Agreement and Plan of Merger - Blimpie International Inc. and Sandwich Acquisition Corp.
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BETWEEN
BLIMPIE INTERNATIONAL, INC.
AND
SANDWICH ACQUISITION CORP.
DATED AS OF OCTOBER 5, 2001
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER .........................................................1
Section 1.1 The Merger .......................................................1
Section 1.2 Effective Time ...................................................2
Section 1.3 Effect of the Merger .............................................2
Section 1.4 Certificate of Incorporation; Bylaws .............................2
Section 1.5 Directors and Officers ...........................................2
Section 1.6 Conversion of Securities .........................................2
Section 1.7 Adjustments to Prevent Dilution ..................................3
Section 1.8 Surrender of Shares ..............................................3
Section 1.9 No Further Transfer or Ownership Rights ..........................4
Section 1.10 Treatment of Options ............................................4
Section 1.11 Execution of Voting Agreement ...................................5
Section 1.12 Execution of Employment and Non-Competition Agreements ..........5
Section 1.13 Adjustment of the Merger Consideration and the Option
Consideration ...................................................5
Section 1.14 Closing .........................................................5
Section 1.15 Deposit .........................................................5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ......................5
Section 2.1 Organization and Qualification ...................................6
Section 2.2 Subsidiaries and Affiliates ......................................6
Section 2.3 Capitalization ...................................................6
Section 2.4 Authority Relative to this Agreement .............................7
Section 2.5 Absence of Certain Changes .......................................8
Section 2.6 Report and Financial Statements ..................................8
Section 2.7 Proxy Statement ..................................................9
Section 2.8 Consents and Approvals; No Violation .............................9
Section 2.9 Brokerage Fees and Commissions ...................................10
Section 2.10 Litigation ......................................................10
Section 2.11 Absence of Changes in Benefit Plans .............................10
Section 2.12 ERISA Compliance ................................................11
Section 2.13 Taxes ...........................................................13
Section 2.14 Compliance with Applicable Laws .................................14
Section 2.15 Environmental ...................................................14
Section 2.16 State Takeover Statutes .........................................15
Section 2.17 Contracts .......................................................16
Section 2.18 Labor Matters ...................................................16
Section 2.19 Property ........................................................17
Section 2.20 [Reserved.] .....................................................17
Section 2.21 Opinion of Financial Advisors ...................................17
Section 2.22 Intellectual Property ...........................................18
Section 2.23 Insurance .......................................................19
Section 2.24 Affiliate Transactions ..........................................19
Section 2.25 Franchise Operations ............................................19
Section 2.26 Health Claims ...................................................22
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF NEWCO ............................23
Section 3.1 Organization and Qualification ...................................23
Section 3.2 Authority Relative to this Agreement .............................23
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Section 3.3 Consents and Approvals; No Violation .............................23
Section 3.4 Financing Commitments; Solvency ..................................24
Section 3.5 Ownership of Company Stock .......................................24
Section 3.6 Information ......................................................24
Section 3.7 Brokerage Fees and Commissions ...................................24
Section 3.8 Litigation .......................................................24
ARTICLE 4 CONDUCT OF BUSINESS PENDING THE MERGER .............................25
Section 4.1 Conduct of Business of the Company Pending the Merger ............25
Section 4.2 Prohibited Actions by the Company ................................25
ARTICLE 5 COVENANTS AND ADDITIONAL AGREEMENTS ................................27
Section 5.1 Solicitation Provisions ..........................................27
Section 5.2 Access to Information ............................................29
Section 5.3 [Reserved] .......................................................30
Section 5.4 Reasonable Best Efforts ..........................................30
Section 5.5 Event Notices and Other Actions ..................................30
Section 5.6 Third Party Standstill Agreements ................................31
Section 5.7 Employee Stock Options; Employee Plans and Benefits ..............31
Section 5.8 Meeting of the Company's Shareholders ............................32
Section 5.9 Proxy Statement ..................................................32
Section 5.10 Public Announcements ............................................33
Section 5.11 FIRPTA ..........................................................33
Section 5.12 Alternative Financing; Disclosure ...............................34
Section 5.13 Delisting .......................................................34
Section 5.14 Stockholder Litigation ..........................................34
Section 5.15 Indemnification .................................................34
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER ...........................35
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger .......35
Section 6.2 Conditions to Obligations of Newco to Effect the Merger ..........35
Section 6.3 Conditions to the Obligations of the Company .....................35
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER .....................................36
Section 7.1 Termination ......................................................36
Section 7.2 Effect of Termination ............................................37
Section 7.3 Fees and Expenses ................................................37
Section 7.4 Amendment ........................................................38
Section 7.5 Extension; Waiver ................................................38
ARTICLE 8 MISCELLANEOUS ......................................................39
Section 8.1 Non-Survival of Representations and Warranties ...................39
Section 8.2 Enforcement of the Agreement .....................................39
Section 8.3 Severability .....................................................39
Section 8.4 Notices ..........................................................39
Section 8.5 Failure or Indulgence Not Waiver; Remedies Cumulative ............40
Section 8.6 Governing Law ....................................................40
Section 8.7 Descriptive Headings .............................................40
Section 8.8 Parties in Interest ..............................................40
Section 8.9 Counterparts .....................................................40
Section 8.10 Certain Definitions .............................................40
Section 8.11 Interpretation ..................................................42
Section 8.12 Entire Agreement; Assignment ....................................42
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, is dated as of October 5, 2001 (the
"Agreement") between Sandwich Acquisition Corp., a New Jersey corporation
("Newco") and Blimpie International, Inc., a New Jersey corporation (the
"Company").
WHEREAS, it is the intention of the parties that Newco shall merge with
and into the Company (the "Merger"), with the Company being the surviving
corporation;
WHEREAS, a Special Committee (the "Special Committee") of the Board of
Directors of the Company (composed entirely of directors who have no direct or
indirect interest in the transactions contemplated hereby) has unanimously
determined, and the Board of Directors of the Company has unanimously
determined, that the Merger and other transactions contemplated by this
Agreement are fair to, advisable and in the best interests of the Company and
its shareholders, and each of the Special Committee and the Board of Directors
of the Company has approved this Agreement and recommended its adoption by the
shareholders of the Company;
WHEREAS, the Special Committee, the Board of Directors of the Company and
the Board of Directors and the sole stockholder of Newco have each approved and
adopted this Agreement and have approved the transactions contemplated hereby;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Newco's willingness to enter into
this Agreement, Messrs. Anthony Conza, David Siegel, Patrick Pompeo, Charles
Leaness and Joe Conza, shareholders of the Company (the "Key Shareholders"),
have entered into a Voting Agreement with Newco (the "Voting Agreement"),
pursuant to which such shareholders have agreed to vote all shares of Company
Common Stock owned by them in favor of the approval of this Agreement and the
Merger and against any competing transaction;
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, as a condition and inducement to Newco's willingness to enter into
this Agreement, the Key Shareholders have entered into employment agreements
(the "Employment Agreements") and Non-Competition and Non-Solicitation
Agreements (the "Non-Competition Agreements") with Newco, which, in each case,
are conditioned upon the consummation of the Merger;
WHEREAS, Newco and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe certain conditions to the Merger; and
NOW THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties hereto
intending to be legally bound, agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.2),
Newco shall be merged with and into the Company and the separate corporate
existence of Newco shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation") and continue its existence under the laws of the State of New
Jersey.
Section 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver in accordance with this Agreement of the conditions set
forth in Article VI of this Agreement, the parties
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hereto shall cause the Merger to be consummated by filing a Certificate of
Merger ("Certificate of Merger") with the Secretary of State of the State of New
Jersey in such form as is required by, and executed in accordance with, the
applicable provisions of the New Jersey Business Corporation Act (the "NJBCA").
The Certificate of Merger will provide that the Merger will become effective
immediately upon the filing thereof with such Secretary of State in accordance
with the NJBCA. The time when the Merger becomes effective is hereinafter
referred to as the "Effective Time."
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided by the NJBCA. Without limiting the foregoing, all
the property, rights, privileges, powers and franchises of the Company and Newco
shall be vested in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Newco shall become the debts, liabilities and duties
of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; Bylaws.
(a) The certificate of incorporation of Newco as in effect at the
Effective Time shall be the certificate of incorporation of the Surviving
Corporation (the "Certificate of Incorporation"), until duly amended as
provided therein or by applicable law, except that Article I thereof shall
be amended to read, "The name of the corporation is Blimpie International,
Inc."
(b) The bylaws of Newco in effect at the Effective Time shall be the
bylaws of the Surviving Corporation (the "Bylaws"), until duly amended as
provided therein or by applicable law (with the name of the Surviving
Corporation changed, as appropriate).
Section 1.5 Directors and Officers.
(a) The directors of Newco at the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation to
serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the Bylaws.
(b) The officers of Newco at the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation to
serve until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in
accordance with the Certificate of Incorporation and the Bylaws.
Section 1.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Newco, the Company or the
holders of any of the following securities:
(a) Each share of common stock of the Company, par value $.01 per
share ("Company Common Stock"), issued and outstanding immediately before
the Effective Time (other than shares of Company Common Stock cancelled
pursuant to Section 1.6(b)) shall be converted into and represent the
right to receive $2.80 in cash (the "Merger Consideration"), without
interest, upon surrender of the certificate formerly representing such
share in the manner provided in Section 1.8, less any required withholding
taxes.
(b) Each share of Company Common Stock held in the treasury of the
Company or held by any Subsidiary of the Company, and each share of
Company Common Stock held by Newco immediately before the Effective Time,
shall be cancelled and cease to exist, and no payment shall be made with
respect thereto.
(c) Each share of common stock, par value $0.01 per share, of Newco
that is issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation.
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Section 1.7 Adjustments to Prevent Dilution. In the event that the Company
changes the number of shares of capital stock of the Company or securities
convertible or exchangeable into or exercisable for shares of capital stock of
the Company issued and outstanding prior to the Effective Time as a result of a
reclassification, stock split (including a reverse split), stock dividend or
distribution, recapitalization, merger, subdivision, issuer tender or exchange
offer, or other similar transaction, the Merger Consideration shall be equitably
adjusted on a dollar-for-dollar or share-for-share basis.
Section 1.8 Surrender of Shares.
(a) Prior to the mailing of the Proxy Statement (as defined in
Section 2.7), Newco shall appoint a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration. At
the Effective Time, the Surviving Corporation shall deposit with the
Paying Agent for the benefit of former holders of shares of Company Common
Stock sufficient funds to make payments of the Merger Consideration on all
shares of Company Common Stock to be converted into cash under Section
1.6(a). Such funds shall be invested by the Paying Agent in money market
obligations selected by the Surviving Corporation. Any net profit
resulting from, or interest or income produced by, such investments shall
be payable to the Surviving Corporation or as it directs.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each record holder, as of the Effective Time,
of an outstanding certificate or certificates which immediately prior to
the Effective Time represented shares of Company Common Stock (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Paying
Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon
surrender to the Paying Agent of a Certificate, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant
to such instructions, the holder of such Certificate shall be entitled to
receive in exchange therefor the aggregate amount of Merger Consideration
into which the number of shares of Company Common Stock previously
represented by such Certificate or Certificates surrendered shall have
been converted pursuant to this Agreement. If any Merger Consideration is
to be remitted to a person whose name is other than that in which the
Certificate surrendered for exchange is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be
properly endorsed, with signature guaranteed, or otherwise in proper form
for transfer, and that the person requesting such exchange shall have paid
any transfer and/or other taxes required by reason of the remittance of
Merger Consideration to a person whose name is other than that of the
registered holder of the Certificate surrendered, or the person requesting
such exchange shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. No
interest shall be paid or accrued, upon the surrender of the Certificates,
for the benefit of holders of the Certificates on any Merger
Consideration.
(c) At any time following the date six months after the Effective
Time, the Surviving Corporation, at its option, shall be entitled to
require the Paying Agent to deliver to it any funds (including any
interest received with respect thereto) which shall have been deposited
with the Paying Agent and which shall have not been disbursed to holders
of Certificates, and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat
or other similar laws) and only as general creditors thereof for payment
of their claim for Merger Consideration to which such holders may be
entitled.
(d) Notwithstanding the provisions of Section 1.8(c), neither the
Surviving Corporation nor the Paying Agent shall be liable to any person
in respect of any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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(e) The Surviving Corporation shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of shares of Company Common Stock such
amounts as the Surviving Corporation (or any affiliate thereof) is
required to deduct and withhold with respect to the making of such payment
under the Code (as defined in Section 2.12), or any provision of any
applicable state, local or foreign law, rule or regulation. To the extent
that amounts are so withheld by the Surviving Corporation and paid by the
Surviving Corporation to the applicable taxing authority, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the former holder of shares of Company Common Stock in respect of
which such deduction and withholding was made by the Surviving
Corporation.
Section 1.9 No Further Transfer or Ownership Rights. After the Effective
Time, there shall be no further transfer on the records of the Company (or the
Surviving Corporation) or its transfer agent of Certificates representing shares
of Company Common Stock, and if such Certificates are presented to the Company
(or the Surviving Corporation) for transfer, they shall be cancelled. From and
after the Effective Time, the holders of certificates evidencing ownership of
shares of capital stock of the Company outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares of
capital stock except as otherwise provided for herein or by applicable law. All
Merger Consideration paid upon the surrender for exchange of certificates
representing shares of capital stock of the Company in accordance with the terms
of this Article I shall be deemed to have been issued (and paid) in full
satisfaction of all rights pertaining to the shares of capital stock of the
Company exchanged for Merger Consideration theretofore represented by such
certificates.
Section 1.10 Treatment of Options. Prior to the Effective Time, the Board
of Directors of the Company (and/or, if appropriate, the Special Committee)
shall adopt appropriate resolutions and take all other actions necessary to
provide that each outstanding stock option or warrant (each, an "Option")
heretofore granted by the Company, whether under the Company's Omnibus Stock
Incentive Plan (the "Stock Incentive Plan"), the Company's 2000 Omnibus Stock
Incentive Plan (the "2000 Plan") (collectively, the "Company Stock Option
Plans"), or otherwise, whether or not then vested or exercisable, shall, at the
Effective Time, be cancelled, and each holder thereof shall be entitled to
receive a payment in cash as provided in Section 5.7 hereof, if any (subject to
any applicable withholding taxes, the "Cash Payment"). As provided herein,
unless otherwise determined by Newco, the Company Stock Option Plans (and any
feature of any other Benefit Plan (as defined in Section 2.11) or other plan,
program or arrangement providing for the issuance or grant of any other interest
in respect of the capital stock of the Company) shall terminate as of the
Effective Time. After the date hereof, the Company will not issue any Options or
other options, warrants, rights or agreements which would entitle any person to
acquire any capital stock of the Company or, except as otherwise provided in
this Section 1.10 or in Section 5.7, to receive any payment in respect thereof.
Section 1.11 Execution of Voting Agreement. Concurrently with the
execution and delivery of this Agreement, and as a condition to Newco's
willingness to enter into this Agreement, the Key Shareholders have executed and
delivered to Newco the Voting Agreement.
Section 1.12 Execution of Employment and Non-Competition Agreements.
Concurrently with the execution and delivery of this Agreement, and as a
condition to Newco's willingness to enter into this Agreement, the Key
Shareholders have executed and delivered their respective Employment Agreements
and Non-Competition Agreements.
