SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
SCHEDULE 13E-3/A
AMENDMENT TO ITEM 12 OF
SCHEDULE 13E-3 FILED ON SEPTEMBER 20, 2001
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)
THE QUIZNO'S CORPORATION
(NAME OF THE ISSUER)
THE QUIZNO'S CORPORATION
FIRENZE CORP.
RICHARD E. SCHADEN
RICHARD F. SCHADEN
(NAME OF THE PERSONS FILING STATEMENT)
COMMON STOCK, $.001 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
749058 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------------
PATRICK E. MEYERS, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
THE QUIZNO'S CORPORATION
1415 LARIMER STREET
DENVER, COLORADO 80202
(720) 359-3300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF PERSONS FILING STATEMENT)
----------------------
COPIES TO:
DAVID C. ROOS, ESQ.
MOYE GILES O'KEEFE VERMIERE & GORRELL, LLP
1225 SEVENTEENTH STREET, SUITE 2900
DENVER, COLORADO 80202
(303) 292-2900
This statement is filed in connection with (check the appropriate box):
[X] (a) The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
[ ] (b) The filing of a registration statement under the Securities Act of 1933.
[ ] (c) A tender offer.
[ ] (d) None of the above.
Check the following box if the soliciting materials or information statement referred to in
checking box (a) are preliminary copies. [ ]
Check the following box if the filing is a final amendment reporting the results of the
transaction. [ ]
CALCULATION OF FILING FEE:
TRANSACTION VALUATION* $20,137,035
AMOUNT OF FILING FEE** $4,027.41
*For purposes of calculating the fee only. The amount assumes the conversion of 2,337,439
shares of Common Stock of The Quizno's Corporation, in the proposed merger, at $8.50 per
share, and options to purchase 155,378 shares of Common Stock with an average net equity
value of $ 1.73 per share.
**The amount of the filing fee calculated in accordance with Rule 0-11 of the Securities
Exchange Act of 1934 equals 1/50th of 1% of the value of the shares to be converted in the
merger.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify
the filing with which the offsetting fee was previously paid. Identify the previous filing
by registration statement number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $4,027.41 Filing Party: The Quizno's Corporation
Form or Registration No.: Schedule 14A, Preliminary proxy statement Date Filed: July 5,
2001
ITEM 12. THE SOLICITATION OR RECOMMENDATION
Attached hereto is a copy of a letter to the shareholders of The Quizno's Corporation.
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SIGNATURES
AFTER DUE INQUIRY AND TO THE BEST OF ITS OR HIS KNOWLEDGE AND BELIEF, EACH OF
THE UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE,
COMPLETE AND CORRECT.
Dated: December 11, 2001
THE QUIZNO'S CORPORATION FIRENZE CORP.
By: /s/Patrick E. Meyers By: /s/Richard
--------------------- -----------
E. Schaden
----------
Patrick E. Meyers
Richard E. Schaden
Vice President and General Counsel President
/s/Richard F. Schaden /s/Richard
--------------------- -----------
E. Schaden
----------
Richard F. Schaden
Richard E. Schaden
Individually
Individually
The Quizno's Corporation
1415 Larimer Street
Denver, Colorado
December __, 2001
To our Shareholders:
On November 5, 2001, we sent our shareholders a notice of special meeting and proxy
statement describing a proposal to approve and adopt a merger agreement between us and
Firenze Corp., pursuant to which Firenze will be merged into us. If the merger is
approved, our public shareholders who do not exercise dissenters' rights will receive $8.50
per share for each share of our common stock that they own. The special meeting of
shareholders' was originally scheduled for November 30, 2001. It has been adjourned and is
currently set to reconvene Friday December 14, 2001 at 10:00 am, at which time it will be
adjourned again and will reconvene at 10:00 am December ____, 2001, at the Oxford Hotel in
Denver, Colorado.
Richard E. Schaden is the president and chief executive officer and chairman of our
board of directors and Richard F. Schaden is our vice president and corporate secretary and
a member of our board of directors. The Schadens are also the sole shareholders, officers
and directors of Firenze. The Schadens, therefore, have a direct conflict of interest with
respect to the proposed transaction. The Schadens own approximately 67% of our outstanding
common stock. In light of this conflict of interest, our board of directors formed the
special committee. The special committee is composed of three of our directors who are not
affiliated with Firenze. The special committee negotiated the terms of the merger
agreement on behalf of the board and us. In connection with the execution of the merger
agreement, both the board and the special committee determined that the merger and the
merger agreement are fair to and in the best interests of our public shareholders.
Our proxy statement described various letters and proposals received from a
shareholder in September and October 2001, and correspondence from the committee responding
to those proposals. The shareholder, Fagan Capital, Inc., generally outlined its
willingness to purchase shares from our minority shareholders, but only if certain
conditions were met. As noted in the proxy statement, the special committee considered and
evaluated the Fagan proposals, and determined it could not agree to the proposals,
particularly the requirement that we grant Fagan a put option, which in turn required
approval by one of our lenders, Levine Leichtman Capital Partners II, L.P. Levine
Leichtman had informed the special committee it would not consent to the put. The
committee notified Fagan, however, that the committee would facilitate a discussion between
Levine Leichtman and Fagan, would review any agreement reached between Fagan and Levine
Leichtman, and would enter into negotiations with Fagan under appropriate circumstances.
The committee requested that any subsequent offer from Fagan be made in the form of a
binding offer with definitive documents.
On October 26, 2001 Fagan's counsel, Schulte, Roth & Zabel, responded to the special
committee noting the benefits of the Fagan proposal, asked the special committee to
announce its withdrawal of support for the Schaden proposal and commence negotiations with
Fagan. The letter also noted the necessity of a third party consent to the put option
included in the Fagan proposal, but declined the invitation to negotiate directly with
Levine Leichtman.
By letter dated October 29, 2001, Brobeck, Phleger & Harrison, LLP responded to the
Schulte letter on behalf of the special committee. The committee reiterated that the
company had been unable to obtain the third party approvals which were a condition to
Fagan's proposal. The committee again noted that the terms of Fagan's current proposal
would cause an event of default under the Levine Leichtman facility. The committee also
offered to facilitate discussions between Fagan and Levine Leichtman to allow Fagan to
make a feasible proposal which the committee would help negotiate. The committee informed
Fagan that it remained willing to negotiate an offer with Fagan whenever Fagan presented to
the special committee an offer which would be acceptable to the independent third parties
whose consent would be required. The special committee also noted that although it could
not force the Schadens to negotiate with Fagan, the committee remained willing to
facilitate a meeting with the Schadens if it would result in a higher price for the
minority shareholders. Finally, the special committee noted that it remained willing to
consider any definitive proposals Fagan actually made.
Schulte responded by letter dated November 1, 2001, reiterating some prior arguments
and noting the potential higher price and non-coercive features of the Fagan proposal. It
alleged that the special committee had failed to fulfill its responsibilities to the
company's minority shareholders and failed to adequately disclose the terms of Fagan's
offer. It also noted that William Fagan had scheduled a meeting with Richard E. Schaden
and expressed hope that progress could be made at the meeting. No proposals were made by
Schulte to obtain the third party consent necessary to implement the Fagan proposal.
Schulte expressed the view that no prudent businessman would make a minority investment
without a necessary liquidity provision, such as the put option proposed by Fagan.
On November 5, 2001, Richard E. Schaden met with William Fagan in Denver, Colorado.
Mr. Fagan proposed a number of possible transactions between Fagan and Firenze. Mr.
Schaden indicated he was not interested in pursuing a transaction with Mr. Fagan, and there
were no agreements or understandings reached.
On November 13, 2001, a lawsuit titled Sebesta v. Schaden, et al., was commenced by
Edward C. Sebesta against us, Richard E. Schaden, Richard F. Schaden, and four other
present or former directors, in the District Court for the City and County of Denver. The
complaint alleges that the defendants breached their fiduciary duties by wrongfully
supporting the proposed merger with Firenze and by failing to adequately disclose
information concerning proposals made by Fagan, the special committee's responses and
alleged conflicts of interest. Plaintiff sought a temporary restraining order or TRO to
preclude us from holding our November 30, 2001 shareholders' meeting until corrective
disclosures were made and disseminated. On November 28, 2001, the court heard and denied
plaintiff's motion finding that the plaintiff had not satisfied any of the requirements for
obtaining injunctive relief. The Court specifically held "...the plaintiff has come into
this Court with unclean hands seeking relief when, in fact, the plaintiff, and its agents,
have been less than candid, less than accurate in its representations, in terms of its own
offer in terms of it being conditional, and any request for relief would not serve the
public's interest". We filed an answer denying any wrongdoing.
On November 27, 2001, three days before the scheduled shareholders' meeting and on
the eve of TRO hearing, Fagan delivered a letter to the special committee which outlined in
general terms apparently three different proposals. It became a major focus of the hearing
for the TRO described in the paragraph above. The first appeared to propose to amend the
current merger to provide $9.50 a share to minority shareholders, allow them an option to
continue as shareholders after the merger, with Fagan buying shares in the surviving entity
and no put option required. Fagan also expressed its continued interest in purchasing the
minority shares for $10.63 per share, but only if we agreed to the put option, and
alternatively indicated its willingness to explore purchasing all of the shares (including
the shares held by the Schadens and their affiliates) for $15 per share. Fagan stated that
its proposal would expire on December 10, 2001. The committee noted that all three of the
apparent proposals required third party consents with no indication by Fagan that the third
parties had approved or been approached.
The committee responded to Fagan on November 28, 2001. It stated that it had engaged
in a lengthy, detailed process attempting to determine whether Fagan would ever be prepared
to make a bona fide offer in a form that could be accepted for the benefit of our minority
shareholders, and noted that Fagan had failed to make such an offer. The committee
expressed its concern that the timing of Fagan's November 27 letter was designed more to
disrupt the shareholders' meeting, and that it was not a sincere expression of interest in
acquiring the minority shares. The committee noted that the letter did not contain
sufficient information to constitute a binding offer that the committee could recommend.
Nevertheless, the committee told Fagan it was willing to immediately pursue a transaction
with Fagan that would ensure the minority shareholders would receive $9.50 per share, with
no put option which would require third party consent. It noted that time was of the
essence since there was a binding agreement providing the minority shareholders $8.50 in
cash scheduled to close on November 30, 2001. The committee once again asked Fagan for a
binding offer with definitive documents and stated it was prepared to negotiate such an
offer through the close of business on November 29, 2001.
The committee did not receive an offer. Instead, on November 29, it received a
three-page letter from Fagan covering a number of topics. Among other things, it asserted
that he had made an "UNCONDITIONAL $9.50 OFFER" and referred to the $10.63 and $15 or
higher proposals. It asked that the committee propose a transaction structure and provide
a form of definitive agreement. Fagan also requested written confirmation that our board
of directors (including the Schadens) support the transaction.
