EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
BY
AND
AMONG
LONE STAR STEAKHOUSE & SALOON, INC.,
LONE STAR U.S. ACQUISITIONS LLC
AND
COI ACQUISITION CORP.
DATED AS OF AUGUST 18, 2006
TABLE OF CONTENTS
Page
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ARTICLE I TERMS OF THE MERGER; THE TRANSFERS..................................2
1.1. Stock Transfers...............................................2
1.2. The Merger....................................................2
1.3. The Closings; Effective Time..................................2
1.4. Conversion of Securities......................................3
1.5. Payment for Certificates; Distribution........................4
1.6. Options.......................................................6
1.7. Dissenting Shares.............................................7
1.8. Certificate of Incorporation and Bylaws.......................7
1.9. Directors and Officers........................................7
1.10. Other Effects of Merger.......................................8
1.11. Additional Actions............................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................8
2.1. Due Organization and Good Standing............................9
2.2. Capitalization................................................9
2.3. Subsidiaries.................................................11
2.4. Authorization; Binding Agreement.............................11
2.5. Governmental Approvals.......................................12
2.6. No Violations................................................12
2.7. SEC Filings; Company Financial Statements....................13
2.8. Absence of Certain Changes...................................14
2.9. Absence of Undisclosed Liabilities...........................16
2.10. Compliance with Laws.........................................16
2.11. Permits......................................................16
2.12. Litigation...................................................16
2.13. Restrictions on Business Activities..........................16
2.14. Material Contracts...........................................17
2.15. Intellectual Property........................................18
2.16. Employee Benefit Plans.......................................19
2.17. Taxes and Returns............................................22
2.18. Finders and Investment Bankers...............................24
2.19. Fairness Opinion.............................................24
2.20. Insurance....................................................25
2.21. Vote Required; Ownership of Purchaser Capital Stock..........25
2.22. Title to Properties..........................................25
2.23. Employee Matters.............................................26
2.24. Environmental Matters........................................27
2.25. Proxy Statement..............................................28
2.26. Franchise Matters............................................28
2.27. Transactions with Affiliates.................................29
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER......................30
3.1. Due Organization and Good Standing...........................30
3.2. Authorization; Binding Agreement.............................30
3.3. Governmental Approvals.......................................30
3.4. No Violations................................................31
3.5. Finders and Investment Bankers...............................31
3.6. Disclosures..................................................31
3.7. Financing....................................................32
3.8. Litigation...................................................32
3.9. No Prior Activities..........................................32
3.10. Investigation by Purchaser and Merger Sub....................32
ARTICLE IV ADDITIONAL COVENANTS OF THE COMPANY...............................33
4.1. Conduct of Business of the Company...........................33
4.2. Notification of Certain Matters..............................35
4.3. Access and Information.......................................36
4.4. Special Meeting; Proxy Statement.............................37
4.5. Commercially Reasonable Efforts..............................38
4.6. Public Announcements.........................................38
4.7. Compliance...................................................38
4.8. No Solicitation..............................................39
4.9. SEC and Stockholder Filings..................................41
4.10. State Takeover Laws..........................................41
4.11. Amendment of the Company Employee Plans......................41
4.12. HSR Act......................................................41
4.13. Actions With Respect to the Transfers........................41
4.14. Tax Sharing Agreements.......................................42
ARTICLE V ADDITIONAL COVENANTS OF PURCHASER..................................42
5.1. Notification of Certain Matters..............................42
5.2. Commercially Reasonable Efforts..............................43
5.3. Compliance...................................................43
5.4. Indemnification and Insurance................................43
5.5. Benefit Plans and Employee Matters...........................44
5.6. Public Announcements.........................................45
5.7. HSR Act......................................................45
ARTICLE VI CONDITIONS........................................................46
6.1. Conditions to Each Party's Obligations.......................46
6.2. Conditions to Obligations of Purchaser to Effect the
Transfers....................................................46
6.3. Conditions to Obligations of Purchaser to Effect the
Merger.......................................................47
6.4. Conditions to Obligations of the Company.....................48
6.5. Frustration of Conditions....................................49
ARTICLE VII TERMINATION AND ABANDONMENT......................................49
7.1. Termination..................................................49
7.2. Effect of Termination........................................50
7.3. Fees and Expenses............................................50
ARTICLE VIII MISCELLANEOUS...................................................52
8.1. Confidentiality..............................................52
8.2. Amendment and Modification...................................53
8.3. Waiver of Compliance; Consents...............................53
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8.4. Survival.....................................................53
8.5. Notices......................................................53
8.6. Binding Effect; Assignment...................................54
8.7. Governing Law; Jurisdiction..................................54
8.8. Counterparts.................................................55
8.9. Interpretation...............................................55
8.10. Entire Agreement.............................................55
8.11. Severability.................................................56
8.12. Specific Performance.........................................56
8.13. Attorneys' Fees..............................................56
8.14. Third Parties................................................56
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT") is made and
entered into as of August 18, 2006, by and among Lone Star Steakhouse & Saloon,
Inc., a Delaware corporation (the "COMPANY"), Lone Star U.S. Acquisitions LLC, a
Delaware limited liability company ("PURCHASER"), and COI Acquisition Corp., a
Delaware corporation and an affiliate of Purchaser ("MERGER SUB").
WITNESSETH:
A. The respective boards of directors or other governing body of
Merger Sub, Purchaser and the Company deem it advisable and in the best
interests of their respective stockholders and/or interest holders that
Purchaser acquire the Company upon the terms and subject to the conditions
provided for in this Agreement.
B. The respective boards of directors or other governing body of
Purchaser and the Company deem it advisable and in the best interests of their
respective stockholders and/or interest holders that, immediately prior to
Purchaser acquiring the Company, Purchaser or its designee acquire all of the
capital stock of certain subsidiaries of the Company upon the terms and subject
to the conditions provided for in this Agreement.
C. The board of directors of the Company (the "BOARD") has
unanimously approved this Agreement, the merger of Merger Sub with and into the
Company with the Company surviving (the "MERGER"), the Transfers (as defined
below) and the Distribution (as defined below) (the Merger, the Transfers and
the Distribution being hereinafter referred to as the "TRANSACTIONS"), and the
Board has determined that such approval is sufficient to render inapplicable to
this Agreement and the Transactions the restrictions against the parties hereto
engaging in any business combination as set forth in Section 203 of the Delaware
General Corporation Law ("DGCL"), has determined that this Agreement and the
Transactions are fair to and in the best interests of the Company and its
stockholders, and has resolved to recommend that the holders of the Company's
issued and outstanding shares of common stock, par value $0.01 per share (the
"COMMON STOCK", with all of the outstanding shares of Common Stock being
hereinafter referred to as the "SHARES"), adopt this Agreement and approve the
Transactions.
D. The board of directors or other governing body of each of
Purchaser, Merger Sub and the Company have each approved this Agreement and the
Transactions, including the Merger, the Transfers and the Distribution, all in
accordance with the DGCL and, in each such case, upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement and intending to be legally
bound hereby, the parties hereto agree as follows:
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ARTICLE I
TERMS OF THE MERGER; THE TRANSFERS
1.1. Stock Transfers.
Immediately prior to the Effective Time (as defined herein), upon
the terms and subject to the conditions of this Agreement, the Company shall, or
shall cause its applicable subsidiaries to, sell, assign, transfer and deliver
(each, a "TRANSFER" and, collectively, the "TRANSFERS") to one or more
affiliates designated by Purchaser in writing at least five business days prior
to the Effective Time ("PURCHASE SUB") all of the shares of the capital stock of
the subsidiaries of the Company set forth on Schedule 1.1 (each, a "TRANSFERRED
SUB" and, collectively, the "TRANSFERRED SUBS"), free and clear of all liens,
claims, pledges, mortgages, security interests, charges, restrictions or
encumbrances of any kind or nature whatsoever or agreements with respect
thereto, in exchange for the aggregate amount of $442,649,781.91 (the "STOCK
PURCHASE AMOUNT"). In connection and concurrently with, and as a part of, the
Transfers, the Company will, or will cause its affiliates to, execute and
deliver to Purchase Sub, as of the Transfer Closing, such instruments of
transfer and assignment (but without any requirement to record, or otherwise
notify any person of or obtain the Consent (as defined below) of any person to,
any such transfer or assignment) as are reasonably necessary to transfer to
Purchase Sub any other capital stock, properties, assets or contracts owned by
the Company or its affiliates reasonably requested by Purchaser in writing at
least 10 business days prior to the Effective Time.
1.2. The Merger.
Upon the terms and subject to the conditions of this Agreement, the
Merger shall be consummated in accordance with the DGCL. At the Effective Time,
upon the terms and subject to the conditions of this Agreement, Merger Sub shall
be merged with and into the Company in accordance with the DGCL and the separate
existence of Merger Sub shall thereupon cease and the Company, as the surviving
corporation in the Merger (the "SURVIVING CORPORATION"), shall continue its
corporate existence under the laws of the State of Delaware as a wholly-owned
subsidiary of Purchaser. It is intended that the Merger, combined with the
Distribution, will be treated as a single overall plan to fully redeem each
Company stockholder of his, her or its shares of Common Stock for United States
federal income tax purposes pursuant to Section 302 of the Internal Revenue Code
of 1986, as amended, including all regulations and interpretations thereof (the
"CODE"), and Revenue Rulings 55-745, 1955-2 C.B. 223 and 75-447, 1975-2 C.B.
113, thereby effecting a complete termination of each Company stockholder's
interest in the Company.
1.3. The Closings; Effective Time.
(a) The closing of the Transfers (the "TRANSFER CLOSING") shall take
place at the offices of Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP, Park
Avenue Tower, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 9:00 a.m. local
time on a date to be specified by the parties, which shall be no later than the
second (2nd) business day after the date that all of the conditions to each
party's obligations to effect the Transfers have been satisfied or waived (if
waivable), unless another time, date or place is agreed upon in writing by the
parties hereto (the "TRANSFER CLOSING DATE").
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(b) Subject to the provisions of this Agreement, on the Transfer
Closing Date:
(i) The Company shall deliver to Purchase Sub the certificates
representing all of the shares of the capital stock of each Transferred Sub,
either duly endorsed for transfer to Purchase Sub or accompanied by duly
executed stock powers.
(ii) Purchaser shall pay, or cause Purchase Sub to pay, to the
Company or its applicable subsidiaries, the Stock Purchase Amount, by wire
transfer of immediately available funds to a bank account specified by the
Company in writing to Purchaser.
(iii) Upon receipt of the Stock Purchase Amount, the Company shall,
or shall cause its applicable subsidiaries to, immediately deposit with American
Stock Transfer & Trust Company, 00000 Xxxxxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx,
XX 00000 (the "TRANSFER AGENT") an amount equal to $442,741,087.98 for
distribution to the Company's stockholders pursuant to the terms of Section 1.5
(the "DISTRIBUTION").
(iv) The parties intend for the Distribution to the Company's
stockholders to be treated as a partial redemption of each Company stockholder's
shares of Common Stock for United States federal income tax purposes. The
parties further intend for the cash received by the Company's stockholders on
partial redemption of their shares of Common Stock pursuant to the Distribution
and the cash received by the Company's stockholders in exchange for their
remaining shares of Common Stock pursuant to the Merger will be treated as part
of the same overall plan to fully redeem each Company stockholder of his, her or
its shares of Common Stock for United States federal income tax purposes
pursuant to Section 302 of the Code, and Revenue Rulings 55-745, 1955-2 C.B. 223
and 75-447, 1975-2 C.B. 113, thereby effecting a complete termination of each
Company stockholder's interest in the Company.
(c) The closing of the Merger (the "CLOSING") shall take place at
the offices of Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP, Park Avenue
Tower, 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m. local time
on the Transfer Closing Date after all of the conditions to each party's
obligations to effect the Merger have been satisfied or waived (if waivable),
unless another time, date or place is agreed upon in writing by the parties
hereto. The Closing shall not occur unless the Transfer Closing shall have
occurred.
(d) Subject to the provisions of this Agreement, on the Closing Date
the parties shall file with the Secretary of State of the State of Delaware a
certificate of merger in accordance with the DGCL (the "CERTIFICATE OF MERGER")
executed in accordance with the relevant provisions of the DGCL and shall make
all other filings or recordings required under the DGCL in order to effect the
Merger. The Merger shall become effective upon the filing of the Certificate of
Merger or at such other time as is agreed by the parties hereto and specified in
the Certificate of Merger. The time when the Merger shall become effective is
herein referred to as the "EFFECTIVE TIME" and the date on which the Effective
Time occurs is herein referred to as the "CLOSING DATE."
1.4. Conversion of Securities.
At the Effective Time, by virtue of the Merger and without any
action on the part of the holders of any securities of Merger Sub or the
Company:
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(a) Each Share that is owned by Purchaser or Merger Sub, or that is
owned by the Company as treasury stock, shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Each issued and outstanding Share (other than Shares to be
cancelled in accordance with Section 1.4(a) hereof and Dissenting Shares (as
defined in Section 1.7 below)) shall automatically be converted into the right
to receive $6.33 in cash, as a result of the Merger (the "MERGER
CONSIDERATION"), and $20.77 in cash, as a result of the Distribution (the
"DISTRIBUTION CONSIDERATION"), payable, without interest, to the holder of such
Share upon surrender, in the manner provided in Section 1.5 hereof, of the
certificate that formerly evidenced such Share. All such Shares, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and the
Distribution Consideration therefor upon the surrender of such certificate in
accordance with Section 1.5 hereof. Without limiting any other provision of this
Agreement, the Merger Consideration and the Distribution Consideration shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Common Stock), reorganization, recapitalization or other like change with
respect to the Common Stock occurring after the date hereof and prior to the
Effective Time and/or the Transfer Closing Date.
(c) Each issued and outstanding share of common stock of Merger Sub
shall be converted into one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
1.5. Payment for Certificates; Distribution.
(a) Transfer Agent. The Transfer Agent shall act as agent for the
holders of the Shares (other than Shares held by Purchaser, the Company and any
of their respective subsidiaries and Dissenting Shares) in connection with the
Merger and the Distribution to receive in trust the aggregate Merger
Consideration and the Distribution Consideration to which holders of Shares
shall become entitled pursuant to Section 1.4(b) hereof. The Company shall
deposit the Distribution with the Transfer Agent pursuant to the terms of
Section 1.3(b)(iii). Purchaser shall deposit the aggregate Merger Consideration
with the Transfer Agent on the Transfer Closing Date. The aggregate Merger
Consideration and the aggregate Distribution Consideration shall be invested by
the Transfer Agent as directed by Purchaser.
(b) Exchange Procedures. Promptly after the Effective Time,
Purchaser and the Surviving Corporation shall cause to be mailed to each holder
of record, as of the Effective Time, of a certificate or certificates, which
immediately prior to the Effective Time represented outstanding Shares (the
"CERTIFICATES"), whose Shares were converted pursuant to Section 1.4(b) hereof
into the right to receive the Merger Consideration and the Distribution
Consideration, a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Transfer Agent and shall be in
such form and have such other provisions as Purchaser may reasonably specify)
and instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration and the Distribution Consideration to be
received by each stockholder. Upon
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surrender of a Certificate for cancellation to the Transfer Agent or to such
other agent or agents as may be appointed by Purchaser, together with such
letter of transmittal, properly completed and duly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration and the Distribution
Consideration for each Share formerly represented by such Certificate, and the
Certificate so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on the cash payable upon the surrender of the Certificates. If
payment of the Merger Consideration and the Distribution Consideration is to be
made to a person other than the person in whose name the surrendered Certificate
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid all
transfer and other Taxes (as defined herein) required by reason of the issuance
to a person other than the registered holder of the Certificate surrendered or
shall have established to the reasonable satisfaction of the Surviving
Corporation that such Tax (as defined herein) either has been paid or is not
applicable. Until surrendered as contemplated by this Section 1.5, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration and the Distribution
Consideration for each Share in cash as contemplated by Section 1.4(b) hereof.
(c) Transfer Books; No Further Ownership Rights in the Shares. At
the Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable Law. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Article I.
(d) Termination of Fund; No Liability. At any time following the
nine-month anniversary of the Effective Time, the Surviving Corporation shall be
entitled to require the Transfer Agent to deliver to it any funds (including any
interest received with respect thereto) which had been made available to the
Transfer Agent, and holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws) only
as general creditors thereof with respect to the Merger Consideration and the
Distribution Consideration payable upon due surrender of their Certificates,
without any interest thereon. Notwithstanding the foregoing, neither the
Surviving Corporation nor the Transfer Agent nor any party hereto shall be
liable to any holder of a Certificate for Merger Consideration or the
Distribution Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(e) Lost, Stolen or Destroyed Certificates. In the event any
Certificate(s) shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate(s) to be lost,
stolen or destroyed and, if required by Purchaser, the posting by such person of
a bond in such sum as Purchaser may reasonably direct as indemnity against any
claim that may be made against any party hereto or the Surviving Corporation
with respect to such Certificate(s), the Transfer Agent will disburse the Merger
Consideration and the Distribution Consideration pursuant to Section 1.5(b)
payable in respect of the Shares represented by such lost, stolen or destroyed
Certificate(s).