Section 1.13 Adjustment of the Merger Consideration and the Option
Consideration. The Merger Consideration and the Option Consideration (as defined
in Section 5.7), each payable pursuant to this Agreement, have been calculated
based upon the representations and warranties made by the Company in Section
2.3. In the event that, at the Closing Date, (i) the actual number of shares of
Company Common Stock outstanding and/or the actual number of shares issuable
upon the exercise of Options or similar agreements or upon conversion of
securities (including without limitation, as a result of any stock split,
reclassification, stock dividend (including any dividend or distribution of
securities
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convertible into shares of Company Common Stock) or recapitalization) is greater
than as described in Section 2.3 hereof, or (ii) the weighted average exercise
price of the Options is lower than described in Section 2.3 hereof, the Merger
Consideration and the Option Consideration shall be appropriately adjusted
downward; provided, however, that no such adjustment shall be required unless
and until the aggregate impact from such differences results in an increase in
the aggregate Merger Consideration and Option Consideration payable by Newco of
at least $50,000. The provisions of this Section 1.13 shall not, in any event,
adversely affect, constitute a waiver of or otherwise impair any of Newco's
rights under this Agreement (including any of Newco's rights arising from any
misrepresentation or breach of the representations and warranties set forth in
Section 2.3 hereof).
Section 1.14 Closing. Immediately prior to the Effective Time, a closing
for the transactions contemplated hereby (the "Closing") will be held at the
offices of Smith, Gambrell & Russell, LLP, 1230 Peachtree Street, NE, Suite
3100, Atlanta, Georgia 30309, unless another place is agreed in writing by Newco
and the Company. All actions taken at the Closing shall be deemed to have been
taken simultaneously at the time the last of any such actions is taken or
completed. The date such Closing occurs is referred to herein as the "Closing
Date."
Section 1.15 Deposit. As of the date of execution of this Agreement, Newco
has deposited Fifty Thousand Dollars ($50,000) (the "Deposit") into an escrow
account to be held by First Union National Bank ("Escrow Agent") pursuant to the
terms of the Escrow Agreement attached hereto as Exhibit 1.15. The Deposit shall
be applied against the Merger Consideration upon Closing. In the event the
Closing does not occur: (x) if this Agreement is terminated by the Company
pursuant to Section 7.1(g) or Section 7.1(i) hereof, then the Deposit shall be
delivered to the Company in accordance with Section 7.3(f) hereof; or (y) if
this Agreement is terminated for any other reason, then the Deposit shall be
returned to Newco.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Newco that, except as set forth in
the corresponding section of the disclosure schedule delivered by the Company to
Newco concurrently with entering into this Agreement (the "Company Disclosure
Schedule"):
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Section 2.1 Organization and Qualification. Except as set forth in Section
2.1(a) of the Company Disclosure Schedule, each of the Company and its
Subsidiaries (specifically excluding for this purpose, the Leasing
Subsidiaries) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power and authority necessary
to enable it to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted. Except as set forth in
Section 2.1(a) of the Company Disclosure Schedule, each of the Leasing
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has the requisite corporate power and authority necessary
to enable it to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing would not have,
individually or in the aggregate, a Material Adverse Effect on the
Company. Each of the Company and its Subsidiaries (specifically excluding
for this purpose, the Leasing Subsidiaries) is duly qualified as a foreign
corporation, and is in good standing, in each state where the character of
the properties owned or leased by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be
so qualified would not have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(b) The Company has delivered or made available to Newco for
inspection complete and correct copies of the certificate or articles of
incorporation and bylaws, or other governing documents as currently in
effect of the Company and each of its Subsidiaries.
Section 2.2 Subsidiaries and Affiliates.
The Company Disclosure Schedule sets forth the name and jurisdiction of
incorporation of each Company Subsidiary and the jurisdictions in which each
such Company Subsidiary is qualified to do business (specifically excluding for
this purpose, the Leasing Subsidiaries). Except for each Company Subsidiary and
except as set forth in the Company Disclosure Schedule, the Company does not
own, directly or indirectly, any capital stock or other equity or similar
interest in, or any interest convertible into or exchangeable or exercisable for
any equity or similar interest in, any corporation or have any direct or
indirect equity or ownership interest in any business. Except as set forth in
the Company Disclosure Schedule, all the outstanding capital stock or other
equity interests of each Company Subsidiary is owned directly or indirectly by
the Company, free and clear of all Liens (as defined in Section 2.8), and is
validly issued, fully paid and non-assessable, and there are no outstanding
options, rights or agreements of any kind relating to the issuance, sale or
transfer of any capital stock or other equity securities of any such Company
Subsidiary to any person except the Company.
Section 2.3 Capitalization.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, par value $.01 per share. As of
the date hereof, 9,163,659 shares of Company Common Stock are issued and
outstanding. As of the date hereof, an aggregate of 1,293,700 shares of
Company Common Stock are reserved for future issuance under the Company
Stock Option Plans and Options to purchase 1,038,000 shares of Company
Common Stock are issued and outstanding under the Company Stock Option
Plans and otherwise. Except for the Options referred to in the preceding
sentence, no Options are issued or outstanding. The weighted average
exercise price for the outstanding Options is $3.44. All of the issued and
outstanding shares of Company Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable and are not subject to
preemptive rights. The shares of Company Common Stock referred to above
that are reserved for issuance, consisting of the shares reserved under
the Company Stock Option Plans, and the 100,000 shares of Company Common
Stock reserved for issuance for outstanding Options, have not been issued
and will not be issued prior to the Effective Time, and no commitment by
the Company has been or will be made for their issuance, other than (in
the case of both preceding clauses) pursuant to the exercise of the
Options described above that are issued and outstanding as of the date of
this Agreement. At the Effective
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Time, except as otherwise provided in Section 1.10 hereof, each Option
shall be cancelled, and the holder thereof shall not be entitled to
receive any consideration therefor other than the cash payments, if any,
provided by Section 1.10 and Section 5.7 of this Agreement. Section 2.3(a)
of the Company Disclosure Schedule sets forth the exercise prices and
number of shares of Company Common Stock in respect of outstanding Options
under the Company Stock Option Plans. There are no bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of the Company may vote
("Voting Company Debt"). Except as set forth above in this Section 2.3(a),
there are no outstanding securities, options, warrants, calls, rights,
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights ("SARs"), stock-based performance units, commitments,
agreements, arrangements or undertakings of any kind (including any
shareholder rights plan) to which the Company is a party or by which the
Company is bound obligating the Company to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock
or other voting securities of the Company or obligating the Company to
issue, grant, extend or enter into any such security, option, warrant,
call, right, unit, commitment, agreement, arrangement or undertaking.
Except as set forth in Section 2.3 of the Company Disclosure Schedule,
there are not any outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire, or providing preemptive or
registration rights with respect to, any shares of, or any outstanding
options, warrants or rights of any kind to acquire any shares of, or any
outstanding securities that are convertible into or exchangeable for any
shares of, capital stock of the Company. Except as set forth in Section
2.3 of the Company Disclosure Schedule, the Company does not have
outstanding any loans to any person in respect of the purchase of
securities issued by the Company.
(b) Except as set forth in Section 2.3(b) of the Company Disclosure
Schedule, there are no voting trusts, proxies, registration rights
agreements, or other agreements, commitments or understandings of any
character to which the Company is bound with respect to the voting of any
shares of capital stock of the Company or with respect to the registration
of the offering, sale or delivery of any shares of capital stock of the
Company under the Securities Act of 1933, as amended (the "Securities
Act").
Section 2.4 Authority Relative to this Agreement.
(a) The Company has all requisite corporate power and authority to
execute and deliver this Agreement and each instrument required hereby to
be executed and delivered by the Company prior to or at the Effective
Time, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby (the "Transactions")
(subject to the Company Shareholder Approval (as defined below) with
respect to the Merger). The execution and delivery of this Agreement and
each instrument required hereby to be executed and delivered by the
Company prior to or at the Effective Time and the performance of its
obligations hereunder and thereunder and the consummation by the Company
of the Transactions have been duly and validly authorized by all necessary
corporate action on the part of the Company (including the unanimous
approval of the Special Committee), and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than the Company Shareholder Approval
and the filing of appropriate merger documents as required by the NJBCA).
This Agreement has been duly and validly executed and delivered by the
Company, and, assuming this Agreement constitutes a valid and binding
obligation of Newco, this Agreement constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(b) The only vote of holders of any class or series of capital stock
of the Company necessary under applicable law or stock exchange (or
similar self regulatory organization)
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regulations to adopt or approve this Agreement and the Merger is the
adoption and approval of this Agreement and the Merger by the holders of a
majority of the votes cast at the Shareholder Meeting (as defined in
Section 5.8) entitled to vote on the Merger, voting together as a single
class, with each share of Company Common Stock entitled to one vote per
share (the "Company Shareholder Approval"). No vote of the holders of any
capital stock or other securities of the Company is necessary to
consummate any of the Transactions other than as set forth in the
preceding sentence.
(c) Consummation of the Transactions (including the transactions
contemplated by Sections 1.10 and 5.7 hereof) does not conflict with or
violate the provisions of any Company Stock Option Plan or any option
agreement evidencing the grant of any Options.
Section 2.5 Absence of Certain Changes. Except (i) as disclosed in the
Company's filings and reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") filed and publicly available prior to the date of
this Agreement (the "Filed Company SEC Documents"), (ii) as set forth in Section
2.5 of the Company Disclosure Schedule, or (iii) for the transactions
contemplated by this Agreement, since June 30, 2001, the Company and each of its
Subsidiaries has conducted its respective business in the ordinary course, and
during such period there has not been any event, change, effect or development
that has had or would reasonably be expected to have a Material Adverse Effect
on the Company. Except (i) as disclosed in the Filed Company SEC Documents, (ii)
as set forth in Section 2.5 of the Company Disclosure Schedule, or (iii) for the
transactions contemplated by this Agreement, since June 30, 2001, there has not
been (a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the capital stock of the Company or any redemption or
other acquisition by the Company of any capital stock of the Company; (b) any
entry into (or any amendment to any material terms of) any Material Agreement by
the Company or any of its Subsidiaries, other than in the ordinary course of
business consistent with past practice; (c) any split, combination or
reclassification of the Company's capital stock or of any other equity interests
in the Company, or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or of any other equity interests in the Company; (d)(i) any
granting by the Company or any of its Subsidiaries to any officer or director of
the Company or any of its Subsidiaries of any material increase in compensation,
except in the ordinary course of business consistent with prior practice or as
was required under employment agreements in effect as of the date hereof
identified in the Company Disclosure Schedule, (ii) any granting by the Company
or any of its Subsidiaries to any such officer or director of any increase in
severance or termination pay, except as was required under employment, severance
or termination agreements in effect as of the date hereof identified in the
Company Disclosure Schedule or (iii) any entry by the Company or any of its
Subsidiaries into (or any amendment to any material terms of) any employment,
severance or termination agreement with any officer or director; (e) any damage,
destruction or loss, whether or not covered by insurance, that has had or would
reasonably be expected to have a Material Adverse Effect on the Company; (f) any
change in accounting methods, principles or practices by the Company materially
affecting the consolidated assets, liabilities, results of operations or
business of the Company, except insofar as may have been required by a change in
generally accepted accounting principles; (g) any tax election that individually
or in the aggregate could reasonably be expected to have a Material Adverse
Effect on the Company; (h) any sale or license of any material Intellectual
Property by the Company or any of its Subsidiaries, other than in the ordinary
course of business consistent with prior practice; or (i) any material
charitable contributions or commitments therefor.
Section 2.6 Report and Financial Statements.
(a) Except as disclosed in Section 2.6(a) of the Company Disclosure
Schedule, since January 1, 1996, the Company has timely filed all required
forms, reports and documents with the Securities and Exchange Commission
(the "SEC") required to be filed by it pursuant to the federal securities
laws and the rules and regulations of the SEC thereunder (collectively,
the "Company SEC Documents"), all of which have complied as of their
respective filing dates (or, if amended or superceded by a filing, then on
the date of such filing) in all material respects with all
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applicable requirements of the Securities Act and the Exchange Act, and
the rules and regulations promulgated thereunder. None of such forms,
reports or documents at the time filed contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
Company Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) The financial statements of the Company and its Subsidiaries
included in the Company SEC Documents (including the notes thereto) have
been prepared from, and are in accordance with, the books and records of
the Company and its consolidated subsidiaries, and comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto as in
effect as of the date of such filing, have been prepared in accordance
with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present, in all material respects, in
accordance with generally accepted accounting principles the consolidated
financial position of the Company and its Subsidiaries as of the dates
thereof and the consolidated results of operations and cash flows of the
Company and its Subsidiaries for the periods then ended (subject, in the
case of any unaudited interim financial statements, to the absence of
footnote disclosure and normal year-end adjustments).
(c) Except as disclosed in Section 2.6(c) of the Company Disclosure
Schedule, at the date of the most recent audited financial statements of
the Company included in the Company SEC Documents, neither the Company nor
any of its Subsidiaries had, and since such date neither the Company nor
any of its Subsidiaries has incurred, any liabilities or obligations of
any nature (whether accrued, absolute, contingent, determinable or
otherwise, and whether or not required to be reflected or reserved against
in a consolidated balance sheet of the Company prepared in accordance with
United States generally accepted accounting principles) except liabilities
incurred in the ordinary and usual course of business and consistent with
past practice, liabilities expressly incurred in connection with the
Merger and liabilities that have not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
Section 2.7 Proxy Statement. At the time the Proxy Statement is mailed,
the Proxy Statement (as defined below) will comply as to form in all material
respects with the Exchange Act and the regulations thereunder. The Proxy
Statement shall not, at the time it is mailed, at the time of the Shareholder
Meeting or at 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, in light of the circumstances
under which they were made, not misleading; provided, that, no representation is
made by the Company with respect to the information furnished by Newco for
inclusion therein. The letter to shareholders, notice of meeting, proxy
statement and form of proxy, or the information statement, as the case may be,
to be distributed to shareholders of the Company in connection with the Merger,
and the Schedule 14A and any other schedule required to be filed with the SEC in
connection therewith, together with any amendments or supplements thereto, are
collectively referred to herein as the "Proxy Statement."
Section 2.8 Consents and Approvals; No Violation. Subject to (i) obtaining
the Company Shareholder Approval, (ii) compliance with the requirements of the
Exchange Act, and (iii) the filing of the Certificate of Merger, and except as
disclosed on Section 2.8 of the Company Disclosure Schedule, the execution,
delivery and performance of this Agreement do not, and the consummation of the
Transactions (including the changes in ownership of the shares of Company Common
Stock or the composition of the Board of Directors of the Company) and
compliance with the provisions of this Agreement will not (i) conflict with or
violate the Certificate of Incorporation or Bylaws of the Company or the
comparable organizational documents of any of its Subsidiaries, (ii) conflict
with or violate any statute, ordinance, rule, regulation, judgment, order, writ,
injunction, decree or law applicable to the Company or its Subsidiaries, or by
which any of them or any of their respective properties or assets may
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be bound or affected, or (iii) result in a violation or breach of or constitute
a default (or an event which with or without notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in any loss of any benefit
under, or the creation of any pledges, claims, equities, options, liens,
charges, call rights, rights of first refusal, "tag" or "drag" along rights,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") on any of the property or assets of the Company or any
of its Subsidiaries pursuant to any loan or credit agreement, note, bond,
mortgage, indenture, License Agreement (as defined in Section 2.22), or other
agreement, instrument, Contract or Permit applicable to the Company, its
Subsidiaries or any of their respective properties or assets, except for such
violations, breaches or defaults that individually or in the aggregate would not
have a Material Adverse Effect on the Company. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by the Company in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the Transactions, except for (i) the filing with the SEC of the
Proxy Statement relating to the approval by the Company's shareholders of this
Agreement, (ii) the filing of the Certificate of Merger pursuant to the NJBCA,
(iii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings identified in Section 2.8 of the Company Disclosure
Schedule, and (iv) consents, approvals, orders, authorizations, registrations,
declarations or filings, the failure of which to obtain would not individually
or in the aggregate have a Material Adverse Effect on the Company.