The committee met by telephone on November 29th to consider the various proposals
from Mr. Fagan. It decided to continue discussions with Mr. Fagan in an attempt to see if
a feasible binding agreement could be reached that would be of greater benefit to the
company and its shareholders than the current agreement at $8.50 per share. The committee
responded in writing that same day. It noted that Fagan failed to provide the requested
definitive legal documentation for execution and again asked Fagan for a definitive offer.
Given the last minute nature of the proposal, it requested funds in escrow or a personal
guaranty to provide certainty. Fagan responded by letter the next morning, November 30,
2001. Fagan repeated the requests of its November 29, 2001, letter but did not provide the
documentation asked for by the committee.
We determined to delay the shareholders' meeting to provide additional disclosure to
our shareholders on the recent developments. We adjourned the shareholders' meeting until
10:00 am the following Tuesday, December 4, 2001.
On December 3, 2001, Fagan sent to the special committee a signed form of investment
agreement and personal guaranty of Fagan's obligations signed by William and Laura Fagan.
Among other things, the investment agreement provided that:
o Parties were Fagan, us and Firenze
o Firenze and we would amend the Firenze merger agreement in a number of respects and
in a form acceptable to Fagan
o Fagan would fund Firenze to have it buy shares from minority shareholders who wished
to sell their shares for $9.50 per share
o Fagan would receive an equivalent number of shares in the surviving company
o Minority shareholders who did not wish to sell their shares would be allowed to
remain shareholders
o We must agree not go private or delist from trading without the affirmative vote of
the majority of the minority shareholders
o The proposal would expire 5:00 pm (CST) on December 5, 2001
The investment agreement, guaranty letter and cover letter are exhibits to a Form SC 13D/A
filed with the Securities Exchange Commission by Fagan and various other shareholders on
December 6, 2001.
The committee met on December 3, 2001 and consulted with its financial advisor and
Brobeck on the merits of the Fagan proposal. It noted that the proposal would require the
approval of Firenze since it would amend the existing merger agreement between Firenze and
us. The committee instructed Brobeck to explore with Schulte and counsel for Firenze
whether changes to the proposed agreement could be made to make it mutually acceptable.
Brobeck asked Schulte whether the covenant against going private or delisting could be
shortened or deleted. Schulte indicated a willingness to discuss with Fagan shortening the
covenant against going private or delisting but no definitive timeframe was set. Brobeck
also noted that the proposed investment agreement would require approval from the Schadens
and Schulte indicated that Fagan was willing to be flexible with regard to various
structures, although no information was provided which indicated that any change to the
proposed form would eliminate the necessity of the Schadens' approval. Brobeck asked
Schadens' counsel if Firenze would raise its $8.50 offer and whether the Schadens would
support a $9.50 offer in the form proposed by Fagan. No material progress was made with
either Fagan or Firenze.
The committee reconvened that evening, heard presentations from us, Richard E.
Schaden and Schadens' counsel, and explored changes that could be made to reach agreement
on changes to the Fagan proposal to allow additional payments to the minority
shareholders. No progress was made. The committee decided that Mr. Bromberg should call
Mr. Fagan to negotiate and Brobeck should call Schulte and Schadens' counsel again to see
if an agreement could be reached. No significant changes were made by any of the parties.
The committee reconvened on December 4, 2001 to further consider the fairness of the
existing merger agreement and whether any changes could be made to any of the Fagan
proposals to deliver additional value to the minority shareholders. Among other things,
the committee reanalyzed its conclusion that it was not in the interests of us and our
shareholders to remain public, for the reasons expressed in the proxy statement and saw no
reason to change its conclusion. However, it decided to continue its efforts to develop a
transaction with Fagan which would result in our shareholders receiving $9.50 a share. On
the same date, two members of the special committee called Mr. Fagan and informed him that
his proposal would not be accepted, principally because of the proposed restriction on
going private and the prohibition on delisting from securities trading.
We adjourned the December 4, 2001 shareholders' meeting.
On December 5, 2001, Fagan delivered a letter to the committee noting its proposal
had expired and indicating it could not enter into an agreement that would allow us to go
private or effect a transaction which would cause it to cease to be a shareholder. Fagan
he said it would not initiate further contacts with the committee, but that it was still
interested in pursuing a transaction with us.
On December 6, 2001, the special committee met to explore alternatives to structure a
transaction that could actually get done, meet our objectives and get additional cash
consideration to the minority shareholders. It also determined to establish a process to
reach a final result in our best interests and in the best interests of our shareholders.
These results are detailed in the next two paragraphs.
On December 7, 2001, Brobeck contacted Schulte to indicate that the committee was
still interested in a transaction with Fagan, and that a definitive proposal would be
made. Later that day, the committee sent Fagan a form of definitive agreement, which if
signed by Fagan, would result in our minority shareholders receiving $9.50 per share from
Fagan for each of their shares. The agreement is intended to firmly obligate Fagan to pay
our shareholders $9.50 a share and contains various provisions designed to assure that the
transaction actually occurs, including a requirement that Fagan escrow the merger price.
The agreement would not limit our ability to go private or effect a transaction that would
cause Fagan to cease to be a shareholder.
The committee said it would be available to negotiate the agreement until 5:00 pm the
following Tuesday, December 11, 2001, and encouraged Fagan and its representatives to be
present at the committee's counsel's offices on December 11 to adequately respond to any
last minute changes. The committee indicated it would not extend the deadline. The
committee informed Fagan that the Schadens and Firenze had agreed not to oppose the
transaction as set forth in the documents sent to Fagan. They also informed Fagan that
Firenze waived the condition of its merger with us related to any material adverse change
and dissenters' rights and that the Schadens would take all corporate and shareholder
action as may be necessary for Firenze to approve the Firenze merger.
The committee set the 5:00 pm December 11, 2001 deadline because of the numerous
proposals Fagan made since the announcement of the Firenze merger -- none of which
developed into a transaction. The committee was concerned that Fagan's actions have
delayed the process, increased the overall transaction costs to us and caused deal risk to
the minority shareholders and that Fagan did not intend to enter into a transaction more
favorable to our minority shareholders. It continues to be concerned by the conditions
attached to Fagan's proposals and, especially in its most recent proposals, their timing
and proximity to our special shareholders' meeting.
In an interview, Mr. Fagan is quoted as saying "It's grossly deficient...If they stick
to their 5 pm deadline, I'd say there's 0 percent chance we'll have an agreement." He is
also quoted as saying, "If the company would grant me standard minority shareholder
protection, we could get a deal done. There is no such thing as making a minority
investment in a private company without that."
By letter dated December 10, 2001, Schulte explained that Fagan had been unable to
review the materials until the 10th. It alleges that the committee has no interest in
seriously considering an alternative proposal and reiterated previous arguments as to why
Fagan's prior proposed agreement was superior. The letter states six conditions before
Fagan would consider a detailed response:
(i) Fagan would like to further discuss alternatives to a coercive transaction,
including allowing the minority shareholders to retain their interests in the
surviving company or at least a meaningful vote with respect to the transaction;
furthermore, Fagan's counsel noted that Fagan was open to structuring the transaction
such that the company could become a private company;
(ii) Schulte indicated that before it could consider if the agreement sent by
the special committee on December 7, 2001 constituted a serious offer, it first
needed for the committee to be ready to disclose the current voting results of the
minority shareholders, as well as explain the rationale for any changes to the terms
of the existing Schaden proposal and an explanation as to why Fagan must become an
actual party to the merger agreement as opposed to merely funding the purchase price
as originally contemplated in the earlier Fagan proposal;
(iii) Schulte indicated that no third party would expend substantial time and
money to provide a superior transaction for minority holders unless it had some
protection against an immediate squeeze out; therefore, Schulte indicated that it
would like to discuss various alternatives and suggested that alternatives could
include precluding the Schadens from squeezing out Fagan for some reasonable period
of time and using an investment banker, as opposed to the courts, to run a fair
market determination process;
(iv) Schulte indicated that the 5:00 p.m. Tuesday deadline was unreasonably
short and shouldn't be adhered to by the special committee in light of the pending
Fagan proposals;
(v) Schulte indicated that in light of the large percentage of minority
shareholders that have expressed an intent to dissent from the Schaden transaction,
potential for a better transaction exists and that additional time should be allotted
to bring a more favorable transaction to the minority shareholders, and further
suggested that delaying action until after the company published its 2001 financial
results would facilitate this objective and allow the parties to reassess the
fairness of the current proposal; and
(vi) Schulte suggested that Fagan needed to better understand the Schadens'
willingness to support an alternative proposal before Fagan could expend more time
and money on such a proposal.
Two members of the special committee repeatedly called Mr. Fagan on the afternoon of
December 11th to determine what conditions Mr. Fagan would require on "squeezed-out"
protection to see if a deal could still be consummated. Mr. Fagan did not return any of
the calls.
Following these events, the special committee met with its financial advisor and
legal counsel and it reviewed and discussed its original recommendation. As a result, the
special committee determined not to change its recommendation that the Firenze merger is
fair and in the best interests of our public shareholders.
The Quizno's Corporation
The correspondence between the
special committee and Fagan from October 22, 2001
through December 10, 2001 is attached as Exhibit A.
The merger agreement sent to Fagan by the
committee is attached as Exhibit B.
Exhibit A
SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, NY 10022
(212) 756-2000
fax (212) 593-5955
www.srz.com
Andre Weiss E-mail
(212) 756-2431 andre.weiss@srz.com
December 10, 2001
VIA FACSIMILE
Mr. Richard R. Plumridge, Esq.
Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard
Suite 500
Broomfield, Colorado 80021
Re: The Quizno's Corporation ("Quizno's")
Dear Richard:
We received the Agreement and Plan of Merger delivered to us at approximately
6:00 p.m. Friday evening. Because of the late hour of delivery, other commitments that
both Bill Fagan and I had this weekend and the absence of any advance notification of
timing, we were not able to review the materials until today. In the interest of avoiding
any misunderstanding on FCI's position, I am transmitting this letter to you on FCI's
behalf.
Based on our initial review, it is incontrovertible that the Committee has no
interest in seriously considering an alternative to the Schaden transaction. The FCI
proposals have been devised so that they represent a distinct and materially beneficial
alternative to the Schaden transaction. FCI furnished, at the Committee's insistence, a
signed definitive agreement and guaranty containing a substantially better price ($9.50
versus $8.50) and substantially better terms ( a non-coercive proposal versus an
involuntary squeeze-out). You indicated only two matters of Committee concern and then
refused to engage in any meaningful dialogue towards addressing any of the Committee's
concerns. The Agreement transmitted continues to reflect the Committee's obvious
indifference to the interests of the Quizno's minority shareholders. Rather than some
vague insinuations, FCI challenges the Committee to disclose publicly and with specificity
those features that make the FCI offer obviously unacceptable to the Special Committee.
