EXHIBIT 99.1
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AGREEMENT AND PLAN OF MERGER
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TDG HOLDING COMPANY,
TDG MERGER CO. AND
THE XXXXX GROUP, INC.
AGREEMENT AND PLAN OF MERGER
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Dated as of May 11, 2003
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TABLE OF CONTENTS
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Merger. . . . . . . . . . . . . . . . . . . 2
Section 1.2 Effective Time. . . . . . . . . . . . . . . . . 2
Section 1.3 Effect of the Merger; Closing . . . . . . . . . 2
Section 1.4 Subsequent Actions. . . . . . . . . . . . . . . 2
Section 1.5 Certificate of Incorporation; Bylaws;
Directors and Officers. . . . . . . . . . . . . 3
Section 1.6 Conversion of Securities. . . . . . . . . . . . 3
Section 1.7 Dissenting Shares . . . . . . . . . . . . . . . 4
Section 1.8 Surrender of Shares; Stock Transfer Books . . . 5
Section 1.9 Stock Plans, Non-Plan Options and Warrant
Agreements. . . . . . . . . . . . . . . . . . . 6
Section 1.10 Certain Adjustments . . . . . . . . . . . . . . 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT
AND PURCHASER. . . . . . . . . . . . . . . . . . . . 7
Section 2.1 Corporate Organization. . . . . . . . . . . . . 7
Section 2.2 Authority Relative to this Agreement. . . . . . 8
Section 2.3 No Conflict; Required Filings and Consents. . . 8
Section 2.4 Financing Arrangements. . . . . . . . . . . . . 9
Section 2.5 Proxy Statement; Schedule 13E-3 . . . . . . . . 9
Section 2.6 Brokers . . . . . . . . . . . . . . . . . . . . 9
Section 2.7 No Additional Representations of Warranties . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . 10
Section 3.1 Organization and Qualification; Subsidiaries. . 10
Section 3.2 Capitalization. . . . . . . . . . . . . . . . . 10
Section 3.3 Authority Relative to this Agreement. . . . . . 11
Section 3.4 No Conflict; Required Filings and Consents. . . 12
Section 3.5 SEC Filings; Financial Statements . . . . . . . 13
Section 3.6 Absence of Certain Changes or Events. . . . . . 14
Section 3.7 Litigation. . . . . . . . . . . . . . . . . . . 14
Section 3.8 Employee Benefit Plans; Labor Matters . . . . . 14
Section 3.9 Proxy Statement; Schedule 13E-3 . . . . . . . . 18
Section 3.10 Compliance; Permits . . . . . . . . . . . . . . 19
Section 3.11 Taxes . . . . . . . . . . . . . . . . . . . . . 20
Section 3.12 Intellectual Property . . . . . . . . . . . . . 21
Section 3.13 Contracts . . . . . . . . . . . . . . . . . . . 23
Section 3.14 Environmental Matters . . . . . . . . . . . . . 23
Section 3.15 Related Party Transactions. . . . . . . . . . . 26
Section 3.16 Relationships with Franchisees. . . . . . . . . 26
Section 3.17 State Takeover Statutes . . . . . . . . . . . . 28
Section 3.18 Required Vote of Company Stockholders . . . . . 28
Section 3.19 Opinion of Financial Advisor. . . . . . . . . . 28
Section 3.20 Brokers . . . . . . . . . . . . . . . . . . . . 28
Section 3.21 No Additional Representations of Warranties . . 28
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ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . 28
Section 4.1 Conduct of Business Pending the Merger. . . . . 28
Section 4.2 No Shopping . . . . . . . . . . . . . . . . . . 30
ARTICLE V ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . 32
Section 5.1 Proxy Statement; Schedule 13E-3 . . . . . . . . 32
Section 5.2 Meeting of Stockholders of the Company. . . . . 33
Section 5.3 Notification of Certain Matters . . . . . . . . 33
Section 5.4 Access to Information; Transition . . . . . . . 33
Section 5.5 Reasonable Best Efforts; Cooperation. . . . . . 34
Section 5.6 Public Announcements. . . . . . . . . . . . . . 36
Section 5.7 Agreement to Defend and Indemnify . . . . . . . 36
Section 5.8 Stockholder Litigation. . . . . . . . . . . . . 38
Section 5.9 Standstill Agreements; Confidentiality
Agreements. . . . . . . . . . . . . . . . . . . 38
Section 5.10 Delisting . . . . . . . . . . . . . . . . . . . 38
Section 5.11 Employee and Termination Benefits . . . . . . . 38
Section 5.12 Tax Treatment . . . . . . . . . . . . . . . . . 40
ARTICLE VI CONDITIONS OF MERGER . . . . . . . . . . . . . . . . 40
Section 6.1 Conditions to Obligations of Each Party
to Effect the Merger. . . . . . . . . . . . . . 40
Section 6.2 Conditions to Obligations of Parent and
Purchaser to Effect the Merger. . . . . . . . . 40
Section 6.3 Conditions to Obligations of the Company
to Effect the Merger. . . . . . . . . . . . . . 42
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . 42
Section 7.1 Termination . . . . . . . . . . . . . . . . . . 42
Section 7.2 Effect of Termination . . . . . . . . . . . . . 44
ARTICLE VIII GENERAL PROVISIONS . . . . . . . . . . . . . . . . . 46
Section 8.1 Non-Survival of Representations, Warranties
and Agreements. . . . . . . . . . . . . . . . . 46
Section 8.2 Notices . . . . . . . . . . . . . . . . . . . . 46
Section 8.3 Expenses. . . . . . . . . . . . . . . . . . . . 47
Section 8.4 Certain Definitions . . . . . . . . . . . . . . 47
Section 8.5 Headings. . . . . . . . . . . . . . . . . . . . 49
Section 8.6 Severability. . . . . . . . . . . . . . . . . . 49
Section 8.7 Entire Agreement; No Third-Party Beneficiaries. 50
Section 8.8 Assignment. . . . . . . . . . . . . . . . . . . 50
Section 8.9 Governing Law . . . . . . . . . . . . . . . . . 50
Section 8.10 Amendment . . . . . . . . . . . . . . . . . . . 50
Section 8.11 Waiver. . . . . . . . . . . . . . . . . . . . . 50
Section 8.12 Consent to Jurisdiction . . . . . . . . . . . . 51
Section 8.13 Specific Enforcement. . . . . . . . . . . . . . 51
Section 8.14 Interpretation. . . . . . . . . . . . . . . . . 51
Section 8.15 Counterparts. . . . . . . . . . . . . . . . . . 51
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TABLE OF DEFINITIONS
Acquisition Agreement . . . 31 Hazardous Substance . . . . 25
Acquisition Transaction . . 32 HSR Act . . . . . . . . . . 9
affiliate . . . . . . . . . 47 Indemnified Parties . . . . 36
Agreement . . . . . . . . . 1 Intellectual Property . . . 21
Board of Directors . . . . 1 IRS . . . . . . . . . . . . 15
Business Day . . . . . . . 2 Knowledge of the Company. . 49
Certificate of Merger . . . 2 Law . . . . . . . . . . . . 25
Certificate(s) . . . . . . 5 License Agreements . . . . 26
Claim . . . . . . . . . . . 36 Licensees . . . . . . . . . 26
Closing . . . . . . . . . . 2 Lien . . . . . . . . . . . 8
Closing Date . . . . . . . 2 Merger . . . . . . . . . . 1
Code . . . . . . . . . . . 15 Merger Consideration . . . 3
Company . . . . . . . . . . 1 Non-Plan Option Agreements. 7
Company Common Stock . . . 10 Non-Plan Options . . . . . 6
Company IP . . . . . . . . 21 Option Plans . . . . . . . 6
Company Material Adverse Options . . . . . . . . . . 6
Effect . . . . . . . . . 48 Parent . . . . . . . . . . 1
Company Preferred Stock . . 10 Parent Information . . . . 9
Company Stockholders Parent Material Adverse
Meeting . . . . . . . . . 18 Effect. . . . . . . . . . 8
Competition Laws . . . . . 9 Parent Representatives. . . 34
Confidentiality Agreement . 31 Parent Stock. . . . . . . . 1
Continuing Employees . . . 38 Paying Agent. . . . . . . . 5
Contribution Agreement . . 1 PCBs. . . . . . . . . . . . 25
control . . . . . . . . . . 48 Permits . . . . . . . . . . 19
Controlled Group . . . . . 15 Person. . . . . . . . . . . 49
Converted Shares . . . . . 1 Proxy Statement . . . . . . 18
Debt . . . . . . . . . . . 14 Purchaser . . . . . . . . . 1
Delaware Law . . . . . . . 1 Recent SEC Reports. . . . . 23
Desktop Software . . . . . 22 Release . . . . . . . . . . 25
Disclosure Schedule . . . . 10 Riverside . . . . . . . . . 1
Dissenting Shares . . . . . 4 Rollover Stockholders . . . 1
DOJ . . . . . . . . . . . . 35 Schedule 13E-3 . . . . . . 19
EBITDA . . . . . . . . . . 49 SEC . . . . . . . . . . . . 13
Effective Time . . . . . . 2 SEC Reports . . . . . . . . 13
Employee Plan . . . . . . . 15 Securities Act . . . . . . 13
Employee Plans . . . . . . 15 Shares. . . . . . . . . . . 1
Environment . . . . . . . . 24 Subsidiary. . . . . . . . . 10
Environmental Claim . . . . 24 Superior Proposal . . . . . 32
Environmental Condition . . 26 Surviving Corporation . . . 2
Environmental Laws . . . . 25 Surviving Corporation Common
Environmental Permit . . . 26 Stock . . . . . . . . . . 4
ERISA . . . . . . . . . . . 14 Tax Return. . . . . . . . . 21
Exchange Act . . . . . . . 6 Taxes . . . . . . . . . . . 21
Expenses . . . . . . . . . 46 Termination Fee . . . . . . 44
Foreign Plan . . . . . . . 18 UFOCs . . . . . . . . . . . 27
Franchise Agreements . . . 26 Voting Agreement. . . . . . 1
Franchisees . . . . . . . . 26 Warrant Agreements. . . . . 7
FTC . . . . . . . . . . . . 27 Warrants . . . . . . .. . . 7
GAAP . . . . . . . . . . . 13
Governmental Entity . . . . 9
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 11, 2003 (this
"Agreement"), is among THE XXXXX GROUP, INC., a Delaware corporation
(the "Company"), TDG HOLDING COMPANY, a Delaware corporation
("Parent"), and TDG MERGER CO., a Delaware corporation and a wholly
owned subsidiary of Parent ("Purchaser").
BACKGROUND INFORMATION
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A. The Board of Directors of the Company has determined that it
is advisable and in the best interests of its stockholders for Parent
to acquire the Company upon the terms and subject to the conditions
set forth herein.
B. The Boards of Directors of the Company, Purchaser and Parent
each have approved and declared advisable this Agreement, which
provides for the merger of Purchaser with and into the Company (the
"Merger") in accordance with the General Corporation Law of the State
of Delaware, as amended ("Delaware Law"), and upon the terms and
subject to the conditions set forth herein, whereby all of the issued
and outstanding shares (the "Shares") of Company Common Stock, other
than Dissenting Shares, the Converted Shares and any shares of Common
Stock owned by Parent, Purchaser or held in the treasury of the
Company, will be converted into the right to receive the Merger
Consideration.
C. The Board of Directors of the Company (the "Board of
Directors") has unanimously resolved to recommend this Agreement and
acceptance of the Merger to the holders of Shares and has determined
that the consideration to be paid for each Share in the Merger is fair
to the holders of such Shares and to recommend that the holders of
such Shares adopt this Agreement.
D. In order to induce Parent and Purchaser to enter into this
Agreement, concurrently with the execution and delivery hereof,
Parent, Purchaser, the Company and certain of the Company's
stockholders (who together beneficially own approximately 58.5% of the
outstanding Shares), are entering into a voting agreement dated the
date hereof (the "Voting Agreement").
E. Concurrently with the execution and delivery hereof, the
stockholders of the Company listed on Section A of the Disclosure
Schedule (the "Rollover Stockholders"), 2000 Riverside Capital
Appreciation Fund, L.P., a Delaware limited partnership ("Riverside"),
and Parent have entered into a contribution agreement (the
"Contribution Agreement"), pursuant to which, subject to the
satisfaction of the conditions set forth therein, (a) Riverside will
contribute cash to Parent in exchange for shares of common stock, $.01
par value per share, of Parent ("Parent Stock"), and (b) the Rollover
Stockholders will contribute shares of Company Common Stock (the
"Converted Shares") or cash to Parent in exchange for shares of Parent
Stock, all as set forth in the Contribution Agreement. Section A of
the Disclosure Schedule sets forth the respective aggregate dollar
value to be contributed to Parent in cash or converted shares by each
Rollover Stockholder.
STATEMENT OF AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally
bound hereby, the Company, Parent and Purchaser hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. At the Effective Time and subject to
and upon the terms and conditions of this Agreement and Delaware Law,
Purchaser shall be merged with and into the Company, the separate
corporate existence of Purchaser shall cease, and the Company shall
continue as the surviving corporation. The Company as the surviving
corporation after the Merger hereinafter sometimes is referred to as
the "Surviving Corporation."
Section 1.2 EFFECTIVE TIME. On or as promptly as practicable
after the Closing Date, the parties hereto shall cause the Merger to
be consummated by filing a Certificate of Merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware, in such
form as required by, and executed in accordance with the relevant
provisions of, Delaware Law (the time of such filing being the
"Effective Time").
Section 1.3 EFFECT OF THE MERGER; CLOSING. At the Effective
Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and
Purchaser shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Purchaser shall become the
debts, liabilities and duties of the Surviving Corporation. The
closing of the Merger (the "Closing") shall take place at a time and
on a date (the "Closing Date") to be specified by the parties, which
shall be as soon as practicable, but in any event no later than the
third Business Day after satisfaction or waiver of the latest to occur
of the conditions precedent set forth in Article VI, at the offices of
Xxxxx Day, 0000 X. Xxxxxxx Xxxxxx, Xxxxxx, Xxxxx or such other
location as may be reasonably requested by Parent's financing sources,
unless another time, date or location is agreed to in writing by the
parties. "Business Day" means any day other than Saturday, Sunday, a
federal holiday or a day on which banks in the State of New York are
required to be closed.
Section 1.4 SUBSEQUENT ACTIONS. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised
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that any deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Surviving Corporation its right,
title or interest in, to or under any of the rights, properties or
assets of either of the Company or Purchaser acquired or to be
acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either
the Company or Purchaser, all such deeds, bills of sale, assignments
and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
Section 1.5 CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS
AND OFFICERS.
(a) At the Effective Time, the certificate of incorporation of
the Purchaser, as in effect immediately before the Effective Time,
shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by Law and such certificate of
incorporation.
(b) The bylaws of Purchaser, as in effect immediately before the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by Law, the certificate of
incorporation of the Surviving Corporation and such bylaws.
