AGREEMENT AND PLAN
OF MERGER
AMONG
CHAMPPS ENTERTAINMENT, INC.,
DAKA INTERNATIONAL, INC.
AND CEI ACQUISITION CORP.
DATED AS OF OCTOBER 10, 1995
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER 1
1.01 The Merger 1
1.02 Closing 2
1.03 Effective Time 2
1.04 Effect of the Merger 2
1.05 Articles of Incorporation and By-Laws 2
1.06 Directors 2
1.07 Officers 2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES 3
2.01 Conversion of Securities 3
2.02 Exchange of Certificates and Cash 4
2.03 Stock Transfer Books 6
2.04 Stock Options 6
2.05 Warrants 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY 7
3.01 Organization 7
3.02 Articles of Incorporation and By-Laws 8
3.03 Capitalization 8
3.04 Authority Relative to this Agreement 9
3.05 Consents and Approvals; No Violations 9
3.06 Compliance 10
3.07 SEC Reports 11
3.08 Absence of Certain Changes 12
3.09 Environmental Matters 12
3.10 Litigation 13
3.11 ERISA Compliance 13
3.12 Trademarks, Patents and Copyrights 16
3.13 Taxes 16
3.14 Labor Matters 17
3.15 Affiliate Transactions 17
3.16 Opinion of Financial Advisor 17
3.17 Vote Required 17
3.18 Brokers 17
3.19 Contracts and Other Agreements 18
3.20 Subsidiaries 19
3.21 Insurance 19
3.22 Disclosure 19
Page
3.23 Definition of Company's Knowledge 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 20
4.01 Organization 20
4.02 Certificate of Incorporation and By-Laws 20
4.03 Capitalization 20
4.04 Authority Relative to this Agreement 21
4.05 Consents and Approvals; No Violations 21
4.06 Compliance 22
4.07 SEC Reports 23
4.08 Absence of Certain Changes 24
4.09 Environmental Matters 24
4.10 Litigation 24
4.11 ERISA Compliance 24
4.12 Trademarks, Patents and Copyrights 27
4.13 Taxes 27
4.14 Labor Matters 28
4.15 Affiliate Transactions 28
4.16 Opinion of Financial Advisor 28
4.17 Vote Required 28
4.18 Brokers 28
4.19 Disclosure 29
4.20 Insurance 29
4.21 Definition of Parent's Knowledge 29
ARTICLE V
COVENANTS 29
5.01 Conduct of Respective Businesses of the Company and
Parent Pending the Merger 29
5.02 No Solicitations 31
5.03 Access to Information; Confidentiality 32
5.04 Indemnification and Insurance 32
5.05 Certain Benefits 33
5.06 Registration Statement; Joint Proxy Statement 34
5.07 Stockholders' Meetings 35
5.08 Letters of Accountants 35
5.09 Further Action; Reasonable Best Efforts 36
5.10 Public Announcements 37
5.11 Affiliates of the Company 37
5.12 Conveyance Taxes 38
5.13 Notification of Certain Matters 38
Page
5.14 Tax Opinion Matters 38
5.15 Interim Financing Arrangement 38
ARTICLE VI
CONDITIONS 38
6.01 Conditions to Each Party's Obligation to Effect
the Merger 38
6.02 Additional Conditions to Obligations of Parent and Sub 39
6.03 Additional Conditions to Obligations of the Company 40
ARTICLE VII
TERMINATION AND AMENDMENT 41
7.01 Termination 41
7.02 Effect of Termination 43
7.03 Amendment 45
7.04 Extension; Waiver 45
ARTICLE VIII
MISCELLANEOUS 45
8.01 Effectiveness of Representations, Warranties
and Agreements 45
8.02 Notices 45
8.03 Descriptive Headings 46
8.04 Counterparts 46
8.05 Entire Agreement; Assignment 47
8.06 Governing Law 47
8.07 Specific Performance 47
8.08 Expenses 47
8.09 Parties in Interest 47
8.10 Severability 47
8.11 Certain Definitions 48
EXHIBITS
EXHIBIT A Form of Affiliate Letter
EXHIBIT B Interim Financing Arrangements
Definition Section
Affiliate 8.11
Articles of Merger 1.03
Assumed Options 2.04
Beneficial Owner 8.11
Benefit Plan 3.11
Certificates 2.02
COBRA 3.11
Closing Date 1.02
Closing Price 2.01(a)
Code Introduction
Company Introduction
Company Affiliate Transaction 3.15
Company 1994 Balance Sheet 3.13
Company Common Stock Introduction
Company Disclosure Volume 2.04
Company Material Adverse Effect 3.01 and 3.11(e)
Company Parties 5.04
Company Permits 3.06
Company Preferred Stock 3.03
Company Proprietary Rights 3.12
Company SEC Reports 3.07
Company Stock Options 3.03
Competing Transaction 7.01
Control 8.11
Disserting Shares 2.01(a)
Effective Time 1.03
ERISA 3.11
Exchange Act 3.05
Exchange Agent 2.02
Exchange Fund 2.02
Exchange Ratio 2.01
Existing Company Options 2.04
Form S-4 5.06
Governmental Entity 3.05
Hazardous Materials 3.09
HSR Act 3.05
Injunction 6.01
IRS 3.11
Issue 5.01(b)
Knowledge 3.22, 4.20
Material Adverse Effect 8.11
Definition Section
Merger Introduction
Merger Consideration 2.02
Parent Introduction
Parent 1995 Balance Sheet 4.13
Parent Affiliate Transaction 4.15
Parent Common Stock Introduction
Parent Disclosure Volume 4.03
Parent Material Adverse Effect 4.01
Parent Permits 4.06
Parent Preferred Stock 4.03
Parent SEC Reports 4.07
Parent Vote Matter 4.04
Person 8.11
Proceeding 7.02(f)
Proxy Statement 5.06
Respective Representatives 5.03
Registration Statement 5.06
Rule 145 5.11
SEC 2.04
Securities Act 3.03
Sub Introduction
Stockholders' Meeting 5.09(c)
Stockholder Agreement 5.09
Subsidiary 8.11
Surviving Corporation 1.01
Third Party 5.02
Warrants 3.03
Welfare Plan 3.11
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 10, 1995 (the "Agreement"),
by and among Champps Entertainment, Inc., a Minnesota corporation
(the "Company"), DAKA International, Inc., a Delaware corporation ("Parent"),
and CEI Acquisition Corp., a Minnesota corporation and a wholly-owned
subsidiary of Parent ("Sub").
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the Minnesota Business Corporation Act ("Minnesota Law"),
Parent, Sub and the Company will enter into a business combination transaction
pursuant to which Sub will merge with and into the Company (the "Merger") and
in connection therewith each stockholder of the Company will be entitled to
receive a share or shares of Common Stock, par value $.01 per share, of Parent
("Parent Common Stock") in exchange for each share of Common Stock, par value
$.01 per share, of the Company ("Company Common Stock") that such
stockholder owns (and cash in lieu of any fractional share of Parent Common
Stock that such stockholder would otherwise be entitled to);
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long-term business
strategy of the Company and is fair to, and in the best interests of, the
Company and the holders of Company Common Stock and has approved and adopted
this Agreement, has approved the Merger and the other transactions
contemplated hereby and has recommended approval and adoption of this
Agreement and of the Merger by the stockholders of the Company;
WHEREAS, the Board of Directors of Parent has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of
Parent and is fair to, and in the best interests of, Parent and its
stockholders and has approved and adopted this Agreement, has approved
the Merger and the other transactions contemplated hereby and recommended
approval and adoption of the Parent Vote Matter (as defined in Section 4.04
of this Agreement) by holders of Parent Common Stock;
WHEREAS, it is intended that the Merger qualify as (i) a "pooling of
interests" under generally accepted accounting principles; and (ii) a
tax-free reorganization under the provisions of Sections 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code").
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 Sub hereby agree as follows.
ARTICLE I
THE MERGER
Section 1.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the relevant provisions of
Minnesota Law, at the Effective Time (as defined in Section 1.03), Sub
shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
Section 1.02 Closing. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 7.01 and subject to the satisfaction or waiver of the conditions
set forth in Article VI, the consummation of the Merger will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VI at the
offices of Xxxxxxx, Procter & Xxxx, Exchange Place, Boston, Massachusetts,
unless another date, time or place is agreed to in writing by the parties
hereto. The date of such consummation is hereinafter referred to as the
"Closing Date".
Section 1.03 Effective Time. As promptly as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article VI, the
parties hereto shall cause the Merger to be consummated by filing articles
of merger (the "Articles of Merger") with the Secretary of State of the State
of Minnesota in such form as required by, and executed in accordance with
the relevant provisions of, Minnesota Law (the date and time of such filing,
or such later date or time as set forth therein, being the "Effective Time").
Section 1.04 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Minnesota
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all of the
property, rights, privileges, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
Section 1.05 Articles of Incorporation and By-Laws. (a) At the Effective
Time, the Articles of Incorporation of Sub as in effect immediately prior
to the Effective Time, shall become the Articles of Incorporation of the
Surviving Corporation, except that the name of the Surviving Corporation
shall be amended to be "Champps Entertainment, Inc."
(b) The By-Laws of Sub as in effect immediately prior to the Effective Time
shall become the By-Laws of the Surviving Corporation.
Section 1.06 Directors. The directors of Sub immediately after the Effective
Time shall be Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxx and one other person to be
mutually designated by Messrs. Xxxxxxxxx and Xxxxxx. The directors of Parent
immediately after the Effective Time shall include Xx. Xxxxxx.
Section 1.07 Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation
subsequent to the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.01 Conversion of Securities. At the Effective Time and without any
action on the part of Parent, Sub, the Company or the holders of any of the
securities of any of these corporations, each of the following shall occur:
(a) Each share of Company Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Company Common Stock to be
canceled pursuant to Section 2.01(b) and shares, if any, held by persons
who in accordance with Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act have taken all actions prior to the Effective Time
to perfect or preserve their rights to demand an appraisal of their shares
("Dissenting Shares")) shall be converted, subject to the provision of
Section 2.02(d), into the right to receive .40 of one share of Parent
Common Stock; provided, however, that in the event that at the Effective
Time the Closing Price (as such term is hereinafter defined) of a share of
Parent Common Stock is less than $30.00 per share, then each share of
Company Common Stock will be converted into the right to receive .43 of
one share of Parent Common Stock; and provided, further, that in the event
that at the Effective Time the Closing Price of a share of Parent Common Stock
is more than $35.00 per share, then each share of Company Common Stock will
be converted into the right to receive .37 of one share of Parent Common
Stock (such fraction of a share of Parent Common Stock as each share of
Company Common Stock shall convert into the right to receive pursuant
hereto, the "Exchange Ratio"). For purposes of this Agreement, the term
"Closing Price" shall mean the average per share closing price of Parent
Common Stock as reported on the Nasdaq National Market System over the
twenty (20) trading days immediately preceding the second trading day prior
to the Closing Date. Notwithstanding the foregoing, if between the date
of this Agreement and the Effective Time the outstanding shares of Parent
Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class or series, by reason of any
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio and the Closing
Prices of Parent Common Stock that determine the Exchange Ratio shall be
correspondingly adjusted to reflect such stockdividend, subdivision,
reclassification, recapitalization, split, combination or exchange of
shares. All such shares of Company Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously evidencing any such shares
shall thereafter represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 2.02, certificates
evidencing such number of whole shares of Parent Common Stock into which
such Company Common Stock was converted in accordance with the Exchange
Ratio. The holders of such certificates previously evidencing such shares of
Company Common Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Company Common
Stock except as otherwise provided herein or by law. No fractional shares
of Parent Common Stock shall be issued in connection with the Merger, and
in lieu thereof, a cash payment shall be made in accordance with the
provisions of Section 2.02(d).
(b) Each share of Company Common Stock held in the treasury of the Company
and each share of Company Common Stock owned by Parent or any direct or
indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall automatically be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
(c) Each share of capital stock of Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common
stock of the Surviving Corporation and thereafter each stock certificate of
Sub shall evidence ownership of shares of common stock of the Surviving
Corporation.
Section 2.02 Exchange of Certificates and Cash. (a) At or prior to the
Effective Time, Parent shall deposit, or shall cause to be deposited, with
or for the account of a bank or trust company designated by Parent and
reasonably acceptable to the Company (the "Exchange Agent"), for the benefit
of the holders of shares of Company Common Stock, for exchange in accordance
with this Article II, (i) certificates evidencing the shares of Parent
Common Stock issuable pursuant to Section 2.01 in exchange for outstanding
shares of Company Common Stock and (ii) upon the request of the Exchange
Agent, cash in an amount sufficient to make any cash payment due under
Section 2.02(d) hereof (such certificates for shares of Parent Common Stock
and cash being hereafter collectively referred to as the "Exchange Fund").
The Exchange Agent shall, pursuant to irrevocable instructions, deliver
Parent Common Stock contemplated to be issued pursuant to Section 2.01 out
of the Exchange Fund to holders of shares of Company Common Stock. Except
as contemplated by Section 2.02(d) hereof, the Exchange Fund shall not be
used for any other purpose. Any interest, dividends or other income earned
on the investment of cash or other property held in the Exchange Fund shall
be for the account of Parent.
(b) As soon as reasonably practicable after the Effective Time, Parent will
instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates that, immediately prior to the Effective Time,
evidenced outstanding shares of Company Common Stock (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall
be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions to effect the surrender of the Certificates
in exchange for the certificates evidencing shares of Parent Common Stock
and cash, if applicable. Upon surrender of a Certificate for cancellation
to the Exchange Agent together with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) a stock certificate evidencing that number of
whole shares of Parent Common Stock that such holder has the right to
receive in accordance with the Exchange Ratio in respect of the shares of
Company Common Stock formerly evidenced by such Certificate, and (B) cash
in lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(d) (the shares of Parent Common Stock and
cash described in clauses (A) and (B) being, collectively, the "Merger
Consideration"), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Company
Common Stock that is not registered in the transfer records of Company,
shares of Parent Common Stock may be issued and paid in accordance with
this Article II to a transferee if the Certificate evidencing such shares of
Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered
as contemplated by this Section 2.02,each Certificate shall be deemed any
time after the Effective Time to evidence only the right to receive the
Merger Consideration upon such surrender. On or after the Effective Time,
any Certificates presented to the Exchange Agent or Parent for any reason
shall be converted into the Merger Consideration.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock they are
entitled to receive until the holder of such Certificate shall surrender
such Certificate.
(d) No fraction of a share of Parent Common Stock shall be issued in
connection with the Merger. In lieu of any such fractional shares, each
holder of Company Common Stock upon surrender of a Certificate for exchange
pursuant to this Section 2.02 shall be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the
Closing Price of a share of Parent Common Stock by (ii) the fraction of a
share of Parent Common Stock to which such holder would otherwise be
entitled to receive under Section 2.01 of this Agreement.
(e) Any portion of the Exchange Fund that remains undistributed to the
holders of Company Common Stock as of that date which is six months after
the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the Merger Consideration
to which they are entitled pursuant to this Article II.