Section 2.9 Brokerage Fees and Commissions. Neither the Company nor any of
its officers, directors or shareholders has employed any investment banker,
business consultant, financial advisor, broker or finder in connection with the
Transactions, except for the Special Committee Financial Advisor, or obligated
the Company to pay any investment banking, business consultancy, financial
advisory, brokerage or finders' fees or commissions in connection with the
Transactions, except for fees payable to the Special Committee Financial
Advisor. Correct and complete copies of the engagement letters between the
Special Committee Financial Advisor and the Company with respect to the
Transactions, which accurately describe the fees payable to the Special
Committee Financial Advisor, have been provided by the Company to Newco.
Section 2.10 Litigation. Except as disclosed in the Filed Company SEC
Documents or as set forth in Section 2.10 of the Company Disclosure Schedule,
there is no claim, suit, action or proceeding (including arbitration
proceedings) pending or, to the knowledge of the Company, threatened against the
Company that has had or would reasonably be expected to have individually or in
the aggregate a Material Adverse Effect on the Company, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its Subsidiaries that has
had or would reasonably be expected to have individually or in the aggregate a
Material Adverse Effect on the Company.
Section 2.11 Absence of Changes in Benefit Plans. Except as disclosed in
the Filed Company SEC Documents, as required by applicable law, as contemplated
by this Agreement, or as set forth in Section 2.11 of the Company Disclosure
Schedule, since June 30, 2000, there has not been any adoption or material
amendment by the Company or any Subsidiary of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding providing benefits to any current or former employee, officer
or director of the Company or any Subsidiary. Except as disclosed in the Filed
Company SEC Documents, as required by applicable law or as set forth on Section
2.11 of the Company Disclosure Schedule, there exist no severance, bonus,
incentive award, termination or indemnification agreements, arrangements or
understandings between the Company or any Subsidiary and any of its current or
former officers or directors or employees.
Section 2.12 ERISA Compliance.
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(a) Section 2.12(a) of the Company Disclosure Schedule sets forth a
complete list of all "employee benefit plans" (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), including, but not limited to, employment contracts, bonus,
pension, profit sharing, deferred compensation, incentive compensation,
excess benefit, stock, stock option, severance, termination pay, change in
control or other employee benefit plans, programs or arrangements,
including those providing medical, dental, vision, disability, life
insurance and vacation benefits (other than those required to be
maintained by law), whether written or unwritten, qualified or
unqualified, funded or unfunded, foreign or domestic, 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 of the Internal
Revenue Code of 1986, as amended (the "Code") (each an "ERISA Affiliate")
for the benefit of any current or former employees, officers or directors
of the Company or any Subsidiary or with respect to which the Company or
its Subsidiary has any liability (collectively, the "Benefit Plans"). As
applicable with respect to each Benefit Plan, the Company has delivered or
made available to Newco, true and complete copies of (i) each Benefit
Plan, including all amendments thereto, and in the case of an unwritten
Benefit Plan, a written description thereof, (ii) all trust documents,
investment management contracts, custodial agreements and insurance
contracts relating thereto, (iii) the current summary plan description and
each summary of material modifications thereto, (iv) the most recent
annual reports (Form 5500 and all schedules thereto) filed with the
Internal Revenue Service ("IRS"), (v) the most recent IRS determination
letter and each currently pending application to the IRS for a
determination letter, (vi) the most recent financial statements and
trustee reports, (vii) all records, notices and filings concerning IRS or
Department of Labor audits or investigations, "prohibited transactions"
within the meaning of Section 406 of ERISA or Section 4975 of the Code and
"reportable events" within the meaning of Section 4043 of ERISA, (viii)
all personnel, payroll, and employment manuals and policies; (ix) all
collective bargaining agreements pursuant to which contributions have been
made or obligations incurred (including both pension and welfare benefits)
by the Company and the ERISA Affiliates, and all collective bargaining
agreements pursuant to which contributions are being made or obligations
are owed by such entities; (x) all registration statements filed with
respect to any Company Plan; (xi) all insurance policies purchased by or
to provide benefits under any Company Plan; (xii) all contracts with third
party administrators, actuaries, investment managers, consultants, and
other independent contractors that relate to any Benefit Plan; (xiii) the
most recent reports submitted by third party administrators, actuaries,
investment managers, consultants, or other independent contractors with
respect to any Benefit Plan; (xiv) all notices that were given by the
Company or any ERISA Affiliate or any Benefit Plan to the IRS, the Pension
Benefit Guaranty Corporation ("PBGC"), or any participant or beneficiary,
pursuant to statute, within the four years preceding the date of this
Agreement; and (xv) with respect to Benefit Plans subject to Title IV of
ERISA, the Form PBGC-1 filed for the most recent plan year.
(b) No event has occurred and, to the knowledge of the Company,
there exists no condition or set of circumstances in connection with which
the Company or any ERISA Affiliate is or would reasonably be expected to
be subject to any material liability under the terms of any Benefit Plan,
under ERISA, or, with respect to any Benefit Plan, under the Code or any
other applicable law, rule or regulation, domestic or foreign. Neither the
Company nor any ERISA Affiliate has incurred or would reasonably be
expected to incur any material liability in respect of any employee
benefit plan maintained by an ERISA Affiliate but not included within the
term "Benefit Plan" or by any person other than the Company or any ERISA
Affiliate. No statement, either written or oral, has been made by the
Company or an ERISA Affiliate to any person with regard to any Benefit
Plan that was not in accordance with the terms of the Benefit Plan and
that would have a Material Adverse Effect on the Company or an ERISA
Affiliate. All filings required by ERISA and the Code as to each Benefit
Plan have been timely, completely and accurately filed, and all notices
and disclosures to participants required by either ERISA or the Code have
been timely, completely and accurately provided. All contributions and
payments
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made or accrued with respect to all Benefit Plans are deductible under
Section 162 or 404 of the Code. No amount, or any asset of any Benefit
Plan is subject to tax as unrelated business taxable income. The Company
has no material liability to the IRS with respect to any Benefit Plan,
including any liability imposed by Chapter 43 of the Code.
(c) Neither the Company nor any ERISA Affiliate has, at any time,
(i) maintained or contributed to any employee pension benefit plan subject
to Title IV of ERISA or Code Section 412 or (ii) been required to
contribute to, or incurred any withdrawal liability within the meaning of
ERISA Section 4201 to, any multiemployer plan as defined in ERISA Section
3(37).
(d) The Benefit Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet
the qualification requirements of Section 401(a) of the Code (each a
"Pension Plan") are prototype plans, which prototype plans have received
favorable determination letters from the IRS, and the Company has no
knowledge of any circumstances likely to result in the revocation of any
such favorable determination letter. The Company has no material liability
to the PBGC with respect to any Benefit Plan or has any liability under
Section 502 or 4071 of ERISA.
(e) Except as set forth on Section 2.12(e) of the Company Disclosure
Schedule or as contemplated by this Agreement, the execution and delivery
of this Agreement do not, and the consummation of the Transactions will
not (i) require the Company or any ERISA Affiliate to pay greater
compensation or make a larger contribution to, or pay greater benefits or
accelerate payment or vesting of a benefit under, any Benefit Plan or (ii)
create or give rise to any additional vested rights or service credits
under any Benefit Plan.
(f) Except for requirements under applicable law, as set forth in
Section 2.12(f) of the Company Disclosure Schedule or as contemplated by
this Agreement, neither the Company nor any ERISA Affiliate is a party to
or is bound by any severance agreement, program or policy.
(g) Except as set forth in Section 2.12(g) of the Company Disclosure
Schedule, no Benefit Plan provides benefits, including without limitation,
death or medical benefits, beyond termination of employment or retirement
other than (i) coverage mandated by law or (ii) death or retirement
benefits under a Benefit Plan qualified under Section 401(a) of the Code.
Neither the Company nor any ERISA Affiliate is contractually obligated to
provide any person with life, medical, dental or disability benefits for
any period of time beyond retirement or termination of employment, other
than as required by the provisions of Sections 601 through 608 of ERISA
and Section 4980B of the Code.
(h) With respect to any Benefit Plan that is an employee welfare
benefit plan (as defined in Section 3(1) of ERISA), (i) no such Benefit
Plan is funded through a "welfare benefit fund", as such term is defined
in Section 419(e) of the Code, (ii) each such Benefit Plan that is a
"group health plan", as such term is defined in Section 5000(b)(l) of the
Code, complies in all respects with the applicable requirements of
Sections 601 through 608 of ERISA and Section 4980B(f) of the Code, and
(iii) each such Benefit Plan (including any such Plan covering retirees or
other former employees), as in effect on the date hereof, may be amended
or terminated as to future benefit accruals without material liability to
the Company or any ERISA Affiliate on or at any time after the Effective
Time.
(i) Except as disclosed in the Company Disclosure Schedule or for
the transactions contemplated by this Agreement, there is no contract,
agreement, Benefit Plan or other arrangement covering any employee or
former employee of the Company or any of its Subsidiaries that would give
rise to the payment of any amount that would not be deductible under
Section 280G of the Code.
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(j) To the knowledge of the Company, no event has occurred or
circumstance exists that would result in a material increase in premium
costs of any Benefit Plan that is insured, or a material increase in
benefit costs of such Plan that is self-insured.
(k) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any
Benefit Plan is pending or, to the Knowledge of the Company or any
Shareholder, is threatened which, if adversely determined, would
individually or in the aggregate have a Material Adverse Effect on the
Company.
(l) Each current or former employee of the Company who has taken a
leave of absence under the Family and Medical Leave Act of 1994, as
amended, was, upon his or her return to employment with the Company,
placed in the same position with respect to all eligibility requirements
and benefits of any Benefit Plan as had been applicable to such employee
immediately before the leave commenced, except where the failure to so
comply would not have a Material Adverse Effect.
Section 2.13 Taxes.
(a) The Company and its Subsidiaries have timely filed (taking into
account any extension of time within which to file) all Tax Returns
required to be filed by or with respect to them, other than those the
failure of which to file would not individually or in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company.
All such filed Tax Returns are complete and accurate in all material
respects. All Taxes that are shown therein as due have been paid in full.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, no Tax Return of the Company or any of its Subsidiaries is under
audit or examination by any taxing authority, and no written notice of
such an audit or examination has been received by the Company or any of
its Subsidiaries.
(c) Except as set forth in Section 2.13(c) of the Company Disclosure
Schedule, there is not in force any waiver or agreement for any extension
of time for the assessment or payment of any Tax due with respect to the
period covered by any Tax Return.
(d) Except as set forth in Section 2.13(d) of the Company Disclosure
Schedule, there is no issue raised or claim against the Company or any of
its Subsidiaries for any Taxes, and no assessments, deficiency or
adjustment has been asserted or proposed with respect to any Tax Return
and no issues relating to Taxes were raised in writing by a taxing
authority in a completed audit or examination that, in each case, would
reasonably be expected to result in an assessment, deficiency, or
adjustment for a later taxable period that, if adversely determined would
individually or in the aggregate have a Material Adverse Effect on the
Company.
(e) Except as set forth in Section 2.13(e) of the Company Disclosure
Schedule, since January 1, 1996, the Company and each of its Subsidiaries
have been a member of an affiliated group filing a consolidated federal
income Tax Return.
(f) There are no material Liens for Taxes on the assets of the
Company or any of its Subsidiaries other than Liens for current taxes not
yet due or payable.
(g) Except as set forth in Section 2.13(g) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is bound by any
tax sharing, tax indemnity or similar agreement with respect to Taxes.
(h) No record owner of shares of Company Common Stock is, to the
Company's knowledge, a non-resident alien individual or foreign
corporation (within the meaning of Section
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897(a)(i) of the Code) that has held more than 5% of the Company Common
Stock at any time during the five-year period ending on the date hereof.
(i) None of the Company and its Subsidiaries has filed a consent
under Code Section 341(f) concerning collapsible corporations. None of the
Company and its Subsidiaries has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during
the applicable period specified in Code Section 897(c)(1)(A)(ii).
As used herein, "Tax Returns" shall mean all returns, declarations, claims
for refund, information returns and reports of or with respect to any Tax which
are required to be filed with a Tax authority by or with respect to the Company
or any of its Subsidiaries, and "Taxes" shall mean (i) income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, real property, personal property, windfall
profits, sales, use, transfers, licensing, employment, payroll and franchises
imposed by or under any federal, state, local or foreign statute, law, rule or
regulation, and such terms shall include any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any such tax or any contest or dispute thereof; (ii) liability
of the Company and its Subsidiaries or any fiduciary for the payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated, combined consolidated or unitary group for any taxable period; and
(iii) liability of the Company and its Subsidiaries for the payment of any
amounts of the type described in clauses (i) or (ii) as a result of any express
or implied obligation to indemnify any other person.
Section 2.14 Compliance with Applicable Laws.
(a) The Company and each of its Subsidiaries has in effect all
licenses, franchises, permits and other governmental authorizations
(including Environmental Permits, as defined in Section 2.15) ("Permits")
necessary to conduct its respective business, other than Permits the
failure of which to hold would not individually or in the aggregate have a
Material Adverse Effect on the Company. Neither the Company nor any of its
Subsidiaries is in violation of any such Permits except for such
violations that would not individually or in the aggregate have a Material
Adverse Effect on the Company.
(b) Except as set forth in Section 2.14(b) of the Company Disclosure
Schedule, the business operations of the Company and its Subsidiaries have
been conducted in compliance with all applicable federal, state, local and
foreign laws, statutes, ordinances, rules, regulations, orders, judgments
and decrees, except for such violations which would not, individually or
in the aggregate, have a Material Adverse Effect on the Company.
Section 2.15 Environmental.
(a) For purposes of this Agreement, the term "Environmental Permit"
means any permit, license, approval or other authorization issued under
any Environmental Law (as defined below).
(b) Each of the Company, its Subsidiaries and their respective
properties, assets, businesses, and operations has all required
Environmental Permits that are material to the business of the Company,
and each of the Company, its Subsidiaries and their respective properties,
assets, businesses and operations is, and has been, in compliance with all
applicable Environmental Laws (as defined below) and Environmental
Permits, except for such violations as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The term
"Environmental Laws" means any federal, state, local or foreign statute,
code, ordinance, rule, regulation, policy, guideline, permit, consent,
approval, license, judgment, order, writ, decree, injunction or other
authorization, including the requirement to register underground storage
tanks, relating to: (i) Releases (as defined below) of Hazardous Material
(as defined below) into the environment or any structure, including into
ambient air, soil, sediments, land
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surface or subsurface, buildings or facilities, surface water,
groundwater, publicly-owned treatment works, septic systems or land; or
(ii) the generation, treatment, storage, recycling, disposal, use,
handling, manufacturing, transportation, distribution in commerce, or
shipment (collectively, "Management") of Hazardous Material; including the
following statutes, their implementing regulations and any state
corollaries: the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act, 42 U.S.C. Section 9601 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Clean Water Act, 33
U.S.C. Section 1251 et seq. and the Clean Air Act, 42 U.S.C. Section 7401
et seq.