To borrow from your own terminology, in attempting to put FCI to the test, the
Committee has failed its test and its solemn responsibility, namely to support only a fair
transaction for the benefit of the minority shareholders of Quizno's. Furthermore, by
presenting the Agreement without appropriate advance notice, although this notice was
personally committed to by you to me, by radically changing the proposed structure without
explanation and by imposing a two business day deadline (one that you acknowledged the
Committee itself did not and could not comply with), the Committee is doing a grave
disservice to the constituents that the Committee is supposed to serve, the minority
shareholders of Quizno's who are being forced out of their investment.
Before FCI determines whether to undertake a detailed response to the proposal
reflected by the Agreement, the Special Committee must provide VCI immediate written
clarification on the following issues:
1. The Agreement contemplates a coercive transaction. FCI has stated on
several occasions, both in letters and conversations, that FCI believes that a coercive
transaction whereby the other minority shareholders are forced out of Quizno's despite
their overwhelming objections can hardly be said to serve their interests. As FCI has
indicated several times, even the price of $9.50 per share falls significantly short of
FCI's view as to the fair market value of Quizno's.
FCI prefers not to participate in a transaction that forces out the minority
shareholders and relegates them to their dissenters' rights and doesn't understand how the
Special Committee can insist on an obviously unfair structure. As I advised you earlier
last week, FCI would be interested in discussing alternatives to that approach, including
allowing the minority shareholders to retain their interests in the surviving company or
providing the minority shareholders with a meaningful vote with respect to the
transaction. Also, FCI believes that remaining public is in the best interest of the
minority shareholders, FCI is nonetheless open to structuring the transaction such that
Quizno's becomes a private company.
2. In order for FCI to consider the Agreement delivered to FCI to constitute a
serious offer, the Committee must be ready to disclose immediately to FCI the current
voting results from the minority shareholders. In addition, a brief review of the
Agreement reveals changes to the terms of the agreement with the Schadens. An immediate
detailed explanation of the rationale for those changes will be necessary to provide the
Committee with FCI's response. Finally, FCI requires an explanation as to why the
Committee has restructured the transaction so that the merger is effected through an FCI
vehicle. FCI had proposed to fund the higher purchase price and sees no reason that it
must become a party to the merger to effectuate that objective.
3. Moreover, frankly, we also don't see how FCI can consider your Agreement to
constitute a serious offer as opposed to an exercise in attempting to cosmetically improve
on the Committee's record. Your proposed transaction provides no bar to the Schadens'
squeezing out the minority shareholders of the Surviving Company (namely, FCI) following
and FCI transaction. It is ludicrous for the Special Committee to believe that FCI or any
third party would expend substantial time and money to provide a superior transaction for
minority holders, but be vulnerable to the Schadens' deciding at any time to squeeze FCI
out after FCI closes its transaction. That simply makes no sense whatsoever. Furthermore,
how does it serve Quizno's interests to go through an anticipated appraisal proceeding with
respect to this transaction and permit another appraisal proceeding covering the same
shares in an appraisal proceeding where FCI dissents.
FCI has indicated to you that it would be willing to discuss alternatives to
that approach that would also make it clear that the FCI transaction is an alternative to
the Schaden transaction and not merely a prelude to yet another Schaden transaction.
Alternatives could include that the Schadens would be precluded from squeezing FCI out for
some reasonable period of time and that a fair market value determination process run by an
investment banker would be used in lieu of the expensive and unpredictable court-run
appraisal process (fair market value could be determined similarly to the method used in
the Levine Leichtman documents).
4. Your letter indicates a 5:00 p.m. Tuesday deadline. We are puzzled as to
the pressure by the Special Committee on a deadline at this stage. As you well know, the
necessary legal predicates for insisting on a deadline are not present. FCI has put on the
table a superior price for the minority shares and has even suggested a higher price
subject to minority protections, in the one case, and subject to a financing condition in
the other case. We see no basis for the Committee to attempt to terminate its fiduciary
obligations merely because the Agreement is not signed by that date. FCI will not be bond
by an unreasonable deadline to abandon its efforts to bring a superior opportunity to the
Quizno's minority shareholders. Inasmuch as it took the Committee five business days to
merely respond to FCI's agreement, which you demanded be delivered to you in a signed form,
it does not even pass minimal legal standards for discharging the Committee's obligations
to Quizno's minority shareholders, to give FCI two business days to finalize an agreement.
Your references to introducing "additional deal risk" at a time of "great
uncertainty in the public markets" rings hollow inasmuch as the NASDAQ composite index has
risen over 40% since mid-September and your minority holders have voted overwhelmingly
against the deal. The only parties in a hurry to rush the Schaden transaction to a close
(in fact, it appears that the only parties willing to close at all) are the Schadens and
the Committee.
5. Consider again that at this time holders of two-thirds of the minority
shareholders have publicly announced their intent to dissent from the transaction. We are
certain that prior to the adjournments of the meeting, Quizno's had in hand a complete
tally of all the minority votes voting on the transaction. In its prior correspondence,
FCI has ventured a guess that the negative votes well exceeded two-thirds of the
minority-owned shares. Therefore, given the potential for a better transaction and the
overwhelming disapproval by the minority shareholders of the Schaden transaction,
additional time should be allotted to bringing the best potential transaction to the
minority shareholders.
In fact, FCI has suggested in its earlier correspondence to the Special Committee
that given the tremendous growth experienced by Quizno's over the recent year and since the
transaction was last formally approved nearly half a year ago, and given a fairness opinion
based on financial statements that at best were updated through March 30, 2001, the Special
Committee and, particularly Quizno's minority shareholders, would be well served to delay
any further action until Quizno's publishes its 2001 financial results. If those results
continue to reflect the steep improvement in growth, FCI believes that even better bids can
be achieved than the ones already received by the Special Committee. Delaying for a few
more weeks would also give the Committee the opportunity to reassess the fairness of any
proposal currently on the table and give Quizno's the opportunity to improve on those
proposals and to properly amend and remail the Quizno's proxy statement in order to
properly disclose the events of the past several weeks.
6. The included letter provides for the Schaden group to agree not to impede
the transaction. While I understand that due to some legal considerations that were
contemplated by that letter, that letter it falls far short of a commitment to vote in
favor of the FCI transaction. FCI is certainly not going to put itself in a position where
it expends even more money and time on a transaction sponsored by the Special Committee,
only to find out subsequently that the Schadens may block it. If that legal commitment
cannot be obtained, it will be necessary for the Schadens to meet directly with Bill Fagan
so that he can understand their intentions. As indicated in our earlier correspondence,
Bill will be available to meet with them at his offices in Dallas this week.
Please contact me to discuss the foregoing.
Very truly yours,
Andre Weiss
Brobeck, Phleger & Harrison llp
370 Interlocken Boulevard
December 7, 2001 Suite 500
Broomfield, Colorado 80021
direct 303.410.2014
fax 303.410.2199
rplumridge@brobeck.com
VIA FACSIMILE AND E-MAIL www.brobeck.com
Andre Weiss, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Re: The Quizno's Corporation (the "Company")
Dear Andre:
Enclosed is an Agreement and Plan of Merger for a Newco to be formed by the Fagans under
which they buy all minority shares of Quizno's except their own at $9.50 per share in cash
(the "Proposed Transaction"). Subject to further developments in the process described
below, it is our understanding that the Company, the Special Committee and the Schadens are
willing to proceed with the Proposed Transaction as drafted. We have also enclosed a form
of letter from the Schadens relating to the Proposed Transaction. Counsel for the Schadens
indicates that they are obtaining signed copies and we will forward them to you when
received.
The Special Committee is dedicated to reaching an agreement that is in the best interests
of the Company and its shareholders. To date, the process involving Fagan Capital, Inc.
has been disruptive and unclear, which unfortunately has delayed the process, increased the
overall transaction costs and injected additional deal risk to the minority shareholders at
a time of great uncertainty in the public markets.
The Special Committee has decided to establish a process to reach a final result in the
best interests of the Company and its shareholders. The Special Committee intends to be
available to negotiate with FCI final definitive documents until 5:00 p.m. on Tuesday,
December 11, 2001 (the "Deadline"). The Special Committee does not intend to consider any
proposals after the Deadline.
In order to enhance Mr. Fagan's chances of successfully completing a transaction with the
Company for the benefit of its shareholders, we encourage you and your client to be
physically present on Tuesday, December 11, 2001 at the law offices of Brobeck, Phleger &
Harrison LLP, located at 370 Interlocken Boulevard, Suite 500, Broomfield, Colorado 80021.
This will allow Mr. Fagan and you to adequately respond to any last minute changes as the
Deadline approaches.
We are concurrently informing Firenze's counsel of the Special Committee's process.
We ask that you promptly call us to discuss any questions you may have and hope to see you
and your clients in person next Tuesday at our law offices. In the meantime, we shall
continue to remain available at all times to discuss and negotiate on the Proposed
Transaction.
Very truly yours,
Brobeck, Phleger & Harrison LLP
By: ________________________________
Richard R. Plumridge,
On behalf of the Special Committee of the Board of Directors for The Quizno's
Corporation
RRP/bsp
cc: Mark Bromberg (via email)
J. Eric Lawrence (via email)
John Todd (via email)
Patrick Meyers, Esq. (via email)
Dean Kristy, Esq. (via email)
Jeff Harris, Esq.
SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, NY 10022
(212) 756-2000
fax (212) 593-5955
www.srz.com
Andre Weiss E-mail
(212) 756-2431 andre.weiss@srz.com
December 6, 2001
VIA FACSIMILE
Richard R. Plumridge, Esq.
Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard, Suite 500
Broomfield, Colorado 80021
Re: The Quizno's Corporation
Dear Richard:
Last evening, Bill Fagan advised the Quizno's Special Committee that FCI's
offer had expired by its terms. In that letter, Bill indicated FCI's ongoing interest in
pursuing a transaction with Quizno's. This morning, you telephoned me to indicate that the
Committee would respond to the FCI proposal, although it had expired.
This letter confirms my statements to you that, given that the past conduce by
the Committee and Quizno's does not even resemble good faith negotiations, FCI requires
that any effort by the Committee to reinitiate contact will be done through formal
proposals. Those proposals will have t have been approved by the Special Committee and by
all necessary parties (including, if require, the Board of Directors and the Schaden
group) before FCI would be willing to authorize the expenditure of any more time or
effort. This approach is only fair in light of history here and the conditions previously
placed on FCI.
Very truly yours,
Andre Weiss
/cmd
cc: Mr. William S. Fagan
FAGAN CAPITAL, INC.
5201 N. O'CONNOR BLVD., SUITE 440
IRVING, TEXAS 75039
December 5, 2001
The Special Committee of Quizno's Corporation
c/o The Quizno's Corporation
1415 Larimer Street
Denver, Colorado 80202
Attention: Mark Bromberg
Gentlemen:
Reference is made to the Investment agreement and Guaranty delivered to Quizno's this past
Monday December 3, 2001. At your insistence, Fagan Capital Inc. executed both of those
instruments, and my wife and I personally executed the Guaranty. By its terms, both of
those instruments expired at 5:00 p.m. (CST) today.
