
WHEREAS, a Special Committee of the Board of Directors of the
Company (the "Special Committee") has determined that the Merger is fair to, and
in the best interests of, the Public Shareholders (as defined in Section
2.1(a)), and has recommended the approval and adoption of this Agreement to the
Board of Directors of the Company;
WHEREAS, the Board of Directors of the Company and the members
of Mergeco have approved and adopted this Agreement and approved the Merger upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company believes it is
in the best interests of the Company and its shareholders to consummate the
Merger upon the terms and subject to the conditions set forth in this Agreement;
and
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) As promptly as practicable following the
satisfaction or waiver of the conditions set forth in Article VI hereof, and in
accordance with the provisions of this Agreement and the provisions of the New
York Business Corporation Law (the "NYBCL") and the New York Limited Liability
Company Law (the "NYLLCL"), the parties hereto shall cause Mergeco to be merged
with and into the Company. The Company shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") and shall continue
its corporate existence under the laws of the State of New York. At the
Effective Time (as hereinafter defined), the separate existence of Mergeco shall
cease.
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(b) The Merger shall have the effects specified in Section 906 of the
NYBCL and Section 1004 of the NYLLCL. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, immunities,
powers and purposes of Mergeco and the Company and shall assume and become
liable for all the liabilities, obligations and penalties of the Company and
Mergeco.
1.2 Certificate of Incorporation. The Certificate of Incorporation of
the Company, as amended and in effect immediately prior to the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the provisions thereof and the NYBCL.
1.3 By-Laws. The By-Laws of the Company in effect immediately prior to
the Effective Time shall be the By-Laws of the Surviving Corporation until
thereafter amended, altered or repealed as provided therein and in the NYBCL.
1.4 Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Time shall be the directors and officers,
respectively, of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and the By-Laws of the Surviving
Corporation.
1.5 Effective Time. As soon as practicable following the Closing (as
defined in Section 7.1 of this Agreement), and provided that this Agreement
shall not have been terminated pursuant to Article VIII hereof, the Company and
Mergeco will cause certificates of merger (the "Certificates of Merger"),
together with any other documents required by law to effectuate the Merger, to
be executed, verified and delivered for filing by the New York Department of
State as provided in Section 904-a of the NYBCL and Section 1003 of the NYLLCL,
to the extent required. The Merger shall become effective on the date on which
the second of the two Certificates of Merger is filed by the New York Department
of State or such other date as shall be specified in the Certificates of Merger.
The date and time when the Merger shall become effective is herein referred to
as the "Effective Time."
ARTICLE II
CONVERSION OF SHARES
2.1 Company Common Stock. (a) Each share of Common Stock issued and
outstanding immediately prior to the Effective Time, except for (i) shares of
Common Stock then owned of record by Mergeco or the Continuing Shareholders and
(ii) shares of Common Stock held in the Company's treasury, if any, shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive $28.85 in cash, payable to the holder
thereof, without interest thereon, upon surrender of the certificate
representing such share of Common Stock (such cash amount is referred to herein
as the "Merger Consideration"; the shares of Common Stock for
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which the Merger Consideration is to be paid are referred to herein as the
"Public Shares"; and the holders thereof are referred to herein as the "Public
Shareholders").
(b) Each share of Common Stock issued and outstanding immediately prior
to the Effective Time that is then owned of record by Mergeco or the Continuing
Shareholders shall, by virtue of the Merger and without any action on the part
of the holder thereof, be canceled and retired and cease to exist, and no
payment shall be made with respect thereto.
(c) Each share of Common Stock issued and held in the Company's
treasury immediately prior to the Effective Time, if any, shall, by virtue of
the Merger, be canceled and retired and cease to exist, and no payment shall be
made with respect thereto.
(d) At the Effective Time, the Public Shareholders shall cease to have
any rights as shareholders of the Company except the right to receive the Merger
Consideration.
2.2 Mergeco Membership Interests. Each membership unit of Mergeco (the
"Mergeco Membership Interests") issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one share of Common Stock of the
Surviving Corporation. The Common Stock issued pursuant to this Section 2.2
shall, immediately after the Effective Time, constitute the only issued or
outstanding shares of capital stock of the Surviving Corporation.
2.3 Exchange of Shares. (a) As of or as soon as reasonably practicable
following the Effective Time, the Surviving Corporation shall deposit in trust
with a bank or trust company that has offices in New York City and is designated
by the Surviving Corporation (the "Paying Agent"), cash in an aggregate amount
equal to the product of (x) the number of Public Shares issued and outstanding
immediately prior to the Effective Time and (y) the Merger Consideration (such
amount being hereinafter referred to as the "Exchange Fund"). The Paying Agent
shall, pursuant to irrevocable instructions, make the payments provided for in
Section 2.1(a) of this Agreement out of the Exchange Fund. The Paying Agent
shall invest the Exchange Fund, as the Surviving Corporation directs, in direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for the
payment of all principal and interest or commercial paper obligations receiving
the highest rating from either Xxxxx'x Investors Service, Inc. or Standard &
Poor's, a division of The McGraw Hill Companies, or a combination thereof,
provided that, in any such case, no such instrument shall have a maturity
exceeding three months. Any net profit resulting from, or interest or income
produced by, such investments shall be payable to the Surviving Corporation. The
Surviving Corporation shall replace any monies lost through any investment made
pursuant to this Section 2.3(a). The Exchange Fund shall not be used for any
other purpose except as provided in this Agreement.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause the Paying Agent to mail to each record holder (as of the Effective Time)
of an outstanding certificate or certificates that immediately prior to the
Effective Time represented Public Shares (the "Certificates")
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a form letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent) and instructions for
use in effecting the surrender of the Certificates for payment therefor. Upon
surrender to the Paying Agent of a Certificate, together with a properly
completed and executed letter of transmittal, the holder of such Certificate
shall be entitled to receive in exchange therefor cash in an amount equal to the
product of the number of Public Shares represented by such Certificate and the
Merger Consideration, less any applicable withholding tax, and such Certificate
shall forthwith be canceled. In the event any Certificate shall have been lost
or destroyed, the Paying Agent, subject to such other reasonable conditions as
the Surviving Corporation may impose (including the posting of an indemnity bond
or other surety in favor of the Surviving Corporation with respect to the
Certificates alleged to be lost or destroyed), shall be authorized to accept an
affidavit from the record holder of such Certificate in a form reasonably
satisfactory to the Surviving Corporation. No interest shall be paid or accrued
on the cash payable upon the surrender of the Certificates. If payment is to be
made to a person other than the person in whose name the Certificate surrendered
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other tax
required by reason of the payment to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of the Paying
Agent and the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
2.3, each Certificate shall represent for all purposes only the right to receive
the Merger Consideration in cash multiplied by the number of Public Shares
evidenced by such Certificate, without any interest thereon.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of Public Shares that were
outstanding immediately prior to the Effective Time.
(d) Any portion of the Exchange Fund that remains unclaimed by the
Public Shareholders of the Company for one year after the Effective Time
(including any interest, dividends, earnings or distributions received with
respect thereto) shall be repaid to the Surviving Corporation, upon demand. Any
Public Shareholders who have not theretofore satisfied the provisions of Section
2.3(b) shall thereafter look only to the Surviving Corporation for payment of
their claim for the Merger Consideration, without any interest thereon, but
shall have no greater rights against the Surviving Corporation than may be
accorded to general creditors of the Surviving Corporation under New York law.
Notwithstanding the foregoing, neither the Paying Agent nor any party hereto
shall be liable to any holder of Certificates formerly representing shares of
Common Stock for any amount paid with respect thereof to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.4 Stock Option Plans. At the Effective Time, all outstanding Stock
Options (as defined herein), including Stock Options held by the Continuing
Shareholders, shall be terminated and, promptly following the Effective Time,
the Surviving Corporation shall, to the extent permitted by the applicable Stock
Option Plan (as defined herein) or agreement between the Company and the
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optionee related to the applicable Stock Option, subject to Section 2.5, pay to
the holder of each such Stock Option, in cash and as full settlement for such
Stock Option, whether or not then exercisable, the Stock Option Buyout Amount
(as defined herein) for the shares of Common Stock subject to such Stock Option.
As used herein: (i) with respect to any Stock Option, the "Stock Option Buyout
Amount" shall mean (A) the excess, if any, of the Merger Consideration over the
exercise price per share of such Stock Option, (B) multiplied by the total
number of shares of Common Stock subject to such Stock Option; (ii) the "1991
Plan" shall mean the Company's 1991 Stock Incentive Plan, as amended to date;
(iii) the "1993 Plan" shall mean the Company's 1993 Non-Employee Director Stock
Option Plan, as amended to date (the 1991 Plan and the 1993 Plan being
collectively referred to herein as the "Stock Option Plans"); and (iv) "Stock
Options" shall mean all options to purchase shares of Common Stock under the
Company's 1985 Incentive Stock Option Plan, the 1991 Plan and the 1993 Plan and
options held by any of the Continuing Shareholders that were not granted under
the Stock Option Plans.