(c) No Environmental Claims or Environmental Liabilities (as such
terms are defined below) are being asserted against the Company or any of
its Subsidiaries nor is the Company aware of any acts, omissions, facts,
or circumstances which would so subject it, arising from or based upon any
act, omission, event, condition or circumstance occurring or existing on
or prior to the date hereof or for which the Company or any of its
Subsidiaries is responsible, including any such Environmental Claims or
Environmental Liabilities arising from or based upon the ownership or
operation of assets, businesses or properties of the Company or any of its
Subsidiaries which, if adversely determined, would individually or in the
aggregate have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries has received any notice of any
violation of any Environmental Law or Environmental Permit or any
Environmental Claim in connection with its assets, properties, businesses
or operations. The Company has provided to Newco and has disclosed on
Section 2.15(c) of the Company Disclosure Schedule all environmental
assessment reports prepared by, on behalf of or, to the extent in the
Company's possession or contract, relating to the Company or any of its
Subsidiaries since January 1, 1996 (or earlier for any such matter which
is unresolved) regarding the environmental condition of the Company's or
its Subsidiaries' properties or the environmental compliance of the
Company or any Subsidiary. The term "Environmental Claim" means any third
party (including governmental agencies, regulatory agencies, employees or
other private parties) action, lawsuit, claim, investigation proceeding
(including claims or proceedings under the Occupational Safety and Health
Act or similar laws relating to safety of employees) which seeks to impose
liability for (i) noise; (ii) pollution or contamination of the air,
surface water, ground water, land or structure; (iii) Hazardous Materials
Management; (iv) exposure to Hazardous Material; (v) the safety or health
of employees, consumers, customers or vendors; or (vi) any violation of
any Environmental Law or Environmental Permit. The term "Environmental
Liabilities" includes all costs arising from any Environmental Claim or
violation or alleged violation or circumstance or condition which would
give rise to a violation or liability under any Environmental Permit or
Environmental Law under any theory of recovery, at law or in equity, and
whether based on negligence, strict liability or otherwise, including but
not limited to: remedial, removal, response, abatement, investigative,
monitoring, personal injury and damage to property, and any other related
costs, expenses, losses, damages, investigatory remediation or monitoring
costs, penalties, fines, liabilities and obligations, including reasonable
attorney's fees and court costs.
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Section 2.16 State Takeover Statutes. The Special Committee and the Board
of Directors of the Company, subject to their fiduciary obligations under
applicable law, have approved the Merger and this Agreement, and such approval
is sufficient to render inapplicable to the Merger, this Agreement, the Voting
Agreement and the other Transactions the provisions of Section 14A:10A-4 and
14A:10A-5 of the NJBCA to the extent, if any, such provisions are applicable to
the Merger, this Agreement, the Voting Agreement and the other Transactions. No
other "fair price," "moratorium," "control share acquisition," "business
combination," or other state takeover statute or similar statute or regulation
applies or purports to apply to the Company, Newco, affiliates of Newco, the
Merger, the Voting Agreement, this Agreement, or any of the other Transactions.
Section 2.17 Contracts. Section 2.17 to the Company Disclosure Schedule
lists, under the relevant heading, all contracts, agreements, arrangements,
guarantees, licenses, leases and executory commitments, other than Benefit
Plans, agreements disclosed on Section 2.11 to the Company Disclosure Schedule,
Leases disclosed on Schedule 2.19(b) of the Company Disclosure Schedule,
Franchise Agreements described in Section 2.25(c) of the Company Disclosure
Schedule and any Contracts heretofore filed as an exhibit to any Filed Company
SEC Document, that exist as of the date hereof to which the Company or any of
its Subsidiaries is a party or by which it is bound and which fall within any of
the following categories (each a "Contract"): (a) Contracts not entered into in
the ordinary course of the Company's or any of its Subsidiaries' respective
businesses; (b) joint venture, partnership or franchising agreements, (c)
Contracts containing covenants purporting to limit the freedom of the Company or
any of its Subsidiaries to compete in any line of business in any geographic
area or to hire any individual or group of individuals, (d) Contracts which
after the consummation of any of the Transactions would have the effect of
limiting the freedom of the Surviving Corporation or any of its affiliates to
compete in any line of business in any geographic area or to hire any individual
or group of individuals, (e) Contracts relating to any outstanding commitment
for capital expenditures in excess of $10,000, (f) indentures, mortgages,
promissory notes, loan agreements or guarantees of borrowed money, letters of
credit or other agreements or instruments of the Company or any of its
Subsidiaries evidencing indebtedness for borrowed money or providing for the
creation of any charge, security interest, encumbrance or Lien upon any of the
assets of the Company or any of its Subsidiaries, (g) License Agreements, (h)
Contracts with respect to which a change in the ownership (whether directly or
indirectly) of the shares of Company Common Stock or the composition of the
Board of Directors of the Company or any of its Subsidiaries or any of the other
Transactions may result in a violation of or default under, or give rise to a
right of termination, modification, cancellation or acceleration of any
obligation or loss of benefits under, such Contract or (i) any other agreement
of a type required to be filed under Item 601(b)(10) of Regulation S-K
promulgated by the SEC. All Contracts to which the Company or any of its
Subsidiaries is a party or by which it is bound are valid and binding
obligations of the Company or its Subsidiary (as applicable) and, to the
knowledge of the Company, the valid and binding obligation of each other party
thereto. Neither the Company or its Subsidiary (as applicable) nor, to the
knowledge of the Company, any other party thereto is in violation of or in
default in respect of, nor has there occurred an event or condition which with
the passage of time or giving of notice (or both) would constitute a default by
the Company or its Subsidiary (as applicable) (or to its knowledge a default by
any other party thereto) under or permit the termination of, any such Contract,
except for such instances of default thereunder or terminations thereof that
would not individually or in the aggregate result in a Material Adverse Effect
on the Company. The Company has, prior to the date hereof, delivered or made
available true, complete and correct copies of the Contracts to Newco.
Section 2.18 Labor Matters. Except to the extent set forth in Section
2.18(a) of the Company Disclosure Schedule, (i) no employee of the Company or
any of its Subsidiaries is represented by any union or other labor organization;
(ii) there is no labor strike, dispute, or work stoppage pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries; and (iii) neither the Company nor any of its Subsidiaries has
ever experienced any work stoppage.
(b) Except to the extent set forth in Section 2.18(b) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries has not
incurred any liability under, and has
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complied in all material respects with, the Worker Adjustment Retraining
Notification Act and the regulations promulgated thereunder ("WARN") and
does not reasonably expect to incur any such liability as a result of
actions taken or not taken prior to the Effective Time. The Company and
each of its Subsidiaries has not given, and has not been required to give,
any notice under WARN within 90 days prior to the date hereof.
Section 2.19 Property.
(a) Section 2.19(a) of the Disclosure Schedule sets forth a list of
all real property owned in fee by the Company or any of its Subsidiaries.
The Company or its Subsidiary (as applicable) has good and valid title to
all such real property, free and clear of all Liens known to the Company
except (i) Liens for taxes, assessments and other governmental charges
that are not delinquent or that are being contested in good faith and in
respect of which adequate reserves have been established, (ii) mechanics',
materialmen's, carriers', workmen's, warehousemen's, repairmen's
landlord's or other similar Liens securing obligations that are not due
and payable or that are being contested in good faith and in respect of
which adequate reserves have been established, (iii) imperfections of
title and Liens that do not and would not reasonably be expected to
detract materially from the value or materially interfere with the present
use of the properties subject thereto or affected thereby, and (iv) in the
case of any real property subject to a title commitment described in
Section 2.19(a) of the Company Disclosure Schedule, imperfections of title
and Liens that are shown on such title commitment or such schedule
(collectively, "Permitted Liens").
(b) The Company has provided or made available to Newco all leases
for all real property leased by the Company or any of its Subsidiaries, as
lessor or lessee, as of the date hereof (the "Leases"). All such Leases
are valid and binding in accordance with their respective terms and the
Company or its Subsidiary (as applicable) is not in default in any respect
under any Lease, except for such instances of default thereunder that
would not individually or in the aggregate result in a Material Adverse
Effect on the Company. Except as set forth in Section 2.19(b) of the
Company Disclosure Schedule, the execution and delivery of this Agreement
by the Company and the consummation of the Transactions, including the
Merger, does not and will not result in a breach or violation of, or
constitute a default or an event that, with the passage of time or the
giving of notice, or both, would constitute a default, give rise to a
right of termination, material modification (including as to the amount,
timing or nature of lease payments), cancellation or acceleration or
require the consent or approval of any party (other than the Company or
its Subsidiary (as applicable)) under any Lease.
Section 2.20 [Reserved.]
Section 2.21 Opinion of Financial Advisors. The Company and the Special
Committee have received the opinion of the Special Committee Financial Advisor,
dated October 5, 2001, to the effect that, as of such date, the consideration to
be received in the Merger by the Company's shareholders is fair to the Company's
shareholders from a financial point of view. The Company has delivered a signed
copy of such opinion to Newco (it being understood that Newco will not be a
third party beneficiary of such opinion), and such opinion has not been amended,
modified or revoked in a manner adverse to Newco. The Company has been
authorized by the Special Committee Financial Advisor to permit the inclusion of
such fairness opinion (and, subject to prior review and consent by such Special
Committee Financial Advisor, a reference thereto) in the Proxy Statement.
Section 2.22 Intellectual Property. Section 2.22(a) of the Company
Disclosure Schedule sets forth, for the Intellectual Property owned by the
Company or its Subsidiaries, a complete and accurate list of all U.S. and
foreign (i) patents and patent applications; (ii) trademark registrations
(including Internet domain registrations), trademark applications, and material
unregistered trademarks; (iii) copyright registrations, and material
unregistered copyrights, as well as (iv) in the case of registrations and
applications, the registration or application number and date. Section
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2.22(a) of the Company Disclosure Schedule contains a list of all software
programs material to the operation of the Company's business (other than readily
available commercial software programs) which are owned or licensed by Company
or its Subsidiaries, and identifies which software is owned or licensed, as the
case may be.
(b) Section 2.22(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of all License Agreements (other than Franchise
Agreements or other agreements pursuant to which the Company or its
Subsidiaries have granted nonexclusive licenses of Intellectual Property
to franchisees or subfranchisees in the ordinary course of business). The
License Agreements are valid and binding obligations of all parties
thereto, enforceable in accordance with their terms, and there exists no
event or condition which will result in a violation or breach of, or
constitute (with or without due notice of lapse of time or both) a default
by any party under any such License Agreement. Neither Company nor any of
its Subsidiaries has licensed or sublicensed its rights in any
Intellectual Property other than pursuant to the License Agreements. No
royalties, honoraria or other fees are payable by Company or any of its
Subsidiaries to any third parties for the use of or right to use any
Intellectual Property except pursuant to the License Agreements.
(c) Except as set forth in Section 2.22(c) of the Company Disclosure
Schedule, the Company and each of its Subsidiaries owns and/or is licensed
to use (in each case, free and clear of any Liens, claims, or similar
encumbrances), and has the right to bring actions for the infringement,
dilution, misappropriation or other violation of, all patents and patent
applications, trademarks, service marks, trade names, and registrations
and applications for registration of industrial designs, copyrights, mask
works, trademarks, service marks, trade names, trade dress, and all domain
names, technology, inventions, know-how, trade secrets, processes and all
agreements and other rights with respect to intellectual property and
computer programs (collectively, "Intellectual Property") material to the
conduct of its respective business as currently conducted;
(d) Except as set forth in Section 2.22(d) of the Company Disclosure
Schedule, all of the patents, trademark and service mark registrations
(including the U.S. trademark registration for "Blimpie"), copyright
registrations and domain name registrations, and all applications for such
registrations, owned by the Company or any of its Subsidiaries (A) are
valid and in full force, (B) are held of record in the name of the Company
or its Subsidiary (as applicable), (C) are not the subject of any
cancellation or reexamination proceeding or any other proceeding
challenging their extent or validity and (D) all necessary registration,
maintenance and renewal fees in connection with such patents and
registrations have been paid and all necessary documents and certificates
in connection with such patents and registrations have been filed with the
relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such patents and registrations. To the Company's knowledge,
all of the patents, trademark and service mark registrations (including
the U.S. trademark registration for "Blimpie"), copyright registrations
and domain name registrations, and all applications for such
registrations, exclusively licensed (including where exclusively licensed
within a discrete territory) to the Company or any of its Subsidiaries (A)
are valid and in full force, (B) are licensed exclusively to the Company
or its Subsidiary (as applicable) in the discrete territory indicated, if
applicable, (C) are not the subject of any cancellation or reexamination
proceeding or any other proceeding challenging their extent or validity
and (D) all necessary registration, maintenance and renewal fees in
connection with such patents and registrations have been paid and all
necessary documents and certificates in connection with such patents and
registrations have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
patents and registrations;
(e) The use of such Intellectual Property by the Company or any of
its Subsidiaries does not infringe on the rights of any party;
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(f) To the knowledge of Company, no person is infringing on any
right of the Company or any of its Subsidiaries with respect to such
Intellectual Property;
(g) Neither the Company nor any of its Subsidiaries is, and the
consummation of the Transactions will not cause them to be, in breach or
violation of any agreement relating to the use of any of its Intellectual
Property, and neither the Company nor any of its Subsidiaries has received
any notification, written or oral, from any third party that there is any
such violation, breach, or inability to perform under any such agreement
and is not aware of any basis therefor;
The Company takes reasonable measures to protect the confidentiality of its
trade secrets. No trade secret has been disclosed or authorized to be disclosed
to any third party other than pursuant to a non-disclosure agreement. To the
Company's knowledge, no party to any non-disclosure agreement relating to its
trade secrets is in breach or default thereof.
Section 2.23 Insurance. The Company and its Subsidiaries maintain policies
of franchise errors and omissions, directors' and officers' liability, fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are prudent and customary in
the industry in which the Company operates. As of the date hereof, except as set
forth in Section 2.23 of the Company's Disclosure Schedule, all such policies
are in full force and effect, all premiums due and payable thereon have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy.
Section 2.24 Affiliate Transactions. Except as disclosed in the Filed
Company SEC Documents or in Section 2.24 of the Company Disclosure Schedule,
there are no transactions, agreements, arrangements or understandings (or series
thereof), written or oral, between the Company or any of its Subsidiaries and
any of their respective directors or officers (including, in the case of natural
persons, any of such persons' relatives or affiliates) that would be required to
be disclosed under Item 404 of Regulation S-K under the Securities Act.
Section 2.25 Franchise Operations.
(a) The Company has provided Newco with a copy of the Company's and its
Subsidiaries' currently effective uniform franchise offering circulars used by
the Company and its Subsidiaries to offer and sell franchises and subfranchises
in the United States and throughout the world for each of its and their brands,
namely, Blimpie, Smoothie Island Juice Bar, Maui Taco and Pasta Central
(collectively, the "Brands") ("Uniform Franchise Offering Circulars" or
"UFOCs").
(b) Except as set forth on Section 2.25(b) of the Company Disclosure
Schedule, the Company does not have any Subsidiary or Affiliate offering or
selling franchises or subfranchises relating to the Brands, domestically or
internationally.
(c) Section 2.25(c) of the Company Disclosure Schedule is a true and
complete list of all subfranchise, franchise or license agreements to which the
Company or a Subsidiary is a party, including at a minimum the name, address and
telephone number of each and every subfranchisee, franchisee, licensee, master
licensee, or master franchisee (a "Franchisee") (collectively, the "Franchise
Agreements"). Each Franchise Agreement is substantially similar to the form of
subfranchise, franchise or license agreement incorporated into the UFOC that was
issued to the Franchisee contemporaneously with the sale of a franchise or
subfranchise by the Company or a Subsidiary to the Franchisee. The Company and
its Subsidiaries had, at all relevant times and in all material respects, the
corporate power and authority and legal right to enter into and carry out the
terms of each Franchise Agreement. All of the Franchise Agreements are valid,
binding and enforceable against the Franchisee thereunder, subject to any such
Franchisee's bankruptcy, insolvency, receivership or similar proceeding under
state or federal law and is enforceable against such Franchisee in accordance
with its terms.
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(d) Section 2.25(d) of the Company Disclosure Schedule identifies each
current Franchisee that (i) has received any outstanding notices of financial
default under a Franchise Agreement, which default has not been cured as of the
Effective Time; (ii) is, to the Company's knowledge, in material default under a
Franchise Agreement for any other reason; or (iii) has on three or more
occasions within any twelve month period received written notices of events of
default under a Franchise Agreement.
