EXHIBIT 2.1
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXXXXXX HOSPITALITY CORPORATION
AND
LSHC ACQUISITION, INC.
AND
CITADEL COMPUTER SYSTEMS, INC.
* * * * *
DATED: FEBRUARY 29, 1996
TABLE OF CONTENTS
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Page
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Recitals............................................................ 1
Agreement........................................................... 1
1. Definitions............................................... 1
2. The Merger................................................ 4
2.1 The Merger........................................... 4
2.2 Effective Time....................................... 4
2.3 The Certificate of Incorporation..................... 4
2.4 The Bylaws........................................... 4
2.5 Officers and Directors............................... 4
2.6 Conversion or Cancellation of Citadel Common Stock... 4
2.7 Exchange of Certificates............................. 5
2.8 Appraisal Rights..................................... 5
2.9 Approval of the Stockholders......................... 6
2.10 Reporting of Merger.................................. 6
3. The Closing............................................... 6
3.1 Time and Place of Closing............................ 6
3.2 Obligations of Citadel at or Prior to the Closing.... 6
3.3 Obligations of XxxxXxxx and Acquisition at or Prior
to the Closing..................................... 7
4. Representations, Warranties and Covenants of Citadel...... 7
4.1 Corporate Organization............................... 7
4.2 Capitalization....................................... 8
4.3 Authority; No Violation.............................. 8
4.4 Consents and Approvals............................... 8
4.5 Violation of Laws, Permits, etc...................... 8
4.6 Citadel Financial Statements......................... 9
4.7 No Undisclosed Liabilities, etc...................... 9
4.8 Absence of Certain Changes........................... 9
4.9 Title to Property; Encumbrances...................... 10
4.10 Litigation........................................... 10
4.11 Taxes................................................ 10
4.12 Insurance............................................ 11
4.13 Contracts............................................ 11
4.14 Compensation and Employee Plans...................... 12
4.15 Brokers, Finders and Advisors........................ 13
4.16 Labor Force.......................................... 13
4.17 Books and Records.................................... 13
4.18 Payments............................................. 13
4.19 Disclosure........................................... 13
4.20 Joint Ventures....................................... 13
4.21 Subsidiaries......................................... 13
4.22 Approval of Stockholders............................ 13
4.23 Intellectual Property............................... 13
5. Representations, Warranties and Covenants of XxxxXxxx
and Acquisition........................................ 14
5.1 Corporate Organization............................... 14
5.2 Capitalization....................................... 14
5.3 Authority............................................ 14
5.4 Consents and Approvals............................... 15
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5.5 Violation of Laws, Permits, etc...................... 15
5.6 XxxxXxxx and Acquisition Financial Statements........ 15
5.7 No Undisclosed Liabilities, etc...................... 15
5.8 Absence of Certain Changes........................... 15
5.9 Title to Property; Encumbrances...................... 16
5.10 Litigation........................................... 16
5.11 Taxes................................................ 17
5.12 Insurance............................................ 18
5.13 Contracts............................................ 18
5.14 Compensation and Employee Plans...................... 19
5.15 Brokers, Finders and Advisors........................ 19
5.16 Labor Force.......................................... 19
5.17 Books and Records.................................... 19
5.18 Payments............................................. 19
5.19 Disclosure........................................... 20
5.20 Joint Ventures....................................... 20
5.21 Subsidiaries......................................... 20
5.22 Approval of Merger................................... 20
5.23 Intellectual Property................................ 20
5.24 SEC Filings.......................................... 20
5.25 Liabilities.......................................... 20
6. Actions of Citadel Prior to the Closing Date.............. 20
6.1 Affirmative Covenants................................ 20
6.2 Negative Covenants................................... 21
6.3 Consents............................................. 21
6.4 Advice of Changes.................................... 21
6.5 Best Efforts......................................... 21
6.6 Access to Properties and Records..................... 21
6.7 Supply Documents, Reports, etc....................... 21
6.8 Stockholder Approval................................. 22
7. Actions of XxxxXxxx and Acquisition Prior to the
Closing Date........................................... 22
7.1 Affirmative Covenants................................ 22
7.2 Negative Covenants................................... 22
7.3 Consents............................................. 22
7.4 Advice of Changes.................................... 22
7.5 OTC Bulletin Board................................... 23
7.6 Best Efforts......................................... 23
8. Conditions to XxxxXxxx'x and Acquisition's Obligations.... 23
9. Conditions to Citadel's Obligations....................... 24
10. Additional Agreements..................................... 26
10.1 Confidentiality..................................... 26
10.2 Further Assurances.................................. 26
11. Termination, Waiver and Amendment......................... 26
11.1 Termination......................................... 26
11.2 Manner of Exercise.................................. 26
11.3 Effect of Termination............................... 26
11.4 Waiver.............................................. 26
11.5 Amendment........................................... 26
12. Miscellaneous............................................. 27
12.1 Expenses............................................ 27
12.2 Press Releases...................................... 27
12.3 Binding Effect...................................... 27
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12.4 Severability........................................ 27
12.5 Notices............................................. 27
12.6 Entire Agreement.................................... 28
12.7 Amendments; Waivers................................. 28
12.8 Headings............................................ 28
12.9 Counterparts........................................ 28
12.10 Specific Performance................................ 28
12.11 GOVERNING LAW....................................... 28
12.12 Time of Essence..................................... 28
12.13 Best Efforts........................................ 28
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SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is entered into as of February 29, 1996, by and among XXXXXXXX
HOSPITALITY CORPORATION, a Delaware corporation ("XxxxXxxx"), LSHC ACQUISITION,
INC., a Delaware corporation ("Acquisition"), and CITADEL COMPUTER SYSTEMS, INC.
("Citadel"), a Delaware corporation.
RECITALS
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XxxxXxxx, Acquisition and Citadel each executed an Agreement and Plan of
Merger on January 31, 1996 and a First Amended and Restated Agreement and Plan
of Merger on February 28, 1996.
XxxxXxxx, Acquisition and Citadel now desire to amend and restate such
First Amended and Restated Agreement and Plan of Merger in accordance with the
following.
AGREEMENT
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NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements hereinafter set forth, in accordance with the provisions of
applicable law, the parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement and documents delivered
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pursuant to this Agreement, the following terms shall have the following
meanings:
ACQUISITION. "Acquisition" means LSHC Acquisition, Inc., which is
a wholly-owned subsidiary of XxxxXxxx.
ACQUISITION COMMON STOCK. "Acquisition Common Stock" means
Acquisition's common stock, par value $.01 per share.
ACQUISITION FINANCIAL STATEMENTS. "Acquisition Financial
Statements" are the unaudited Financial Statements of Acquisition for the year
ended December 31, 1995.
AFFILIATE. "Affiliate" means an "affiliate" or "associate" as those
terms are defined in Rule 12b-2 promulgated by the Commission under the Exchange
Act.
CERTIFICATE OF MERGER. "Certificate of Merger" is as defined in
SECTION 2.2.
CITADEL. "Citadel" means Citadel Computer Systems, Inc.
CITADEL COMMON STOCK. "Citadel Common Stock" means Citadel's
common stock, par value $.01 per share.
CITADEL DISCLOSURE SCHEDULE. The "Citadel Disclosure Schedule" is
the disclosure schedule delivered by Citadel to XxxxXxxx contemporaneously with
the execution of this Agreement. Each heading in the Citadel Disclosure Schedule
shall refer to the applicable section of this Agreement.
CITADEL FINANCIAL STATEMENTS. "Citadel Financial Statements" are,
collectively, the audited Financial Statements of Citadel as of and for the year
ended December 31, 1994 and the unaudited Financial Statements of Citadel as of
and for year ended December 31, 1993 and the nine months ended September 30,
1995.
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CITADEL WARRANT HOLDERS. "Citadel Warrant Holders" means the
warrant holders referred to in SECTION 3.2(K).
CLOSING. "Closing" means the closing referred to in SECTION 3.1.
CLOSING DATE. The "Closing Date" shall be such date as shall be set
by the parties in writing following satisfaction (or waiver) of the conditions
to the Closing set forth in SECTIONS 8 and 9 hereof.
CODE. "Code" means the Internal Revenue Code of 1986, as amended,
or any successor statute.
COMMISSION. "Commission" means the Securities and Exchange
Commission and/or any other Governmental Entity that administers either the
Securities Act or the Exchange Act.
DGCL. "DGCL" means the Delaware General Corporation Law, as
amended, or any successor statute.
EFFECTIVE DATE. "Effective Date" is as defined in SECTION 2.2.
EFFECTIVE TIME. "Effective Time" is as defined in SECTION 2.2.
ENCUMBRANCE. An "Encumbrance" is any option, pledge, security
interest, lien, charge, encumbrance, or restriction (whether on voting, sale,
transfer, disposition or otherwise), whether imposed by agreement,
understanding, law or otherwise, except those arising under applicable federal
or state securities laws.
ERISA. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, or any successor statute.
EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any successor statute.
GAAP. "GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants, in statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination.
GOVERNMENTAL ENTITY. A "Governmental Entity" is any federal, state,
municipal, domestic or foreign court, tribunal, administrative agency,
department, commission, board, bureau or other governmental authority or
instrumentality.
INTELLECTUAL PROPERTY. "Intellectual Property" is as defined in
SECTION 4.23.
JOINT VENTURE AND JOINT VENTURES. "Joint Venture" or "Joint
Ventures" means any partnership or joint venture with third parties in which
Citadel is a partner, venturer or participant.
XXXXXXXX. "XxxxXxxx" means XxxxXxxx Hospitality Corporation and any
Subsidiary of XxxxXxxx, except for Acquisition.
XXXXXXXX AND ACQUISITION DISCLOSURE SCHEDULE. "XxxxXxxx and
Acquisition Disclosure Schedule" is the disclosure schedule delivered by
XxxxXxxx and Acquisition to Citadel contemporaneously with the
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execution of this Agreement. Each heading in the XxxxXxxx and Acquisition
Disclosure Schedule shall refer to the applicable section of this Agreement.
XXXXXXXX COMMON STOCK. "XxxxXxxx Common Stock" means XxxxXxxx'x
common stock, par value $0.01 per share.
XXXXXXXX FINANCIAL STATEMENTS. "XxxxXxxx Financial Statements" are
collectively, the audited Financial Statements of XxxxXxxx as of the year ended
March 31, 1994 and 1995, and the unaudited Financial Statements of XxxxXxxx for
the six months ended September 30, 1995.
XXXXXXXX SEC DOCUMENTS. "XxxxXxxx SEC Documents" are collectively
XxxxXxxx'x Form 10-KSB for the year ended March 31, 1995, as amended, Form 10-
QSB for the quarterly period ended September 30, 1995 and Form 8-K dated
December 4, 1995.
XXXXXXXX SHARES. "XxxxXxxx Shares" mean the XxxxXxxx Common Stock
to be issued to Citadel in connection with the Merger.
MATERIAL EFFECT. "Material Effect" means a material adverse effect
in the business, operations, properties, assets, liabilities, prospects or
condition (financial or otherwise) of Citadel, XxxxXxxx or Acquisition, as the
context requires.