(c) The board of directors of Purchaser immediately before the
Effective Time will be the initial board of directors of the Surviving
Corporation, and the officers of the Company immediately before the
Effective Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy shall
exist on the board of directors of the Surviving Corporation or in any
office of the Surviving Corporation, such vacancy may thereafter be
filled in the manner provided by Law.
Section 1.6 CONVERSION OF SECURITIES. At the Effective Time,
by virtue of the Merger and without any further action on the part of
Purchaser, the Company or the holder of any capital stock of the
Company or Purchaser:
(a) Each Share issued and outstanding immediately before the
Effective Time (other than any Shares to be canceled pursuant to
Section 1.6(b) and any Dissenting Shares) shall be converted into the
right to receive $6.75 in cash payable to the holder thereof, without
interest (the "Merger Consideration"), upon surrender of the
certificate which immediately prior to the Effective Time represented
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such Share in the manner provided in Section 1.8. All such Shares,
when so converted as provided herein, shall automatically be canceled
and extinguished and will no longer be outstanding and will
automatically be canceled and retired and will cease to exist, and
each holder of a certificate which immediately prior to the Effective
Time represented such Share will cease to have any rights with respect
thereto except as otherwise provided herein and by Law and shall only
represent the right to receive the Merger Consideration therefor upon
the surrender of such certificate in accordance with Section 1.8. Any
payment made pursuant to this Section 1.6(a) will be made net of
applicable withholding taxes to the extent such withholding is
required by Law.
(b) Each Share issued and outstanding immediately before the
Effective Time and held in the treasury of the Company or owned by
Parent, Purchaser or any other subsidiary of Parent (including,
without limitation, the Converted Shares) shall be automatically
canceled and will cease to exist and no payment or other consideration
shall be made with respect thereto.
(c) Each share of common stock, par value $.0l per share, of
Purchaser issued and outstanding immediately before the Effective Time
shall thereafter represent one validly issued, fully paid and
nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation ("Surviving Corporation Common Stock").
Section 1.7 DISSENTING SHARES.
(a) Notwithstanding any provision of this Agreement to the
contrary, any Shares that are issued and outstanding immediately prior
to the Effective Time and that are held by a holder who has not voted
in favor of the Merger or consented thereto in writing and who has
demanded appraisal of the Shares owned by such holder in accordance
with Delaware Law (including, but not limited to, Section 262 thereof)
and as of the Effective Time has neither effectively withdrawn nor
lost the right to such appraisal ("Dissenting Shares"), shall not be
converted into or represent the right to receive cash pursuant to
Section 1.6, and the holder thereof shall be entitled to only such
rights as are granted by Delaware Law.
(b) Notwithstanding the provisions of Section 1.7(a), if any
holder of Dissenting Shares shall fail to perfect or effectively
withdraw or lose (through failure to perfect or otherwise) the right
to appraisal, then such holder's Shares shall be treated as if they
had been automatically converted as of the Effective Time into and
represent only the right to receive cash as provided in Section
1.6(a), without interest thereon upon surrender of the certificate or
certificates formerly representing such Shares.
(c) The Company shall give Purchaser (i) prompt notice of any
written demands for appraisal or payment of the fair value of any
Shares, withdrawals of such demands, and any other instruments served
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pursuant to Delaware Law received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under Delaware Law. The Company
shall not voluntarily make any payment with respect to any demands for
appraisal and shall not, except with the prior written consent of
Purchaser, settle or offer to settle any such demands.
Section 1.8 SURRENDER OF SHARES; STOCK TRANSFER BOOKS.
(a) Before the Effective Time, Purchaser shall designate a bank
or trust company reasonably acceptable to the Company to act as agent
for the holders of Shares (other than the Converted Shares) (the
"Paying Agent") to receive the funds necessary to make the payments
contemplated by Section 1.6. Immediately following the Effective
Time, and promptly as needed thereafter, Purchaser shall deposit, or
cause to be deposited, in trust with the Paying Agent for the benefit
of holders of Shares (other than the Shares to be cancelled pursuant
to Section 1.6(b)) the aggregate consideration to which such holders
shall be entitled at the Effective Time pursuant to Section 1.6.
(b) Promptly after the Effective Time, Purchaser shall cause the
distribution to holders of record of Shares (other than the Converted
Shares) as of the Effective Time of appropriate materials to
facilitate such surrender in a form mutually acceptable to Purchaser
and the Company. Each holder of a certificate or certificates which
immediately before the Effective Time represented Shares (other than
the Converted Shares) (the "Certificate(s)") may thereafter surrender
such Certificate or Certificates to the Paying Agent, as agent for
such holder. Upon the surrender of Certificates for cancellation,
together with such materials, Purchaser shall cause the Paying Agent
to promptly pay the holder of such Certificates in exchange therefor,
cash in an amount equal to the Merger Consideration multiplied by the
number of Shares formerly represented by such Certificate. Until so
surrendered, each such Certificate (other than Certificates
representing Converted Shares, Dissenting Shares and Certificates
representing Shares held by Parent, Purchaser, or any subsidiary of
Parent or in the treasury of the Company) shall represent solely the
right to receive the Merger Consideration relating thereto.
(c) If payment of cash in respect of canceled Shares is to be
made to a Person other than the Person in whose name a surrendered
Certificate is registered, it shall be a condition to such payment
that the Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the Person
requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name other than that of the
registered holder of the Certificate or instrument surrendered or
shall have established to the satisfaction of Purchaser or the Paying
Agent that such tax either has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the
Company shall be closed and there shall not be any further
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registration of transfers of any Shares thereafter on the records of
the Company. If, at or after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and
exchanged for cash as provided in Section 1.6(a). No interest shall
accrue or be paid on any cash payable upon the surrender of a
Certificate or Certificates which immediately before the Effective
Time represented issued and outstanding Shares.
(e) Promptly following the date which is one (1) year after the
Effective Time, the Paying Agent shall deliver to Purchaser all cash,
Certificates and other documents in its possession relating to the
transactions contemplated hereby, and the Paying Agent's duties shall
terminate. Thereafter, each holder of a Certificate (other than
Certificates representing Converted Shares, Dissenting Shares and
Certificates representing Shares held by Parent, Purchaser, or any
other subsidiary of Parent or in the treasury of the Company) may
surrender such Certificate to Parent or the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar Laws)
receive in consideration thereof the Merger Consideration relating
thereto, without any interest or dividends thereon.
(f) The Merger Consideration paid in the Merger shall be net to
the holder of Shares in cash, subject to reduction only for any
applicable federal back-up withholding.
(g) In the event any Certificate has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed, the Paying
Agent will issue in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration deliverable in respect thereof
as determined in accordance with Section 1.6 if the Person to whom the
Merger Consideration is paid shall, as a condition precedent to the
payment thereof, give the Surviving Corporation a bond in such sum as
the Surviving Corporation may reasonably direct or otherwise indemnify
the Surviving Corporation in a manner reasonably satisfactory to it
against any claim that may be made against the Surviving Corporation
with respect to the Certificate claimed to have been lost, stolen or
destroyed.
Section 1.9 STOCK PLANS, NON-PLAN OPTIONS AND WARRANT
AGREEMENTS.
(a) The Company shall (which shall include, but are not limited
to, satisfying the requirements of Rule 16b-3(e) which is promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), without incurring any liability in connection
therewith) provide that, upon consummation of the Merger, (i) each
then outstanding option to purchase Shares (the "Options") granted
under any of the Company's stock option plans referred to in Section
3.2(a), each as amended (collectively, the "Option Plans"), (ii) each
then outstanding option to purchase Shares (the "Non-Plan Options")
granted outside of the Option Plans referred to in Section 3.2(a),
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each as amended (collectively, the "Non-Plan Option Agreements") and
(iii) each then outstanding warrant to purchase Shares (the
"Warrants") granted under any of the warrant agreements referred to in
Section 3.2(a), each as amended (collectively, the "Warrant
Agreements"), whether or not then exercisable or vested, shall be
acquired by the Company for cancellation in consideration of payment
to the holders of such Options, Non-Plan Options and Warrants of an
amount in cash in respect thereof equal to the product of (A) the
excess, if any, of the Merger Consideration over the per share
exercise price thereof and (B) the number of Shares subject thereto
(such payment to be net of applicable withholding taxes). Without
limiting the generality of the Company's obligations under this
Section 1.9(a), the Company shall obtain any consents required of
holders of Options, Non-Plan Options and Warrants to effect the
foregoing.
(b) Subject to Sections 1.9(a) and (b), the Company shall cause
the Option Plans, Non-Plan Option Agreements and Warrant Agreements to
terminate as of the Effective Time, and the Company shall ensure that
following the Effective Time no holder of Options, Non-Plan Options or
Warrants or any participant in the Option Plans, shall have any right
to acquire any equity securities of the Surviving Corporation or any
subsidiary thereof solely as a result of such holder's Options, Non-
Plan Options or Warrants.
Section 1.10 CERTAIN ADJUSTMENTS. If at any time during the
period between the date of this Agreement and the Effective Time, any
change in the outstanding shares of capital stock of the Company shall
occur by reason of any reclassification, recapitalization, stock
split, reverse stock split, exchange or readjustment of shares, or any
similar transaction, or any stock dividend thereon with a record date
during such period, the Merger Consideration shall be appropriately
adjusted to provide the holders of Shares, Options, Non-Plan Options
and Warrants the same economic effect as contemplated by this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and
warrant to the Company as follows:
Section 2.1 CORPORATE ORGANIZATION. Each of Parent and
Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction in which it is
organized and has the requisite corporate power and authority and any
necessary governmental authority to own, operate or lease the
properties that it purports to own, operate or lease and to carry on
its business as it is now being conducted. Purchaser is a wholly
owned subsidiary of Parent.
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Section 2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of
Parent and Purchaser has the necessary corporate power and authority
to enter into this Agreement and, subject to the filing of the
Certificate of Merger as required by Delaware Law, to carry out each
of their obligations hereunder. The execution and delivery of this
Agreement by Parent and Purchaser and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Purchaser and, subject to the filing of the Certificate of Merger as
required by Delaware Law, no other corporate proceeding is necessary
for the execution and delivery of this Agreement by Parent or
Purchaser, the performance by Parent or Purchaser of their respective
obligations hereunder and the consummation by Parent or Purchaser of
the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Purchaser and, assuming due
authorization, execution and delivery of this Agreement by the
Company, constitutes a legal, valid and binding obligation of each
such corporation, enforceable against each of them in accordance with
its terms, except that (a) the enforceability hereof may be subject to
applicable bankruptcy, insolvency or other similar Laws, now or
hereinafter in effect, affecting creditors' rights generally, and (b)
the general principles of equity (regardless of whether enforceability
is considered at a proceeding at Law or in equity).
Section 2.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the consummation by Parent and Purchaser of the
transactions contemplated hereby will not, (i) conflict with or
violate any Law, court order, judgment or decree applicable to Parent
or Purchaser or by which any of their property is bound, (ii) violate
or conflict with the organizational documents of either Parent or
Purchaser, or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien, encumbrance,
pledge, claim, option, charge, easement, restriction, covenant,
condition of record, encroachment, encumbrance or security interest (a
"Lien") on any of the property or assets of Parent or Purchaser
pursuant to, any material contract, instrument, permit, license to
which Parent or Purchaser is a party or by which Parent or Purchaser
or any of their property is bound, except in the case of clauses (i)
and (iii) for conflicts, violations, breaches or defaults that
individually or in the aggregate would not be reasonably expected to
prevent or materially impair or delay the consummation by Parent or
Purchaser of the transactions contemplated hereby (each, a "Parent
Material Adverse Effect").
(b) Except for applicable requirements, if any, under the
Exchange Act or under Competition Laws, and the filing of the
Certificate of Merger as required by Delaware Law, neither Parent nor
Purchaser is required to submit any notice, report or other filing
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with any federal, state or local or foreign government, any court,
administrative, regulatory or other governmental agency, commission or
authority or any non-governmental United States or foreign self-
regulatory agency, commission or authority or any arbitral tribunal
(each, a "Governmental Entity"), in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby, the failure of which to submit would
have a Parent Material Adverse Effect. Parent, as the sole
stockholder of Purchaser, has voted or consented in writing to the
adoption of this Agreement. "Competition Laws" means statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines,
and other Laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization,
lessening of competition or restraint of trade, and includes the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and, to the extent applicable, equivalent Laws of the European
Union or the Member States thereof, Canada and any other country in
which the Company or any of its Subsidiaries has operations or derives
revenue.
Section 2.4 FINANCING ARRANGEMENTS. Parent has, or at the
Closing will have, and at the Closing will make available to
Purchaser, sufficient cash, available lines of credit or other sources
of immediately available funds necessary to purchase all of the Shares
(other than the Converted Shares), Options, Non-Plan Options and
Warrants, in accordance with the terms of this Agreement and to pay
all related fees and expenses pursuant to the Merger.
Section 2.5 PROXY STATEMENT; SCHEDULE 13E-3. None of the
information supplied or to be supplied by Parent, Purchaser, their
respective officers, directors, representatives, agents or employees
(the "Parent Information"), for inclusion in the Proxy Statement or
the Schedule 13E-3, or in any amendments thereof or supplements
thereto, will, (a) in the case of the Proxy Statement, on the date the
Proxy Statement is first mailed to stockholders of the Company or at
the time of the Company Stockholders Meeting, or (b) in the case of
the Schedule 13E-3, as of the date thereof and at the Effective Time,
contain any statement which, at such time and in light of the
circumstances under which it will be made, will be false or misleading
with respect to any material fact, or will omit to state any material
fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which has become false or misleading.
Notwithstanding the foregoing, Parent and Purchaser do not make any
representation or warranty with respect to any information that has
been supplied by the Company or its accountants, counsel or other
authorized representatives for use in any of the foregoing documents.
Section 2.6 BROKERS. Except for any affiliate of The
Riverside Company, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection
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with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Purchaser.
Section 2.7 NO ADDITIONAL REPRESENTATIONS OF WARRANTIES.
Other than the representations and warranties expressly set forth in
this Article II, Parent and Purchaser make no representations or
warranties in connection with the transactions contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule to this Agreement
(the "Disclosure Schedule"), which is expressly incorporated herein by
reference, the Company hereby represents and warrants to Parent and
Purchaser as follows:
Section 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. The
Company and each of its Subsidiaries (a) is a corporation or other
legal entity duly organized, validly existing and in good standing
under the Laws of the jurisdiction in which it is organized and has
the requisite corporate or other power, as the case may be, and
authority and any necessary governmental authority to own, operate or
lease the properties that it purports to own, operate or lease and to
carry on its business as it is now being conducted, and (b) is duly
qualified as a foreign corporation or other legal entity to do
business, and is in good standing, in each other jurisdiction where
the character of its properties owned, operated or leased or the
nature of its activities makes such qualification necessary, except in
the case of clause (b) for failures which, when taken together with
all other such failures, would not have a Company Material Adverse
Effect. Section 3.1 of the Disclosure Schedule lists each of the
Company's Subsidiaries (specifying those that as of the date of this
Agreement are Significant Subsidiaries (as defined in Rule 1-02 of
Regulation S-X under the Exchange Act)) and their respective
jurisdictions of incorporation or organization. The term "Subsidiary"
means any corporation or other legal entity of which the Company
(either alone or through or together with any other Subsidiary) owns,
directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity. The Company has previously
delivered to Parent a complete and correct copy of the certificate of
incorporation and bylaws (or comparable organizational documents) of
the Company and each Subsidiary, as currently in effect.