(e) Except as set forth on Section 2.25(e) of the Company Disclosure
Schedule, and except as may be granted by operation of law, no Franchisee has a
protected territory, exclusive territory, right of first refusal, option or
other arrangement with the Company or its Subsidiaries for the acquisition of
additional franchises or expansion of the Franchisee's territory. Except as
described in Section 2.25(d) of the Company Disclosure Schedule, no Franchisee's
protected territory is shared in whole or in part with any other Franchisee.
(f) Section 2.25(f) of the Company Disclosure Schedule is a true and
complete list of all written or oral agreements (and with respect to oral
agreements a description thereof) with independent sales representatives,
contractors or agents (exclusive of representatives of subfranchisors) with
respect to the sale or development of franchises by the Company or its
Subsidiaries, brokers or consultants and all territorial development, and master
franchise agreements or any other agreements or arrangements under which the
Company or its Subsidiaries has authorized any person to sell or promote
franchises or licenses on behalf of the Company or its Subsidiaries or agreed to
rebate or share amounts receivable under any Franchise Agreement and indicating
which of such agreements are in default and may be terminated by the Company or
a Subsidiary by notice to the other party. The Company has delivered to Newco
true, correct and complete copies of all written agreements described in Section
2.25(f) of the Company Disclosure Schedule. The Company has delivered to Newco
true, correct and complete copies of all written correspondence and memoranda
evidencing such oral agreements described in Section 2.25(f) of the Company
Disclosure Schedule. The payments payable to all parties to each such oral
agreement are set forth on such Schedules.
(g) To the knowledge of the Company and its Subsidiaries, no outlet
operating under any Brand is in a condition or is being operated in a manner
that is so materially inconsistent with the requirements of the Franchise
Agreement or franchise systems associated with such Brand that such condition or
operation will result in early termination of the Franchise Agreement relating
to that outlet.
(h) The Company and its Subsidiaries have prepared and maintained each of
its and their UFOCs in an accurate and correct manner, have filed UFOCs in all
states requiring registration and approval prior to any offers or sales of
subfranchises and franchises in such states and have filed all material changes,
amendments, renewals thereto on a timely and accurate basis. There were no
material misrepresentations or material omissions of information in any UFOC at
the time the Company or its Subsidiaries was using such UFOC.
(i) (1) Except as disclosed in Section 2.25(i) of the Company Disclosure
Schedule, each Franchise Agreement complies, and the offer and sale thereof
complied at the time such offer and sale was made, in all material respects with
all foreign and domestic (federal and state) laws, rules, ordinances and
regulations thereunder and all orders, consents or decrees from any foreign or
domestic administrative or regulatory agency;
(2) Except as listed or described in Section 2.25(i) of the Company
Disclosure Schedule, no Franchise Agreement has been subordinated and no
provision regarding the calculation and payment of royalty fees in any
Franchise Agreement has been waived, altered or modified in any respect
adverse to the Company or its Subsidiaries thereunder; no right of
rescission, set-off, counterclaim or defense has been asserted or to the
knowledge of the Company, is threatened or exists, with respect to any
Franchise Agreement; no notices of default have been issued by the Company
with respect to any Franchise Agreement for defaults which
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have not been cured, and the Company has not waived any default by a
Franchisee which would adversely affect any Franchise Agreement.
(3) Except as set forth in Section 2.25(i) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary operates a franchise or
subfranchise associated with the Brands;
(4) Except as set forth in Section 2.25(i) of the Company Disclosure
Schedule, the Company's and its Subsidiaries' franchise operation manuals
for all Brands have been in the past, and currently are, consistent in all
material respects with the respective UFOCs the Company and its
Subsidiaries previously used, and currently use, to offer and sell
subfranchises and franchises.
(j) (1) Except as set forth on Section 2.25(j) of the Company Disclosure
Schedule, no orders, consents or decrees have been issued by any foreign or
domestic (federal or state) administrative or regulatory agency to the Company
or a Subsidiary nor have letters of inquiry, investigation or the like been
issued to the Company or a Subsidiary by such foreign or domestic administrative
or regulatory agencies relating, directly or indirectly, to the Company's or a
Subsidiary's offer and sale of franchises or business opportunities. The Company
has permitted Newco the right to inspect all material correspondence between the
Company and its Subsidiaries and such foreign or domestic administrative and
regulatory agencies relating to the offering and sale of franchises or business
opportunities;
(2) Except as set forth in Section 2.25(j) of the Company Disclosure
Schedule, to the Company's knowledge, the Company and its Subsidiaries
have not violated any foreign or domestic (federal or state) law, rule,
ordinance or regulation thereunder in connection with the offer and sale
of franchises or business opportunities;
(3) At all times while the Company and its Subsidiaries and
affiliates have offered and sold franchises and business opportunities,
each of the Company and its Subsidiaries and affiliates has been duly
authorized pursuant to, or has otherwise qualified for exemption from
registration under, the various laws and regulations governing the
offering and sale of franchises and business opportunities in each of the
jurisdictions (domestic and international) in which they respectively
offered to sell or sold franchises or business opportunities. The Company
has heretofore made available to Newco correct and complete copies of all
registrations, advertising or promotional materials, UFOCs, disclosure
documents or agreements filed with any foreign or domestic administrative
or regulatory agency or otherwise used by the Company or any Subsidiaries
in connection with the offer, sale and operation of franchises or business
opportunities in any jurisdiction (domestic or international). Neither the
Company nor any of its Subsidiaries or affiliates has, in any of the
aforementioned documents (including, without limitation, UFOCs or
disclosure documents), made any untrue statement of a material fact, or
omitted to state any fact necessary to made the statements made by the
Company or its Subsidiaries, taken as a whole, not misleading, in
connection with the offer or sale of any franchise or business
opportunity;
(4) Neither the Company nor any Subsidiary has during the time
period described in (iii) above authorized its officers, directors or
representatives to furnish any materials or information which is in any
way inconsistent with the "earnings claim" information set forth in Item
19 of any UFOC and to the Company's knowledge, no such earnings claims
were ever made to prospective Franchisees by the Company, any Subsidiary
or an officer, director or representative of either.
(k) Except as set forth in Section 2.25(k) of the Company Disclosure
Schedule, no Franchisee has alleged to the Company or a Subsidiary that the
Company or a Subsidiary has acted improperly regarding (y) disparate treatment
among the Franchisees in violation of any foreign or domestic law, rule,
regulation or ordinance or (z) providing prospective Franchisees with inaccurate
or incorrect earnings claims or earnings claims that violated any foreign or
domestic law.
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(l) Except as set forth in Section 2.25(l) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary or affiliate has entered into
any contracts, agreements, or arrangements, orally or in writing, whereby the
Company or any Subsidiary or affiliate receives rebates, commissions, discounts
or other payments or remuneration of any kind from suppliers selling products or
services to Franchisees.
(m) Neither the Company nor any Subsidiary is in material violation or
default of any Franchise Agreement, nor has there occurred any event or
condition which with the passage of time or giving of notice (or both) would
constitute a material default by the Company or any Subsidiary of any Franchise
Agreement under, or permit termination of, any such Franchise Agreement. Neither
the execution of this Agreement nor the consummation of the transactions
contemplated herein would result in a violation of or a default under, or give
rise to a right of termination, modification, cancellation or acceleration of
any obligation or loss of benefits under, any Franchise Agreement.
(n) The Company and its Subsidiaries have complied with all applicable
foreign and domestic franchise termination, fair practices and relationship laws
with respect to the proper notice of default, time to cure, and the actual
termination of any of its franchises or business opportunities as prescribed by
such laws.
(o) The Company and its Subsidiaries have not made to any Franchisee, or
any of its Franchisees' employees or agents, or to any other person, any
commitment to provide any special discount, allowance or accommodation other
than as set forth in the UFOCs. There are no material agreements or special
arrangements with any Franchisee other than as set forth in the UFOCs.
(p) Each of Blimpie Brand Building Fund, Inc., Maui Tacos Brand Building
Fund, Inc., Pasta Central Brand Building Fund, Inc. and Smoothie Island Brand
Building Fund, Inc. are entities that are authorized to receive voluntary
marketing allowances and payments from purveyors, distributors and manufacturers
servicing the Brands (the "Building Funds"). The Company and its Subsidiaries
have at all times complied fully with all agreements governing the Building
Funds including, without limitation, agreements contained in the Franchise
Agreements and UFOCs. The Building Funds and all monies paid thereto have been
allocated and used consistent with the Franchise Agreements and UFOCs and no
monies have been commingled with the monies or accounts of the Company or its
Subsidiaries.
Section 2.26 Health Claims. Except as set forth on Section 2.26 of the
Company Disclosure Schedule, no Health Claims (as defined below) are being
asserted against the Company or any of its Subsidiaries nor is the Company aware
of any acts, omissions, facts, or circumstances which would so subject it,
arising from or based upon any act, omission, event, condition or circumstance
occurring or existing on or prior to the date hereof or for which the Company or
any of its Subsidiaries is responsible, including any such Health Claims arising
from or based upon the ownership or operation of assets, businesses or
properties of the Company or any of its Subsidiaries, other than, in each case,
Health Claims that if adversely determined against the Company, would not
individually or in the aggregate have a Material Adverse Effect on the Company.
Neither the Company nor any of its Subsidiaries has received any notice of any
Health Claim in connection with its assets, properties, businesses or
operations. The term "Health Claim" means any third party (including
governmental agencies, regulatory agencies, employees or other private parties)
action, lawsuit, claim, investigation proceeding which seeks to impose liability
for (i) violation of the Federal Food Drug and Cosmetic Act ("FDC Act"), and all
acts and/or rules and regulations amending or supplementing same, the Federal
Wholesome Poultry Act, the Federal Wholesome Meat Act, the Federal Insecticide
Fungicide and Rodenticide Act, the Federal Hazardous Substance Labeling Act, any
state food and drug law or other applicable federal, state or municipals laws,
ordinances, rules or regulations; or (ii) sale of any food products containing
any salmonella or listeria organisms, toxins, foreign material or other
poisonous or injurious matter or any chemicals on any list promulgated by any
state or federal government of known chemicals causing cancer or reproductive
toxicity.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco represents and warrants to the Company as follows:
Section 3.1 Organization and Qualification. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey and has the requisite corporate power and authority to carry on its
business as it is now being conducted. Newco is duly qualified as a foreign
corporation or licensed to do business, and is in good standing, in each state
where the character of its properties owned or leased or the nature of its
activities makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed and in good standing would not reasonably
be expected to prevent or materially delay the consummation of the Merger or the
other Transactions.
Section 3.2 Authority Relative to this Agreement. Newco has all requisite
corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by Newco prior to or at
the Effective Time, to perform its obligations hereunder and thereunder, and to
consummate the Transactions. The execution and delivery by Newco of this
Agreement and each instrument required hereby to be exercised and delivered by
Newco prior to or at the Effective Time and the performance of its obligations
hereunder and thereunder, and the consummation by Newco of the Transactions have
been duly and validly authorized by the Board of Directors and sole stockholder
of Newco, and no other corporate proceedings on the part of Newco are necessary
to authorize this Agreement or to consummate the Transactions, other than filing
of appropriate merger documents as required by the NJBCA. This Agreement has
been duly and validly executed and delivered by Newco, and, assuming this
Agreement constitutes a valid and binding obligation of the Company, this
Agreement constitutes a valid and binding agreement of Newco, enforceable
against Newco in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
Section 3.3 Consents and Approvals; No Violation. Subject to the taking of
the actions described in the immediately succeeding sentence, the execution and
delivery of this Agreement do not, and the consummation of the Transactions will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
modification, termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon any
of the material properties or assets of Newco under (a) the certificate of
incorporation or bylaws of Newco, (b) any loan or credit agreement, note, bond,
indenture, lease or other agreement, instrument or Permit applicable to Newco or
its properties or assets, (c) any judgment, order, writ, injunction, decree,
law, statute, ordinance, rule or regulation applicable to Newco or its
properties or assets. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any other
person is required by Newco in connection with the execution and delivery of
this Agreement or the consummation by Newco of any of the Transactions, except
(i) pursuant to the Exchange Act, (ii) the filing of the Certificate of Merger
pursuant to the NJBCA, (iii) where the failure to obtain any such consent,
approval, authorization or permit, or to make any such filing or notification,
would not reasonably be expected to prevent or materially delay consummation of
the Merger or would not otherwise prevent Newco from performing its obligations
under this Agreement.
Section 3.4 Financing Commitments; Solvency. Newco has sufficient cash and
commitments for financing (and has provided the Special Committee with written
evidence thereof and all amendments or additions thereto) in an aggregate amount
sufficient to pay all of the Merger Consideration, Cash Payment and Company
Expense Reimbursement as required by this Agreement and to pay all other related
fees and expenses, and payments required under this Agreement. Newco has
delivered to the Special Committee true and correct copies of the commitment
letters of the lenders that will provide the debt financing which, together with
available equity, is expected to be sufficient to satisfy all of Newco's
obligations under this Agreement (the "Financing Commitments"). As of the date
of this Agreement, the Commitment Letters are in full force and effect and Newco
has paid all commitment fees required
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thereunder. Immediately after giving effect to the transactions contemplated
hereby, Newco will not (i) be insolvent (either because its financial condition
is such that the sum of its debts is greater than the fair value of its assets
or because the fair salable value of its assets is less than the amount required
to pay its probable liability on its existing debts as they mature), (ii) have
unreasonably small capital with which to engage in its business, or (iii) have
incurred debts beyond its ability to pay as they come due.
Section 3.5 Ownership of Company Stock. As of the date of this Agreement,
neither Newco nor any "affiliate" or "associate" of Newco is an "interested
stockholder" of the Company, as such quoted terms are defined in Section
14A:10A-3 of the NJBCA.
Section 3.6 Information. None of the information supplied or to be
supplied by Newco for inclusion or incorporation by reference in the Proxy
Statement will, at the respective times filed with the SEC and, in addition, at
the date it or any amendment or supplement is mailed to shareholders, at the
time of the Shareholder Meeting and 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 made therein, in
light of the circumstances under which they were made, not misleading.
Section 3.7 Brokerage Fees and Commissions. Neither Newco nor any of its
officers, directors or shareholders has employed any investment banker, business
consultant, financial advisor, broker or finder in connection with the
Transactions, except for The Robinson-Humphrey Company, LLC
("Robinson-Humphrey"), or obligated Newco to pay any investment banking,
business consultancy, financial advisory, brokerage or finders' fees or
commissions in connection with the Transactions, except for fees payable to
Robinson-Humphrey. A correct and complete copy of the engagement letter between
Robinson-Humphrey and Newco with respect to the Transactions, which accurately
describes the fees payable to Robinson-Humphrey, has been provided by Newco to
the Company.
Section 3.8 Litigation. There is no claim, suit, action or proceeding
(including arbitration proceedings) pending or, to the knowledge of Newco,
threatened against Newco that has had or would reasonably be expected to have a
Material Adverse Effect on Newco, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against Newco
or any of its Affiliates that has had or would reasonably be expected to have a
Material Adverse Effect on Newco.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
Section 4.1 Conduct of Business of the Company Pending the Merger. The
Company hereby covenants and agrees that, from the date hereof until the
Effective Time, unless otherwise expressly contemplated by this Agreement or
consented to in writing by Newco, the Company will, and will cause each of its
Subsidiaries to:
(a) operate their respective businesses in the usual and ordinary
course consistent with past practices;
(b) employ their reasonable best efforts to preserve intact (i)
their business organization, maintain their rights and franchises, retain
the services of their respective key employees and maintain their
relationships with their respective customers and suppliers and others
having business dealings with them, and (ii) the goodwill of those having
relationships with it;
(c) use their reasonable best efforts to maintain and keep their
properties and assets in as good repair and condition as at present,
ordinary wear and tear excepted, and maintain supplies and inventories in
quantities consistent with their customary business practice; and
(d) use their reasonable best efforts to keep in full force and
effect insurance and bonds comparable in amount and scope of coverage to
that currently maintained.