MERGER. "Merger" means the merger of Citadel with and into
Acquisition as described in SECTION 2.1.
NASDAQ. "NASDAQ" means the National Association of Securities
Dealers Automated Quotations.
PLAN. "Plan" is as defined in SECTION 4.14.
RESTAURANT ASSETS. "Restaurant Assets" mean assets used in or in
connection with the operation of restaurants by XxxxXxxx.
SECURITIES ACT. "Securities Act" means the Securities Act of 1933,
as amended, or any successor statute.
SPECIAL MEETING. "Special Meeting" means the Special Meeting of
Citadel Stockholders to be held in 1996 to consider the Merger.
STOCKHOLDERS. "Stockholders" means the stockholders of Citadel on
the record date with respect to the Special Meeting as set forth in the Proxy
Statement.
SUBSIDIARY AND SUBSIDIARIES. "Subsidiary" or "Subsidiaries" means
any corporation with more than 50 percent of its voting power owned directly or
indirectly by Citadel, Acquisition, XxxxXxxx or other relevant person, as the
context requires.
SURVIVING CORPORATION. "Surviving Corporation" is as defined in
SECTION 2.1.
TAXES. "Taxes" is as defined in SECTION 4.11.
TAX RETURN. "Tax Return" is as defined in SECTION 4.11.
TRANSFER AGENT. "Transfer Agent" means the American Securities
Transfer, Inc.
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2. THE MERGER.
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2.1 THE MERGER. Subject to the terms and conditions of this
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Agreement, at the Effective Time, Citadel shall be merged with and into
Acquisition and the separate corporate existence of Citadel shall cease (the
"Merger"). Acquisition shall be the surviving corporation in the Merger
(sometimes referred to as the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware, and the separate corporate
existence of Acquisition with all its rights, privileges, immunities, powers
and franchises shall continue unaffected by the Merger, except as set forth
below in this ARTICLE 2. The Merger shall have the effects specified in the
DGCL.
2.2 EFFECTIVE TIME. The Merger will become effective upon the
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proper filing of a Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with Sections 251 and 103 of the DGCL (the time
of such filing referred to as the "Effective Time" and the date of such filing
referred to as the "Effective Date"). The Certificate of Merger will be
delivered to the Secretary of State of the State of Delaware as soon as
practicable after approval of this Agreement by the Stockholders and
satisfaction or waiver of the other conditions precedent to consummation of the
Merger. It is presently expected that the Merger will become effective on the
date of the Special Meeting. The stock transfer books relating to the Citadel
Common Stock will be closed as of the close of business on the Effective Date,
and thereafter no transfers of record of certificates theretofore representing
shares of Citadel Common Stock will be made.
2.3 THE CERTIFICATE OF INCORPORATION. The Certificate of
--------------------------------
Incorporation of the Surviving Corporation will be the Certificate of
Incorporation of Acquisition following the Effective Date unless and until it is
duly amended in accordance with the terms thereof and the DGCL, except that the
Certificate of Merger shall further amend the Certificate of Incorporation of
Acquisition to change the name of Acquisition to "Citadel Computer Systems,
Inc." Following the Effective Time, XxxxXxxx will use its best efforts to amend
its certificate of incorporation, as promptly as practicable, to change its name
to "Citadel Computer Systems, Inc."
2.4 THE BYLAWS. The Bylaws of Acquisition in effect at the
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Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL.
2.5 OFFICERS AND DIRECTORS. The officers of XxxxXxxx and
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Acquisition at the Effective Time shall be Xxxxxxx Xxxxxxx as Chairman of the
Board, Xxxxxx Xxxxx as President, Chief Executive Officer and Assistant
Secretary and Xxxxx Xxxxxxx as Chief Operating Officer and Secretary, and the
directors of Acquisition shall be Xxxxxxx Xxxxxxx, Xxxxxx Xxxxx and Xxxxx
Xxxxxxx, until such officer's and director's successor has been duly elected or
appointed and qualified or until such officer's and director's earlier death,
resignation or removal in accordance with Acquisition's Certificate of
Incorporation and Bylaws and the DGCL. In addition, Xxxxxxx Xxxxxxx and Xxxxxx
Xxxxx shall become directors of XxxxXxxx at the Effective Time. Additional
officers and directors may be added from time to time in accordance with
Acquisition's and XxxxXxxx'x Certificates of Incorporation and Bylaws and the
DGCL and shall be added if necessary to comply with applicable law and the rules
and regulations of NASDAQ.
2.6 CONVERSION OR CANCELLATION OF CITADEL COMMON STOCK. The
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Citadel Common Stock shall be converted or canceled in the Merger as follows:
Subject to SECTION 2.8, each certificate that prior to the Effective
Date represented outstanding shares of Citadel Common Stock will, after such
time, be deemed for all purposes to evidence only the right to receive four and
one-half (4.5) shares of XxxxXxxx Common Stock. No interest will accrue or be
payable with respect to the amounts payable upon exchange of certificates. Any
shares of Citadel Common Stock held in the treasury of Citadel will be canceled
upon consummation of the Merger, and no consideration will be delivered in
exchange for
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those shares. No share of Acquisition Common Stock shall be affected in any
manner by the consummation of the Merger.
No fraction of a share of XxxxXxxx Common Stock will be issued upon such
exchange of shares of Citadel Common Stock, but any holder of shares of Citadel
Common Stock who would otherwise be entitled to a fraction of a shares of
XxxxXxxx Common Stock will instead receive a cash payment in lieu of and with
respect to said fraction of a share to which such holder would be so entitled
determined by multiplying (i) the value of a share of XxxxXxxx Common Stock
(calculated as hereinafter provided) times (ii) the fractional share interest to
which such holder would otherwise be entitled, which product shall be rounded to
the nearest whole cent. For purposes of computing such cash payment, the value
of a share of XxxxXxxx Common Stock shall be the average of the closing bid
prices of XxxxXxxx Common Stock on the OTC Bulletin Board for the last five
trading days prior to the Effective Time. Such cash payment shall be paid in
U.S. dollars at the time of presentation for surrender to the Transfer Agent of
the certificate representing shares of Citadel Common Stock. The right to
receive such cash payment shall, if the holder thereof shall not prior thereto
so present such certificate, terminate on the second anniversary date of the
Effective Time.
At the Effective Time, each outstanding option and warrant to purchase
capital stock of Citadel, listed in the Citadel Disclosure Schedule and
outstanding immediately prior to the Effective Time, shall become an option or
warrant after the Effective Time to purchase a number of shares of XxxxXxxx
Common Stock equal to four and one-half (4.5) times the number of shares subject
to the Citadel options and warrants set forth in the Citadel Disclosure Schedule
at the same aggregate exercise price of Citadel options and warrants as set
forth in the Citadel Disclosure Schedule, which is 22.2% of the per share
exercise price of the Citadel options and warrants as set forth in the Citadel
Disclosure Schedule; provided, however, that this provision shall not apply to
the outstanding contingent rights held by certain Citadel noteholders and set
forth in the Citadel Disclosure Schedule to acquire warrants to purchase
XxxxXxxx Common Stock following the Merger.
2.7 EXCHANGE OF CERTIFICATES. Promptly after the Effective Time,
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XxxxXxxx shall cause the Transfer Agent to mail to each record holder, as of the
Effective time, of an outstanding certificate or certificates that immediately
prior to the Effective Time represented issued and outstanding shares of Citadel
Common Stock, a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates shall pass,
only upon proper delivery of the certificates to the Transfer Agent) and
instructions for use in effecting the surrender of the certificates. Upon
surrender to the Transfer Agent of such certificate, together with such letter
of transmittal duly executed, each holder of such certificates formerly
representing shares of Citadel Common Stock shall be entitled to receive in
exchange therefor a certificate representing the whole number of shares of
XxxxXxxx Common Stock into which such shares of Citadel Common Stock shall have
been converted as set forth herein and such certificates of Citadel Common Stock
shall then be canceled.
2.8 APPRAISAL RIGHTS.
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(a) Notwithstanding any other provision of this Agreement to the
contrary, shares of Citadel Common Stock issued and outstanding
immediately prior to the Effective Time and which are held by
shareholders who object to the Merger and comply with all of the
relevant provisions of the DGCL ("Dissenting Shares") shall not be
converted into or represent a right to receive XxxxXxxx Common Stock
hereunder or pursuant to the Articles of Merger at or after the
Effective Time, but instead shall be entitled to receive payment of the
appraised value of such shares in accordance with the provisions of the
DGCL, unless and until the holder thereof shall have failed to perfect,
or shall have effectively withdrawn or lost, such rights to appraisal
and payment under the DGCL. If a holder of Dissenting Shares shall have
so failed to perfect or shall have effectively withdrawn or lost such
right to appraisal and payment, then as of the Effective Time or the
occurrence of such event, whichever last occurs, such holder's
Dissenting Shares shall be converted into and solely represent the right
to receive shares of XxxxXxxx Common Stock, as provided herein. Citadel
shall give XxxxXxxx prompt notice upon receipt by Citadel of any written
objection to the plan of merger set
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forth herein (any shareholder duly making such objection being
hereinafter called a "Dissenting Shareholder"). Citadel agrees that
prior to the Effective Time, it will not, without the prior written
consent of XxxxXxxx, voluntarily make or agree to make any payment with
respect to, or settle or offer to settle, any such objection.
(b) Each Dissenting Shareholder who becomes entitled, pursuant to
the provisions of the DGCL, to payment for his Dissenting Shares shall
receive payment therefor after the Effective Time from the Surviving
Corporation (but only after the amount thereof shall have been agreed
upon or finally determined pursuant to such provisions) and such shares
shall be canceled.
2.9 APPROVAL OF THE STOCKHOLDERS. As soon as reasonably
----------------------------
practicable after the date of this Agreement, Citadel will, in compliance with
all applicable state and federal laws, obtain the approval of the Stockholders
to the Merger. The materials sent by Citadel, in connection with the approval
of Stockholders, will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
2.10 REPORTING OF MERGER. For federal, state and local income tax
-------------------
return reporting purposes, all parties agree to treat the Merger as a forward
subsidiary merger under section 368(a)(2)(D) of the Code.
3. THE CLOSING.
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3.1 TIME AND PLACE OF CLOSING. The closing of the Merger (the
-------------------------
"Closing"), shall, unless otherwise agreed to in writing by the parties, take
place at the offices of Looper, Reed, Xxxx & McGraw, 0 Xxxxxxxx Xxxxx, Xxxxx
0000, Xxxxxxx, Xxxxx at 10:00 a.m., local time, on the Closing Date.