(f) None of the Surviving Corporation, Parent or the Company shall be
liable to any holder of, or person otherwise entitled to receive, shares of
Parent Common Stock for any such shares of Parent Common Stock (or dividends
or distributions with respect thereto) from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Parent and the Exchange Agent shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable pursuant to this Agreement
to any holder of shares of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, (i) such withheld amounts shall be paid over to the proper
authority or authorities in a reasonably commercial manner and time and
(ii) such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock in respect of which such deduction and withholding was made by Parent
or the Exchange Agent.
Section 2.03 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on
the records of the Company. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Parent for any reason shall
be converted into the Merger Consideration.
Section 2.04 Stock Options. Prior to the Effective Time, the Company and
Parent shall take such actions with respect to each stock option (each,
an "Existing Company Options") set forth in Schedule 3.03 of the volume of
disclosure schedules delivered by the Company to Parent on October 10, 1995
(the "Company Disclosure Volume") as may be necessary to cause such Existing
Company Option to be assumed by Parent (such options after such assumption,
the "Assumed Options"), subject to the amendments described in this Section
2.04. Each Assumed Option shall continue to have, and be subject to, the
same terms and conditions (including, without limitation, the applicable
vesting schedule, as modified to reflect the change in the number of shares
covered by such option as described herein) as set forth in the stock
option plan and agreement (as in effect immediately prior to the Effective
Time) pursuant to which such Existing Company Option was issued, except that
(i) all references to the Company shall be deemed to be references to Parent
(or, with respect to employment, Parent or its subsidiaries), (ii) each
option shall be exercisable for that number of whole shares of Parent
Common Stock equal to the product of the number of shares of Company Common
Stock covered by such option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounded down to the nearest whole
number of shares of Parent Common Stock and (iii) the exercise price
per share of Parent Common Stock under such option shall be equal to the
exercise price per share of Company Common Stock under the Existing Company
Option divided by the Exchange Ratio and rounded down to the nearest cent.
The adjustment provided herein with respect to any Existing Company Options
that are "incentive stock options" (as defined in Section 422 of the Code)
shall be and is intended to be effected in a manner that is consistent with
Section 424(a) of the Code. Parent shall (i) reserve for issuance the
number of shares of Parent Common Stock that will become issuable upon the
exercise of such Assumed Options pursuant to this Section 2.04 and
(ii) promptly after the Effective Time issue to each holder of an
outstanding Existing Company Option a document evidencing the assumption by
Parent of the Company's obligations with respect thereto under this
Section 2.04. Nothing in this Section 2.04 shall affect the schedule of
vesting with respect to Company Stock Options to be assumed by Parent as
provided in this Section 2.04. Promptly after the Effective Time, Parent
shall file a registration statement on Form S-8 with the Securities and
Exchange Commission (the "SEC") covering the shares of Parent Common Stock
to be issued upon exercise of the Assumed Options, shall use reasonable
best efforts to cause such registration statement to become and remain
effective so long as any Assumed Options are outstanding, and shall
reserve a sufficient number of shares of Parent Common Stock for issuance
upon exercise thereof.
Section 2.05 Warrants. At the Effective Time, the Company's obligations
with respect to each outstanding warrant to purchase shares of Company
Common Stock set forth in Schedule 3.03 of the Company Disclosure Volume,
that will not automatically terminate by its terms at the Effective Time,
shall be assumed by Parent, subject to the amendments described in this
Section 2.05. The Company's warrants so assumed by Parent shall continue to
have, and be subject to, the same terms and conditions as set forth in such
warrants as in effect immediately prior to the Effective Time, except that
(A) each such warrant shall be exercisable for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of
Company Common Stock into which such warrant was exercisable immediately
prior to the Effective Time multiplied by the Exchange Ratio and rounded to
the nearest whole number of shares of Parent Common Stock and (B) the
exercise price per share of Parent Common Stock under such warrant shall be
equal to the exercise price per share of Company Common Stock under such
warrant immediately prior to the Effective Time divided by the Exchange Ratio
and rounded to the nearest cent. The duration and other terms of the new
warrant shall be the same as the original warrant, except that all
references to the Company shall be deemed to be references to Parent.
Parent shall (i) reserve for issuance the number of shares of Parent Common
Stock that will become issuable upon the exercise of such warrant pursuant
to this Section 2.05 and (ii) promptly after the Effective Time, issue to
each holder of such an outstanding warrant a document evidencing the
assumption by Parent of Company's obligations with respect thereto under
this Section 2.05.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.01 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Minnesota. Each of the Company's subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization. The Company and each of
its subsidiaries have the requisite power and authority and all necessary
governmental approvals to own, lease and operate their properties and to
conduct their businesses as currently conducted, except where the failure
to have such power, authority or governmental approval would not,
individually or in the aggregate, have a Company Material Adverse Effect
(as defined below). Each of the Company and its subsidiaries is duly
qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, individually or
in the aggregate, have a Company Material Adverse Effect. The term
"Company Material Adverse Effect" means any change or effect that is
or would be materially adverse to the business, results of operations or
financial condition of the Company and its subsidiaries taken as a whole.
Section 3.02 Articles of Incorporation and By-Laws. The Company has
previously delivered to Parent a true, complete and correct copy of the
Articles of Incorporation and the By-Laws or equivalent organizational
documents, each as amended to date, of the Company and each of its
subsidiaries. Such Articles of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect. Neither the Company
nor any of its subsidiaries is in violation of any provision of its
Articles of Incorporation, By-Laws or equivalent organizational documents.
Section 3.03 Capitalization. The authorized capital stock of the Company
consists of (i) 15,000,000 shares of Company Common Stock and (ii) 1,000,000
shares of preferred stock, $.01 par value per share (the "Company Preferred
Stock"). As of the date of this Agreement, (i) 4,953,774 shares of Company
Common Stock are issued and outstanding, (ii) 263,000 shares of Company
Common Stock are issuable upon the exercise of outstanding stock options
granted pursuant to the Company's employee stock option plans, ("Company
Stock Options"), (iii) 120,000 shares of Company Common Stock are issuable
upon exercise of the Company's outstanding warrants, (iv) no shares of
Company Common Stock are held in the treasury of the Company and (v) no
shares of Company Preferred Stock are issued or outstanding. The actions
necessary under Section 2.04 to cause such options to become Assumed Options
are permitted under the terms of the agreements and plans under which such
optionswere issued. Schedule 3.03 of the Company Disclosure Volume sets
forth a complete and accurate list of all outstanding Company Stock Options
or any other options to purchase shares of Company Common Stock, including
with respect to each such option: (i) its grant date, (ii) the per share
exercise price, (iii) the termination date, and (iv) the vesting schedule for
such option, including whether or not the vesting of such option will be
accelerated as a result of the transactions contemplated by this Agreement.
Schedule 3.03 of the Company Disclosure Volume sets forth a complete and
accurate list of all outstanding warrants (the "Warrants") to purchase shares
of Company Common Stock, including with respect to each such Warrant:
(i) its grant date, (ii) the per share exercise price, (iii) the termination
date, and (iv) a summary of any rights of the holder of such Warrant to have
the Company register the shares issuable upon exercise of the Warrant under
the Securities Act of 1933, as amended (the "Securities Act"). Except as
set forth in Schedule 3.03 of the Company Disclosure Volume, at the Effective
Time, all of the Warrants will automatically terminate by their terms, the
holders thereof will have no further rights thereunder, including no right
to receive the Merger Consideration, and no person will have any right from
and after the Effective Time to obligate the Company, the Surviving
Corporation, the Parent or any other person to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
the Company, the Surviving Corporation or any other person pursuant to the
Warrants. The Company has no restricted Company Common Stock that is
subject to vesting or a restricted stock grant. All of the outstanding
shares of Company Common Stock has been duly authorized and validly
issued and are fully paid and non-assessable and free of preemptive rights.
Except as set forth in this Section 3.03 or Schedule 3.03 of the Company
Disclosure Volume, the Company does not have any outstanding options,
warrants, subscriptions or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued capital
stock of the Company or any of its subsidiaries or obligating the Company or
any of its subsidiaries to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any of its subsidiaries. The
Company owns all of the outstanding shares of capital stock of each of its
subsidiaries, and such shares are duly authorized, validly issued, fully paid
and non-assessable, and free and clear of all preemptive rights and all
liens, charges, encumbrances, equities, claims and options of any kind
whatsoever. There are no agreements or understandings to which the Company
is a party with respect to the voting of any shares of Company Common Stock
or which restrict the transfer of any such shares, nor does the Company have
knowledge of any such agreements or understandings with respect to the
voting of any such shares or which restrict the transfer of such shares.
There are no outstanding contractual obligations of the Company or any
subsidiary of the Company to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any subsidiary of the Company.
Except as set forth in Schedule 3.03 of the Company Disclosure Volume,
neither the Company nor any subsidiary of the Company is under any
obligation, contingent or otherwise, by reason of any agreement to register
any of its securities under the Securities Act.
Section 3.04 Authority Relative to this Agreement. The Company has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company, and no other corporate proceedings or action on the
part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement (other than the
approval and adoption of the Merger and this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock and the filing
and recordation of appropriate merger documents as required by Minnesota
Law). This Agreement has been duly and validly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Parent and Sub, constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
Section 3.05 Consents and Approvals; No Violations. (a) The Board of
Directors of the Company has approved the Merger and this Agreement, and the
execution and enforceability of this Agreement and the acquisition of shares
of Company Common Stock pursuant hereto are not affected by or prohibited
under any antitakeover or business combination statute under Minnesota law
(provided that no representation is made with respect to Section 302A.071 of
the Minnesota Business Corporation Act.)
(b) Except as set forth on Schedule 3.05 of the Company Disclosure Volume,
the execution and delivery of this Agreement by the Company do not, and the
performance of the transactions contemplated by this Agreement by the
Company will not, require any filing with or notification to, or any
consent, approval, authorization or permit from, any governmental or
regulatory authority, domestic or foreign (a "Governmental Entity")
or any other person except (i) for (A) applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and state securities or "blue sky" laws, (B) the
pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), and (C) the filing and recordation of Articles
of Merger as required by Minnesota Law, or (ii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, (X) would not prevent or delay consummation of the Merger in
any material respect, (Y) would not otherwise prevent or delay the Company
from performing its obligations under this Agreement in any material respect
or (Z) would not, individually or in the aggregate, have a Company Material
Adverse Effect.
(c) Except as set forth on Schedule 3.05 of the Company Disclosure Volume,
the execution and delivery of this Agreement by the Company do not, and the
performance of the transactions contemplated by this Agreement by the
Company will not, (i) conflict with or violate the Articles of
Incorporation, By-Laws or equivalent documents of the Company or any of its
subsidiaries, (ii) conflict with or violate any order, writ, injunction,
decree, statute, treaty, law, rule or regulation applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company
or any of its subsidiaries is bound or affected, or (iii) result in a
violation or a breach of, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or result in
the loss of a benefit under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of the Company or any of
any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease,license, permit, franchise or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any property or asset of the
Company or any of its subsidiaries is bound or affected, except, in the case
of clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences that (A) would not prevent or delay
consummation of the Merger in any material respect or otherwise prevent or
delay the Company from performing its obligations under this Agreement in
any material respect or (B) would not, individually or in the aggregate,
have a Company Material Adverse Effect.
Section 3.06 Compliance. (a) The Company and its subsidiaries have all
licenses, permits, franchises, orders or approvals of any federal, state,
local or foreign governmental or regulatory body or other Governmental
Entity material to the conduct of the business of the Company (collectively,
"Company Permits"), and such Company Permits are in full force and effect
and no proceeding is pending or, to the best knowledge of the Company,
threatened to revoke or limit any Company Permit. Except as set forth on
Schedule 3.06 of the Company Disclosure Volume, the execution and delivery
of this Agreement and the consummation of the transactions contemplated by
this Agreement will not adversely affect any Company Permit or result in any
Company Permit being either revoked or limited in any material respect. The
Company has made available for review by Parent all material Company Permits.
(b) Neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of, (i) any law, rule, ordinance, regulation,
order, judgment or decree applicable to the Company or any of its
subsidiaries or by which any property or asset of the Company or any of its
subsidiaries is bound or affected (including, without limitation, any of the
same that apply to franchisors and the offering and sale of franchises) or
(ii) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or
any of its subsidiaries is a party or by which the Company or any its
subsidiaries or any property or asset of the Company or any of its
subsidiaries is bound or affected, except for any such conflicts, defaults
or violations that would not, individually or in the aggregate, have a
Company Material Adverse Effect. No investigation or review by any
Governmental Entity or any other person concerning any such possible
violations by the Company or any of its subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity or any
other person indicated an intention to conduct the same in each case other
than those the outcome of which would not have, or that, insofar as
reasonably can be foreseen, in the future are not reasonably likely to
have, a Company Material Adverse Effect.
Section 3.07 SEC Reports. (a) The Company has filed all forms, reports and
documents required to be filed by it with the SEC since April 6, 1994, and
has heretofore provided to Parent, in the form filed with the SEC (including
any exhibits thereto), (i) its Annual Reports on Form 10-KSB for the fiscal
year ended December 31, 1994, (ii) its Quarterly Reports on Form 10-QSB
filed with the SEC since April 6, 1994, (iii) all proxy statements relating
to the Company's meetings of stockholders (whether annual or special) held
since April 6, 1994 and (iv) all other forms, reports, registration
statements and other documents filed by the Company with the SEC since
April 6, 1994 (the forms, reports, registration statements and other
documents referred to in clauses (i), (ii), (iii) and (iv) above being
referred to herein, collectively, as the "Company SEC Reports"). The
Company SEC Reports and any other forms, reports and other documents filed
by the Company with the SEC after the date of this Agreement (i) were or
will be prepared in accordance with the requirements of the Securities Act
and the Exchange Act, as the case may be, and the rules and regulations
thereunder and (ii) did not at the time they were filed, or will not at the
time they are 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 made therein, in the light of the circumstances under
which they were or are made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each fairly presented the consolidated
financial position, results of operations and cash flows of the Company
and its consolidated subsidiaries, as the case may be, as at the respective
dates thereof and for the respective periods indicated therein (subject, in
the case of unaudited statements, to normal and recurring year-end adjustments
that were not and are not expected, individually or in the aggregate, to be
material in amount).