2.5 Withholding Rights. The Surviving Corporation and the Paying Agent
shall be entitled to deduct and withhold from the amounts payable (including the
Merger Consideration) pursuant to this Agreement to any Public Shareholder or
holder of Stock Options such amounts as Mergeco, the Surviving Corporation or
the Paying Agent is required to deduct and withhold with respect to the making
of such payment under applicable tax law. To the extent that amounts are so
deducted and withheld by Mergeco, the Surviving Corporation or the Paying Agent,
such amounts shall be treated for all purposes of this Agreement as having been
paid to the relevant Public Shareholder or holder of Stock Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Mergeco as follows:
3.1 Organization. The Company is a corporation validly existing and in
good standing under the laws of the State of New York and has all requisite
power (corporate or otherwise) and authority to own, lease and operate its
properties and to conduct its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not, individually or in the aggregate, have a material
adverse effect on the business, condition (financial or otherwise), properties,
assets or prospects of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). The Company was formed under the name Sbarro
Licensing Inc.
3.2 Capitalization. The authorized capital stock of the Company
consists of (i) 40,000,000 shares of Common Stock, of which, on January 15,
1999, there were 20,531,977 shares issued and outstanding, which number of
outstanding shares may change by virtue of the exercise of outstanding Stock
Options, and (ii) 1,000,000 shares of preferred stock, par value $1.00 per
share, of which there are no shares issued and outstanding. Except for the Stock
Option Plans, there are
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not now any existing stock option or similar plans and, except for currently
outstanding Stock Options, there are not now any outstanding options, warrants,
calls, subscriptions, preemptive rights or other rights or other agreements or
commitments whatsoever obligating the Company to issue, transfer, deliver or
sell, or cause to be issued, transferred, delivered or sold, any shares of
capital stock or equity interests, as the case may be, of the Company or
obligating the Company to grant, extend or enter into any such agreement or
commitment.
3.3 Authorization of this Agreement; Recommendation of Merger. (a) The
Company has all requisite corporate power and authority to execute and deliver
this Agreement and, subject to approval by the shareholders of the Company, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by the Company's Board of
Directors and, except for the adoption of this Agreement by the shareholders of
the Company, no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and, subject only to adoption hereof by its
shareholders (and assuming the due authorization, execution and delivery hereof
by Mergeco and the Continuing Shareholders), this Agreement constitutes a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms.
(b) The Special Committee has received the opinion of Prudential
Securities Incorporated ("Prudential Securities") dated January 19, 1999 that,
as of the date of such opinion, the Merger Consideration to be received by the
Public Shareholders pursuant to this Agreement is fair, from a financial point
of view, to the Public Shareholders.
(c) The Special Committee (at a meeting duly called and held at which a
quorum was present) has determined that the Merger is fair to, and in the best
interests of, the Public Shareholders, and has recommended the adoption of this
Agreement to the Board of Directors of the Company, subject to the right of the
Special Committee to withdraw, modify or amend such recommendation if the
Special Committee determines, in good faith after consultation with legal
counsel, that failure to take such action would be reasonably likely to result
in a breach of its fiduciary duties to the Company's shareholders under
applicable law.
(d) The Board of Directors of the Company (at a meeting duly called and
held at which a quorum was present) has determined that the Merger is fair to,
and in the best interests of, the shareholders of the Company, has adopted this
Agreement and has recommended the adoption of this Agreement by the shareholders
of the Company, subject to the right of the Board of Directors of the Company to
withdraw, modify or amend such recommendation to the extent that the Board of
Directors of the Company determines, in good faith after consultation with legal
counsel, that failure to take such action would be reasonably likely to result
in a breach of its fiduciary duties to the Company's shareholders under
applicable law.
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3.4 Governmental Filings; No Conflicts. Except for (i) filings required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), (ii) the filing and
recordation of appropriate merger documents as required by the NYBCL and, if
applicable, the laws of other states in which the Company is qualified to do
business, (iii) filings, if any, under securities or blue sky laws or takeover
statutes, (iv) filings to fulfill the delisting requirements of the New York
Stock Exchange, (v) regulatory filings relating to the operation of the
Company's business, (vi) filings in connection with any applicable transfer or
other taxes in any applicable jurisdiction and (vii) filings under applicable
alcohol and beverage laws and regulations, no filing with, and no permit,
authorization, consent or approval of, any public body or authority is necessary
for the consummation by the Company of the transactions contemplated by this
Agreement, the failure to make or obtain which would have, individually or in
the aggregate, a Material Adverse Effect or a material adverse effect on the
ability of the Company to consummate the transactions contemplated hereby.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by the Company with any of the
provisions hereof will (x) conflict with or result in any violation of any
provision of the Certificate of Incorporation of the Company or By-Laws of the
Company, as in effect on the date hereof, or (y) assuming the truth of the
representations and warranties of Mergeco contained herein and its compliance
with all agreements contained herein and assuming the due making of all filings
and obtaining all permits, authorizations, consents and approvals referred to in
the preceding sentence, violate any statute, rule, regulation, order,
injunction, writ or decree of any public body or authority by which the Company
or any of its assets or properties is bound, excluding from the foregoing clause
(y) conflicts, violations, breaches or defaults which, either individually or in
the aggregate, would not have a Material Adverse Effect or a material adverse
effect on the Company's ability to consummate the transactions contemplated
hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MERGECO
AND THE CONTINUING SHAREHOLDERS
Mergeco and the Continuing Shareholders, jointly and severally,
represent and warrant to the Company as follows:
4.1 Organization. Mergeco is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
New York and has all requisite power and authority to consummate the
transactions contemplated hereby. Mergeco was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement. As of the date
hereof and the Effective Time, except for obligations or liabilities incurred in
connection with its organization and the transactions contemplated by this
Agreement and, except for this Agreement, its Operating Agreement and any other
agreements or arrangements contemplated by this Agreement or in furtherance of
the transactions contemplated hereby, Mergeco has not and will not have
incurred, directly or indirectly, any obligations or liabilities or engaged in
any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person whatsoever.
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4.2 Membership Interests. All of the outstanding Mergeco Membership
Interests are owned by the Continuing Shareholders. There are not now, and, at
the Effective Time there will not be, any other outstanding membership interests
or rights or other agreements or commitments whatsoever obligating Mergeco or
any of its subsidiaries, if any, to issue, transfer, deliver or sell, or cause
to be issued, transferred, delivered or sold, to any other person any additional
membership interests of Mergeco, or obligating Mergeco to grant, extend or enter
into any such agreement or commitment.
4.3 Authorization of this Agreement. Mergeco and the Continuing
Shareholders have all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
holders of all the membership interests of Mergeco, and no other proceedings on
the part of Mergeco are necessary to authorize this Agreement or consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Mergeco and the Continuing Shareholders and adopted by
the members of Mergeco, and (assuming the due authorization, execution and
delivery hereof by the Company) constitutes a valid and binding agreement of
Mergeco and the Continuing Shareholders.
4.4 Governmental Filings; No Violations. Except for (i) filings
required by the applicable requirements of the Exchange Act, (ii) the filing and
recordation of appropriate merger documents as required by the NYLLCL, (iii)
filings, if any, under the securities or blue sky laws or takeover statutes,
(iv) filings in connection with any applicable transfer or other taxes in any
applicable jurisdiction and (v) filings under applicable alcohol and beverage
laws and regulations, no filing with, and no permit, authorization, consent or
approval of, any public body or authority is necessary for the consummation by
Mergeco of the transactions contemplated by this Agreement, the failure to make
or obtain which is reasonably likely to impair the ability of Mergeco to perform
its obligations hereunder or to consummate the transactions contemplated hereby.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by Mergeco with any of the
provisions hereof will (x) conflict with or result in any violation of any
provision of the articles of organization or operating agreement of Mergeco, (y)
result in a violation or breach of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under, any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which Mergeco is a party, or by which it or any of its properties or assets is
bound or (z) assuming the truth of the representations and warranties of the
Company hereunder and its compliance with all agreements contained herein and
assuming the due making of all filings or obtaining of all permits,
authorizations, consents and approvals referred to in the preceding sentence,
violate any statute, rule, regulation, order, injunction, writ or decree of any
public body or authority by which Mergeco or any of its properties or assets is
bound, excluding from the foregoing clauses (y) and (z) conflicts, violations,
breaches or defaults which, either individually or in the aggregate, are not
reasonably likely to impair materially the ability of Mergeco to perform its
obligations hereunder or to consummate the transactions contemplated hereby.