3.2 OBLIGATIONS OF CITADEL AT OR PRIOR TO THE CLOSING. At or
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prior to Closing, and subject to the satisfaction by Xxxxxxxx and Acquisition of
their respective obligations hereunder, Citadel shall deliver to XxxxXxxx the
following:
(a) A copy of the charter of Citadel certified as of a date within
thirty days of the Closing Date by the Secretary of State of the state of
incorporation and certified by Citadel's corporate secretary as to the absence
of any amendments between the date of certification by the Secretary of State
and the Closing Date;
(b) A certificate from the appropriate governmental officials of the
state of incorporation as to the existence and good standing of Citadel and the
payment of Taxes by Citadel as of a date within thirty days of the Closing Date,
and a telegram or other verification from such officials as to the same matters
dated the business day before the Closing Date;
(c) A certificate from the appropriate governmental officials of the
Other Citadel States (as defined in SECTION 4.1 below) as to the good standing
of Citadel and the payment of Taxes by Citadel as of a date within thirty days
of the Closing Date, and a telegram or other verification from such officials as
to the same matters dated the business day before the Closing Date;
(d) A certificate of the corporate secretary of Citadel attaching
thereto a true and correct copy of the bylaws of Citadel and the corporate
resolutions duly adopted by the board of directors and stockholders of Citadel
authorizing the consummation of the transactions contemplated hereby;
(e) The Certificate of Merger duly executed on behalf of Citadel;
(f) The certificate of Citadel referred to in SECTION 8(A);
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(g) All consents or approvals of any third party or any
Governmental Entity that are required under SECTION 8(B);
(h) The warrant agreement to purchase XxxxXxxx Shares (the "Warrant
Agreement") in substantially the same form as the warrant agreement to purchase
shares of Citadel Common Stock, executed by all Citadel Warrant Holders, as
listed in the Citadel Disclosure Schedule; and
(i) Such other documents as are required pursuant to this Agreement or
as may reasonably be requested from Citadel by XxxxXxxx or its counsel.
3.3 OBLIGATIONS OF XXXXXXXX AND ACQUISITION AT OR PRIOR TO THE
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CLOSING. At or prior to the Closing, and subject to the satisfaction by Citadel
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of its obligations hereunder, XxxxXxxx and Acquisition, as the context requires,
shall deliver to Citadel the following:
(a) A copy of the charter of XxxxXxxx and Acquisition certified as of
a date within thirty days of the Closing Date by the Secretary of State of the
state of incorporation and certified by the respective corporate secretary of
XxxxXxxx and Acquisition as to the absence of any amendments between the date of
certification by the respective Secretary of State and the Closing Date.
(b) A certificate from the appropriate governmental officials of the
respective Secretary of State as to the existence and good standing of XxxxXxxx
and Acquisition and the payment of Taxes by XxxxXxxx and Acquisition as of a
date within thirty days of the Closing Date, and a telegram or other
verification from such officials as to the same matters dated the business day
before the Closing Date;
(c) A certificate from the appropriate governmental officials of the
Other XxxxXxxx States (as defined in SECTION 5.1 below) as to the good standing
of XxxxXxxx and the payment of Taxes by XxxxXxxx as of a date within thirty days
of the Closing Date, and a telegram of other verification from such officials as
to the same matters dated the business day before the Closing Date;
(d) A certificate of the corporate secretary of XxxxXxxx and
Acquisition attaching thereto a true and correct copies of the bylaws of
XxxxXxxx and Acquisition and the corporate resolutions duly adopted by the board
of directors of XxxxXxxx and the board of directors and stockholders of
Acquisition authorizing the consummation of the transactions contemplated
hereby;
(e) The Certificate of Merger duly executed on behalf of XxxxXxxx
and Acquisition;
(f) The certificate of XxxxXxxx and Acquisition referred to in
SECTION 9(A);
(g) All consents or approvals from any third parties or any
Governmental Entity that are required under SECTION 9(B); and
(h) Such other documents as are required pursuant to this Agreement or
as may reasonably be requested from XxxxXxxx or Acquisition by Citadel or its
counsel.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF CITADEL. Except as
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expressly set forth and specifically identified by the section number of this
Agreement in the Citadel Disclosure Schedule, Citadel represents, warrants and
covenants to each of XxxxXxxx and Acquisition, on the date hereof and as of the
Closing Date, as follows:
4.1 CORPORATE ORGANIZATION. Citadel is a corporation duly
----------------------
incorporated and validly existing as a corporation and in good standing under
the laws of its jurisdiction of incorporation. Citadel has the requisite
corporate power and authority to carry on its business as now being conducted
and to own, lease and
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operate its property and assets, and Citadel is duly qualified or licensed to do
business and is in good standing in every jurisdiction (the "Other Citadel
States") in which the failure to be so qualified and licensed could have a
Material Effect. SECTION 4.1 of the Citadel Disclosure Schedule sets forth the
name and state of incorporation of Citadel and each state in which it is
qualified or licensed to do business.
4.2 CAPITALIZATION.
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(a) The authorized, issued and outstanding capital stock of Citadel,
all outstanding securities convertible into or exchangeable or exercisable for
shares of capital stock of Citadel and all rights, agreements or other
commitments of Citadel to issue, transfer or sell its capital stock is as set
forth in SECTION 4.2 of the Citadel Disclosure Schedule. All of the issued and
outstanding shares of capital stock of Citadel are validly issued, fully paid
and nonassessable, and none of such shares have been issued in violation of the
preemptive rights of any person.
(b) Citadel does not own or hold any equity, debt or other interest in
any entity or business or any option to acquire any such interest, except for
accounts receivable that have arisen in the ordinary course of business.
4.3 AUTHORITY; NO VIOLATION.
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(a) The execution and performance of this Agreement by Citadel has
been duly and validly authorized by the board of directors of Citadel, and no
other corporate action is necessary to authorize the execution, delivery and
performance of this Agreement by Citadel, except for approval of the Merger by
the stockholders of Citadel. Citadel has the corporate power and authority to
execute and perform this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly and validly executed by
Citadel and is a valid and binding obligation of Citadel, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, moratorium, reorganization, receivership or similar laws affecting
the rights of creditors generally.
(b) None of the execution, delivery or performance of this Agreement
does or will: (i) result in any violation of or be in conflict with or
constitute a default under any term or provision of the Certificate of
Incorporation or Bylaws of Citadel or any term or provision of any judgment,
decree, order, statute, injunction, rule or regulation applicable to Citadel, or
of any material note, bond, mortgage, indenture, lease, license, franchise,
agreement or other instrument or obligation to which Citadel is bound; (ii)
result in the creation of any material Encumbrance upon any of the properties or
assets of Citadel or Acquisition pursuant to any such term or provision; or
(iii) constitute a default under, terminate, accelerate, amend or modify, or
give any party the right to terminate, accelerate, amend, modify, abandon or
refuse to perform or comply with, any material contract, agreement, arrangement,
commitment or plan to which Citadel is a party, or by which Citadel or any of
its properties or assets may be subject or bound.
4.4 CONSENTS AND APPROVALS. No federal, state or other regulatory
----------------------
approvals are required to be obtained, nor any regulatory requirements complied
with, by Citadel in connection with the Merger.
4.5 VIOLATION OF LAWS, PERMITS, ETC.
-------------------------------
(a) Citadel is not in violation of any term or provision of its
Certificate of Incorporation or Bylaws, or of any material term or provision of
any judgment, decree, order, statute, law, injunction, rule, ordinance or
governmental regulation that is applicable to it and where the failure to comply
with which would have a Material Effect.
8
(b) Citadel has maintained in full force and effect all certificates,
licenses and permits material to the conduct of its business, and has not
received any notification that any revocation or limitation thereof is
threatened or pending.
4.6 CITADEL FINANCIAL STATEMENTS. The Citadel Financial
----------------------------
Statements fairly present the assets, liabilities and financial position of
Citadel purported to be covered thereby as of the dates thereof and the results
of their operations for the respective periods ended on such dates, all in
conformity with GAAP consistently applied.
4.7 NO UNDISCLOSED LIABILITIES, ETC. Citadel does not have any
--------------------------------
material liabilities or obligations, whether direct, indirect, absolute or
contingent (including, without limitation, liabilities as guarantor or otherwise
with respect to obligations of others), except (a) liabilities that are fully
reflected on or reserved against on the latest balance sheet included in the
Citadel Financial Statements, (b) liabilities incurred in the ordinary course of
business since the date of the latest balance sheet included in the Citadel
Financial Statements that are consistent with past practice and are included in
the latest Citadel Financial Statements, or (c) as specifically disclosed in the
Citadel Financial Statements.
4.8 ABSENCE OF CERTAIN CHANGES. Since the date of the latest
--------------------------
Financial Statement, except as specifically disclosed in the latest Citadel
Financial Statements, Citadel has not:
(a) Suffered any change that would be likely to result in a
Material Effect;
(b) Adopted or made any change in any pension, retirement, profit
sharing or other employee benefit plan or arrangement;
(c) Borrowed or agreed to borrow any money or incurred, assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
other obligation or liability for borrowed money, whether absolute, contingent,
known, unknown, or otherwise, except in the ordinary course of business and
consistent with past practice;
(d) (i) Issued, purchased or redeemed any of its capital securities or
any option, warrant or right to purchase any of the same; (ii) authorized,
declared or paid stock dividends; (iii) authorized, declared or paid any
dividends, distributions of earnings or capital on, or splits or any other
reclassification of, its equity securities;
(e) Mortgaged, pledged or subjected to any Encumbrance any material
portion of its assets, tangible or intangible;
(f) Acquired or disposed of, or entered into any agreement to acquire
or dispose of, any material assets or properties, other than in the ordinary
course of business;
(g) Increased the salaries, compensation, pension or other benefits
payable to its officers and directors or their Affiliates;
(h) Forgiven or cancelled any debts or claims or waived any rights
against Citadel or its Affiliates or forgiven or cancelled any material debts or
claims or waived any material rights against any other person;
(i) Entered into, terminated or received notice of the termination of
any commitment, contract, agreement or transaction that is material to Citadel;
or
9
(j) Agreed, either in writing or otherwise, to take any action
described in this SECTION 4.8.
(k) Made any capital expenditure or commitment, except capital
expenditures that individually or in the aggregate do not exceed $50,000, as
Citadel may, in its discretion, deem appropriate.
4.9 TITLE TO PROPERTY; ENCUMBRANCES. Citadel has good and
-------------------------------
indefeasible title to and other legal right to use all properties and assets,
real, personal and mixed, tangible and intangible, reflected as owned on the
latest balance sheet included in the Citadel Financial Statements or acquired
after the date of such balance sheet, except for properties and assets disposed
of in accordance with customary practice in the business or disposed of for full
and fair value since the date of such balance sheet in the ordinary course of
business consistent with past practice and except for matters that would not
have a Material Effect.
4.10 LITIGATION.
----------
(a) There is no action, proceeding, investigation or inquiry pending
or, to the best of Citadel's knowledge, threatened (i) against or affecting any
of Citadel's assets or business that, if determined adversely to Citadel, would
result in a Material Effect or (ii) that questions this Agreement or any action
contemplated by this Agreement or in connection with the Merger.
(b) There are no citations, fines or penalties heretofore asserted
against Citadel or its assets under any federal, state or local law relating to
air, noise or water pollution or other environmental protection matters, or
relating to occupational health or safety, of which Citadel has received notice
and that remain unpaid or that could otherwise bind the assets of Citadel and
that would result in a Material Effect.
(c) Citadel has no knowledge of any state of facts or of the
occurrence or nonoccurrence of any event or group of related events, that should
reasonably cause Citadel to determine that there exists any basis for any
material claim against Citadel for any of the matters described in paragraphs
(a) or (b) above.