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Section 4.2 Prohibited Actions by the Company. Without limiting the
generality of Section 4.1, the Company covenants and agrees that, except as
expressly contemplated by this Agreement or otherwise consented to in writing by
Newco, from the date hereof until the Effective Time, neither it nor any of its
Subsidiaries shall:
(a) (i) increase the compensation (or benefits) payable to or to
become payable to any director or employee, except for increases in salary
or wages of employees in the ordinary course of business and consistent
with past practice; (ii) grant any severance or termination pay to, or
enter into or amend any employment or severance agreement with, any
employee, except any such grants made in the ordinary course of business
consistent with past practice, or pursuant to agreements, plans or
policies existing on the date hereof or as otherwise provided under this
Agreement; (iii) establish, adopt, enter into or amend any collective
bargaining agreement or Benefit Plan of the Company or any ERISA
Affiliate; or (iv) take any action to accelerate any rights or benefits,
or make any determinations not in the ordinary course of business
consistent with past practice, under any Benefit Plan of the Company or
any ERISA Affiliate; provided, however, that the Company may amend the
Company Stock Option Plans or take other action to accelerate the vesting
of any unvested Options that were issued and outstanding on the date
hereof and disclosed in Section 2.3 of the Company Disclosure Schedule;
and may otherwise amend the Company Stock Option Plans (and option
agreements entered into thereunder) to effectuate the purposes of Section
1.10 hereof;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, other than dividends at the current
annual rate of $0.07 per share or dividends or distributions by a
wholly-owned Subsidiary to the Company;
(c) redeem, purchase or otherwise acquire, or offer or propose to
redeem, purchase or otherwise acquire, any outstanding shares of capital
stock of, or other equity interests in, or any securities that are
convertible into or exchangeable for any shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights
of any kind to acquire any shares of capital stock of, or other equity
interests in, the Company (other than any purchase, forfeiture or
retirement of shares of Company Common Stock or the Options occurring
pursuant to the terms (as in effect on the date hereof) of any existing
Benefit Plan of the Company);
(d) except as provided in Sections 1.4 and 1.6 hereof, effect any
reorganization or recapitalization; or split, combine or reclassify any of
the capital stock of, or other equity interests in, the Company or issue
or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of such capital stock or
such equity interests;
(e) except as provided in Sections 1.4 and 1.6 hereof, offer, sell,
issue or grant, or authorize or propose the offering, sale, issuance or
grant of, any shares of capital stock of, or other equity interests in,
any securities convertible into or exchangeable for (or accelerate any
right to convert or exchange securities for) any shares of capital stock
of, or other equity interest in, or any options, warrants or rights of any
kind to acquire any shares of capital stock of, or other equity interests
in, or any Voting Company Debt or other voting securities of, the Company,
or any "phantom" stock, "phantom" stock rights, SARs or stock-based
performance units (or increase the number of shares reserved for issuance
under the Company Option Plans), other than issuance of shares of Company
Common Stock upon the exercise of the Options issued and outstanding as of
the date hereof and disclosed in Section 2.3 of the Company Disclosure
Statement in accordance with the terms thereof (as in effect on the date
hereof);
(f) acquire or agree to acquire, by merging or consolidating with,
by purchasing stock or other equity interest in or a portion of the assets
of, or in any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or interest
therein or otherwise acquire any assets of any other person (other than
the purchase of
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inventories and supplies from suppliers or vendors in the ordinary course
of business and consistent with past practice);
(g) sell, lease, exchange or otherwise dispose of, or grant any Lien
with respect to, any of the properties or assets of the Company or any of
its Subsidiaries that are material to the business of the Company or any
of its Subsidiaries (including without limitation any Intellectual
Property), except for dispositions of excess or obsolete assets and sales
in the ordinary course of business and consistent with past practice
(provided, however, that (i) Newco has approved the Company's sale
or closing of its Maui Tacos store in New York City and (ii) the Company
shall have the right to sell its Maui Tacos store in Atlanta, Georgia,
subject to Newco's written consent of the terms of such sale, which will
not be unreasonably withheld or delayed); or license any Intellectual
Property other than in the ordinary course of business consistent with
past practice.
(h) except as contemplated by Section 1.4, propose or adopt any
amendments to its Certificate of Incorporation or Bylaws or other
organizational documents;
(i) effect any change in any accounting methods, principles or
practices in effect as of June 30, 2001 affecting the reported
consolidated assets, liabilities or results of operations of the Company,
except as may be required by a change in generally accepted accounting
principles;
(j) (i) incur any indebtedness for borrowed money, issue or sell any
debt securities or warrants or other rights to acquire any debt securities
of the Company or any of its Subsidiaries, guarantee any such indebtedness
or debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, or grant to any person or create any Lien outside the ordinary
course of business, or (ii) make any loans, advances or capital
contributions to, or investments in, any other person except for (x) loans
of up to $50,000 in the aggregate, the terms of which have been approved
in writing by Newco, such approval not to be unreasonably withheld or
delayed, and (y) loans, advances, capital contributions or investments
between any wholly-owned Subsidiary of the Company and the Company or
another wholly-owned Subsidiary of the Company;
(k) (i) enter into or amend any Contract of a type described in
Section 2.17 or Section 2.25(c) or enter into or amend a lease for real
property, other than in the ordinary course of business consistent with
past practice (including on substantially the same terms and conditions),
or (ii) enter into or renew any vendor or supply agreement, absent the
written consent of Newco, such consent not to be unreasonably withheld or
delayed;
(l) pay, discharge, settle or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business
consistent with past practice;
(m) make any Tax election except in a manner consistent with past
practice, or change any method of accounting for Tax purposes, except as
required by applicable law or GAAP, or settle or compromise any material
Tax liability;
(n) make or agree to make any material capital expenditures for the
period from June 30, 2001 until the Effective Time other than in the
normal course of business consistent with past practices and not in excess
of $50,000 in the aggregate.
(o) form, create or organize any Subsidiary, other than in the
ordinary course of business consistent with past practice; or
(p) agree in writing or otherwise to take any of the foregoing
actions or any action which would cause any condition set forth in Article
VI to be unsatisfied.
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ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
Section 5.1 Solicitation Provisions.
(a) Subject to the terms of Section 5.1(c) below, during the period
(x) beginning on the date of this Agreement and (y) continuing until the
thirty-day anniversary of the date of this Agreement, the Company, its
Subsidiaries and their respective officers, directors, employees,
representatives, agents or affiliates (including any investment banker,
attorney or accountant retained by the Company or the Special Committee)
shall have the right to: (i) initiate, solicit and encourage (including by
way of furnishing non-public information or assistance, but only pursuant
to appropriate confidentiality and standstill agreements) inquiries or the
making or submission of Acquisition Proposals (as defined below); and (ii)
enter into and maintain or continue discussions or negotiations with any
person or group in furtherance of such inquiries and to obtain or induce
any person or group to make or submit an Acquisition Proposal.
(b) During the period (x) beginning on the thirty-day anniversary of
the date of this Agreement and (y) continuing until the earlier of the
Effective Time or the termination of this Agreement in accordance with
Section 7.1, neither the Company, its Subsidiaries nor any of their
respective officers, directors, employees, representatives, agents or
affiliates (including any investment banker, attorney or accountant
retained by the Company or the Special Committee) will directly or
indirectly initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or take any other action
with the intention of facilitating, any inquiries or the making or
submission of any Acquisition Proposal (as defined below), or enter into
or maintain or continue discussions or negotiate with any person or group
in furtherance of such inquiries or to obtain or induce any person or
group to make or submit an Acquisition Proposal, or agree to or endorse
any Acquisition Proposal, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person or group to do or
seek any of the foregoing, or authorize or permit any of its officers,
directors or employees or any of its affiliates or any investment banker,
financial advisor, attorney, accountant or other representative or agent
retained by it to take any such action; provided, however, that nothing
contained in this Agreement shall prohibit the Board of Directors of the
Company or the Special Committee or the Representatives from (a)
furnishing information to or entering into discussions or negotiations
with any person or group that makes an unsolicited written, bona fide
Acquisition Proposal, if, and only to the extent that (i) the Special
Committee determines in good faith by a majority vote, after consultation
with the Special Committee Financial Advisor (or other nationally
reputable financial advisor) and with independent legal counsel that such
proposal is, or is reasonably likely to lead to, a Superior Proposal, (ii)
the Special Committee determines in good faith by a majority vote after
consultation with its outside legal counsel that the failure to negotiate,
or otherwise engage in discussions, with such third party would be
inconsistent with the Board's fiduciary duties under applicable law, and
(iii) such person or group, prior to the disclosure of any non-public
information, enters into a confidentiality agreement with the Company that
does not contain exclusivity provisions which would prevent the Company
from complying with its obligations hereunder, or (b) maintaining or
continuing discussions or negotiations with any party that has expressed
an interest in making or submitting an Acquisition Proposal (whether
orally or in writing) within the 30-day period referenced in Section
5.1(a) above. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this Section 5.1 by any
officer, director, employee or affiliate of the Company or its
Subsidiaries or any investment banker, attorney, accountant or other
advisor, agent or representative of the Company or its Subsidiaries or the
Special Committee, whether or not such person is purporting to act on
behalf of the Company or its directors or otherwise, shall be deemed to be
a breach of this Section 5.1 by the Company.
(c) Except as expressly permitted by this Section 5.1(c), neither
the Board of Directors of the Company nor the Special Committee (or any
other committee thereof) shall enter
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into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement (each, an "Acquisition Agreement") related to
any Acquisition Proposal; provided, however, that the Company may
terminate this Agreement pursuant to the provisions of Section 7.1(h) if
(i) the Company has received a Superior Proposal, (ii) in light of such
Superior Proposal, the Special Committee has determined in good faith
(after having consulted with outside legal counsel) that it would be
necessary for the Board to terminate this Agreement in order to comply
with its fiduciary obligations under applicable law, (iii) the Company has
notified Newco in writing of the determinations described in clause (ii)
above at least three (3) business days prior to terminating this
Agreement, (iv) the Special Committee concurrently or previously approves
the Superior Proposal, and (v) the Company shall have paid the Newco
Expense Reimbursement and Termination Fee required by Section 7.3.
(d) In addition to the obligations of the Company set forth in
Sections (b) and (c) above, the Company shall promptly (and in any event,
within 72 hours) advise Newco orally and in writing of any request for
information (if it occurs after the thirty day anniversary of the date of
this Agreement), or the submission or receipt of any Acquisition Proposal,
or any inquiry with respect to or which could lead to any Acquisition
Proposal (if it occurs after the thirty day anniversary of the date of
this Agreement), the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person making any
such request, Acquisition Proposal or inquiry and its response or
responses thereto. The Company will keep Newco fully informed of the
status and material terms (including amendments or proposed amendments) of
any such request (if it occurs after the thirty day anniversary of the
date of this Agreement), Acquisition Proposal or inquiry (if it occurs
after the thirty day anniversary of the date of this Agreement). Except as
expressly permitted by Section 5.1(b), the Company, its Subsidiaries,
their respective officers, directors, employees, representatives, agents
and affiliates (including any investment banker, attorney or accountant
retained by the Company or the Special Committee) will immediately cease
and cause to be terminated any activities, discussions or negotiations
existing on the thirty-day anniversary of the date hereof with any parties
conducted with respect to any of the foregoing, provided that this
sentence will not make the provisions of Sections 5.1(b) or (c)
inapplicable to a subsequent proposal by any such party.
(e) As used herein, "Acquisition Proposal" means an inquiry, offer
or proposal regarding any of the following (other than the Transactions
contemplated by this Agreement) involving the Company: (i) any merger,
consolidation, share exchange, recapitalization, liquidation, dissolution,
business combination or other similar transaction; (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of 15% or more
of the assets of the Company and its Subsidiaries taken as a whole or of
any Material Business (as defined below) in a single transaction or series
of related transactions; (iii) any tender offer (including a self tender
offer) or exchange offer that, if consummated, would result in any person
or group beneficially owning more than 15% of the outstanding shares of
any class of equity securities of the Company (or in the case of a person
or group which beneficially owns more than 15% of the outstanding shares
of any class of equity securities of the Company as of the date hereof,
would result in such person or group increasing the percentage or number
of shares of such class beneficially owned by such person or group) or the
filing of a registration statement under the Securities Act in connection
therewith; (iv) any acquisition of 15% or more of the outstanding shares
of capital stock of the Company or the filing of a registration statement
under the Securities Act in connection therewith or any other acquisition
or disposition the consummation of which would prevent or materially
diminish the benefits to Newco of the Merger; or (v) any public
announcement by the Company or any third party of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of
the foregoing. "Superior Proposal" means any proposal made by a third
party to acquire, directly or indirectly, including pursuant to a tender
offer, exchange offer, merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or other similar
transaction, not less than 51% of the shares of Company Common Stock then
outstanding or all or substantially all of the assets of the Company and
its Subsidiaries taken as a whole which the Special Committee determines
in good
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faith (A) is more favorable to all of the shareholders of the Company from
a financial point of view than the transactions contemplated by this
Agreement (including any adjustment to the terms and conditions proposed
in writing by Newco in response to such Acquisition Proposal) and (B) is
reasonably likely to be consummated in a timely manner, taking into
account all financial, regulatory, legal and other aspects of such
proposal. "Material Business" means any business (or the assets needed to
carry out such business) that contributed or represented 15% or more of
the net sales, the net income or the assets (including equity securities)
of the Company and its Subsidiaries taken as a whole.
(f) Subject to compliance with Section 5.1(c), the Company or the
Board of Directors of the Company or the Special Committee may make any
disclosure or statement to the Company's shareholders if it determines in
good faith after consultation with independent legal counsel as to legal
matters that the failure to take such action would be inconsistent with
the fiduciary duty of the Board of Directors under applicable law or is
required by applicable law.
Section 5.2 Access to Information. Between the date hereof and the
Effective Time, the Company shall (a) afford to Newco and its officers,
directors, employees, accountants, consultants, legal counsel, agents and other
representatives full access during normal business hours and at all other
reasonable times to the officers, employees, agents, properties, offices and
other facilities of the Company and its Subsidiaries and to their books and
records (including all Tax Returns and all books and records related to Taxes
and such returns), (b) permit Newco to make such inspections as it may require
(and the Company shall cooperate with Newco in any inspections, and (c) furnish
promptly to Newco and its representatives a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and such other
information concerning the business, properties, contracts, records and
personnel of the Company and its Subsidiaries (including financial, operating
and other data and information) in the possession of the Company or the
Company's counsel, accountants or other consultants or agents as may be
reasonably requested, from time to time, by or on behalf of Newco. All access,
inspections and furnishing pursuant to this Section 5.2 shall (i) be on
reasonable notice to the Company, (ii) be scheduled and otherwise managed so as
not to unreasonably disrupt the Company's operations, and (iii) without prior
authorization of the Company (such authorization not to be unreasonably
withheld) not involve direct contact with non-officer employees, suppliers or
non-retail customers.
Section 5.3 [Reserved].
Section 5.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions herein (including Section
5.1), each of the parties hereto agrees to 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 as soon as
reasonably practicable the Merger and the other Transactions. 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 take all such
necessary action. Such reasonable best efforts shall include reasonable
best efforts to obtain the Company Required Consents and the Newco
Required Consents (as defined in Section 6.2(b) and 6.3(b) hereof).