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(f) Withholding Taxes. Purchaser, Merger Sub and the Company, as
applicable, shall be entitled to deduct and withhold, or cause the Transfer
Agent to deduct and withhold, from the Merger Consideration and/or the
Distribution Consideration payable to a holder of Shares pursuant to the Merger
and/or the Distribution any such amounts as are required under the Code, or any
applicable provision of state, local or foreign Tax law. To the extent that
amounts are so withheld by Purchaser, Merger Sub or the Company, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the Shares in respect of which such deduction and withholding
was made by Purchaser, Merger Sub or the Company.
1.6. Options.
(a) With respect to all outstanding options to purchase Shares (the
"COMPANY OPTIONS") granted under the Company's 1992 Incentive and Non-qualified
Stock Option Plan, as amended, 1992 Directors' Stock Option Plan, as amended,
and 2004 Stock Option Plan, as amended (collectively, the "COMPANY OPTION
PLANS") or otherwise, whether or not then vested, at the Effective Time, subject
to the terms and conditions set forth below in this Section 1.6(a), each holder
of a Company Option will be entitled to receive from the Company, and shall
receive, in settlement of each Company Option a cash amount (the "CASH AMOUNT")
equal to the net amount of (A) the product of (i) the excess, if any, of the sum
of the Merger Consideration plus the Distribution Consideration less the
exercise price per share of such Company Option at the Effective Time,
multiplied by (ii) the number of shares subject to such Company Option, less (B)
any applicable withholdings for Taxes. If the exercise price per share of any
Company Option equals or exceeds the sum of the Merger Consideration plus the
Distribution Consideration, the Cash Amount therefor shall be zero and such
Company Option shall be cancelled and all of such holder's rights under such
Company Options shall terminate at the Effective Time. Notwithstanding the
foregoing, (i) payment of the Cash Amount is subject to written acknowledgement,
in a form reasonably acceptable to the Surviving Corporation, that no further
payment is due to such holder on account of any Company Option and all of such
holder's rights under such Company Options have terminated and (ii) with respect
to any person subject to Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), any Cash Amount to be paid to such person in
accordance with this Section 1.6(a) shall be paid as soon as practicable after
the payment can be made without liability to such person under Section 16(b) of
the Exchange Act.
(b) As of the Effective Time, except as provided in this Section
1.6, all rights under any Company Option and any provision of the Company Option
Plans and any other plan, program or arrangement providing for the issuance or
grant of any other interest in respect of the securities of the Company shall be
cancelled. The Company shall ensure that, as of and after the Effective Time,
except as provided in this Section 1.6, no person shall have any right
(including, without limitation, any right to acquire any securities of the
Company or any of its subsidiaries) under the Company Option Plans or any other
plan, program or arrangement with respect to securities of the Company, the
Surviving Corporation or any subsidiary thereof.
(c) At or before the Effective Time, the Company shall cause to be
effected any necessary amendments to the Company Option Plans and any other
resolutions, consents or notices, in form and substance reasonably acceptable to
Purchaser, required under the Company
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Option Plans or any Company Options to give effect to the foregoing provisions
of this Section 1.6.
(d) The Company and the Purchaser agree that it is their intent to,
and that they will, report all income tax deductions resulting from the payment
of the Cash Amount in the portion of the Company's taxable year prior to the
Effective Time.
1.7. Dissenting Shares.
Notwithstanding any provision of this Agreement to the contrary,
each outstanding Share, the holder of which has demanded and perfected such
holder's right to dissent from the Merger and to be paid the fair value of such
Shares in accordance with the DGCL and, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("DISSENTING SHARES"),
shall not be converted into or represent a right to receive the Merger
Consideration and the Distribution Consideration into which Shares are converted
pursuant to Section 1.4(b) hereof, but the holder thereof shall be entitled only
to such rights as are granted by the DGCL. Notwithstanding the immediately
preceding sentence, if any holder of Shares who demands dissenters' rights with
respect to its Shares under the DGCL effectively withdraws or loses (through
failure to perfect or otherwise) its dissenters' rights, then as of the
Effective Time or the occurrence of such event, whichever later occurs, such
holder's Shares will automatically be converted into and represent only the
right to receive the Merger Consideration and the Distribution Consideration as
provided in Section 1.4(b) hereof, without interest thereon, upon surrender of
the certificate or certificates formerly representing such Shares, in the manner
provided in Section 1.5 hereof. The Company shall give Purchaser (i) prompt
written notice of any notice of intent to demand fair value for any Shares,
withdrawals of such notices, and any other instruments served pursuant to the
DGCL and received by the Company, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for fair value for Shares
under the DGCL. The Company shall not, except with the prior written consent of
Purchaser, make any payment with respect to any demands for fair value for
Shares or offer to settle or settle any such demands.
1.8. Certificate of Incorporation and Bylaws.
Subject to Section 5.4 hereof, at and after the Effective Time until
the same have been duly amended, (i) the Certificate of Incorporation of the
Company in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation and (ii) and the Bylaws of Merger Sub
in effect at the Effective Time shall be the Bylaws of the Surviving
Corporation.
1.9. Directors and Officers.
At and after the Effective Time, the directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, and the officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case until
their successors are elected or appointed and qualified. If, at the Effective
Time, a vacancy shall exist on the board of directors or in any office of the
Surviving Corporation, such vacancy may thereafter be filled in the manner
provided by Law.
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1.10. Other Effects of Merger.
The Merger shall have all further effects as specified in the
applicable provisions of the DGCL.
1.11. Additional Actions.
If, at any time after the Effective Time, the Surviving Corporation
or Purchase Sub shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Purchaser, the
Surviving Corporation or Purchase Sub its right, title or interest in, to or
under any of the rights, properties or assets of Merger Sub, the Company or the
Transferred Subs or otherwise to carry out this Agreement or the Transactions,
the officers and directors of the Surviving Corporation or Purchase Sub, as
applicable, shall be authorized to execute and deliver, in the name and on
behalf of Merger Sub, the Company or the Transferred Subs, as applicable, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of Merger Sub, the Company or the Transferred Subs, as
applicable, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to and
under such rights, properties or assets in the Purchaser, Surviving Corporation
or Purchase Sub, as applicable, or otherwise to carry out this Agreement or the
Transactions. Any such transfers or actions that occur pursuant to this Section
1.11 shall be deemed to have occurred immediately prior to or on the Transfer
Closing Date or the Closing Date, as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The following representations and warranties by the Company to
Purchaser and Merger Sub are qualified by the Company Disclosure Schedule, which
sets forth certain disclosures concerning the Company, its subsidiaries and its
business (the "COMPANY DISCLOSURE SCHEDULE"). The disclosure of any fact or item
in any section of the Company Disclosure Schedule shall, should the existence of
such fact or item be relevant to any other section, be deemed to be disclosed
with respect to that other section so long as the relevance of such disclosure
to such other section is reasonably apparent.
The Company hereby represents and warrants to Purchaser and Merger
Sub as follows:
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2.1. Due Organization and Good Standing.
Each of the Company and its subsidiaries is a corporation or other
form of entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Each of the Company and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the character of the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing could not reasonably be expected to have a Company Material
Adverse Effect. For purposes of this Agreement, the term "COMPANY MATERIAL
ADVERSE EFFECT" shall mean a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, or the ability of the Company to consummate any of the Transactions,
except in each case for any such effects resulting from, arising out of or
relating to (a) the taking of any action or incurring of any expense in
connection with this Agreement or any of the Transactions, (b) the entry into or
announcement of this Agreement and the Transactions, (c) any change in or
interpretations of (i) U.S. generally accepted accounting principles ("GAAP") or
(ii) any Law, (d) any change in interest rates or general economic conditions in
the industries or markets in which the Company or any of its subsidiaries
operates or affecting the United States or foreign economies in general or in
the United States or foreign financial, banking or securities markets (which
changes do not affect the Company and its subsidiaries to a materially
disproportionate degree), (e) any action taken by Purchaser, Merger Sub,
Purchase Sub or any of their respective affiliates, (f) any natural disaster or
act of God, or (g) any act of terrorism or outbreak or escalation of hostilities
or armed conflict. Company Material Adverse Effect does not include any changes,
events, conditions or effects relating solely to Purchaser or its subsidiaries'
financial condition, results of operations or business. The Company has
heretofore made available to Purchaser accurate and complete copies of the
Certificate of Incorporation and Bylaws or other organizational documents, as
currently in effect, of the Company and each of its subsidiaries.
2.2. Capitalization.
(a) The authorized capital stock of the Company consists of
98,000,000 shares of Common Stock and 2,000,000 shares of preferred stock, par
value $.01 per share (the "PREFERRED STOCK" and, together with the Common Stock,
the "COMPANY CAPITAL STOCK"). As of the close of business on the date hereof,
except as set forth on Section 2.2(a) of the Company Disclosure Schedule, (i)
21,316,374 shares of Common Stock were issued and outstanding, (ii) no shares of
Preferred Stock were issued and outstanding, and (iii) 3,723,671 shares of
Common Stock were reserved for issuance pursuant to outstanding Company Options.
All of the outstanding shares of Company Capital Stock are, and all shares of
Company Capital Stock which may be issued pursuant to the exercise of
outstanding Company Options will be, when issued in accordance with the
respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. None of the outstanding Company Capital Stock has been issued in
violation of any federal or state securities laws or in violation of any
purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right. Except as set forth above or in Section
2.3 below, as of the date hereof, no shares of voting or non-voting capital
stock, other equity interests, or other voting securities of the Company or its
subsidiaries are
9
issued, reserved for issuance or outstanding. All outstanding Company Options
were granted under the Company Option Plans. Neither the Company nor any of its
subsidiaries has issued any Company Option where, as of the date the Company
Option was granted, the exercise price of the Company Option was less than the
fair market value of the stock subject to such Company Option as of that date.
Except as set forth on Section 2.2(a) of the Company Disclosure Schedule, there
are no stock-appreciation rights, stock-based performance units, "phantom" stock
rights or other agreements, arrangements or commitments of any character
(contingent or otherwise), pursuant to which any person is or may be entitled to
receive any payment or other value based on the revenues, earnings or financial
performance, stock price performance or assets of the Company or any of its
subsidiaries or calculated in accordance therewith (other than ordinary course
payments, commissions or bonus plans to employees or sales representatives of
the Company or its subsidiaries based upon revenues or profits generated by them
without augmentation as a result of the Transactions) or to cause the Company or
any of its subsidiaries to file a registration statement under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), or which otherwise require the
registration of any securities of the Company or any of its subsidiaries.
(b) Except as set forth in Section 2.2(b) of the Company Disclosure
Schedule, (i) the Company directly or indirectly owns all of the capital stock
of, or other equity interests in, its subsidiaries, (ii) there are no existing
options, warrants, puts, calls, preemptive or similar rights, bonds, debentures,
notes or other indebtedness having voting rights or debt convertible into
securities having such rights ("VOTING DEBT") or subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of, or other equity interests in, the Company or any
of its subsidiaries obligating the Company or any of its subsidiaries to issue,
transfer or sell or cause to be issued, transferred, sold or repurchased any
options or shares of capital stock or Voting Debt of, or other equity interest
in, the Company or any of its subsidiaries or securities convertible into or
exchangeable for such shares or equity interests, or obligating the Company or
any of its subsidiaries to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment and
(iii) there are no outstanding contractual obligations or other commitments of
the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any Company Capital Stock, or other capital stock of, or equity
interests in, the Company or any of its subsidiaries or to provide funds to make
any investment (in the form of a loan, capital contribution or otherwise) in any
other entity.
(c) There are no voting trusts or other agreements or understandings
to which the Company is a party with respect to the voting of the Company
Capital Stock.
(d) Following the Effective Time, no holder of Company Options will
have any right to receive shares of common stock of the Surviving Corporation
upon exercise of Company Options.
(e) Except as disclosed in Section 2.2(e) of the Company Disclosure
Schedule, no Indebtedness of the Company or any of its subsidiaries contains any
restriction upon (i) the prepayment of any of such Indebtedness, (ii) the
incurrence of Indebtedness by the Company or any of its subsidiaries, or (iii)
the ability of the Company or any of its subsidiaries to grant any lien on its
properties or assets. As used in this Agreement, "INDEBTEDNESS" means (A) all
10
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (B) any
other indebtedness that is evidenced by a note, bond, debenture or similar
instrument, (C) all obligations under financing leases, (D) all obligations in
respect of acceptances issued or created, (E) all liabilities secured by any
lien on any property and (F) all guarantee obligations.
(f) Section 2.2(f) of the Company Disclosure Schedule lists all
Company Options outstanding as of the date hereof and the name of the holder,
the exercise price, and the number and class of Company Capital Stock which are
the subject of each Company Option.
(g) No agreement or understanding requires consent or approval from
the holder of any Company Option to effectuate the terms of this Agreement.
2.3. Subsidiaries
Section 2.3 of the Company Disclosure Schedule contains a list of
all subsidiaries of the Company and the number and class of outstanding capital
stock, or other equity interests, held directly or indirectly by the Company in
each such subsidiary. Each subsidiary is wholly owned by the Company or one of
its subsidiaries, except as set forth in Section 2.3 of the Company Disclosure
Schedule. All of the capital stock and other interests of the subsidiaries so
held are owned by the Company free and clear of any liens, claims, pledges,
mortgages, security interests, charges, restrictions or encumbrances of any kind
or nature whatsoever or agreement with respect thereto. All of the outstanding
shares of capital stock in each of the subsidiaries held by the Company are duly
authorized, validly issued, fully paid and nonassessable and were issued free of
preemptive rights and in compliance with applicable Laws. No equity securities
or other interests of any of the subsidiaries are or may become required to be
issued or purchased by reason of any options, warrants, rights to subscribe to,
puts, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of any capital
stock of, or other equity interests in, any subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any subsidiary
is bound to issue additional shares of its capital stock or other equity
interests, or options, warrants or rights to purchase or acquire any additional
shares of its capital stock or other equity interests or securities convertible
into or exchangeable for such shares or interests.
2.4. Authorization; Binding Agreement.
The Company has all requisite corporate power and authority to
execute and deliver this Agreement and to consummate the Transactions. The
execution and delivery of this Agreement and the consummation of the
Transactions have been duly and validly authorized and unanimously approved by
the Board, such approval is sufficient to render inapplicable to this Agreement
and the Transactions the provisions of Section 203 of the DGCL such that said
provisions will not apply to this Agreement and the Transactions, and no other
corporate proceedings on the part of the Company are necessary to authorize the
execution and delivery of this Agreement or to consummate the Transactions
(other than the requisite approval of the Transactions by the stockholders of
the Company in accordance with the DGCL). This Agreement has been duly and
validly executed and delivered by the Company and constitutes the
11
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by principles of equity regarding the availability of remedies ("ENFORCEABILITY
EXCEPTIONS").
2.5. Governmental Approvals.
No consent, approval, waiver or authorization of, notice to or
declaration or filing with ("CONSENT"), any nation or government, any state or
other political subdivision thereof, any entity, authority or body exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any governmental or
regulatory authority, agency, department, board, commission, administration or
instrumentality, any court, tribunal or arbitrator or any self-regulatory
organization ("GOVERNMENTAL AUTHORITY") on the part of the Company or any of its
subsidiaries is required to be obtained or made in connection with the execution
or delivery by the Company of this Agreement or the consummation by the Company
of the Transactions other than (i) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the DGCL,
(ii) filings with the Securities and Exchange Commission (the "SEC") and state
securities laws administrators, (iii) such filings as may be required in any
jurisdiction where the Company or its subsidiaries are qualified or authorized
to do business as a foreign corporation in order to maintain such qualification
or authorization, (iv) pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR ACT"), (v) such filings as may be required
with respect to the Company Permits (as hereinafter defined), (vi) pursuant to
federal, state, city and local Laws governing the sale of liquor that may be
applicable, and (vii) those Consents that, if they were not obtained or made,
could not reasonably be expected to result in a Company Material Adverse Effect.
2.6. No Violations.
The execution and delivery of this Agreement, the consummation of
the Transactions and the compliance by the Company and its subsidiaries with any
of the provisions hereof will not (i) conflict with or result in any breach of
any provision of the Certificate of Incorporation or Bylaws or other governing
instruments of the Company or any of its subsidiaries, (ii) except as set forth
on Section 2.6 of the Company Disclosure Schedule, require any Consent under or
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any Company Material Contract (as defined below), Company Lease (as defined
below), material agreement related to Company Intellectual Property (as defined
below) or Franchise Agreement (as defined below), to which the Company or any of
its subsidiaries is a party or by which their assets are bound, (iii) result in
the creation or imposition of any liens, charges, security interests, options,
claims, mortgages, pledges, assessments, adverse claims, rights of others or
restrictions (whether on voting, sale, transfer, disposition or otherwise) or
other encumbrances or restrictions of any nature whatsoever, whether imposed by
agreement, understanding, law or equity, or any conditional sale contract, title
retention contract or other contract to give or refrain from giving any of the
foregoing ("ENCUMBRANCES") upon any of the assets of the Company or any of its
subsidiaries or (iv)
12
subject to obtaining the Consents from Governmental Authorities referred to in
Section 2.5 hereof, contravene any applicable provision of any statute, law,
rule or regulation or any legally binding order, decision, injunction, judgment,
award or decree ("LAW" or "LAWS") to which the Company, any of its subsidiaries
or any of their assets or properties is subject or any Company Permit.