4.11 TAXES.
-----
(a) Citadel has duly filed all required separate, consolidated,
combined or unitary tax returns (including any estimated tax returns), reports,
elections, information returns, declarations, statements or other filings
(including any amendments thereto) required to be filed with any relevant taxing
authority ("Tax Returns"). All taxes, imposts, duties, fees, levies,
withholdings or other like assessments or charges, including, without
limitation, income, gross receipts, capital, transfer, excise, occupancy, real
and personal property, sales, use, employment franchise, ad valorem, social
-- -------
security, payroll, unemployment compensation, stamp, net worth, surplus,
environmental, privilege, windfall profits, value-added, customs or other taxes
of any sort, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof, including any interest, penalties
and additions to tax attributable thereto ("Taxes") owed by Citadel have been
paid in all material respects. Citadel has caused to be duly filed all required
Tax Returns for any partnerships as to which it is the general partner. All
such Tax Returns described are complete and accurate in all material respects
and there is no basis for any material assessment of any addition to the Tax
shown thereon and (i) none of such Tax Returns has been audited by the Internal
Revenue Service or any state, local or other taxing authority, (ii) Citadel has
no proposed or outstanding Tax deficiency or assessment (except as disclosed in
the Citadel Financial Statements) nor has Citadel been notified of any Tax
Return examination applicable to the business or assets of Citadel (or of any
examination of any consolidated, combined or unitary Tax Returns of any
affiliated group within the meaning of Section 1504 of the Code (or any similar
group defined under comparable provisions of state, local or foreign law) (an
"Affiliated Group") of which Citadel was a member and which relate in part to
Citadel), (iii) no waiver of any statute of limitations relating to such Tax
Returns (or to Taxes payable by or chargeable as a lien upon the assets of
Citadel) has been given or requested, and (iv) no extension of the period for
assessment or collection of any such Taxes has been agreed, (v) there are no Tax
liens on any of the assets or properties of Citadel other than liens for current
10
Taxes not yet due and payable, and (vi) Citadel has no deferred gain or loss (y)
arising from deferred intercompany transactions (as described in Treasury
Regulations Section 1.1502-13) or (z) with respect to the stock or obligations
of any other corporation (as described in Treasury Regulations Section 1.1502-
14). All Taxes payable by, or chargeable as a lien upon the assets of Citadel
as of the Closing have been duly paid, and the latest balance sheet reflects an
adequate reserve for all Taxes payable or asserted to be payable by or
chargeable as a lien upon the assets of Citadel for all taxable periods or
portions thereof through the date thereof. Any tax sharing agreements or
arrangements between Citadel on the one hand and any other corporation on the
other and any obligations to make payments under any such agreement or
arrangement shall be or has been cancelled without any liability of any party to
such agreement or arrangement, or affiliates thereof as of the Closing.
(b) No consent has been filed under Section 341(f) of the Code with
respect to Citadel.
(c) Citadel is not a "United States real property holding corporation"
(as defined in Section 897(c)(2) of the Code).
(d) Citadel has not made any material payments, is not obligated to
make any material payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any material payments that will
not be deductible under Section 280G of the Code.
(e) Citadel has no liability for the Taxes of any person other than
Citadel (1) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local, or foreign law), (2) as a transferee or successor,
(1) by contract or (2) otherwise.
(f) Citadel has delivered to XxxxXxxx correct and complete copies of
all federal, state and local Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Citadel since its first fiscal
year.
(g) The Citadel Disclosure Schedule sets forth the following
information with respect to Citadel (or, in the case of clause (2) below, with
respect to each of the Subsidiaries) as of the most recent practicable date (as
well as on an estimated pro forma basis as of the Closing giving effect to the
consummation of the transactions contemplated hereby): (1) the adjusted tax
basis of Citadel in its assets; (2) the adjusted tax basis of the stockholder(s)
of each Subsidiary in its stock (or the amount of any Excess Loss Account as
defined in Treas. Reg. (S)1.1502-32(e)(1) or Treas. Reg. (S)1.1502-32(a)(3)(ii),
as the case may be; (3) the amount of any net operating loss carryforward, net
capital loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to Citadel; and (4) the amount of any deferred
gain or loss allocable to Citadel out of any deferred intercompany transaction.
4.12 INSURANCE. The policies of fire, casualty and extended
---------
coverage, public liability, products liability, worker's compensation and other
forms of insurance owned or held by or for the benefit of Citadel are sufficient
for compliance with all requirements of law and all agreements to which Citadel
is a party, are valid and enforceable policies, and will not in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement. All premiums due under such policies have been paid and
Citadel has complied in all material respects with such policies.
4.13 CONTRACTS.
---------
(a) SECTION 4.13 of the Citadel Disclosure Schedule contains a
complete and correct list as of the date hereof of all material agreements,
contracts and commitments of the following types (and all amendments thereto),
written or oral, to which Citadel is a party or by which any of its properties
is bound:
(i) notes, agreements, mortgages, indentures, security
agreements and other instruments relating to the borrowing of money
or evidence of credit or the deferred purchase
11
price of property, or the direct or indirect guarantee by such
entities of any such indebtedness or deferred purchase price;
(ii) leases of real property and material personal property
(other than Leases);
(iii) Joint Venture agreements;
(iv) management, employment and consulting agreements or other
contracts for personal services that are not terminable by any of
such entities on not more than one month's notice without penalty;
(v) any agreements providing for liability for severance pay,
collective bargaining agreements, labor contracts, or labor or
personnel policies;
(vi) material surety, performance and maintenance bonds;
(vii) any plan, contract or arrangement providing for
bonuses, pensions, deferred compensation, retirement plan payments,
profit sharing, incentive pay, or for any other employee benefit
plan;
(viii) brokerage or finder's agreements;
(ix) any agreement that (a) restricts the right of such
entities to engage in any place in any line of business, other than
in the ordinary course of business or (b) would restrict the right
of Acquisition or any subsidiary of Acquisition to engage in any
line of business after the Closing Date, other than in the ordinary
course of business; and
(x) any contract, commitment or agreement that individually or
in the aggregate is material to Citadel, except contemplated by
this Agreement or in the ordinary course of business and consistent
with past practice.
(b) Citadel has made available to XxxxXxxx complete and correct copies
of all material written agreements, contracts and commitments, together with all
amendments thereto, and accurate (in all material respects) descriptions of all
material oral agreements. Such agreements, contracts and commitments are in
full force and effect, and all of such entities and, to the best of Citadel's
knowledge, all other parties to such agreements, contracts and commitments have
performed all obligations required to be performed by them to date thereunder in
all material respects and are not in default thereunder in any material respect.
4.14 COMPENSATION AND EMPLOYEE PLANS.
-------------------------------
(a) For all purposes of this Section, "Plan" means (i) any employee
benefit plan as defined in Section 3(3) of the ERISA, that is (a) maintained by
Citadel, or (b) to which Citadel is making or accruing an obligation to make
contributions, or (ii) any other formal or informal obligation to, arrangement
with, or plan or program for the benefit of, employees of Citadel, including,
but not limited to, stock options, stock bonuses, stock purchase agreements,
bonuses, incentive compensation, deferred compensation, supplemental pensions,
vacations, severance pay, insurance or any other benefit, program or practice.
SECTION 4.14 of the Citadel Disclosure Schedule sets forth the name of each Plan
and lists all documents evidencing any Plan.
(b) Each Plan is now, and has been from its inception, administered in
compliance in all material respects with the provisions of all applicable laws
and regulations, including ERISA, the Code and the Age Discrimination in
Employment Act, as amended, insofar as such statutes are applicable to such
Plan.
12
4.15 BROKERS, FINDERS AND ADVISORS. Citadel has not employed any
-----------------------------
broker, finder, or investment advisor on its behalf, or incurred any liability
for any brokerage or finder's fees or commissions, in connection with the
transaction contemplated hereby.
4.16 LABOR FORCE.
-----------
(a) Citadel is in compliance in all material respects with all
applicable laws (including, without limitation, federal income tax laws),
ordinances, regulations, statutes, rules and restrictions of any Governmental
Entity respecting employment and employment practices and terms and conditions
of employment.
(b) No union representation question exists respecting the employees
of Citadel and, to Citadel's knowledge, no union organizing activities are
taking place.
4.17 BOOKS AND RECORDS. The books and records of Citadel (including,
-----------------
without limitation, the books of account, minute books and stock record books)
are complete and correct in all material respects and have been maintained in
accordance with sound business practices. The minute books of Citadel contain
accurate and complete records in all material respects of all meetings held of,
and corporate action taken by, the stockholders and the Boards of Directors of
the respective entities, and no meetings of or actions by such stockholders or
any such Boards of Directors have been held or taken for which minutes have not
been prepared and are not contained in such minute books. None of the records
and written documents furnished or made available by Citadel or its agents to
XxxxXxxx'x representatives or agents, when considered in context and together
with any relevant or related documents also so furnished or made available,
contain any untrue statement of material fact or omit a material fact necessary
to make any statement therein not misleading.
4.18 PAYMENTS. Citadel has not, directly or indirectly, paid or
--------
delivered any fee, commission or other sum of money or item of property however
characterized to any finder, agent, government official or other party, in the
United States or any other country, in any manner related to its business or
operations, that Citadel knows or has reason to believe to have been illegal
under any federal, state or local laws of the United States or any other country
or territory having jurisdiction over such entity, and has not participated,
directly or indirectly, in any boycotts or similar practices.
4.19 DISCLOSURE. No representation or warranty made by Citadel in
----------
this Agreement (including, without limitation, in the Citadel Disclosure
Schedule) contains any untrue statement of material fact or omits to state any
material fact necessary to make the statements herein or therein not misleading
in light of the circumstances under which made.
4.20 JOINT VENTURES. Citadel is not a member of any partnership,
--------------
joint venture or other business entity.
4.21 SUBSIDIARIES. Citadel does not own any subsidiaries.
------------
4.22 APPROVAL OF STOCKHOLDERS. The board of directors of Citadel
------------------------
have recommended approval of the Merger by the Stockholders, without reservation
or qualification. Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx have executed concurrently
herewith the Voting Agreement substantially in the form of EXHIBIT I.
4.23 INTELLECTUAL PROPERTY. Citadel owns and has the right to use
---------------------
all right, title and interest in and to all patents, trademarks, tradenames,
logos, commercial symbols, service marks, copyrights, software, trade secrets
and know-how used in its businesses (the "Intellectual Property"). All such
Intellectual Property is owned by Citadel, and Citadel has the full right to use
such Intellectual Property, free and clear of all liens, security interests,
charges, encumbrances, equities and other adverse claims. No such item of
Intellectual Property (a) is infringed or has been challenged or threatened in
any material respect; (b) infringes or has been alleged to infringe any similar
property right of any third party; or (c) has been or is now involved in any
13
opposition, invalidation or cancellation proceeding (nor is any such action
threatened with respect to any such item). Citadel is not aware of any
potentially infringing patent, trademark, copyright or application therefor of
any third party.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF XXXXXXXX AND
---------------------------------------------------------
ACQUISITION. Except as expressly set forth and specifically identified by the
-----------
section number of this Agreement in the XxxxXxxx and Acquisition Disclosure
Schedule, XxxxXxxx and Acquisition hereby represent, warrant and covenant to
Citadel, on the date hereof and as of the Closing Date, as follows:
5.1 CORPORATE ORGANIZATION. XxxxXxxx and Acquisition each are a
-----------------------
corporation duly incorporated and validly existing as a corporation and in good
standing under the laws of their respective jurisdictions of incorporation.