(c) Except as set forth in the Company SEC Reports filed with the SEC
prior to the date of this Agreement, the Company and its subsidiaries do not
have any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) other than liabilities and obligations that would
not, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.08 Absence of Certain Changes. Since December 31, 1994, except as
disclosed in any Company SEC Report, there has not been (i) a Company
Material Adverse Effect, (ii) any declaration, setting aside or payment of
any dividend or other distribution in respect of any shares of any capital
stock of the Company or any of its subsidiaries, or any redemption, purchase
or other acquisition of any of their respective securities other than
dividends by a subsidiary to the Company, (iii) any entry into any
agreement, commitment or transaction by the Company or any of its
subsidiaries that is material to the Company and its subsidiaries taken as
a whole, except agreements, commitments or transactions in the ordinary
course of business and lease and other agreements relating to the opening of
new Company-owned restaurants, (iv) any change by the Company in accounting
methods, principles or practices, or (v) any damage, destruction or loss
(whether or not covered by insurance) with respect to any property or asset
of the Company or any of its subsidiaries and having, individually or in
the aggregate, a Company Material Adverse Effect. To the best knowledge of
the Company, the Company has disclosed to Parent all facts and circumstances
regarding the Company and the transactions it has engaged in which could
reasonably be expected to adversely affect or preclude accounting for the
Merger (as structured by this Agreement, the Stockholders Agreement and the
Employment Agreement of even date herewith with Xx. Xxxxxx (the "Employment
Agreement")) as a pooling of interest if consummated at any time from the
date hereof through June 30, 1996. As of the date hereof, to the best
knowledge of the Company based on the facts and circumstances known to it,
the Company has no reason to believe that accounting for the Merger as a
pooling of interests if consummated at any time from the date hereof through
June 30, 1996 would not be available.
Section 3.09 Environmental Matters. The Company and its subsidiaries are
in compliance with all Environmental Laws, except for any noncompliance
that, either singly or in the aggregate, could not have a Company Material
Adverse Effect. "Environmental Laws" shall mean all federal, state and
local laws, rules, regulations, ordinances and orders that purport to
regulate the release of hazardous substances or other materials into the
environment, or impose requirements relating to environmental protection.
The Company has previously furnished to Parent a true and correct list of
all Hazardous Materials (as hereinafter defined) generated, used, handled or
stored by the Company or any of its subsidiaries, the proper disposal of which
will require any material expenditure by the Company or any of its
subsidiaries. "Hazardous Materials" means any "hazardous waste" as defined
in either the United States Resource Conservation and Recovery Act or
regulations adopted pursuant to said act, any "hazardous substances" or
"hazardous materials" as defined in the United States Comprehensive
Environmental Response, Compensation and Liability Act and, to the extent
not included in the foregoing, any medical waste. The Company has
previously made available to Parent copies of all documents concerning
any environmental or health and safety matter adversely affecting the
Company and copies of any environmental audits or risk assessments, site
assessments, documentation regarding off-site disposal of Hazardous
Materials, spill control plans and material correspondence with any
Governmental Entity regarding the foregoing.
Section 3.10 Litigation. Except as set forth in Schedule 3.10 of the
Company Disclosure Volume, there is no litigation, claim, suit, action,
proceeding, investigation or complaint pending or, to the best knowledge of
the Company, threatened against the Company or any of its subsidiaries
before any court, arbitrator or administrative, governmental or regulatory
authority or body, domestic or foreign (including, without limitation, any
litigation, claim, suit, action, proceeding, investigation, or complaint in
which any person alleges (i) the release, threat of release or placement of
any hazardous substance in connection with the business of the Company or
any subsidiary of the Company, (ii) the generation, transportation, storage,
treatment or disposal of any hazardous substance, hazardous waste,
pollutant, contaminant or other substance listed or regulated under the
Environmental Laws in connection with the business of the Company or any
subsidiary of the Company or (iii) any failure of the Company or a
subsidiary of the Company to comply with any of the Environmental Laws).
Section 3.11 ERISA Compliance, etc. (a) The Company has delivered to Parent
true and complete copies of all "employee welfare benefit plans" ("Welfare
Plans") (as defined in Section 3(1) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), and all other bonus, deferred
compensation, pension, profit-sharing, retirement, medical, group life,
disability income, stock purchase, stock option or other "employee
pension benefits plans" (as defined in Section 3(2) of ERISA), or any bonus
or incentive plan, stock option plan, restricted stock plan, stock bonus plan,
deferred bonus plan, salary reduction agreement, change-of-control
agreement, employment agreement, consulting agreement, severance agreement or
plan, material fringe benefit plan or payroll practice, whether or not
written or terminated (sometimes referred to herein collectively as
"Benefit Plans") currently maintained or contributed to, or required to be
maintained or contributed to, by the Company or any other person or entity
that, together with the Company, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled
Entity") or for which the Company could have any material liability of any
nature and which is for the benefit of any current or former employees,
officers or directors or independent contractors (or the dependents or
beneficiaries thereof) of the Company or any of its Commonly Controlled
Entities. The Company has delivered to Parent true, complete and correct
copies of (x) the three (3) most recent annual reports on Form 5500 filed
with the Internal Revenue Service (the "IRS") with respect to each Benefit
Plan (if any such report was required), (y) the most recent summary plan
description for each Benefit Plan for which such summary plan description is
required or if no such summary plan description is required, a written
summary of the material terms of each such Benefit Plan and (z) each funding
vehicle or arrangement relating to any Benefit Plan.
(b) Except as would not give rise either singly or in the aggregate to a
Company Material Adverse Effect:
(i) Each Benefit Plan has been administered in accordance with its terms.
The Company, any Commonly Controlled Entity and each Benefit Plan are in
compliance with all applicable provisions of ERISA and the Code.
(ii) All Benefit Plans intended to be qualified under Section 401(a) of
the Code have been the subject of determination letters from the Internal
Revenue Service to the effect that such Benefit Plans are qualified and
exempt from federal income taxes under Section 401(a) and 501(a),
respectively, of the Code and no such determination letter has been revoked
nor, to the knowledge of the Company or any Commonly Controlled Entity, has
revocation been threatened, nor has any such Benefit Plan been amended (or
failed to be amended) since the date of its most recent determination letter
or application therefor in any respect that would result in a loss of
qualification or exempt status of any such Benefit Plan.
(iii) No person has engaged in a non-exempt "prohibited transaction"
(as such term is defined in Section 406 of ERISA or Section 4975 of the
Code) or any other breach of fiduciary responsibility that could subject
the Company, any of its subsidiaries, any officer of the Company or any of
its subsidiaries or any Benefit Plan service provider to tax or penalty
under ERISA, the Code or other applicable law. There has been no
"reportable event" (as that term is defined in Section 4043 of ERISA)
with respect to any Benefit Plan during the last five years.
(iv) With respect to any Benefit Plan that is a Welfare Plan, (Y) no
such Benefit Plan is funded through a "welfare benefit fund," as such term
is defined in Section 419(a) of the Code, and (Z) each such Benefit
Plan complies in all material respects with the applicable requirements of
Section 4980B(f) of the Code, Part 6 of Subtitle B of Title I of ERISA
and any applicable state continuation coverage requirements ("COBRA").
(v) With respect to each Benefit Plan, there are no actions, suits
or investigations or claims pending or, to the knowledge of the Company or
any of its Commonly Controlled Entities, threatened with respect to
the assets thereof (other than routine claims for benefits), and there are
no facts that could give rise to any liability, action, suit, investigation,
or claim against any Benefit Plan, any fiduciary or plan administrator or
other person dealing with any Benefit Plan or the assets of any such Benefit
Plan.
(vi) Each Benefit Plan may be amended, terminated, modified or otherwise
revised by the Company or any of its Commonly Controlled Entities as of the
Effective Time, including the elimination of any and all benefits under any
Benefit Plan (except claims incurred but not reported under any Welfare
Plan or any benefit described in Section 411(d)(6) of the Code or benefits
under cash bonus plans, stock option and stock incentive plans, employment
agreements, consulting agreements and change-of-control agreements;
provided that copies of such plans and agreements have been provided to
Parent's counsel).
(vii) There is no accrued liability with respect to a Benefit Plan
except for which there exists a separate funding vehicle, with assets equal
to such liability, or an equal accrual on the balance sheets (except for
liabilities under cash bonus plans, stock option and stock incentive plans,
employment agreements, consulting agreements and change-of-control
agreements (provided that copies of such plans and agreements have been
provided to Parent's counsel), and, except as set forth on Schedule
3.11 of the Company Disclosure Volume, for accruals in respect of earned
vacation pay).
(c) The Company and any Commonly Controlled Entity do not maintain
or contribute to or have any other liability of any nature with respect to
any Benefit Plan that is subject to Title IV of ERISA, subject to Code
Section 412, a "multiemployer plan" as defined in Section 4001 of ERISA,
a "multiemployer plan" within the meaning of Section 3(37) of ERISA, a
"multiple employer plan" within the meaning of Code Section 413(c) or
a "multiple employer welfare arrangement" within the meaning of Section
3(40) of ERISA. No Benefit Plan provides post-retirement medical or life
insurance benefits, except as may be required by COBRA.
(d) No payment will be made to any "disqualified individual" as defined
in Section 280G(c) of the Code as a result of the Merger that will result
in a loss of deduction by Parent or the Surviving Corporation as a result
of the provisions of Section 280G of the Code.
(e) For purposes of this Section 3.11, "Company Material Adverse Effect"
shall mean a material adverse effect on the business, results of operations
or financial condition of the Company and its subsidiaries taken as a whole,
after taking into account the liabilities of the Company and its
subsidiaries and any other liabilities arising with respect to any
Benefit Plan, either to such Benefit Plan or any fiduciary, participant,
beneficiary or agent thereof (whether or not the Company and its
subsidiaries are obligated directly or indirectly for such liabilities).
Section 3.12 Trademarks, Patents and Copyrights. The Company and its
subsidiaries own, or possess adequate licenses or other valid rights to
use, all patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, copyrights, service marks, service xxxx rights, trade
secrets, applications to register and registrations for, the foregoing
patents, trademarks, service marks, know-how and other proprietary rights
and information used in connection with the business of the Company
and its subsidiaries as currently conducted (the "Company Proprietary
Rights"), and no assertion or claim has been made in writing challenging
the validity of any of the Company Proprietary Rights. To the best
knowledge of the Company, the conduct of the business of the Company and
its subsidiaries as currently conducted does not conflict in any way with
any patent, patent rights, license, trademark, trademark right, trade
name, trade name right, service xxxx, copyright or other proprietary right
of any other person, the Company has received no claim or threat that any
such conflict exists, and no litigation, claim, suit, action, proceeding, or
complaint concerning the foregoing has been filed or is ongoing. Except as
set forth in Schedule 3.12 of the Company Disclosure Volume, the Company
and its subsidiaries have the unencumbered right to sell their products
and services (whether now offered for sale or under development) free from
any royalty or other obligations to any third parties.
Section 3.13 Taxes. The Company and its subsidiaries have timely filed
all material federal, state, local and foreign tax returns and reports
required to be filed by them through the date hereof and shall timely
file all returns and reports required on or before the Effective Time.
Such reports and returns are and will be true, correct and complete in
all material respects. The Company and its subsidiaries have paid and
discharged all federal, state, local and foreign taxes due from them,
other than such taxes that are being contested in good faith by appropriate
proceedings and are adequately reserved for as shown in the audited
consolidated balance sheet of the Company dated December 31, 1994
(the "Company 1994 Balance Sheet") and its most recent quarterly
financial statements, except for such failures to so pay and discharge
that would not, individually or in the aggregate, have a Company Material
Adverse Effect. Neither the IRS nor any other taxing authority or agency,
domestic or foreign, is now asserting or, to the best knowledge of the
Company, threatening to assert against the Company or any of its
subsidiaries any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith that, if such deficiencies
or claims were finally resolved against the Company and its subsidiaries,
would, individually or in the aggregate, have a Company Material Adverse
Effect. The accruals and reserves for taxes (including interest
and penalties, if any, thereon) reflected in the Company 1994 Balance Sheet
and the most recent quarterly financial statements are adequate in
accordance with generally accepted accounting principles. The Company and
its subsidiaries have withheld or collected and paid over to the
appropriate governmental authorities or are properly holding for such
payment all taxes required by law to be withheld or collected, except for
such failures to have so withheld or collected and paid over to be so holding
for payment that would not, individually or in the aggregate, have a
Company Material Adverse Effect. There are no material liens for taxes upon
the assets of the Company and its subsidiaries. Neither the Company nor
any of its subsidiaries has agreed to or is required to make any adjustment
under Section 481(a) of the Code. Neither the Company nor any of its
subsidiaries has made an election under Section 341(f) of the Code. For
purposes of this Section 3.13, where a determination of whether a failure
by the Company or any of its subsidiaries to comply with the representations
herein has a Company Material Adverse Effect is necessary, such determination
shall be made on an aggregate basis with all other failures within this
Section 3.13. As of today no payments are due under, and the Company knows
of no facts or circumstances that exist and which could give rise to the
obligation of the Company to make payments under, any agreement to which the
Company is subject and under which the Company has agreed to indemnify
persons for tax liabilities.
Section 3.14 Labor Matters. There is not currently, and within the last
three years neither the Company nor any subsidiary of the Company has
experienced, any strike, picketing, boycott, work stoppage or slow down or
union organization activity. No employee of the Company or any subsidiary
of the Company is represented by a union or any similar entity and there is
no request for representation pending. The Company has no knowledge
(i) of any allegation, charge or complaint of unfair labor practice,
employment discrimination or other matter relating to the employment of labor
pending or threatened against the Company or any subsidiary of the Company,
(ii) of any basis for any such allegation, charge or complaint or
(iii) that it, or any subsidiary of the Company, has not complied
with all applicable laws relating to the employment of labor that could
reasonably be expected to have, either individually or in the aggregate,
a Company Material Adverse Effect.
Section 3.15 Affiliate Transactions. The Company has set forth in
Schedule 3.15 of the Company Disclosure Volume each material transaction
involving the transfer of any cash, property or rights to or from the
Company or any subsidiary of the Company from, to or for the benefit of
any affiliate or former affiliate of the Company or any subsidiary
of the Company or any officer, director, employee or greater than five
percent shareholder of the Company ("Company Affiliate Transactions")
during the period commencing March 29, 1994 through the date hereof and
any existing commitments of the Company or any subsidiary of the Company
to engage in the future in any material Company Affiliate Transactions.
Section 3.16 Opinion of Financial Advisor. The Company has received the
opinion of Xxxxxxxxxx Securities, Inc. ("Xxxxxxxxxx"), dated as of the date
hereof, to the effect that, as of such date, the Merger Consideration is
fair to the stockholders of the Company from a financial point of view, a
copy of which opinion has been delivered to Parent.
Section 3.17 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to
vote is the only vote of the holders of any class or series of the
Company's capital stock necessary to approve the Merger, this Agreement
and the transactions contemplated by this Agreement.
Section 3.18 Brokers. No broker, finder or investment banker (other than
Xxxxxxxxxx) is entitled to any brokerage, finder's or other fee or
commission from the Company in connection with the transactions
contemplated by this Agreement. The Company has heretofore furnished
to Parent a complete and correct copy of all agreements between the
Company and Xxxxxxxxxx pursuant to which such firm would be entitled to
any payment relating to the transactions contemplated by this Agreement.