2.7. SEC Filings; Company Financial Statements.
(a) The Company has timely filed all forms, reports, schedules,
statements and other documents required to be filed by the Company with the SEC
since December 31, 2003 under the Exchange Act or the Securities Act, and has
made available to Purchaser true and complete copies of such forms, reports and
documents in the form filed with the SEC. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the "COMPANY SEC REPORTS." At the time when
filed (or if amended or superseded by a subsequent filing prior to the date
hereof then on the date of such later filing), the Company SEC Reports (i)
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, the Xxxxxxxx-Xxxxx Act of 2002 and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. There are
no outstanding comments from, or, to the Company's knowledge, unresolved issues
raised by, the SEC with respect to the Company SEC Reports. To the Company's
knowledge, none of the Company SEC Reports is currently being reviewed by the
SEC, and the Company has not received any correspondence or indication in
writing from the SEC that it, or any transaction or transactions entered into by
the Company or any of its subsidiaries, is being investigated either formally or
informally by the SEC. Between the date of this Agreement and the Closing Date,
the Company will timely file with the SEC all documents required to be filed by
it under the Exchange Act. None of the Company's subsidiaries has filed, or is
obligated to file, any report, registration statement or other filing with the
SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports as
amended to date (the "COMPANY FINANCIALS"), including each Company SEC Report
filed after the date hereof until the Closing, (i) was prepared from, in
accordance with and accurately reflects in all material respects the Company's
books and records as of the times and for the periods referred to therein, (ii)
complied in all material respects with the published rules and regulations of
the SEC with respect thereto, (iii) was prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act),
and (iv) fairly presented the consolidated financial position of the Company as
at the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments, none of which were or are expected
to be material. The balance sheet of the Company contained in the Company SEC
Report as of June 13, 2006 (the "BALANCE SHEET DATE") as filed with the SEC
before the date hereof is hereinafter referred to as the "COMPANY BALANCE
SHEET."
13
(c) The Company has heretofore made available to Purchaser a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC but which are required to be filed, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Securities Act or the Exchange Act.
(d) Section 2.7(d) of the Company Disclosure Schedule sets forth a
complete list of all effective registration statements filed on Form S-3 or Form
S-8 or otherwise relying on Rule 415 under the Securities Act on which there
remain unsold securities.
(e) The Company has established and maintains disclosure controls
and procedures (as defined in Rules 13a-14 and 15d-14 promulgated under the
Exchange Act) so that material information relating to the Company should be
made known to the Chief Executive Officer and Chief Financial Officer. To the
Company's knowledge, there are no significant deficiencies or material
weaknesses in the design or operation of the Company's internal controls that
could adversely affect the Company's ability to record, process, summarize and
report financial data.
(f) Section 2.7(f) of the Company Disclosure Schedule lists all
"off-balance sheet arrangements" (as defined in Item 303 of Regulation S-K
promulgated by the SEC) effected by the Company or any of its subsidiaries since
December 31, 2003, and the Company has provided or made available to Purchaser
copies of the documentation creating or governing such arrangements.
2.8. Absence of Certain Changes.
Except as disclosed in Section 2.8 of the Company Disclosure
Schedule, from the Balance Sheet Date to the date hereof, the Company and its
subsidiaries have not:
(a) suffered any Company Material Adverse Effect or any event or
change which could reasonably be expected to result in a Company Material
Adverse Effect;
(b) except for items incurred in the ordinary course of business and
consistent with past practice, incurred any liabilities or obligations
(absolute, accrued, contingent or otherwise) which exceed $500,000 in the
aggregate;
(c) paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of claims, liabilities and obligations reflected or reserved
against in the Company Balance Sheet or incurred in the ordinary course of
business and consistent with past practice since the Balance Sheet Date;
(d) permitted or allowed any of their properties or assets (real,
personal or mixed, tangible or intangible) to be subjected to any Encumbrances,
except for liens for current Taxes not yet due or liens the incurrence of which
could not reasonably be expected to have a Company Material Adverse Effect;
(e) cancelled any debts or waived any claims or rights of material
value;
14
(f) sold, transferred or otherwise disposed of any of their material
properties or assets (real, personal or mixed, tangible or intangible), except
in the ordinary course of business, consistent with past practice;
(g) granted any material increase in the compensation or benefits
payable or to become payable to any director, officer or employee of the
Company;
(h) made any material change in severance policies or practices;
(i) declared, paid or set aside for payment any dividend or other
distribution (whether in cash, stock or property) in respect of their respective
capital stock or other equity interests or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of the Company, other than (1) the Distribution or (2) the Company's
standard quarterly cash dividend payments to its stockholders;
(j) (i) made any changes in any of the accounting methods used by
it, except for such changes required by GAAP; or (ii) made or changed any
election relating to Taxes, adopted or changed any accounting method relating to
Taxes, entered into any closing agreement relating to Taxes, filed any amended
Tax Return, settled or consented to any claim or assessment relating to Taxes,
incurred any obligation to make any payment of, or in respect of, any Taxes,
except in the ordinary course of business, or agreed to extend or waive the
statutory period of limitations for the assessment or collection of Taxes;
(k) paid, loaned, modified or advanced any amount to, or sold,
transferred or leased any material properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any material agreement or
arrangement with, any of their respective officers, directors or stockholders or
any affiliate or associate of any of their officers, directors or stockholders,
except for directors' fees, expense reimbursements in the ordinary course and
compensation to officers at rates not inconsistent with the Company's past
practice;
(l) written-down the value of any inventory (including write-downs
by reason of shrinkage or xxxx-down) or assets, or written off as uncollectible
any notes or accounts receivable in excess of $500,000 in the aggregate;
(m) suffered any material impairment of any Company Intellectual
Property (as defined in Section 2.15 below) or any material adverse change in
any Company Intellectual Property licensed from a third party, in each case,
other than in the ordinary course of business consistent with past practice;
(n) granted, issued, accelerated, paid, accrued or agreed to pay or
make any accrual or arrangement for payments or benefits pursuant to any Company
Employee Plans (as defined in Section 2.16(a) below) except in accordance with
the terms of the respective Company Employee Plans, or adopted any Company
Employee Plan, or amended any Company Employee Plan in any material respect,
except in the ordinary course of business consistent with past practice; or
(o) authorized or agreed, whether in writing or otherwise, to take
any action described in this Section 2.8.
15
2.9. Absence of Undisclosed Liabilities.
As of the date hereof, except (a) as disclosed in the Company
Balance Sheet, (b) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the Balance Sheet Date
which do not, in the aggregate, materially increase the amount of such type of
liabilities reflected on the Company Balance Sheet, or (c) as set forth on
Section 2.9 of the Company Disclosure Schedule, neither the Company nor its
subsidiaries has any liabilities or obligations of any nature (whether absolute,
accrued, fixed, contingent or otherwise) that are material to the financial
condition of the Company and its subsidiaries, taken as a whole.
2.10. Compliance with Laws.
The business of the Company and its subsidiaries has been operated
in compliance with all Laws applicable thereto, except for any instances of
non-compliance which could not reasonably be expected to have a Company Material
Adverse Effect.
2.11. Permits.
Each of the Company and its subsidiaries has all material permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of its business, including those required under
regulatory Laws and those required by state, city or local liquor licensing
boards, agencies or other similar entities (collectively, "COMPANY PERMITS").
Neither the Company nor any of its subsidiaries is in material violation of any
Company Permit. No proceedings are pending or, to the knowledge of the Company,
threatened to revoke or limit any Company Permit except, in each case, those the
absence or violation of which could not reasonably be expected to have a Company
Material Adverse Effect.
2.12. Litigation.
Except as disclosed in Section 2.12 of the Company Disclosure
Schedule, as of the date hereof, there is no private or governmental action,
suit, proceeding, claim, arbitration or investigation ("LITIGATION") pending
before any agency, arbitrator, mediator, court or tribunal, foreign or domestic,
or, to the knowledge of the Company, threatened against the Company, its
subsidiaries or any of their properties or, to the knowledge of the Company, any
of their officers or directors (in their capacities as such). As of the date
hereof, there is no judgment, decree or order against the Company or its
subsidiaries or, to the knowledge of the Company, any of their directors or
officers (in their capacities as such) that would prevent, enjoin or materially
alter or delay any of the Transactions. Except as disclosed in Section 2.12 of
the Company Disclosure Schedule, as of the date hereof there is no Litigation
that the Company or its subsidiaries have pending against other parties.
2.13. Restrictions on Business Activities.
Except as disclosed in Section 2.13 of the Company Disclosure
Schedule, there is no agreement, judgment, injunction, order or decree binding
upon the Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or impairing in any material respect
any current business practice of the Company or any of its subsidiaries, any
acquisition of property by the Company or any of its subsidiaries, the conduct
16
of business by the Company or any of its subsidiaries as currently conducted, or
restricting in any material respect the ability of the Company or any of its
subsidiaries from engaging in business or from competing with other parties.
2.14. Material Contracts.
(a) Except as filed as an exhibit to the Company SEC Reports filed
before the date of this Agreement or as set forth in Section 2.14 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is a party
to or bound by any:
(i) employment agreement pursuant to which an employee is entitled
to receive a base salary in excess of $100,000 per year (other than those that
are terminable at will by the Company or such subsidiary without cost, payment
or penalty);
(ii) contract, whether as licensor or licensee, for the license of
any patent, know-how, trademark, trade name, service xxxx, copyright or other
intangible asset that provides for payments by or to the Company or such
subsidiary in excess of $100,000 per year (other than licenses of commercial
off-the-shelf computer software);
(iii) loan or guaranty agreement, indenture or other instrument,
contract or agreement under which in excess of $100,000 has been borrowed or
loaned or any note, bond or other evidence of indebtedness in excess of $100,000
has been issued, other than guarantees by the Company of real property leases of
certain of its subsidiaries;
(iv) mortgage, security agreement, conditional sales contract,
capital lease or similar agreement with total payments in excess of $100,000 per
year or that effectively creates a lien, encumbrance or security interest on any
material assets of the Company or any of its subsidiaries;
(v) contract restricting the Company or any of its subsidiaries in
any material respect from engaging in business or from competing with any other
parties, including, but not limited to, geographic limitations on the Company's
or any of its subsidiaries' activities;
(vi) written agreement relating to the reorganization or merger of
the Company or any subsidiary that has not been consummated as of the date
hereof;
(vii) material partnership or joint venture agreement;
(viii) collective bargaining agreement;
(ix) contract that is a "material contract" (as defined in Item
601(b)(10) of Regulation S-K under the Securities Act);
(x) restaurant services, management, royalty or similar agreement
with total payments by the Company or any subsidiary in excess of $100,000 per
year, other than intercompany agreements among the Company and/or one or more of
its subsidiaries;
17
(xi) agreements relating to the acquisition of any material assets
or relating to the merger or consolidation of the Company or any of its
subsidiaries with any other entity that have (A) not been consummated as of the
date hereof or (B) that, if consummated as of the date hereof, have any
remaining outstanding monetary obligations in excess of $100,000;
(xii) investment banking agreement of any kind or nature whatsoever;
(xiii) other contracts (other than those listed in clauses (i)
through (xii) above) (A) with a term longer than one (1) year from the date
hereof that involve payments by the Company and/or any of its subsidiaries in
excess of $100,000 per year; or (B) with a term less than one (1) year from the
date hereof that involve payments by the Company and/or any of its subsidiaries
in excess of $200,000, that are not terminable without premium or penalty on
less than 30 days' notice;
(xiv) agreements or insurance policies providing for indemnification
of any officer or director of the Company or any of its subsidiaries, other than
the existing directors' and officers' insurance policy and the Certificate of
Incorporation and Bylaws or other organizational documents, as currently in
effect, of the Company and each of its subsidiaries; or
(xv) agreements evidencing a loan to any officer or director of the
Company or any of its subsidiaries, other than advances for expenses pursuant to
the Company's standard expense reimbursement policies.
All of the foregoing, together with the Company Leases, any material
agreements related to Company Intellectual Property, and the Franchise
Agreements, are collectively called "COMPANY MATERIAL CONTRACTS."
(b) All such Company Material Contracts are in full force and effect
and are valid and binding obligations of the Company or its subsidiaries and
enforceable against the Company or its subsidiaries in accordance with their
respective terms, subject to the Enforceability Exceptions. Neither the Company
nor any of its subsidiaries nor, to the knowledge of the Company, any other
party to any Company Material Contract is in breach of or in default under any
of the Company Material Contracts, except for such breaches or defaults that
have not had and could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. True and complete copies of
all written Company Material Contracts and true and correct summaries of all
oral Company Material Contracts have been delivered or made available to
Purchaser.
2.15. Intellectual Property.
Except as set forth in Section 2.15 of the Company Disclosure
Schedule, each of the Company and its subsidiaries owns, or holds adequate
licenses or other rights to use, all material (i) patents, patent applications
and statutory invention registrations, (ii) trademarks, service marks, trade
dress, logos, trade names, corporate names, domain names and other source
identifiers, and registrations and applications for registration thereof, (iii)
copyrightable works, copyrights and registrations and applications for
registration thereof, including, without limitation, software, recipes, menus,
operation manuals, marketing materials, architectural designs and layouts, (iv)
confidential and proprietary information, including, without limitation,
18
trade secrets, customer lists, vendor and supply lists, know-how and processes,
and (v) rights of publicity and privacy related to the use of names, likenesses,
voice, signatures and biographical information of real persons, in each case
necessary for their respective businesses as now conducted by them (the "COMPANY
INTELLECTUAL PROPERTY"), and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with, and, to the Company's
knowledge, there are no infringements of or conflicts with, the rights of others
with respect to the use of any of the Company Intellectual Property that, in
either such case, has had or could reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect.
2.16. Employee Benefit Plans.
(a) Section 2.16(a) of the Company Disclosure Schedule lists, with
respect to the Company and its subsidiaries and any trade or business (whether
or not incorporated) which is treated as a single employer with the Company and
its affiliates within the meaning of Sections 414(b), (c), (m) or (o) of the
Code (an "ERISA AFFILIATE"), (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) loans to officers and directors, other than advances for
expenses reimbursements incurred in the ordinary course of business, and any
stock option, stock purchase, "phantom" stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria (Code Section 125), health flexible
spending, dependent care (Code Section 129), life insurance or accident
insurance plans, programs, agreements or arrangements not disclosed under
Section 2.16(a)(i) above, (iii) all material bonus, pension, profit sharing,
savings, deferred compensation or incentive plans, programs, agreements or
arrangements not disclosed under Sections 2.16(a)(i) or 2.16(a)(ii) above, (iv)
other material fringe or employee benefit plans, programs, agreements or
arrangements of the Company and its subsidiaries (including long term care
plans) and (v) any current or former employment, change of control, retention or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of the Company or any of its affiliates remain for
the benefit of, or relating to, any present or former employee, consultant or
director of the Company or any of its subsidiaries (together, the "COMPANY
EMPLOYEE PLANS").
(b) The Company has made available to Purchaser a copy of each of
the Company Employee Plans and other plan-related documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and any material employee
communications required under Part 1 of ERISA and relating thereto) and has,
with respect to each Company Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports filed for the most recent
three (3) plan years. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has either obtained from the Internal Revenue Service
("IRS") a favorable determination letter as to its qualified status under the
Code, including all amendments to the Code effected by the Economic Growth and
Tax Relief Reconciliation Act of 2001 and related guidance and subsequent Law
and regulatory changes, has timely applied to the IRS for such a determination
letter prior to the expiration of the requisite period under applicable Treasury
Regulations or IRS pronouncements in which to apply for such determination
letter and to make any amendments necessary to obtain a favorable determination,
or has been established under a standardized
19
prototype plan for which an IRS opinion letter has been obtained by the plan
sponsor and is valid as to the adopting employer. The Company has also made
available to Purchaser the most recent IRS determination, notification, advisory
or opinion letter, as appropriate, issued with respect to each such Company
Employee Plan, and, to the Company's knowledge, nothing has occurred since the
issuance of each such letter which could reasonably be expected to cause the
loss of the tax-qualified status of any Company Employee Plan subject to Code
Section 401(a).
(c) There has been no "prohibited transaction," as such term is
defined in Sections 406 or 407 of ERISA and Section 4975 of the Code, by the
Company or, to the knowledge of the Company, by any trusts created thereunder or
any trustee or administrator thereof, with respect to any Company Employee Plan.
Each Company Employee Plan has been administered in accordance with its terms
and in compliance with the requirements prescribed by any and all applicable
Laws (including ERISA and the Code), except as could not reasonably be expected
to have, in the aggregate, a Company Material Adverse Effect, and the Company
and each ERISA Affiliate have performed all material obligations required to be
performed by them under, are not in any material respect in default under or
violation of, and have no knowledge of any material default or violation by any
other party to, any of the Company Employee Plans. To the Company's knowledge,
neither the Company nor any of its subsidiaries is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or ERISA with respect to
any of the Company Employee Plans. All contributions and premiums required to be
made by the Company or any ERISA Affiliate to any Company Employee Plan have
been made on or before their due dates. Each Company Employee Plan can be
amended, terminated or otherwise discontinued in accordance with its terms. With
respect to each Company Employee Plan subject to ERISA, the Company has prepared
in good faith and timely filed all requisite material governmental reports
(which were true and correct in all material respects as of the date filed) and
has in good faith and timely filed and distributed or posted all material
notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan. No suit, administrative
proceeding, action or other litigation has been brought, or to the knowledge of
the Company is threatened, against or with respect to any such Company Employee
Plan, including any audit or inquiry by the IRS or United States Department of
Labor, other than routine claims for benefits.