Section 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
15,000,000 shares of common stock, $.10 par value (the "Company Common
Stock"), and 500,000 shares of preferred stock, $1.00 par value (the
"Company Preferred Stock"). As of the close of business on May 11,
2003, (i) 7,063,931 shares of Company Common Stock were issued and
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outstanding, all of which were duly authorized, validly issued, fully
paid and nonassessable, (ii) 647,254 shares of Company Common Stock
were held in the treasury of the Company, (iii) 990,000 shares of
Company Common Stock were reserved for issuance under the Option Plans
and the Non-Plan Option Agreements, as listed on Section 3.2(a) of the
Disclosure Schedule in the amounts stated in such schedule, (iv)
337,920 shares of Company Common Stock were reserved for issuance upon
the exercise of Warrants issued under the Warrant Agreements, as
listed on Section 3.2(a) of the Disclosure Schedule, and (v) no shares
of Preferred Stock were issued and outstanding. Section 3.2(a) of the
Disclosure Schedule sets forth the holders of all outstanding Options,
Non-Plan Options, Warrants, restricted stock, performance shares or
units, deferred shares, stock units and other stock awards and the
number, exercise prices, vesting schedules, performance targets,
expiration dates and other forfeiture provisions of each grant to such
holders. Except as disclosed on Section 3.2(a) of the Disclosure
Schedule, there are no existing (i) options, warrants, calls,
preemptive rights, subscriptions or other rights, convertible
securities, agreements or commitments of any character obligating the
Company or any of its Subsidiaries to issue, transfer or sell any
shares of capital stock or other equity interest in, the Company or
any of its Subsidiaries or securities convertible into or exchangeable
for such shares or equity interests, (ii) contractual obligations of
the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any capital stock of the Company or any of its
Subsidiaries or (iii) voting trusts or similar agreements to which the
Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its Subsidiaries.
(b) All outstanding shares of capital stock of, or other equity
interests in, each of the Company's Subsidiaries (i) have been validly
issued and are fully paid and nonassessable; (ii) are free and clear
of all Liens; and (iii) are free of any other restriction (including
any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests), except as provided
by applicable Law. All outstanding shares of capital stock (or
equivalent equity interests of entities other than corporations) of
each of the Company's Subsidiaries are beneficially owned, directly or
indirectly, by the Company. The Company does not, directly or
indirectly, own more than 20% but less than 100% of the capital stock
or other equity interest in any Person except as listed on Section
3.2(b) of the Disclosure Schedule, nor is it obligated to make any
capital contribution to or other investment in any other Person.
Section 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company
has the necessary corporate power and authority to enter into this
Agreement and, subject to obtaining any necessary stockholder vote
required by Delaware Law and the filing of a Certificate of Merger as
required by Delaware Law, to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the
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part of the Company and, subject to any necessary stockholder vote
required by Delaware Law and the filing of the Certificate of Merger
as required by Delaware Law, no other corporate proceeding is
necessary for the execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder
and the consummation by the Company of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery of
this Agreement by Parent and Purchaser, constitutes a legal, valid and
binding obligation of the Company, enforceable against it in
accordance with its terms, except that (a) the enforceability hereof
may be subject to applicable bankruptcy, insolvency or other similar
Laws, now or hereinafter in effect, affecting creditors' rights
generally, and (b) the general principles of equity (regardless of
whether enforceability is considered at a proceeding at Law or in
equity).
Section 3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by the Company
does not, and the consummation by the Company of the transactions
contemplated hereby will not, (i) conflict with or violate any Law,
court order, judgment or decree applicable to the Company or by which
its property is bound, (ii) violate or conflict with the certificates
of incorporation or bylaws (or comparable organizational documents) of
the Company or any of its Subsidiaries, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of
time of both would become a default) under, or give to others any
rights of termination or cancellation of, or result in the creation of
a Lien on any of the properties or assets of the Company or any of its
Subsidiaries pursuant to, any contract, instrument, Permit, License
Agreement or Franchise Agreement to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries or their respective property is bound, except in the case
of clauses (i) and (iii) for conflicts, violations, breaches or
defaults which, individually or in the aggregate, would not have or
result in a Company Material Adverse Effect.
(b) Except for applicable requirements, if any, of the Exchange
Act or under Competition Laws, "takeover" or "blue sky" Laws of
various states, filing of the Certificate of Merger as required by
Delaware Law, and as set forth on Section 3.4(b) of the Disclosure
Schedule, the Company is not required to submit any notice, report or
other filing with any Governmental Entity in connection with the
execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby the failure of
which to submit would, individually or in the aggregate, have or
result in a Company Material Adverse Effect. Except as set forth on
Section 3.4(b) of the Disclosure Schedule, no waiver, consent,
approval or authorization of any Governmental Entity or any third
party is required to be obtained or made by the Company in connection
with its execution, delivery or performance of this Agreement the
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failure of which to obtain or make, individually or in the aggregate,
would have or result in a Company Material Adverse Effect.
Section 3.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has timely filed all forms, reports, schedules,
statements and other documents required to be filed with the SEC since
January 1, 2000, except where any failure to so timely file would not
have or result in a Company Material Adverse Effect, and the Company
has heretofore delivered or made available to Parent, in the form
filed with the Securities and Exchange Commission (the "SEC"), its
(i) Annual Report on Form 10-K for the fiscal year ended December 31,
2002, (ii) all proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held since January 1, 2000,
and (iii) all other forms, reports or registration statements (other
than registration statements on Form S-8) filed by the Company with
the SEC pursuant to the Exchange Act and the Securities Act of 1933,
as amended (the "Securities Act"), as the case may be, since January
1, 2000 (collectively, whether filed before, on or after the date
hereof, the "SEC Reports"). The SEC Reports (i) complied as to form
in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder, and (ii) did
not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The consolidated financial statements contained in the SEC
Reports were prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis ("GAAP")
throughout the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q) and fairly presented in all material respects the
consolidated financial position of the Company and its Subsidiaries as
at the respective dates thereof and the consolidated results of
operations and changes in financial position of the Company and its
Subsidiaries for the periods indicated, except that the unaudited
interim financial statements contained in the SEC Reports may not
contain footnotes and were or are subject to normal and recurring
year-end adjustments which should not be materially adverse to the
Company and its Subsidiaries taken as a whole.
(c) Except as reflected or reserved against in the consolidated
financial statements contained in the SEC Reports filed prior to the
date hereof or otherwise disclosed in the SEC Reports filed prior to
the date hereof, neither the Company nor any of its Subsidiaries has
any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which in the aggregate would have
or result in a Company Material Adverse Effect or which would be
required to be set forth in consolidated financial statements in
accordance with GAAP.
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(d) Section 3.5(d) of the Disclosure Schedule, as of the date
indicated therein, includes a true, correct and complete list of the
individual components (indicating the amount and the Person to whom
such Debt is owed) of all Debt outstanding with respect to the Company
or any of its Subsidiaries. "Debt" means: either (i) any liability
(A) for borrowed money (including the current portion thereof);
(B) under any reimbursement obligation relating to a letter of credit,
bankers' acceptance or note purchase facility; (C) evidenced by a
bond, note, debenture or similar instrument (including a purchase
money obligation); (D) for the payment of money relating to a lease
that is required to be classified as a capitalized lease obligation in
accordance with GAAP; or (E) for all or any part of the deferred
purchase price of property or services (other than trade payables); or
(ii) any liability of others described in the preceding clause (i)
that such Person has guaranteed, that is recourse to such Person or
any of its assets or that is otherwise its legal liability or that is
secured in whole or in part by the assets of such Person.
Section 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
December 31, 2002, except as contemplated by this Agreement, set forth
in the SEC Reports filed prior to the date hereof or set forth on
Section 3.6 of the Disclosure Schedule, (a) the Company and its
Subsidiaries have conducted their respective operations only in the
ordinary course consistent with past practices, (b) there has not been
a Company Material Adverse Effect, and (c) the Company and its
Subsidiaries have not taken action that if taken after the date hereof
would constitute a violation of Section 4.1 hereof.
Section 3.7 LITIGATION. Except as disclosed in the SEC
Reports filed prior to the date hereof or as set forth on Section 3.7
of the Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations of any nature pending or, to the
knowledge of the Company, threatened against the Company, or any
properties or rights of the Company, before any court, administrative,
governmental or regulatory authority or body, domestic or foreign
which, if adversely determined individually or in the aggregate with
all such other claims, actions, suits, proceedings or investigations
would be reasonably expected to (a) have a Company Material Adverse
Effect, or (b) materially and adversely affect the Company's ability
to perform its obligations under this Agreement. The Company is not
subject to any order, judgment, injunction or decree having,
individually or in the aggregate, a Company Material Adverse Effect.
Section 3.8 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Section 3.8(a) of the Disclosure Schedule sets forth a
complete list of (i) all "employee benefit plans," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), (ii) all other severance pay, salary
continuation, bonus, incentive, stock option, retirement, pension,
profit sharing or deferred compensation plans, contracts, programs,
funds, or arrangements of any kind, and (iii) all other employee
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benefit plans, contracts, programs, funds, or arrangements (whether
written or oral, qualified or nonqualified, funded or unfunded,
foreign or domestic, currently effective or terminated) and any trust,
escrow, or similar agreement related thereto, whether or not funded,
in respect of any present or former employees, directors, officers,
stockholders, consultants, or independent contractors of the Company
or any of its Subsidiaries or with respect to which the Company or any
of its Subsidiaries has made or is required to make payments,
transfers, or contributions (all of the above being hereinafter
individually or collectively referred to as "Employee Plan" or
"Employee Plans," respectively). The Company and its Subsidiaries
have no liability with respect to any plan, arrangement or practice of
the type described in the preceding sentence other than (x) the
Employee Plans and (y) as set forth on Section 5.11(c) of the
Disclosure Schedule.
(b) Copies of the following materials have been delivered or
made available to Parent: (i) all current plan documents for each
Employee Plan or, in the case of an unwritten Employee Plan, a written
description thereof, (ii) all determination letters or prototype
opinion letters from the Internal Revenue Service ("IRS") with respect
to any of the Employee Plans intended to satisfy the qualification
requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), (iii) all current summary plan descriptions, summaries of
material modifications and annual reports, and summary annual reports
for the two plan years immediately preceding the date hereof, (iv) all
current trust agreements, insurance contracts, and other documents
relating to the funding or payment of benefits under any Employee
Plan, and (v) any other documents, forms or other instruments relating
to any Employee Plan reasonably requested by Parent.
(c) Each Employee Plan has been maintained, operated, and
administered in compliance in all material respects with its terms and
any related documents or agreements and in compliance in all material
respects with all applicable Laws. There have been no prohibited
transactions or breaches of any of the duties imposed on "fiduciaries"
(within the meaning of Section 3(21) of ERISA) by ERISA with respect
to the Employee Plans that could result in any material liability or
excise tax under ERISA or the Code being imposed on the Company or any
of its Subsidiaries.
(d) Each Employee Plan intended to be qualified under Section
401(a) of the Code has received a favorable determination letter or
prototype opinion letter from the IRS, and the Company is not aware of
any circumstances likely to result in revocation of any such favorable
determination letter.
(e) Neither the Company nor any member of a trade or business
(whether or not incorporated) (i) under common control within the
meaning of Section 4001(b)(1) of ERISA with the Company or (ii) which
together with the Company is treated as a single employer under
Section 414(t) of the Code (the "Controlled Group") currently has and
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at no time in the past has had an obligation to contribute to a
"defined benefit plan" as defined in Section 3(35) of ERISA, a pension
plan subject to the funding standards of Section 302 of ERISA or
Section 412 of the Code, a "multiemployer plan" as defined in Section
3(37) of ERISA or Section 414(f) of the Code or a "multiple employer
plan" within the meaning of Section 210(a) of ERISA or Section 413(c)
of the Code.
(f) With respect to each group health plan benefiting any
current or former employee of the Company or any member of the
Controlled Group that is subject to Section 4980B of the Code, the
Company and each member of the Controlled Group has complied in all
material respects with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of
ERISA.
(g) With respect to each group health plan that is subject to
Section 1862(b)(1) of the Social Security Act (42 U.S.C. Section
1395y(b)), to the knowledge of the Company, the Company and its
Subsidiaries have complied with the secondary payer requirements of
Section 1862(b)(1) of such Act.
(h) No Employee Plan is or at any time was funded through a
"welfare benefit fund" as defined in Section 419(e) of the Code, and
no benefits under any Employee Plan are or at any time have been
provided through a voluntary employees' beneficiary association
(within the meaning of subsection 501(c)(9) of the Code) or a
supplemental unemployment benefit plan (within the meaning of Section
501(c)(17) of the Code).
(i) All contributions, transfers, and payments in respect of any
Employee Plan, other than transfers incident to an incentive stock
option plan within the meaning of Section 422 of the Code, have been
or are fully deductible under the Code.
(j) There is no pending or, to the knowledge of the Company,
threatened assessment, complaint, proceeding, or investigation of any
kind in any court or government agency with respect to any Employee
Plan (other than routine claims for benefits), nor, to the knowledge
of the Company, is there any basis for one.
(k) All (i) insurance premiums required to be paid with respect
to, (ii) benefits, expenses, and other amounts due and payable under,
and (iii) contributions, transfers, or payments required to be made
to, any Employee Plan have been paid, made or accrued.
(l) To the knowledge of the Company, with respect to any
insurance policy providing funding for benefits under any Employee
Plan, (i) there is no liability of the Company or any of its
Subsidiaries, in the nature of a retroactive rate adjustment, loss
sharing arrangement, or other actual or contingent liability, nor
would there be any such liability if such insurance policy was
-16-
terminated on the date hereof, and (ii) no insurance company issuing
any such policy is in receivership, conservatorship, liquidation or
similar proceeding, and no such proceedings with respect to any
insurer are imminent.
(m) No Employee Plan provides benefits, including, without
limitation, death or medical benefits, beyond termination of service
or retirement other than (i) coverage mandated by law, (ii) death or
retirement benefits under any qualified Employee Plan, (iii) deferred
compensation benefits reflected on the books of the Company or any of
its Subsidiaries, or (iv) the exercise of options following
termination of service or retirement.