Section 3.19 Contracts and Other Agreements. Neither the Company nor any of
its subsidiaries is a party to or bound by, and neither they nor any of
their properties or assets are bound or subject to, any contract or other
agreement required to be disclosed in, or filed as exhibit to, the Company
SEC Reports which is not filed in the Company SEC Reports. All such contracts
and other agreements and each of the contracts set forth in Schedule 3.19 of
the Company Disclosure Volume are valid, existing, in full force and effect,
binding upon the Company or its subsidiaries, as the case may be, and to the
best knowledge of the Company, binding upon the other parties thereto in
accordance with their terms, and the Company and its subsidiaries have
paid in full or accrued all amounts now due from them thereunder and
have satisfied in full or provided for all of their liabilities and
obligations thereunder which are presently required to be satisfied or
provided for, and are not in default under any of them, nor, to the best
knowledge of the Company, is any other party to any such contract or other
agreement in default thereunder, nor does any condition exist that with
notice or lapse of time or both would constitute a default thereunder.
Schedule 3.19 of the Company Disclosure Volume sets forth a list of the
following contracts and other agreements to which the Company or
any of its subsidiaries is a party or by or to which they or their assets
or properties are bound or subject:
(a) any agreement that individually requires aggregate expenditures by
the Company or any of its subsidiaries in any one year of more than $10,000;
(b) any indenture, trust agreement, loan agreement or note that involves
or evidences outstanding indebtedness, obligations or liabilities for
borrowed money in excess of $10,000;
(c) any lease, sublease, installment purchase or similar arrangement
for the purchase, use or occupancy of real or personal property (i) that
individually requires aggregate expenditures by the Company or any of its
subsidiaries in any one year of more than $10,000, or (ii) pursuant to
which the Company or any of its subsidiaries is the lessor of any real
property which has rentals over $5,000 per year, together with the date of
termination of such leases, the name of the other party and the annual
rental payments required to be made under such leases;
(d) any agreement of surety, guarantee or indemnification, other
than (i) an agreement in the ordinary course of business with respect
to obligations in an amount not in excess of $10,000, or
(ii) indemnification provisions contained in leases not otherwise
required to be disclosed;
(e) any agreement, including without limitation employment agreements
and bonus plans, relating to the compensation of, or obligating the Company
to make payments (whether such payments are fixed in amount or contingent
upon revenues of, or opening of, a restaurant or other factors) to,
(i) officers, (ii) employees, (iii) former employees, (iv) consultants,
(v) advisors or (vi) any person who was promised such payments in
consideration of helping the Company establish or promote restaurants;
(f) any agreement containing covenants of the Company not to compete in
any line of business, in any geographic area or with any person or
covenants of any other person not to compete with the Company or in any
line of business of the Company;
(g) any agreement granting or restricting the right of the Company
or any of its subsidiaries to use a trade name, trade xxxx, logo or the
Company Proprietary Rights;
(h) any agreement with any customer or supplier that cannot be
terminated without penalty in excess of $10,000 by the Company or any of its
subsidiaries within one year; and
(i) any franchise, licensing or development agreement.
True and complete copies of all of the contracts and other agreements set
forth in Schedule 3.19 of the Company Disclosure Volume (or required to
be set forth therein) have been previously provided to Parent.
Section 3.20 Subsidiaries. Set forth on Schedule 3.20 to the Company
Disclosure Volume is a list of all subsidiaries of the Company, their
jurisdiction of incorporation or organization, and the location of their
principal offices. Such subsidiaries are wholly owned by the Company and
no person has a right to acquire an interest therein. Other than such
subsidiaries, the Company does not have any interest, direct or indirect,
in any partnership, joint venture or other business entity.
Section 3.21 Insurance. During the last five years (or, with respect to
any particular type of claim, the applicable statute of limitations
with respect to such claim) the Company has maintained liability insurance
policies of a commercially reasonable amount and nature consistent for a
company of its size and with its operations at such time.
Section 3.22 Disclosure. To the best knowledge of the Company, all material
facts relating to the business, operations, properties, assets, liabilities
(contingent or otherwise), and financial condition of the Company and its
subsidiaries have been disclosed to Parent in or in connection with this
Agreement. The representations, warranties and statements made by the
Company in this Agreement and in the certificates delivered pursuant
hereto do not contain any untrue statement of a material fact, and, when
taken together, do not omit to state any material fact necessary to make
such representations, warranties and statements, in light of the
circumstances under which they are made, not misleading.
Section 3.23 Definition of Company's Knowledge. As used in this Agreement,
the phrase "to the knowledge of the Company" or "to the best knowledge of
the Company" (or words of similar import) means the knowledge or the best
knowledge of those individuals identified in Schedule 3.23 of the Company
Disclosure Volume, and includes any fact, matter or circumstance which any of
such individuals, as an ordinary and prudent business person employed in the
same capacity in the same type and size of business as the Company, should
have known.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the Company
as follows:
Section 4.01 Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Each of Parent's subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction
of incorporation or organization. Each of Parent and its subsidiaries has
the requisite power and authority and all necessary governmental approvals
to own, lease and operate its properties and to conduct its business as it
is currently conducted, except where the failure to have such power, authority
or governmental approval would not, individually or in the aggregate, have a
Parent Material Adverse Effect (as defined below). Each of Parent and its
subsidiaries is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character
of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for such
failures to be so qualified or licensed and in good standing that would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
The term "Parent Material Adverse Effect" means any change or effect that
is or would be materially adverse to the business, results of operations or
financial condition of the Parent and its subsidiaries taken as a whole.
Sub is a newly-formed, wholly-owned subsidiary of Parent, formed solely
for the purpose of consummating the transactions described herein, and has
no assets (other than those received in connection with its initial
capitalization) or liabilities.
Section 4.02 Certificate of Incorporation and By-Laws. Parent has made
available to the Company a true, complete and correct copy of the
Certificate of Incorporation, the By-Laws or equivalent organizational
documents, each as amended to date, of Parent and each of its subsidiaries.
Such Certificate of Incorporation, By-Laws and equivalent organizational
documents are in full force and effect. Neither Parent nor any of its
subsidiaries is in violation of any provision of its Certificate of
Incorporation, By-Laws or equivalent organizational documents.
Section 4.03 Capitalization. The authorized capital stock of Parent
consists of 20,000,000 shares of Parent Common Stock and 1,000,000 shares
of preferred stock, $.01 par value per share ("Parent Preferred Stock").
As of the date of this Agreement, (i) 6,924,419 shares of Parent Common
Stock are issued and outstanding, (ii) 755,883 shares of Parent Common
Stock are issuable upon the exercise of outstanding stock options granted
pursuant to Parent's employee stock option plans, (iii) no shares of Parent
Common Stock are held in the treasury of Parent, and (iv) 11,911.545 shares
of Parent Preferred Stock are issued and outstanding and 264,701 shares
of Parent Common Stock are issuable upon conversion of such shares, and
(v) 1,291,667 shares of Parent Common Stock are issuable upon conversion
of outstanding convertible subordinated notes. All of the outstanding shares
of Parent Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable and free of preemptive rights. Except as set
forth in Schedule 4.03 of the volume of disclosure schedules delivered by
the Parent to the Company on October 10, 1995 (the "Parent Disclosure Volume"),
Parent does not have any outstanding options, warrants, subscriptions or other
rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Parent or any of its subsidiaries
or obligating Parent or any of its subsidiaries to issue or sell any shares
of capital stock of, or other equity interests in, Parent or any of its
subsidiaries. Parent owns all of the outstanding shares of capital stock
of each of its subsidiaries, and such shares are duly authorized, validly
issued, fully paid and non-assessable, and free and clear of all preemptive
rights and all liens, charges, encumbrances, equities, claims and options
of any kind whatsoever.
Section 4.04 Authority Relative to this Agreement. Except as set forth on
Schedule 4.05, each of Parent and Sub has all necessary power and authority
to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent
and Sub of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Parent and Sub and the sole
stockholder of Sub, and no other corporate proceedings or action on the
part of Parent and Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement (other than,
with respect to consummation of the Merger, (i) the approval by Parent's
stockholders, in accordance with applicable rules of the Nasdaq National
Market System, of the issuance of shares of Parent Common Stock (the
"Parent Vote Matter") and (ii) filing and recordation of the appropriate
merger documents by Sub as required by Minnesota Law). This Agreement has
been duly and validly executed and delivered by parent and Sub, as the case
may be, and, assuming the due authorization, execution and delivery by the
Company, constitute the valid and binding agreements of parent and Sub, as
the case may be, enforceable against parent and Sub in accordance with
their terms.
Section 4.05 Consents and Approvals; No Violations. (a) The Board of
Directors of each of Parent and Sub and the sole stockholder of Sub
have approved the Merger and this Agreement.
(b) Except as set forth in Schedule 4.05 of the Parent Disclosure Volume,
the execution and delivery of this Agreement by Parent and Sub do not, and
the performance of the transactions contemplated by this Agreement by
Parent and Sub will not, require any filing with or notification to, or
any consent, approval, authorization or permit from, any Governmental
Entity or any other person except (i) for (A) applicable requirements of
the Securities Act, the Exchange Act and state securities or "blue sky"
laws, (B) the pre-merger notification requirements of the HSR Act, and
(C) the filing and recordation of the Articles of Merger, as required by
Minnesota Law, or (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications,
(X) would not prevent or delay consummation of the Merger in any material
respect or otherwise prevent or delay either Parent or Sub from performing
its obligations under this Agreement in any material respect, (Y) would not
otherwise prevent or delay Parent from performing its obligations under this
Agreement in any material respect or (Z) would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(c) Except as set forth in Schedule 4.05 of the Parent Disclosure Volume,
the execution and delivery of this Agreement by Parent and Sub do not, and
the performance of the transactions contemplated by this Agreement by
Parent and Sub will not, (i) conflict with or violate the Certificate of
Incorporation, By-Laws or equivalent documents of Parent or of any of its
subsidiaries, (ii) conflict with or violate any order, writ, injunction,
decree, statute, treaty, law, rule or regulation applicable to Parent or
any of its subsidiaries or by which any property or asset of Parent or any
of its subsidiaries is bound or affected or (iii) result in a violation or
a breach of, or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or result in the loss of a
benefit under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of Parent or any of any
of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
or any of its subsidiaries or any property or asset of Parent or any of its
subsidiaries is bound or affected, except, in the case of clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences that (A) would not prevent or delay consummation of the Merger
in any material respect or otherwise prevent or delay either Parent or Sub
from performing its obligations under this Agreement in any material
respect or (B) would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
Section 4.06 Compliance. (a) Parent and its subsidiaries have all
licenses, permits, franchises, orders or approvals of any federal,
state, local or foreign governmental or regulatory body or other
Governmental Entity material to the conduct of the business of Parent
(collectively, "Parent Permits"), and such Parent Permits are in full
force and effect and no proceeding is pending or, to the best knowledge of
Parent, threatened to revoke or limit any Parent Permit. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement will not adversely affect any Parent Permit
or result in any Parent Permit being either revoked or limited in any
material respect.
(b) Neither Parent nor any of its subsidiaries is in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment
or decree applicable to Parent or any of its subsidiaries or by which
any property or asset of Parent or any of its subsidiaries is bound or
affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which Parent or any of its subsidiaries is a party or by which Parent or
any its subsidiaries or any property or asset of Parent or any of its
subsidiaries is bound or affected, except for any such conflicts, defaults
or violations that would not, individually or in the aggregate, have a
Parent Material Adverse Effect. No investigation or review by any
Governmental Entity or any other person concerning any such possible
violations by Parent or any of its subsidiaries is pending or, to the
knowledge of Parent, threatened, nor has any Governmental Entity or any
other person indicated an intention to conduct the same in each case other
than those the outcome of which would not have, or that insofar as
reasonably can be foreseen, in the future are not reasonably likely to
have, a Parent Material Adverse Effect.
Section 4.07 SEC Reports. (a) Parent has filed all forms, reports and
documents required to be filed by it with the SEC since June 30, 1994 and
has heretofore made available to the Company, in the form filed with the
SEC (excluding any exhibits thereto), (i) its Annual Report on Form 10-K
for the fiscal year ended July 1, 1995, and (ii) all other forms, reports,
registration statements and other documents filed by Parent with the
SEC since July 1, 1995 (the forms, reports, registration statements and
other documents referred to in clauses (i) and (ii) above being referred
to herein, collectively, as the "Parent SEC Reports"). The Parent SEC
Reports and any other forms, reports and other documents filed by Parent
with the SEC after the date of this Agreement (i) were or will be prepared
in accordance with the requirements of the Securities Act and the Exchange
Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed, or will not at the time they
are 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 made therein, in the light of the circumstances
under which they were or are made, not misleading.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent SEC Reports was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each fairly presented the consolidated
financial position, results of operations and cash flows of Parent and
its consolidated subsidiaries as the case may be, as at the respective
dates thereof and for the respective periods indicated therein (subject, in
the case of unaudited statements, to normal and recurring year-end
adjustments that were not and are not expected, individually or in the
aggregate, to be material in amount).
(c) Except as set forth in the Parent SEC Reports filed with the SEC
prior to the date of this Agreement, Parent and its subsidiaries do not
have any liability or obligation of any nature (whether accrued, absolute,
contingent or otherwise) other than liabilities and obligations that would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.08 Absence of Certain Changes. Since July 1, 1995, except as
disclosed in any Parent SEC Report, there has not been (i) a Parent
Material Adverse Effect, (ii) any declaration, setting aside or payment
of any dividend or other distribution in respect of any shares of any
capital stock of Parent or any of its subsidiaries, or any redemption,
purchase or other acquisition of any of their respective securities other
than dividends by a subsidiary to Parent, (iii) any entry into any
agreement, commitment or transaction by Parent or any of its subsidiaries
that is material to Parent and its subsidiaries taken as a whole, except
agreements, commitments or transactions in the ordinary course of business,
(iv) any change by Parent in accounting methods, principles or practices,
or (v) any damage, destruction or loss (whether or not covered by insurance)
with respect to any property or asset of Parent or any of its subsidiaries
and having, individually or in the aggregate, a Parent Material Adverse
Effect. To the best knowledge of Parent, Parent has disclosed to the
Company all facts and circumstances regarding Parent and the transactions
it has engaged in which could reasonably be expected to adversely affect
or preclude accounting for the Merger (as structured by this Agreement, the
Stockholders Agreement and the Employment Agreement) as a pooling of
interests if consummated at any time from the date hereof through June 30,
1996. As of the date hereof, to the best knowledge of Parent based on the
facts and circumstances known to it, Parent has no reason to believe that
accounting for the Merger as a pooling of interests if consummated at any
time from the date hereof through June 30, 1996 would not be available.
Section 4.09 Environmental Matters. Parent and its subsidiaries are in
compliance with all Environmental Laws, except for any noncompliance that,
either singly or in the aggregate, would not have a Parent Material Adverse
Effect. "Environmental Laws" shall mean all federal, state and local laws,
rules, regulations, ordinances and orders that purport to regulate the
release of hazardous substances or other materials into the environment,
or impose requirements relating to environmental protection.