(d) With respect to each Company Employee Plan, the Company and its
affiliates have complied with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the regulations thereunder, (ii) the applicable requirements of
the Family Medical and Leave Act of 1993 and the regulations thereunder and
(iii) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations thereunder, except where the
failure to comply with the applicable requirements of such laws and regulations
could not reasonably be expected to have a Company Material Adverse Effect.
(e) Except as disclosed in Section 2.16(e) of the Company Disclosure
Schedule, the consummation of any of the Transactions will not (i) entitle any
current or former employee, director or consultant of the Company or its
subsidiaries to any payment (whether of severance pay, unemployment
compensation, golden parachute, bonus or otherwise), (ii) accelerate, forgive
indebtedness, vest, distribute, or increase benefits or obligation to fund
benefits with respect to any employee, former employee or director of the
Company, or (iii) accelerate the time of
20
payment or vesting of any Company Options, or increase the amount of
compensation due any such employee, former employee, director or consultant.
(f) Except as set forth on Section 2.16(f) of the Company Disclosure
Schedule, no amounts payable under any of the Company Employee Plans or any
other contract, agreement or arrangement with respect to which the Company may
have any liability will not be deductible for federal income tax purposes by
virtue of Section 162(m) or Section 280G of the Code. None of the Company
Employee Plans contains any provision requiring a gross-up pursuant to Section
280G of the Code or similar tax provisions.
(g) Except as set forth on Section 2.16(g) of the Company Disclosure
Schedule, no Company Employee Plan maintained by the Company or its subsidiaries
provides benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or its subsidiaries after retirement or other termination of service
(other than (i) coverage mandated by COBRA, (ii) death benefits or retirement
benefits under any Company Employee Plan that is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, that has been disclosed
under this Section 2.16, or (iii) benefits, the full cost of which is borne by
the current or former employee (or beneficiary thereof)).
(h) There has been no amendment to, written or oral interpretation
or announcement by the Company or any ERISA Affiliate relating to, or change in
participation or coverage under, any Company Employee Plan which would
materially increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan for the most recent fiscal quarter
included in the Company Financials.
(i) Neither the Company nor any ERISA Affiliate has any liability
with respect to any (i) employee pension benefit plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code or (ii) "multiemployer plan"
as defined in Section 3(37) of ERISA.
(j) Section 2.16(j) of the Company Disclosure Schedule sets forth each written
employment, compensation and employee benefit plan, program or arrangement known
to the Company with respect to persons with no U.S. source income, as defined in
Section 862 of the Code, and who provide or have provided services to the
Company and its affiliates and any trade or business (whether or not
incorporated) which is treated as a single employer with the Company and its
affiliates within the meaning of Sections 414(b), (c), (m) or (o) of the Code.
(k) Except as otherwise disclosed in Section 2.16(k) of the Company
Disclosure Schedule, none of the Company, any of its subsidiaries or any ERISA
Affiliate has granted, or is a party to any contract that grants, any
compensation, equity award or bonus that constitutes deferred compensation
within the meaning of Section 409A of the Code. None of the Company, any of its
subsidiaries or any ERISA Affiliate has any liability, or other obligation, to
make any payments or issue any equity award or bonus that constitutes deferred
compensation within the meaning of Section 409A of the Code. None of the
Company, any of its subsidiaries or any ERISA Affiliate sponsors, maintains or
administers any benefit plan, contract or arrangement
21
that constitutes, in whole or in part, a deferred compensation plan within the
meaning of Section 409A of the Code.
2.17. Taxes and Returns.
(a) Except as set forth on Section 2.17(a) of the Company Disclosure
Schedule, the Company has timely filed, or caused to be timely filed, all
material Tax Returns (as defined in Section 2.17(p) below) required to be filed
by it and its subsidiaries under applicable laws and regulations. All such Tax
Returns were correct and complete in all material respects and were prepared in
substantial compliance with all applicable laws and regulations. All material
Taxes (as defined in Section 2.17(p) below) due and owing by the Company or any
of its subsidiaries (whether or not shown on any Tax Return) have been paid.
Neither the Company nor any of its subsidiaries currently is the beneficiary of
any extension of time within which to file any Tax Return. Except as set forth
on Section 2.17(a) of the Company Disclosure Schedule, no claim has been made in
writing within the six years immediately preceding the date hereof by a
Governmental Authority in a jurisdiction where the Company or any of its
subsidiaries does not file Tax Returns that the Company or any of its
subsidiaries is or may be subject to taxation by that jurisdiction. The Company
and each of its subsidiaries has paid, collected or withheld, or caused to be
paid, collected or withheld, all material Taxes required to be paid, collected
or withheld (whether or not any such Taxes were shown on any Tax Return).
(b) The unpaid Taxes of the Company and its subsidiaries did not, as
of the date of the most recent Company Financials, exceed by a material amount
the reserve or accrual for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set
forth on the face of the most recent Company Financials (rather than in any
notes thereto). Since the date of the most recent Company Financials, neither
the Company nor any of its subsidiaries has incurred any liability for Taxes
arising from extraordinary gains or losses, as that term is used in GAAP,
outside the ordinary course of business consistent with past custom and
practice.
(c) Except as set forth on Section 2.17(c) of the Company Disclosure
Schedule, there are no outstanding requests by the Company or any of its
subsidiaries for any extension of time within which to file any Tax Return or
within which to pay any Taxes shown to be due on any return. There are no liens
for material amounts of Taxes on the assets of the Company or any of its
subsidiaries, except for statutory liens for current Taxes not yet due and
payable.
(d) Except as set forth on Section 2.17(d) of the Company Disclosure
Schedule, there are no outstanding claims or assessments pending against the
Company or any of its subsidiaries for any alleged material deficiency in any
Tax claimed or raised by any Governmental Authority in writing. Neither the
Company nor any of its subsidiaries has any outstanding waivers of any statute
of limitations in respect of Taxes or has agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) Neither the Company nor any of its subsidiaries has distributed
stock of another person, or, to the knowledge of the Company, has had its stock
distributed by another person, in a transaction that was purported or intended
to be governed in whole or in part by Section 355 or Section 361 of the Code.
22
(f) The Company (i) is a domestic corporation as defined in
7701(a)(4) of the Code and (ii) has never been a member of any consolidated,
combined, unitary or affiliated group of corporations for any Tax purpose other
than a group of which the Company is or was the common parent corporation.
Neither the Company nor any of its subsidiaries has any material liability for
the Taxes of any person or entity (other than the Company or any of its
subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of Law), as a transferee or successor, by contract or otherwise.
(g) Except as set forth on Section 2.17(g) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries will be required to
include any material item of income in, or exclude any material item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any: (i) change in method of
accounting for a taxable period ending on or prior to the Closing Date; (ii)
"closing agreement" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law)
executed on or prior to the Closing Date; (iii) intercompany transactions or any
excess loss account described in Treasury Regulations under Section 1502 of the
Code (or any corresponding or similar provision of state, local or foreign
income Tax law); (iv) installment sale or open transaction disposition made on
or prior to the Closing Date; or (v) prepaid amount received on or prior to the
Closing Date.
(h) Except as set forth on Section 2.17(h) of the Company Disclosure
Schedule, as of the date hereof, neither the Company nor any of its subsidiaries
is being audited by any taxing authority or, to the knowledge of the Company,
has been notified by any tax authority that any such audit is contemplated or
pending.
(i) Neither the Company nor any of its subsidiaries is or has been a
beneficiary or has otherwise participated in: (i) any reportable transaction
within the meaning of Treasury Regulation ss. 1.6011-4(b)(1); (ii) any
transaction that was required to be registered as a "tax shelter" pursuant to
Section 6111 of the Code; or (iii) any transaction subject to comparable
provisions of state law.
(j) Each of the Company and its subsidiaries have disclosed on their
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code.
(k) None of the assets of the Company or any of its subsidiaries
constitutes tax-exempt bond financed property or tax-exempt use property within
the meaning of Section 168 of the Code and none of the assets reflected on the
Company Financials or the Company Balance Sheet will be subject to a safe harbor
lease within the meaning of Section 168(f)(8) of the Code, as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
(l) Except as set forth on Section 2.17(l) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any Tax
sharing agreement.
(m) Except as set forth on Section 2.17(m) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
joint venture, partnership or
23
other arrangement that is treated as a partnership or disregarded entity for
federal income tax purposes.
(n) Except as set forth on Section 2.17(n) of the Company Disclosure
Schedule, correct and complete copies of all federal income Tax Returns filed by
the Company or any of its subsidiaries (including any predecessors) for each of
the last three (3) years, together with all schedules and attachments thereto,
have been delivered or made available to Purchaser. Copies of examination
reports, and statements of deficiencies assessed against, or agreed to by the
Company or any of its subsidiaries with respect to such Tax Returns or any other
Tax Returns filed covering the taxable years of those Tax Returns have been
delivered or made available to Purchaser. None of such Tax Returns has been
audited or is currently the subject of an audit by a Governmental Authority.
(o) The Company has delivered or made available to Purchaser a tax
basis balance sheet for the Company and its subsidiaries as of June 13, 2006
that is true and correct in all material respects. Section 2.17(o) of the
Company Disclosure Schedule lists and contains an accurate and complete
description of the net operating and capital loss carryforwards for the Company
and each of its subsidiaries (including any limitations of such net operating or
capital loss carryforwards under Code Sections 382, 383 or 384 of the Treasury
Regulations).
(p) For purposes of this Agreement, the term "TAX" or "TAXES" shall
mean any tax, custom, duty, governmental fee or other like assessment or charge
of any kind whatsoever, imposed by any Governmental Authority (including, but
not limited to, any federal, state, local, foreign or provincial income, gross
receipts, real property, personal property, sales, use, registration, license,
excise, severance, stamp, profits, franchise, employment, payroll, occupation,
windfall profits, environmental, capital stock, withholding, social security (or
similar), unemployment, disability, estimated, alternative or added minimum, ad
valorem, transfer or excise tax) together with any interest, addition or penalty
imposed thereon, whether disputed or not and including any obligations to
indemnify or otherwise assume or succeed to the Tax liability of any other
person. The term "TAX RETURN" shall mean any report, return or other information
statement (including any attached schedules or any amendments to such report,
return or other information statement) required to be supplied to or filed with
a Governmental Authority with respect to any Tax, including an information
return, claim for refund, amended return or declaration of estimated Tax.
2.18. Finders and Investment Bankers.
Except as set forth in Section 2.18 of the Company Disclosure
Schedule, the Company has not employed any broker or finder or otherwise
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the Transactions. Section 2.18 of the Company Disclosure
Schedule sets forth the amount of any brokerage fees, commissions or finders'
fees payable in connection with the Transactions.
2.19. Fairness Opinion.
The Company has received from each of North Point Advisors LLC and
Xxxxxx Xxxxxx Partners LLC, its financial advisors, a written opinion addressed
to it for inclusion in the Proxy
24
Statement (as defined in Section 4.4(a)) to the effect that the consideration to
be received in the Transactions by the Company's stockholders is fair to the
Company's stockholders (other than Purchaser, Merger Sub, Purchase Sub and their
respective affiliates) from a financial point of view.
2.20. Insurance.
Section 2.20 of the Company Disclosure Schedule sets forth a true
and complete list of all material insurance policies carried by, or covering,
(i) the Company or any of its subsidiaries with respect to each of their
business, assets and properties and (ii) the directors and officers of the
Company or its subsidiaries. The Company and its subsidiaries maintain insurance
policies in such amounts as the Company believes are adequate for its business.
Each insurance policy set forth on Section 2.20 of the Company Disclosure
Schedule is in full force and effect and all premiums due thereon have been paid
in full. The Company has delivered, or has caused to be delivered, or made
available, or caused to be made available, to Purchaser true, correct and
complete copies of each of the insurance policies and all self-insurance
programs or policies relating to the Company and its subsidiaries that are
currently in effect. With respect to each such insurance policy, neither the
Company nor any of its subsidiaries, nor to the knowledge of the Company, any
other party to the policy, is in material breach or default thereunder. Neither
the Company nor any of its subsidiaries has received any written notice of
cancellation or termination of any such policy or refusal of coverage
thereunder.
2.21. Vote Required; Ownership of Purchaser Capital Stock.
(a) The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock (the "COMPANY STOCKHOLDER APPROVAL") to
approve the Merger and the Transfers is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve the
Transactions.
(b) Other than any actions described in Section 2.21(a), the Company
has taken all actions necessary under the DGCL to approve this Agreement and the
Transactions. The Board, at a meeting duly called and held, has unanimously
approved this Agreement and the Transactions.
2.22. Title to Properties.
Section 2.22 of the Company Disclosure Schedule sets forth a
complete list of all material real property owned in fee by the Company and its
subsidiaries and sets forth all material real property leased by the Company and
its subsidiaries as lessee as of the date hereof (such owned and leased material
real property, including all improvements thereon, referred to collectively as
the "COMPANY REAL PROPERTY"). The Company has heretofore furnished or made
available to Purchaser true and correct copies of all leases, subleases and
other occupancy or use agreements concerning the material real property leased
by the Company or any of its subsidiaries (the "COMPANY LEASES"). All such
Company Leases are in full force and effect and are valid and binding
obligations of the Company or its subsidiaries and enforceable against the
Company or its subsidiaries in accordance with their respective terms, subject
to the Enforceability Exceptions. Neither the Company nor any of its
subsidiaries nor, to the
25
knowledge of the Company, any other party to any Company Lease is in breach of
or in default under any of the Company Leases, except for such breaches or
defaults that have not had and could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
Real Property set forth in Section 2.22 of the Company Disclosure Schedule
comprises all of the material real property necessary and/or currently used in
the operations of the business of the Company and its subsidiaries. The Company
and its subsidiaries have good and valid title to, or, as to Company Real
Property designated as leased, a valid leasehold interest in, all of the Company
Real Property. The Company Real Property is free of Encumbrances, except for:
(a) liens with respect to Taxes either not due or being diligently contested in
appropriate proceedings; (b) mechanics', materialmen's or similar statutory
liens for amounts not yet due or being diligently contested in appropriate
proceedings; (c) the terms and conditions of the lease creating the leaseholds;
and (d) other exceptions with respect to title to the Company Real Property
(including easements of public record) that do not and would not materially
interfere with the current and currently intended use of such Company Real
Property (clauses, (a), (b), (c) and (d) being referred to herein as "PERMITTED
ENCUMBRANCES"); and the consummation of the Transactions will not create any
Encumbrance (other than Permitted Encumbrances) on any of the Company Real
Property. The Company and its subsidiaries enjoy undisturbed possession under
all leases of Company Real Property, except for such breaches of the right to
undisturbed possession that do not materially interfere with the ability of the
Company and its subsidiaries to conduct their business on such property.
2.23. Employee Matters.
(a) Except as set forth on Section 2.23(a) of the Company Disclosure
Schedule, as of the date hereof, there are no labor or employment claims,
grievances, arbitration demands, actions, suits or disputes pending or, to the
Company's knowledge, threatened involving the Company or any of its subsidiaries
and any of their employees or former employees, other than those that could not
reasonably be expected to have a Company Material Adverse Effect. Except as set
forth on Section 2.23(a) of the Company Disclosure Schedule, there has been: (i)
to the knowledge of the Company, no labor union organizing or attempting to
organize any employee of the Company or any of its subsidiaries into one or more
collective bargaining units; and (ii) no labor dispute, strike, work slowdown,
work stoppage, picketing, or lock out or other collective labor action by or
with respect to any employees of the Company or any of its subsidiaries pending
or occurring within the past three (3) years, or, to the Company's knowledge,
threatened against the Company or any of its subsidiaries. Except as set forth
on Section 2.23(a) of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries is a party to, or bound by, any collective bargaining
agreement or other agreement with any labor organization applicable to the
employees of the Company or any of its subsidiaries and no such agreement is
currently being negotiated.
(b) The Company and its subsidiaries (i) are in compliance in all
material respects with all applicable Laws, regulations, policies and
procedures, and collective bargaining and other contractual obligations
respecting employment and employment practices, terms and conditions of
employment, including all such obligations relating to health and safety,
discrimination, harassment, immigration, compensation, and wages and hours, and
are not engaged in any unfair labor practice, (ii) are not liable in any
material respect for any arrears of wages or any penalty for failure to comply
with any of the foregoing and (iii) are not liable for
26
any material payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the ordinary course of business and consistent
with past practice).
(c) To the Company's knowledge, no employee of the Company or any of
its subsidiaries has provided or is providing information to any law enforcement
agency regarding the commission or possible commission of any crime or the
violation or possible violation of any applicable Law involving the Company or
any of its subsidiaries. None of the Company, any of its subsidiaries or, to the
Company's knowledge, any officer, employee, contractor, subcontractor or agent
of the Company or any of its subsidiaries has discharged, demoted, suspended,
threatened, harassed or in any other manner discriminated against an employee of
the Company or any of its subsidiaries in the terms and conditions of employment
because of any act of such employee described in 18 U.S.C. Section 1514A(a).