Our $9.50 offer was a clearly superior alternative to the Schaden offer, and unlike our
$10.63 offer, you could not take the position that Quizno's mezzanine lender had to consent
to the acceptance of the $9.50 offer. The acceptance or rejection of our $9.50 offer was
solely in the hands of the Special Committee, the Board and the Schadens. We believe our
offer would have had the overwhelming support of the minority holders; those who wanted out
at $9.50 could get their $9.50 in cash immediately, and those who wanted to stay in for the
ride could do so, continuing in a public company format.
In your November 28, 2001 letter to me, you expressed skepticism over the seriousness of
our intentions since our offer was not yet in the form of a definitive agreement. You
stated: "Nonetheless, we are prepared to pursue immediately a transaction with FCI where
each of the Quizno's minority shareholders will be certain to receive $9.50 per share in
cash with no put option which would require third party consent...As expressed in our letter
of October 22, 2001, and as we did with Firenze, we request that your proposal be made
immediately in the form of a binding offer with definitive documentation. We are prepared
to negotiate a definitive document binding on FCI..."
We delivered a signed definitive agreement to you on Monday December 3, 2001 that met your
criteria. Our attorney then addressed by phone and email the only issues raised by your
attorney - that FCI was flexible as to deal structure (such as converting our offer to a
tender offer, as suggested by your counsel) and FCI was willing to entertain other
approaches as long as they reflected FCI's proposal for what it was - an alternative to the
Schaden proposal, not a prelude to another going private transaction by the Schaden's.
Nonetheless all of our communication did not even amount to a negotiation. Nothing was
suggested by the Committee, other than that we remove section 5.08 and allow the Schadens
to take the company private and squeeze us out at any time after we completed our $9.50
offer! It is inconceivable that any bidder would agree to such a provision, and you have
created a situation where it is impossible to present an alternative for the minority
shareholders to consider.
Since then, Quizno's has essentially declared radio silence. We do not see how the
Committee served the best interests of the Company's minority shareholders by allowing a
superior offer, in for form of a signed definitive agreement, to die on the vine - not to
mention our even higher offers which were met with no encouragement whatsoever.
Quizno's is worth many multiples of, not merely a few dollars more than, the $8.50 price
being forced on us. And you are going to force us to go through a multi-year and very
expensive legal battle to get our appropriate compensation; and that's just plain wrong and
unfair. We have already acknowledged that our $9.50 offer was also woefully inadequate
price-wise, but at least it was superior to $9.50 and it offered shareholders a choice; it
was not coercive. In any event, in legal proceedings we fully expect to show that
shareholders are entitled to compensation equal to many times the $8.50 price.
Since the financial statements and projections that the Committee's investment banker based
it "fairness opinion" on are stale for a company that's growing and changing as fast as
Quizno's is, we implore you to at a minimum delay the merger at least a few more weeks,
until you and the minority shareholders have had the opportunity to review the latest
audited financial information which Quizno's is due to file as its annual report on Form
10-K. You should also get your investment banker to update his fairness opinion, based on
the new financial information, for his and your protection.
As noted, FCI's offered has expired. In light of all Quizno's actions over the last
several months regarding negotiations with us, including most recently your silence
regarding FCI's definitive agreement and your allowing of the deadline on it to pass, we
have reluctantly and finally concluded that we will be blocked in any further effort to
bring value to the minority holders. We don't understand why Quizno's won't deal with us
and entertain our premium offers, especially given our great admiration for the Schadens
and the company. In any event, unless we receive further communications from you directly
or via press release, you will receive no further offers and will not hear from us further
on this matter prior to the Firenze merger. We've made our case.
However, please be very clear about the fact that, if you are interested, we expect to
remain very interested in pursuing a transaction with the company before you close the
merger, including any of the $9.50, $10.63 or $15.00 offers previously stated. In fact, we
would be exceedingly interested in pursuing a purchase of the entire company, in
conjunction with our capital partner, and if you would permit us to perform due diligence,
I am confident we could offer a very large premium to the $8.50 price, to all
shareholders. We think it would be worth your time to permit us to proceed. Please
advise, and if you are interested, we would be prepared to commence due diligence promptly
and solely at our expense.
Very truly yours,
FAGAN CAPITAL, INC.
By:___________________
William S. Fagan, President
Cc: Andre Weiss
Richard Plumridge
Pat Meyers
FAGAN CAPITAL, INC.
5201 N. O'CONNOR BLVD., SUITE 440
IRVING, TEXAS 75039
PHONE 972-869-3430
FAX 972-869-4066
wfagan@swbell.net
November 30, 2001
The Special Committee of Quizno's Corporation
c/o The Quizno's Corporation
1415 Larimer Street
Denver, Colorado 80202
Attention: Mark Bromberg
Gentlemen:
We received the letter from the Special Committee last evening at 8:00 p.m.
(Eastern time) demanding that a definitive agreement executed by FCI be delivered by no
later than 12:00 a.m. (Mountain time) that night! We are stunned by the eagerness of the
Committee not to "deprive" the minority holders of the $8.50 per share merger
consideration, when already holders of about 65% of the minority shares have publicly
stated their intention to dissent from the merger. To be blunt, the $8.50 consideration is
mind-bogglingly inadequate and the minority shareholders and the financial press know it
but the Special Committee won't admit it. I acknowledge that the $9.50 per share in our
offer (as well as the $10.63 and $15.00 per share proposals) are also woefully inadequate
and if the Schaden merger is permitted to go forward, FCI will ask for and expect to
receive many multiples of the $8.50 per share in appraisal proceedings. However, unlike
the Schadens, I am not proposing a forced squeeze-out of the minority as sanctified by your
Committee.
In my phone call with you that ended at about 10:15PM Central Time Thursday
night, we discussed the fairness of the Schaden merger. I asked you whether the fact that
Rick Schaden wouldn't sell me his shares at $15 might have a bearing on your perception of
whether a forced squeeze-out of minority holders at $8.50 is fair, and you responded that
it was irrelevant, because Rick didn't want to sell his shares, or at least not at that
price. The price at which the controlling shareholder is willing to sell should be
critical to you.
And then when I stated that I didn't want to sell my shares either, you said I
didn't have to. And that's not the first time you said that to me. Don't you understand
that the minority is being forced out of the Company? If the Schadens wanted to merely
offer $8.50 per share on a non-coercive basis, we would not have undertaken the efforts
that we have. You, as the Chairman of the Special Committee, must be clear as to the
implications of the Schaden transaction. We are being forced out so that the Schadens can
benefit from the Company that we have all invested in. Don't even entertain the notion
that having appraisal rights is the same thing as continuing as a stockholder, and you
should have taken that into account in your deliberations.
Irrespective of the above issues, FCI is still willing to enter into a
definitive agreement promptly to buy at $9.50 per share any and all minority Quizno's
shares from holders who wish to get cash and is willing to arrange for the preparation of
such agreement. Furthermore, Laura Fagan and William Fagan are willing to jointly and
severally guaranty the obligation to fund FCI's proposed transaction. It is necessary that
we have responses to the following requests which we requested previously in our letter but
which were ignored by the Committee:
1. Advise us as to which structure Quizno's wants pursue (tender offer by FCI, or
amended merger agreement by Quizno's along with a stock purchase
agreement between FCI and Quizno's).
2. Provide written confirmation that our proposed $9.50 per share non-coercive offer has
the support of the Special Committee and the Board of Directors of
Quizno's, including the Schadens. It would be wasteful for FCI and
Quizno's to pursue a transaction if we were not assured that Quizno's
would accept it.
3. Confirm that the Special Committee is not interested in pursuing any of the higher
priced alternatives made by FCI in its earlier letter, although FCI
remains quite eager to pursue these if you can arrange for it.
The answers to these questions are imperative for FCI to properly instruct its
attorneys so that the definitive documents may be drafted efficiently and effectively.
If the Special Committee truly supports the best interest of the minority
shareholders, the Special Committee should delay today's shareholders' meeting in deference
to the overwhelming consensus of the minority shareholders, and the strong possibility that
we can work together to provide a tangible superior alternative in short order.
Very truly yours,
FAGAN CAPITAL, INC.
By:__________________
William S. Fagan, President
Cc: Andre Weiss (fax) 212-593-5955
John Moye (fax) 303-292-4510
Richard Plumridge (fax) 303-410-2199
Lexi Methvin (fax) 303-410-2199
Special Committee
Of
The Quizno's Corporation
November 29, 2001
William S. Fagan
President
Fagan Capital, Inc.
5201 N. O'Connor Blvd., Suite 440
Irving, Texas 75039
Dear Bill,
We have received midday your response to our November 28, 2001 letter.
It is our goal to provide the greatest benefit possible to our minority shareholders. We
would like to believe that your primary goal is to complete a transaction that would
benefit the minority shareholders rather than to disrupt the existing agreement. After
careful review of your letter we continue to believe that you have not been responsive to
our requests, including our request that you provide us with definitive documentation for
execution. In addition, we believe that you have inaccurately portrayed the actions of the
Special Committee. You should assume we disagree with the factual assertions in your
letter. Nevertheless, in the interest of maximizing value to our minority shareholders we
are willing to try once again to clearly state what is required in order for us to
effectively complete a transaction with you.
Our letter of November 28, 2001 clearly states that in order for us to pursue your proposal
you needed to provide us with definitive, executable documentation. To date you have
failed to provide us with any documentation which if signed by Quizno's would be binding on
FCI and provide value to the minority shareholders. We do not wish to have any further
miscommunication with you on this point. IN order for you to demonstrate you are serious
in your proposal, we require that you provide us with definitive documents executed by you
no later than midnight (Mountain time) tonight. Unless you comply with this request, which
we made numerous times including in our October 23, 2001 and November 28, 2001 letters, we
cannot and will not deprive the minority shareholders of their right to receive $8.50 a
share.
It is not the Special Committee's obligation to draft a definitive agreement for you and
will not do so. I am sure you have at your disposal competent attorneys who can advise you
and guide you through this process. We remind you once again that the agreement with
Firenze, which the Special Committee has approved, is publicly available.
Given the last minute nature of your proposal (the timing of which is extraordinary), our
letter of November 28, 2001 informed you of our requirement that you put sufficient funds
into escrow in order to fund the transaction. Your letter today indicates your
unwillingness to do this. We will not continue discussions with you at this late date
unless this requirement is met. In the alternative, we will accept a joint and several
personal guaranty of the performance of FCI's obligations from you and your wife to secure
the funding obligation.
If you have any questions, please feel free to contact our counsel, Richard Plumridge at
(303) 410-2014 or Lexi Methvin at (303) 881-6854.
Best Regards,
Mark Bromberg
Chairman
Cc: Richard R. Plumridge
Lexi Methvin
Andre Weiss
FAGAN CAPITAL, INC.