(n) Except as set forth on Section 4.1(d) of the Disclosure
Schedule, the execution and performance of this Agreement will not (i)
constitute a stated triggering event under any Employee Plan that will
result in any payment (whether of severance pay or otherwise) becoming
due from the Company or any of its Subsidiaries to any officer,
employee, or former employee (or dependents of such employee), or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any employee, officer or director of the Company
or any of its Subsidiaries.
(o) The Company and its Subsidiaries have not agreed or
committed to institute any plan, program, arrangement or agreement for
the benefit of employees or former employees of the Company or any of
its Subsidiaries other than the Employee Plans, or to make any
amendments to any of the Employee Plans, except (i) for amendments
required by applicable Law or this Agreement, (ii) for amendments
deemed necessary by the Company to obtain a favorable determination
letter from the IRS and (iii) as set forth in Section 4.1(d) of the
Disclosure Schedule.
(p) The Company and its Subsidiaries have reserved all rights
necessary to amend or terminate each of the Employee Plans except as
required by applicable Law.
(q) Except as set forth on Section 3.8(q) of the Disclosure
Schedule, no Employee Plan provides benefits to any individual who is
not a current or former employee, director, officer, stockholder,
consultant or independent contractor of the Company or any of its
Subsidiaries, or the dependents or other beneficiaries of any such
current or former employee, director, officer, stockholder, consultant
or independent contractor, except for benefits for continued group
health coverage required by Part 6 of Title I of ERISA or Section
4980B of the Code, or similar state Laws.
(r) All premium payments required to be paid by the Company with
respect to workers' compensation arrangements of the Company have been
made or accrued as a liability on the Company's consolidated financial
statements.
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(s) No amount that could be received (whether in cash or
property or the vesting of property) as a result of any of the
transactions contemplated by this Agreement by any employee, officer
or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Employee
Plan currently in effect would be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of
the Code). The disallowance of a deduction under Section 162(m) of
the Code for employee remuneration will not apply to any amount paid
or payable by the Company or any of its Subsidiaries under any
contract, Employee Plan, program, arrangement or understanding
currently in effect.
(t) The term "Foreign Plan" shall mean any Employee Plan that is
maintained outside of the United States. Neither the Company, nor any
member of the Controlled Group currently has and at no time in the
past has sponsored or maintained or had an obligation to contribute to
a Foreign Plan.
(u) None of the Company or any of its Subsidiaries is a party to
any collective bargaining agreement or other labor agreement with any
union or labor organization, and the Company does not know of any
activity or proceeding of any labor organization (or representative
thereof) to organize any of its or their employees. The Company and
its Subsidiaries are not, and have not since January 1, 2000 been,
subject to any pending, or to the knowledge of the Company, threatened
(i) unfair labor practice, employment discrimination or sexual
harassment claim, suit, action, demand, governmental investigation or
other complaint; (ii) strike, lockout or dispute, slowdown or work
stoppage; or (iii) claim, suit, action, demand, governmental
investigation or other complaint, in respect of which any director,
officer, employee or agent of the Company or any of its Subsidiaries
is or may be entitled to claim indemnification from the Company or any
of its Subsidiaries.
(v) No representation or warranty set forth in this Section 3.8
shall be deemed to be breached unless such breach, individually or in
the aggregate, would result in a Company Material Adverse Effect.
Section 3.9 PROXY STATEMENT; SCHEDULE 13E-3. The proxy
statement or information statement to be sent to the stockholders of
the Company in connection with the meeting of the Company's
stockholders to consider the adoption of the Agreement, including any
adjournment or postponement thereof (the "Company Stockholders
Meeting") (such proxy statement or information statement, as amended
or supplemented, is herein referred to as the "Proxy Statement"), at
the date mailed to the stockholders of the Company and at the time of
the Company Stockholders Meeting (a) will comply in all material
respects with the applicable requirements of the Exchange Act and the
rules and regulations thereunder, and (b) will not contain any untrue
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statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Rule 13E-3 Transaction Statement on
Schedule 13E-3 (such transaction statement, as amended or
supplemented, is herein referred to as the "Schedule 13E-3"), as of
the date of such Schedule 13E-3 and at the Effective Time, (a) will
comply in all material respects with the applicable requirements of
the Exchange Act and the rules and regulations thereunder, and (b)
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. No representation or
warranty is made by the Company with respect to any information
supplied by Parent or Purchaser or their respective accountants,
counsel or other authorized representatives for use in any of the
foregoing documents.
Section 3.10 COMPLIANCE; PERMITS.
(a) Except as disclosed in the SEC Reports filed prior to the
date hereof, the business of the Company and its Subsidiaries is not
being conducted in default or violation of any term, condition or
provision of (i) their respective certificate of incorporation or
bylaws (or comparable organizational documents); (ii) any note, bond,
mortgage, indenture, contract, agreement, franchise, lease or other
instrument or agreement of any kind to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any
of their respective properties or assets may be bound; or (iii) any
Law, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to
the Company or any Subsidiary, except, with respect to the foregoing
clauses (ii) and (iii), defaults or violations that would not,
individually or in the aggregate, have or result in a Company Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has
received any written notice, or has knowledge of any claim, alleging
any such violation, except for such violations that, individually or
in the aggregate, would not have or result in a Company Material
Adverse Effect.
(b) The Company and its Subsidiaries hold all licenses, permits,
variances, consents, authorizations, waivers, grants, franchises,
concessions, exemptions, orders, registrations and approvals of any
Governmental Entity or other Persons necessary for the ownership,
leasing, operation, occupancy and use of their respective property and
assets and the conduct of their respective businesses as currently
conducted ("Permits"), except where the failure to hold such Permits,
individually or in the aggregate, would not have or result in a
Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received written notice that any Permit will be
terminated or modified or cannot be renewed in the ordinary course of
business, and the Company has no knowledge of any reasonable basis for
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any such termination, modification or nonrenewal, except for such
terminations, modifications or nonrenewals as, individually or in the
aggregate, would not have or result in a Company Material Adverse
Effect.
Section 3.11 TAXES.
(a) Except as would result in a Company Material Adverse Effect,
(i) the Company and each Subsidiary have timely filed with the
appropriate Governmental Entities all Tax Returns required to be
filed; (ii) except for those Taxes being contested in good faith and
for which adequate reserves have been established in the financial
statements included in the SEC Reports in accordance with GAAP, the
Company and each Subsidiary have paid all Taxes (whether or not shown
to be due on such Tax Returns), and all Taxes required to be withheld
by the Company or any Subsidiary have been timely withheld and paid to
the appropriate taxing authority in the manner provided by Law;
(iii) no federal, state, local or foreign audits, administrative
proceedings or court proceedings are pending with regard to any Taxes
or Tax Returns of the Company or any of its Subsidiaries and there are
no outstanding Tax deficiencies or assessments asserted to the Company
in writing or, to the knowledge of the Company, proposed; (iv) there
are no outstanding agreements, consents or waivers extending the
statutory period of limitations applicable to the assessment of any
Taxes or deficiencies against the Company or any Subsidiary; (v) none
of the Company or any of its Subsidiaries is a party to any agreement
providing for the allocation or sharing of Taxes; and (vi) none of the
Company or any of its Subsidiaries is liable for the payment of Taxes
as a result of any express or implied obligation to indemnify any
other Person.
(b) None of the Company nor any Subsidiary has filed a consent
to the application of Section 341(f) of the Code.
(c) No Debt of the Company or any Subsidiary is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the
Code.
(d) Except as set forth on Section 3.11(d) of the Disclosure
Schedule, none of the Company nor any Subsidiary has (i) been a member
of an affiliated group filing consolidated or combined Tax Returns
other than a federal income tax group the common parent of which is
the Company, or (ii) has any liability for Taxes of any Person (other
than any of the Company or any of its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of Law), as a
transferee or successor, by contract, or otherwise.
(e) None of the Company or any of its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G of the
Code.
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(f) The transfer pricing agreements or arrangements among the
Company and its Subsidiaries or affiliates comply in all material
respects with the requirements of applicable Law.
(g) None of the Company or any of its Subsidiaries will be
required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion
thereof) ending after the Effective Time as a result of any change in
method of accounting for a taxable period ending on or prior to the
Effective Time under Section 481 of the Code (or any corresponding
provision of Law).
(h) For purposes of this Agreement, "Taxes" means all taxes,
charges, fees, levies or other assessments imposed by any United
States Federal, state, or local taxing authority or by any non-U.S.
taxing authority, including but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad
valorem, value added, withholding, social security, national insurance
(or other similar contributions or payments), franchise, estimated,
severance, stamp, and other taxes (including any interest, fines,
penalties or additions attributable to or imposed on or with respect
to any such taxes, charges, fees, levies or other assessments).
(i) For purposes of this Agreement, "Tax Return" means any
return, report, information return or other document (including any
related or supporting information and, where applicable, profit and
loss accounts and balance sheets) with respect to Taxes.
Section 3.12 INTELLECTUAL PROPERTY.
(a) The term "Intellectual Property" means any (i) patents, (ii)
trademarks, service marks, trade names, brand names, trade dress,
slogans, logos and internet domain names, (iii) inventions,
discoveries, ideas, processes, formulae, designs, models, industrial
designs, know-how, proprietary information, trade secrets, and
confidential information (including, without limitation, customer and
Franchisee lists, Franchisee training materials and related matters,
research, Franchisee financial business information and Franchisee
marketing and sales plans), whether or not patented or patentable,
(iv) copyrights, writings and other copyrightable works and works in
progress, databases and software, (v) all other intellectual property
rights and foreign equivalent or counterpart rights and forms of
protection of a similar or analogous nature or having similar effect
in any jurisdiction throughout the world, (vi) all registrations and
applications for registration of any of the foregoing, (vii) all
common law trademarks and service marks used by the Company or any of
its Subsidiaries and (viii) any renewals, extensions, continuations,
divisionals, reexaminations or reissues or equivalent or counterpart
of any of the foregoing in any jurisdiction throughout the world. The
term "Company IP" means any Intellectual Property used or held for use
by the Company or any of its Subsidiaries, in the conduct of their
respective businesses as currently conducted.
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(b) Section 3.12(b) of the Disclosure Schedule sets forth, a
complete and accurate list (including, the owner, title, registration
and/or application number and country of registration and/or
application, as applicable) of all of the following Company IP: (i)
registered trademarks, (ii) applications for trademark registration,
(iii) domain names, (iv) patents, (v) applications for patents, (vi)
registered copyrights (vii) applications for copyright registration,
and (viii) licenses of all Intellectual Property (other than Desktop
Software) to or from the Company or any of is Subsidiaries. The
Company has delivered or made available to Parent prior to the
execution of this Agreement complete and correct copies of all
licenses of Company IP both to and from the Company or any of its
Subsidiaries, except off-the-shelf business productivity software that
is the subject of a shrink wrap or click wrap software license
agreement ("Desktop Software").
(c) The Company IP constitutes all of the Intellectual Property
used by and necessary for the Company and its Subsidiaries to operate
their respective business as currently conducted, except where the
lack of such Intellectual Property would not have or result in a
Company Material Adverse Effect. Except for Desktop Software and
other Intellectual Property that is the subject of a license agreement
as set forth on Section 3.12(c) of the Disclosure Schedule, the
Company or its Subsidiary(ies) owns all legal and beneficial right,
title and interests in the Company IP, and the Company and/or its
respective Subsidiary(ies) has/have the valid, sole and exclusive
right to use, assign, transfer and license all such Company IP for the
life thereof for any purpose, free from (i) any Liens, and (ii) any
requirement of any past, present or future royalty payments, license
fees, charges or other payments, or conditions or restrictions
whatsoever, except where such lack of ownership or rights would not
have or result in a Company Material Adverse Effect.
(d) All patent, trademark, service xxxx, copyright, patent and
domain name registrations set forth on Schedule 3.12(b) of the
Disclosure Schedule are in full force and effect and have not been
abandoned, dedicated, disclaimed or allowed to lapse for non-payment
of fees or taxes or for any other reason.
(e) None of the Company IP owned by the Company or any of the
Subsidiaries has been declared or adjudicated invalid, null or void,
unpatentable or unregistrable in any judicial or administrative
proceeding. To the knowledge of the Company, none of the Company IP
used (but not owned) by the Company or any of the Subsidiaries has
been declared or adjudicated invalid, null or void, unpatentable or
unregistrable in any judicial or administrative proceeding.
(f) Except as set forth on Section 3.12(f) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has received
any written notices of, or has knowledge of, any infringement or
misappropriation by or of, or conflict with, any third party with
respect to the Company IP or Intellectual Property owned by any third
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party. Neither the Company nor any of its Subsidiaries has infringed,
misappropriated or otherwise violated or conflicted with any
Intellectual Property of any third party except where such
infringement, misappropriation, violation or conflict would not have
or result in a Company Material Adverse Effect. The operation of the
Company and its Subsidiaries does not, as currently conducted,
infringe, misappropriate or otherwise violate or conflict with the
Intellectual Property of any third party except where such
infringement, misappropriation, violation or conflict would not have
or result in a Company Material Adverse Effect.
(g) There is currently no claim that would have or result in a
Company Material Adverse Effect by any past or present officer,
director, stockholder, employee, consultant, agent or other
representative of the Company and its Subsidiaries that he, she or it
owns or asserts any rights in (nor has any of them made application
for registration of) any of the Company IP and to the knowledge of the
Company there are no grounds for any of the foregoing claims; and, to
the knowledge of the Company, there are no such claims threatened.
(h) The transactions contemplated by this Agreement will have no
Company Material Adverse Effect on the right, title and interest of
the Company and its Subsidiaries in and to the Company IP, and the
Company and its Subsidiaries have taken all necessary action to
maintain and protect the Company IP set forth on Section 3.12(b) of
the Disclosure Schedule and, until the Effective Time, will continue
to maintain and protect such Company IP so as to not materially
adversely affect the validity or enforceability of such Company IP.
Section 3.13 CONTRACTS. Except as set forth on Section 3.13 of
the Disclosure Schedule, each contract or agreement to which the
Company or any of its Subsidiaries or Licensors is a party or by which
any of them is bound (including, without limitation, the License
Agreements and Franchise Agreements) is in full force and effect, and
neither the Company nor any of its Subsidiaries, nor, to the actual
knowledge of the Company, any other Person, is in breach of, or
default under, any such contract or agreement, and no event has
occurred that with notice or passage of time or both would constitute
such a breach or default thereunder by the Company or any of its
Subsidiaries, or, to the actual knowledge of the Company, any other
Person, except for such failures to be in full force and effect and
such breaches and defaults as, individually or in the aggregate, would
not have or result in a Company Material Adverse Effect.
Section 3.14 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the SEC Reports filed since January
1, 2000 (the "Recent SEC Reports"), or where noncompliance,
individually or in the aggregate, would not have or result in a
Company Material Adverse Effect, the Company and its Subsidiaries are
and have been in compliance with all applicable Environmental Laws and
Environmental Permits.
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(b) Except as disclosed in the Recent SEC Reports, there are no
written Environmental Claims pending or, to the knowledge of the
Company, threatened, against the Company or any of its Subsidiaries
and, to the knowledge of the Company, there are no existing
conditions, circumstances or facts that could reasonably be expected
to result in an Environmental Claim.