XxxxXxxx and Acquisition each have the requisite corporate power and authority
to carry on their respective business as now being conducted and to own, lease
and operate their respective property and assets, and XxxxXxxx and Acquisition
is each duly qualified or licensed to do business and is in good standing in
every jurisdiction (the "Other XxxxXxxx States") in which the failure to be so
qualified and licensed could have a Material Effect. SECTION 5.1 of the
XxxxXxxx and Acquisition Disclosure Schedule sets forth the name and state of
incorporation of XxxxXxxx and each state in which it is qualified or licensed to
do business.
5.2 CAPITALIZATION.
--------------
(a) The authorized, issued and outstanding capital stock of
XxxxXxxx and Acquisition, all outstanding securities convertible into or
exchangeable or exercisable for shares of capital stock of XxxxXxxx or
Acquisition and all rights agreements or other commitments of XxxxXxxx or
Acquisition to issue, transfer or sell their capital stock is as set forth in
SECTION 5.2 of the XxxxXxxx and Acquisition Disclosure Schedule. All of the
issued shares of XxxxXxxx and Acquisition are validly issued, fully paid and
nonassessable, and none of such shares have been issued in violation of the
preemptive rights of any person.
(b) The XxxxXxxx Shares shall be validly issued, fully paid and
nonassessable.
(c) XxxxXxxx and Acquisition do not own or hold any equity, debt or
other interest in any entity or business on any option to acquire any such
interest, except for XxxxXxxx'x interest in Acquisition and accounts receivable
that have arisen in the ordinary course of business.
5.3 AUTHORITY.
---------
(a) The execution and performance of this Agreement have been duly
and validly authorized by the board of directors of XxxxXxxx and the board of
directors and stockholder of Acquisition, and no other corporate action by
XxxxXxxx or Acquisition is necessary to authorize the execution, delivery and
performance of this Agreement. XxxxXxxx and Acquisition have the corporate power
and authority to execute and perform this Agreement and to carry out the
transactions contemplated hereby. This Agreement has been duly and validly
executed on behalf of XxxxXxxx and Acquisition and is a valid and binding
obligation of XxxxXxxx and Acquisition, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, moratorium,
reorganization, receivership or similar laws affecting the rights of creditors
generally.
(b) None of the execution, delivery or performance of this
Agreement does or will, after the giving of notice, lapse of time or otherwise,
(i) result in any violation of or be in conflict with or constitute a default
under any term or provision of the Certificate of Incorporation or Bylaws of
XxxxXxxx or Acquisition or any term or provision of any instrument, judgment,
decree, order, statute, injunction, rule or regulation applicable to XxxxXxxx or
Acquisition or of any material note, bond, mortgage, indenture, lease, license,
franchise, agreement or other instrument or obligation to which XxxxXxxx or
Acquisition is bound; or (ii) result in the creation of any material lien upon
any of the properties or assets of XxxxXxxx or Acquisition pursuant to any such
term or provision; or (iii) constitute a default under, terminate, accelerate,
amend or modify, or give any party the right to terminate,
14
accelerate, amend, modify, abandon or refuse to perform or comply with any
material contract, agreement, arrangement, commitment or plan to which XxxxXxxx
or Acquisition is a party, or by which XxxxXxxx or Acquisition or any of the
rights, properties or assets of XxxxXxxx or Acquisition may be subject or bound.
5.4 CONSENTS AND APPROVALS. No federal, state or other regulatory
-----------------------
approvals are required to be obtained, nor any regulatory requirements complied
with, by XxxxXxxx or Acquisition in connection with the Merger.
5.5 VIOLATION OF LAWS, PERMITS, ETC.
--------------------------------
(a) Neither XxxxXxxx nor Acquisition is in violation of any term or
provision of their respective Certificates of Incorporation or Bylaws, or in any
material respect of any term or provision of any judgment, decree, order,
statute, injunction, rule, ordinance or governmental regulation applicable to
them and where the failure to comply with which would have a Material Effect.
(b) XxxxXxxx and Acquisition have maintained in full force and effect
all certificates, licenses and permits material to the conduct of their
respective business, and have not received any notification that any revocation
or limitation thereof is threatened or pending.
5.6 XXXXXXXX AND ACQUISITION FINANCIAL STATEMENTS. The XxxxXxxx
---------------------------------------------
Financial Statements and Acquisition Financial Statements fairly present the
assets, liabilities and financial position of such entity as of the dates
thereof and the results of its operations for the respective periods ended on
such dates, all in conformity with GAAP consistently applied.
5.7 NO UNDISCLOSED LIABILITIES, ETC. Neither XxxxXxxx nor
-------------------------------
Acquisition have any material liabilities or obligations, whether direct,
indirect, absolute or contingent (including, without limitation, liabilities as
guarantor or otherwise with respect to obligations of others), except (a)
liabilities that are fully reflected on or reserved against on the latest
balance sheet included in the XxxxXxxx Financial Statements and the Acquisition
Financial Statements, (b) liabilities incurred in the ordinary course of
business since the date of the latest balance sheet included in the XxxxXxxx
Financial Statements or the Acquisition Financial Statements that are consistent
with past practice and are included in the latest XxxxXxxx Financial Statements
or the Acquisition Financial Statements, or (c) as specifically disclosed in the
XxxxXxxx Financial Statements or the Acquisition Financial Statements.
5.8 ABSENCE OF CERTAIN CHANGES. Since the date of the latest
--------------------------
XxxxXxxx Financial Statement, except as specifically disclosed in the latest
Financial Statements for XxxxXxxx, neither XxxxXxxx nor Acquisition have:
(a) Suffered any change that would be likely to result in a Material
Effect;
(b) Adopted or made any change in any pension, retirement, profit
sharing or other employee benefit plan or arrangement;
(c) Borrowed or agreed to borrow any money or incurred, assumed or
become subject to, whether directly or by way of guarantee or otherwise, any
other obligation or liability for borrowed money, whether absolute, contingent,
known, unknown, or otherwise, except in the ordinary course of business and
consistent with past practice;
(d) (i) Issued, purchased or redeemed any of its capital securities or
any option, warrant or right to purchase any of the same; (ii) authorized,
declared or paid stock dividends; (iii) authorized, declared or paid any
dividends, distributions of earnings or capital on, or splits or any other
reclassification of, its equity securities;
15
(e) Mortgaged, pledged or subjected to any Encumbrance any material
portion of its assets, tangible or intangible;
(f) Acquired or disposed of, or entered into any agreement to acquire
or dispose of, any material assets or properties, other than in the ordinary
course of business;
(g) Increased the salaries, compensation, pension or other benefits
payable to its officers and directors or their Affiliates;
(h) Forgiven or cancelled any debts or claims or waived any rights
against XxxxXxxx or Acquisition or their Affiliates or forgiven or cancelled any
material debts or claims or waived any material rights against any other person;
(i) Entered into, terminated or received notice of the termination of
any commitment, contract, agreement or transaction that is material to XxxxXxxx
or Acquisition; or
(j) Agreed, either in writing or otherwise, to take any action
described in this SECTION 5.8.
(k) Made any capital expenditure or commitment, except capital
expenditures that individually or in the aggregate do not exceed $50,000, as
XxxxXxxx or Acquisition may, in its discretion, deem appropriate.
5.9 TITLE TO PROPERTY; ENCUMBRANCES. XxxxXxxx and Acquisition,
-------------------------------
either directly or indirectly, have good and indefeasible title to and other
legal right to use all properties and assets, real, personal and mixed, tangible
and intangible, reflected as owned on their latest balance sheets included in
the XxxxXxxx or Acquisition Financial Statements or acquired after the date of
such balance sheet, except for properties and assets disposed of in accordance
with customary practice in the business or disposed of for full and fair value
since the date of such balance sheet in the ordinary course of business
consistent with past practice and except for matters that would not have a
Material Effect.
5.10 LITIGATION.
----------
(a) There is no action, proceeding, investigation or inquiry pending
or, to the best of XxxxXxxx'x or Acquisition's knowledge, threatened (i) against
or affecting any of XxxxXxxx'x or Acquisition's assets or business that, if
determined adversely to XxxxXxxx or Acquisition, would result in a Material
Effect or (ii) that questions this Agreement or any action contemplated by this
Agreement or in connection with the Merger.
(b) There are no citations, fines or penalties heretofore asserted
against XxxxXxxx or Acquisition or their assets under any federal, state or
local law relating to air, noise or water pollution or other environmental
protection matters, or relating to occupational health or safety, of which
XxxxXxxx or Acquisition have received notice and that remain unpaid or that
could otherwise bind the assets of XxxxXxxx or Acquisition and that would result
in a Material Effect.
(c) Neither XxxxXxxx nor Acquisition have knowledge of any state of
facts or of the occurrence or nonoccurrence of any event or group of related
events, that should reasonably cause XxxxXxxx or Acquisition to determine that
there exists any basis for any material claim against XxxxXxxx or Acquisition
for any of the matters described in paragraphs (a) or (b) above.
16
5.11 TAXES.
-----
(a) XxxxXxxx and Acquisition have duly filed all required Tax Returns.
All Taxes owed by XxxxXxxx and Acquisition have been paid in all material
respects, except as disclosed in the XxxxXxxx Financial Statements. XxxxXxxx
and Acquisition have caused to be timely and duly filed all required Tax Returns
for any partnerships as to which either is the general partner. All such Tax
Returns described are complete and accurate in all material respects and there
is no basis for any material assessment of any addition to the Tax shown thereon
and (i) none of such Tax Returns has been audited by the Internal Revenue
Service or any state, local or other taxing authority, (ii) XxxxXxxx and
Acquisition have no proposed or outstanding Tax deficiency (except as disclosed
in the XxxxXxxx Financial Statements) or assessment nor have they been notified
of any Tax Return examination applicable to the business or assets of XxxxXxxx
or Acquisition (or of any examination of any consolidated, combined or unitary
Tax Returns of any Affiliated Group of which XxxxXxxx or Acquisition was a
member and which relate in part to XxxxXxxx or Acquisition, (iii) no waiver of
any statute of limitations relating to such Tax Returns (or to Taxes payable by
or chargeable as a lien upon the assets of XxxxXxxx or Acquisition) has been
given or requested, (iv) no extension of the period for assessment or collection
of any such Taxes has been agreed, (v) there are no Tax liens on any of the
assets or properties of XxxxXxxx or Acquisition other than liens for current
Taxes not yet due and payable, and (vi) XxxxXxxx and Acquisition have no
deferred gain or loss (y) arising from deferred intercompany transactions (as
described in Treasury Regulations Section 1.1502-13) or (z) with respect to the
stock or obligations of any other corporation (as described in Treasury
Regulations Section 1.1502-14). All Taxes payable by, or chargeable as a lien
upon the assets of XxxxXxxx or Acquisition as of the Closing have been duly
paid, and the balance sheet in the latest XxxxXxxx Financial Statement reflects
an adequate reserve for all Taxes payable or asserted to be payable by or
chargeable as a lien upon the assets of XxxxXxxx or Acquisition for all taxable
periods or portions thereof through the date thereof. Any tax sharing
agreements or arrangements between XxxxXxxx or Acquisition on the one hand and
any other corporation on the other and any obligations to make payments under
any such agreement or arrangement shall be or has been cancelled without any
liability of any party to such agreement or arrangement, or affiliates thereof
as of the Closing.