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4.5 Financing Arrangements. Mergeco and the Continuing Shareholders
have received a "highly confident" letter (the "Debt Financing Letter") dated
the date hereof from Bear, Xxxxxxx & Co. Inc. ("Bear Xxxxxxx"), a copy of which
is annexed as Exhibit "A" to this Agreement, relating to approximately $300
million of debt financing (the "Debt Financing"), which Debt Financing Letter is
currently in effect. It is contemplated that the Debt Financing, together with
the Company's cash and marketable securities immediately prior to the Effective
Time (collectively with the Debt Financing, the "Financing"), will be sufficient
to enable the Surviving Corporation to pay the Merger Consideration to all
Public Shareholders, make any payments contemplated by Section 2.4 and otherwise
to consummate the transactions contemplated hereby and to fund all costs and
expenses of the Company and Mergeco incurred in connection with the Merger and
the transactions contemplated hereby. The revolving credit facility, or the
excess cash, referred to in the Debt Financing Letter is designed to fund the
Surviving Corporation's ongoing working capital needs.
ARTICLE V
COVENANTS
5.1 Conduct of the Business of the Company. During the period from the
date of this Agreement to the Effective Time, neither the Company nor any of its
subsidiaries will (i) carry on their respective businesses other than in the
usual, regular and ordinary course of business, consistent with past practice;
(ii) issue any options to purchase shares of Common Stock or other capital stock
or issue any shares of Common Stock (other than pursuant to the exercise of
currently outstanding Stock Options) or other capital stock; or (iii) declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, or equity
interest, as the case may be, or repurchase or agree to repurchase any shares of
its capital stock, or agree to do any of the foregoing; provided, however, that
(x) any of the Company's wholly-owned direct or indirect subsidiaries may
declare, set aside or pay any dividend or other distribution with respect to
their capital stock, and (y) any other subsidiary of the Company may make a
distribution to the Company or other owners of such subsidiary if and to the
extent such subsidiary is required to do so by contract as in effect on the date
hereof.
5.2 Activities of Mergeco. From the date of this Agreement to the
Effective Time, Mergeco will not conduct any business or engage in any
activities of any nature other than activities in connection with this Agreement
or the transactions contemplated hereby.
5.3 Access to Information. During the period from the date of this
Agreement to the Effective Time, during normal business hours, upon reasonable
notice and in such a manner as will not unreasonably interfere with the conduct
of the business of the Company, the Company will (i) give Mergeco and its
authorized representatives, including representatives and advisors of persons
proposing to provide the Debt Financing, reasonable access to all stores,
offices and other facilities, and to all books and records, of the Company and
its subsidiaries, (ii) permit Mergeco and its authorized representatives to make
such inspections as it may reasonably require and (iii) cause its
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officers and those of its subsidiaries to furnish Mergeco with a copy of each
report, schedule and other document filed or received by it during such period
pursuant to the requirements of federal and state securities laws and such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries as Mergeco may from time to
time reasonably request. Mergeco shall take reasonable steps to insure that any
confidential information provided to it or its representatives and advisors
remains confidential and is used for no purpose other than the transactions
contemplated hereby.
5.4 Financing. Mergeco and the Continuing Shareholders shall use their
best efforts to obtain the Debt Financing on terms and conditions no less
favorable to the Company than those described in Section 6.2(g). The Company
shall cooperate with, and use its best efforts to assist, Mergeco in obtaining
the Financing.
5.5 Shareholders' Meeting. (a) As soon as practicable, the Company,
acting through its Board of Directors, shall, in accordance with applicable law,
take all steps necessary to duly call, give notice of, convene and hold a
special or annual meeting of its shareholders (as same may be adjourned or
postponed from time to time, the "Shareholders' Meeting") for the purpose of
adopting this Agreement. The notice of such meeting shall contain the
information required to be included therein pursuant to the NYBCL.
(b) The Continuing Shareholders agree (i) to vote at the Shareholders'
Meeting all 7,064,328 shares of outstanding Common Stock owned of record by them
as of the date of this Agreement (the "Continuing Shareholder Shares") for
adoption of this Agreement but only if at least a majority of the votes cast at
the Shareholders' Meeting (excluding votes cast by the holders of the Continuing
Shareholder Shares, abstentions and broker non-votes) are cast in favor of
adoption of this Agreement, (ii) not to grant a proxy to vote any Continuing
Shareholder Shares other than to another Continuing Shareholder or to persons
identified in a proxy card distributed on behalf of the Company's Board of
Directors to vote such Continuing Shareholder Shares at the Shareholders'
Meeting in the manner provided in clause (i), and (iii) not to sell, transfer or
otherwise dispose of any Continuing Shareholder Shares (other than transfers of
Continuing Shareholder Shares to Mergeco or any family members of Xxxxx Xxxxxx,
Xxxxxxx Xxxxxx or Xxxxxx Xxxxxx or trusts for the benefit of such Continuing
Shareholders or such family members), which shares may be so transferred only if
the transferee agrees in writing to be bound by the terms of the agreements
contained in this Section 5.5(b). In the event of any transfer of Continuing
Shareholder Shares after the date hereof, such shares shall remain Continuing
Shareholder Shares and be deemed to be owned of record by the Continuing
Shareholders for purposes of Article II of this Agreement and this Section
5.5(b).
5.6 Proxy Statement and Schedule 13E-3. (a) The Company will, as soon
as practicable, prepare and file with the Securities and Exchange Commission
(the "Commission") a proxy statement and a form of proxy, in connection with the
vote of the Company's shareholders with respect to the Merger (such proxy
statement, together with any amendments thereof or supplements thereto, in each
case in the form or forms mailed to the Company's shareholders, being the "Proxy
Statement"). The Company, Mergeco and the Continuing Shareholders shall together
prepare and file a Transaction
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Statement on Schedule 13E-3 (the "Schedule 13E-3") under the Exchange Act. Each
of Mergeco, the Company and the Continuing Shareholders shall furnish all
information required to be included about such person (as defined in Section
9.10) in the Proxy Statement and the Schedule 13E-3 and, after consultation with
each other, shall respond promptly to any comments made by the Commission with
respect to the Proxy Statement and any preliminary version thereof and the
Schedule 13E-3. The Company shall cause the Proxy Statement to be mailed to its
shareholders at the earliest practicable time. The Proxy Statement shall include
the recommendation of the Company's Board of Directors to the shareholders of
the Company (and reflect that the Special Committee has made a similar
recommendation to the Company's Board of Directors), subject to the fiduciary
duties under applicable law of such directors (including the directors
constituting the Special Committee), as determined by such directors in good
faith after consultation with counsel, in favor of the adoption of this
Agreement. The Company shall use its best efforts to obtain the necessary
adoption of this Agreement by its shareholders. Notwithstanding anything to the
contrary in this Agreement, if the Board of Directors of the Company or the
Special Committee determines, in good faith after consultation with counsel
that, in the exercise of its respective fiduciary duties, under applicable law
it is required to withdraw, modify or amend its recommendation in favor of the
Merger, such withdrawal, modification or amendment shall not constitute a breach
of this Agreement.
(b) The information supplied by the Company for inclusion in the Proxy
Statement or the Schedule 13E-3 shall not, at the time the Proxy Statement is
mailed, 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 were made,
not misleading or, at the time of the Shareholders' Meeting, as then amended or
supplemented, omit to state any material fact necessary to correct any statement
originally supplied by the Company for inclusion in the Proxy Statement or the
Schedule 13E-3 which has become false or misleading. If, at any time prior to
the Effective Time, any event relating to the Company or any of its affiliates,
or relating to their respective officers, directors or shareholders, should be
discovered which should be set forth in an amendment of, or a supplement to,
such Proxy Statement or Schedule 13E-3, the Company shall promptly so inform
Mergeco and will furnish all necessary information to Mergeco relating to such
event. All documents that the Company is responsible for filing with the
Commission in connection with the transactions contemplated by this Agreement
shall comply in all material respects, both as to form and otherwise, with the
Exchange Act.
(c) The information supplied or to be supplied by Mergeco and the
Continuing Shareholders for inclusion in the Proxy Statement or the Schedule
13E-3 shall not, at the time the Proxy Statement is mailed, 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 were made, not misleading or, at the time of
the Shareholders' Meeting, as then amended or supplemented, omit to state any
material fact necessary to correct any statement originally supplied by Mergeco
and the Continuing Shareholders for inclusion in the Proxy Statement or the
Schedule 13E-3 which has become false or misleading. If, at any time prior to
the Effective Time, any event relating to Mergeco or any of its affiliates, or
relating to the respective officers, directors or shareholders of Mergeco or its
affiliates, as the case
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may be, should be discovered which should be set forth in an amendment of, or a
supplement to, such Proxy Statement or Schedule 13E-3, Mergeco shall promptly so
inform the Company and will furnish all necessary information to the Company
relating to such event. All documents that Mergeco is responsible for filing
with the Commission in connection with the transactions contemplated by this
Agreement shall comply in all material respects, both as to form and otherwise,
with the Exchange Act.