(c) The Company has set forth on Section 3.14(c) of the
Disclosure Schedule all material information, including such studies,
audits, analyses and test results, in the possession, custody or
control of the Company and its Subsidiaries relating to (i) the
Company's and its Subsidiaries' past or present noncompliance with
Environmental Laws and Environmental Permits, or (ii) Environmental
Conditions on, under or about any of the properties or assets owned,
leased, or operated by any of the Company or any of its Subsidiaries
at any time or for which any of the Company or any of its Subsidiaries
may be liable and that would have or result in a Company Material
Adverse Effect.
(d) Except as disclosed in the Recent SEC Reports, during and,
to the knowledge of the Company, prior to, the period of ownership or
operation by the Company or any of its Subsidiaries, there were no
Releases of Hazardous Substance in, on, under, from or affecting any
currently or previously owned or leased properties that would,
individually or in the aggregate, have or result in a Company Material
Adverse Effect.
(e) Except as disclosed in the Recent SEC Reports, none of the
Company or any of its Subsidiaries has received from any Governmental
Entity or other third party any written (or to the knowledge of the
Company, other) notice that any of them or any of their predecessors
is or may be a potentially responsible party in respect of, or may
otherwise bear liability for, any actual or threatened Release of
Hazardous Substance at any site or facility that is, has been or could
reasonably be expected to be listed on the National Priorities List,
the Comprehensive Environmental Response, Compensation and Liability
Information System or any similar or analogous federal, state,
provincial, territorial, municipal, county, local or other domestic or
foreign list, schedule, inventory or database of Hazardous Substance
sites or facilities.
(f) As used in this Agreement:
(i) the term "Environment" means soil, surface
waters, ground water, land, stream sediments, surface or
subsurface strata, ambient air, indoor air or indoor air quality,
including, without limitation, any material or substance used in
the physical structure of any building or improvement.
(ii) the term "Environmental Claim" means any
demand, suit, action, proceeding, investigation or notice to any
of the Company or any of its Subsidiaries by any Person alleging
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any potential liability (including, without limitation, potential
liability for investigatory costs, risk assessment costs, cleanup
costs, governmental response costs, natural resource damages, or
penalties) arising out of, based on, or resulting from
(1) alleged noncompliance with any Environmental Law or
Environmental Permit; (2) alleged injury or damage arising from
exposure to Hazardous Substances; or (3) the presence, Release or
threatened Release into the Environment, of any Hazardous
Substance at or from any location, whether or not owned, leased,
operated or used by the Company or any of its Subsidiaries.
(iii) the term "Environmental Laws" means all Laws in
effect as of the date of this Agreement, relating to (1)
pollution or protection of the Environment; (2) emissions,
discharges, Releases or threatened Releases of Hazardous
Substances; (3) threats to human health or ecological resources
arising from exposure to Hazardous Substances; or (4) the
manufacture, generation, processing, distribution, use, sale,
treatment, receipt, storage, disposal, transport or handling of
Hazardous Substances, and includes, without limitation, the
Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conversation and Recovery Act, the Clean Air
Act, the Clean Water Act, the Water Pollution Control Act, the
Toxic Substances Control Act, the Occupational Safety and Health
Act and any similar foreign, state or local Laws.
(iv) the term "Hazardous Substance" means
(1) chemicals, pollutants, contaminants, hazardous wastes, toxic
substances, and oil and petroleum products; (2) any substance
that is or contains asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls ("PCBs"), petroleum or petroleum-
derived substances or wastes, radon gas or related materials; (3)
any substance that requires removal or remediation under any
Environmental Law, or is defined, listed or identified as a
"hazardous waste" or "hazardous substance" thereunder; or (4) any
substance that is regulated under any Environmental Law due to
its actual or potentially toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or hazardous
properties or that could otherwise give rise to liability under
any Environmental Law.
(v) the term "Release" means any releasing,
disposing, discharging, injecting, spilling, leaking, pumping,
dumping, emitting, escaping, emptying or migration into or upon,
any land, soil, sediment, surface water, ground water or air, or
otherwise entering into the Environment or resulting in exposure
of a Person.
(vi) the term "Law" means any foreign, federal,
state, local, municipal or provincial law, statute, code,
ordinance, regulation, rule, principle of common law or other
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legally enforceable obligation imposed by a court or other
Governmental Entity in the applicable jurisdiction.
(vii) the term "Environmental Permit" means all
Permits or the timely submission of applications for Permits, as
required under Environmental Laws.
(viii) the term "Environmental Condition" means any
contamination, damage, injury or other condition related to
Hazardous Substances and includes, without limitation: Releases
from any present or former Hazardous Substance treatment,
storage, disposal or recycling units, underground storage tanks,
or wastewater treatment or management systems; or the current
presence of asbestos containing materials, lead paint or PCB-
containing articles.
Section 3.15 RELATED PARTY TRANSACTIONS. Except for those
arrangements, agreements and contracts set forth on Section 3.15 of
the Disclosure Schedule, there are no written arrangements, agreements
or contracts currently in effect entered into by the Company or any of
its Subsidiaries with any Person who is an executive officer, director
or affiliate of the Company or any of its Subsidiaries, or any entity
of which any of the foregoing is an affiliate. Except as set forth on
Section 3.15 of the Disclosure Schedule, there are no amounts owed to
the Company or any of its Subsidiaries by any such executive officer,
director or affiliate.
Section 3.16 RELATIONSHIPS WITH FRANCHISEES.
(a) Section 3.16(a) of the Disclosure Schedule contains a true,
correct and accurate list of all current master licensees of the
Company and its Subsidiaries with respect to the franchise business
(collectively, the "Licensees") as of the date hereof and the states
or other jurisdictions in which such Licensees are located, and true,
complete and accurate copies of all the written contracts, agreements
or arrangements with such Licensees, including any material addenda,
modifications or side letters (the "License Agreements"), have been
made available for review by Parent.
(b) Section 3.16(b) of the Disclosure Schedule contains a true,
complete and accurate list of all current franchisees of the Company
and its Subsidiaries (collectively, "Franchisees") as of the date
hereof and the states or other jurisdictions in which such Franchisees
are located, and true, complete and accurate copies of all the
written contracts, agreements or arrangements with such Franchisees,
including any material addenda, modifications or side letters (the
"Franchise Agreements"), have been made available for review by
Parent.
(c) Except as set forth on Section 3.16(c) of the Disclosure
Schedule, as of the date hereof, neither the Company nor any of the
Subsidiaries has received written notice of any default (including any
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financial or other material obligation) from any other party under any
Franchise Agreement or License Agreement. The enforcement by the
Company or any of the Subsidiaries of any Franchise Agreement in
accordance with its terms will not violate any franchise Law
applicable to such Franchise Agreement, except where such
noncompliance or enforcement, as the case may be, would not,
individually or in the aggregate, have or result in a Company Material
Adverse Effect. The Franchise Agreements and License Agreements do
not give any Franchisee or Licensee the right, as a result of the
consummation of the Merger, to terminate its relationship with the
Company or any of its Subsidiaries or reduce the amount of royalties
payable by such Franchisee or Licensee to the Company or any of its
Subsidiaries.
(d) Section 3.16(d) of the Disclosure Schedule sets forth a
true, complete and accurate list, as of the date hereof, of (i) all
states in which the Company or any of its Subsidiaries has registered
to offer to sell or has sold its franchises or has received an
official written notice from the appropriate state officials that the
offer to sell and the sale of its franchises are exempt from the
registration provisions of such jurisdiction's franchise registration
Laws, and (ii) all other states in which the Company or any of its
Subsidiaries or Licensees has offered to sell or has sold its
franchises based upon a claimed exemption from the registration
provisions of such state's applicable franchise registration laws.
True and correct copies of all written notices of registrations and
all written notices of exemption, as described in clauses (i) and (ii)
above, have been made available to Parent, and such registrations and
exemption notices are in full force and effect as of the date hereof
except as set forth on Section 3.16(d) of the Disclosure Schedule; in
each case, except as, individually or in the aggregate, would not have
or result in a Company Material Adverse Effect.
(e) The Company has delivered to Parent a true, complete and
accurate copy of each of the Company's Uniform Franchise Offering
Circulars ("UFOCs") that are currently being used in connection with
the offers to sell and the sales of its franchises. The UFOCs
currently used by the Company and its Subsidiaries (i) comply in all
material respects with all applicable Laws pertaining to offers to
sell and the sale of franchises in jurisdictions in which they are
being used, including, without limitation, in the United States and
under the Uniform Franchise Offering Circular Guidelines adopted by
the North American Securities Administrators Association on April 25,
1993, and approved by the Federal Trade Commission ("FTC") on December
30, 1993, as an alternative to the FTC disclosure statement, and (ii)
do not 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 light of the circumstances
under which they are made, not misleading; in all cases, except where
any failure to comply or an untrue statement or omission would not,
individually or in the aggregate, have or result in a Company Material
Adverse Effect.
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Section 3.17 STATE TAKEOVER STATUTES. The Board of Directors
has taken all actions necessary so that no "fair price," "moratorium,"
"control share acquisition" or other antitakeover statute or
regulation, including Section 203 of Delaware Law or any applicable
antitakeover provision in the Company's certificate of incorporation
or bylaws, is applicable to the transactions contemplated by this
Agreement, including, without limitation, the Voting Agreement.
Section 3.18 REQUIRED VOTE OF COMPANY STOCKHOLDERS. The
affirmative vote of the holders of a majority of the outstanding
Shares entitled to vote thereon is the only vote of any class of
capital stock of the Company required by Delaware Law or the
certificate of incorporation or the bylaws of the Company to adopt
this Agreement.
Section 3.19 OPINION OF FINANCIAL ADVISOR. Xxxxxxx Xxxxx & Co.
has rendered an opinion to the Board of Directors of the Company,
dated the date of this Agreement, to the effect that, as of such date,
the Merger Consideration is fair from a financial point of view to the
holders of Shares.
Section 3.20 BROKERS. Except for Xxxxxxx Xxxxx & Co., no
broker, finder or investment banker is entitled to any brokerage,
finder's, financial advisor's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Parent true and complete information
concerning the financial arrangements between the Company and Xxxxxxx
Xxxxx & Co. pursuant to which such firm would be entitled to any
payment as a result of the transactions contemplated hereunder.
Section 3.21 NO ADDITIONAL REPRESENTATIONS OF WARRANTIES.
Other than the representations and warranties expressly set forth in
this Article III, the Company makes no representations or warranties
with respect to itself, its Subsidiaries, its business or otherwise in
connection with the transactions contemplated hereby.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1 CONDUCT OF BUSINESS PENDING THE MERGER. The
Company covenants and agrees that, between the date of this Agreement
and the Effective Time or earlier termination of this Agreement,
unless Parent shall otherwise consent in writing:
(a) the business of the Company and its Subsidiaries shall be
conducted only in, and the Company shall not take, or permit any
Subsidiary to take, any action except in the ordinary course of
business and in a manner consistent with past practice; and the
Company will use its reasonable efforts to preserve substantially
intact the business organization of the Company and its Subsidiaries,
to keep available the services of the present officers, employees and
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consultants of the Company and its Subsidiaries and to preserve the
present relationships of the Company and its Subsidiaries with
Franchisees, customers, suppliers and other Persons with which the
Company or any Subsidiary has significant business relations, in each
case in the ordinary course of business and in a manner consistent
with past practice;
(b) the Company and its Subsidiaries will not amend their
respective certificates of incorporation or bylaws (or comparable
organizational documents);
(c) the Company will not declare, set aside or pay any dividend
or other distribution payable in cash, stock or property with respect
to its capital stock; and neither the Company nor any of its
Subsidiaries will (i) issue, sell, transfer, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights
of any kind to acquire, any shares of capital stock of any class of
the Company or any of its Subsidiaries, other than issuances of Shares
pursuant to securities, Options, Non-Plan Options or Warrants existing
at the date hereof and previously disclosed on Section 3.2(a) to the
Disclosure Schedule; (ii) incur any Debt, except in the ordinary
course of business and in a manner consistent with past practice;
(iii) redeem, purchase or otherwise acquire directly or indirectly any
of its capital stock or other securities; or (iv) enter into, amend,
terminate, cancel, renew or fail to use reasonable efforts to renew in
any material respect any material contract;
(d) except as set forth on Section 4.1(d) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries will
(i) grant any increase in the compensation or benefits payable or to
become payable by the Company or any of its Subsidiaries to any
employee; (ii) adopt, enter into, amend (except for amendments
required by applicable Law or amendments deemed reasonably necessary
by the Company to obtain a favorable determination letter from the
IRS) or otherwise increase, or accelerate the payment or vesting of
the amounts, benefits or rights payable or accrued or to become
payable or accrued under any bonus, incentive compensation, deferred
compensation, severance, termination, change in control, retention,
hospitalization or other medical, life, disability, insurance or other
welfare, profit sharing, stock option, stock appreciation right,
restricted stock or other equity based, pension, retirement or other
employee compensation or benefit plan, program agreement or
arrangement; or (iii) enter into or amend in any material respect any
employment or collective bargaining agreement or, except in accordance
with the existing written policies of the Company or existing
contracts or agreements, grant any severance or termination pay to any
officer, director or employee of the Company or any of its
Subsidiaries;
(e) neither the Company nor any of its Subsidiaries will change
the accounting principles used by it unless required by GAAP (or, if
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applicable with respect to Subsidiaries, foreign generally accepted
accounting principles);
(f) neither the Company nor any of its Subsidiaries shall
acquire by merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire any
material assets of any other Person;
(g) neither the Company nor any of its Subsidiaries shall sell,
lease, exchange, transfer or otherwise dispose of, or agree to sell,
lease, exchange, transfer or otherwise dispose of, any of its material
assets;
(h) the Company and its Subsidiaries shall not mortgage, pledge,
hypothecate, grant any security interest in, or otherwise subject to
any other Lien on any of its material properties or assets;
(i) neither the Company nor any of its Subsidiaries shall
compromise, settle, grant any waiver or release relating to or
otherwise adjust any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise)
other than in the ordinary course of business and in a manner
consistent with past practice;
(j) neither the Company nor any of its Subsidiaries shall
terminate any Franchisee or Licensor other than in the ordinary course
of business and in a manner consistent with past practice; and
(k) neither the Company nor any of its Subsidiaries will enter
into an agreement, contract, commitment or arrangement to do any of
the foregoing.
Section 4.2 NO SHOPPING.