(d) Neither the Company nor any of its subsidiaries: (A) has
effected during the past three (3) years, or currently intends to effect, any
mass layoff of employees, as defined under the Workers Adjustment and Retraining
Notification Act ("WARN") (or other similar state law); or (B) has implemented
during the past three (3) years, or currently intends to implement, any early
mass retirement or mass separation program.
2.24. Environmental Matters.
Except as set forth in Section 2.24 of the Company Disclosure
Schedule or as could not reasonably be expected to result in a Company Material
Adverse Effect:
(a) Neither the Company nor any of its subsidiaries is the subject
of any federal, state, local or foreign investigation, decree, order or
judgment, and neither the Company nor any of its subsidiaries has received any
written notice or claim, or entered into any negotiations or agreements with any
person, relating to any liability or remedial action under any applicable
Environmental Laws;
(b) The Company and its subsidiaries have complied and currently
comply with all Environmental Laws;
(c) Neither the Company nor any of its subsidiaries has
manufactured, treated, stored, disposed of, arranged for or knowingly permitted
the disposal of, generated, handled or released any Hazardous Substance or owned
or operated any property or facility in a manner that has given or would
reasonably be expected to give rise to any liability under Environmental Laws;
(d) No Hazardous Substances have been released or, to the knowledge
of the Company, otherwise come to be located at any property or facility owned,
operated or used by on behalf of the Company or any of its subsidiaries in a
manner that is in violation of any Environmental Law or that has given or would
reasonably be expected to give rise to any liability under Environmental Laws;
and
27
(e) The Company and each of its subsidiaries holds and is in
compliance with all Company Permits required to conduct its business and
operations under all applicable Environmental Laws.
"ENVIRONMENTAL LAWS" means any and all applicable federal, state or
local statutes, regulations, ordinances, codes, decrees, permits or other
legally enforceable requirement (including common law) of any foreign
government, the United States, or any state, local, municipal or other
governmental entity, regulating, relating to or imposing liability or standards
of conduct concerning protection of the environment (including indoor air,
ambient air, surface water, groundwater, land surface, subsurface strata, or
plant or animal species) or human health as affected by the environment or
Hazardous Substances (including employee health and safety).
"HAZARDOUS SUBSTANCE" means all explosive or radioactive substances,
materials or wastes, hazardous or toxic substances, materials or wastes, friable
asbestos, friable asbestos-containing materials, toxic mold, pollutants and
contaminants (including petroleum or any fraction thereof) and all other
substances, materials or wastes that are regulated pursuant to any applicable
Environmental Law.
2.25. Proxy Statement.
The Proxy Statement will not, on the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to stockholders of the
Company, 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 made therein, in the light of the circumstances under which they are
made, not misleading or, at the time of the Special Meeting (as defined herein),
omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Special Meeting which shall have become false or misleading in any material
respect. The Proxy Statement will comply as to form in all material respects
with the applicable provisions of the Exchange Act and the rules and regulations
thereunder. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to information supplied in writing by or on behalf of
Purchaser or Merger Sub which is contained in the Proxy Statement.
2.26. FRANCHISE MATTERS.
(a) Section 2.26(a) of the Company Disclosure Schedule sets forth
all currently-effective oral and written franchise agreements, license
agreements, subfranchise agreements, sublicense agreements, master franchise
agreements, development agreements, market development agreements, and reserved
area agreements (each a "FRANCHISE AGREEMENT" and, collectively, the "FRANCHISE
AGREEMENTS"), to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound, which grants or purports
to grant to a Franchisee the right to operate or license others to operate or to
develop within a geographic area any of the following: "Lone Star Steakhouse &
Saloon" restaurants; "Del Frisco Double Eagle Steakhouse" restaurants;
"Xxxxxxxx'x Steakhouse" restaurants; or "Texas Land & Cattle" restaurants (each
a "FRANCHISED RESTAURANT" ). True and complete copies of all Franchise
Agreements have been delivered or made available to Purchaser.
28
(b) Except as set forth on Section 2.26(b) of the Company Disclosure
Schedule, no person holds any option or right to acquire from the Company or any
of its subsidiaries any Franchise Agreements. For purposes of this Agreement, a
"FRANCHISEE" is a person other than the Company or its subsidiaries that is
granted a right (whether directly by the Company or one of its subsidiaries or
by another Franchisee) to operate or license others to operate or to develop
within a geographic area a Franchised Restaurant.
(c) With respect to all terminations (including expirations without
renewal) of Franchise Agreements since January 1, 2004, the Company and each of
its subsidiaries have complied in all material respects with all applicable
Laws. Since January 1, 2004, neither the Company nor any of its subsidiaries has
offered or sold a Franchise Agreement except in material compliance with all
applicable Laws.
(d) Except as set forth on Section 2.26(d) of the Company Disclosure
Schedule, none of the Company or any of its subsidiaries has previously
registered to offer and sell franchises in any jurisdiction, foreign or
domestic. Neither the Company nor any of its subsidiaries is subject to any
currently effective order, injunction, or similar mandate with respect to the
offer or sale of Franchise Agreements in any jurisdiction. There are no
proceedings pending (or to the knowledge of the Company, threatened) against the
Company or any of its subsidiaries alleging failure to comply with any franchise
registration laws or franchise relationship laws of any jurisdiction.
(e) Except as may be granted by operation of Law or as set forth on
Section 2.26(e) of the Company Disclosure Schedule, no Franchisee has a
protected territory, exclusive territory, right of first refusal, option, or
other similar arrangement with respect to a Franchised Restaurant. Except as set
forth on Section 2.26(e) of the Company Disclosure Schedule, no person currently
holds any right or option to operate, develop, or locate a Franchised
Restaurant, or to exclude the Company, its subsidiaries, or others from
operating or licensing a third party to operate a Franchised Restaurant, in any
geographic area.
(f) All the Franchise Agreements are in full force and effect and
are valid and binding obligations of the Company or its subsidiaries and
enforceable against the Company or its subsidiaries in accordance with their
respective terms, subject to the Enforceability Exceptions. Neither the Company
nor any of its subsidiaries nor, to the knowledge of the Company, any other
party to any Franchise Agreement is in breach of or in default under any of the
Franchise Agreements, except for such breaches or defaults that have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(g) The Company and its subsidiaries have no currently-effective
contracts with any formal or informal franchisee association or group of
franchisees regarding any Franchise Agreement or franchise operational matter.
2.27. Transactions with Affiliates.
All transactions, agreements, arrangements or understandings between
the Company or any of its subsidiaries, on the
29
one hand, and the Company's affiliates or other persons, on the other hand (an
"AFFILIATE TRANSACTION"), that are required to be disclosed in the Company SEC
Reports in accordance with Item 404 of Regulation S-K under the Securities Act
have been so disclosed. There have been no Affiliate Transactions that are
required to be disclosed pursuant to Item 404 of Regulation S-K which have not
already been disclosed in the Company SEC Reports.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
3.1. Due Organization and Good Standing.
Each of Purchaser and Merger Sub is a corporation or limited
liability company duly formed, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all requisite corporate or
limited liability company power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Purchaser has
heretofore made available to the Company accurate and complete copies of the
organizational documents, as currently in effect, of Purchaser and Merger Sub.
3.2. Authorization; Binding Agreement.
Purchaser and Merger Sub have all requisite corporate or limited
liability company power and authority to execute and deliver this Agreement and
to consummate the Transactions. The execution and delivery of this Agreement and
the consummation of the Transactions have been duly and validly authorized by
the respective boards of directors, or other governing bodies, of Purchaser and
Merger Sub, as appropriate, and no other corporate or limited liability company
proceedings on the part of Purchaser or Merger Sub are necessary to authorize
the execution and delivery of this Agreement or to consummate the Transactions
(other than the requisite approval by the sole stockholder of Merger Sub of this
Agreement and the Transactions). This Agreement has been duly and validly
executed and delivered by each of Purchaser and Merger Sub and constitutes the
legal, valid and binding agreement of each of Purchaser and Merger Sub,
enforceable against each of Purchaser and Merger Sub in accordance with its
terms, subject to the Enforceability Exceptions.
3.3. Governmental Approvals.
No Consent from or with any Governmental Authority on the part of
Purchaser or Merger Sub is required to be obtained or made in connection with
the execution or delivery by Purchaser or Merger Sub of this Agreement or the
consummation by Purchaser or Merger Sub of the Transactions other than (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL, (ii) filings with the SEC, state
securities laws administrators and the National Association of Securities
Dealers, Inc. (the "NASD"), (iii) pursuant to the HSR Act, and (iv) those
Consents that, if they were not obtained or made, could not reasonably be
expected to have a material adverse effect on the business, financial condition
or results of operations of Purchaser and its subsidiaries, taken as a whole, or
the ability of Purchaser or Merger Sub to consummate any of the Transactions,
except in each case for any such effects resulting from, arising out of or
relating to (a) the taking of any action or incurring
30
of any expense in connection with this Agreement or any of the Transactions or
(b) any action taken by the Company or any of its affiliates ("PURCHASER
MATERIAL ADVERSE EFFECT").
3.4. NO VIOLATIONS.
The execution and delivery of this Agreement, the consummation of
the Transactions and the compliance by Purchaser and Merger Sub with any of the
provisions hereof will not (i) conflict with or result in any breach of any
provision of the organizational documents of Purchaser or Merger Sub, (ii)
require any Consent under or result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any agreement or other instrument to which Purchaser
or Merger Sub is a party or by which its assets are bound, (iii) result in the
creation or imposition of any Encumbrance upon any of the assets of Purchaser or
Merger Sub or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 3.3 hereof, contravene any Law to which
Purchaser or Merger Sub or any of their respective assets or properties is
subject, except, in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing which could not reasonably be expected to have a
Purchaser Material Adverse Effect.
3.5. Finders and Investment Bankers.
Other than Xxxxx Xxxxxxx & Co., neither Purchaser nor Merger Sub has
employed any broker or finder or otherwise incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the
Transactions.
3.6. Disclosures.
The information supplied by Purchaser or Merger Sub for inclusion in
the Proxy Statement will not, on the date the Proxy Statement (or any amendment
or supplement thereto) is first mailed to stockholders of the Company, 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 the light of the circumstances under which they are made, not
misleading or, at the time of the Special Meeting, omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the Special Meeting which shall have
become false or misleading in any material respect. Notwithstanding the
foregoing, Purchaser and Merger Sub make no representation or warranty with
respect to any information supplied in writing by or on behalf of the Company
which is contained in the Proxy Statement or any amendment or supplement
thereto.
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3.7. Financing.
At the Transfer Closing Date and the Closing Date, Purchaser and
Merger Sub will have sufficient cash and cash equivalent resources available to
pay the aggregate Stock Purchase Amount and Merger Consideration pursuant to the
Transactions.
3.8. Litigation.
There is no Litigation pending before any agency, court or tribunal,
foreign or domestic, or, to the knowledge of Purchaser, threatened against
Purchaser, its subsidiaries or any of their properties or, to the knowledge of
Purchaser, any of their officers or directors (in their capacities as such) that
would prevent, enjoin or materially alter or delay any of the Transactions.
There is no judgment, decree or order against Purchaser or its subsidiaries or,
to the knowledge of Purchaser, any of their directors or officers (in their
capacities as such) that would prevent, enjoin or materially alter or delay any
of the Transactions.
3.9. NO PRIOR ACTIVITIES.
Except for obligations or liabilities incurred in connection with
its incorporation or organization or the negotiation and consummation of this
Agreement and the Transactions, Merger Sub has not incurred any obligations or
liabilities, engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person or
entity.
The Shares owned, whether beneficially or of record, by Purchaser,
Merger Sub and their respective affiliates do not constitute as of the date
hereof more than 10% of the issued and outstanding Shares.
3.10. INVESTIGATION BY PURCHASER AND MERGER SUB.
Each of Purchaser and Merger Sub:
(a) acknowledges that, other than as set forth in this Agreement,
none of the Company, its subsidiaries or any of their respective directors,
officers, employees, affiliates, agents or representatives makes any
representation or warranty, either express or implied, as to the accuracy or
completeness of any of the information provided or made available to Purchaser
or Merger Sub or its agents or representatives prior to the execution of this
Agreement; and
(b) agrees, to the fullest extent permitted by Law (except with
respect to claims of fraud), that none of the Company, its subsidiaries or any
of their respective directors, officers, employees, stockholders, affiliates,
agents or representatives shall have any liability or responsibility whatsoever
to Purchaser or Merger Sub on any basis (including, without limitation, in
contract, tort or otherwise) based upon any information provided or made
available, or statements made, to Purchaser or Merger Sub prior to the execution
of this Agreement.
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ARTICLE IV
ADDITIONAL COVENANTS OF THE COMPANY
4.1. Conduct of Business of the Company.
(a) Unless Purchaser shall otherwise agree in writing or except as
expressly contemplated by this Agreement, during the period from the date of
this Agreement to the Effective Time, (i) the Company and its subsidiaries shall
conduct their business in the ordinary course and consistent with past practice
and (ii) the Company and its subsidiaries shall use their commercially
reasonable efforts to preserve intact their business organizations, to keep
available the services of their officers and employees, to perform all of their
contractual obligations, to maintain satisfactory relationships with all persons
with whom they do business, and to preserve the title, possession, control and
condition of all of their assets.
(b) Without limiting the generality of the foregoing clause (a) and
except as expressly contemplated by this Agreement or as specifically set forth
in Section 4.1 of the Company Disclosure Schedule, during the period from the
date of this Agreement to the Effective Time, neither the Company nor any of its
subsidiaries will, without the prior written consent of Purchaser:
(i) amend or propose to amend its certificate of incorporation or
bylaws (or comparable governing instruments) or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the corporate
or organizational structure or ownership of the Company or any of its
subsidiaries;
(ii) authorize for issuance, issue, grant, sell, pledge, dispose of
or propose to issue, grant, sell, pledge or dispose of (A) any shares of, or any
options, warrants, commitments, subscriptions or rights of any kind to acquire
or sell any shares of, its capital stock or other securities or equity interests
or any Voting Debt, including, but not limited to, any securities convertible
into or exchangeable for shares of stock of any class, except for the issuance
of Shares pursuant to the exercise of Company Options outstanding on the date of
this Agreement in accordance with their present terms, or (B) any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock based
performance units;
(iii) split, combine, reclassify, alter or amend the terms of any of
the items set out in Section 4.1(b)(ii) or declare, pay or set aside any
dividend or other distribution (whether in cash, stock or property or any
combination thereof), other than the Distribution, in respect of the items set
out in Section 4.1(b)(ii), or directly or indirectly redeem, purchase or
otherwise acquire or offer to acquire any of the items set out in Section
4.1(b)(ii), including any dividends or distributions to the Company from its
subsidiaries (or to a subsidiary of the Company from its subsidiaries), other
than with respect to the Distribution;
(iv) (A) create, incur, assume, forgive or make any changes to the
terms or collateral of any debt or receivables (other than trade payables and
receivables in the ordinary course of business consistent in type and amount
with prior practice and the incurrence of debt in connection with capital
expenditures made in accordance with the Capex Budget (as defined below)), or
any employee or officer loans or advances, except incurrences that constitute a
33
refinancing of existing obligations on terms that are no less favorable to the
Company and its subsidiaries than the existing terms; (B) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly, indirectly,
contingently or otherwise) for the obligations of any person; (C) except in
accordance with the Company's capital expenditure budget for the 2006 fiscal
year (the "CAPEX BUDGET"), make any capital expenditures or incur any opening or
preopening expenses; (D) make any loans, advances or capital contributions to,
or investments in, any other person (other than customary travel, relocation or
business advances to employees consistent with past practices); (E) acquire
stock or assets of, or merge or consolidate with, any other person; (F) incur
any material liability or obligation (absolute, accrued, contingent or
otherwise) other than trade payables in the ordinary course of business
consistent in type and amount with past practice; or (G) sell, transfer,
mortgage, pledge, lease, encumber or otherwise dispose of, or agree to sell,
transfer, mortgage, pledge, lease, encumber or otherwise dispose of, any assets
or properties (real, personal or mixed, tangible or intangible) other than
inventory held for sale or the disposition and replacement of obsolete personal
property in the ordinary course of business, or to secure debt permitted under
subclause (A) of this clause (iv);
(v) increase the wages, salaries, bonus, compensation or other
benefits of any of its officers or employees (other than non-material increases
granted to retain employees, other than officers, who have been offered
employment by another person) or enter into, establish, amend or terminate any
employment, consulting, retention, change in control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance,
termination, deferred compensation or other compensation or benefit plan,
policy, agreement, trust, fund or other arrangement with, for or in respect of
any officer, director or employee other than as required by applicable Law or
pursuant to the terms of agreements in effect on the date of this Agreement or
in the ordinary course of business consistent with past practice with employees
(other than officers) of the Company or any of its subsidiaries;
(vi) (A) commence or settle any Litigation or other proceedings with
any Governmental Authority or other person in excess of amounts reserved for
such Litigation in the Company Financial Statements or (B) make, amend or
rescind any election relating to Taxes, settle any Litigation, audit or
controversy relating to Taxes in excess of amounts reserved therefor in the
Company Financial Statements, file any amended Tax Return or claim for refund,
change any method of accounting or make any other change in its accounting or
Tax policies or procedures, agree to an extension of any statute of limitations
related to any Tax, enter into a closing agreement related to any Tax, or
surrender any right to claim a Tax refund, except as required by applicable Law
or GAAP;
(vii) adopt or amend any resolution or agreement concerning
indemnification of its directors, officers, employees or agents;
(viii) transfer or license to any person or entity or otherwise
extend, materially amend or modify, permit to lapse or fail to preserve any of
the Company Intellectual Property as currently maintained or disclose to any
person who has not entered into a confidentiality agreement any trade secrets;
34
(ix) modify, amend or terminate any Company Material Contract, or
waive, release or assign any rights or claims thereunder, enter into any
agreement that if entered into prior to the date hereof would be a Company
Material Contract, or enter into or materially amend any contract or agreement
with any affiliate of the Company;
(x) modify, amend or terminate, or waive, release or assign any
rights or claims with respect to, any confidentiality agreement or
non-competition agreement to which the Company or any of its subsidiaries is a
party;
(xi) fail to maintain its books, accounts and records in the usual
manner on a basis consistent with that heretofore employed;
(xii) establish any subsidiary or enter into any new line of
business;
(xiii) permit any insurance policy naming the Company or any of its
subsidiaries as a beneficiary or a loss payee to be cancelled or terminated,
unless the Company maintains substantially similar insurance coverage as is
currently in place;
(xiv) revalue any of its assets or make any change in accounting
methods, principles or practices, except as required by GAAP;
(xv) fail to make in a timely manner any filings with the SEC
required under the Securities Act or the Exchange Act or the rules and
regulations promulgated thereunder;
(xvi) discharge any obligations (including accounts payable) other
than on a timely basis in the ordinary course of business consistent with past
practice;
(xvii) close or materially reduce the Company's or any subsidiary's
activities, or effect any layoff or other Company-initiated personnel reduction
or change, at any of the Company's or any subsidiary's facilities; or
(xviii) authorize any of, or agree to commit to do any of, the
foregoing actions.