5.7 Best Efforts. Subject to the terms and conditions herein provided
and the fiduciary duties under applicable law of the directors of the Company,
including directors constituting the Special Committee, as determined by such
directors in good faith after consultation with counsel, each of the parties
hereto agrees to use its best efforts consistent with applicable legal
requirements to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary or proper and advisable (including, but not
limited to, executing any and all additional documents) under applicable laws
and regulations to ensure that the conditions set forth in Article VI hereof are
satisfied and to consummate and make effective, in a commercially reasonable
manner, the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, the Continuing Shareholders shall use their best
efforts to cause Mergeco to perform all of its obligations under this Agreement.
5.8 Consents. Mergeco and the Company each shall use their best efforts
to obtain all material consents of third parties and governmental authorities,
and to make all governmental filings, necessary for the consummation of the
transactions contemplated by this Agreement.
5.9 Public Announcements. Mergeco and the Company will consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Merger, this Agreement and the transactions
contemplated hereby, and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
in accordance with the Company's obligations incurred pursuant to its listing
agreement with the New York Stock Exchange.
5.10 Indemnification. (a) Until and for a period of six years after the
Effective Time, the provisions of the Certificate of Incorporation of the
Company limiting the personal liability of directors for damages and the
indemnification provisions of the Certificate of Incorporation and Bylaws of the
Company as they relate to those who have served as directors or officers of the
Company at any time through the Effective Time shall not be amended, repealed or
otherwise modified in any manner that would make any of such provisions less
favorable to the directors or officers of the Company or the Surviving
Corporation than those that pertain to directors and officers on the date
hereof. Until and for a period of six years after the Effective Time (provided
that if any claim or claims are asserted or made under this Section 5.10 within
such six-year period, all rights to indemnification in respect of each such
claim shall continue until final disposition of such claim), the Surviving
Corporation shall, (i) indemnify, defend and hold harmless the present and
former officers and directors of the Company and its subsidiaries, Mergeco and
the members of Mergeco (collectively, the "Indemnified Parties"), from and
against, and pay or reimburse the Indemnified
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Parties for, all losses, obligations, expenses, claims, damages or liabilities
(whether or not resulting from third-party claims and including interest,
penalties, out-of-pocket expenses and attorneys' fees incurred in the
investigation or defense of any of the same or in asserting any of their rights
hereunder) resulting from or arising out of actions or omissions of such
Indemnified Parties occurring on or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement) to the
fullest extent permitted or required, as the case may be, under (A) applicable
law, (B) the Certificate of Incorporation or By-laws of the Company or the
articles of organization or operating agreement of Mergeco in effect on the date
of this Agreement, including, without limitation, provisions relating to
advances of expenses incurred in the defense of any action or suit, (C) any
indemnification agreement between the Indemnified Party and the Company, or (D)
resolutions adopted by the shareholders or directors of the Company or the
members of Mergeco; and (ii) advance to any Indemnified Parties expenses
incurred in defending any action or suit with respect to such matters upon
receipt of an undertaking (which need not be secured) by or on behalf of such
Indemnified Party to repay such amount as, and to the extent, it is not entitled
to be indemnified, in each case to the fullest extent such Indemnified Party is
entitled to indemnification or advancement of expenses under the Company's
Certificate of Incorporation, By-laws or indemnification agreements with its
officers and directors or Mergeco's operating agreement in effect on the date
hereof and subject to the terms of such Certificate of Incorporation, By-laws,
indemnification agreements or operating agreement; provided, however, that (i)
no indemnification shall be made to or on behalf of Mergeco or a member of
Mergeco in his or its individual capacity or in his or its capacity as a member
of Mergeco which arises as a result of the transactions contemplated herein if a
judgment or other final adjudication adverse to Mergeco or such member of
Mergeco, as the case may be, establishes that its or his acts constituted a
breach of (x) its or his fiduciary duties to the Company or the shareholders of
the Company, or (y) any of Mergeco's or such member's representations,
warranties or obligations hereunder which caused the Company to terminate this
Agreement; and (ii) nothing herein shall be construed as adversely affecting any
such member's entitlement to indemnification from the Company as an officer or
director of the Company.
(b) The Surviving Corporation shall use its best efforts to maintain in
effect for one year after the Effective Time one or more policies of directors'
and officers' liability insurance covering (i) reimbursement of the Company for
any obligation it incurs as a result of indemnification of directors and
officers (the "Corporate Reimbursement Feature") and (ii) also providing
insurance for directors and officers individually in cases where the Corporate
Reimbursement Feature is not applicable, including in the event of the
insolvency of the Company (the "Individual Feature"), with an aggregate limit of
liability of not less than $5.0 million for the policy period for all such
policies; provided, however, that the Surviving Corporation shall not be
required to pay a premium therefor in excess of $100,000, but, if such premium
would exceed such amount, the Surviving Corporation shall purchase as much
coverage as possible for such amount. Such policy shall be on a "claims made"
basis and shall have a retention amount of not more than $250,000 and no
co-insurance with respect to the Corporate Reimbursement Feature, and retention
and co-insurance amounts not greater than the minimum amounts required by New
York state law with respect to the Individual Feature. The policies will cover
and relate to any individual who is, becomes or was a director or officer of the
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Company. Such policies may be subject to additional customary conditions and
exclusions, including an exclusion for any lawsuits pending at the time such
policy is written or relating to the Merger.
(c) Any Indemnified Party wishing to claim indemnification under
Section 5.10(a) shall provide notice to the Surviving Corporation promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and the Indemnified Party shall permit the Surviving Corporation
(at its expense) to assume the defense of any claim or any litigation resulting
therefrom; provided, however, that (i) counsel for the Surviving Corporation,
who shall conduct the defense of such claim or litigation, shall be reasonably
satisfactory to the Indemnified Party and the Indemnified Party may participate
in such defense at such Indemnified Party's expense, and (ii) the omission by or
delay of any Indemnified Party to give notice as provided herein shall not
relieve the Surviving Corporation of its indemnification obligation under this
Agreement, except to the extent that such omission or delay results in a failure
of actual notice to the Surviving Corporation or the Surviving Corporation is
materially prejudiced as a result thereof. In the event that the Surviving
Corporation does not accept the defense of any matter as above provided, or
counsel for such Indemnified Party advises that there are issues that raise
conflicts of interest between the Surviving Corporation and the Indemnified
Party, the Indemnified Party may retain counsel satisfactory to it, and the
Surviving Corporation shall pay all reasonable fees and expenses of such counsel
for the Indemnified Party promptly as statements therefor are received;
provided, however, that the Surviving Corporation shall not be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld); and provided, further, that the Surviving Corporation
shall not be responsible for the fees and expenses of more than one counsel for
all of the Indemnified Parties, unless such Indemnified Party concludes (based
upon the written advice of counsel to such Indemnified Party) that there may be
legal defenses available to such Indemnified Party that are different from or
additional to those available to any other Indemnified Party, in which event the
Indemnified Party making such conclusion shall be entitled to select separate
counsel to assert such legal defenses and to otherwise participate in the
defense of the matter, and the Surviving Corporation shall be liable to the
Indemnified Party under this Section 5.10 for any such legal or other expenses
incurred by the Indemnified Party in connection with such defense. In any event,
the Surviving Corporation and the Indemnified Parties shall cooperate in the
defense of any action or claim. The Surviving Corporation shall not, in the
defense of any such claim or litigation, except with the consent of the
Indemnified Party, consent to entry of any judgment or enter into any settlement
that provides for injunctive or other nonmonetary relief affecting the
Indemnified Party or that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability with respect to such claim or litigation.
(d) This Section 5.10 is intended for the benefit of, and to grant
third party rights to, persons entitled to indemnification under this Section
5.10 and/or the benefits of Article Seventh of the Certificate of Incorporation
of the Company as in effect on the date hereof, whether or not parties to this
Agreement, and each of such persons shall be entitled to enforce the covenants
contained in this Section 5.10.
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(e) If the Surviving Corporation or any of its respective successors or
assigns (i) reorganizes or consolidates with or merges into any other person and
is not the resulting, continuing or surviving corporation or entity of such
reorganization, consolidation or merger, or (ii) liquidates, dissolves or
transfers all or substantially all of its properties and assets to any person or
persons, then, and in such case, proper provision will be made so that the
respective successors and assigns of the Surviving Corporation assume all of the
obligations of the Surviving Corporation referred to in this Section 5.10.