(a) The Company and its Subsidiaries will not, directly or
indirectly, through any officer, director, agent, financial adviser,
attorney, accountant or other representative or otherwise, solicit,
initiate or encourage submission of proposals or offers from any
Person relating to, or that could reasonably be expected to lead to,
an Acquisition Transaction or participate in any negotiations or
discussions regarding, or furnish to any other Person any information
with respect to, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any
other Person to do or seek an Acquisition Transaction; PROVIDED,
HOWEVER, that, prior to the approval of this Agreement by the
stockholders at the Company Stockholders Meeting, the Company may, in
response to an unsolicited written proposal with respect to an
Acquisition Transaction from a third party that the Board of Directors
determines, in its good faith and reasonable judgment, after
consultation with its financial advisor, is a Superior Proposal,
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pursuant to a customary confidentiality agreement with terms not
substantially more favorable to such third party than the
confidentiality agreement, dated as of October 23, 2002, between the
Company and the Parent (the "Confidentiality Agreement"), furnish the
same information to such third party as was previously furnished to
Parent, as revised or updated to reflect any changes or additions to
such information (provided that such revised information is
contemporaneously furnished to Parent to the extent it had not been
previously so furnished), and negotiate, explore or otherwise engage
in substantive discussions with such third party, but only if the
Board of Directors determines, in good faith and in its reasonable
judgment after consultation with its outside counsel that failing to
take such action would result in a breach of the fiduciary duties of
the Board of Directors under applicable Law. Notwithstanding the
foregoing, the Company shall be permitted to take and disclose to the
Company's stockholders a position with respect to the Merger or
another Acquisition Transaction proposal, or amend or withdraw such
position, pursuant to Rules 14d-9 and 14e-2 under the Exchange Act.
(b) Except as expressly permitted by this Section 4.2(b),
neither the Board of Directors nor any committee thereof may
(i) withdraw or modify, or propose publicly to withdraw or modify, in
a manner adverse to Parent or Purchaser, the approval or
recommendation by the Board of Directors or such committee of the
Merger or this Agreement; (ii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Transaction; or
(iii) cause the Company to enter into any letter of intent, agreement
in principle, acquisition agreement or other similar agreement related
to any Acquisition Transaction (each, an "Acquisition Agreement").
Notwithstanding the foregoing, prior to the approval of this Agreement
by the stockholders at the Company Stockholders Meeting, in response
to an unsolicited Acquisition Transaction proposal, if the Board of
Directors determines, in its good faith reasonable judgment, (1) after
consultation with its financial advisor, that such proposal is a
Superior Proposal, and (2) after consultation with its outside
counsel, that failure to do any of the actions set forth in clauses
(i) or (ii) above would result in a breach of the fiduciary duties of
the Board of Directors under applicable Law, the Board of Directors
may withdraw or modify its approval or recommendation of the Merger or
this Agreement or approve or recommend an Acquisition Transaction;
PROVIDED, HOWEVER, that it gives Parent three Business Days prior
written notice of its intention to do so (PROVIDED, FURTHER, that the
foregoing will in no way limit or otherwise affect Parent's right to
terminate this Agreement pursuant to Section 7.1(g) at such time as
the requirements of such subsection have been met). Any such
withdrawal or modification of the recommendation of the Board of
Directors of the Merger or this Agreement or any such approval or
recommendation of an Acquisition Transaction will not change the
approval of the Board of Directors for purposes of causing any state
takeover statute or other state Law to be inapplicable to the
transactions contemplated hereby, including the Merger. Nothing in
this Section 4.2(b) shall be construed to (i) permit the Company to
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terminate this Agreement (except as provided by Section 7.1 of this
Agreement), (ii) permit the Company to enter into any agreement with
respect to any Acquisition Transaction, or (iii) affect any other
obligation of the Company under this Agreement.
(c) The Company will (i) immediately (and in any event, no later
than one Business Day after receipt) advise Parent in writing of the
receipt of a request for information or any inquiries or proposals
relating to an Acquisition Transaction (including the specific terms
and conditions thereof and the identity of the other party or parties
involved) and any actions taken pursuant to Section 4.2(a); (ii)
promptly deliver to Parent a copy of any such written inquiry or
proposal and copies of any information provided to or by any third
party relating thereto; and (iii) keep Parent informed of the status
of any such request or proposed Acquisition Transaction.
(d) For purposes of this Agreement, (i) "Acquisition
Transaction" means (other than the transactions contemplated by this
Agreement) (1) a merger, consolidation or other business combination,
share exchange, sale of shares of capital stock, tender offer or
exchange offer or similar transaction involving the Company or any of
its Subsidiaries; (2) acquisition in any manner, directly or
indirectly, of a material interest in any voting securities of, or a
material equity interest in a material portion of the assets of, the
Company or any of its Subsidiaries, including any single or multi-step
transaction or series of related transactions which is structured to
permit a third party to acquire beneficial ownership of a majority or
greater equity interest in the Company; or (3) the acquisition in any
manner, directly or indirectly, of any material portion of the
business or assets of the Company, and (ii) "Superior Proposal" means
a proposed Acquisition Transaction involving at least a majority of
the shares of capital stock of the Company or all or substantially all
of the assets of the Company that the Board of Directors determines,
after consulting with the Company's financial advisors to be more
favorable to the Company's stockholders than the Merger and for which
no financing contingency exists; PROVIDED, HOWEVER, that a proposed
Acquisition Transaction will not be deemed to be a Superior Proposal
unless it involves consideration per Share that exceeds the Merger
Consideration.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 PROXY STATEMENT; SCHEDULE 13E-3. As promptly as
practicable after the date of this Agreement, the Company shall
prepare and file with the SEC, and shall use all reasonable efforts to
have cleared by the SEC, the Proxy Statement and the Schedule 13E-3
and shall promptly thereafter mail to its stockholders the Proxy
Statement. The Proxy Statement shall contain the recommendation of
the Board of Directors that stockholders of the Company adopt this
Agreement. The Company agrees not to mail the Proxy Statement to its
stockholders until Parent confirms that the information provided by
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Parent continues to be accurate. If at any time prior to the Company
Stockholders Meeting any event or circumstance relating to the Company
or any of its Subsidiaries or affiliates, or its or their respective
officers or directors, should be discovered by the Company that is
required to be set forth in a supplement to the Proxy Statement or the
Schedule 13E-3, the Company shall promptly inform Parent and
Purchaser, so supplement the Proxy Statement and the Schedule 13E-3
and mail such Proxy Statement supplement to its stockholders.
Section 5.2 MEETING OF STOCKHOLDERS OF THE COMPANY. As
promptly as practicable after the date of this Agreement, and
clearance by the SEC of the Proxy Statement and the Schedule 13E-3,
the Company shall promptly take all action necessary in accordance
with Delaware Law and its certificate of incorporation and bylaws to
convene the Company Stockholders Meeting. The Company shall use its
reasonable best efforts to solicit from stockholders of the Company
proxies in favor of adoption of this Agreement. Without limiting the
generality of the foregoing but subject to its rights pursuant to
Section 4.2, the Company agrees that its obligations pursuant to the
first sentence of this Section 5.2 will not be affected by the
commencement, public proposal, public disclosure or communication to
the Company of any Acquisition Transaction or the Board of Directors'
withdrawal or modification of its recommendation of the Merger or this
Agreement.
Section 5.3 NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to Parent, and Parent shall give prompt
notice to the Company, of (a) the occurrence or non-occurrence of any
event whose occurrence or non-occurrence could reasonably be expected
to cause any representation or warranty contained in this Agreement to
be untrue or inaccurate in any material respect as of the Effective
Time, and (b) any failure of the Company, Parent or Purchaser, as the
case may be, or any officer, director, employee or agent thereof, to
comply with or satisfy, in any material respect, any covenant,
condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the Company shall not be permitted
or required to supplement or update any Disclosure Schedule after the
date hereof; PROVIDED, FURTHER, that the delivery of any notice
pursuant to this Section 5.3 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 5.4 ACCESS TO INFORMATION; TRANSITION.
(a) From the date hereof to the Effective Time, subject to
applicable antitrust Laws relating to the exchange of information, the
Company shall, and shall cause each of its subsidiaries, its officers,
directors, employees, auditors and agents to, afford Parent
Representatives reasonable access upon reasonable notice and during
normal business hours to its officers, employees, agents, properties
(including for purposes of conducting environmental assessments and
sampling of the Environment), offices and other facilities and to all
books and records, and shall furnish Parent and Purchaser with all
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financial, operating and other data and information as Parent or
Purchaser, through Parent Representatives, may reasonably request for
purposes consistent with this Agreement and the transactions
contemplated hereby.
(b) Parent and Purchaser will, and will cause their affiliates
and each of their respective officers, directors, employees, financial
advisors, agents and other authorized representatives (the "Parent
Representatives") to, hold in strict confidence all data and in
accordance with the Confidentiality Agreement and be responsible for
any breaches of such obligation by the Parent Representatives.
Section 5.5 REASONABLE BEST EFFORTS; COOPERATION.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use reasonable best
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable, subject to
applicable Laws, to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement and to obtain satisfaction or waiver of the conditions
precedent to consummation of the Merger, including (i) the obtaining
of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action
or proceeding by, any Governmental Entity; (ii) the obtaining of all
necessary consents, approvals or waivers from third parties; (iii) the
defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby or thereby, including seeking to
have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed; and (iv) the execution
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of,
this Agreement.
(b) In connection with and without limiting the foregoing, the
Company and Parent will, in compliance with applicable Laws (i) take
all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Merger,
this Agreement or any of the other transactions contemplated hereby,
and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Merger, this Agreement or any of
the other transactions contemplated hereby, take all action necessary
to ensure that the Merger and the other transactions contemplated by
this Agreement may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise to minimize the
effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement. Nothing in this
Agreement will be deemed to require Parent to agree to, or proffer to,
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divest or hold separate any assets or any portion of any business of
Parent, the Company or any of their respective Subsidiaries if the
Parent determines that so doing would materially impair the benefit
intended to be obtained by Parent in the Merger.
(c) Each of Parent and the Company will (i) make the filings
required of such party under Competition Laws with respect to the
Merger and the other transactions contemplated by this Agreement as
soon as practicable or as otherwise required after the date of this
Agreement; (ii) comply at the earliest practicable date with any
request under the HSR Act for additional information, documents or
other materials received by such party from the FTC or the Department
of Justice (the "DOJ") or any other Governmental Entity in respect of
such filings or the Merger and the other transactions contemplated by
this Agreement; (iii) promptly notify the other of (A) the receipt of
any comments on, or any request of amendments or supplements to any
such filings or information, documents, or other materials by any
Governmental Entity or official and (B) any other communications from
or with any Governmental Entity with respect to the Merger; and (iv)
cooperate with the other party in connection with making any filing
under Competition Laws and in connection with any filings, conferences
or other submissions related to resolving any investigation or other
inquiry by any such Governmental Entity under Competition Laws with
respect to the Merger and the other transactions contemplated by this
Agreement, including (A) keeping the other party apprised of the
status of matters relating to the completion of the transactions
contemplated hereby and working cooperatively in connection with
obtaining any consents from any Governmental Entity, (B) not
participating in any meeting with any Governmental Entity unless it
consults with the other party in advance and to the extent permitted
by such Governmental Entity gives the other party the opportunity to
attend and participate therein, and (C) providing copies of all such
documents and correspondence to the non-filing party and its advisors
prior to filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith.
Notwithstanding anything to the contrary contained herein, in no event
will Parent be required to (1) dispose of or hold separate any
material portion of its, the Surviving Corporation's or any of their
respective affiliates or Subsidiaries assets or business or the
Company's assets or business, (2) accept any material limitation on
its, the Surviving Corporation's or any of their respective affiliates
or Subsidiaries ability to acquire, operate or hold their respective
assets or business or the Company's asset or business, or (3) defend
any litigation instituted by the FTC or the DOJ or any other
Governmental Entity that seeks to restrain or prohibit the
consummation of the Merger or that seeks to impose any of the actions
set forth in clauses (1) or (2) above.
(d) The Company and the Subsidiaries will provide reasonable
cooperation with Parent to obtain all releases, including, without
limitation, under the Uniform Commercial Code, of any financing
statements filed against any of the assets or properties of the
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Company or any of its Subsidiaries, evidencing discharge, removal and
termination of Liens in respect of Debt of the Company to be retired
by Parent in connection with the transactions contemplated by this
Agreement. In addition, unless otherwise requested by Parent in
writing the Company will use commercially reasonable efforts to cause
the amounts owed to it set fourth on Section 3.15 to be paid to it at
or prior to the Effective Time.
Section 5.6 PUBLIC ANNOUNCEMENTS. Parent and the Company will
consult with each other before holding any press conferences, analysts
calls or other meetings or discussions and before issuing any press
release or other public announcements with respect to the transactions
contemplated by this Agreement, including the Merger. The parties
will provide each other the opportunity to review and comment upon any
press release or other public announcement or statement with respect
to the transactions contemplated by this Agreement, including the
Merger, and will not issue any such press release or other public
announcement or statement prior to such consultation, except as may be
required by applicable Law, court process or by obligations pursuant
to any listing agreement with any national securities exchange. The
parties agree that the initial press release or releases to be issued
with respect to the transactions contemplated by this Agreement will
be mutually agreed upon prior to the issuance thereof. In addition,
the Company will, and will cause its Subsidiaries to, (a) consult with
Parent regarding communications with customers, stockholders,
Franchisees and employees relating to the transactions contemplated by
this Agreement, and (b) allow and facilitate Parent reasonable contact
with stockholders and Franchisees of the Company in accordance with
applicable Law and upon prior written approval from the Company in
each instance.
Section 5.7 AGREEMENT TO DEFEND AND INDEMNIFY.
(a) The certificate of incorporation and bylaws of the Surviving
Corporation shall not be amended, repealed or otherwise modified in
any manner that would adversely affect the rights thereunder of
individuals who as of the date hereof were directors, officers,
employees, fiduciary or agents of the Company or otherwise entitled to
indemnification under the certificate of incorporation, bylaws or
indemnification agreements (the "Indemnified Parties"); PROVIDED, that
all rights to indemnification in respect of any claims (each a
"Claim") asserted or made shall continue until the disposition of such
Claim. It is understood and agreed that the Company shall, to the
fullest extent permitted under Delaware Law and regardless of whether
the Merger becomes effective, indemnify, defend and hold harmless, and
after the Effective Time, Parent will cause the Surviving Corporation,
to the fullest extent permitted under Delaware Law, to indemnify,
defend and hold harmless, each Indemnified Party against any costs or
expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation,
including without limitation liabilities arising out of this
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transaction, to the extent that it was based on the fact that such
Indemnified Party is or was a director, officer or employee of the
Company and arising out of actions or omissions or alleged actions or
omissions occurring at or prior to the Effective Time, and in the
event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) the Company
or the Surviving Corporation, as applicable, shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Company or the
Surviving Corporation, promptly as statements therefor are received,
and (ii) the Company and the Surviving Corporation will cooperate in
the defense of any such matter; PROVIDED, HOWEVER, that neither the
Company nor the Surviving Corporation shall be liable for any
settlement effected without its written consent (which consent shall
not be unreasonably withheld); and PROVIDED, FURTHER, that neither the
Company nor the Surviving Corporation shall be obliged pursuant to
this Section 5.7 to pay the fees and disbursements of more than one
counsel for all Indemnified Parties in any single action except to the
extent that, in the opinion of counsel for the Indemnified Parties,
two or more of such Indemnified Parties have conflicting interests in
the outcome of such action. For three years after the Effective Time,
the Surviving Corporation shall be required to maintain or obtain
officers' and directors' liability insurance covering the Indemnified
Parties who are currently covered by the Company's officers and
directors liability insurance policy on terms not less favorable than
those in effect on the date hereof in terms of coverage and amounts;
PROVIDED, HOWEVER, that the Surviving Corporation will not be required
to expend in any year an amount in excess of 200% of the annual
aggregate premiums currently paid by the Company for such insurance;
and PROVIDED, FURTHER, that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation will be
obligated to obtain a policy with the best coverage available, in the
reasonable judgment of its Board of Directors, for a cost not
exceeding such amount. This Section 5.7 shall survive the
consummation of the Merger. Parent shall cause Surviving Corporation
to reimburse all expenses, including reasonable attorney's fees and
expenses, incurred by any Person to enforce the obligations of Parent
and the Surviving Corporation under this Section 5.7. Notwithstanding
Section 8.7 hereof, this Section 5.7 is intended to be for the benefit
of and to grant third party rights to Indemnified Parties whether or
not parties to this Agreement, and each of the Indemnified Parties
shall be entitled to enforce the covenants contained herein.