(b) The Company shall give and make all required notices and reports
to the appropriate persons with respect to the Permits and Environmental
Permits that are necessary for the ownership, operation and use of the
assets of Surviving Corporation after the Effective Time. Subject to the
other terms of this Agreement, each of the Company and Newco shall
cooperate and use their respective reasonable best efforts to make all
filings, to obtain all actions or nonactions, waivers, and orders of
Governmental Entities necessary to consummate the Transactions and to take
all reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity.
Each of the parties hereto
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will furnish to the other parties such necessary information and
reasonable assistance as such other parties may reasonably request in
connection with the foregoing.
(c) The Company and its Board of Directors shall (i) use reasonable
best efforts to make any state takeover statute or similar statute, rule
or regulation inapplicable to the Merger, this Agreement, the Voting
Agreement or any of the other Transactions and (ii) if any state takeover
statute or similar statute, rule or regulation becomes applicable to the
Merger, this Agreement, the Voting Agreement or any of the other
Transactions, use reasonable best efforts to ensure that the Merger and
such other Transactions may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the
effect of such statute or regulation on the Merger and such other
Transactions, in each case consistent with the fiduciary duties of the
Board of Directors and the Special Committee.
Section 5.5 Event Notices and Other Actions.
(a) From and after the date hereof until the Effective Time, the
Company shall promptly notify Newco of (i) the occurrence or nonoccurrence
of any event, the occurrence or nonoccurrence of which has resulted in, or
would reasonably be expected to result in, any condition to the Merger set
forth in Article VI not being satisfied, (ii) the Company's failure to
comply with any covenant or agreement to be complied with by it pursuant
to this Agreement which has resulted in, or would reasonably be expected
to result in, any condition to the Merger set forth in Article VI not
being satisfied and (iii) any representation or warranty made by the
Company contained in this Agreement becoming untrue or inaccurate in any
material respect. The Company's delivery of any notice pursuant to this
Section 5.5(a) shall not cure any breach of any representation or warranty
of the Company contained in this Agreement or otherwise limit or affect
the remedies available hereunder to Newco.
(b) Subject to the terms and conditions herein (including Section
5.1) and applicable law, the Company shall not take any action or
nonaction that will, or that would reasonably be expected to, cause any
condition to the Merger set forth in Section 6.2(a) not to be satisfied.
(c) From and after the date hereof until the Effective Time, Newco
shall promptly notify the Company of (i) the occurrence or nonoccurrence
of any event, the occurrence or nonoccurrence of which has resulted in, or
would reasonably be expected to result in, any condition to the Merger set
forth in Article VI not being satisfied, (ii) Newco's failure to comply
with any covenant or agreement to be complied with by it pursuant to this
Agreement which has resulted in, or would reasonably be expected to result
in, any condition to the Merger set forth in Article VI not being
satisfied and (iii) any representation or warranty made by Newco contained
in this Agreement becoming untrue or inaccurate in any material respect.
Newco's delivery of any notice pursuant to this Section 5.5(c) shall not
cure any breach of any representation or warranty of Newco contained in
this Agreement or otherwise limit or affect the remedies available
hereunder to the Company.
(d) Subject to the terms and conditions herein and applicable law,
Newco shall not take any action or nonaction that will, or that would
reasonably be expected to cause any condition to the Merger set forth in
Section 6.3(a) not to be satisfied.
(e) No rights of a party hereunder shall be limited, and no party
shall be deemed to have waived any rights, by reason of any investigation
or audit conducted before or after the date hereof by any party or the
knowledge of any breach of a representation, warranty or covenant by the
other party contained in this Agreement. Each of Newco, on the one hand,
and the Company, on the other, shall have the right to rely fully on the
representations, warranties and covenants of the other party contained in
this Agreement.
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Section 5.6 Third Party Standstill Agreements During the period from the
date hereof through the Effective Time, the Company shall not terminate, amend,
modify or take any action to waive any provision of any confidentiality or
standstill or similar agreement to which the Company is a party. Subject to the
foregoing, during such period, the Company agrees to enforce to the fullest
extent permitted under applicable law, the provisions of any such agreements,
including obtaining injunctions to prevent any breaches of such agreements and
to enforce specifically the terms and provisions thereof in any court or other
tribunal having jurisdiction. Notwithstanding the foregoing, nothing in this
Section 5.6 is intended to prevent the Company from exercising its rights under
Section 5.1 in accordance with the provisions of such Section.
Section 5.7 Employee Stock Options; Employee Plans and Benefits.
(a) Options. Prior to the Effective Time, the Board of Directors of
the Company (or, if appropriate, the Special Committee or any committee
administering the Company Stock Option Plans) shall adopt such resolutions
or take such other actions as are required to effect the transactions
contemplated by Section 1.10 in respect of all outstanding Options, and
thereafter the Board of Directors of the Company (or any such committee)
shall adopt any such additional resolutions and take such additional
actions as are required in furtherance of the foregoing.
(b) Payments in Respect of Options. Each Option cancelled pursuant
to Section 1.10 shall, upon cancellation, be converted into the right to
receive an amount in cash equal to the product of (i) the number of shares
of Company Common Stock subject to such Option, whether or not then
exercisable, and (ii) the excess, if any, of the Merger Consideration over
the exercise price per share subject or related to such Option (the
"Option Consideration").
(c) Time of Payment. The cash amount described in paragraph (b) of
this Section 5.7 shall be paid as promptly as is practicable after the
Effective Time.
(d) Withholding. All amounts payable pursuant to Section 1.10 and
Section 5.7(b) and (c) shall be subject to any required withholding of
taxes and shall be paid without interest. Payment shall, at Newco's
request, be withheld in respect of any Option until Newco has received
documentation that evidences such payment is in full satisfaction of all
rights under such Option.
(e) Termination of Equity-Based Compensation. No stock options or
warrants will be issued under the Company Stock Option Plans or otherwise
after the date hereof. Unless otherwise determined by Newco, any provision
in any other Benefit Plan providing for the potential issuance, transfer
or grant of any capital stock of the Company or any interest, or release
of restrictions, in respect of any capital stock of the Company shall be
terminated as of the Effective Time. The Company shall ensure that, as of
the Effective Time, unless otherwise determined by Newco, no holder of an
Option, restricted stock or derivative security or any participant in the
Company Stock Option Plans or other Benefit Plan or otherwise shall have
any right thereunder to acquire any capital stock of the Company or the
Surviving Corporation, other than shares of Company Common Stock issued or
issuable upon exercise of Options that were issued and outstanding on the
date hereof. Holders of Options shall not be entitled to receive any
payment or benefit except as provided in Section 1.10 and this Section
5.7.
(f) No Right to Employment. Other than as specifically contemplated
in this Agreement, nothing contained in this Agreement shall confer upon
any employee of the Company or any ERISA Affiliate any right with respect
to employment by Newco, the Surviving Corporation or any of Newco's
affiliates, nor shall anything herein interfere with any or create any
additional right of Newco, the Surviving Corporation or any of Newco's
affiliates to terminate the employment of any such employee at any time,
with or without cause, or restrict Newco, the Surviving Corporation or any
of Newco's affiliates in the exercise of their independent business
judgment in modifying any other terms and conditions of the employment of
any such employee.
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Section 5.8 Meeting of the Company's Shareholders.
The Company shall, as soon as practicable after execution of this
Agreement, take all action reasonably necessary in accordance with the NJBCA and
its Certificate of Incorporation and Bylaws to convene a shareholder meeting to
consider and vote on the Merger and this Agreement (the "Shareholder Meeting").
At the Shareholder Meeting, all of the shares of Company Common Stock then owned
by Newco or any other affiliate of Newco shall be voted to approve the Merger
and this Agreement. Subject to Section 5.1, the Board of Directors of the
Company (and the Special Committee) shall recommend that the Company's
shareholders vote to approve the Merger and this Agreement, shall use its
reasonable best efforts to solicit from shareholders of the Company proxies in
favor of the Merger and shall take all other action necessary and appropriate to
secure the vote of shareholders required by the NJBCA to effect the Merger.
Section 5.9 Proxy Statement.
(a) The Company and Newco shall furnish to each other all
information concerning such person or such person's business that is
required for the Proxy Statement. The Company shall, as soon as
practicable after the date hereof, prepare and file (after providing Newco
with a reasonable opportunity to review and comment thereon) the Proxy
Statement with the SEC and shall use its reasonable best efforts to
respond to any comments of the SEC (after providing Newco with a
reasonable opportunity to review and comment thereon); provided, however,
that in no event shall the Company file the preliminary Proxy Statement
with the SEC any later than October 22, 2001 (unless Newco shall have
failed to cooperate with the preparation thereof as contemplated by this
Section 5.9). The Company shall cause the Proxy Statement to be mailed to
the Company's shareholders as promptly as practicable, but in any event no
more than five business days after responding to all such comments to the
satisfaction of the staff of the SEC and in any case no earlier than
November 8, 2001. The Company shall notify Newco promptly of the receipt
of any comments from the SEC and of any request by the SEC for amendments
or supplements to the Proxy Statement or for additional information and
shall supply Newco with copies of all correspondence between the Company
or any of its representatives, on the one hand, and the SEC, on the other
hand, with respect to the Proxy Statement or the Transactions. The Company
will cause the Proxy Statement to comply in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
thereunder applicable to the Proxy Statement and the solicitation of
proxies for the Shareholder Meeting (including any requirement to amend or
supplement the Proxy Statement). Newco shall cooperate with the Company in
the preparation of the Proxy Statement, and without limiting the
generality of the foregoing, the Company and Newco shall promptly furnish
to the other such information relating to it and its affiliates and the
Transactions and such further and supplemental information as may be
reasonably requested by the other party and shall promptly notify the
other party of any change in such information. If at any time prior to the
Shareholder Meeting there shall occur any event that should be set forth
in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its shareholders such an amendment or
supplement; provided, however, that no such amendment or supplement to the
Proxy Statement will be made by the Company without providing Newco the
reasonable opportunity to review and comment thereon and without the
approval of Newco, which approval shall not be unreasonably withheld. The
Company and its counsel shall (and the Company shall cause the Special
Committee and its counsel to) use reasonable efforts to permit Newco and
its counsel to participate in all communications with the SEC and its
staff, including all meetings and telephone conferences, relating to the
Proxy Statement, this Agreement or the Transactions; provided, however,
that in the event that such participation by Newco does not take place,
the Company (or the Special Committee) shall promptly inform Newco of the
content of all such communications and the participants involved therein
that specifically relate to the Proxy Statement, this Agreement or the
Transactions.
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(b) Subject to the provisions of Section 5.1, the Company agrees to
include in the Proxy Statement the recommendation of the Company's Board
of Directors and the Special Committee. The Proxy Statement shall contain
a copy of the opinion of the Special Committee Financial Advisor.
Section 5.10 Public Announcements. Newco and the Company shall to the
fullest extent practicable consult with each other before issuing any press
release or otherwise making any public statement with respect to this Agreement,
the Merger and the other Transactions and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law.
Section 5.11 FIRPTA. The Company shall deliver to Newco prior to the
execution of this Agreement a certified statement, prepared in accordance with
Sections 897 and 1445 of the Code, that the shares of Company Common Stock are
not "United States real property interests" within the meaning of Section 897 of
the Code.
Section 5.12 Alternative Financing; Disclosure.
(a) Newco shall use its reasonable best efforts to satisfy the
requirements of the Financing Commitments and to obtain the funding
contemplated by and on the terms contained in the Financing Commitments
or, if any of the Financing Commitments is terminated or such funds shall
not otherwise be available, use its reasonable best efforts to obtain an
alternative source of financing, in each case, on financial and other
terms no less favorable to Newco than those set forth in the respective
Financing Commitments.
(b) Following the date hereof, any amendment, termination or
cancellation of any Financing Commitment or any modification of any
Financing Commitment or any information which becomes known to Newco which
makes it substantially unlikely to obtain the financing on the terms set
forth in the Financing Commitments, shall be promptly disclosed to the
Company and the Special Committee of the Board of Directors. Newco shall
keep the Company and the Special Committee of the Board of Directors
reasonably apprised of any discussions or communications with each person
providing debt financing which relates to the matters referred to in the
preceding sentence.
Section 5.13 Delisting. Each of the parties hereto agrees to cooperate
with the other party in taking, or causing to be taken, all actions necessary
(i) to delist the Company Common Stock from the American Stock Exchange and (ii)
to terminate the registration of the Company Common Stock under the Exchange
Act; provided that such delisting and termination shall not be effective until
or after the Closing Date.
Section 5.14 Stockholder Litigation. Each of the Company and Newco shall
give the other the reasonable opportunity to participate in the defense of any
stockholder litigation against the Company or Newco, as applicable, and their
respective directors relating to the Merger. The Company agrees that it will not
settle any litigation currently pending, or commenced after the date hereof,
against the Company or any of its directors by any stockholder of the Company
relating to this Agreement, or the Merger, without prior written notice to
Newco. Subject to the terms and conditions herein (including Section 5.1) and
applicable law, the Company will not voluntarily cooperate with any third party
which has sought or may hereafter seek to restrain or prohibit or otherwise
oppose the Merger and will cooperate with Newco to resist any such effort to
restrain or prohibit or otherwise oppose the Merger.
Section 5.15 Indemnification.
(a) Newco agrees that all rights to indemnification now existing in
favor of any individual who at or prior to the Effective Time was a
director, officer, employee or agent of the Company or any of its
Subsidiaries (the "Indemnified Parties") as provided in their respective
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charters, by-laws or indemnification agreements, as in effect on the date
hereof, shall survive the Merger and shall continue in full force and
effect for a period of not less than six years from the Effective Time
unless otherwise required by law, provided that in the event any claim or
claims are asserted or made within such six-year period, all rights to
indemnification in respect of any such claim or claims shall continue
until final disposition of any and all such claims.
(b) Newco agrees that the Company and, from and after the Effective
Time, the Surviving Corporation shall cause to be maintained in effect for
not less than six years from the Effective Time the current policies of
the directors' and officers' liability insurance maintained by the Company
(provided that Newco may substitute therefor, at its election, policies
with the same carriers or other obligors of substantially equal or better
financial standing as insure Newco's directors and officers of at least
substantially similar coverage and amounts containing terms and conditions
which are substantially similar to the existing insurance applicable to
Newco's directors or officers to the extent that such insurance policies
provide coverage for events occurring prior to or upon the Effective Time
for all persons who are directors and officers of the Company on the date
hereof); provided, that in no event will the Surviving Corporation be
required to expend annually in excess of 150% of the annual premium
currently paid by the Company for such coverage.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, prior to the Effective Time, of the
following conditions:
(a) this Agreement shall have been approved by the affirmative vote
of the shareholders of the Company by the requisite vote in accordance
with the NJBCA, the rules of the American Stock Exchange and any
applicable provisions of the Company's certificate of incorporation or
bylaws.
(b) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated, or enforced by
any court or Governmental Entity which is in effect and has the effect of
prohibiting the consummation of the Merger; provided, however, that each
of the parties shall have used its reasonable best efforts (subject to the
other terms and conditions of this Agreement) to prevent the entry of any
such injunction or other order and to appeal as promptly as practicable
any injunction or other order that may be entered prior to it having
become final and nonappropriate.
Section 6.2 Conditions to Obligations of Newco to Effect the Merger. The
obligations of Newco to effect the Merger shall be subject to the fulfillment at
or before the Effective Time of the following conditions, any one or more of
which may be waived by Newco, in its sole discretion:
(a) Since the date of this Agreement, there shall not have occurred
a Material Adverse Effect with respect to the Company;
(b) The Company shall have received (and furnished to Newco evidence
thereof reasonably satisfactory to Newco) the approvals and consents from
third parties or Governmental Entities listed on Schedule 6.2(b) (the
"Company Required Consents"), and such approvals and consents shall not
have expired or been withdrawn; and
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Section 6.3 Conditions to the Obligations of the Company. The obligations
of the Company to effect the Merger shall be subject to the fulfillment at or
before the Effective Time of the following conditions, any one or more of which
may be waived by the Company, in its sole discretion:
(a) Since the date of this Agreement, there shall not have occurred
a Material Adverse Effect on Newco.