5.11 No Solicitation. (a) The Company and its subsidiaries shall not,
and shall not authorize or permit any of their officers, directors (including
but not limited to directors who are members of the Special Committee), agents,
representatives, advisors or affiliates (collectively, for the purposes of this
Section 5.11, "Representatives") to, in each case whether or not in writing and
whether or not communicated to the shareholders of the Company generally, (i)
take any action to solicit, initiate or encourage any Transaction Proposal (as
defined herein), or (ii) enter into negotiations with, or furnish information
to, any other party with respect to any Transaction Proposal; provided, however,
that the Company and the Representatives shall not be prohibited from taking any
action described in clause (ii) above to the extent such action is taken by, or
upon the authority of, the Board of Directors of the Company if, in the good
faith judgment of the Board of Directors, (x) such Transaction Proposal is
(after consultation with a financial advisor of a nationally recognized
reputation) (A) more favorable to the Company's shareholders than the Merger,
(B) achievable, and (C) supported by creditable financing, which may include a
"highly confident" letter from a nationally recognized investment banking firm
or nationally recognized lending institution, and (y) after consultation with
counsel, failure to take such action would breach its fiduciary duties to the
Company's shareholders under applicable law. For the purposes of this Agreement,
"Transaction Proposal" means any offer or proposal for, or any indication of
interest in, a merger or other business combination involving the Company or any
subsidiary of the Company or the acquisition of any equity interest in, or the
sale of a substantial portion of the assets of, the Company or any such
subsidiary, except for the transactions contemplated hereby.
(b) The Company shall promptly provide Mergeco with a summary of the
material terms of any Transaction Proposal and of any negotiations or
communications between the Company or its subsidiaries or any of their
respective Representatives concerning any Transaction Proposal.
(c) The Company shall give Mergeco not less than three business days'
written notice before providing any confidential information to any person
(other than Mergeco, the prospective sources of the Debt Financing and their
respective representatives) concerning the business, properties or prospects of
the Company and/or its subsidiaries.
(d) Nothing contained in this Agreement shall prohibit the Company from
making a statement to its shareholders that is required by Rule 14e-2(a)
promulgated under the Exchange Act or from making any other disclosure to its
shareholders if, in the good faith judgment of the Board of Directors, after
consultation with counsel, failure to make such a statement would breach its
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fiduciary duties to the Company's shareholders under applicable law or would
otherwise violate the Exchange Act, other applicable law or stock exchange
regulation.
5.12 Transfer Taxes. Except to the extent otherwise contemplated in
Section 2.3, the Surviving Corporation shall pay any transfer taxes (including
any interest and penalties thereon and additions thereto) payable in connection
with the Merger and shall be responsible for the preparation and filing of any
required tax returns, declarations, reports, schedules, terms and information
returns with respect to such transfer taxes.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to the Obligations of Each Party. The respective
obligations of each party hereto to effect the Merger shall be subject to the
satisfaction or waiver, at or prior to the Effective Time, of the following
conditions:
(a) the proposal to adopt this Agreement at the Shareholders' Meeting
shall have been approved and adopted by the affirmative vote of at least
two-thirds of the votes of all outstanding shares of Common Stock entitled to
vote thereon in accordance with the NYBCL;
(b) the proposal to adopt this Agreement shall have been approved and
adopted by the affirmative vote of at least a majority of the votes cast at the
Shareholders' Meeting excluding (i) votes cast by the holders of the Continuing
Shareholder Shares, (ii) abstentions and (iii) broker non- votes;
(c) there shall not have occurred (i) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or (ii) a commencement of a war, armed hostilities or other international
or national calamity, directly involving the United States, that has a material
adverse effect on the general economic conditions in the United States such as
to make it, in the judgment of a party hereto, inadvisable or impractical to
proceed with the Merger or the transactions contemplated hereby or by the Debt
Financing; and
(d) other than the filing of the Certificates of Merger as contemplated
in Section 1.5, each of the Company and Mergeco shall have obtained such
consents from third parties and approvals from government instrumentalities as
shall be required for the consummation of the transactions contemplated hereby,
except for such consents the failure to obtain which would not have a Material
Adverse Effect.
6.2 Conditions to the Obligations of Mergeco. The obligation of Mergeco
pursuant to this Agreement to consummate the Merger is also subject to the
satisfaction or waiver, at the Closing, of the following additional conditions:
(a) the representations and warranties of the Company contained herein
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality
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qualification) or in all material respects (in the case of any representation or
warranty without any materiality qualification) as of the date of this Agreement
and as of the Closing with the same effect as though all such representations
and warranties had been made as of the Closing, except (i) for any such
representations and warranties made as of a specified date, which shall be true
and correct as of such date, (ii) as expressly contemplated by this Agreement,
and (iii) for breaches of representations or warranties that (x) would not have
a Material Adverse Effect or a material adverse effect on the ability of the
Company to consummate the transactions contemplated hereby, or (y) are known on
the date hereof by any of the Continuing Shareholders; and Mergeco shall have
received from the Company an officer's certificate to this effect at the
Closing;
(b) each and all of the covenants and agreements of the Company to be
performed and complied with pursuant to this Agreement prior to the Closing
shall have been duly performed and complied with, except where the failure to
comply with such covenant or agreement (i) would not have a Material Adverse
Effect or a material adverse effect on the ability of the Company to consummate
the transactions contemplated hereby, or (ii) was the direct result of an act or
omission of any of the Continuing Shareholders; and Mergeco shall have received
from the Company an officer's certificate to this effect at the Closing;
(c) there shall have been no (i) material adverse change in the
business, condition (financial or otherwise), properties, assets or prospects of
the Company and its subsidiaries taken as a whole; (ii) death or disability of
any of Xxxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxx Xxxxxx or Xxxxxxx Xxxxxx or any
executive officer of the Company named in the Company's Annual Report on Form
10- K/A for the year ended December 28, 1997 as stated therein to have a family
relationship (as such term is defined in Item 401 of Regulation S-K promulgated
by the Commission) with a Continuing Shareholder; or (iii) material adverse
change, or event or occurrence that is reasonably likely to result in an adverse
change, in securities, financial or borrowing markets, or applicable tax or
other laws or regulations, such as to decrease in any material respect the
benefits of the Merger to the Continuing Shareholders or make it impractical to
proceed with the Merger or the transactions contemplated hereby or by the Debt
Financing;
(d) no statute, rule, regulation, or temporary, preliminary or
permanent order or injunction shall have been proposed, promulgated, enacted,
entered, enforced or deemed applicable by any state, federal or foreign
government or governmental authority or court or governmental agency of
competent jurisdiction that (i) prohibits consummation of the Merger or the
transactions contemplated hereby or thereby, or (ii) imposes material
limitations on the ability of the Continuing Shareholders effectively to
exercise full rights of ownership with respect to the shares of Common Stock to
be issued to them pursuant to Section 2.2 of this Agreement;
(e) the seven class action lawsuits which have heretofore been
instituted with respect to the transactions contemplated hereby shall have been
consolidated into one action in the Supreme Court of the State of New York and
the settlement of such actions, as reflected in that certain Memorandum of
Understanding dated January 19, 1999 (the "Memorandum of Understanding") among
the parties to such actions, shall have been approved by the Supreme Court of
New York
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County, final judgment shall have been entered in accordance with the Settlement
Agreement contemplated in the Memorandum of Understanding and shall have become
final, such actions shall have been dismissed with prejudice and without costs
to any party (except as provided in the Memorandum of Understanding) and no
holders, or holders of no more than an aggregate of 1,000,000 shares of Common
Stock, shall have requested exclusion from the "Class", as such term is defined
in the Memorandum of Understanding.
(f) neither (i) any action, suit or proceeding before any court or
governmental body relating to the Merger or the transactions contemplated hereby
shall be pending in which an unfavorable judgment or decree could prevent or
substantially delay the consummation of the Merger, or is reasonably likely to
(w) result in a material increase in the aggregate Merger Consideration, (x)
result in an award of material damages, (y) cause the Merger to be rescinded or
(z) result in a material amount of rescissory damages, nor (ii) any decision in
any action, suit or proceeding relating to the Merger or the transactions
contemplated hereby shall have been rendered by any court or governmental body
which has any such effect; and
(g) the Company shall have obtained the Debt Financing referred to in
Section 4.5: (i) in at least the amount set forth in the Financing Letter, (ii)
on the material terms and conditions no less favorable to the Surviving
Corporation than those set forth in the Term Sheet annexed as Exhibit "B" to
this Agreement, and (iii) having a yield to maturity not to exceed 11.25% per
annum.