(b) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers all or substantially all of
its properties and assets to any Person, then and in each such case,
proper provision shall be made so that the successors and assigns of
the Surviving Corporation assume the obligations set forth in this
Section 5.7.
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Section 5.8 STOCKHOLDER LITIGATION. The parties to this
Agreement will cooperate and consult with one another, to the fullest
extent possible, in connection with any stockholder litigation against
any of them or any of their respective directors or officers with
respect to the transactions contemplated by this Agreement. In
furtherance of and without in any way limiting the foregoing, each of
the parties will use its respective reasonable best efforts to prevail
in such litigation so as to permit the consummation of the
transactions contemplated by this Agreement in the manner contemplated
by this Agreement. Notwithstanding the foregoing, the Company agrees
that it will not compromise or settle any litigation commenced against
it or its directors or officers relating to this Agreement or the
transactions contemplated hereby (including the Merger) without
Parent's prior written consent, which will not be unreasonably
withheld or delayed.
Section 5.9 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS.
During the period from the date of this Agreement through the
Effective Time, the Company will not terminate, amend, modify or waive
any provision of any confidentiality or standstill agreement to which
it or any of its Subsidiaries is a party, other than (a) the
Confidentiality Agreement, pursuant to its terms or by written
agreement of the parties thereto; (b) confidentiality agreements under
which the Company does not provide any confidential information to
third parties; or (c) standstill agreements that do not relate to the
equity securities of the Company or any of its Subsidiaries. During
such period, the Company will enforce, to the fullest extent permitted
under applicable Law, the provisions of any such agreement, including
by obtaining injunctions to prevent any breaches of such agreements
and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having
jurisdiction.
Section 5.10 DELISTING. Each of the parties hereto agrees to
cooperate with each other in taking, or causing to be taken, all
actions necessary to delist the Company Common Stock from The Nasdaq
National Market, provided that such delisting shall not be effective
until after the Effective Time of the Merger.
Section 5.11 EMPLOYEE AND TERMINATION BENEFITS.
(a) Except as otherwise provided in this Section 5.11 and except
with respect to the individuals set forth on Section 5.11(a) of the
Disclosure Statement, as of and after the Effective Time, and at
Purchaser's election and subject to the requirements of the Code and
ERISA, the Employee Plans shall continue to be maintained separately
or terminated; PROVIDED, HOWEVER, that the Surviving Corporation or
Parent shall, through December 31, 2004, provide employees who
continue employment with the Surviving Corporation or Parent after the
Effective Time ("Continuing Employees") and their dependents with
employee benefits that are substantially comparable, in the aggregate,
to those available to such Continuing Employees and their dependents
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at the Effective Time. In furtherance of the foregoing, in the event
of a termination of any or all Employee Plans, Continuing Employees
shall receive credit for all service with both the Company and the
Surviving Corporation or Parent at any time prior to the effective
time of such termination for purposes of eligibility and vesting
determination under any successor or substitute Surviving Corporation
Employee Plan or Parent Employee Plan. Such prior service shall also
apply for purposes of satisfying any waiting periods, actively-at-work
requirements, and evidence of insurability requirements of any
successor or substitute Surviving Corporation or Parent health plan.
Continuing Employees who become covered under a successor or
substitute Surviving Corporation health plan or Parent health plan
shall not be required to satisfy the deductible limitations of such
health plan for the plan year in which coverage commences to the
extent that prior to the time coverage commences the dollar amount of
such deductibles have been satisfied for such Continuing Employees
under a Company health plan.
(b) The Surviving Corporation or Parent, as the case may be,
shall honor all obligations under the 2003 Associate Bonus Plan and
the Executive Bonus Plan and shall make the payments required
thereunder, which payments shall be calculated as set forth on Section
5.11(b) of the Disclosure Schedule. The budgeted amounts for such
payments are set forth on Section 5.11(b) of the Disclosure Schedule.
(c) For the period from the Effective Time until the first
anniversary of the Effective Time, the Surviving Corporation or Parent
shall provide severance benefits to any Continuing Employee in
accordance with the severance pay guidelines set forth on Section
5.11(c) of the Disclosure Schedule.
(d) In the event of any termination of any Company health or
disability plan, (i) terminated Company or Surviving Corporation
employees and qualified beneficiaries will have the right to continued
coverage under group health plans of the Surviving Corporation or
Parent, as the case may be, as required by Code Section 4980B(f) and
ERISA Sections 601 through 609 ("COBRA"), and (ii) any pre-existing
condition, limitation or exclusion in a successor or substitute
Surviving Corporation or Parent health or disability plan shall not
apply to Continuing Employees or their covered dependents who have
satisfied such pre-existing condition limitation or exclusion waiting
period under a Company health or disability plan with respect to such
pre-existing condition at the time of such termination of the Company
health or disability plan.
(e) Notwithstanding any other provision of this Agreement to the
contrary, effective as of the Closing Date, except as required by
COBRA, no Employee Plan shall provide benefits to any individual who
is not a current or former employee of the Company or any of its
Subsidiaries.
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(f) The Surviving Corporation shall honor its obligations set
forth on Section 5.11 of the Disclosure Schedule.
Section 5.12 TAX TREATMENT. The parties to this Agreement (and
each of their affiliates, employees, representatives, or other agents)
may disclose to any and all Persons, without limitation of any kind,
the tax treatment and tax structure of the transaction contemplated by
this Agreement and the Contribution Agreement and all materials of any
kind (including opinions and other tax analyses) that are provided to
the taxpayer relating to such tax treatment or tax structure;
PROVIDED, HOWEVER, that the parties shall not be required to disclose
non-tax related proprietary business information.
ARTICLE VI
CONDITIONS OF MERGER
Section 6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT
THE MERGER. The respective obligations of each party to effect the
Merger shall be subject to the satisfaction on or prior to the Closing
Date of each of the following conditions (any or all of which may be
waived by the parties hereto in writing, in whole or in part, to the
extent permitted by applicable Law):
(a) STOCKHOLDER APPROVAL. This Agreement shall have been
adopted by the requisite vote of the stockholders of the Company under
Delaware Law.
(b) NO CHALLENGE. No Law, judgment, writ, decree, order or
injunction (whether temporary, preliminary or permanent) shall have
been promulgated, enacted, entered or enforced, and no other action
shall have been taken, by any Governmental Entity or by any court of
competent jurisdiction, that in any of the foregoing cases has the
effect of making illegal or directly or indirectly restraining,
prohibiting or restricting the consummation of the Merger.
(c) GOVERNMENTAL AND REGULATORY APPROVALS. All consents,
approvals and actions of, filings with and notices to any Governmental
Entity required of Parent, Purchaser, the Company or any of its
Subsidiaries to consummate the Merger and the other transactions
contemplated hereby, the failure of which to be obtained or taken is
reasonably expected to have or result in a material adverse effect on
the Surviving Corporation and its subsidiaries, taken as a whole,
shall have been obtained.
(d) HSR ACT. The waiting period (including any extension
thereof) applicable to the consummation of the Merger under the HSR
Act, if any, shall have expired or been terminated.
Section 6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER
TO EFFECT THE MERGER. The obligations of Parent and Purchaser to
effect the Merger shall be further subject to the satisfaction or
waiver of the following conditions prior to the Effective Time:
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(a) REPRESENTATIONS AND WARRANTIES. Those representations and
warranties of the Company set forth in this Agreement which are
qualified by materiality or a Company Material Adverse Effect or words
of similar effect shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent such representations and warranties
expressly relate to a specific date in which case such representations
and warranties shall be true and correct as of such date). Those
representations and warranties of the Company set forth in this
Agreement which are not so qualified by materiality or a Company
Material Adverse Effect or words of similar effect shall be true and
correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties expressly
relate to a specific date in which case such representations and
warranties shall be true and correct in all material respects as of
such date). Notwithstanding the foregoing, the representations and
warranties of the Company set forth in Sections 3.2, 3.3 and 3.5(b)
and (c) shall be true and correct on the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date
(except to the extent such representations and warranties expressly
relate to a specific date, in which case such representations and
warranties shall be true and correct as of such date).
(b) AGREEMENTS AND COVENANTS. The Company shall have performed
in all material respects all obligations and complied in all material
respects with all agreements and covenants of the Company required to
be performed or complied with by it under this Agreement, including,
without limitation, its obligations under Section 4.1 hereof.
(c) DISSENTING SHARES. The holders of not more than ten percent
(10%) of the issued and outstanding shares of Company Common Stock
shall have taken action prior to or at the time of the stockholders
vote on the Merger as is necessary as of that time to entitle them to
the statutory dissenters' rights referred to in Section 1.7.
(d) NO COMPANY MATERIAL ADVERSE EFFECT. There shall not have
occurred any Company Material Adverse Effect.
(e) CANCELLATION OF OPTIONS, NON-PLAN OPTIONS AND WARRANTS.
Each Option, Non-Plan Option and Warrant shall have been exercised,
forfeited or cancelled.
(f) CONTRIBUTION AGREEMENT. Parent, Riverside and the Rollover
Stockholders shall have consummated the transactions contemplated by
the Contribution Agreement.
(g) CONSENTS, ETC. Any consent, authorization, order or
approval of (or filing or registration with) any third party
identified on Section 6.2(g) of the Disclosure Schedule.
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(h) MINIMUM EBITDA. Twelve-month trailing EBITDA is not less
than $6,460,000, as calculated and certified by the Company's chief
financial officer and measured as of the month end immediately
preceding the mailing of the Proxy Statement pursuant to Section 5.1.
Section 6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT
THE MERGER. The obligations of the Company to effect the Merger shall
be further subject to the satisfaction or waiver of the following
conditions prior to the Effective Time:
(a) REPRESENTATIONS AND WARRANTIES. Those representations and
warranties of Parent and Purchaser set forth in this Agreement which
are qualified by materiality or a Parent Material Adverse Effect or
words of similar effect shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent such representations and
warranties expressly relate to a specific date in which case such
representations shall be true and correct as of such date). Those
representations and warranties of Parent and Purchaser set forth in
this Agreement which are not so qualified by materiality or a Parent
Material Adverse Effect or words of similar effect shall be true and
correct in all material respects as of the date of this Agreement and
as of the Closing Date as though made on the Closing Date (except to
the extent such representations and warranties expressly relate to a
specific date in which case such representations and warranties shall
be true and correct in all material respects as of such date).
(b) AGREEMENTS AND COVENANTS. Parent and Purchaser shall have
performed in all material respects all obligations and complied in all
material respects with all agreements and covenants of Parent and
Purchaser required to be performed or complied with by them under this
Agreement.
(c) CONTRIBUTION AGREEMENT. Parent and Riverside shall have
performed in all material respects all obligations and complied in all
material respects with all agreements and covenants required to be
performed or complied with by them under the Contribution Agreement.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at
any time before the Effective Time, whether before or after the
adoption of this Agreement by the stockholders of the Company:
(a) By mutual written consent of Parent and the Company by
action of their respective Board of Directors;
(b) By either Parent or the Company if a court of competent
jurisdiction or Governmental Entity shall have issued a final
nonappealable order, decree or ruling or taken any other action (which
order, decree, ruling or actions the parties hereto shall use their
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best efforts to lift), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this
Agreement;
(c) By either Parent or the Company if the Merger has not been
consummated by December 31, 2003, or such later date, if any, as
Parent and the Company mutually agree upon; PROVIDED, HOWEVER, that no
party may terminate this Agreement pursuant to this paragraph (c) if
such party's failure to fulfill any of its obligations under this
Agreement shall have been the reason that the consummation of the
Merger shall not have occurred on or before said date;
(d) By either Parent or the Company, if the stockholders of the
Company fail to adopt this Agreement at the Company Stockholders
Meeting (including any postponement or adjournment thereof);
(e) By the Company, if it shall not be in material breach of its
representations, warranties, covenants or agreements hereunder, if (i)
there shall be a material breach of any of Parent's or Purchaser's
representations or warranties hereunder, which breach shall not have
been cured within 30 days of the receipt of written notice thereof by
Parent from the Company, or (ii) there shall have been a material
breach on the part of Parent or Purchaser of any of their respective
covenants or agreements hereunder, which breach shall not have been
cured within 30 days of the receipt of written notice thereof by
Parent from the Company;
(f) By Parent, if it shall not be in material breach of its
representations, warranties, covenants or agreements hereunder, if (i)
there shall be a material breach of any of the Company's
representations or warranties hereunder, which breach shall not have
been cured within 30 days of the receipt of written notice thereof by
the Company from Parent, or (ii) there shall have been a material
breach on the part of the Company of any of its covenants or
agreements hereunder, which breach shall not have been cured within 30
days of the receipt of written notice thereof by the Company from
Parent;
(g) By Parent, at any time prior to the approval of this
Agreement by the stockholders at the Company Stockholders Meeting, if
(i) the Board of Directors shall have withdrawn, modified or changed
its recommendation or approval in respect of this Agreement or the
Merger; (ii) the Board of Directors shall have recommended any
proposal other than by Parent or Purchaser in respect of an
Acquisition Transaction; or (iii) the Board of Directors shall have
resolved to take any of the foregoing actions; or
(h) By Parent, if the condition set forth in Section 6.2(h) is
not satisfied in accordance with its terms.
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Section 7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement as provided in
Section 7.1 hereof, the terminating party shall provide prompt written
notice to the other party of such termination and the applicable
grounds therefor under this Section 7.1 (except in the case of a
termination pursuant to Section 7.1(a)), and this Agreement shall
forthwith become void and there shall be no liability on the part of
the Parent, Purchaser or the Company, except (i) as set forth in
Sections 5.4 (b), 5.6, 7.2 and 8.3 hereof, and (ii) subject to the
limitations set forth in Section 7.2(b), nothing herein shall relieve
any party from liability for any breach of this Agreement. All
payments to be made in accordance with the provisions of Section
7.2(b) shall be made by wire transfer of immediately available funds.