5201 N. O'CONNOR BLVD., SUITE 440
IRVING, TEXAS 75039
PHONE 972-869-3430
FAX 972-869-4066
November 29, 2001
The Special Committee of Quizno's Corporation
c/o The Quizno's Corporation
1415 Larimer Street
Denver, Colorado 80202
Attn: Mark Bromberg
Gentlemen:
FCI appreciates your November 28, 2001 response to our proposal of November 27,
2001. We trust that the Committee has properly reflected on our proposal and the
alternatives presented. Before addressing how to proceed with the Committee's apparent
acceptance of our UNCONDITIONAL $9.50 OFFER, we would like to set the record straight in
response to your inaccurate statement that we don't have a sincere interest in acquiring
Quizno's minority shares. In fact, the record will show that we've bent over backwards to
try to offer Quizno's minority shareholders a substantially better deal than the offer you
are supporting, and we are still interested in doing so.
FCI made a very clear, fully financed and binding commitment to offer $10.63
per share to the Quizno's minority shareholders over two months ago. After several weeks,
you reported to us that our $10.63 offer was blocked by your mezzanine lender despite the
fact that all FCI asked for was a put on the same terms that such lender was granted last
year. FCI made it clear that we would defer exercise of such put until after the lender
had been paid in full, effectively subordinating our put to both the lender's loan and its
put. Frankly since our put poses no risk to the lender, we can't understand its objections
to our request.
It is especially troubling that less than one year ago and in full anticipation
of a subsequent going-private proposal by the Schadens, the Directors (including the
Special Committee members) sought a lender to provide financing for such going-private
proposal and then gave such lender sweeping rights to block virtually any offer made by any
other party who might wish to compete with the Schadens! This lender can not only prevent
any third party (such as FCI) from obtaining the same benefits which were afforded the
lender (such as the put we requested), but you have informed us that the lender can block
virtually any debt or equity transaction involving Quizno's. You have placed the Schadens
in a position to take the Company private just as the cash flows really started exploding,
and at a price that the overwhelming majority of non-Schaden shareholders find very
objectionable.
Further, as you know, FCI spent substantial time and money meeting your
requests during the fall of 2001, trying to put together a transaction that would benefit
the Quizno's minority shareholders prior to the mailing of the current proxy statement.
Those efforts to reach a mutually agree superior offer were halted on November 5th, after
my in-person meeting with Rick Schaden. As you know, after many requests since February
2001 by me to meet with him, in late October Rick Schaden finally called to invite me to
meet with him in Denver, ostensibly to see if we could reach an agreement that would be
beneficial to all parties. You, in fact, advised me that Mr. Schaden would suggest
constructive alternatives at such meeting. At the November 5th meeting, and tat the
request of Schaden and John Moye, I outlined in good faith some alternatives for resolving
our differences and providing better alternatives to shareholders. After my presentation
of numerous approaches, I was then summarily informed by Schaden, without any negotiation
or the proffer of any ideas on his part, that he would not propose or even consider any
alternatives, since the Schaden offer was "to far along" and he didn't want to disrupt the
transaction that he currently had on the table. Later that day, I learned that Quizno's
had actually been filing their final proxy with the SEC while our meeting was taking
place. Quizno's participation in the meeting was disingenuous.
Notwithstanding these matters, we are delighted that you are willing to pursue
immediately a definitive transaction at $9.50 per share with no put. Given certain
mischaracterizations of our offer, we wish to emphasize that OUR $9.50 OFFER IS NOT A
CONDITIONAL OFFER, and it appears that you agree that neither the special committee nor the
mezzanine lender has any basis to reject such offer and must accept it as superior to the
similarly unconditional but inferior Schaden $8.50 offer.
In light of the events to date, it is understandable that we are leery of
wasting more time and money on wild goose chases. Therefore, please advise us promptly as
to which structure the Committee would like to pursue (tender offer by FCI, or amended
merger agreement by Quizno's along with a stock purchase agreement between FCI and
Quizno's). Please promptly furnish us with a draft agreement with standard provisions
incorporating such structure. To ensure that this effort is not merely another useless
exercise, we also require written confirmation that the Board of Quizno's (not just the
Special Committee) supports the $9.50 offer. As you have previously advised us, the
Special Committee lacks the authority to bind Quizno's to approve and FCI proposal without
Schaden approval. Therefore, it is critical to know where the Schadens stand now.
Again, we wish to reiterate that in addition to our UNCONDITIONAL $9.50 OFFER,
we are still interested in offering much more that $9.50 per share if the Schadens and your
mezzanine lender would consent to giving us standard minority shareholders protections
including a put. Further, we would be keenly interested in purchasing the entire Company
for at least $15 per share, although since no one knows better than the Schadens that the
Company is probably worth at least twice that much, we would be shocked (and delighted!) if
they would seriously enter into negotiations to sell us the Company at such price.
Finally, as you have already acknowledged in writing, FCI has proven its
financial wherewithal to complete a purchase of minority shares. To underscore that
capability, I am willing to personally guarantee the availability of such financing. It is
disingenuous that your November 28 letter adds a brand new condition to any prospective
negotiations - that you want an escrow account to be funded to ensure that FCI can complete
the purchase of such shares. An escrow was never raised by you in the past and it is
neither necessary nor acceptable at this late date.
We look forward to completing a transaction promptly with you, as we view
Quizno's as an incredible cash-flow machine, and as we've said many times, we think Rick
and Dick Schaden and their team are among the most brilliant business people in the United
States and have executed superbly thus far. We are honored to be their partners, and hope
to continue to be their partners for a very long time. We certainly understand why the
Schadens want to take the Company private at these prices; we share their views about the
great future of the company and hope to move forward on friendly terms. Thank you.
Very truly yours,
FAGAN CAPITAL, INC.
By:__________________
William S. Fagan, President
Cc: Andre Weiss (fax) 212-593-5955
John Moye (fax) 303-292-4510
Richard Plumridge (fax) 303-410-2199
Lexi Methvin (fax) 303-410-2199
Special Committee
Of
The Quizno's Corporation
1415 Larimer
Denver, Colorado 80202
November 28, 2001
William S. Fagan
President
Fagan Capital, Inc.
5201 N. O'Connor Blvd., Suite 440
Irving, Texas 75039
Dear Mr. Fagan:
Thank you for your letter of November 27, 2001 which was received yesterday evening. As
you will recall, we have been engaged in a lengthy, detailed process attempting to
determine whether FCI is finally prepared to make a bona fide binding offer in a form that
could be accepted for the benefit of Quizno's minority shareholders. After many months and
on the eve of our shareholder vote and closing of our existing binding agreement, you have
still failed to do so. We are concerned that the timing of your letter is designed more to
disrupt the shareholder meeting and closing than it is a sincere expression of interest in
acquiring Quizno's minority shares. In this respect we note that your letter does not
contain sufficient information to constitute a binding offer which the Special Committee
could recommend on behalf of the minority shareholders. We have been requesting that type
of detailed information at least since my letter of September 7, 2001 to you.
Nonetheless, we are prepared to pursue immediately a transaction with FCI where each of the
Quizno's minority shareholders will be certain to receive $9.50 per share in cash, with no
put option which would require third party consent. As you know, time is of the essence,
since we have a fully committed agreement guaranteeing the minority shareholders $8.50 per
share in cash scheduled to close on Friday November 30. As expressed in our letter of
October 22, 2001 and as we did with Firenze, we request that your proposal be made
immediately in the form of a binding offer with definitive documentation. We are prepared
to negotiate a definitive document binding on FCI by the close of business on Thursday,
November 29, 2001.
In order to protect the minority shareholders, we ask you to confirm that the $9.50 offer
to the shareholders would be unconditional and that the funds necessary would be placed
immediately in escrow. We and our counsel are available immediately and continuously to
complete negotiations if FCI is willing to make a binding commitment.
If you have any questions, please feel free to contact our counsel, Richard Plumridge at
(303) 410-2014 or Lexi Methvin at (303) 410-2022.
Best Regards,
Mark Bromberg
Chairman
Cc: Richard R. Plumridge
Lexi Methvin
Andre Weiss
FAGAN CAPITAL, INC.
5201 N. O'CONNOR BLVD., SUITE 440
IRVING, TEXAS 75039
PHONE 972-869-3430
FAX 972-869-4066
wfagan@swbell.net
November 27, 2001
The Special Committee of Quizno's Corporation
c/o The Quizno's Corporation
1415 Larimer Street
Denver, Colorado 80202
Attn: Mark Bromberg
Gentlemen:
In light of Special Committee's responses to our earlier proposal, dated
September 21, 2001, Fagan Capital Inc. ("FCI") hereby renews its proposal on the following
terms:
1. The current merger would be amended to provide for a cash consideration to minority
holders of $9.50 per share of Quizno's common stock.
2. The merger would be non-coercive, allowing holders to continue to be shareholders of
the surviving company following the merger.
3. FCI would fund the purchase price for the minority shares and receive a number of
newly-issued shares of the surviving company's common stock equal to the number of shares
that the minority holders of Quizno's common stock elected to cash out in the merger.
4. FCI's offer would not be contingent on any put option.
5. FCI stands ready to pay at least $10.63 per share if Quizno's is willing to grant FCI
a fair market value put option with appropriate protective provisions along the lines
previously proposed. In the alternative, FCI is also willing to pay $!5.00 per share for
all of the outstanding equity of Quizno's, subject to obtaining satisfactory financing and
necessary regulatory approvals and consents, as ell as other standard closing conditions.
The foregoing proposal is subject to reaching a mutually satisfactory
definitive agreement providing for standard terms. FCI is willing to move
expeditiously to a definitive agreement and closing.
As provided in FCI's October 2, 2001 letter, FCI has proven to the Special
Committee its ability to finance its proposal through funds it manages.
This proposal has been structured to minimize the delay in consummating the
merger. FCI would also be willing to proceed using another structure, such as a tender
offer, approved and recommended by the Quizno's Special Committee.
The proposal set forth in this letter eliminates the Special Committee's only
stated bar to approving the FCI proposal. This proposal is clearly superior to the
Schadens' proposal and should be accepted by the Committee promptly.
This offer expires at 5:00 p.m. CST on Monday, December 10, 2001. As always,
we are happy to respond to any relevant questions or comments. Again, we are willing to
consider alternative structures and approaches, and we reiterate our request for
negotiations. Please contact me at the above number, or FCI's attorney Andre Weiss at
212-756-2431.
Very truly yours,
FAGAN CAPITAL, INC.
By:__________________
William S. Fagan, President
Cc: Andre Weiss (fax) 212-593-5955
John Moye (fax) 303-292-4510
Richard Plumridge (fax) 303-410-2199
Lexi Methvin (fax) 303-410-2199
Securities and Exchange Commission, Division of Corporation Finance
SCHULTE ROTH & ZABEL
919 Third Avenue
New York, NY 10022
(212) 756-2000
fax(212) 598-5955
Andre
Weiss
E-mail
(212)
756-2431
andre.weiss@srz.com
November 1, 2001
VIA FACSIMILE
Richard R. Plumridge, Esq.
Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard
Suite 500
Broomfield, CO 80021
Re: The Quizno's Corporation
Dear Richard:
On behalf of FCI, I am responding to certain of the statements in your letter of
October 29, 2001.
1. I never stated that I was told that the SEC filings would be put on hold
indefinitely. I was told by your associate, in response to my concern that FCI was being
misled by the Committee, that I should not be concerned as the Schaden proposal was not
proceeding through the SEC process. I should have been advised that, rather than awaiting
FCI's response to Mark Bromberg's letter, the Committee had determined to proceed with the
process.
2. On the issue of my so-called unsolicited legal advise to the Committee, our
firm represents FCI, a substantial minority shareholder of the Company. That shareholder
has made a proposal, not subject to any financing condition, at a price that is 25 percent
higher than an offer the Committee had already accepted. Rather than focus (and, by the
way, disclose) the offer and its non-coercive features, the Committee elected to focus on
(and disclose) only the FCI rejection by the Committee due to FCI's request for a
[illegible text] Levine Leichtman. FCI is well within its rights to direct its counsel to
comment on the manner in which the special committee [illegible text].
3. Perhaps most troublesome is your statement that "the special committee has not
refused to negotiate." The statement is directly contradicted by Mr. Bromberg's October
22, 2001 letter, in which he states "the Special Committee would be pleased to review and
enter into negotiations under appropriate circumstances." As I previously pointed out,
those appropriate circumstance have never been specified. Also, your associate advised me
that the Committee would not negotiate unless third party consent was obtained in advance.
The Committee is clearly hiding behind the Levine Leichtman refusal as a basis for not
negotiating. A minority shareholder of Quizno's would want the Committee, faced with a
non-coercive offer that is substantially higher than the proposal it has already deemed to
be "fair", to be pleading with FCI to negotiate a proposal rather than, by a letter,
rejecting negotiations.
4. Whether it was the Committee that approved the Levine Leichtman facility or the
members of the Committee in their capacity as Directors is irrelevant. What is [illegible
text] compete with the Schaden's offer from obtaining a necessary liquidity provision,
without which no prudent businessman would make the minority investment. (The proof the
necessity is that it was a condition to the Levine Leichtman financing.)
I now understand that Bill Fagan has scheduled a meeting with Rick Schaden during
which we hope progress can be made. Nevertheless, FCI's view stands that the Committee has
failed to discharge its responsibilities to the minority shareholders of Quizno's. The
mere expenditure of "time and effort" in focusing on the consent issue cannot be considered
sufficient in light of FCI's superior offer. The failure by the Committee and the Company
to disclose the [illegible text] minority shareholders reaction when they comprehend the
extent to which the Schaden offer is below the FCI offer. We trust that such omission will
not pass SEC scrutiny once the SEC becomes aware of the underlying facts.
Very truly yours,
Andre Weiss
/cmd
cc: William Fagan
Brobeck
Attorneys at Law
October 29, 2001 Brobeck, Phleger & Harrison LLP
370 Interlocken Boulevard
VIA FACSIMILE AND MAIL Suite 500
Broomfield, Colorado 80021
DIRECT 303.410.2014
FAX 303.410.2199
rplumridge@brobeck.com
www.brobeck.com
Andre Weiss, Esq.
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Re: The Quizno's Corporation
Dear Andre,
On behalf of the Special Committee, I am responding to your October 26, 2001 letter to Mark
Bromberg. First, as a point of order, future communications to the special committee from
you should be addressed to Lexi Methvin or myself as counsel to the Special Committee. As
in the past, Mr. Fagan should continue to feel free to contact Mr. Bromberg directly.
Your letter makes certain statements of fact, as well as telling the committee what you
believe is the proper standard for the committee to use in evaluating Mr. Fagan's
proposal. This letter is intended only to respond to certain of your statements of fact
which are inaccurate. We will not deal with your unsolicited legal advice to the Special
Committee, except to note that it is inappropriate and incorrect.
Your statement that we made a representation that all filings with the SEC would be
indefinitely put on hold is not correct. It was stated that while the Special Committee
was continuing to evaluate Mr. Fagan's proposal, we understand that Quizno's would not make
additional filings with the SEC. Subsequently, the Special Committee informed Mr. Fagan of
its inability to obtain necessary third party approvals of the condition to Mr. Fagan's
proposal.
The Special Committee has been extremely diligent in performing its duties. It actively
pursued with Quizno's and Levine Leichtman whether the conditions to Mr. Fagan's proposal
could be met to allow a feasible offer to be made by Mr. Fagan to the minority
stockholders. The committee also offered to facilitate discussions between Mr. Fagan and
Levine Leichtman to allow Mr. Fagan to actually make a feasible proposal which the
committee would be pleased to negotiate. We are surprised that instead of pursuing a
proposal which could actually be performed, you have chosen to write a letter casting
legally and factually inaccurate aspersions on the Special Committee.
You state that the Special Committee has refused to negotiate with Mr. Fagan. The Special
Committee has not refused to negotiate and your statement to the contrary is offensive to
the committee members who have spent a great deal of time analyzing Mr. Fagan's proposal
and speaking directly with him. As the Special Committee has informed Mr. Fagan, it
remains willing to negotiate an offer with Mr. Fagan when Mr. Fagan presents to the Special
Committee an offer which would be acceptable to the independent third parties whose consent
will be required. We note that the Special Committee cannot force Mr. Schaden to negotiate
with Mr. Fagan and that point is very clearly stated in the proxy statement. The Special
Committee also remains willing to facilitate a meeting with Mr. Schaden if it would result
in a higher price for the minority shareholders.
You state that the Special Committee approved the Levine Leichtman facility. At the time
that Quizno's entered into the facility, the Special Committee had not been established so
this is clearly not correct.
The fact that Quizno's is subject to the terms and conditions of the Levine Leichtman
facility and the terms of Mr. Fagan's proposal would cause an event of default. The
Special Committee does not have the authority or power to alter this circumstance.
Your statement that "the committee is unwilling to and does not even have the authority to
enter in negotiations except..." is completely without foundation. In facet, the committee
proactively agreed to facilitate discussions with Levine Leichtman in an attempt to remove
the primary third party barrier to an actual offer to minority shareholders. The Special
Committee remains willing to consider any definitive proposals Mr. Fagan makes. H cannot
expect the committee to work miracles for him to meet conditions he has imposed on third
parties over which the committee has no control.
If you have any questions, please fee free to contact either Lexi Methvin or myself.
Best regards,
Richard R. Plumridge
Cc: Mr. Mark Bromberg
Lexi Methvin, Esq.
SCHULTE ROTH & ZABEL LLP
919 Third Avenue
New York, NY 10022
(212) 756-2000
fax (212) 593-5955
www.srz.com
Andre Weiss E-mail
(212) 756-2431 andre.weiss@srz.com
October 26, 2001
VIA FACSIMILE
The Quizno's Corporation
1415 Larimer Street
Denver Colorado 80202
Attention: Mr. Mark Bromberg, Chairman of the Special Committee
Re: The Quizno's Corporation
Dear Mr. Bromberg:
Bill Fagan has asked me to respond to your letter of October 22, 2001 for our
client FCI. First, however, Bill has also asked be to convey his appreciation for your
statements to him of your personal efforts and desire to discharge your obligations fully
to the minority shareholders and for arranging for Rick Schaden to contact Bill to set up a
meeting. As you know, Bill has been asking for such a meeting for months. Bill expects to
arrange for that meeting based on an understanding that the Company will suspend processing
the Schaden proposal pending the outcome of those discussions, and FCI will likewise
continue to hold in abeyance its various legal and other actions. As you know, the
Committee's counsel advised me last week that Quizno's had suspended those efforts. We are
now faced with yet another SEC filing contrary to that representation.
I now turn to addressing your letter. Rather than unduly elevating the issue
of the feasibility of the FCI proposal, the Committee should focus intently on the essence
of the matter, namely that the FCI proposal is a fully financed proposal at a price that is
25% higher than the one that the Committee accepted from the Schadens. It is, to say the
least, bizarre that the Company and the Committee chose to delete this information from its
most recent SEC filing. How can the Committee imagine that disclosure of an offer of this
magnitude would not be material to the minority shareholders of the Company? In addition,
the filing failed to point out that the FCI proposal is non-coercive, in contrast to the
Schaden proposal, and that the Committee had refused to enter into negotiations or even
specify what are the appropriate circumstances for those negotiations.
Instead, the Committee dwells on the only condition to the FCI proposal, namely
the requirements of a put virtually identical to the put that Quizno's granted to Levine
Lichtman to support the Schaden proposal. It is unconscionable for the Committee to reject
the FCI proposal merely because of a bar that the Committee allowed to be created in
furtherance of the Schaden proposal Effectively, the Committee has created a wildly uneven
playing field favoring the Schadens to the disadvantage of the minority shareholders. In
any event, irrespective of the perceived feasibility of the FCI proposal, FCI believes that
the Committee, in serving the interest of the minority shareholders of the Company, should
announce that the Committee is withdrawing its support for the Schaden proposal and has
commenced negotiations with FCI.
Furthermore, FCI doesn't believe it makes any sense to initiate negotiations
with Levine Lichtman at this time. There is not transaction for which Levine Lichtman
approval can even be sought. In fact, your letter states that the Committee is unwilling
to and does not even have the authority to enter into negotiations excepted "under
appropriate circumstances," which circumstances the Committee has not identified.
If by your letter you were suggesting that FCI remunerate Levine Lichtman for
any waiver, the amount of the remuneration would be deducted from the amount that FCI is
willing to pay the minority shareholders to obtain Levine Lichtman's consent. In that
event, FCI, of course, has to know at what price and on what terms would the FCI proposal
be acceptable. Conversely, if Levine Lichtman's concerns are not at odds with those of the
minority shareholders, then FCI is very confident that an accommodation can be reached with
Levine Lichtman once an agreement is reached with the Company and the Schadens.
FCI looks forward to resolving this matter and giving the minority shareholders
the opportunity to participate in a superior transaction.
Very truly yours,
Andre Weiss
/cmd
cc: Mr. William S. Fagan (via facsimile)
Lexi Methvin, Esq. (via facsimile)
Special Committee
Of
The Quizno's Corporation
October 22, 2001
William S. Fagan
President
Fagan Capital, Inc.
5201 N. O'Connor Blvd., Suite 440
Irving, Texas 75039
Dear Bill,
Thank you for your proposal to acquire the outstanding minority shares of common stock of
the Quizno's Corporation ("Quizno's"). As the Special Committee (the "Special Committee")
to the board of directors of Quizno's, we have carefully reviewed and analyzed your letter
dated October 2, 2001, including the condition to your proposal that Quizno's grant you a
put option.