Section 4.10 Litigation. There is no litigation, claim, suit, action,
proceeding, investigation or complaint pending or, to the best knowledge
of Parent, threatened against Parent or any of its subsidiaries before any
court, arbitrator or administrative, governmental or regulatory authority
or body, domestic or foreign (including, without limitation, any litigation,
claim, suit, action, proceeding, investigation, or complaint in which any
person alleges (i) the release, threat of release or placement of any
hazardous substance in connection with the business of Parent or any
subsidiary of Parent, (ii) the generation, transportation, storage, treatment
or disposal of any hazardous substance, hazardous waste, pollutant,
contaminant or other substance listed or regulated under the Environmental
Laws in connection with the business of Parent or any subsidiary of Parent
or (iii) any failure of Parent or a subsidiary of Parent to comply with any
of the Environmental Laws) which are expected, individually or in the
aggregate, to have a Parent Material Adverse Effect.
Section 4.11 ERISA Compliance. (a) Parent has made available to the Company
true and complete copies of all Welfare Plans and all other bonus, deferred
compensation, pension, profit-sharing, retirement, medical, group life,
disability income, stock purchase, stock option or other "employee pension
benefits plans" (as defined in Section 3(2) of ERISA), or any bonus or
incentive plan, stock option plan, restricted stock plan, stock bonus plan,
deferred bonus plan, salary reduction agreement, change-of-control
agreement, employment agreement, consulting agreement, severance agreement
or plan, material fringe benefit plan or payroll practice, whether or not
written or terminated (sometimes referred to herein collectively as
"Parent Benefit Plans") currently maintained or contributed to, or required
to be maintained or contributed to, by Parent or any other person or
entity that, together with Parent, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Parent Commonly
Controlled Entity") or for which Parent could have any material liability
of any nature and that is for the benefit of any current or former
employees, officers or directors or independent contractors (or the
dependents or beneficiaries thereof) of Parent or any of the Parent Commonly
Controlled Entities. Parent has made available to the Company true,
complete and correct copies of (x) the most recent annual report on Form 5500
filed with the IRS with respect to each Parent Benefit Plan (if any such
report was required), (y) the most recent summary plan description for each
Parent Benefit Plan for which such summary plan description is required or
if no such summary plan description is required, a written summary of the
material terms of each such Parent Benefit Plan and (z) each funding
vehicle or arrangement relating to any Parent Benefit Plan.
(b) Except as would not give rise either singly or in the aggregate to a
Parent Material Adverse Effect:
(i) Each Parent Benefit Plan has been administered in accordance with its
terms. Parent, any Parent Commonly Controlled Entity and each Parent
Benefit Plan are in compliance with all applicable provisions of ERISA and
the Code.
(ii) All Parent Benefit Plans intended to be qualified under Section
401(a) of the Code have been the subject of determination letters from the
Internal Revenue Service to the effect that such Parent Benefit Plans are
qualified and exempt from federal income taxes under Section 401(a) and
501(a), respectively, of the Code and no such determination letter has been
revoked nor, to the knowledge of Parent any Parent Commonly Controlled
Entity, has revocation been threatened, nor has any such Parent Benefit
Plan been amended (or failed to be amended) since the date of its most
recent determination letter or application therefor in any respect that would
result in a loss of qualification or exempt status of any such Parent Benefit
Plan.
(iii) No person has engaged in a non-exempt "prohibited transaction"
(as such term is defined in Section 406 of ERISA or Section 4975 of the
Code) or any other breach of fiduciary responsibility that could subject
Parent, any of its subsidiaries, any officer of Parent or any of its
subsidiaries or any Parent Benefit Plan service provider to tax or penalty
under ERISA, the Code or other applicable law. There has been no "reportable
event" (as that term is defined in Section 4043 of ERISA) with respect to any
Parent Benefit Plan during the last five years.
(iv) With respect to any Parent Benefit Plan that is a Welfare Plan,
(Y) no such Parent Benefit Plan is funded through a "welfare benefit fund,"
as such term is defined in Section 419(a) of the Code, and (Z) each such
Parent Benefit Plan complies in all material respects with the applicable
requirements of COBRA.
(v) With respect to each Parent Benefit Plan, there are no actions,
suits or investigations or claims pending or, to the knowledge of Parent
or any of its Parent Commonly Controlled Entities, threatened with
respect to the assets thereof (other than routine claims for benefits),
and there are no facts that would give rise to any liability, action, suit,
investigation, or claim against any Parent Benefit Plan, any fiduciary or
plan administrator or other person dealing with any Parent Benefit Plan or
the assets of any such Parent Benefit Plan.
(vi) Each Parent Benefit Plan may be amended, terminated, modified or
otherwise revised by Parent or any Parent Commonly Controlled Entities as of
the Effective Time, including the elimination of any and all benefits under
any Parent Benefit Plan (except claims incurred but not reported under any
Welfare Plan or any benefit described in Section 411(d)(6) of the Code or
benefits under cash bonus plans, stock option and stock incentive plans,
employment agreements, consulting agreements and change-of-control
agreements; provided that copies of such plans and agreements have been
provided to the Company's counsel).
(vii) There is no accrued liability with respect to a Parent Benefit
Plan except for which there exists a separate funding vehicle, with assets
equal to such liability, or an equal accrual on the balance sheets (except
for liabilities under cash bonus plans, stock option and stock incentive
plans, employment agreements, consulting agreements and change-of-control
agreements; provided that copies of such plans and agreements have been
provided to the Company's counsel).
(c) Parent and any Parent Commonly Controlled Entity do not maintain or
contribute to or have any other liability of any nature with respect to any
Parent Benefit Plan that is subject to Title IV of ERISA, subject to
Code Section 412, a "multiemployer plan" as defined in Section 4001 of
ERISA, a "multiemployer plan" within the meaning of Section 3(37) of ERISA,
a "multiple employer plan" within the meaning of Code Section 413(c) or a
"multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA. No Parent Benefit Plan provides post-retirement medical or life
insurance benefits, except as may be required by COBRA.
(d) For purposes of this Section 4.11, "Parent Material Adverse Effect" shall
mean a material adverse effect on the business, results of operations or
financial condition of Parent and its subsidiaries taken as a whole, after
taking into account the liabilities of Parent and its subsidiaries and any
other liabilities arising with respect to any Parent Benefit Plan, either
to such Parent Benefit Plan or any fiduciary, participant, beneficiary or
agent thereof (whether or not Parent and its subsidiaries are obligated
directly or indirectly for such liabilities).
Section 4.12 Trademarks, Patents and Copyrights. Parent and its
subsidiaries own, or possess adequate licenses or other valid rights to
use, all patents, patent rights, patents, trademarks, trademark rights,
trade names, trade name rights, copyrights, service marks, service xxxx
rights, trade secrets, applications to register and registrations for, the
foregoing trademarks, service marks, know-how and other proprietary rights
and information used in connection with the business of Parent and its
subsidiaries as currently conducted (the "Parent Proprietary Rights"), and
no assertion or claim has been made in writing challenging the validity of
any of the Parent Proprietary Rights. To the best knowledge of Parent, the
conduct of the business of Parent and its subsidiaries as currently
conducted does not conflict in any way with any patent, patent rights,
license, trademark, trademark right, trade name, trade name right, service
xxxx, copyright or other proprietary right of any other person. Except as
set forth in Schedule 4.12 of the Parent Disclosure Volume, Parent and its
subsidiaries have the unencumbered right to sell their products and services
(whether now offered for sale or under development) free from any royalty or
other obligations to any third parties.
Section 4.13 Taxes. Parent and its subsidiaries have timely filed all
federal, state, local and foreign tax returns and reports required to be
filed by them through the date hereof and shall timely file all returns and
reports required on or before the Effective Time. Such reports and returns
are and will be true, correct and complete in all material respects. Parent
and its subsidiaries have paid and discharged all federal, state, local and
foreign taxes due from them, other than such taxes that are being contested
in good faith by appropriate proceedings and are adequately reserved as
shown in the audited consolidated balance sheet of Parent dated July 1, 1995
(the "Parent 1995 Balance Sheet"), except for such failures to so pay and
discharge which would not, individually or in the aggregate, have a Parent
Material Adverse Effect. Neither the IRS nor any other taxing authority or
agency, domestic or foreign, is now asserting or, to the best knowledge of
Parent, threatening to assert against Parent or any of its subsidiaries any
deficiency or claim for additional taxes or interest thereon or penalties
in connection therewith that, if such deficiencies or claims were finally
resolved against Parent and its subsidiaries, would, individually or in the
aggregate, have a Parent Material Adverse Effect. The accruals and
reserves for taxes (including interest and penalties, if any, thereon)
reflected in the Parent 1995 Balance Sheet are adequate in accordance
with generally accepted accounting principles. Parent and its subsidiaries
have withheld or collected and paid over to the appropriate governmental
authorities or are properly holding for such payment all taxes required by
law to be withheld or collected, except for such failures to have so
withheld or collected and paid over to be so holding for payment that would
not, individually or in the aggregate, have a Parent Material Adverse
Effect. There are no material liens for taxes upon the assets of Parent
and its subsidiaries. Neither Parent nor any of its subsidiaries has agreed
to or is required to make any adjustment under Section 481(a) of the Code.
Neither Parent nor any of its subsidiaries has made an election under Section
341(f) of the Code. For purposes of this Section 4.13, where a determination
of whether a failure by Parent or any of its subsidiaries to comply with the
representations herein has a Parent Material Adverse Effect is necessary,
such determination shall be made on an aggregate basis with all other
failures within this Section 4.13.
Section 4.14 Labor Matters. There is not currently, and within the last
three years neither Parent nor any subsidiary of Parent has experienced,
any strike, picketing, boycott, work stoppage or slow down or union
organization activity. No employee of Parent or any subsidiary of Parent
is represented by a union or any similar entity and there is no request
for representation pending. Parent has no knowledge (i) of any allegation,
charge or complaint of unfair labor practice, employment discrimination or
other matter relating to the employment of labor pending or threatened
against Parent or any subsidiary of Parent, (ii) of any basis for any such
allegation, charge or complaint or (iii) that it, or any subsidiary of
Parent, has not complied with all applicable laws relating to the
employment of labor that could reasonably be expected to have, either
individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.15 Affiliate Transactions. Parent has set forth in Schedule 4.15
of the Parent Disclosure Volume each material transaction involving
the transfer of any cash, property or rights to or from Parent or any
subsidiary of Parent from, to or for the benefit of any affiliate or former
affiliate of Parent or any subsidiary of Parent or any officer, director,
employee or greater than five percent shareholder of the Company ("Parent
Affiliate Transactions") during the period from July 2, 1994 through the
date hereof and any existing commitments of Parent or any subsidiary
of Parent to engage in the future in any material Parent Affiliate
Transactions.
Section 4.16 Opinion of Financial Advisor. Parent has received the opinion
of Xxxxx Xxxxxxx, Inc. ("Xxxxx Xxxxxxx"), dated as of the date hereof, to the
effect that, as of such date, the Merger Consideration is fair to the
stockholders of Parent from a financial point of view, a copy of which
opinion has been delivered to the Company.
Section 4.17 Vote Required. The affirmative vote of the holders of a
majority of the shares of Parent Common Stock cast at the Parent Stockholders
Meeting, provided that the total vote cast on the Parent Vote Matter
represents over 50% of the outstanding shares of Parent Common Stock, is
the only vote of the holders of any class or series of Parent's capital
stock necessary to approve the Parent Vote Matter. The sole stockholder
of Sub has approved this Agreement and the Merger and no further vote of
such stockholder is required with respect to such matters.
Section 4.18 Brokers. No broker, finder or investment banker (other than
Xxxxx Xxxxxxx) is entitled to any brokerage, finder's or other fee or
commission from Parent in connection with the transactions contemplated
herein by this Agreement. The Parent has heretofore furnished to the
Company a complete and correct copy of all agreements between Parent and
Xxxxx Xxxxxxx pursuant to which such firm would be entitled to any payment
relating to the transactions contemplated by this Agreement.
Section 4.19 Disclosure. To the best knowledge of Parent and Sub, all
material facts relating to the business, operations, properties, assets,
liabilities (contingent or otherwise) and financial condition of Parent
and its subsidiaries have been disclosed to the Company in or in connection
with this Agreement. The representations, warranties and statements made
by Parent and Sub in this Agreement and in the certificates delivered pursuant
hereto do not contain any untrue statement of a material fact, and, when taken
together, do not omit to state any material fact necessary to make such
representations, warranties and statements, in light of the circumstances
under which they are made, not misleading.
Section 4.20 Insurance. During the last five years (or, with respect to any
particular type of claim, the applicable statute of limitations with respect
to such claim) Parent has maintained liability insurance policies of a
commercially reasonable amount and nature consistent for a company of its
size and with its operations at such time.
Section 4.21 Definition of Parent's Knowledge. As used in this Agreement,
the phrase "to the knowledge of Parent" or "to the best knowledge of Parent"
(or words of similar import) means the knowledge or the best knowledge
of those individuals identified in Schedule 4.21 of the Parent Disclosure
Volume, and includes any fact, matter or circumstance which any of
such individuals, as an ordinary and prudent business person employed in
the same capacity in the same type and size of business as Parent,should
have known.