(b) No consent has been filed under Section 341(f) of the Code with
respect to XxxxXxxx or Acquisition.
(c) Neither XxxxXxxx nor Acquisition is a "United States real property
holding corporation" (as defined in Section 897(c)(2) of the Code).
(d) Neither XxxxXxxx nor Acquisition has made any material payments,
is not obligated to make any material payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
material payments that will not be deductible under Section 280G of the Code.
(e) Neither XxxxXxxx nor Acquisition has any material liability for
the Taxes of any person other than XxxxXxxx and Acquisition (1) under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local, or
foreign law), (2) as a transferee or successor, (3) by contract or (4)
otherwise.
(f) XxxxXxxx has delivered to Citadel correct and complete copies of
all federal, state and local Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by XxxxXxxx since its first fiscal
year.
(g) The XxxxXxxx and Acquisition Disclosure Schedule sets forth the
following information with respect to XxxxXxxx and Acquisition (or, in the case
of clause (2) below, with respect to each of the Subsidiaries) as of the most
recent practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): (1) the adjusted tax basis of XxxxXxxx and Acquisition and their
assets; (2) the adjusted tax basis of the stockholder(s) of each Subsidiary in
its stock (or the amount of any Excess Loss Account as defined in Treas. Reg.
(S)1.1502-32(e)(1) or Treas. Reg. (S)1.1502-32(a)(3)(ii), as the case may be;
(3) the amount of any net operating loss carryforward, net capital loss, unused
17
investment or other credit, unused foreign tax, or excess charitable
contribution allocable to XxxxXxxx or Acquisition and (4) the amount of any
deferred gain or loss allocable to XxxxXxxx or Acquisition out of any deferred
intercompany transaction.
5.12 INSURANCE. The policies of fire, casualty and extended
---------
coverage, public liability, products liability, worker's compensation and other
forms of insurance owned or held by or for the benefit of XxxxXxxx and
Acquisition are sufficient for compliance with all requirements of law and all
agreements to which XxxxXxxx or Acquisition are a party, are valid and
enforceable policies, and will not in any way be affected by, or terminate or
lapse by reason of, the transactions contemplated by this Agreement. All
premiums due under such policies have been paid and XxxxXxxx and Acquisition
have complied in all material respects with such policies.
5.13 CONTRACTS.
---------
(a) SECTION 5.13 of XxxxXxxx and Acquisition Disclosure Schedule
contains a complete and correct list as of the date hereof of all material
agreements, contracts and commitments of the following types (and all amendments
thereto), written or oral, to which XxxxXxxx or Acquisition are a party or by
which any of its properties is bound:
(i) notes, agreements, mortgages, indentures, security
agreements and other instruments relating to the borrowing of money
or evidence of credit or the deferred purchase price of property,
or the direct or indirect guarantee by such entities of any such
indebtedness or deferred purchase price;
(ii) leases of real property and material personal property
(other than Leases);
(iii) Joint Venture agreements;
(iv) management, employment and consulting agreements or other
contracts for personal services that are not terminable by any of
such entities on not more than one month's notice without penalty;
(v) any agreements providing for liability for severance pay,
collective bargaining agreements, labor contracts, or labor or
personnel policies;
(vi) material surety, performance and maintenance bonds;
(vii) any plan, contract or arrangement providing for
bonuses, pensions, deferred compensation, retirement plan payments,
profit sharing, incentive pay, or for any other employee benefit
plan;
(viii) brokerage or finder's agreements;
(ix) any agreement that (a) restricts the right of such
entities to engage in any place in any line of business, other than
in the ordinary course of business or (b) would restrict the right
of XxxxXxxx or any subsidiary of XxxxXxxx to engage in any line of
business after the Closing Date, other than in the ordinary course
of business; and
(x) any contract, commitment or agreement that individually or
in the aggregate is material to XxxxXxxx and Acquisition, except
contemplated by this Agreement or in the ordinary course of
business and consistent with past practice.
18
(b) XxxxXxxx and Acquisition have made available to Citadel complete
and correct copies of all material written agreements, contracts and
commitments, together with all amendments thereto, and accurate (in all material
respects) descriptions of all material oral agreements. Such agreements,
contracts and commitments are in full force and effect, and all of such entities
and, to the best of XxxxXxxx'x and Acquisition's knowledge, all other parties to
such agreements, contracts and commitments have performed all obligations
required to be performed by them to date thereunder in all material respects and
are not in default thereunder in any material respect.
5.14 COMPENSATION AND EMPLOYEE PLANS.
-------------------------------
(a) For all purposes of this Section, "Plan" means (i) any employee
benefit plan as defined in Section 3(3) of the ERISA, that is (a) maintained by
XxxxXxxx or Acquisition, or (b) to which XxxxXxxx or Acquisition is making or
accruing an obligation to make contributions, or (ii) any other formal or
informal obligation to, arrangement with, or plan or program for the benefit of,
employees of XxxxXxxx or Acquisition, including, but not limited to, stock
options, stock bonuses, stock purchase agreements, bonuses, incentive
compensation, deferred compensation, supplemental pensions, vacations, severance
pay, insurance or any other benefit, program or practice. SECTION 5.14 of the
XxxxXxxx and Acquisition Disclosure Schedule sets forth the name of each Plan
and lists all documents evidencing any Plan.
(b) Each Plan is now, and has been from its inception, administered in
compliance in all material respects with the provisions of all applicable laws
and regulations, including ERISA, the Code and the Age Discrimination in
Employment Act, as amended, insofar as such statutes are applicable to such
Plan.
5.15 BROKERS, FINDERS AND ADVISORS. Neither XxxxXxxx nor Acquisition
-----------------------------
has employed any broker, finder, or investment advisor on its behalf, or
incurred any liability for any brokerage or finder's fees or commissions, in
connection with the transaction contemplated hereby.
5.16 LABOR FORCE.
-----------
(a) XxxxXxxx and Acquisition are in compliance in all material
respects with all applicable laws (including, without limitation, federal income
tax laws), ordinances, regulations, statutes, rules and restrictions of any
Governmental Entity respecting employment and employment practices and terms and
conditions of employment.
(b) No union representation question exists respecting the employees
of XxxxXxxx and Acquisition and, to XxxxXxxx'x and Acquisition's knowledge, no
union organizing activities are taking place.
5.17 BOOKS AND RECORDS. The books and records of XxxxXxxx and
-----------------
Acquisition (including, without limitation, the books of account, minute books
and stock record books) are complete and correct in all material respects and
have been maintained in accordance with sound business practices. The minute
books of XxxxXxxx and Acquisition contain accurate and complete records in all
material respects of all meetings held of, and corporate action taken by, the
stockholders and the Boards of Directors of the respective entities, and no
meetings of or actions by such stockholders or any such Boards of Directors have
been held or taken for which minutes have not been prepared and are not
contained in such minute books. None of the records and written documents
furnished or made available by XxxxXxxx and Acquisition or their agents to
Citadel's representatives or agents, when considered in context and together
with any relevant or related documents also so furnished or made available,
contain any untrue statement of material fact or omit a material fact necessary
to make any statement therein not misleading.
5.18 PAYMENTS. Neither XxxxXxxx nor Acquisition has, directly or
--------
indirectly, paid or delivered any fee, commission or other sum of money or item
of property however characterized to any finder, agent, government official or
other party, in the United States or any other country, in any manner related to
its
19
business or operations, that XxxxXxxx or Acquisition knows or has reason to
believe to have been illegal under any federal, state or local laws of the
United States or any other country or territory having jurisdiction over such
entity, and has not participated, directly or indirectly, in any boycotts or
similar practices.
5.19 DISCLOSURE. No representation or warranty made by XxxxXxxx or
----------
Acquisition in this Agreement (including, without limitation, in the XxxxXxxx
and Acquisition Disclosure Schedule) contains any untrue statement of material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading in light of the circumstances under which made.
5.20 JOINT VENTURES. Neither XxxxXxxx or Acquisition is a member of
--------------
any partnership, joint venture or other business entity.
5.21 SUBSIDIARIES. Neither XxxxXxxx or Acquisition own any
------------
subsidiaries except for XxxxXxxx'x ownership of Acquisition.
5.22 APPROVAL OF MERGER. The board of directors of XxxxXxxx and
------------------
Acquisition have approved the Merger without reservation or qualification.
5.23 INTELLECTUAL PROPERTY. XxxxXxxx and Acquisition own and have
---------------------
the right to use all right, title and interest in and to Intellectual Property
used in their business. All such Intellectual Property is owned by XxxxXxxx or
Acquisition and XxxxXxxx or Acquisition have the full right to use such
Intellectual Property, free and clear of all liens, security interests, charges,
encumbrances, equities and other adverse claims. No such item of Intellectual
Property (a) is infringed or has been challenged or threatened in any material
respect; (b) infringes or has been alleged to infringe any similar property
right of any third party; or (c) has been or is now involved in any opposition,
invalidation or cancellation proceeding (nor is any such action threatened with
respect to any such item). Neither XxxxXxxx nor Acquisition is aware of any
potentially infringing patent, trademark, copyright or application therefor of
any third party.
5.24 SEC FILINGS. XxxxXxxx has filed all forms, reports and
-----------
documents required to be filed with the Commission. All of such filings were
prepared in accordance with the requirements of all applicable laws in all
material respects, and 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.
5.25 LIABILITIES. As of the Closing Date, neither XxxxXxxx nor
-----------
Acquisition have any outstanding payables other than (i) indebtedness to
Xxxxxxxx Diversified Leasing, Inc. and to Miami Subs U.S.A., Inc. and (ii) as
listed in Section 5.25 of the XxxxXxxx and Acquisition Disclosure Schedule.
6. ACTIONS OF CITADEL PRIOR TO THE CLOSING DATE.
--------------------------------------------
6.1 AFFIRMATIVE COVENANTS. Prior to the Closing Date, Citadel
---------------------
covenants that, unless the prior written consent of XxxxXxxx is first obtained,
which consent shall not be unreasonably withheld, Citadel will:
(a) During the period from the date of this Agreement to the Effective
Time, Citadel will conducts its operations according to its ordinary and usual
course of business and consistent with past practice, and Citadel will use its
best efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain satisfactory
relationships with licensors, licensees, suppliers, contractors, distributors,
customers and others having business relationships with Citadel.
20
(b) Duly comply with all laws applicable to them and their respective
properties, operations, business and employees that if not complied with would
result in a Material Effect.
(c) Provide each Citadel Warrant Holder with notice as required
pursuant to such Citadel Warrant Holder's agreement with Citadel.