(b) (i) (1) If this Agreement is terminated in accordance with
Section 7.1(f) as a result of a willful breach by the Company
which frustrates the consummation of the Merger (including,
without limitation, a breach of Section 4.2), then the Company
shall promptly (but not later than two Business Days after any
termination notice delivered in accordance with Section 7.2(a))
pay Parent's actual and reasonably documented Expenses, which
shall not exceed $750,000; (2) if this Agreement is terminated in
accordance with Section 7.1(f), and, if at the time of the
Company's breach of this Agreement, there shall have been a
third-party offer or proposal with respect to an Acquisition
Transaction which at the time of such termination shall not have
been rejected by the Company and the Board of Directors or
withdrawn by the third party then the Company (jointly and
severally with its affiliates) shall promptly (but no later than
two Business Days after any termination notice delivered in
accordance with Section 7.2(a)) pay Parent's actual and
reasonably documented Expenses, which shall not exceed $750,000,
and if within two years of any such termination the Company or an
affiliate thereof becomes a subsidiary of such offeror or a
subsidiary of an affiliate of such offeror or consummates an
Acquisition Transaction with such offeror or an affiliate
thereof, then, no later than two Business Days after the
consummation of such Acquisition Transaction, if any, the Company
(jointly and severally with its affiliates) shall pay Parent or
its designee a fee equal to $2,000,000 (the "Termination Fee");
PROVIDED, HOWEVER, that in no event shall the Termination Fee
provided for in Section 7.2(b)(ii) be payable if the Termination
Fee referred to in this Section 7.2(b)(i)(2) has been paid; and
(3) if this Agreement is terminated in accordance with Section
7.1(f) for any reason other than as set forth in clauses (1) and
(2), then Parent will be entitled to pursue any and all rights
and remedies it may have against the Company at Law or in equity,
but will be limited to a maximum aggregate recovery against the
Company and its affiliates of $100,000. The remedies set forth
in this Section 7.2(b)(i), as applicable, will constitute the
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sole and exclusive remedies of Parent and Purchaser for any
claims arising from Section 7.1(f) of this Agreement.
(ii) If an Acquisition Transaction shall have been
made known to the Company or any of its Subsidiaries or has been
made directly to its stockholders generally or any Person shall
have publicly announced an intention (whether or not conditional)
to make an Acquisition Transaction, and (1) this Agreement is
terminated by either the Company or Parent in accordance with
Section 7.1(d), then the Company shall (x) promptly (but no later
than two Business Days after any termination notice delivered in
accordance with Section 7.2(a)) pay Parent or its designee
Parent's actual and reasonably documented Expenses, which shall
not exceed $750,000, and (y) no later than two Business Days
after the consummation of such Acquisition Transaction, if any,
pay the Termination Fee or (2) this Agreement is terminated by
Parent in accordance with Section 7.1(g), then the Company shall
(x) promptly (but no later than two Business Days after any
termination notice delivered in accordance with Section 7.1(a))
pay Parent or its designee Parent's actual and reasonably
documented Expenses, which shall not exceed $750,000, and (y) no
later than two Business Days after the consummation of such
Acquisition Transaction, if any, pay the Termination Fee. The
Company acknowledges that the agreements contained in Sections
7.2(b)(i) and (ii) are an integral part of the transactions
contemplated by this Agreement, and that, without these
agreements, Parent would not enter into this Agreement. The
remedies set forth in this Section 7.2(b)(ii), as applicable,
will constitute the sole and exclusive remedies of Parent and
Purchaser for any claims arising from Sections 7.1(d) and (g) of
this Agreement.
(iii) If, at any time after the conditions set forth
in Section 6.1 and Section 6.2 have been satisfied, this
Agreement is terminated in accordance with Section 7.1(e) as a
result of a willful breach by Parent or Purchaser which
frustrates the consummation of the Merger, then Parent (jointly
and severally with its affiliates) shall promptly (but not later
than two Business Days after any termination notice delivered in
accordance with Section 7.2(a)) pay to the Company the
Termination Fee plus the Company's actual and reasonably document
Expenses, which shall not exceed $750,000. If this Agreement is
terminated pursuant to Section 7.1(e) for any reason other than
as set forth in the preceding sentence, then Company shall be
entitled to pursue any and all rights and remedies it may have at
Law or in equity against Parent or Purchaser but will be limited
to a maximum aggregate recovery against Parent, Purchaser and
their affiliates of $100,000. The remedies set forth in this
Section 7.2(b)(iii) will constitute the sole and exclusive
remedies of the Company for any claims arising from Section
7.1(e) of this Agreement.
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(c) The term "Expenses" means all reasonable out-of-pocket fees,
costs and other expenses incurred or assumed by Parent or Purchaser,
or the Company, as the case may be, or incurred on their behalf in
connection with this Agreement or any of the transactions contemplated
hereby, including, but not limited to, in connection with the
negotiation, preparation, execution and performance of this Agreement,
the structuring and financing of the Merger and the other transactions
contemplated hereby, or any commitments or agreements relating to such
financing, including, without limitation, fees and expenses payable to
all banks, investment banking firms, other financial institutions and
other Persons and their respective agents and counsel for arranging,
committing to provide or providing any financing for the Merger and
any other transactions contemplated hereby or structuring, negotiating
or advising with respect to such transactions or such financing, and
all fees and expenses of counsel, accountants, experts and
environmental, actuarial, insurance and other consultants to Parent or
Purchaser, or the Company, as the case may be.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this
Agreement shall terminate at the Effective Time, except that the
agreements set forth in Article I and Section 5.7 shall survive the
Effective Time indefinitely and those set forth in Sections 5.4(b),
5.6, 7.2 and 8.3 shall survive termination indefinitely.
Section 8.2 NOTICES. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed
to have been duly given or made (a) as of the date delivered if
delivered personally or by overnight courier, (b) on the third
Business Day after deposit in the U.S. mail, if mailed by registered
or certified mail (postage prepaid, return receipt requested), or (c)
when successfully transmitted by facsimile (with a confirming copy of
such communication to be sent as provided in clauses (a) or (b)
above), and, in each case to the parties at the following addresses or
facsimile number (or at such other address for a party as shall be
specified by like notice, except that notices of changes of address
shall be effective upon receipt):
(a) if to Parent or Purchaser:
c/o The Riverside Company
Rockefeller Center
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
With a copy (which shall not constitute notice) to:
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Xxxxx Day
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxx Xxxx, XX 00000
Attention: Xxxx X. XxXxxx
Facsimile: 650.739.3900
(b) if to the Company:
The Xxxxx Group, Inc.
0000 X. Xxxxxxxxxx Xxxxx Xxxxx
Xxxx, XX 00000
Attention: President
Facsimile: 254.745.2590
With a copy (which shall not constitute notice) to:
Schiff, Hardin & Xxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: 312.258.5600
Section 8.3 EXPENSES. Except as expressly set forth in
Section 7.2(b), all fees, costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs and expenses.
Section 8.4 CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first mentioned
Person;
(b) "Change of Control" means if at any time any of the
following events shall have occurred:
(i) Parent is merged or consolidated or reorganized
into or with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less than
a majority of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such
transaction are held in the aggregate by the holders of shares of
Parent Common Stock outstanding immediately prior to such
transaction;
(ii) Parent sells or otherwise transfers all or
substantially all of its assets to any other corporation (other
than a subsidiary of Parent) or other legal person, and less than
a majority of the combined voting power of the then-outstanding
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securities of such corporation or person immediately after such
sale or transfer is held in the aggregate by the holders of
shares of Parent Common Stock outstanding immediately prior to
such sale or transfer;
(iii) If 2000 Riverside Capital Appreciation Fund, L.
P. together with its affiliates cease for any reason, other than
a public offering of the Parent's equity securities, to own a
majority of the combined voting power of the outstanding
securities of Parent;
(iv) If, at any time after any public offering of any
of Parent's equity securities, any "person" (as such term is used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3
promulgated under the Exchange Act ) (other than Parent, any
trustee or other fiduciary holding securities under an employee
benefit plan of Parent, or any corporation owned, directly or
indirectly, by the stockholders of Parent in substantially the
same proportions as their ownership of stock of Parent), directly
or indirectly, of securities of Parent representing more than
fifty percent (50%) of the combined voting power of Parent's then
outstanding securities; or
(v) The stockholders of Parent approve a plan of
complete liquidation or dissolution of Parent.
(c) "Company Material Adverse Effect" means any change or effect
that is materially adverse to the business, assets, properties
(including intangible properties), financial condition, results of
operations, liabilities or regulatory status of the Company and the
Subsidiaries taken as a whole; PROVIDED, HOWEVER, that none of the
following shall be deemed in themselves, either alone or in
combination, to constitute, and none of the following shall be taken
into account in determining whether there has been or will be, a
Company Material Adverse Effect: any change or effect that results
from (i) conditions affecting the United States economy generally;
(ii) conditions affecting the franchising industry generally, so long
as such changes or effects do not affect the Company and its
Subsidiaries in a disproportionate manner as compared to companies of
a similar size; and (iii) any acts of terrorism against the United
States or any war involving the armed forces of the United States;
PROVIDED, FURTHER that the Company shall bear the burden of proof in
any proceeding or action with regard to establishing that any change
or effect is not Company Material Adverse Effect because it is
attributable to the causes or effects set forth in clauses (i), (ii)
or (iii) of this sentence;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies
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of a Person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "EBITDA" means the Company's consolidated net income as
reflected in the Company's consolidated financial statements for the
relevant period, excluding (i) any extraordinary gains or losses, plus
(i) the amount reflected in such financial statements as expenses
incurred for interest, income Taxes, depreciation and amortization,
but only to the extent that such items were deducted in computing the
Company's consolidated net income, and (ii) any expenses or charges
relating to the consummation of the transactions contemplated by this
Agreement, including, without limitation, any and all financial
advisory fees and expenses, legal and accounting fees and expenses,
printing, mailing and proxy solicitation costs, filing fees and
expenses and compensation, in the amounts set forth on Section 3.6 of
the Disclosure Schedule, paid to members of the independent special
committee of the Board of Directors, calculated consistent with prior
practice and in each case (x) in accordance with GAAP as in effect
during such period and as consistently applied by the Company; and (y)
without giving effect after the date of this Agreement to any (A)
change in any accounting, financial reporting or Tax practice or
policy of the Company or any method of calculating any bad debt,
contingency or other reserve of the Company for accounting, financial
reporting or Tax (B) write-off or write-down of or any determination
to write-off or down any of the assets and properties of the Company
not consistent with prior practice (C) change in the general pricing
practices or policies or any change in the credit or allowance
practices or policies of the Company not in the ordinary course of
business consistent with prior practice;
(f) "Knowledge of the Company" or words of similar import means
all information that is actually known after reasonable inquiry by the
individuals set forth on Section 8.4 of the Disclosure Schedule;
(g) "Person" means an individual, corporation, partnership,
limited liability company, association, trust or any unincorporated
organization;
(h) "tax structure" means any fact that may be relevant to
understanding the purported or claimed Federal income tax treatment of
the transaction; and
(i) "tax treatment" means a purported or claimed Federal income
tax treatment of the transaction.
Section 8.5 HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 8.6 SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by
any rule of Law, or public policy, all other conditions and provisions
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of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the maximum extent possible.
Section 8.7 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES.
This Agreement, the Voting Agreement, the Contribution Agreement and
the Confidentiality Agreement constitute the entire agreement and
supersede any and all other prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to
the subject matter hereof. Except as expressly provided in Article I,
Section 5.7 and Section 5.11 (which are intended to be for the benefit
of the Persons covered thereby and may be enforced by such persons
only following the Effective Time), this Agreement is not intended to
confer upon any other Person any rights or remedies hereunder.
Section 8.8 ASSIGNMENT. This Agreement shall not be assigned
by operation of Law or otherwise, except that Parent and Purchaser may
assign all or any of their rights hereunder to any affiliate of Parent
or to or for the account of any financing sources solely and
specifically for the purposes of securing any debt; PROVIDED, HOWEVER,
that no such assignment shall relieve the assigning party of its
obligations hereunder. This Agreement shall be binding upon, and
shall be enforceable by and inure to the benefit of the parties hereto
and their respective successors and assigns.
Section 8.9 GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the Laws of the State of
Delaware applicable to contracts executed in and to be performed
entirely within that State.
Section 8.10 AMENDMENT. This Agreement may be amended by
agreement of the parties hereto in writing by action taken by (a)
Parent and Purchaser, and (b) by or on behalf of the Company's Board
of Directors at any time before the Effective Time notwithstanding the
adoption of this Agreement by the stockholders of the Company;
PROVIDED, HOWEVER, that, after the adoption of this Agreement by the
stockholders of the Company, no amendment may be made which would
reduce the amount or change the type of consideration into which each
Share will be converted upon consummation of the Merger or alter or
change any of the terms or conditions of this Agreement if such
alteration or change would adversely affect the holders of Shares.
This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
Section 8.11 WAIVER. At any time before the Effective Time,
any party hereto may (a) extend the time for the performance of any of
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the obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only as against such party and only if set forth
in an instrument in writing signed by such party. Any such waiver
shall constitute a waiver only with respect to the specific matter
described in such writing and shall in no way impair the rights of the
party granting such waiver in any other respect or at any other time.
Neither the waiver by any of the parties hereto of a breach of or a
default under any of the provisions of this Agreement, nor the failure
by any of the parties, on one or more occasions, to enforce any of the
provisions of this Agreement or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions,
rights or privileges hereunder. The rights and remedies herein
provided are cumulative and, except as otherwise set forth in Section
7.2, none is exclusive of any other, or of any rights or remedies that
any party may otherwise have at Law or in equity.
Section 8.12 CONSENT TO JURISDICTION. Each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of
any federal court located in the State of Delaware or any Delaware
state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement; (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court; and
(c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in
any court other than a federal court sitting in the State of Delaware
or an Delaware state court.
Section 8.13 SPECIFIC ENFORCEMENT. The parties agree that
irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
terms or were otherwise breached. It is accordingly agreed that the
parties will be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any federal court located in the State
of Delaware or a Delaware state court, this being in addition to any
other remedy to which they are entitled at Law or in equity.
Section 8.14 INTERPRETATION. In the event of an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or
burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
Section 8.15 COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to
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be an original but all of which shall constitute one and the same
agreement.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused
this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
TDG HOLDING COMPANY
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: President
TDG MERGER CO.
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: President
THE XXXXX GROUP, INC.
By: /s/ Xxxx Xxxxx-Xxxxx
------------------------------
Name: Xxxx Xxxxx-Xxxxx
Title: President & CEO
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