6.3 Conditions to the Obligations of the Company. The obligation of the
Company pursuant to this Agreement to consummate the Merger is also subject to
the satisfaction or waiver, at the Closing, of the following additional
conditions:
(a) the representations and warranties of Mergeco contained herein
shall be true and correct in all respects (in the case of any representation or
warranty containing any materiality qualification) or in all material respects
(in the case of any representation or warranty without any materiality
qualification) as of the date of this Agreement and as of the Closing with the
same effect as though all such representations and warranties had been made as
of the Closing, except (i) for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, (ii) as
expressly contemplated by this Agreement, and (iii) for breaches of
representations or warranties that would not have a material adverse effect on
the ability of Mergeco to consummate the transactions contemplated hereby; and
the Company shall have received from Mergeco a member's certificate to this
effect at the Closing; and
(b) each and all of the covenants and agreements of Mergeco to be
performed and complied with pursuant to this Agreement prior to the Closing
shall have been duly performed and complied with in all material respects except
where the failure to comply with such covenant or agreement would not have a
material adverse effect on the ability of Mergeco to consummate the transactions
contemplated hereby; and the Company shall have received from Mergeco a member's
certificate to this effect at the Closing; and
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(c) no statute, rule, regulation, or temporary, preliminary or
permanent order or injunction shall have been proposed, promulgated, enacted,
entered, enforced or deemed applicable by any state, federal or foreign
government or governmental authority or court or governmental agency of
competent jurisdiction that prohibits consummation of the Merger or the
transactions contemplated hereby or thereby.
ARTICLE VII
CLOSING
7.1 Time and Place. The closing of the Merger (the "Closing") shall
take place at the offices of Xxxxxx Xxxxxx Flattau & Klimpl, LLP, 1211 Avenue of
the Americas, New York, New York, as soon as practicable following satisfaction
or waiver of the conditions set forth in Article VI. The date on which the
Closing actually occurs is herein referred to as the "Closing Date."
7.2 Filings at the Closing. Promptly following the Closing, the Company
and Mergeco shall cause Certificates of Merger, together with any other
documents required by law to effectuate the Merger, to be executed, verified and
delivered for filing by the New York Department of State as provided by Section
904-a of the NYBCL and Section 1003 of the NYLLCL, respectively, to the extent
required, and shall take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective. 7.3
ARTICLE VIII
TERMINATION AND ABANDONMENT
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the shareholders of the
Company:
(a) by mutual consent of the Board of Directors of the Company (by
action taken by the Company's Board of Directors) and the members of Mergeco;
(b) automatically, without action by any party hereto, if, at the
Shareholders' Meeting, the Company's shareholders shall have not voted to adopt
this Agreement in accordance with the requirements set forth in Sections 6.1(a)
and (b);
(c) by action of the Board of Directors of the Company or the members
of Mergeco if, without the fault of the terminating party, the Merger has not
been consummated on or prior to June 30, 1999;
(d) by action of the Board of Directors of the Company or the members
of Mergeco if the Special Committee shall have withdrawn or modified in a manner
adverse to Mergeco its approval or recommendation of the Merger, this Agreement
or the transactions contemplated hereby;
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(e) by action of the Board of Directors of the Company or the members
of Mergeco if (i) any of the events set forth in Section 6.1(c) shall have
occurred or (ii) consents or approvals described in Section 6.1(d) shall not
have been obtained prior to the Closing or shall have become incapable of being
obtained, and, in the case of (i) or (ii), shall not have been, on or before the
date of such termination, permanently waived by the Board of Directors of the
Company or the members of Mergeco, as the case may be;
(f) by action of the members of Mergeco if (i) any of the conditions
set forth in Sections 6.2(a), (b), (e), or (g) that are required to be satisfied
at or prior to the Closing shall not have been satisfied prior to the Closing or
shall have become incapable of being satisfied or (ii) if any of the events set
forth in Sections 6.2(c), (d) or (f) shall have occurred prior to the Closing
and, in the case of (i) or (ii), shall not have been, on or before the date of
such termination, permanently waived by Mergeco; provided, however, that, in the
case of Sections 6.2(a) or (b), the Company shall not have cured such breach, in
all material respects, within ten (10) business days following the receipt of
written notice from Mergeco of such breach; and
(g) by action of the Board of Directors of the Company if (i) any of
the conditions set forth in Sections 6.3(a) or (b) that are required to be
satisfied at or prior to the Closing shall not have been satisfied prior to the
Closing or shall have become incapable of being satisfied or (ii) if any of the
events set forth in Section 6.3(c) shall have occurred prior to the Closing and,
in the case of (i) or (ii), shall not have been, on or before the date of such
termination, permanently waived by the Board of Directors of the Company;
provided, however, that, in the case of Sections 6.3(a) and (b), Mergeco and the
Continuing Shareholders shall not have cured such breach, in all material
respects, within ten (10) business days following the receipt of written notice
from the Company of such breach.
8.2 Procedure and Effect of Termination. In the event of termination
and abandonment of the Merger by either Mergeco or the Company pursuant to
Section 8.1, written notice thereof shall forthwith be given to the other, and
this Agreement shall terminate and the Merger shall be abandoned, without
further action by any of the parties hereto. If this Agreement is terminated as
provided herein, no party hereto shall have any liability or further obligation
to any other party to this Agreement; provided, however, that (i) any
termination by the Company arising out of a breach by Mergeco or the Continuing
Shareholders of any representation, warranty, covenant or agreement contained in
this Agreement shall be without prejudice to the rights of the Company to seek
damages with respect thereto, and (ii) any termination by Mergeco arising out of
a breach by the Company of any representation, warranty, covenant or agreement
contained in this Agreement, other than a breach by the Company that is the
direct result of an act or omission of the Continuing Shareholders, shall be
without prejudice to the rights of Mergeco to seek damages with respect thereto;
and provided, further, however, that the obligations set forth in this Section
8.2 and Section 9.6 shall in any event survive any termination.
-20-
ARTICLE IX
MISCELLANEOUS
9.1 Amendment; Modification and Approval of Special Committee. Subject
to applicable law, this Agreement may be amended, modified or supplemented only
by written agreement of Mergeco and the Continuing Shareholders, on the one
hand, and the Company, on the other hand, at any time prior to the Effective
Time with respect to any of the terms contained herein; provided, however, that
(i) after this Agreement is adopted by the Company's shareholders pursuant to
Section 5.5, no such amendment or modification shall be made that reduces the
amount or changes the form of the Merger Consideration or otherwise materially
and adversely affects the rights of the Public Shareholders hereunder without
further approval by the holders of such number of votes of shares of Common
Stock that are required to approve this Agreement pursuant to Sections 6.1(a)
and (b), and (ii) the approval of the Special Committee shall be required for
any action that may be taken by the Board of Directors pursuant to this
Agreement, including without limitation, any determination to terminate this
Agreement, any amendment or modification of this Agreement, any extension by the
Company of the time for the performance of any obligations or other acts of
Mergeco and any waiver of any of the Company's rights under this Agreement.
9.2 Waiver of Compliance; Consents. Any failure of Mergeco or the
Company to comply with any obligation, covenant, agreement or condition herein
may be waived by the other party, only by a written instrument signed by the
party granting such waiver (and if required pursuant to Section 9.1(ii), by an
authorized member of the Special Committee), but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 9.2.
9.3 Non-Survival of Representations and Warranties. Each and every
representation and warranty made in this Agreement shall expire with, and be
terminated and extinguished by, the Merger. This Section 9.3 shall have no
effect upon any other obligation of the parties hereto, whether to be performed
before or after the Closing.
9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if (i) delivered personally or by
nationally-recognized overnight courier, (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid or (iii) transmitted by
facsimile, and in each case, addressed to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice:
-21-
(a) if to Mergeco or the Continuing Shareholders, to:
Sbarro Merger LLC
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxx
with copies to
Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxxx & Kuh, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Esq.
(b) if to the Company, to
Sbarro, Inc.
000 Xxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Vice President-Finance
with copies to
Xxxxxx Xxxxxx Flattau & Klimpl, LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
and to
Special Committee of the Board of Directors of Sbarro, Inc.
c/o Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
-22-
with copies to
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Any notice so addressed shall be deemed to be given (x) three business days
after being mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid and (y) upon delivery, if transmitted by personal
delivery, nationally-recognized overnight courier or facsimile; provided,
however, that notices of a change of address shall be effective only upon
receipt thereof.
9.5 Assignment; Parties in Interest. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns; but neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any party without the prior written consent of the other parties.
Except for Section 5.10, which is intended for the benefit of the Indemnified
Parties, this Agreement is not intended to confer upon any person, except the
parties, any rights or remedies under or by reason of this Agreement.