ARTICLE V
COVENANTS
Section 5.01 Conduct of Respective Businesses of the Company and Parent
Pending the Merger. Each of the Company and Parent covenants and agrees
as to itself and each of its subsidiaries that between the date of this
Agreement and the Effective Time, it shall carry on its respective
businesses in the usual, regular and ordinary course, consistent with
past practice, and each of them shall use its reasonable best efforts to
preserve intact its present business organizations, keep available the
services of its present officers and employees, keep in effect casualty,
public liability, worker's compensation and other insurance policies in
coverage amounts not less than those in effect as of the date of this
Agreement, to preserve and protect the Company Proprietary Rights (in the
case of the Company) and the Parent Proprietary Rights (in the case of
Parent) and preserve its relationships with customers, franchisees,
suppliers, licensors and other persons with which it has significant
business dealings. Without limiting the generality of the foregoing,
neither the Company nor Parent nor any of their respective subsidiaries
shall, between the date of this Agreement and the Effective Time, directly
or indirectly, do, or propose or agree to do, any of the following without
the prior written consent of the other:
(a) (i) Declare, set aside or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect
of any of its capital stock, except for any dividend from a subsidiary to
Parent or the Company, as the case may be, (ii) split, combine, reclassify
or subdivide any of its capital stock or (iii) repurchase, redeem or
otherwise acquire any of its capital stock;
(b) Authorize for issuance, issue, sell, deliver or agree or commit to issue,
sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise)
(collectively, "Issue") any shares of stock of any class or any other
securities (including indebtedness having the right to vote) or equity
equivalents (including, without limitation, phantom stock or stock
appreciation rights), other than (i) the issuance of capital stock in
connection with (X) the exercise of options, warrants, convertible
debentures, convertible preferred stock or other similar rights outstanding
as of the date of this Agreement and in accordance with the terms of such
options, warrants, convertible debentures, convertible preferred stock or
other rights in effect on the date of this Agreement or (Y) options granted
under Parent's stock option plans after the date of this Agreement, or
(ii) is otherwise permitted to be issued pursuant to this Agreement;
(c) In the case of the Company, acquire or encumber (other than in
connection with the opening of new Company-owned restaurants) or sell,
lease, transfer or dispose of any assets other than in the ordinary course
of business;
(d) In the case of the Company, other than in connection with activities
consistent with expansion of Company's restaurant operations, incur any
long-term indebtedness for borrowed money, guarantee any indebtedness,
issue or sell debt securities or warrants or rights to acquire any debt
securities, guarantee (or otherwise become liable or potentially liable
for) any debt of others, make any loans, advances or capital contributions;
mortgage, pledge or otherwise encumber any material assets; or create or
suffer any material lien thereupon other than in the ordinary course of
business consistent with prior practice or incur any short-term indebtedness
for borrowed money except for credit facilities in existence on the date
hereof;
(e) In the case of the Company, pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than any payment, discharge or satisfaction
(i) in the ordinary course of business consistent with past practice,
(ii) in connection with the transactions contemplated by this Agreement,
or (iii) in accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the consolidated financial statements (or
the notes thereto) of the Company and its consolidated subsidiaries or Parent
and its consolidated subsidiaries, as the case may be;
(f) Change any of the accounting principles or practices used by it (except
as required by generally accepted accounting principles);
(g) In the case of the Company, increase the compensation payable or to
become payable to its officers or employees, except for increases in the
ordinary course of business in accordance with past practice, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director or officer of it or any of its subsidiaries,
or establish, adopt, enter into or amend in any material respect or take
action to accelerate any rights or benefits under any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer or employee;
(h) Amend or otherwise change the Company's Articles of Incorporation
or By-Laws (in the case of the Company) Parent's Certificate of
Incorporation or By-Laws (in the case of Parent) or Sub's Articles of
Incorporation or By-laws(in the case of Parent);
(i) In the case of the Company, other than in connection with activities
consistent with expansion of Company's restaurant operations, (i) enter
into a new agreement, contract or commitment involving payment to or by the
Company of $10,000 or more or (ii) amend any existing agreement that could
reasonably be expected to have a Company Material Adverse Effect;
(j) In the case of the Company,other than in connection with activities
consistent with expansion of the Company's restaurant operations, enter
into or modify or amend any lease, license agreement, franchise agreement
or development agreement;
(k) Knowingly engage in any transaction or cause any fact or circumstance to
occur which would preclude accounting for the Merger (as structured by this
Agreement, the Stockholders Agreement and the Employment Agreement) as a
pooling of interests if consummated at any time from the date hereof
through June 30, 1996; or
(l) Enter into an agreement to take any of the foregoing actions or take, or
enter into an agreement to take, any action that would result in any of
the conditions to the Merger set forth in Article VI not being satisfied.
Section 5.02 No Solicitations. (a) Unless and until this Agreement shall
have terminated in accordance with its terms, neither the Company nor any
of its subsidiaries shall (and the Company and each of its subsidiaries
shall use its best efforts to cause all of its officers, directors,
employees, agents, representatives and advisors, including, without
limitation, investment bankers, attorneys and accountants, not to), directly
or indirectly, solicit, initiate, knowingly encourage or enter into any
agreement with respect to or participate in negotiations with, provide any
confidential information to, enter into any agreement with or (except, as
advised in a written opinion of Xxxxxxxxxx & Xxxxx, P.A. or other counsel
reasonably acceptable to Parent, as may be required by applicable state
corporate law with respect to the provisions of materials to a stockholder
of the Company) otherwise cooperate in any way in connection with, any Third
Party (as hereinafter defined) concerning any Competing Transaction (as
defined in Section 7.01). For purposes of this Agreement, "Third Party"
shall mean any corporation, partnership, person or "group" (as defined in
Section 13(d)(3) of the Exchange Act and the Rules and Regulations
thereunder) other than Parent, Sub, any affiliate of Parent or Sub or any
of their respective directors, officers, employees, representatives,
advisors and agents. The Company agrees to terminate, immediately following
the execution of this Agreement, all pending discussions or negotiations
with any Third Party with respect to any possible Competing Transaction (as
defined in Section 7.01).
(b) The Company will notify Parent and Sub orally, within twenty-four hours,
and in writing, as promptly as practicable (i) of the identity of any Third
Party from which it or any of its subsidiaries or any of their respective
officers, directors, employees, agents, representative or advisors receives
any request for information, any inquiry or any proposal to initiate
discussions or negotiations with respect to, or relating to, a Competing
Transaction or any of the other matters set forth in Section 5.02(a) and
(ii) if applicable, the terms of such Competing Transaction. If such
request, inquiry or proposal is in writing, the Company will deliver to
Parent and Sub a copy of such request, inquiry or proposal within
twenty-four hours of its receipt.
Section 5.03 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, each of the Company and Parent shall (and
shall cause its subsidiaries and officers, directors, employees, auditors and
agents to) afford the officers, employees and agents of the other party
(the "Respective Representatives") reasonable access at all reasonable
times to its officers, employees, agents, properties, offices, plants and
other facilities, books and records, and shall furnish such Respective
Representatives with all financial, operating and other data and information
as may be reasonably requested.
(b) All information obtained by the Company or Parent pursuant to this
Section 5.03 shall be kept confidential in accordance with the terms of the
agreement or agreements covering confidentiality of materials entered into
between each party or between a party and a financial advisor to a party in
connection with a contemplated transaction between the parties.
(c) No investigation pursuant to this Section 5.03 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 5.04 Indemnification and Insurance. (a) The provisions in the
charter and by-laws of each of the Surviving Corporation and Parent with
respect to indemnification of officers and directors and limitations on
their personal liability shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner
that would adversely affect the rights thereunder of individuals who at
any time prior to the Effective Time were directors or officers of the
Company ("Company Parties") in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification
is required by law. Parent shall guarantee the obligations of the
Surviving Corporation arising out of such provisions or, at its option,
in the alternative shall purchase a one-year directors' and officers'
"tail" insurance policy covering the obligations of the Surviving
Corporation in such regard.
(b) This Section 5.04 is intended for the irrevocable benefit of, and to
grant third party rights to, the Company Parties and shall be binding on
all successors and assigns of Parent, the Company and the Surviving
Corporation. Each of the Company Parties shall be entitled to enforce the
covenants contained in this Section 5.04.
(c) In the event the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all
or substantially all of its properties and assets to any person or
entity, 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 5.04.
Section 5.05 Certain Benefits. (a) Parent and Sub agree that the Company
and its subsidiaries, and the Surviving Corporation and its subsidiaries
after the Effective Time, will provide benefit plans to employees of the
Company and its subsidiaries that, at the option of the Parent, either
(i) will be no less favorable, in the aggregate, than those provided by
Parent and its subsidiaries to their employees or (ii) will, in the
aggregate, be no less favorable than those provided by the Company and
its subsidiaries to their employees prior to the date of this Agreement.
Nothing contained in this Section 5.05(a) shall be construed to grant
any right of continued employment to any present employee of the Company
or any of its subsidiaries.
(b) If any employee of the Company or any of its subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Parent,
any of its affiliates or the Surviving Corporation, such employee shall
be given credit under such plan for all service prior to the Effective
Time with the Company and its subsidiaries or any predecessor employer
(to the extent such credit was given by the Company under a similar plan)
for purposes of eligibility (including, without limitation, waiting
periods), vesting and vacation accrual.
(c) Except for normal increases in the ordinary course of business
that are consistent with past practices and that, in the aggregate, do
not result in a material increase in benefits or compensation expense
to the Company, the Company will not, and will not permit any of its
Commonly Controlled Entities to, adopt or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or welfare of
any director, officer or employee that increase in any manner the
compensation, retirement, welfare or fringe benefits of any director,
officer or employee or pay any benefit not required by any existing plan
or arrangement (including without limitation the granting of stock options)
or take any action or grant any benefit not expressly required under the
terms of any existing agreements, trusts, plans, funds or other such
arrangements or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 5.06 Registration Statement; Joint Proxy Statement. (a) As
promptly as practicable after the execution of this Agreement, (i) Parent
and the Company shall prepare and file with the SEC a joint proxy
statement relating to the meetings of the stockholders of Parent and the
Company to be held in connection with the Merger and the Parent Vote Matter
(together with any amendments thereof or supplements thereto, the "Proxy
Statement") and (ii) Parent shall prepare and file with the SEC a
registration statement on Form S-4 (the "Form S-4") in which the Proxy
Statement shall be included as part (together with the Proxy Statement
and all amendments to the Proxy Statement and the Form S-4, the
"Registration Statement") in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to the
stockholders of the Company pursuant to the Merger. Each of the Company
and Parent shall use their reasonable best efforts to have or cause the
Registration Statement to become effective as promptly as practicable, and
shall take all or any action required under any applicable federal or
state securities laws in connection with the issuance of shares of Parent
Common Stock pursuant to the Merger. Each of the Company and Parent shall
furnish all information concerning itself to the other as the other may
reasonably request in connection with such actions and the preparation of
the Registration Statement. As promptly as practicable after the
Registration Statement shall have become effective, each of Parent
and the Company shall mail the Registration Statement to its respective
stockholders. The Registration Statement shall include the recommendation
of the Board of Directors of each of Parent and the Company in favor of the
Merger, the Merger Agreement and the Parent Vote Matter, as the case may
be; provided, however, that nothing contained in this Section 5.06 shall
prohibit the Board of Directors of the Company or Parent from failing to
make the recommendation if the Board of Directors of Parent or the Company,
as the case may be, has determined in good faith, after consultation with
and based upon the written advice of independent legal counsel, that such
action is necessary for such Board of Directors to comply with its
fiduciary duties to its stockholders under applicable law.
(b) The information supplied by Parent for inclusion in the Registration
Statement shall not, at (i) the time the Registration Statement is declared
effective, (ii) the time the Registration Statement (or any amendment
thereof or supplement thereto) is first mailed to the stockholders of
Parent and the Company, (iii) the time of each of the Stockholders Meetings
(as defined in Section 5.07), and (iv) the Effective Time, 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 not misleading. If at any time prior to the Effective Time any
event or circumstance relating to Parent or any of its subsidiaries, or
any of their respective officers or directors, should be discovered by
Parent which should be set forth in an amendment or a supplement to the
Registration Statement, Parent shall promptly inform the Company.
(c) The information supplied by the Company for inclusion in the
Registration Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Registration Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company and Parent, (iii) the time of each of the
Stockholders Meetings (as defined in Section 5.07), and iv) the Effective
Time, 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 not misleading. If at any time prior to the
Effective Time any event or circumstance relating to the Company or any
its subsidiaries, or any of their respective officers or directors, should
be discovered by the Company that should be set forth in an amendment or
a supplement to the Registration Statement, the Company shall promptly
inform Parent.
Section 5.07 Stockholders' Meetings. Parent shall call and hold a meeting
of its stockholders, and the Company shall call and hold a meeting of its
stockholders (collectively, the "Stockholders' Meetings") as promptly as
practicable for the purpose of voting upon the approval, in the case of
the Company, of the Merger and the Merger Agreement and, in the case of
Parent, of the Parent Vote Matter, and Parent and the Company shall use
their reasonable best efforts to hold the Stockholders' Meetings on the
same day and as soon as practicable after the date on which the
Registration Statement becomes effective. The Company and Parent shall
use their reasonable best efforts to solicit from their stockholders
proxies in favor of the approval of the Merger and Merger Agreement or the
Parent Vote Matter, as the case may be, and shall take all other action
necessary or advisable to secure the vote or consent of stockholders
required by Delaware Law or Minnesota law, as the case may be, to obtain
such approvals. Parent shall vote the shares of Company Common Stock for
which it will act as proxy at the Company's Stockholder Meeting pursuant
to the Stockholders Agreement in favor of approval of the Merger and
the Merger Agreement.
Section 5.08 Letters of Accountants. Provided Parent gives to Xxxxxx
Xxxxxxxx LLP a customary representation letter, the Company shall deliver
to Parent "comfort" letters of Xxxxxx Xxxxxxxx LLP, the Company's
independent public accountants, dated and delivered the date on which
the Registration Statement shall become effective and as of the Effective
Time, and addressed to Parent, in form and substance reasonably satisfactory
to Parent, to the effect that:
(i) they are independent accountants within the meaning of the Securities
Act and the Exchange Act;
(ii) in their opinion, the financial statements of the Company included in
the Registration Statement that were reported on by such firm comply as to
form in all material respects with the applicable accounting requirements
of the Securities Act and the Exchange Act;
(iii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; their
limited review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited interim
financial information for the period since December 31, 1994, carrying out
certain specified procedures (but not an examination in accordance with
generally accepted auditing standards) which would not necessarily reveal
matters of significance with respect to the comments set forth in such
letter; a reading of the minutes of the meetings of the stockholders,
the board of directors and the executive, compensation, and audit
committees of the board of directors; and inquiries of certain officials
of the Company who have responsibility for financial and accounting matters
of the Company and its subsidiaries as to transactions and events
subsequent to December 31, 1994, nothing came to their attention which
caused them to believe that:
(1) any unaudited financial statements included in the Registration
Statement do not comply in form in all material respects with applicable
accounting requirements of the Act and with the published rules and
regulations of the Commission with respect to registration statements
on Form S-4; or that any material modifications should be made to such
unaudited financial statements for them to be in conformity with generally
accepted accounting principles applied on a basis substantially consistent
with that of the audited financial statements included in the Registration
Statement,
(2) with respect to the period subsequent to the unaudited interim balance
sheet of the Company set forth in the Registration Statement, there were
any changes, at a specified date not more than five business days prior to the
date of the letter, in the long-term debt or notes payable of the Company
and its subsidiaries or capital stock of the Company or increases in the
accumulated deficit of the Company as compared with the amounts shown on
such balance sheet included in the Registration Statement, or for the period
from the date of such balance sheet to such specified date there were any
decreases, as compared with the corresponding period in the preceding
quarter, in operating revenues, or any decreases, as compared with the
corresponding period in the preceding year, in operating income or net
income before income taxes or in total or per share amounts of net income
of the Company, except in all instances for changes or decreases set forth
in such letter, in which case the letter shall be accompanied by an
explanation by the Company as to the significance thereof unless such
explanation is not deemed necessary by Parent; and
(iv) they have performed certain other specified procedures as a result of
which they determined that certain information (including specified dollar
amounts, numbers of shares, and percentages of revenues and earnings)
of an accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the general
accounting records of the Company and its subsidiaries) set forth in the
Registration Statement, agrees with the accounting records of the Company
and its subsidiaries, excluding any questions of legal interpretation.