(c) The Company shall, and shall cause its subsidiaries to, use its
commercially reasonable efforts to comply with all Laws applicable to it or any
of its properties, assets or business and maintain in full force and effect all
the Company Permits.
4.2. Notification of Certain Matters.
The Company shall give prompt notice to Purchaser if any of the
following occur after the date of this Agreement: (i) there has been a material
failure of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; (ii) receipt of any
notice or other communication in writing from any third party alleging that the
Consent of such third party is or may be required in connection with any of the
Transactions; (iii) receipt of any notice or other communication from any
Governmental Authority (including, but not limited to, the NASD or any
securities exchange) in connection with any of the Transactions; (iv) the
occurrence of an event which could reasonably be expected to have a Company
Material Adverse Effect or that could otherwise reasonably be expected to cause
a
35
condition in Article VI not to be satisfied; or (v) the commencement or threat,
in writing, of any Litigation against the Company or any of its subsidiaries, or
any of their respective properties or assets, or, to its knowledge, any
employee, agent, director or officer, in his or her capacity as such, of the
Company or any of its subsidiaries which, if pending on the date hereof, would
have been required to have been disclosed by the Company in this Agreement or
which relates to the consummation of any of the Transactions. No such notice to
Purchaser shall have any effect on the determination of whether any of the
conditions to the consummation of any of the Transactions have been satisfied or
in determining whether any of the representations, warranties or covenants
contained in this Agreement have been breached.
4.3. Access and Information.
(a) Between the date of this Agreement and the Effective Time, the
Company will give, and shall direct its accountants and legal counsel to give,
Purchaser and its authorized representatives (including, without limitation, its
financial advisors, accountants and legal counsel), at all reasonable times,
access as reasonably requested to all offices and other facilities and to all
contracts, agreements, commitments, books and records (including work papers) of
or pertaining to the Company and any of its subsidiaries, will permit the
foregoing to make such reasonable inspections as they may require and will cause
its officers promptly to furnish Purchaser with (i) periodic unaudited combined
(and separated by brand) balance sheets of the Company and its subsidiaries'
domestic operations as of each four-week period then ended and related domestic
combined (and separated by brand) statements of earnings, cash flow and
stockholders' equity, in the Company's standard format, (ii) such other
financial and operating data and other information with respect to the business
and properties of the Company and any of its subsidiaries as Purchaser may from
time to time reasonably request, and (iii) a copy of each report, schedule and
other document filed or received by the Company pursuant to the requirements of
applicable securities laws or the NASD. Between the date hereof and the
Effective Time, Purchaser may, upon the prior written approval of the Company's
Chief Executive Officer or Chief Financial Officer, contact any employee of the
Company or any of its subsidiaries directly, provided that such contact is for
informational purposes only and does not unreasonably interfere with such
employee's ongoing responsibilities to the Company or any of its subsidiaries.
No such access, inspections or furnishing of information shall have any effect
on Purchaser or Merger Sub's ability to assert that conditions to Closing or to
the consummation of the Merger have not been satisfied.
(b) Between the date of this Agreement and the Transfer Closing
Date, subject to any limitations set forth in Section 4.3(a), the Company shall
provide such information as is reasonably requested by Purchaser, and shall
reasonably cooperate with Purchaser, to enable Purchaser to determine (A)
whether the Company has been at any time within the five-year period ending on
the Transfer Closing Date a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code, (B) whether the Company has
any shareholders as of the Transfer Closing Date who are "Foreign Persons" as
defined in Section 1445 of the Code that have owned more than 5% of the
outstanding stock of the Company at any time within the five-year period ending
on the Transfer Closing Date and (C) the current and accumulated earnings and
profits of the Company and each of its subsidiaries for federal income tax
purposes.
36
(c) Without limiting any other provision of this Agreement,
immediately before the close of business on the day which is six (6) business
days prior to the then scheduled Closing Date, the Company shall inform
Purchaser as to the then-current status of satisfaction of the conditions
described in Sections 6.2(a), (b) and (c).
4.4. Special Meeting; Proxy Statement.
(a) As promptly as practicable following the execution of this
Agreement, the Company, acting through its Board, shall, in accordance with
applicable Law:
(i) (A) duly call, give notice of, convene and (unless this
Agreement has been terminated) hold a special meeting of its stockholders (the
"SPECIAL MEETING") for the purposes of considering and taking action upon the
approval and adoption of this Agreement and the Transactions, including
adjourning such meeting for up to ten (10) business days to obtain such
approval;
(B) subject to Section 4.8, declare advisable and recommend to its
stockholders that they adopt this Agreement and approve the Transactions, and
shall include disclosure regarding the approval of the Board; and
(C) without limiting the generality of the foregoing, the Company
agrees that its obligations under clause (A) of this Section 4.4(a)(i) shall not
be affected by the commencement, public proposal, public disclosure or other
communication to the Company or any other person of any Company Takeover
Proposal (as such term is defined in Section 4.8(a)) or the withdrawal or
modification by the Board of its approval of this Agreement or the Transactions
or its recommendation that holders of Shares adopt this Agreement and approve
the Transactions;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to the Transactions and this Agreement and obtain and furnish the
information required to be included by the SEC therein (the Company agrees that
it shall be obligated to file such preliminary proxy statement on or before
fifteen (15) days after the date of this Agreement) and, after consultation with
Purchaser, respond as promptly as reasonably practicable to any comments made by
the SEC with respect to the preliminary proxy statement and cause a definitive
proxy statement, including any amendments or supplements thereto (the "PROXY
STATEMENT"), to be mailed to its stockholders at the earliest practicable date,
provided that no amendments or supplements to the Proxy Statement will be made
by the Company without prior consultation with Purchaser and its counsel; and
(iii) notify Purchaser promptly of the receipt of any comments from
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Proxy Statement or for additional information and will
supply Purchaser with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement. The Company shall give Purchaser a
reasonable opportunity to comment on any correspondence with the SEC or its
staff or any proposed material to be included in the Proxy Statement prior to
transmission to the SEC or its staff and shall not, unless required by Law,
transmit any such material to which Purchaser
37
reasonably objects. If at any time prior to the Special Meeting there shall
occur any event that should be set forth in an amendment or supplement, after
obtaining the consent of Purchaser to such amendment or supplement (which
consent shall not be unreasonably withheld or delayed), the Company shall
promptly transmit such amendment or supplement to its stockholders.
(b) To the extent permitted by Law, Purchaser shall vote, or cause
to be voted, all of the Shares then owned by it, Merger Sub or any of
Purchaser's other subsidiaries in favor of the adoption of this Agreement and
the approval of the Transactions.
4.5. Commercially Reasonable Efforts.
Subject to the terms and conditions herein provided, including
Section 4.8 of this Agreement, the Company agrees to, and shall cause its
subsidiaries to, use its commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
Transactions, including, but not limited to: (i) obtaining all Consents from
Governmental Authorities and other third parties for which the Company or any of
its subsidiaries would need to obtain consent required for the consummation of
the Transactions (provided that the Company shall not make any payment or amend
the terms of any agreement in connection with obtaining any such Consent without
the prior written approval of Purchaser) and (ii) consulting and cooperating
with, providing assistance to and furnishing information reasonably requested by
Purchaser and Merger Sub in the preparation and filing with the SEC of the Proxy
Statement and all necessary amendments and supplements thereto. Upon the terms
and subject to the conditions hereof, the Company agrees to, and shall cause its
subsidiaries to, use its commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary to
satisfy the conditions to the consummation of the Transactions to be satisfied
by the Company.
4.6. Public Announcements.
So long as this Agreement is in effect, the Company shall not, and
shall cause its affiliates not to, (i) issue or cause the publication of any
press release or any other announcement or communication with respect to this
Agreement or the Transactions without the prior written consent of Purchaser, or
(ii) discuss with the press or the media this Agreement or the Transactions (and
will refer any and all questions and inquiries concerning Purchaser or its
affiliates to Purchaser), except in any case under (i) or (ii) to the extent
that such release, announcement communication or discussion is required by
applicable Law or Governmental Authority and in such cases only after
consultation with Purchaser.
4.7. Compliance.
In consummating the Transactions, the Company shall, and shall cause
its subsidiaries to, comply with the provisions of the Exchange Act, the
Securities Act, the DGCL and all other applicable Laws, provided, however, that
the failure of the Company or any of its subsidiaries to obtain any Consent in
connection with this Agreement or any of the Transactions pursuant to any
federal, state, city or local Law governing the sale of liquor that may be
applicable or required by any Company Material Contract shall not be deemed to
cause a breach of this covenant.
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4.8. No Solicitation.
(a) For purposes of this Agreement, "COMPANY TAKEOVER PROPOSAL"
means (other than the Transactions) any inquiry, proposal or offer from any
person relating to (1) any direct or indirect acquisition or purchase of assets
of the Company representing 20% or more of the assets of the Company and its
subsidiaries, including by way of the purchase of stock of subsidiaries of the
Company, (2) any issuance, sale or other disposition of (including by way of
merger, consolidation, business combination, share exchange, joint venture or
any similar transaction) securities (or options, rights or warrants to purchase,
or securities convertible into or exchangeable for, such securities)
representing 20% or more of the voting power of the Company, (3) any tender
offer, exchange offer or other transaction in which, if consummated, any person
or "group" (as such term is defined under the Exchange Act) shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act), or the right to acquire beneficial ownership, of 20% or more of the voting
power of the Company, or (4) any merger, consolidation, share exchange, business
combination, recapitalization, liquidation or dissolution involving the Company.
For purposes of this Agreement, a "COMPANY SUPERIOR OFFER" means a Company
Takeover Proposal on terms that the Board determines, in good faith, based upon
consultations with its outside legal counsel and its financial advisors, are
more favorable to the Company's stockholders than this Agreement and the
Transactions, taken as a whole, after giving effect to any adjustments to the
terms and conditions of this Agreement agreed to in writing by Purchaser in
response to such Company Takeover Proposal, and is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of,
and conditions to, the Company Superior Offer and the person making the Company
Superior Offer (including any financing required by such person).
(b) Except as set forth in this Section 4.8, the Company shall not,
directly or indirectly, and shall not, directly or indirectly, authorize or
permit any officer, director, employee, agent or representative of the Company
to, (i) solicit, encourage, initiate or facilitate the making, submission or
announcement of any Company Takeover Proposal, (ii) furnish any non-public
information regarding the Company or the Transactions to any person (other than
Purchaser, Merger Sub or their representatives) in connection with or in
response to a Company Takeover Proposal, (iii) engage in discussions or
negotiations with any person with respect to any Company Takeover Proposal, (iv)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Purchaser, the approval of this Agreement or the Transactions or its
recommendation that holders of Shares adopt this Agreement, (v) approve or
recommend, or propose publicly to approve or recommend, any Company Takeover
Proposal, or (vi) cause the Company to discuss, negotiate or enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Company Takeover Proposal.
(c) Notwithstanding the provisions of Section 4.8(b), nothing in
this Agreement shall prohibit or limit (i) the Company, or the Board, prior to
the date of the Special Meeting, from furnishing non-public information
regarding the Company to, or entering into discussions or negotiations with, any
person in response to an unsolicited, bona fide written Company Takeover
Proposal if (A) the Board determines in good faith, after consultation with its
outside legal counsel, that such action with respect to such Company Takeover
Proposal is necessary for the Board to comply with its fiduciary duties to the
Company's stockholders under applicable Law, (B) the Company receives from such
person an executed confidentiality agreement with
39
provisions no less favorable, in the aggregate, to the Company than those
contained in the confidentiality agreement dated December 7, 2005 by and between
the Company and Purchaser, and (C) contemporaneously with furnishing any such
information to such person, the Company furnishes such information to Purchaser
to the extent such information has not been previously furnished to Purchaser;
or (ii) the Company from complying with Rules l4d-9 and 14e-2 promulgated under
the Exchange Act with regard to any Company Takeover Proposal.
(d) The Company shall notify Purchaser as promptly as practicable
(and in any event within one business day) of the receipt by the Company, or any
of its representatives, of any bona fide inquiries, proposals or offers,
requests for information or requests for discussions or negotiations regarding
any Company Takeover Proposal or any bona fide inquiries, proposals or offers,
requests for information or requests for discussions or negotiations that could
reasonably be expected to result in a Company Takeover Proposal, specifying the
terms and conditions thereof and the identity of the party making such inquiry,
proposal, offer or request for information. The Company shall keep Purchaser
informed of the status of any such discussions or negotiations and of any
modifications to such inquiries, proposals, offers or requests for information.
The Company agrees that it shall not terminate, waive, amend or modify any
provision of any existing standstill or confidentiality agreement to which it is
a party and that relates to a Company Takeover Proposal, and the Company shall
use commercially reasonable efforts to enforce the provisions of any such
agreement. The Company shall immediately cease and cause to be terminated any
discussions or negotiations with any parties that may be ongoing with respect to
any Company Takeover Proposal as of the date hereof and shall inform its
representatives of the obligations undertaken in this Section 4.8.
(e) Notwithstanding anything in this Agreement to the contrary,
including Section 4.8(b), the Board may, at any time prior to the date of the
Special Meeting: (i) (A) withdraw or modify its approval of this Agreement or
the Transactions or its recommendation that holders of Shares adopt this
Agreement and approve the Transactions or (B) approve or recommend a Company
Superior Offer if, in the case of both clause (A) and (B) above: (x) an
unsolicited, bona fide written offer is made to the Company by a third party for
a Company Takeover Proposal; (y) the Board determines in good faith, after
consultation with its financial advisors, that such offer constitutes a Company
Superior Offer; and (z) following consultation with outside legal counsel, the
Board determines that the withdrawal or modification of its approval of this
Agreement or the Transactions or its recommendation that holders of Shares adopt
this Agreement and approve the Transactions is required to comply with the
fiduciary duties of the Board to the stockholders of the Company under
applicable Law, but only, in the case of both clause (A) and (B) above, (i)
after providing written notice to Purchaser (a "NOTICE OF SUPERIOR OFFER")
advising Purchaser that the Board has received a Company Superior Offer,
specifying the material terms and conditions of such Company Superior Offer and
identifying the person or persons making such Company Superior Offer, and (ii)
if Purchaser does not, within three (3) business days of Purchaser's receipt of
the Notice of Superior Offer, make an offer that the Board determines in good
faith, after consultation with its financial advisors, to be at least as
favorable to the Company's stockholders as the Company Superior Offer; provided
that during such three (3) business day period, the Company shall, and shall use
commercially reasonable efforts to cause its financial and legal advisors to,
negotiate in good faith with Purchaser (to the extent Purchaser wishes to
negotiate) to enable Purchaser to make such an offer; or (ii) other than in
connection with a Company Takeover Proposal, withdraw or modify its approval of
this Agreement or the
40
Transactions or its recommendation that holders of Shares adopt this Agreement
and approve the Transactions, if the Board reasonably determines (after
consultation with outside legal counsel) that the withdrawal or modification of
such approval or recommendation is required to comply with the fiduciary duties
of the Board to the stockholders of the Company under applicable Law.
4.9. SEC and Stockholder Filings.
The Company shall send to Purchaser a copy of all reports and
materials promptly after the time it sends the same to its stockholders, the SEC
or any state or foreign securities commission.
4.10. State Takeover Laws.
Notwithstanding any other provision in this Agreement, if any state
takeover statute may become, or may purport to be, applicable to any of the
Transactions, the Company and the members of its Board will, and the Company
will cause its subsidiaries to, grant such approvals and take such actions as
are necessary so that the Transactions may be consummated as promptly as
practicable on the terms and conditions contemplated hereby and otherwise act to
eliminate the effect of any takeover statute on any of the Transactions.