9.6 Costs and Expenses. Each party represents and warrants that it has
not obligated either itself or any other party to incur any broker, finder or
investment banking fees or related expenses, except for fees and expenses
payable by the Company to Bear, Xxxxxxx and to Prudential Securities. In the
event that this Agreement is terminated for any reason, the Company, on the one
hand, and Mergeco and the Continuing Shareholders, on the other hand, shall each
pay their own fees and expenses, it being understood that (a) the fees and
expenses of the Company shall include (i) the fees and expenses of financial
advisors (including Bear Xxxxxxx and Prudential Securities), (ii) any fees and
expenses involved in the preparation, printing, mailing and filing of documents
used in connection with the Merger or the Debt Financing, and (iii) the fees and
expenses of accountants and counsel for the Company and the Special Committee,
and (b) the fees and expenses of Mergeco shall include (i) any commitment and
other fees or expenses payable to any person providing or proposing to provide
the Debt Financing for the Merger, and (ii) the fees and expenses of counsel for
Mergeco; provided, however, that in the event this Agreement is terminated for
any reason other than pursuant to (A) Section 8.1(g) due to a breach of this
Agreement under Sections 6.3(a) or (b), or (B) Section 8.1(f) by reason of the
failure to obtain the Debt Financing on the terms contemplated in Section 6.2(g)
other than by reason of circumstances described in Section 6.2(c)(iii), the
Company shall pay and reimburse Mergeco and the Continuing Shareholders for the
fees and expenses incurred by them in connection with the transactions
contemplated hereby up to $500,000 in the aggregate; and provided, further,
however, that if this Agreement is terminated pursuant to Section 8.1(f) by
reason of the failure to obtain the Debt Financing on the terms contemplated in
Section 6.2(g) other than by reason of circumstances described in Section
6.2(c)(iii), Mergeco and the Continuing Shareholders shall, jointly and
severally, be obligated to pay and reimburse the Company for 50% of the fees and
expenses incurred by the Company, provided that Mergeco and the Continuing
Shareholders,
-23-
together, shall not be obligated to so pay or reimburse the Company in excess of
$500,000 in the aggregate.
9.7 Specific Performance. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity. Notwithstanding the foregoing, and without
limiting the Company's obligations under Section 9.6, in the event of a breach
of this Agreement by the Company, the sole and exclusive remedy of Mergeco or
the Continuing Shareholders shall be to either (i) terminate this Agreement
pursuant to Section 8.1 (and seek any remedy provided them under Section 8.2),
or (ii) pursue specific performance pursuant to this Section 9.7.
9.8 Governing Law. This Agreement shall be governed by the laws of the
State of New York (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
9.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.10 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (i) the term "person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization and a government or
any department or agency thereof; (ii) the terms "affiliate" and "associate"
shall have the meanings set forth in Rule 12b- 2 of the General Rules and
Regulations promulgated under the Exchange Act; (iii) the term "subsidiary" of
any specified corporation shall mean any corporation, limited liability company
or other entity that is controlled, directly or indirectly, by the Company; (iv)
"best efforts" shall mean the commercially reasonable efforts that a prudent
person desirous of achieving a result would use in similar circumstances to
ensure that such result is timely achieved; provided, however, that a person
required to use his best efforts under this Agreement will not be required to
take actions that would result in a materially adverse change in the benefits to
such person of this Agreement and the transactions contemplated hereby; and (v)
the words "hereunder," "herein," "hereof" and words or phrases of similar import
shall refer to each and every term and provision of this Agreement.
9.11 Entire Agreement. This Agreement, including the schedules hereto,
embodies the entire agreement and understanding of the parties in respect of the
subject matter contained herein
-24-
and supersedes all prior agreements and the understandings between the parties
with respect to such subject matter.
9.12 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in effect and shall in no way be affected, impaired or invalidated.
9.13 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of any provision of this Agreement.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
-25-
IN WITNESS WHEREOF, Mergeco, the Company and the Continuing
Shareholders have caused this Agreement to be signed, by their respective duly
authorized officers or directly, as of the date first above written.
SBARRO MERGER LLC
By: /s/ Xxxxx Xxxxxx
------------------------------
Name: Xxxxx Xxxxxx
Title: Member
SBARRO, INC.
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President-Finance
The Continuing Shareholders:
/s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
----------------------------------
Xxxxxx Xxxxxx
XXXXXX XXXXXX (1994) FAMILY
LIMITED PARTNERSHIP
By: /s/ Xxxxxx Xxxxxx
------------------------------
Xxxxxx Xxxxxx, General Partner
/s/ Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxxx Xxxxxxxxxx
----------------------------------
Xxxxxxxx Xxxxxxxxxx, not
individually but as trustee under
that certain Trust Agreement dated
April 28, 1984 for the benefit of
Xxxxxxx Xxxxxx and her descendants
/s/ Xxxxx Xxxxxx
----------------------------------
Xxxxx Xxxxxx, not individually but
as trustee under that certain
Trust Agreement dated April 28,
1984 for the benefit of Xxxxxxx
Xxxxxx and her descendants
-26-
EXHIBIT A
[LETTERHEAD OF BEAR XXXXXXX]
January 19, 1999
Xx. Xxxxx Xxxxxx
Xx. Xxxxxx Xxxxxx
Xx. Xxxxxxx Xxxxxx
The Trust of Xxxxxxx Xxxxxx
Sbarro Merger LLC
Gentlemen:
We understand that Sbarro Merger LLC and Sbarro, Inc. (the "Company") are
contemporaneously herewith entering into an Agreement and Plan of Merger dated
January 19, 1999, pursuant to which, among other things, all shareholders of the
Company, other than the Continuing Shareholders (as defined in the Agreement and
Plan of Merger), will receive $28.85 per share in cash (the "Transaction").
You have informed us that the aggregate cash purchase price, together with fees
and expenses, will result in a total Transaction cost of approximately $408
million. You have informed us that the Transaction cost will be funded by: (a)
approximately $138 million of cash and marketable securities which is expected
to be available to the Company at the closing of the Transaction and (b)
approximately $300 million of total debt financing, based in all material
respects on the terms and conditions set forth in Exhibit B to the Agreement and
Plan of Merger (the "Debt Financing"). The Debt Financing shall include either a
bank revolving credit facility, which shall have undrawn availability on the
closing date of the Transaction, or excess cash to fund the Company's ongoing
working capital needs, including capital expenditures.
You have asked Bear, Xxxxxxx & Co. Inc. ("Bear Xxxxxxx") to act as placement
agent and arranger in connection with the Debt Financing.
This letter will confirm that, based upon and subject to (a) the foregoing, (b)
the information concerning the Company supplied to us by the Continuing
Shareholders and the Company, and (c) current market conditions, Bear Xxxxxxx is
highly confident as of the date hereof of its ability to place and arrange the
Debt Financing, subject to each of the following: (i) the negotiation of
definitive language with respect to the terms and conditions of the senior notes
included in the Debt Financing as set forth in Exhibit B to the Agreement and
Plan of Merger and the negotiation of other acceptable terms and conditions of
the Debt Financing, including, but not limited to, interest rate, price and
other covenants; (ii) the negotiation of acceptable terms, and the execution of
acceptable documentation, related to the Transaction and the Debt Financing;
(iii) no material adverse change in the business,
prospects, condition (financial or otherwise) or results of operations of the
Company; (iv) satisfactory completion of legal due diligence; (v) nothing coming
to our attention which shall contradict or call into question (A) the
information previously provided to us by the Continuing Shareholders or the
Company or (B) the results of our financial due diligence investigation; (vi) no
material adverse change in market conditions for new issues of high yield debt
or syndicated bank loan facilities; (vii) no material adverse change in
conditions of the financial and capital markets generally, and (viii) the
Continuing Shareholders' and the Company's full cooperation with respect to the
marketing of the Debt Financing. The acceptability of each of the foregoing will
be determined in the sole discretion of Bear Xxxxxxx' Commitment Committee.
This letter does not constitute a commitment or undertaking on the part of Bear
Xxxxxxx to provide any part of the Debt Financing described above and does not
ensure the successful placement, arrangement or completion of the Debt
Financing. Bear Xxxxxxx does not and shall not have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company, the
Continuing Shareholders or any other person or entity in connection with this
letter.
You are hereby authorized to deliver a copy of this letter to the Continuing
Shareholders' and the Company's respective affiliates and representatives;
provided, however, that in connection with the Transaction and the related Debt
Financing, no public reference to Bear Xxxxxxx or this letter shall be made by
the Continuing Shareholders or the Company or any of its respective
representatives or affiliates without our express written consent.