The Special Committee has carefully reviewed all aspects of your proposal, including the
proposed condition. As part of our review, with the assistance of our independent
financial advisors, we have carefully analyzed the financial implications of the proposed
put option on the company and we have conducted substantive discussions with Quizno's
lenders, as well as with company management. As a result of our analysis and of our
discussions, the Special Committee was informed by Levine Lichtman that the proposed put
option is a violation of several of the covenants in their agreements with Quizno's and
that they are unwilling, at this time, to consent to such a condition. As I am sure you
can appreciate, the negative impact of a default under the Levine Lichtman facility makes
your proposal as structured unfeasible for further consideration.
While at this time we are unable to agree to the condition you outlined in your October 2,
2001 letter, we would be pleased to facilitate a discussion between you and Levine Lichtman
in the hope that a mutually satisfactory agreement can be achieved. We encourage you to
contact Levine Lichtman directly to discuss their specific concerns.
Once you have reached a mutually satisfactory agreement with Levine Lichtman, the Special
Committee would be please to review it and enter into negotiations under appropriate
circumstances. As we did with Firenze, we request that any offer you make be in the form
of a binding offer with definitive documentation.
If you have any questions, please feel free to contact our counsel, Richard Plumridge at
(303) 410-2014 or Lexi Methvin at (303) 410-2022.
Best Regards,
Mark Bromberg
Chairman
Cc: Richard R. Plumridge
Lexi Methvin
Holly Stein Sollod
Andre Weiss
Exhibit B
AGREEMENT AND PLAN OF MERGER
by and between
_____________, Inc.
and
THE QUIZNO'S CORPORATION
TABLE OF CONTENTS
Page
ARTICLE I The Merger.........................................................1
Section 1.1 The Merger.................................................1
Section 1.2 Effective Time.............................................2
Section 1.3 Effects of the Merger......................................2
Section 1.4 Articles of Incorporation and By-laws......................2
Section 1.5 Directors and Officers.....................................2
Section 1.6 Vacancies..................................................3
Section 1.7 Company Stock Options and Warrants.........................3
Section 1.8 Preferred Stock............................................3
Section 1.9 Deposit of Funds by Newco..................................4
ARTICLE II Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates.......................................4
Section 2.1 Effect on Capital Stock....................................4
Section 2.2 Surrender of Certificates..................................5
ARTICLE III Representations and Warranties...................................7
Section 3.1 Representations and Warranties of the Company..............7
Section 3.2 Representations and Warranties of Newco and the Fagan
Parties 11
ARTICLE IV Covenants Relating to Conduct of Business........................14
Section 4.1 Conduct of Business of the Company........................14
Section 4.2 Conduct of Business of Newco..............................14
ARTICLE V Additional Agreements.............................................14
Section 5.1 Shareholder Approval; Preparation of Proxy Statement......15
Section 5.2 Reasonable Efforts; Notification..........................15
Section 5.3 Indemnification...........................................16
Section 5.4 Fees and Expenses.........................................17
Section 5.5 Public Announcements......................................17
Section 5.6 Purchases of Common Stock of the Other Party..............18
Section 5.7 Characterization for Federal Income Tax Purposes..........18
ARTICLE VI Conditions Precedent.............................................18
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger18
Section 6.2 Conditions of the Company.................................18
ARTICLE VII Termination, Amendment and Waiver...............................18
Section 7.1 Termination...............................................18
Section 7.2 Effect of Termination.....................................19
Section 7.3 Amendment.................................................20
Section 7.4 Extension; Waiver.........................................20
ARTICLE VIII General Provisions.............................................20
Section 8.1 Nonsurvival of Representations and Warranties.............20
Section 8.2 Notices...................................................20
Section 8.3 Definitions...............................................21
Section 8.4 Interpretation............................................22
Section 8.5 Counterparts..............................................22
Section 8.6 Entire Agreement; No Third-Party Beneficiaries............22
Section 8.7 Governing Law.............................................22
Section 8.8 Assignment................................................22
Section 8.9 Enforcement of the Agreement..............................22
Section 8.10.............................................Attorneys'
Fees23
Section
8.11................................................Severability23
23
DENSERV1\RRP\41683.03
1
DENSERV1\RRP\41683.03
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of December ___, 2001 by
and between _____________, a [Colorado] corporation ("Newco"), and THE QUIZNO'S
CORPORATION, a Colorado corporation (the "Company").
WHEREAS, Newco was formed on December ___, 2001, for the sole purpose
of entering into the transactions contemplated by this Agreement and has been
formed by William Fagan, Laura Fagan and Fagan Capital Inc., a ________________
corporation (the "Fagan Parties");
WHEREAS, the respective Boards of Directors of Newco and the Company
have approved, and deem it fair to, advisable and in the best interests of their
respective companies and shareholders to consummate the merger of Newco with and
into the Company (the "Merger"), upon the terms and subject to the conditions of
this Agreement and Plan of Merger (this "Agreement"), whereby each issued and
outstanding share of the Company's common stock, $0.001 par value (a "Company
Share"), not owned by the Company, Newco or the Surviving Owners as defined in
Schedule 2.1, will be paid nine dollars fifty cents ($9.50) per share ("Merger
Consideration");
WHEREAS, the Board of Directors of the Company, based upon the
recommendation of the Special Committee (as defined), has determined that the
Merger Consideration is fair to the holders of such Company Shares and has
resolved to recommend that the holders of the Company Shares approve the Merger
and adopt this Agreement upon the terms and subject to the conditions set forth
in this Agreement; and
WHEREAS, Newco and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and also
to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree as
follows:
ARTICLE I
The Merger
Section 1.1 The Merger. Upon the terms and subject to the conditions hereof and
in accordance with the Colorado Business Corporation Act (the "CBCA"), Newco will
be merged with and into the Company at the Effective Time (as defined).
Following the Merger, the separate corporate existence of Newco will cease and
the Company will continue as the surviving corporation (the "Surviving
Corporation") and will continue its corporate existence in accordance with the
CBCA.
Section 1.2 Effective Time. The closing of the Merger (the "Closing") will take
place at the offices of the Company upon the satisfaction or, to the extent
permitted hereunder, waiver of the conditions set forth in Article VI, and on the
date of the meeting of the Company's shareholders to approve the Merger (the
"Company Shareholders Meeting"), or, at such other time and place or such other
date as agreed to by Newco and the Company (the "Closing Date"). Newco and the
Fagan Parties agree to take all corporate and shareholder action as may be
necessary for Newco to approve the Merger. The Eagan Parties further agree to
vote all Company Shares, as well as all shares of Newco capital stock, held by
any of them or their Affiliates in favor of the Merger. As soon as practicable
following the Closing the Surviving Corporation will file the Articles of Merger
required by the CBCA with respect to the Merger and other appropriate documents
(the "Articles of Merger") executed in accordance with the relevant provisions of
the CBCA. The Merger will become effective at such time as the Articles of
Merger is duly filed with the Colorado Secretary of State (the time the Merger
becomes effective being the "Effective Time").
Section 1.3 Effects of the Merger. The Merger will have the effects set forth in
Section 7-111-106 of the CBCA. If at any time after the Effective Time, the
Surviving Corporation considers or is advised that any further assignments or
assurances in law or otherwise are necessary or desirable to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation, all rights, title
and interests in all real estate and other property and all privileges, powers
and franchises of Newco and the Company, the Surviving Corporation and its proper
officers and directors, in the name and on behalf of Newco and the Company, will
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary and proper to vest, perfect or confirm title to such
property or rights in the Surviving Corporation and otherwise to carry out the
purpose of this Agreement, and the proper officers and directors of the Surviving
Corporation are fully authorized in the name of the Company, Newco or otherwise
to take any and all such action.
Section 1.4 Articles of Incorporation and By-laws.
(a) The Restated Articles of Incorporation of the Company, as in effect
immediately prior to the Effective Time, will be, from and after the Effective
Time, the Articles of Incorporation of the Surviving Corporation, until
thereafter altered, amended or repealed as provided therein and in accordance
with applicable law.
(b) The by-laws of the Company, as in effect immediately prior to the Effective
Time, will become, from and after the Effective Time, the by-laws of the
Surviving Corporation, until thereafter altered, amended or repealed as provided
therein and in accordance with applicable law.
Section 1.5 Directors and Officers. The directors and officers of the Company
immediately prior to the Effective Time will become, from and after the Effective
Time, the directors and officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified or their
earlier resignation or removal, in accordance with the Surviving Corporation's
articles of incorporation or by-laws.
Section 1.6 Vacancies. If at the Effective Time a vacancy exists in the Board of
Directors or in any of the offices of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by the CBCA and the Articles of
Incorporation and By-laws of the Surviving Corporation.
Section 1.7 Company Stock Options and Warrants.
(a) Stock Option Plans. At the Effective Time, the Company's Employee Stock
Option Plan (the "Employee Plan"), the Company's Amended and Restated Stock
Option Plan for Directors and Advisers (the "Directors Plan"), and each
outstanding option to purchase Shares under such plans owned by the Surviving
Owners whether vested or unvested, will be assumed by the Surviving Corporation.
Each such option so assumed by the Surviving Corporation under this Agreement
shall continue to have, and be subject to, the same terms and conditions set
forth in the Employee Plan or the Directors Plan, as the case may be, and the
applicable stock option agreement immediately prior to the Effective Time. At
the Effective Time, each outstanding option to purchase Shares under the Employee
Plan or the Directors Plan which is not owned by the Surviving Owners will
automatically be converted into the right to receive an amount in cash equal to
nine dollars and fifty cents per share ($9.50), less the applicable exercise
price of such option, without interest thereon, upon surrender of the certificate
formerly representing such option to the Company.
(b) Assumption of Warrants. At the Effective Time, each outstanding Warrant of
the Company will be assumed by the Surviving Corporation. Each such Warrant so
assumed by the Surviving Corporation under this Agreement shall continue to have
the rights and privileges set forth in the Warrant immediately prior to the
Effective Time.
Section 1.8 Preferred Stock. The Company's shares of Class C, Class D and Class
E Preferred Stock issued and outstanding as of the date of this Agreement which
are not owned by the Surviving Owners may be redeemed by the Company prior to the
Effective Time. The redemption price with respect to the Class C Preferred Stock
and the Class E Preferred Stock is not expected to exceed the greater of (i) the
Merger Consideration (paid assuming the shares of Class C and Class E Preferred
Stock are converted into Company Shares in accordance with their respective
terms) or (ii) the liquidation value of the respective class of Preferred Stock,
plus accumulated but unpaid dividends, and, in the case of the Class E Preferred
Stock, a negotiated fee to terminate certain rights held by the Class E
shareholders, which termination fee will be subject to approval by the Company's
Board of Directors. The redemption price with respect to the Class D Preferred
Stock is not expected to exceed the liquidation value of such Preferred Stock.
All shares of the Company's Class A, Class C, Class D and Class E Preferred Stock
that have not been redeemed prior to the Effective Time will be assumed by the
Surviving Corporation and shall continue to have, and be subject to, the rights
and preferences applicable to the Class A, Class C, Class D and Class E shares,
respectively, immediately prior to the Effective Time.