4.11. AMENDMENT OF THE COMPANY EMPLOYEE PLANS.
The Company will, effective at or immediately before the Effective
Time, cause any of its or its subsidiaries' Company Employee Plans to be
amended, to the extent reasonably requested by Purchaser, for the purpose of
permitting such Company Employee Plan to continue to operate in conformity with
ERISA and the Code and with the structure of the Company and its affiliates
following the Transfers and the Merger.
4.12. HSR ACT.
The Company will, and will cause its subsidiaries to, promptly after
the execution of this Agreement, file all Notification and Report Forms and
related materials that it may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the HSR Act in connection with the Transactions, will exercise its
commercially reasonable efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may be
necessary to consummate the Transactions.
4.13. ACTIONS WITH RESPECT TO THE TRANSFERS.
(a) Notwithstanding any other provision in this Agreement, on or
prior to the Transfer Closing Date, the following events will occur:
(i) The Board shall have declared the Distribution, payable to all
holders of record of Shares immediately prior to the Effective Time.
(ii) The Company and Purchaser shall join in making an election
under Section 338(h)(10) of the Code (and any corresponding elections under
state, local or foreign
41
Tax law) (collectively, a "SECTION 338(h)(10) ELECTION") with respect to the
purchase and sale of the stock of each of the Transferred Subs.
(iii) Each such Section 338(h)(10) Election shall be made pursuant
to Section 338(h)(10) of the Code and the Treasury Regulations promulgated
thereunder. The Company shall include any income, gain, loss, deduction or other
Tax items resulting from the Section 338(h)(10) Election on its Tax Returns to
the extent required by applicable Law.
(iv) The Company shall have also furnished Purchaser with a
non-foreign affidavit dated as of the Transfer Closing Date, sworn under penalty
of perjury and in form and substance required under the Treasury Regulations
issued pursuant to Section 1445 of the Code, stating that the Company is not a
"Foreign Person" as defined in Section 1445 of the Code.
(b) Effective immediately prior to the Transfer Closing, the Company
shall eliminate all intercompany receivables owed to the Company or any of its
subsidiaries by any of the Transferred Subs in a tax-free transaction by having
the Company and/or any of its subsidiaries contribute such intercompany
receivables to the applicable Transferred Sub having the corresponding
intercompany payable.
4.14. Tax Sharing Agreements.
To the extent permitted by the Internal Revenue Service, all Tax
sharing agreements or similar arrangements with respect to or involving the
Company or any of its subsidiaries shall be terminated as of the Closing Date
and, after the Closing Date, the Company and its subsidiaries shall not be bound
thereby or have any liability thereunder.
ARTICLE V
ADDITIONAL COVENANTS OF PURCHASER
5.1. Notification of Certain Matters.
Purchaser shall give prompt notice to the Company if any of the
following occur after the date of this Agreement: (i) there has been a material
failure of Purchaser or Merger Sub to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder; (ii)
receipt of any notice or other communication in writing from any third party
alleging that the Consent of such third party is or may be required in
connection with any of the Transactions; (iii) receipt of any notice or other
communication from any Governmental Authority (including, but not limited to,
the NASD or any securities exchange) in connection with any of the Transactions;
(iv) the occurrence of an event which could reasonably be expected to have a
Purchaser Material Adverse Effect or that could otherwise reasonably be expected
to cause a condition in Article VI not to be satisfied; or (v) the commencement
or threat, in writing, of any Litigation against Purchaser or any of its
subsidiaries, or any of their respective properties or assets, or, to its
knowledge, any employee, agent, director or officer, in his or her capacity as
such, of Purchaser or any of its subsidiaries which, if pending on the date
hereof, would have been required to have been disclosed by Purchaser in this
Agreement or which relates to the consummation of any of the Transactions. No
such notice to the Company shall have any effect on the determination of whether
any of the conditions to the consummation of any of the
42
Transactions have been satisfied or in determining whether any of the
representations, warranties or covenants contained in this Agreement have been
breached.
5.2. COMMERCIALLY REASONABLE EFFORTS.
Subject to the terms and conditions herein provided, Purchaser
agrees to use its commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
Transactions, including, but not limited to: (i) obtaining all Consents from
Governmental Authorities and other third parties (for which Purchaser would need
to obtain Consent) required for the consummation of the Transactions and (ii)
consulting and cooperating with, providing assistance to and furnishing
information reasonably requested by the Company in the preparation and filing
with the SEC of the Proxy Statement and all necessary amendments and supplements
thereto. Upon the terms and subject to the conditions hereof, Purchaser agrees
to use its commercially reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary to satisfy the
conditions to the consummation of the Transactions to be satisfied by Purchaser.
5.3. COMPLIANCE.
In consummating the Transactions, Purchaser and Merger Sub shall
comply with the provisions of the Exchange Act, the Securities Act, the DGCL and
all other applicable Laws.
5.4. INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and Bylaws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification than are set forth in the Certificate of Incorporation and
Bylaws, respectively, of the Company, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective Time
in any manner that would affect adversely the rights thereunder of individuals
who, at or prior to the Effective Time, were directors, officers, employees,
fiduciaries or agents of the Company or any of its subsidiaries. After the
Closing, the Surviving Corporation shall, to the fullest extent permitted under
applicable Law, indemnify and hold harmless each present and former director and
officer of the Company and each of its subsidiaries at or prior to the Effective
Time (collectively, the "INDEMNIFIED PARTIES") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), whether civil, criminal, administrative or investigative, arising out of
or pertaining to any action or omission, in his or her capacity as an officer,
director, employee, fiduciary or agent, occurring on or before the Effective
Time, to the same extent as provided in the Certificate of Incorporation or
Bylaws of the Company, or any other applicable contract or agreement, in effect
on the date hereof. In the event of any such claim, action, suit, proceeding or
investigation, (i) the Surviving Corporation shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Surviving Corporation, promptly after statements
therefor are received (provided the applicable Indemnified Party provides an
undertaking to repay all advanced expenses if it is finally judicially
determined that such Indemnified Party is not entitled
43
to indemnification) and (ii) the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that the Surviving Corporation
shall not be liable for any settlement effected without the Surviving
Corporation's written consent (which consent shall not be unreasonably withheld
or delayed); and provided, further, that the Surviving Corporation shall not be
obligated pursuant to this Section 5.4(a) to pay the fees and expenses of more
than one counsel (selected by a plurality of the applicable Indemnified Parties)
for all Indemnified Parties in any jurisdiction with respect to any single
action except to the extent that two or more of such Indemnified Parties shall
have conflicting interests in the outcome of such action; and provided, further,
that, in the event that any claim for indemnification is asserted or made within
six (6) years after the Effective Time, all rights to indemnification in respect
of such claim shall continue until the disposition of such claim.
(b) The Surviving Corporation shall either (i) cause to be obtained
at the Effective Time "tail" insurance policies with a claims period of at least
six years from the Effective Time with respect to directors' and officers'
liability insurance in amount and scope at least as favorable as the Company's
existing policies for claims arising from facts or events that occurred on or
prior to the Effective Time; or (ii) maintain in effect for six years from the
Effective Time, if available, the current directors' and officers' liability
insurance policies maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions that are not less favorable) with respect to
matters occurring on or prior to the Effective Time; provided, however, that in
no event shall the Surviving Corporation, in order to obtain the insurance
policies required under this Section 5.4(b), be required to expend in any year
during such six (6) year period more than 300% of current annual premiums paid
by the Company for current comparable insurance coverage; provided, however,
that in the event of an expiration, termination or cancellation of such current
policies, the Surviving Corporation shall be required to obtain as much coverage
as is possible under substantially similar policies for such maximum annual
amount. The Company represents that such current annual premium amount is set
forth in Section 5.4(b) of the Company Disclosure Schedule.
(c) In the event the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case, proper provision shall be made so
that the successors and assigns of the Surviving Corporation shall succeed to
the obligations set forth in this Section 5.4.
(d) The provisions of this Section 5.4 (i) are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives and (ii) are in addition to, and not in substitution
for, any other rights to indemnification or contribution that any such person
may have by contract or otherwise.
5.5. Benefit Plans and Employee Matters.
(a) From and after the Transfer Closing or the Effective Time, as
the case may be, Purchaser shall cause the Transferred Subs to, and the
Surviving Corporation and its subsidiaries shall, continue to honor, in
accordance with their terms, all binding contracts, agreements,
44
arrangements, policies, plans and commitments of the Company and its
subsidiaries as in effect immediately prior to the Transfer Closing or the
Effective Time, as the case may be, that are applicable to any current or former
employees or directors of the Company or any of its subsidiaries.
(b) Employees of the Company and its subsidiaries as of the Transfer
Closing or the Effective Time, as the case may be (each, an "EMPLOYEE"), shall
receive credit under any employee benefit plan, program or arrangement
(including vacation plans, programs and arrangements) established or maintained
by Purchase Sub or any of the Transferred Subs or the Surviving Corporation or
any of its subsidiaries, as the case may be, for service with the Company and
its subsidiaries through the Transfer Closing or the Effective Time, as the case
may be. Each Employee shall retain their current credit for service accrued or
deemed accrued on or prior to the Transfer Closing or the Effective Time, as the
case may be, with the Company or any of its subsidiaries; provided, however,
that such crediting of service shall not operate to duplicate any benefit or the
funding of any such benefit.
(c) With respect to the welfare benefit plans, programs and
arrangements maintained, sponsored or contributed to by Purchase Sub or any of
the Transferred Subs, or by the Surviving Corporation or any of its
subsidiaries, in which an Employee may be eligible to participate on or after
the Transfer Closing or the Effective Time, as the case may be, Purchaser shall
provide credit to each Employee for any co-payments, deductibles and
out-of-pocket expenses paid by such Employee under the Company Employee Plans
during the relevant plan year, up to and including the Transfer Closing or the
Effective Time, as the case may be.
(d) From and after the Transfer Closing or the Effective Time, as
the case may be, Purchaser shall cause the Transferred Subs to, and the
Surviving Corporation and its subsidiaries shall, continue to honor, in
accordance with their terms, all employment and retention agreements listed in
Section 5.5(d) of the Company Disclosure Schedule.
5.6. Public Announcements.
So long as this Agreement is in effect, each of Purchaser and Merger
Sub shall not, and each shall cause its respective affiliates not to, (i) issue
or cause the publication of any press release or any other announcement or
communication with respect to this Agreement or the Transactions without the
prior written consent of the Company, or (ii) discuss with the press or the
media this Agreement or the Transactions (and will refer any and all questions
and inquiries concerning the Company or its affiliates to the Company), except
in any case under (i) or (ii) to the extent that such release, announcement,
communication or discussion is required by applicable Law or Governmental
Authority and in such cases only after consultation with the Company.
5.7. HSR ACT.
Each of Purchaser and Merger Sub will, promptly after the execution
of this Agreement, file all Notification and Report Forms and related materials
that it may be required to file with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the HSR Act
in connection with the Transactions, will exercise its commercially
45
reasonable efforts to obtain an early termination of the applicable waiting
period, and will make any further filings pursuant thereto that may be necessary
to consummate the Transactions.
ARTICLE VI
CONDITIONS
6.1. Conditions to Each Party's Obligations.
The respective obligations of each party to effect the Transactions
shall be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
(a) Stockholder Approval. The Company Stockholder Approval shall
have been obtained.
(b) No Injunction or Action. No order, statute, law, rule,
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or other
Governmental Authority, which makes illegal, prohibits or prevents the
consummation of any of the Transactions and which has not been vacated,
dismissed or withdrawn prior to the Transfer Closing Date or the Closing Date,
as applicable. The Company and Purchaser shall use their commercially reasonable
efforts to have any of the foregoing vacated, dismissed or withdrawn by the
Transfer Closing Date.
(c) HSR Act. The applicable waiting period under the HSR Act shall
have expired or been terminated.
6.2. Conditions to Obligations of Purchaser to Effect the Transfers.
The obligations of Purchaser to effect the Transfers shall be
subject to the fulfillment at or prior to the Transfer Closing Date of the
following additional conditions, which may be waived by Purchaser in writing in
its sole discretion:
(a) Representations and Warranties. The representations and
warranties of the Company (i) set forth in this Agreement (other than Sections
2.2(a)-(d), 2.2(f), 2.3 and 2.4) shall be true and correct as of the date of
this Agreement and as of the Transfer Closing Date (other than representations
and warranties which address matters only as of a particular date, which shall
be true and correct on and as of such particular date, subject to the
qualification below), as if made at and as at such date, except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "Company
Material Adverse Effect" set forth therein) could not reasonably be expected to
have a Company Material Adverse Effect, and (ii) set forth in Sections
2.2(a)-(d), 2.2(f), 2.3 and 2.4 shall be true and correct in all material
respects as of the date of this Agreement and as of the Transfer Closing Date
(other than representations and warranties which address matters only as of a
particular date, which shall be true and correct in all material respects on and
as of such particular date), as if made at and as at such date.
46
(b) Covenants. The Company shall have performed in all material
respects its obligations and complied in all material respects with its
agreements or covenants to be performed or complied with by it under this
Agreement on or prior to the Transfer Closing Date.
(c) Material Adverse Effect. There shall not have occurred any
changes, conditions, events or developments that have had or that could
reasonably be expected to have a Company Material Adverse Effect.
(d) Certificate. The Company shall have furnished Purchaser with a
certificate dated as of the Transfer Closing Date signed on its behalf by its
Chief Executive Officer, in such capacity but not as an individual, to the
effect that the conditions set forth in paragraphs (a) and (b) of this Section
6.2 have been satisfied.
(e) Governmental Action. There shall not have been entered, enforced
or issued by any Governmental Authority any judgment, order, injunction, ruling
or decree which: (i) prohibits or materially limits the ownership or operation
by the Surviving Corporation, Purchaser or Purchase Sub of any material portion
of the shares of stock (or other rights of ownership) or assets of the Company
and its subsidiaries, taken as a whole; or (ii) requires divestiture or
rescission by Purchaser, Merger Sub or Purchase Sub of any material portion of
the shares of stock (or other rights of ownership) or assets of the Company and
its subsidiaries, taken as a whole.
(f) Consents. All Consents required in connection with this
Agreement or the Transactions (other than any Consents that may be required
under any Company Leases or Company Permits, including, without limitation,
pursuant to any federal, state, city or local Law governing the sale of liquor
that may be applicable) shall have been obtained and shall be in full force and
effect, except where the failure to so obtain or have in effect such Consents
could not reasonably be expected to have, in the aggregate, a Company Material
Adverse Effect.
(g) Dissent Condition. The holders of not more than twenty-two and
one-half percent (22.5%) of the Shares shall have exercised dissenter's rights
in accordance with the DGCL.
Purchaser and Merger Sub expressly acknowledge that the Company's failure to
obtain or have in effect Consents that may be required under any Company Leases
or Company Permits, including, without limitation, pursuant to any federal,
state, city or local Law governing the sale of liquor that may be applicable,
shall not constitute a Company Material Adverse Effect.
6.3. CONDITIONS TO OBLIGATIONS OF PURCHASER TO EFFECT THE MERGER.
The obligations of Purchaser and Merger Sub to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions, which may be waived by Purchaser in writing in
its sole discretion:
(a) Closing of Transfers and Distribution. The Transfer Closing
shall have occurred and the Company shall have deposited the Distribution with
the Transfer Agent.
(b) Transfer Closing Conditions. All of the conditions set forth in
Section 6.2 shall be conditions to the obligation of Purchaser and Merger Sub to
effect the Merger, with any such
47
conditions that are to be fulfilled at or prior to the Transfer Closing Date
being required to be fulfilled as of the Effective Time.
(c) Certificate. The Company shall have furnished Purchaser with a
certificate in substance the same as the one furnished pursuant to Section
6.2(d), dated as of the Closing Date.
6.4. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
(a) Closing of Transfers. The obligations of the Company to effect
the Transfers shall be subject to the fulfillment at or prior to the Transfer
Closing Date of the following additional conditions, which may be waived by the
Company in writing in its sole discretion:
(i) Representations and Warranties. The representations and
warranties of Purchaser set forth in this Agreement shall be true and correct as
of the date of this Agreement and as of the Transfer Closing Date (other than
representations and warranties which address matters only as of a particular
date, which shall be true and correct on and as of such particular date, subject
to the qualification below), as if made at and as at such date, except where the
failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "Purchaser
Material Adverse Effect" set forth therein) could not reasonably be expected to
have a Purchaser Material Adverse Effect.
(ii) Covenants. Purchaser shall have performed in all material
respects its obligations and complied in all material respects with its
agreements or covenants to be performed or complied with by it under this
Agreement on or prior to the Transfer Closing Date.
(iii) Certificate. Purchaser shall have furnished the Company with a
certificate dated as of the Transfer Closing Date signed on its behalf by its
President, in such capacity but not as an individual, to the effect that the
conditions set forth in paragraphs (i) and (ii) of this Section 6.4(a) have been
satisfied.
(b) Closing of Merger. The obligations of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following additional conditions, which may be waived by the Company in
writing in its sole discretion:
(i) Closing of Transfers. The Transfer Closing shall have occurred.