(d) Execute and deliver to XxxxXxxx the note containing the terms set
forth in SECTION 7.1(C) hereof and in a form that is mutually agreeable to
XxxxXxxx and Citadel (the "Note"), upon XxxxXxxx commencing the funding of the
loan referred to in SECTION 7.1(C) hereof.
(e) Furnish to XxxxXxxx and Acquisition the Citadel Disclosure
Schedule within three business days of the date hereof.
6.2 NEGATIVE COVENANTS. Prior to the Closing Date, except with the
------------------
prior written consent of XxxxXxxx, which consent shall not be unreasonably
withheld, Citadel will not:
(a) Do any of the restricted acts set forth in SECTION 4.8 hereof, or
enter into any agreement of a nature set forth in SECTION 4.13 hereof;
(b) Enter into any transaction other than in the ordinary course of
business; or
(c) Amend the respective organizational or governing documents of
Citadel.
6.3 CONSENTS. Citadel will use best efforts to obtain all consents
--------
from third parties, including, without limitation, Governmental Entities
necessary or appropriate to effectuate the transactions contemplated by this
Agreement.
6.4 ADVICE OF CHANGES. Citadel will promptly advise XxxxXxxx in
-----------------
writing from time to time prior to the Closing Date with respect to any matter
hereafter arising and known to them that, if existing or occurring at the date
of this Agreement, would have been required to be set forth or described in the
Citadel Disclosure Schedule or would have resulted in any representation of
Citadel in this Agreement being untrue.
6.5 BEST EFFORTS. Citadel will use best efforts to cause to be
------------
fulfilled those of the conditions to XxxxXxxx'x and/or Acquisition's obligations
to consummate the transactions contemplated by this Agreement that are dependent
upon Citadel's actions and to execute and deliver such instruments and take such
other actions as necessary or appropriate in order to carry out the intent of
this Agreement.
6.6 ACCESS TO PROPERTIES AND RECORDS. From and after the date of
--------------------------------
this Agreement through the earlier of the Closing or the termination of this
Agreement, Citadel shall (a) provide XxxxXxxx an identification of and access to
all books, records and documents, including contracts, agreements, consents,
settlements, revenue and expense information, and (b) afford to XxxxXxxx and its
officers, attorneys, accountants and other authorized representatives free and
full access during normal business hours to the offices, properties, books and
records of Citadel.
6.7 SUPPLY DOCUMENTS, REPORTS, ETC.
-------------------------------
(a) Citadel shall furnish or make available to XxxxXxxx all documents,
reports and other information and data (including financial statements)
concerning Citadel as XxxxXxxx may reasonably require in connection with any
statement, application, or document required to be filed with applicable
Governmental Entities in connection with the transaction contemplated by this
Agreement or furnished to any other person, firm, corporation or Governmental
Entity in connection with this Agreement, including, but not limited to the
Commission.
21
(b) Citadel represents and warrants that all such information shall be
true, correct, and complete in all material respects and shall not omit any
material fact required to be stated to make such information not misleading in
light of the circumstances under which made.
6.8 STOCKHOLDER APPROVAL. Citadel will use its best efforts to
--------------------
submit this Agreement to the Stockholders for approval at the Special Meeting to
be held at the earliest practicable date for the purpose, among other things, of
considering and voting upon a proposal to approve and adopt this Agreement.
7. ACTIONS OF XXXXXXXX AND ACQUISITION PRIOR TO THE CLOSING DATE.
-------------------------------------------------------------
7.1 AFFIRMATIVE COVENANTS. Prior to the Closing Date, XxxxXxxx and
---------------------
Acquisition covenant that, unless the prior written consent of Citadel is first
obtained, each (except with respect to subparagraph (c) below that applies
solely to XxxxXxxx) will:
(a) During the period from the date of this Agreement to the Effective
Time, conduct their operations according to their ordinary and usual course of
business and consistent with past practice, and will use their best efforts to
preserve intact their business organizations, to keep available the services of
their officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relationships with XxxxXxxx or Acquisition.
(b) Duly comply with all laws applicable to them and their respective
properties, operations, business and employees that if not complied with would
result in a Material Effect.
(c) Within two business days of the date hereof, XxxxXxxx shall
advance to Citadel $100,000 as an unsecured loan and upon any financing of debt
or equity by XxxxXxxx after the date hereof, XxxxXxxx shall, within two business
days of XxxxXxxx'x receipt of such proceeds, fund to Citadel such proceeds until
Citadel has received an unsecured loan to Citadel in an additional principal
amount of $400,000, pursuant to the Note to be executed by Citadel. The Note
shall be for a term of one year, shall bear interest at 12% per annum, shall be
an unsecured obligation and shall be in a form that is mutually agreeable to
XxxxXxxx and Citadel.
(d) Furnish to Citadel the XxxxXxxx and Acquisition Disclosure
Schedule within three business days of the date hereof.
7.2 NEGATIVE COVENANTS. Prior to the Closing Date without the prior
------------------
written consent of Citadel, XxxxXxxx and Acquisition will not:
(a) Do any of the restricted acts set forth in SECTION 5.8 hereof, or
enter into any agreement of a nature set forth in SECTION 5.13 hereof;
(b) Enter into any transaction other than in the ordinary course of
business; or
(c) Amend their respective organizational or governing documents of
XxxxXxxx and Acquisition.
7.3 CONSENTS. XxxxXxxx and Acquisition will use best efforts to
--------
obtain all consents from third parties, including, without limitation,
Governmental Entities necessary or appropriate to effectuate the transactions
contemplated by this Agreement.
7.4 ADVICE OF CHANGES. XxxxXxxx will promptly advise Citadel in
-----------------
writing from time to time prior to the Closing Date with respect to any matter
hereafter arising and known to it that, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in the
XxxxXxxx and
22
Acquisition Disclosure Schedule or would have resulted in any representation of
XxxxXxxx or Acquisition in this Agreement being untrue in any material respect.
7.5 OTC BULLETIN BOARD. XxxxXxxx will use its best efforts to
------------------
maintain the listing on the OTC Bulletin Board of the XxxxXxxx Common Stock.
7.6 BEST EFFORTS. XxxxXxxx and Acquisition will use their best
------------
efforts to cause to be fulfilled those of the conditions to Citadel's
obligations to consummate the transactions contemplated by this Agreement that
are dependent upon XxxxXxxx'x or Acquisition's actions and to execute and
deliver such instruments and take such other actions as necessary or appropriate
in order to carry out the intent of this Agreement.
7.7 ACCESS TO PROPERTIES AND RECORDS. From and after the date of
--------------------------------
this Agreement through the earlier of the Closing or the termination of this
Agreement, XxxxXxxx and Acquisition shall (a) provide Citadel an identification
of and access to all books, records and documents, including contracts,
agreements, consents, settlements, revenue and expense information, and (b)
afford to Citadel and its officers, attorneys, accounts and other authorized
representatives free and full access during normal business hours to the
offices, properties, books and records of XxxxXxxx and Acquisition.
7.8 SUPPLY DOCUMENTS, REPORTS, ETC.
------------------------------
(a) XxxxXxxx and Acquisition shall furnish or make available to
Citadel all documents, reports and other information and data (including
financial statements) concerning XxxxXxxx and Acquisition as Citadel may
reasonably require in connection with any statement, application, or document
required to be filed with applicable Government Entities in connection with the
transaction contemplated by this Agreement or furnished to any other person,
firm, corporation or Governmental Entity in connection with this Agreement,
including, but not limited to the Commission.
(b) XxxxXxxx and Acquisition represent and warrant that all such
information shall be true, correct, and complete in all material respects and
shall not omit any material fact required to be stated to make such information
not misleading in light of the circumstances under which made.
8. CONDITIONS TO XXXXXXXX'X AND ACQUISITION'S OBLIGATIONS. Each and
------------------------------------------------------
every obligation of XxxxXxxx and Acquisition under this Agreement (other than
the obligation to make the loan referenced in SECTION 7.1(C) hereof) to be
performed on or before the Closing Date is, at the option of XxxxXxxx or
Acquisition, subject to the satisfaction on or before the Closing Date of each
of the following conditions:
(a) (i) All of the terms, covenants and conditions of this Agreement
to be complied with or performed by Citadel at or before the Closing Date shall
have been duly complied with and performed in all material respects, (ii) the
representations and warranties of Citadel set forth in ARTICLE 4, as modified by
the statements contained in the Citadel Disclosure Schedule, shall be true in
all material respects on and as of the Closing Date with the same force and
effect as if such representations and warranties had been made on and as of the
Closing Date and (iii) XxxxXxxx shall have received a certificate to such effect
from the President of Citadel.
(b) All consents, waivers, approvals, licenses, authorizations of, or
filings or declarations with third parties or Governmental Entities required to
be obtained by Citadel in order to permit the transactions contemplated by this
Agreement to be consummated in accordance with agreements and court orders
applicable to Citadel and applicable governmental laws, rules, regulations and
agreements shall have been obtained and any waiting period thereunder shall have
expired or been terminated and XxxxXxxx shall have received a certificate to
such effect from the President of Citadel.
(c) XxxxXxxx shall have received from each Stockholder an investment
letter executed by such Stockholder reasonably acceptable to XxxxXxxx pursuant
to which, among other things, such Stockholder
23
acknowledges that the XxxxXxxx Shares are restricted securities under the
Securities Act and represents that such Stockholder is acquiring the XxxxXxxx
Shares without a view to distribution.
(d) XxxxXxxx shall have received the written opinion of Endeavour
Capital Corporation as to the fairness to XxxxXxxx'x Stockholders of the Merger.
(e) XxxxXxxx shall have received a Voting Agreement substantially in
the form of EXHIBIT I executed by Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx.
(f) All actions, proceedings, instruments and documents in connection
with the consummation of the transactions contemplated by this Agreement,
including the forms of all documents, legal matters, opinions and procedures in
connection therewith, shall have been approved in form and substance by counsel
for XxxxXxxx, which approval shall not be unreasonably withheld.
(g) Citadel shall have furnished such certificates to evidence
compliance with the conditions set forth in this Article, as may be reasonably
requested by XxxxXxxx or its counsel.
(h) Citadel shall not have suffered any Material Effect.
(i) No material information or data provided or made available to
XxxxXxxx or Acquisition by or on behalf of Citadel shall be incorrect in any
material respect.
(j) No investigation and no suit, action or proceeding before any
court or any governmental or regulatory authority shall be pending or threatened
by any state or federal governmental or regulatory authority, against Citadel or
any of its affiliates, associates, officers or directors seeking to restrain,
prevent or change in any material respect the transactions contemplated hereby
or seeking damages in connection with such transactions that are material to
Citadel.
(k) The Placement Agency Agreement, dated November 14, 1995, by and
between Citadel and Xxxxxxx-Xxxxxx Associates, L.P. shall have been terminated
by Citadel without any liability except as provided for in Section 12 thereof.
(l) Holders of no more than 15% of the issued and outstanding shares
of the capital stock of Citadel shall have exercised appraisal rights under the
DGCL.
(m) An Employment Agreement shall have been executed and delivered by
Xxxxxx X. Xxxxxxx in substantially the same form as the employment agreements
executed by Messrs. Xxxxxxx and Xxxxx referred to in subparagraph 9(j) below.