Section 5.09 Further Action; Reasonable Best Efforts. (a) Upon the terms
and subject to the conditions hereof, each of the parties hereto shall
(i) make promptly its respective filings, and thereafter make any other
required submissions under the HSR Act with respect to the transactions
contemplated herein, (ii) use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
herein including, without limitation, using its reasonable best efforts to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Entities and all parties to
contracts with Parent and the Company and their respective subsidiaries
as are necessary for the consummation of the transactions contemplated
herein. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of each party to this Agreement shall
use their reasonable best efforts to take all such action. Each party
shall promptly consult with the other with respect to, provide any
necessary information with respect to and provide the other (or its counsel)
with copies of, (i) all filings made by such party with any Governmental
Entity or any other person in connection with the execution of this
Agreement and the consummation of the transactions contemplated hereby
and (ii) all other written materials submitted or prepared by any such
party concerning obtaining all licenses, permits, consents, approvals,
authorizations and orders that are required to be obtained in connection
with the execution of this Agreement and the consummation of the
transactions contemplated by this Agreement.
(b) Each party shall use its best efforts not to take any action, or enter
into any transaction, that would cause any of its representations or
warranties contained in this Agreement to be untrue or result in a breach of
any covenant made by it in this Agreement.
(c) The Company will take no action to assert or cooperate (other than as
required by law) with a Third Party who asserts that the voting rights of
the shares of common stock of the Company that are subject to that certain
stockholders Agreement of even date herewith among certain Stockholders of
the Company and Parent (the "Stockholders Agreement") are adversely
affected by the execution and delivery of the Stockholders' Agreement as a
result of the provisions of Section 302A.671 of the Minnesota Business
Corporation Act or any other antitakeover or business combination statute
under Minnesota law.
Section 5.10 Public Announcements. Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated
herein and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which consent shall
not be unreasonably withheld; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make such
public statement as may be required by law if it has used all reasonable
efforts to consult with the other party and to obtain such party's consent
but has been unable to do so in a timely manner.
Section 5.11 Affiliates of the Company. Within 30 days after the date of
this Agreement, (a) the Company shall deliver to Parent a letter
identifying all persons who may be deemed affiliates of the Company
under Rule 145 of the Securities Act ("Rule 145"), including, without
limitation, all directors and executive officers of the Company and (b) the
Company shall advise the persons identified in such letter of the resale
restrictions imposed by applicable securities laws. The Company shall use
its best efforts to obtain as soon as practicable from any person who
may be deemed to have become an affiliate of the Company after the
Company's delivery of the letter referred to above and prior to the
Effective Time, a written agreement substantially in the form of Exhibit A.
Section 5.12 Conveyance Taxes. Parent and the Company shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales,
use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
Section 5.13 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty
contained in this Agreement to be untrue or inaccurate or (y) any covenant,
condition or agreement contained in this Agreement not to be complied with
or satisfied and (ii) any failure of the Company or Parent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.14 shall not limit
or otherwise affect the remedies available hereunder to the party receiving
such notice.
Section 5.14 Tax Opinion Matters. Each of Parent, Sub and the Company will
deliver to counsel to the parties hereto a document containing, to the
extent reasonably required, the representations, warranties and agreements
necessary for counsel to the parties to render the opinions described in
Sections 6.02(c) and 6.03(c).
Section 5.15 Interim Financing Arrangement. Parent and Company shall
promptly negotiate and enter into a financing arrangement on the terms
set forth on Exhibit B.
ARTICLE VI
CONDITIONS
Section 6.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger and
the other transactions contemplated herein shall be subject to the
satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived, in whole or in part, to the extent
permitted by applicable law:
(a) Effectiveness of the Registration Statement. The Registration Statement
shall have been declared effective by the SEC under the Securities Act.
No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall
have been initiated or, to the knowledge of Parent or the Company,
threatened by the SEC.
(b) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the
Company, and the Parent Vote Matter shall have been approved and adopted
by the requisite vote of the stockholders of Parent. In addition, the
holders of the requisite number of shares of Company Common Stock
sufficient, either alone or in combination with other factors (including
payment of cash in lieu of fractional shares), to preclude accounting for
the Merger as a pooling of interests or to obtain tax free treatment for
the Merger under Section 368(a) of the Code shall not have perfected or
preserved dissenters' rights under applicable law with respect to the
adoption of this Agreement.
(c) No Injunction or Restraints; Illegality. The consummation of the Merger
shall not be prohibited by any injunction, order, decree or ruling (an
"Injunction") of a United States federal or state court of competent
jurisdiction (each party agreeing to use its best efforts to have any
such Injunction stayed or reversed), and there shall not have been any
action taken or any statute, ruleor regulation enacted, promulgated or
deemed applicable to the Merger, or any executive order or decree issued,
by any Government Entity that is in effect and that makes consummation of
the Merger illegal.
(d) HSR Act. The applicable waiting period under the HSR Act shall have
expired or been terminated.
(e) Approvals; Consents. Other than the filing of merger documents in
accordance with Minnesota Law, all authorizations, consents (including
the consent of Parent's lender as set forth in Schedules 4.04 and 4.05),
waivers, orders and approvals required to be obtained, and all filings,
notices and declarations required to be made, by Parent and the Company
prior to the consummation of the Merger and the transactions contemplated
hereunder shall have been obtained from, and made with, all required
Governmental Entities and all other persons except for such authorizations,
consents, waivers, orders, approvals, filings, notices or declarations
the failure to obtain or make would not have a Material Adverse Effect
(as defined in Section 8.11), at or after he Effective Time, on (i) the
Company and its subsidiaries taken as a whole or (ii) Parent and its
subsidiaries taken as a whole.
(f) Accountants' Letters. Each of Parent and the Company shall have
received letters, dated as of the Effective Time, from Deloitte &
Touche LLP and Xxxxxx Xxxxxxxx LLP to the effect that the Merger will
qualify for pooling of interests accounting treatment under Accounting
Principles Board Opinion No. 16 if closed and consummated in accordance
with this Agreement.
Section 6.02 Additional Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger and the transactions
contemplated herein are also subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by
Parent and Sub in their sole discretion:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as
of the Effective Time as though made on and as of their Effective Time
(except for such representations and warranties which are qualified by
their terms by a reference to materiality or a Company Material Adverse
Effect, which representations and warranties as so qualified shall be
correct in all respects as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time). Parent
and Sub shall have received a certificate signed on behalf of the
Company by the Chief Executive Officer and Chief Financial Officer of
the Company to the foregoing effect.
(b) Agreement and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time. Parent and Sub shall have received a certificate signed
on behalf of the Company by the Chief Executive Officer and Chief Financial
Officer of the Company to the foregoing effect.
(c) Tax Opinion. Parent and Sub shall have received the opinion of Xxxxxxx,
Procter & Xxxx dated on or about the date that is two business days prior
to the date the Registration Statement is first mailed to stockholders of
Parent and the Company, reasonably acceptable to Parent and Sub, and
subject to customary conditions and qualifications, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization qualifying under the provisions of Sections 368(a) of the
Code, which opinion shall not have been withdrawn or modified in any
material respect.
(d) Material Adverse Change. Except for any event disclosed in the
Company's SEC Reports filed prior to the date of this Agreement, there
shall not have occurred any change concerning the Company or any of its
subsidiaries that, individually or in the aggregate, has had a Material
Adverse Effect on the Company and its subsidiaries taken as a whole
since December 31, 1994, and Parent and Sub shall have received a
certificate signed on behalf of the Company by the Chief Executive Officer
and Chief Financial Officer of the Company to the foregoing effect.
(e) Additional Tax Statement. Parent shall have received a statement dated
as of immediately prior to the Effective Time, from the Company to the
effect that the Company Common Stock is not a "U.S. real property interest."
Such statement shall be in compliance with Treasury Regulations Sections
1.897-2(h) and 1.1445-2(c)(3).
Section 6.03 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement are also subject to the satisfaction of
following conditions, any or all of which may be waived by the Company in
its sole discretion:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as
of the Effective Time, as though made on and as of the Effective Time
(except for such representations and warranties which are qualified by
their terms by a reference to materiality or a Parent Material Adverse
Effect, which representations and warranties as so qualified shall be
correct in all respects as of the date of this Agreement and as of the
Effective Time as though made on and as Effective Time). The Company
shall have received a certificate signed on behalf of the Parent and Sub
by the Chief Executive Officers and Chief Financial Officers of Parent and
Sub to the foregoing effect.
(b) Agreements and Covenants. Parent and Sub shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate signed
on behalf of the Parent and Sub by the Chief Executive Officers and Chief
Financial Officers of Parent and Sub to the foregoing effect.
(c) Tax Opinion. The Company shall have received the opinion of Xxxxxxxxxx
& Xxxxx, P.A. dated on or about the date that is two business days prior
to the date the Registration Statement to first mailed to stockholders of
the Company and Parent, reasonably acceptable to the Company, and subject
to customary conditions and qualifications, to the effect that the Merger
will be treated for federal income tax purposes as a tax-free reorganization
qualifying under the provisions of Sections 368(a) of the Code, which
opinion shall not have been withdrawn or modified in any material respect.
(d) Material Adverse Change. Except for any event disclosed in Parent's SEC
Reports filed prior to the date of this Agreement, there shall not have
occurred any change concerning Parent or any of its subsidiaries that,
individually or in the aggregate, has had a Material Adverse Effect on
Parent and its subsidiaries taken as a whole since July 1, 1995, and the
Company shall have received a certificate signed on behalf of Parent and
Sub by the Chief Executive Officers and Chief Financial Officers of
Parent and Sub to the foregoing effect.
ARTICLE VII
TERMINATION AND AMENDMENT
Section 7.01 Termination. (a) This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval and adoption
of this Agreement by the stockholders of the Company or the approval by
the stockholders of Parent of the Parent Vote Matter:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if any United States federal or state
court of competent jurisdiction or other Government Entity shall have
issued an Injunction or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such Injunction or other
action shall have become final and non-appealable;
(c) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if
any representation or warranty of the Company shall have become untrue,
in each case such that the conditions set forth in Section 6.02(a) or
Section 6.02(b), as the case maybe, would be incapable of being satisfied
by June 30, 1996; provided that, in any case, a willful breach shall be
deemed to cause such conditions to be incapable of being satisfied for
purposes of this Section 7.01(c);
(d) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Sub set forth in this
Agreement, or if any representation or warranty of Parent or Sub shall
have become untrue, in either case such that the conditions set forth
in Section 6.03(a) or Section 6.03(b), as the case may be, would be
incapable of being satisfied by June 30, 1996; provided that, in any case,
a willful breach shall be deemed to cause such conditions to be incapable
of being satisfied for purposes of this Section 7.01(d);
(e) by Parent, if (i) the Board of Directors of the Company shall have
failed to make or shall withdraw, modify or change its recommendation
of this Agreement or the Merger or shall have resolved to do any of the
foregoing, or (ii) a Third Party shall have commenced (as such term is
defined in Rule 14d-2 of the Exchange Act) and consummated a tender offer
or exchange offer for 20% or more of the outstanding shares of Company
Common Stock;
(f) by either Parent or the Company if (i) the Merger and the Merger
Agreement shall have failed to receive the requisite vote for approval and
adoption by the stockholders of the Company (except that Parent may not
terminate under this clause 7.01(f)(i) if Parent failed to vote for such
matters the shares of Company Common Stock with respect to which it had
authority to act as proxy at the Company Stockholder Meeting and such
matters would have been approved had such shares been voted for such
matters) or (ii) the Parent Vote Matter shall have failed to receive the
requisite vote for approval and adoption by the stockholders of Parent; or
(g) by either Parent or the Company, if the Merger shall not have been
consummated on or before June 30, 1996; or
(h) by Company if (i) the Board of Directors of Parent shall have failed
to make or shall withdraw, modify or change its recommendation of this
Agreement or the Merger or shall have resolved to do any of the foregoing,
or (ii) a Third Party shall have commenced (as such term is defined in
Rule 14d-2 of the Exchange Act), or shall have filed a Registration
Statement under the Securities Act, with respect to a tender offer or
exchange offer for 20% or more of the outstanding shares of Parent Common
Stock.
The right of any party hereto to terminate this Agreement pursuant to this
Section 7.01 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective employees, officers,
directors, agents, representatives or advisors, whether prior to or after
the execution of this Agreement. For purposes of this Agreement, a
"Competing Transaction" shall mean any of the following involving the
Company or any of its subsidiaries: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction, (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of
20% or more of the assets of the Company and its subsidiaries taken as a
whole, in a single transaction or series of transactions, (iii) any tender
offer or exchange offer for 20% or more of the outstanding shares of
Company Common Stock or the filing of a registration statement under
the Securities Act in connection therewith, (iv) the issuance, sale or
other disposal by the Company (including by way of merger, consolidation,
share exchange or any similar transaction) of securities representing, or
convertible into or exercisable for the acquisition of, 20% or more of the
voting power of the Company or any of its subsidiaries or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.
Section 7.02 Effect of Termination. (a) Except as set forth in Section 8.01,
in the event of the termination and abandonment of this Agreement pursuant
to Section 7.01 hereof, this Agreement shall forthwith become void
and have no effect, without any liability on the part of any party hereto
or its affiliates, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease; provided that nothing contained
in this Section 7.02 shall relieve any party from liability for any breach
of this Agreement except as provided in Section 7.02(f) or shall relieve
the Company from liability under this Section 7.02 except as provided in
Section 7.02(f).
(b) If Parent terminates this Agreement pursuant to Section 7.01(c) or
pursuant to Section 7.01(e) or 7.01(f)(i), then, within ten (10) days of
the date of such termination (or within 45 days of such termination if
Company acknowledges to Parent in writing within ten days of such
termination that it is obligated to pay the Termination Fee with no
right of offset for counterclaims, but such 45 day period shall end if a
Proceeding (as defined below) should occur), the Company shall pay to
Parent the Termination Fee (as defined below); provided, that, no such
Termination Fee will be due in the event of a termination of this Agreement
pursuant to Section 7.01(f)(i) if the average per share closing price of
Parent Common Stock on the Nasdaq National Market System over the twenty
(20) trading days immediately preceding the originally scheduled date
of the Company's Stockholder Meeting was less than $22.50.
(c) If at any time prior to or within one year after termination of this
Agreement (unless such termination was pursuant to Section 7.01(a), (b),
(d), (g), (h), (f)(ii) or, if the average per share closing price of Parent
Common Stock on the Nasdaq National Market System over the twenty (20)
trading days immediately preceding the date of the Company's Stockholder
Meeting was less than $22.50, f(i)) the Company enters into an agreement
relating to a Competing Transaction with a Third Party or the Company's
Board of Directors recommends or resolves to recommend to the Company's
stockholders approval or acceptance of a Competing Transaction with a Third
Party then, upon the entry into such agreement or the making of such
recommendation or resolution the Company shall pay to Parent the
Termination Fee.
(d) At any time prior to or within one year after termination of this
Agreement, the Company shall not enter into any agreement relating
to a Competing Transaction with a Third Party unless such agreement
provides that such Third Party shall, upon the execution of such agreement,
pay any Termination Fee due Parent under this Section 7.02.