(ii) Transfer Closing Conditions. All of the conditions set forth in
Section 6.4(a) shall be conditions to the obligation of the Company to effect
the Merger, with any such conditions that are to be fulfilled at or prior to the
Transfer Closing Date being required to be fulfilled as of the Effective Time.
(iii) Certificate. Purchaser shall have furnished the Company with a
certificate in substance the same as the one furnished pursuant to Section
6.4(a)(iii), dated as of the Closing Date.
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6.5. Frustration of Conditions.
None of Purchaser, Merger Sub or the Company may rely on the failure
of any condition set forth in this Article VI to be satisfied if such failure
was caused by such party's failure to comply with or perform any of its
covenants or obligations set forth in this Agreement.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1. Termination.
This Agreement may be terminated and the Transactions may be
abandoned at any time prior to the Closing Date by action taken or authorized by
the Board of Directors or other governing body of the terminating party or
parties, as follows (the date of any such termination, the "TERMINATION DATE"):
(a) by mutual written consent of Purchaser and the Company;
(b) by either Purchaser or the Company, if the Merger has not been
consummated on or before December 15, 2006 (the "OUTSIDE DATE"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Merger to be consummated on or before such date;
(c) by either Purchaser or the Company, if any Governmental
Authority shall have enacted, issued, promulgated, enforced or entered any
legally binding Law, injunction, order, decree or ruling or taken any other
action (including the failure to have taken an action) which has become final
and non-appealable and has the effect of making consummation of any of the
Transactions illegal or otherwise preventing or prohibiting consummation of any
of the Transactions;
(d) by Purchaser, if neither Purchaser nor Merger Sub is in material
breach of any of its representations, warranties or covenants under this
Agreement, and if (i) any of the representations or warranties of the Company
herein become untrue or inaccurate such that the condition set forth in Section
6.2(a) would not be satisfied, or (ii) there has been a breach on the part of
the Company of any of its covenants or agreements herein such that the condition
set forth in Section 6.2(b) would not be satisfied, and such breach (if curable)
has not been cured within twenty (20) days after notice to the Company;
(e) by the Company, if the Company is not in material breach of any
of its representations, warranties or covenants under this Agreement, and if (i)
any of the representations or warranties of Purchaser or Merger Sub herein
become untrue or inaccurate, such that the condition set forth in Section
6.4(a)(i) would not be satisfied or (ii) there has been a breach on the part of
Purchaser or Merger Sub of any of its covenants or agreements herein such that
the condition set forth in Section 6.4(a)(ii) would not be satisfied, and such
breach (if curable) has not been cured within twenty (20) days after notice to
Purchaser or Merger Sub, as the case may be;
49
(f) by Purchaser, if the Board shall have (i) withdrawn or modified
in a manner adverse to Purchaser its approval of this Agreement or the
Transactions or its recommendation that holders of Shares adopt this Agreement
and approve the Transactions or (ii) recommended or approved any Company
Takeover Proposal;
(g) by the Company, if the Board shall have withdrawn or modified in
a manner adverse to Purchaser its approval of this Agreement or the Transactions
or its recommendation that holders of Shares adopt this Agreement and approve
the Transactions in accordance with Section 4.8(e)(i) of this Agreement,
provided, however, that any such purported termination pursuant to this Section
7.1(g) shall be void and of no force or effect unless the Company concurrently
with such termination (i) pays to Purchaser the Company Termination Fee and the
Termination Expenses in accordance with Section 7.3 and (ii) enters into a
definitive acquisition, merger or similar agreement to effect the Company
Superior Offer; or
(h) by Purchaser or the Company, if, at the Special Meeting, the
Company Stockholder Approval is not obtained.
7.2. Effect of Termination.
In the event of the termination of this Agreement pursuant to
Section 7.1, this Agreement shall forthwith become void, and there shall be no
liability under this Agreement on the part of any party hereto (except that the
provisions of this Section 7.2, Section 7.3 (Fees and Expenses) and Section 8.1
(Confidentiality) shall survive any such termination); provided, however, that,
in the event of a termination of this Agreement under Section 7.1(d) or 7.1(e),
the terminating party shall be entitled to receive from the breaching party,
within two business days after such termination of this Agreement, an amount
equal to $3,000,000 (the "LIQUIDATED DAMAGES AMOUNT") as the sole and liquidated
damages of the terminating party, except as otherwise expressly provided in
Section 7.3(b)(iii). The parties acknowledge that, in the event of a termination
of this Agreement under either such Section, the damages incurred by the
terminating party would be difficult to determine and that the Liquidated
Damages Amount represents a reasonable estimate of such damages. A party will
not otherwise have any liability for any breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement prior to a
termination of this Agreement under Section 7.1, or otherwise in connection with
any termination of this Agreement under Section 7.1, except as otherwise
expressly provided above in this Section 7.2 or in Section 7.3 below.
Notwithstanding anything to the contrary contained in this Agreement, nothing
shall limit or prevent any party from exercising any rights or remedies it may
have under Section 8.12 hereof in lieu of terminating this Agreement pursuant to
Section 7.1.
7.3. Fees and Expenses.
(a) Except as otherwise set forth in this Section 7.3, all Expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any of the Transactions is
consummated. As used in this Agreement, "EXPENSES" shall include all reasonable
out-of-pocket expenses (including all fees and expenses of counsel, accountants,
investment bankers, financing sources, experts and consultants to a party hereto
and its affiliates) incurred by a party or on its behalf in connection with or
related to the
50
authorization, preparation, negotiation, execution or performance of this
Agreement, the preparation, printing, filing or mailing of the Proxy Statement,
the solicitation of stockholder approvals and all other matters related to the
consummation of the Transactions. Purchaser and the Company shall each pay
one-half of the filing fee in connection with the filings under the HSR Act.
(b) The Company agrees that if this Agreement shall be terminated:
(i) pursuant to Section 7.1(f), then (so long as neither Purchaser
nor Merger Sub was, as of the Termination Date, in breach of any of its
representations, warranties or covenants in this Agreement such that the
condition set forth in Section 6.4(a)(i) or Section 6.4(a)(ii) would not be
satisfied) the Company shall pay Purchaser the Company Termination Fee and the
Termination Expenses; or
(ii) pursuant to Section 7.1(g), then the Company shall pay
Purchaser the Company Termination Fee and the Termination Expenses;
(iii) pursuant to Section 7.1(b) or Section 7.1(h) (if prior to such
termination a Company Takeover Proposal shall have been publicly announced or
otherwise disclosed to the stockholders of the Company (a "COMPANY PUBLIC
PROPOSAL")) or pursuant to Section 7.1(d) and within nine (9) months of the
Termination Date the Company or any of its subsidiaries enters into a definitive
agreement with respect to, or the Board recommends that the Company stockholders
approve, adopt or accept, any Company Takeover Proposal, then the Company shall
pay Purchaser the Company Termination Fee (in the case of a termination pursuant
to Section 7.1(d), with a credit for the Liquidated Damages Amount previously
paid as provided in Section 7.2) and the Termination Expenses; or
(iv) pursuant to Section 7.1(h) if prior to such termination no
Company Public Proposal shall have been publicly announced or otherwise
disclosed to the stockholders of the Company, then the Company shall pay
Purchaser the Termination Expenses.
(c) All Termination Expenses payable to Purchaser under Section
7.3(b) shall be paid to Purchase or its designee by the Company in immediately
available funds within two (2) business days after receiving evidence of the
reasonably documented Expenses of Purchaser and its affiliates. The Company
Termination Fee shall be paid to Purchaser or its designee by the Company in
immediately available funds (i) within two (2) business days after the
termination of this Agreement pursuant to Section 7.1(f), (ii) concurrently with
and as a condition to the effectiveness of a termination of this Agreement by
the Company pursuant to Section 7.1(g), and (iii) concurrently upon the Company
entering into a definitive agreement with respect to, or the Board recommending
that the Company stockholders approve, adopt or accept, a Company Takeover
Proposal, if this Agreement is terminated under any of the circumstances set
forth in Section 7.3(b)(iii). In no event shall the Company be required to pay
under Section 7.3(b) an amount in the aggregate in excess of $19,500,000.
(d) For purposes of this Agreement, (i) "COMPANY TERMINATION FEE"
means an amount equal to $18,000,000 and (ii) "TERMINATION EXPENSES" means an
amount, not to exceed
51
$1,500,000 (and not to exceed $1,000,000 in the case of Section 7.3(b)(iv)),
equal to the reasonably documented Expenses of Purchaser and its affiliates.
(e) Each of the Company and Purchaser acknowledges that the
agreements contained in this Section 7.3 are an integral part of the
Transactions. In the event that the Company shall fail to pay the Company
Termination Fee or any Termination Expenses when due, the Company shall
reimburse Purchaser, in addition to the Termination Expenses and not subject to
any cap or limit thereon, for all reasonable costs and expenses actually
incurred or accrued by Purchaser (including reasonable fees and expenses of
counsel) in connection with the collection under and enforcement of this Section
7.3. Notwithstanding anything to the contrary in this Agreement, if this
Agreement is terminated under any of the circumstances set forth in Section
7.3(b) as a result of which Purchaser is entitled to receive payment of the
Company Termination Fee and/or Termination Expenses, Purchaser's right to
receive payment of the Company Termination Fee and/or Termination Expenses
pursuant to this Section 7.3 shall be the exclusive remedy of Purchaser and
Merger Sub for the loss suffered as a result of the failure of the Transactions
to be consummated, and upon payment of the Company Termination Fee and/or
Termination Expenses in accordance with this Section 7.3, the Company shall have
no further liability or obligation relating to or arising out of this Agreement
or the Transactions (except with respect to the second sentence of this Section
7.3(e) and with respect to Section 8.1) if this Agreement is terminated under
any of the circumstances set forth in Section 7.3(b).
ARTICLE VIII
MISCELLANEOUS
8.1. Confidentiality.
Unless (i) otherwise expressly provided in this Agreement, (ii)
required by applicable Law or Governmental Authority, (iii) necessary to secure
any required Consents as to which the other party has been advised, or (iv)
consented to in writing by Purchaser or the Company, as applicable, any
information or documents furnished in connection herewith shall be kept strictly
confidential by the Company, Purchaser, Merger Sub and their respective
officers, directors, employees, agents and representatives. Prior to any
disclosure pursuant to the preceding sentence, the party intending to make such
disclosure shall use its commercially reasonable efforts to consult with the
other party regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply with
accounting, SEC and other disclosure obligations imposed by applicable Law. To
the extent required by such disclosure obligations, Purchaser or the Company,
after a party uses its commercially reasonable efforts to consult with the other
party, may file with the SEC a Report on Form 8-K pursuant to the Exchange Act
with respect to the Transactions, which report may include, among other things,
financial statements and pro forma financial information with respect to the
other party. Purchaser and the Company shall cooperate with the other and
provide such information and documents as may be required in connection with any
filings with the SEC. In the event this Agreement is terminated, each party
shall return to the other any documents furnished by the other and all copies
thereof any of them may have made and will hold in confidence any information
obtained from the other party except to the extent (i) such party is required to
disclose such information by applicable Law or such disclosure is necessary in
connection with the pursuit or defense of a claim, (ii) such information was
known by such party prior to such
52
disclosure or was thereafter developed or obtained by such party independent of
such disclosure or (iii) such information becomes generally available to the
public other than by breach of this Section 8.1. Prior to any disclosure of
information pursuant to the exception in clause (i) of the preceding sentence,
the party intending to disclose the same shall so notify the party which
provided the same in order that such party may seek a protective order or other
appropriate remedy should it choose to do so.
8.2. Amendment and Modification.
This Agreement may be amended, modified or supplemented only by a
written agreement among the Company, Purchaser and Merger Sub.
8.3. Waiver of Compliance; Consents.
Any failure of the Company, on the one hand, or Purchaser or Merger
Sub, on the other hand, to comply with any obligation, covenant, agreement or
condition herein may be waived by Purchaser, on the one hand, or the Company, on
the other hand, only by a written instrument signed by the party granting such
waiver, 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 8.3.
8.4. Survival.
The respective representations and warranties of the Company,
Purchaser and Merger Sub contained herein or in any certificates or other
documents delivered prior to or at the Closing shall survive the execution and
delivery of this Agreement, notwithstanding any investigation made or
information obtained by the other party, but shall terminate at the Effective
Time.
8.5. Notices.
All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given when delivered in person, by
facsimile, receipt confirmed, or on the next business day when sent by overnight
courier or on the second succeeding business day when sent by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to the Company, to:
Lone Star Steakhouse & Saloon, Inc.
000 Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
Attention: Xxxx X. Xxxxx
Facsimile: (000) 000-0000
53
with a copy to (but which shall not constitute notice to the
Company):
Xxxxxx Xxxxxxxx Frome Xxxxxxxxxx & Xxxxxxx LLP
Park Avenue Tower
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(ii) if to Purchaser or Merger Sub, to:
c/o Hudson Advisors, L.L.C.
000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
with a copy to (but which shall not constitute notice to Purchaser
or Merger Sub)
Jenkens & Xxxxxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. XxXxxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
8.6. Binding Effect; Assignment.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto prior to the Effective Time, without the prior written consent of the
other parties hereto; provided, however, that Purchaser and Merger Sub may
assign all or any of their rights hereunder to any of their respective
affiliates; provided, further, however, that no such assignment shall relieve
the assigning party of its obligations hereunder.
8.7. Governing Law; Jurisdiction.
This Agreement shall be deemed to be made in, and in all respects
shall be interpreted, construed and governed by and in accordance with the
internal laws of, the State of Delaware, without regard to the conflicts of law
principles thereof. In any action between any of the parties arising out of or
relating to the subject matter of this Agreement or any of the Transactions: (a)
each of the parties irrevocably and unconditionally consents and submits to the
exclusive jurisdiction and venue of the state and federal courts located in the
State of Delaware (and agrees not to commence any such action except in such
courts) and irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action brought in such court has been
brought in an inconvenient forum; (b) if any such action is commenced in a state
54
court, then, subject to applicable law, no party shall object to the removal of
such action to any federal court located in the State of Delaware; (c) each of
the parties irrevocably waives the right to trial by jury and (d) each of the
parties irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 8.5.
8.8. Counterparts.
This Agreement may be executed in one or more counterparts, each of
which together shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.9. 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 association, an unincorporated organization, a
Governmental Authority and any other entity, (ii) unless otherwise specified
herein, the term "AFFILIATE," with respect to any person, shall mean and include
any person controlling, controlled by or under common control with such person,
(iii) the term "SUBSIDIARY" of any specified person shall mean any corporation a
majority of the outstanding voting power of which, or any partnership, joint
venture, limited liability company or other entity a majority of the total
equity interest of which, is directly or indirectly owned by such specified
person, (iv) the term "KNOWLEDGE," when used with respect to the Company, shall
mean the knowledge of the executive officers of the Company (without a duty to
investigate) and, when used with respect to Purchaser, shall mean the knowledge
of the executive officers of Purchaser (without a duty to investigate), and (v)
the term "INCLUDING" shall mean "including, without limitation." The parties
have participated jointly in the negotiation and drafting of this Agreement.
Consequently, in the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provision of this
Agreement.
8.10. Entire Agreement.
This Agreement and the documents or instruments referred to herein,
including, but not limited to, the Exhibit(s) attached hereto and the Company
Disclosure Schedule referred to herein, which Exhibit(s) and Company Disclosure
Schedule are incorporated herein by reference, any other written agreement
entered into contemporaneously herewith, and the Confidentiality Agreement,
dated December 7, 2005, between the Company and Purchaser, embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, representations,
warranties, covenants or undertakings other than those expressly set forth or
referred to herein. This Agreement and such other agreements supersede all prior
agreements and the understandings between the parties with respect to such
subject matter.
55
8.11. Severability.
In case any provision in this Agreement shall be held invalid,
illegal or unenforceable in a jurisdiction, such provision shall be modified or
deleted, as to the jurisdiction involved, only to the extent necessary to render
the same valid, legal and enforceable, and the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby nor shall the validity, legality or enforceability
of such provision be affected thereby in any other jurisdiction.
8.12. Specific Performance.
The parties hereto 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. Accordingly,
the parties further agree that each party shall be entitled to an injunction or
restraining order 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 right or
remedy to which such party may be entitled under this Agreement, at law or in
equity.
8.13. Attorneys' Fees.
If any legal action or any arbitration is brought for the
enforcement of this Agreement or because of an alleged dispute, controversy,
breach or default in connection with the subject matter of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees and all
other reasonable costs and expenses incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
8.14. Third Parties.
Nothing contained in this Agreement or in any instrument or document
executed by any party in connection with the Transactions shall create any
rights in, or be deemed to have been executed for the benefit of, any person or
entity that is not a party hereto or thereto or a successor or permitted assign
of such a party, except pursuant to, as provided by and in accordance with the
provisions of Sections 5.4 and 5.5(d) hereof.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
and Plan of Merger to be signed and delivered by their respective duly
authorized officers as of the date first above written.
LONE STAR STEAKHOUSE & SALOON, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx
-------------------------------
Xxxxx X. Xxxxxxx,
Chief Executive Officer
LONE STAR U.S. ACQUISITIONS LLC,
a Delaware limited liability company
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
Vice President
COI ACQUISITION CORP., a Delaware corporation
By: /s/ Xxxx X. Xxxxxx
-------------------------------
Xxxx X. Xxxxxx
Vice President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
57