9. CONDITIONS TO CITADEL'S OBLIGATIONS. Except as set forth below,
-----------------------------------
each and every obligation of Citadel under this Agreement to be performed on the
Closing Date is, at the option of Citadel, subject to the satisfaction on or
before the Closing Date, of each of the following conditions:
(a) (i) All of the terms, covenants and conditions of this Agreement
to be complied with or performed by XxxxXxxx and Acquisition at or before the
Closing Date shall have been duly complied with and performed in all material
respects, (ii) the representations and warranties of Acquisition set forth in
ARTICLE 5 shall be true in all material respects on and as of the Closing Date
with the same force and effect as if such representations and warranties had
been made on and as of the Closing Date, and (iii) Citadel shall have received a
certificate from an officer of XxxxXxxx and an officer of Acquisition at Closing
to such effect.
(b) All consents, waivers, approvals, licenses, authorizations of, or
filings or declarations with third parties or Governmental Entities required to
be obtained by XxxxXxxx and Acquisition in order to permit
24
the transactions contemplated by this Agreement to be consummated in accordance
with agreements and court orders applicable to XxxxXxxx and Acquisition and
applicable governmental laws, rules, regulations and agreements shall have been
obtained and any waiting period thereunder shall have expired or been terminated
and Citadel shall have received a certificate from an officer of XxxxXxxx and an
officer of Acquisition at Closing to such effect.
(c) All actions, proceedings, instruments and documents in connection
with the consummation of the transactions contemplated by this Agreement,
including the forms of all documents, legal matters, opinions and procedures in
connection therewith, shall have been approved in form and substance by counsel
for Citadel, which approval shall not be unreasonably withheld.
(d) XxxxXxxx shall have furnished such certificates of its officers
and others to evidence compliance with the conditions set forth in this Article,
as may be reasonably requested by Citadel or their counsel.
(e) Neither XxxxXxxx nor Acquisition shall have suffered any Material
Effect.
(f) No material information or data provided or made available to
Citadel by or on behalf of XxxxXxxx or Acquisition shall be incorrect in any
material respect.
(g) No investigation and no suit, action or proceeding before any
court or any governmental or regulatory authority shall be pending or threatened
by any state or federal governmental or regulatory authority, against XxxxXxxx
or Acquisition or any of their affiliates, associates, officers or directors
seeking to restrain, prevent or change in any material respect the transactions
contemplated hereby or seeking damages in connection with such transactions that
are material to XxxxXxxx or Acquisition.
(h) Citadel shall be reasonably satisfied that XxxxXxxx'x cash flow
from the Restaurant Assets is positive as of the Closing Date; provided,
however, that for this purpose, expenses not directly related to restaurant
operations, including, but not limited to, general and administrative expenses;
legal and other expenses in connection with financing activities, the
transactions contemplated by this Agreement, and other acquisition and/or
dispositions of assets not in the ordinary course of business; and litigation
expenses, including judgments, settlements and legal fees and expenses, shall
not be included in the calculation of cash flow.
(i) The Placement Agency Agreement, dated November 14, 1995, by and
between Citadel and Xxxxxxx-Xxxxxx Associates, L.P. shall have been terminated
by Citadel without any liability except as provided for in Section 12 thereof.
(j) Employment Agreements shall have been executed and delivered by
Xxxxxxx Xxxxxxx and Xxxxxx Xxxxx in a form reasonably satisfactory to XxxxXxxx
and Citadel.
(k) XxxxXxxx shall have sold the Restaurant Assets on terms and
conditions no less favorable to XxxxXxxx than as set forth on EXHIBIT II or if
the Restaurant Assets have not been sold on such terms, Citadel shall be
reasonably satisfied with XxxxXxxx'x progress in selling the Restaurant Assets.
(l) Lone Star has made the loan to Citadel described in SECTION
7(C)(I) by February 15, 1996.
Notwithstanding the foregoing, if XxxxXxxx shall have sold the
Restaurant Assets as provided in (k) above and has made the loan as described in
(l) above, all other conditions set forth in SECTION 9 shall have been deemed to
be satisfied.
25
10. ADDITIONAL AGREEMENTS.
---------------------
10.1 CONFIDENTIALITY. The parties hereto will, and will cause their
---------------
officers, directors, employees and authorized representatives to, hold in
confidence all, and not to use or to disclose to others any, nonpublic
information received by them from another party hereto in connection with the
transactions contemplated by this Agreement; provided, however, the foregoing
shall not restrict necessary disclosures in compliance with requirements of any
law, governmental order or regulation.
10.2 FURTHER ASSURANCES. After Closing, the parties shall execute,
------------------
acknowledge and deliver or cause to be executed, acknowledged and delivered such
instruments and take such other action including payment of monies as may be
necessary or advisable to carry out their obligations under this Agreement and
under any document, certificate or other instrument delivered pursuant hereto or
required by law. If at any time subsequent to the Closing, any party comes into
possession of money or property belonging to another party, such money or
property shall be promptly turned over to the party entitled thereto.
11. TERMINATION, WAIVER AND AMENDMENT.
---------------------------------
11.1 TERMINATION. This Agreement may be terminated prior to the
-----------
Effective Date before or after approval by the Stockholders by: (i) mutual
consent of the board of directors of XxxxXxxx, Acquisition and Citadel for any
reason; (ii) XxxxXxxx or Acquisition, if Citadel has failed to comply in any
material respect with any of its covenants or agreements under this Agreement
that are required to be complied with prior to the date of such termination;
(iii) Citadel, if XxxxXxxx or Acquisition has failed to comply in any material
respect with any of their covenants or agreements under this Agreement that are
required to be complied with prior to the date of such termination; (iv) either
XxxxXxxx, Acquisition or Citadel, if the Closing does not take place prior to
February 28, 1996, except that such date may be extended until March 31, 1996,
by XxxxXxxx, Acquisition or Citadel if such delay is attributable to actions by
a Governmental Entity; (v) either XxxxXxxx, Acquisition or Citadel, if a
Governmental Entity has permanently enjoined or prohibited consummation of the
Merger and such court or government action is final and nonappealable; or (vi)
Citadel, if XxxxXxxx has not advanced at least $500,000 as an unsecured loan to
Citadel as provided in SECTION 7.1(C) by February 15, 1996.
11.2 MANNER OF EXERCISE. In the event of termination and abandonment
------------------
by XxxxXxxx, Acquisition or Citadel, pursuant to SECTION 11.1, written notice
thereof shall forthwith be given to the other parties, and this Agreement shall
terminate and the transactions contemplated hereunder shall be abandoned without
further action by the parties.
11.3 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment pursuant to SECTION 11.1, this Agreement shall become void and have
no effect, without any liability on the part of any of the parties or their
directors or officers or stockholders in respect of this Agreement and the
transactions contemplated hereby except that a party that breaches this
Agreement may have liability to the other parties hereto arising out of such
breach. Except as allowed under this Agreement, if the Merger is not
consummated, each party to this Agreement will bear its own costs and expenses
in connection therewith and the transactions contemplated thereby.
11.4 WAIVER. The respective obligations of XxxxXxxx, Acquisition and
------
Citadel to effect the Merger are subject to written waiver thereof.
11.5 AMENDMENT. XxxxXxxx, Acquisition and Citadel may amend this
---------
Agreement before or after approval by the stockholders of the companies, but no
amendment may be made after such approval if the amendment would change the
exchange ratio provided in SECTION 2.6 hereof or if any such amendment would
materially adversely affect the rights of any such stockholder, except with the
further approval of the stockholders so adversely affected. The parties to this
Agreement may, at any time prior to the Effective Date, extend the time for
performance of any of the other parties' obligations under this Agreement and
waive any inaccuracies in the
26
representations and warranties contained herein and waive compliance with any of
the agreements or conditions contained herein that may be legally waived.
12. MISCELLANEOUS.
-------------
12.1 EXPENSES. Except as otherwise provided herein, each party shall
--------
pay all expenses and costs in connection with this Agreement and the
transactions contemplated hereby.
12.2 PRESS RELEASES. No party shall make any public announcement or
--------------
press release with respect to this transaction without written consent of the
others (which shall not be unreasonably withheld), except as required by law.
12.3 BINDING EFFECT. 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 party
without the prior written consent of the others. Nothing contained herein,
express or implied, is intended to confer on any person other than the parties
hereto or their respective successors and permitted assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
12.4 SEVERABILITY. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, in such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.5 NOTICES. Any notice, request, instructions or other document to
-------
be given hereunder to any party shall be in writing, sent by facsimile
transmission or delivered personally or by courier or sent by certified mail,
postage prepaid, as follows:
If to Citadel:
Citadel Computer Systems, Inc.
0000 Xxxxx Xxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxx, President
If to XxxxXxxx or Acquisition:
XxxxXxxx Hospitality Corporation
0000 Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, President
Any party may change its address for purposes of this Section by giving written
notice of such change of address to the other parties in the manner herein
provided for giving notice. Any notice or communication hereunder shall be
deemed to have been given when (i) deposited in the United States mail, if by
certified mail, and (ii) received, if delivered personally or by courier or
facsimile transmission.
27
12.6 ENTIRE AGREEMENT. This Agreement (including the instruments
----------------
between the parties referred to herein and any waivers delivered pursuant
hereto) constitutes the entire agreement among the parties and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof. The
Exhibits and Schedules are a part of this Agreement as if fully set forth
herein. All references to articles, sections, subsections, paragraphs, clauses,
exhibits and schedules shall be deemed references to such part of this
Agreement, unless the context shall otherwise require.
12.7 AMENDMENTS; WAIVERS. No supplement, modification, or amendment
-------------------
of this Agreement or waiver of any provision of this Agreement will be binding
unless executed in writing by, or on behalf of, all parties to this Agreement.
No waiver of any of the provisions of this Agreement will be deemed or will
constitute a waiver of any other provision of this Agreement (regardless of
whether similar), nor will any such waiver constitute a continuing waiver unless
otherwise expressly provided.
12.8 HEADINGS. Descriptive headings contained herein are for
--------
convenience of reference only and shall not affect the meaning or interpretation
hereof.
12.9 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one agreement.
12.10 SPECIFIC PERFORMANCE. The parties hereto agree that
--------------------
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provision hereof in any court of the United States of
America or any state having jurisdiction, in addition to any other remedy to
which they are entitled at law or in equity.
12.11 GOVERNING LAW. THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN
-------------
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
12.12 TIME OF ESSENCE. Time is of the essence of the parties'
---------------
obligation to consummate the transactions contemplated by this Agreement on the
Closing Date.
12.13 BEST EFFORTS. No provision of this Agreement calling for a
------------
party to use its best efforts or reasonable efforts shall be construed so as to
require such party to incur out-of-pocket expenditures other than expenditures
normally incurred in transactions similar to the Merger or to take any step that
would not be commercially reasonable, in light of all of the circumstances.
28
EXECUTED as of the day and year first above written.
XXXXXXXX HOSPITALITY CORPORATION
By:
-------------------------
Name:
-----------------------
Title:
----------------------
LSHC ACQUISITION, INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
CITADEL COMPUTER SYSTEMS, INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