Yours sincerely,
BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxx
Senior Managing Director
EXHIBIT B
THIS SUMMARY TERM SHEET DOES NOT CONSTITUTE A COMMITMENT OR UNDERTAKING ON THE
PART OF BEAR XXXXXXX TO PROVIDE OR ARRANGE THE DEBT FINANCING AND DOES NOT
ENSURE THE SUCCESSFUL PLACEMENT OR COMPLETION OF THE DEBT FINANCING. THE
FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE SECURITIES AND DOES NOT
PURPORT TO BE COMPLETE.
SBARRO, INC.
Senior Notes Summary Term Sheet
--------------------------------------------------------------------------------
Issue Senior Notes due 2009 (the "Notes").
Issuer Sbarro, Inc. (the "Company").
Distribution The Notes will be sold to qualified institutional
buyers in a Rule 144A private placement.
Subsidiary Guarantees The Notes will be jointly and severally
guaranteed on a senior basis by all of the
Company's present and future Restricted
Subsidiaries.
Maturity 10 years.
Coupon To be determined based on market conditions at the
time of pricing.
Ranking The Notes will be general unsecured senior
obligations of the Company, ranking pari passu with
all existing and future senior indebtedness of the
Company.
Security None.
Mandatory Redemption The Company will not be required to make
mandatory redemption or sinking fund payments with
respect to the Notes (other than in connection with
Asset Sales or a Change of Control).
Optional Redemption The Notes will be non-callable for five years after
issuance. Thereafter, the Notes may be redeemed at
the option of the Company, in whole or in part, at
premiums declining ratably to par to the end of
year eight, plus accrued interest and Liquidated
Damages, if any, through the redemption date. Until
the third anniversary of the issuance of the Notes,
the Company may redeem up to 35% of the original
principal amount of the Notes with the net cash
proceeds of a
Public Equity Offering at a price of __% of par,
plus accrued interest and Liquidated Damages, if
any; provided however, that following such
redemption, at least 65% of the original principal
amount of the Notes remains outstanding.
Registration Rights The Registration Rights Agreement will provide that
the Company will file and cause to become effective
a registration statement relating to an exchange
offer for the Notes. If such filing does not occur
or such exchange offer is not consummated (unless,
in the circumstances provided for in the
Registration Rights Agreement, the Company
registers the Notes for resale) within the
specified time periods (consistent with market
practices) set forth in the Registration Rights
Agreement, the Company will be required to pay
Liquidated Damages (consistent with market
practices) until so consummated.
Change of Control Upon any Change of Control, the Company will be
required to offer to purchase all of the
outstanding Notes at 101% plus accrued interest and
Liquidated Damages, if any, through the redemption
date.
Covenants The Notes will be governed by an Indenture
containing certain covenants customary for a
transaction of this nature that, among other
things, will limit the ability of the Company and
its subsidiaries to incur additional indebtedness;
pay dividends, repurchase capital stock or make
other restricted payments; create restrictions on
the ability of restricted subsidiaries to make
certain payments; create liens; enter into
transactions with affiliates; sell assets or enter
into certain mergers and consolidations. A summary
description of certain key covenants is as follows:
Restricted Payments. Restricted Payments may not
exceed 50% of cumulative Adjusted Consolidated Net
Income of the Company and its Restricted
Subsidiaries or, if cumulative Adjusted
Consolidated Net Income is a loss, minus 100% of
such loss, plus $5.0 million. Restricted Payments
include, among other items: (i) dividends or other
distributions on the Company's capital stock; (ii)
the purchase or redemption of any of the Company's
capital stock; (iii) the retirement of any debt
that is subordinated to the Notes, and (iv) any
Investments (other than Permitted Investments) in
entities which are not Wholly Owned Restricted
Subsidiaries.
Adjusted Consolidated Net Income means
for any period the sum of (a)
Consolidated Net Income for such period
plus (b) the aggregate amount of
intangible amortization charges resulting
from the contemplated merger transaction
to the extent deducted in calculating
Consolidated Net Income for such period.
Consolidated Net Income means for any
period, the aggregate of the Net Income
of the Company and its Restricted
Subsidiaries for such period, on a
consolidated basis, determined in
accordance with GAAP, less the Tax Amount
for such period; provided that (a) the
Net Income (but not the loss) of any
Person that is not a Restricted
Subsidiary of the Company or that is
accounted for by the equity method of
accounting shall be excluded except to
the extent of the amount of dividends or
distributions paid in cash by such Person
to the Company or Wholly Owned Restricted
Subsidiaries of the Company during such
period, (b) the Net
Income of any Restricted Subsidiary shall
be excluded to the extent that the
declaration or payment of dividends or
similar distributions by that Restricted
Subsidiary of that Net Income is not at
the date of determination permitted
without any prior governmental approval
(that has not been obtained) or, directly
or indirectly, or operation of the terms
of its charter or any agreement,
instrument, judgment, decree, order,
statute, rule or governmental regulation
applicable to that Subsidiary or its
stockholders, (c) the Net Income (or
loss) of any Person acquired in a pooling
of interests transaction for any period
prior to the date of such acquisition
shall be excluded, (d) any non-cash
write-off or charge (excluding any such
non-cash write-off or charge to the
extent it represents an accrual of or
reserve for cash expenses in any future
period) in respect of disposition of
assets other than in the ordinary course
of business shall be excluded, (e)
extraordinary gains or losses as
determined in accordance with GAAP shall
be excluded and (f) the cumulative effect
of a change in accounting principles
shall be excluded.
Tax Amount generally means (so long as
the Company is treated as a Subchapter S
Corporation for federal income tax
purposes) with respect to the Company,
for any period, the aggregate combined
federal, state, local and foreign income
taxes (including estimated taxes)
actually payable by shareholders
(including partners, members, or other
owners of shareholders) of the Company in
respect of such Person's taxable income
for such period in respect of the
Company, as more specifically provided in
the Indenture.
Permitted Investments include, among
other items: (i) Investments made after
the original issuance date of the Notes
in businesses similar or reasonably
related to that of the Company and its
Restricted Subsidiaries as of the
issuance date in an amount not to exceed
$10.0 million in aggregate outstanding at
any one time and (ii) the guarantee made
after the original issuance date of the
Notes by the Company of indebtedness of
Unrestricted Subsidiaries of the Company
in an amount not to exceed $10.0 million
in aggregate principal outstanding at any
one time, subject to the incurrence of
such guarantee being permitted under the
Consolidated Interest Coverage Ratio test
of the Limitation of Indebtedness
covenant.
Limitation on Indebtedness. The Company and its
Restricted Subsidiaries shall only be permitted to
create, incur, assume, guarantee or otherwise
become directly or indirectly liable for the
payment of any Indebtedness, other than Permitted
Indebtedness, if, after giving pro forma effect
thereto, the Consolidated Interest Coverage Ratio
for the four prior quarters is at least 2.0x to
1.0. Permitted Indebtedness will include, among
other items: (i) Indebtedness incurred by the
Company and its Restricted Subsidiaries under the
Senior Credit Facility, or any refinancing thereof,
not to exceed $75.0 million at any one time
outstanding (less amounts applied to repay or
prepay permanently such Indebtedness in accordance
with the "Limitation on Asset Sales" covenant); and
(ii) other Indebtedness of the Company or its
Restricted Subsidiaries in an aggregate principal
amount not in excess of $10.0 million at any one
time outstanding.
Covenants (cont.) Consolidated Interest
Coverage Ratio means with respect to the
Company and its Restricted Subsidiaries
for any period, the ratio of the
Consolidated Cash Flow for such period to
the Consolidated Interest Expense for
such period.
Consolidated Cash Flow means for any
period, the sum of (a) the Consolidated
Net Income of the Company and its
Restricted Subsidiaries for such period,
plus (b) the provision for taxes based on
income or profits or the Tax Amount for
such period to the extent that such
provision for taxes or Tax Amount was
deducted in computing Consolidated Net
Income for such period plus (c) the
Consolidated Interest Expense of the
Company and its Restricted Subsidiaries
for such period, plus (d) consolidated
depreciation and amortization (including
amortization of goodwill and other
intangibles but excluding amortization of
prepaid cash expenses that were paid in a
prior period) of the Company and its
Restricted Subsidiaries to the extent
deducted in computing Consolidated Net
Income for such period, plus (e) other
consolidated non-cash expenses of the
Company and its Restricted Subsidiaries
for such period (excluding any such
non-cash expense to the extent it
represents an accrual of or reserve for
cash expenses in any future period); less
the amount of non-cash items increasing
such Consolidated Net Income for such
period. Notwithstanding the foregoing,
the Net Income of any Unrestricted
Subsidiary shall be excluded, whether or
not distributed to the Company or one of
its Restricted Subsidiaries.