(e) As used herein, the term "Termination Fee" means the sum of $2,800,000
paid in cash in immediately available funds to an account designated by
Parent, provided that the Termination Fee shall be reduced, on a dollar for
dollar basis, to the extent that payments are made to Parent under the
certain Stockholder's Agreement on account of Stockholder Fees (as
defined therein). The parties acknowledge and agree that the provisions
for payment of a Termination Fee are included herein in order to reimburse
Parent for incurring the costs and expenses related to entering into this
Agreement and consummating the transactions contemplated by this Agreement.
No more than one Termination Fee shall be paid under this Section 7.02.
The parties hereto agree that any Termination Fee that is paid to or due
Parent shall not be deemed to be liquidated damages, and that, subject to
Section 7.02(f), Parent's right to payment of the Termination Fee shall be
in addition to any other rights or remedies under contract, at law or in
equity to which Parent may be entitled.
(f) In the event of a termination giving rise to the right of Parent to
receive a Termination Fee, Company shall have no liability to Parent other
than the payment of such Termination Fee so long as (x) such Termination
Fee is paid in full when due, (y) there is no pending or threatened suit
or complaint brought by or on behalf of any stockholder of the Company
against Parent or Sub arising out of any matter relating to this Agreement
or the transactions contemplated in connection herewith (a "Proceeding"),
and (z) the Company and the persons who are parties to the Stockholders
Agreement have given a full release of any rights or claims they then or
may thereafter have arising out of this Agreement and have waived all
rights to instigate or pursue any Proceeding; provided that if at any
time a Proceeding is initiated by any stockholder of the Company or by
or on behalf of the Company (other than on behalf of the Company by Parent
or a stockholder of the Company controlled by Parent), then, during the
existence of such Proceeding, Parent's rights shall not be limited by
this clause (f).
Section 7.03 Amendment. This Agreement may be amended by the parties hereto,
by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, after
approval of the Merger or the Parent Vote Matter by the stockholders of
Parent or the Company, no amendment that under applicable law may not be
made without the approval of the stockholders of Parent or the Company may
be made without such approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
Section 7.04 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto or
(iii) waive compliance by the other party 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 if set forth
in a written instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Effectiveness of Representations, Warranties and Agreements.
Except as set forth in Section 8.01(b), the representations, warranties and
agreements of each party hereto shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
other party hereto, any person controlling any such party or any of their
officers or directors, whether prior to or after the execution of this
Agreement.
(b) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Article VII; except that the agreements set forth in Articles I,
II and VIII and Sections 5.04, 5.05(a) and (b) shall survive the Effective
Time and those set forth in Sections 5.03(b) and 7.02 and Article VIII
hereof shall survive termination.
Section 8.02 Notices. All notices and other communications hereunder shall be
in writing (and shall be deemed given upon receipt) if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
DAKA International, Inc.
Xxx Xxxxxxxxx Xxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxxxx, Xx.
General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to
Xxxxxxx, Procter & Xxxx
Exchange Place
Boston, MA 02109-2881
Attn: Xxxxxx Xxxxxxxx, P.C.
Tel: (000) 000-0000
Fax: (000) 000-0000
(b) if to the Company, to
Champps Entertainment, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx
President
Tel: (000) 000-0000
Tel: (000) 000-0000
with a copy to
Xxxxxxxxxx & Xxxxx, P.A.
1100 International Center
000 0xx Xxx. Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
Section 8.03 Descriptive Headings. The descriptive headings herein are
inserted for convenience only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Section 8.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.05 Entire Agreement; Assignment. This Agreement (together with the
Confidentiality Agreement, the Company Disclosure Volume, the Parent
Disclosure Volume, the exhibits hereto and the other documents delivered
pursuant hereto) (a) constitute the entire agreement of the parties and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof and (b) shall
not be assigned by operation of law or otherwise, provided that Parent may
cause Sub to assign its rights and obligations to Parent or any other direct
or indirect wholly-owned subsidiary of Parent that becomes a party to this
Agreement and agrees to perform and assume the obligations of Sub hereunder,
but no such assignment shall relieve either Parent or Sub of its obligations
hereunder if such assignee does not perform such obligations.
Section 8.06 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Minnesota without regard to any
applicable principles of conflicts of law.
Section 8.07 Specific Performance. Except when Section 7.02(f) limits the
remedies of Parent and Sub, the parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist and damages would be difficult to
determine, and that the parties shall be entitled to specific performance
of the terms hereof, without the posting of any bond whatsoever in addition
to any other remedy at law or equity.
Section 8.08 Expenses. Fees, expenses and all out-of-pocket costs and
expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred by the parties hereto shall
be borne solely and entirely by the party that has incurred such costs and
expenses; provided, however, that all costs and expenses related to
printing, filing and mailing the Registration Statement and all SEC and
other regulatory filing fees (including, without limitation, under the HSR
Act) incurred in connection with the Registration Statement shall be borne
equally by the Company and Parent.
Section 8.09 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person or persons any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement, except pursuant to Sections
5.04 and 5.05 hereof. Parent shall cause Sub to perform its obligations
hereunder and shall be fully liable, severally and jointly, for any failure
of Sub to perform such obligations.
Section 8.10 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 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 materially 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 to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled
to the extent possible.
Section 8.11 Certain Definitions. For purposes of this Agreement, the term:
(a) "affiliate" 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) With respect to any shares of Company Common Stock, a person shall be
deemed to be the "beneficial owner" of such shares (i) that such person or
any of its affiliates or associates (as such term is defined in Rule 12b-2
promulgated under the Exchange Act) beneficially owns, directly or indirectly
(ii) that such person or any of its affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time or the satisfaction of
certain conditions), pursuant to any agreement, arrangement or understanding
or upon the exercise of consideration rights, exchange rights, warrants or
options or otherwise or (B) the right to vote pursuant to any agreement,
arrangement or understanding or (iii) that are beneficially owned, directly
or indirectly, by any other persons with whom such person or any of its
affiliates or associates, or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares,
and with respect to any shares of capital stock of any person other than
the Company, beneficial ownership shall be determined in accordance with the
provisions of Rule 13(d)(3) of the Exchange Act;
(c) "control" (including the terms "controlled," "controlled by" and
"under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the ownership
of stock or as trustee or executor, by contract or credit arrangement or
otherwise;
(d) "subsidiary" or "subsidiaries" of Parent, the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which Parent, the Company, the Surviving
Corporation or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests, the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity;
(e) "person" shall mean any individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or government or
any agency or political subdivision thereof or any other entity; and
(f) "Material Adverse Effect" shall mean, when used with respect to any
person, a material adverse effect on the business, operations, results of
operations or financial condition of such person.
IN WITNESS WHEREOF,
the Company, Parent and Sub have caused this Agreement to be signed by their
respective officers thereunto duly authorized as of the date first written
above.
Attest: CHAMPPS ENTERTAINMENT, INC.
/s/Xxxxx Xxxxxx By:/s/Xxxx X. Xxxxxx
----------------------------- --------------------------
Secretary Name: Xxxx X. Xxxxxx
Title:
Attest: DAKA INTERNATIONAL, INC.
/s/Xxxxxxx X. Xxxxxxxxxxx, Xx. By:/s/Xxxxxxx X. Xxxxxxxxx
------------------------------ ---------------------------
Secretary Name: Xxxxxxx X. Xxxxxxxxx
Title:
Attest: CEI ACQUISITION CORP.
/s/Xxxxxxx X. Xxxxxxxxxxx, Xx. By:/s/Xxxxxxx X. Xxxxxxxxx
------------------------------ ---------------------------
Secretary Name: Xxxxxxx X. Xxxxxxxxx
Title:
Exhibit A - Form of Affiliate Letter
___________ __, 1995
DAKA International, Inc.
Xxx Xxxxxxxxx Xxxxx
00 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Gentlemen:
The undersigned, a holder of shares and/or options to purchase shares of
common stock, par value $.01 per share (collectively, the "Champps Shares"),
of Champps Entertainment, Inc. ("Champps"), is entitled to receive shares
and/or options to purchase shares of common stock, $.01 par value per share
(collectively, the "Daka Stock"), of DAKA International, Inc. ("Daka"), in
connection with the merger ("the Merger") of CEI Acquisition Corp. ("Sub"),
a wholly-owned subsidiary of Daka, into Champps as contemplated by the
Agreement and Plan of Merger dated October __, 1995 (the "Merger Agreement")
among Daka, Sub and Champps. The Daka Stock into which the undersigned's
Champps Shares will convert pursuant to the Merger shall be referred to
herein as "Daka Shares."
Rule 145. The undersigned has been advised that the issuance of the Daka
Shares in the Merger has been registered with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), on a
Registration Statement on Form S-4. However, the undersigned has also been
advised that, since at the time the Merger is submitted for a vote of
Champps stockholders the undersigned may be an "affiliate" of Champps
(although nothing contained herein should be construed as an admission
of such fact), as that term is used in Rule 145(c) promulgated under the
Act ("Rule 145"), the Daka Shares may be offered for sale, sold, assigned,
transferred, distributed or otherwise disposed of (any of such transactions
being referred to hereinafter as a "sale") by the undersigned only if
(i) the undersigned sells the Daka Shares in conformity with certain
provisions of Rule 144 promulgated under the Act as made applicable
pursuant to paragraph (d) of Rule 145, (ii) any subsequent sale of the Daka
Shares by the undersigned has been registered under the Act, or
(iii) in the opinion of counsel, reasonably satisfactory to Daka, some
other exemption from registration under the Act is available with respect
to any sale of the Daka Shares.
The undersigned understands that the requirements of Rule 145(d) will
differ depending upon how long the undersigned holds the Daka Shares and
whether the undersigned is or recently was an affiliate of Daka at the time
of sale. The undersigned understands that, in general, the provisions of
Rule 145(d) will permit resale of the Daka Shares within two years following
the Merger only in brokers' transactions where the aggregate number of shares
sold at any time, together with all sales of the undersigned's Daka Stock
during the preceding three-month period, does not exceed the greater of
(i) one percent (1%) of the total number of shares of Daka Stock outstanding
or (ii) the average weekly volume of trading in shares of Daka Stock on all
national securities exchanges during the four-week period preceding any such
sale.
The undersigned hereby represents to and covenants to Daka that the
undersigned will not sell the Daka Shares except pursuant to the provisions
of Rule 145, an effective registration statement or an exemption from
registration under the Act.
In the event that the undersigned intends to sell Daka Shares other than
(i) pursuant to Rule 145 or (ii) pursuant to an effective registration
statement, at least two business days prior to effecting any such sale the
undersigned will furnish Daka with an opinion of counsel, reasonably
satisfactory to Daka (the "Legal Opinion"), to the effect that some other
exemption from registration is available with respect to such sale.
Pooling of Interest. The undersigned acknowledges that Daka and Champps
contemplate that the Merger will be treated as pooling of interests" under
generally accepted accounting principles. In connection therewith, the
undersigned hereby represents and warrants to and covenants with Daka that
the undersigned will not, directly or indirectly, sell, transfer or
otherwise dispose of any shares of Daka Stock including the Daka Shares, or
cause any shares of Daka Stock including the Daka Shares, to be sold,
transferred or otherwise disposed of, until such time as unaudited financial
statements covering at least 30 days of the combined operations of Champps
and Daka following the Merger have been published by Daka.
Representation. The undersigned represents and warrants to Daka as follows:
(a) Set forth below the undersigned's signature hereto are the exact
numbers of Champps Shares which the undersigned owns of record only,
beneficially only and of record and beneficially; and
(b) Such ownership is free and clear of any security interest, lien,
encumbrance, charge, equity, claim or restriction whatsoever, except as
set forth below the undersigned's signature hereto and as may be imposed
by reason of the Act or the General Rules and Regulations thereunder.
The undersigned understands that Daka may, within the two-year period
immediately following the Merger, instruct its transfer agent to withhold
the transfer of any Daka Shares by the undersigned, but if the transfer is
pursuant to an effective registration statement or Rule 145 or if Daka
receives a Legal Opinion (in the case of a sale made pursuant to an
exemption from registration other than Rule 145) the transfer agent shall
effect such transfer.
The undersigned acknowledges that the undersigned has carefully read this
letter, has had the opportunity to discuss this letter with counsel and
understands the requirements hereof and the limitations imposed upon the
sale of the Daka Shares.
Very truly yours,
____________ __, 1995
Signature
Name
Champps Shares Owned of Record Only: ____
Champps Shares Owned Beneficially Only: ____
Champps Shares Owned Beneficially and of
Record: ____
Encumbrances Noted: _____________________
Exhibit B - Interim Financing Agreement
Summary of Interim Financing Arrangement
Parent will, or will cause one of its subsidiaries to, provide to the Company
additional financing for the development of Champps restaurants subject to
the terms and conditions outlined below:
1. Amount and Terms of Additional Financing:
up to $3,000,000 aggregate principal amount, with each
loan bearing interest at the rate of 10% per year, interest
on all loans payable quarterly in arrears and principal of
all loans payable in a single installment on October 10, 2000
(or such earlier date to which maturity is accelerated pursuant
to paragraph 4 below). In the alternative, Parent may satisfy
its commitment by providing credit enhancements to induce
third parties to provide financing to the Company upon terms
and conditions no less favorable than those described herein.
2. Conditions of Each Loan:
(i) consent of the Company's lender, if required, including
an agreement to subordinate with respect to liens described
in paragraph 3 below, and (ii) delivery of customary
documentation in form and substance reasonably
satisfactory to Parent and the Company.
3. Form of and Collateral for Each Loan:
Loans shall be provided by Parent from time to time as
required with respect to the development by the Company
of specific proposed Champps restaurants ("Approved
Projects"), so long as the site and plans for such proposed
new restaurant (including without limitation the terms of
any lease) are approved by Parent, which approval shall
not be unreasonably withheld. Parent shall provide such
loans with respect to any Approved Project in such amount
and in form as is reasonably acceptable to Parent giving
due regard to the circumstances affecting the development
of such restaurant, it being understood that such form is
presently contemplated to be a mortgage loan secured by
a first priority lien on and collateral assignment of all real
estate leases (or owned real estate, if any) with respect to
each Approved Project, a security interest in all furniture,
fixtures and equipment at such Approved Project (which
may be junior to any purchase money lien to the extent
such property is financed through loans from third parties),
collateral assignments of all licenses, permits and approvals
and a license upon reasonably acceptable terms and
conditions with respect to the "Champps" trademark and
trade dress effective in the event of foreclosure. The
subsidiaries of the Company will guarantee all obligations
of the Company to Parent.
4. Termination; Prepayment; Acceleration:
No further financing will be made available by Parent in
the event that the Merger Agreement terminates. All
principal of outstanding loans may be (a) repaid at any
time at the option of the Company and (b) declared
immediately due and payable by Parent (i) in the event
that a majority change of control occurs with respect to
the Company or (ii) upon the happening of usual and
customary events of default with respect to payment
collateral, cross-defaults and insolvency and
grace periods. t B