(b) Newco shall have received (and furnished to the Company evidence
thereof reasonably satisfactory to the Company) the approvals and consents
from third parties or Governmental Entities listed on Schedule 6.3(b) (the
"Newco Required Consents"), and such approvals and consents shall not have
expired or been withdrawn.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination. This Agreement may be terminated and the Merger
and the other Transactions may be abandoned at any time prior to the Effective
Time, by written notice by the terminating party to the other party, whether
before or after approval of the matters presented in connection with the Merger
to the shareholders of the Company:
(a) by the mutual written consent of the Board of Directors of Newco
and the Company;
(b) by either Newco or the Company by action of its Board of
Directors if the Merger shall not have been consummated by March 31, 2002
(provided the right to terminate this Agreement under this Section 7.1(b)
shall not be available to a party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of
the Merger to occur on or before such date);
(c) by either Newco or the Company by action of its Board of
Directors if a court of competent jurisdiction or other Governmental
Entity shall have issued a nonappealable final order, decree or ruling or
taken any other action, in each case having the effect of permanently
restraining, enjoining, or otherwise prohibiting the Merger, except if the
party relying on such order, decree, or ruling or other action has not
complied with its obligations under Section 5.4 of this Agreement;
(d) by either Newco or the Company by action of its Board of
Directors, if at the Shareholders Meeting (including any adjournment or
postponement thereof), the requisite vote of the shareholders of the
Company in favor of the Merger and this Agreement shall have not been
obtained (provided the right to terminate this Agreement under this
Section 7.1(d) shall not be available (x) to the Company if it has failed
to fulfill its obligations under Section 5.8 or (y) to Newco if it has
failed to fulfill its obligations under Section 5.12);
(e) by Newco by action of its Board of Directors, (i) if (A) the
Board of Directors of the Company (or any committee thereof, including the
Special Committee) shall have taken any material action prohibited by
Section 5.1; or (B) the Board of Directors of the Company (or any
committee thereof, including the Special Committee) shall have recommended
to the shareholders of the Company an Acquisition Proposal or entered into
an Acquisition Agreement; or (ii) (A) if the Board of Directors of the
Company (or any committee thereof, including the Special Committee) shall
have withdrawn, revoked, amended or modified its approval or
recommendation of the Merger and this Agreement in a manner adverse to
Newco (other than in response to an injunction issued by a court in
connection with the Metro Matter), (B) if the Special Committee Financial
Advisor shall have withdrawn, revoked, amended or modified its opinion
referred to in Section 2.21 in a manner adverse to Newco and such
withdrawn, amended or modified opinion is not substituted with an opinion
of the nature referred to in Section 2.21 or
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(C) the Company shall fail to include in the Proxy Statement its approval
or recommendation of the Merger and this Agreement;
(f) by Newco, if the Company shall have breached or failed to
perform in any respect any of its representations, warranties or covenants
required to be performed by it under this Agreement (other than breaches
that individually or in the aggregate would not have a Material Adverse
Effect on the Company), and such breach or failure to perform has
continued unremedied for ten business days following notice of such breach
to Company by the Newco;
(g) by the Company, if Newco shall have breached or failed to
perform in any respect any of its representations, warranties or covenants
required to be performed by it under this Agreement (other than breaches
that individually or in the aggregate would not have a Material Adverse
Effect on the Newco), and such breach or failure to perform has continued
unremedied for ten business days following notice of such breach to Newco
by the Company; and
(h) by the Company at any time prior to the Shareholder Meeting, by
action of the Special Committee, if a third party, including any group,
shall have made a Superior Proposal and the requirements of Section 5.1(c)
have been satisfied in all material respects.
(i) By the Company in the event of Newco's failure to obtain the
funds to be provided by the financing contemplated in Section 3.4 on or
before March 31, 2002.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement, except for the provisions
of Sections 7.2, 7.3, and 8.6, shall immediately become void and there shall be
no liability or obligation on the part of Newco or the Company or their
respective officers, directors, shareholders or affiliates, except as set forth
in Section 7.3 below or except to the extent that a party to this Agreement has
breached in any material respect any representation, warranty or covenant
contained in this Agreement; provided, however, that the provisions of Sections
7.2, 7.3 and 8.6 of this Agreement shall remain in full force and effect and
survive any termination of this Agreement.
Section 7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated.
(b) In the event of a termination of this Agreement by the Company
pursuant to Section 7.1(h), the Company shall pay to Newco (i) the Newco
Expense Reimbursement (as defined in Section 7.3(h) below), and (ii) an
amount equal to $1,300,000 (the "Termination Fee"), in each case within
three business days after such termination (by check or wire transfer of
same day funds).
(c) In the event of termination of this Agreement by Newco pursuant
to Section 7.1(e) hereof, then the Company shall pay to Newco (i) the
Newco Expense Reimbursement and (ii) the Termination Fee, in each case
within twenty business days after such termination (by check or wire
transfer of same day funds).
(d) In the event of termination of this Agreement by Newco pursuant
to Section 7.1(f) hereof, or by either Newco or the Company pursuant to
Section 7.1(d) hereof, the Company shall pay to Newco the Newco Expense
Reimbursement within seven business days after such termination (or, if
such termination is by Newco, within twenty business days of such
termination) (in either case, by check or wire transfer of same day
funds).
(e) [Reserved.]
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(f) In the event of termination of this Agreement by the Company
pursuant to Section 7.1(g) or Section 7.1(i) hereof, then the Deposit
shall be delivered to the Company pursuant to the terms of the Escrow
Agreement and Newco shall pay to the Company the Company Expense
Reimbursement (as defined in Section 7.3(i) below) within seven business
days after such termination (by check or wire transfer of same day funds).
(g) The parties acknowledges that the Termination Fee, Company
Expense Reimbursement, Deposit and Newco Expense Reimbursement are
integral parts of the transactions contemplated by this Agreement and not
a penalty, and that, without these provisions, the parties would not enter
into this Agreement. Further, nothing in this Section 7.3 shall be deemed
to limit any liability of any party hereto for any breach in any material
respect of any representations, warranties or covenants contained in this
Agreement that occurs prior to termination of this Agreement.
(h) As used herein, "Newco Expense Reimbursement" means all
reasonable out-of-pocket fees and expenses actually incurred by Newco (and
its agents and representatives) or on its behalf in connection with the
Merger and the proposed financing thereof (including travel expenses of
such parties, fees and expenses of accountants, appraisers, engineers,
consultants and other persons engaged to perform due diligence,
syndication, due diligence and other expenses of prospective financing
sources of Newco and reasonable attorneys' fees and expenses of counsel
for Newco and reasonable attorneys' fees and expenses of counsel for
prospective financing sources of Newco, expenses payable to shareholders
or potential shareholders of Newco, or any commitment, transaction or
similar fees payable to financing sources of Newco. Notwithstanding
anything to the contrary contained herein, in no event shall the Newco
Expense Reimbursement exceed (i) $600,000, in the event of termination of
this Agreement pursuant to Section 7.1(f); or (ii) $200,000, in the event
of termination for any other reason.
(i) As used herein, "Company Expense Reimbursement" means all
reasonable out-of-pocket fees and expenses actually incurred by Company
(and its agents and representatives) or on its behalf in connection with
the Merger and the proposed financing thereof (including travel expenses
of such parties, fees and expenses of accountants, appraisers, engineers,
consultants and other persons engaged to perform due diligence,
syndication, due diligence and other expenses of prospective financing
sources of Company and reasonable attorneys' fees and expenses of counsel
for Company and reasonable attorneys' fees and expenses of counsel for
prospective financing sources of Company, expenses payable to shareholders
or potential shareholders of Company, or any commitment, transaction or
similar fees payable to financing sources of Company. Notwithstanding
anything to the contrary contained herein, in no event shall the Company
Expense Reimbursement exceed $200,000.
Section 7.4 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by Newco and the Board of Directors of
the Company at any time before or after approval of this Agreement by the
shareholders of the Company, but, after any such shareholder approval, no
amendment shall be made that by law requires the further approval of such
shareholders without the approval of such shareholders. This Agreement may not
be amended except by an instrument in writing signed on behalf of all the
parties.
Section 7.5 Extension; Waiver. At any time prior to the Effective Time, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
documents, certificate or writing delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions of the other parties hereto
contained herein; provided that after the approval of the Merger by the
shareholders of the Company, no extensions or waivers shall be made that by law
require further approval by such shareholders without the approval of such
shareholders. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
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ARTICLE 8
MISCELLANEOUS
Section 8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties made in this Agreement shall survive after the
Effective Time. This Section 8.1 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time.
Section 8.2 Enforcement of the Agreement. The Company agrees that
irreparable damage would occur to Newco in the event that any of the provisions
of this Agreement were not performed by the Company in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that Newco
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
federal or state court located in the State of New York (as to which the parties
agree to submit jurisdiction of the purposes of such action), this being in
addition to any other remedy to which they are entitled at law or in equity
including those set forth in Section 7.3 of this Agreement. The Company further
agrees to waive any requirement for the securing or posting of any bond in
connection with obtaining any such injunction or other equitable relief.
Section 8.3 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 and legal substance of
the Transactions 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 in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provisions of this Agreement, which
shall remain in full force and effect.
Section 8.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given upon receipt if
delivered personally, mailed by registered or certified mail (postage prepaid,
return receipt requested) or sent by a nationally recognized overnight courier
service, such as Federal Express, to the respective parties at the following
addresses or sent by electronic transmission to the fax number specified below,
with a confirming copy mailed or delivered (or at such other address or fax
number of a party as shall be specified by such party by like notice):
if to Newco:
Sandwich Acquisition Corporation
c/o Smith, Gambrell & Russell, LLP
Suite 3100, Promenade II
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Attention: Arthur Jay Schwartz, Esq.
Fax: (404) 685-6932
if to the Company:
Blimpie International, Inc.
740 Broadway, 12th Floor
New York, New York 10003
Attention: Chief Executive Officer
Fax: (212) 995-2560
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with a copy to:
Hall Dickler Kent Goldstein & Wood, LLP
909 Third Avenue
New York, New York 10022
Attention: Steven D. Dreyer, Esq.
Fax: (212) 935-3121
Notice given by fax shall be deemed received on the day the sender
receives fax confirmation that such notice was received at the fax number of the
addressee. Notice given by mail as set out above shall be deemed received three
days after the date the same is postmarked.
Section 8.5 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
Section 8.6 Governing Law. Except to the extent the provisions of the
NJBCA mandatorily apply hereto, this Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New York
regardless of the laws that might otherwise govern under principles of conflicts
of laws applicable thereto.
Section 8.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 8.8 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 confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 8.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 8.10 Certain Definitions. For purposes of this Agreement, the
following terms shall have the meanings ascribed to them below:
(a) "affiliate" of a person shall mean (i) 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 and (ii)
an "associate" of such person, as that term is defined in Rule 12b-2
promulgated under the Exchange Act as in effect on the date hereof.
(b) "beneficial owner" (including the term "beneficially own" or
correlative terms) shall have the meaning ascribed to such term under Rule
13d-3(a) under the Exchange Act.
(c) "business day" shall have the meaning ascribed to such term
under Rule 14d-1 of the Exchange Act.
(d) "control" (including the terms "controlling," "controlled by"
and "under common control with" or correlative terms) shall mean the
possession, directly or indirectly or as trustee or executor, of the power
to direct or cause the direction of the management and policies of a
person, whether through ownership of voting securities or as trustee or
executor, by contract or credit arrangement, or otherwise.
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(e) "group" shall have the meaning ascribed to such term under Rule
13d-3(a) under the Exchange Act.
(f) "Leasing Subsidiaries" shall mean the subsidiaries of the
Company listed in Schedule 8.10(f) that were formed for the sole purpose
of entering into a lease agreement on behalf of the franchisees of the
Company.
(g) "License Agreements" shall mean all agreements (whether oral or
written) to which Company or any of its Subsidiaries is a party or
otherwise bound, (i) granting or obtaining any right to use or practice
any rights under any Intellectual Property, or (ii) restricting the
Company's (or such Subsidiary's) rights to use any Intellectual Property,
including license agreements, development agreements, distribution
agreements, settlement agreements, consent to use agreements, and
covenants not to sue.
(h) "Material Adverse Effect" shall mean (i) any fact, event or
circumstance that results in or would reasonably be expected to result in
an adverse change or effect in the financial condition, assets,
liabilities, business, properties or results of operations of a specified
person, which change or effect is material with any other such changes or
effects, to the specified person (and when used with respect to the
Company, taking into consideration the Company and its Subsidiaries taken
as a whole), or (ii) any event, matter, condition or effect which
materially impairs the ability of a specified person to perform on a
timely basis its obligations under this Agreement or the consummation of
the Transactions; in each case, other than any change or effect
attributable to (i) the economy in general, (ii) the Metro Matter, or
(iii) with respect to the Company, a change in relationships with
franchisees resulting primarily from the announcement of the Merger.
(i) "Material Agreement" shall mean any agreement, commitment or
transaction by which the Company or its Subsidiaries is required to be
filed or disclosed as an exhibit to the Filed Company SEC Documents
pursuant to Item 601 of Regulation S-K of the Securities Act.
(j) "Metro Matter" shall mean the claims and allegations of
Metropolitan Blimpie, Inc. as disclosed in item 5 under "Threatened
Litigation" of Section 2.10 of the Disclosure Schedules, including any
litigation, injunction or arbitration resulting therefrom or relating
thereto.
(k) "person" shall mean a natural person, company, corporation,
partnership, association, trust or any unincorporated organization.
(l) "Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have the
majority of the voting interest in such partnership) or (ii) at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and one
or more of its Subsidiaries.
Section 8.11 Interpretation.
(a) The words "hereof," "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and article, section, paragraph, exhibit and schedule
references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified. Whenever the words
"include," "includes" or "including" are used in
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this Agreement they shall be deemed to be followed by the words "without
limitation." All terms defined in this Agreement shall have the defined
meanings contained herein when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to
the feminine and neuter genders of such term. Any agreement, instrument,
statute or rule defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument,
statute or rule as from time to time amended, modified or supplemented,
including (in the case of agreements and instruments) by waiver or consent
and (in the case of statutes and rules) by succession of comparable
successor statutes and rules and all attachments thereto and instruments
incorporated therein. References to a person are also to its permitted
successors and assigns.
(b) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any
provisions of this Agreement.
(c) References in this Agreement to "the Company's knowledge" or
"the knowledge of the Company" or similar terms mean the knowledge of any
of the Company's officers or directors; "knowledge" means actual
knowledge, together with the knowledge a reasonable business person would
have obtained after making reasonable inquiry and exercising reasonable
diligence to the matters at hand.
Section 8.12 Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule), the Escrow Agreement, the Voting Agreement and the
Employment Agreements, (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof, and (b) shall not be assigned
by operation of law or otherwise, provided that Newco may assign any of its
rights and obligations to any direct or indirect wholly owned subsidiary of
Newco or as collateral security to any lender providing financing to Newco in
connection with the Transactions, but no such assignment shall relieve Newco of
its obligations hereunder. Any attempted assignment in violation of this Section
8.12 shall be void. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, on the day and
year first above written.
BLIMPIE INTERNATIONAL, INC.
By: /s/ Anthony P. Conza
------------------------------------
Name: Anthony P. Conza
Title: CEO
SANDWICH ACQUISITION CORP.
By: /s/ Jeffrey Endervelt
------------------------------------
Name: Jeffrey Endervelt
Title: CEO
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