Section 1.9 Deposit of Funds by Newco. Prior to the execution of this Agreement,
Newco deposited funds in the amount of $[6,300,000] (representing the estimated
total Merger Consideration payable upon the surrender of and payment for Company
Shares in accordance with Section 2.1(a) and the conversion and cancellation of
certain stock options pursuant to Section 1.7(a) above) into the following escrow
account established by the Company with [Wells Fargo] in connection with the
Merger (the "Company Escrow Account"):
[Identify account]
Such funds shall be held in the Company Escrow Account until the Effective Time,
at which time funds, except for the funds for the option shares and the
Dissenting Shares (as defined below), will be transferred out of the Company
Escrow Account to an account established by the Transfer Agent (as defined below)
and thereafter used to pay the Merger Consideration with respect to the Company
Shares that are surrendered pursuant to Section 2.1(a) and the funds for the
option shares and the Dissenting Shares will be transferred out of the Company
Escrow Account to a separate account established by the Company for the amounts
due to the dissenting shareholders and the amounts due to the holders of certain
stock options which are to be converted and canceled pursuant to Section 1.7(a).
If the funds and any interest thereon held in the Company Escrow Account are
inadequate to make the payments described above, then Newco (or after the
Effective Time, Fagan (as defined below)) shall deposit with the Transfer Agent
such additional funds as may be necessary to make such payments. In the event
the Agreement is terminated, all funds held in the Company Escrow Account (or
such other accounts as such Newco deposited funds may be located as contemplated
by this Section 1.9, including any interest thereon) will be promptly returned to
Newco.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
Section 2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Company Shares:
(a) Conversion of Company Shares. At the Effective Time, each Company Share
issued and outstanding immediately prior to the Effective Time, other than
Dissenting Shares and other than Company Shares owned by the Company, any of the
Company's subsidiaries or the Surviving Owners, will, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the right
to receive an amount in cash equal to nine dollars and fifty cents ($9.50) per
share payable to the holder thereof, without interest thereon, upon surrender of
the certificate formerly representing such Company Shares in accordance with
Section 2.2. All such Company Shares, when so converted, will no longer be
outstanding and will automatically, by virtue of the Merger, be canceled and
retired, and each holder of a certificate formerly representing such shares will
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration. The Surviving Corporation will issue to William Fagan
("Fagan") so many of the Surviving Corporation's Shares as are equal to the
Company Shares cancelled as a result of the Merger pursuant to this Section
2.1(a).
(b) Company Shares Owned by Surviving Owners. At the Effective Time, the
Company Shares owned by the Surviving Owners will become fully paid and
nonassessable shares of the Surviving Corporation.
(c) Newco Capital Stock. Each share of Newco capital stock issued and
outstanding immediately prior to the Effective Time will, by virtue of the Merger
and without any action on the part of the holder thereof, be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(d) Cancellation of Subsidiary-Owned Stock. Each Company Share owned by any of
the Company's subsidiaries, shall be cancelled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(e) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, each Company Share that is issued and outstanding immediately prior to
the Effective Time and that is held by a shareholder who has properly exercised
and perfected appraisal rights under Article 113 of the CBCA (the "Dissenting
Shares"), will not be converted into or exchangeable for the right to receive the
Merger Consideration, but will be entitled to receive such consideration as shall
be determined pursuant to Article 113 of the CBCA, but the holder thereof will
not be entitled to vote or to exercise any other rights of a shareholder of the
Company; provided, however, that if such holder fails to perfect or has
effectively withdrawn or lost its right to appraisal and payment under the CBCA,
each Company Share owned by such holder will thereupon be deemed to have been
converted into and to have become exchangeable for, as of the Effective Time, the
right to receive the Merger Consideration, without any interest thereon, in
accordance with Section 2.1(a), and such shares will no longer be Dissenting
Shares. With respect to the payment which the Surviving Corporation is required
to make to holders of Dissenting Shares, as determined pursuant to Article 113 of
the CBCA, the first $9.50 paid for each Dissenting Share shall be paid by Fagan
(whether out of the Company Escrow Account or otherwise); any additional funds
which are necessary to make such payments shall be provided by the Surviving
Corporation. At such time as the required payment for Dissenting Shares has been
made, the Surviving Corporation shall issue a like number of shares of its common
stock to Fagan for each $9.50 paid by Fagan to a Dissenting Shareholder pursuant
to this Section 2.1(e). At such time as payment has been made for all Dissenting
Shares, all funds held in the Company Escrow Account, if any, shall be returned
to Fagan.
Section 2.2 Surrender of Certificates.
(a) Transfer Agent. Prior to the Effective Time, the Company will engage
Computershare Trust Co., Inc., or such other bank or trust company reasonably
acceptable to the Company, to act as exchange agent (the "Transfer Agent") for
the payment of the Merger Consideration upon surrender of Certificates (as
defined).
(b) Payment of Merger Consideration. The Company Escrow Account will cause
there to be deposited with the Transfer Agent (whether by transfer or otherwise)
prior to or at the Effective Time cash in an amount equal to the aggregate
consideration to be paid upon the surrender of the Company Shares pursuant to
Section 2.1(a). Such funds shall be invested as reasonably directed by the
Surviving Corporation in reasonably prudent investments pending payment thereof
by the Transfer Agent to holders of the surrendered Company Shares. Earnings
from such investments shall be the sole and exclusive property of the Surviving
Corporation and no part of such earnings shall accrue to the benefit of holders
of Company Shares and any Taxes payable on such earnings shall be the sole
obligation of the Surviving Corporation.
(c) Exchange Procedure. As soon as practicable after the Effective Time, the
Transfer Agent will mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented outstanding
Company Shares (the "Certificates"), other than the Company, any of Company's
subsidiaries, Newco and any Surviving Owner, (i) a letter of transmittal (which
will specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon delivery of the Certificates to the Transfer
Agent and will be in a form and have such other provisions as the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration to be paid to the
holders of the Certificates. Upon surrender of a Certificate for cancellation to
the Transfer Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with the letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Transfer Agent, the
holder of such Certificate will be entitled to receive in exchange therefor the
Merger Consideration, and the surrendered Certificate will forthwith be
canceled. If the any part of the Merger Consideration is to be paid to a Person
(as defined below) other than the Person in whose name the Certificate is
registered, it will be a condition of exchange that the Certificate will be
properly endorsed or otherwise in proper form for transfer and that the Person
requesting the exchange will pay any transfer or other taxes required by reason
of the exchange to a Person other than the registered holder of such Certificate
or establish to the reasonable satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered as contemplated
by this Section 2.2, each Certificate will be deemed at any time after the
Effective Time to represent only the right to receive, upon surrender of such
Certificate, the cash to be paid for such Company Shares.
(d) No Further Ownership Rights in Company's Shares. The Merger Consideration
to be paid upon the surrender of Certificates in accordance with the terms of
this Article II will be deemed to have been exchanged and paid in full
satisfaction of all rights pertaining to the Company Shares theretofore
represented by such Certificates and there will be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the Company
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, such Certificate will be canceled and exchanged as provided in this
Article II.
(e) At any time following six (6) months after the Effective Time, the
Surviving Corporation shall be entitled to require the Transfer Agent to deliver
to it any funds (including any earnings with respect thereto) which had been made
available to the Transfer Agent and which had not been disbursed to holders of
the 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 with respect to the Merger
Consideration payable upon due surrender of their Certificates, without any
interest thereon. Notwithstanding the foregoing, neither Newco, the Surviving
Corporation nor the Exchange Agent shall be liable to any holder of a Certificate
for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
Representations and Warranties
Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants to Newco as follows, except as expressly contemplated by
this Agreement:
(a) Organization; Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Colorado and has the requisite corporate power and authority to carry on its
business as now being conducted. The Company is duly qualified to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification necessary,
other than in such jurisdictions where the failure to be so qualified to do
business or in good standing (individually, or in the aggregate) would not have a
Material Adverse Effect (as defined below) on the Company.
(b) Subsidiaries. Except as set forth in the exhibits to the Company SEC
Documents (as defined in Section 3.1(f)), the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any subsidiary which
would be required to be listed as a subsidiary of the Company under the rules of
the Securities and Exchange Commission (the "SEC") with the filing by the Company
of an Annual Report on Form 10-K. The Company's subsidiaries that are
corporations are corporations duly organized, validly existing and in good
standing under the laws of their respective jurisdictions of incorporation and
have the requisite corporate power and authority to carry on their respective
businesses as they are now being conducted and to own, operate and lease the
assets they now own, operate or hold under lease, except where the failure to be
so organized, existing or in good standing would not have a Material Adverse
Effect on the Company. The Company's subsidiaries that are limited liability
companies are companies duly organized, validly existing and in good standing
under the laws of their respective jurisdictions of formation and have the
requisite company power and authority to carry on their respective businesses as
they are now being conducted and to own, operate and lease the assets they now
own, operate or hold under lease, except where the failure to be so organized,
existing or in good standing would not have a Material Adverse Effect on the
Company. All the outstanding shares of capital stock or membership interests of
the Company's subsidiaries that are owned by the Company or its subsidiaries have
been duly authorized and validly issued and are fully paid and non-assessable and
were not issued in violation of any preemptive rights or other preferential
rights of subscription or purchase of any Person other than those that have been
waived or otherwise cured or satisfied. All such stock and ownership interests
are owned of record and beneficially by the Company or by a direct or indirect
wholly owned subsidiary of the Company, free and clear of all liens, pledges,
security interests, charges, claims, rights of third parties and other
encumbrances of any kind or nature ("Liens"), except as set forth on Schedule
3.1(b).
(c) Capital Structure. The authorized capital stock of the Company is as
disclosed in the Company SEC Documents and as set forth on Schedule 3.1(c).
Except as disclosed in the Company SEC Documents or as set forth on Schedule
3.1(c), no shares of capital stock of the Company are authorized, reserved for
issuance or issued and outstanding. All issued and outstanding shares of Company
common stock have been duly authorized and are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as disclosed in the Company
SEC Documents or as set forth in Schedule 3.1(c), the Company does not have
outstanding any subscription, option, put, call, warrant or other right or
commitment to issue or any obligation or commitment to redeem or purchase, any of
its authorized capital stock or any securities convertible into or exchangeable
for any of its authorized capital stock. Except as disclosed in the Company SEC
Documents or as set forth on Schedule 3.1(c), there are no shareholder
agreements, voting agreements, voting trusts or other similar arrangements to
which the Company is a party which have the effect of restricting or limiting the
transfer, voting or other rights associated with the capital stock of the Company.
(d) Authority; Non-contravention. The Company has the requisite corporate
power and authority to enter into this Agreement and, subject to approval of the
Merger and this Agreement by the holders of a majority of the outstanding Company
Shares as of the record date for the Company Shareholders Meeting ("Company
Shareholder Approval"), to consummate the transactions contemplated hereby and to
take such actions, if any, as shall have been taken with respect to the matters
referred to in Section 3.1(h). The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
by this Agreement have been duly authorized by all necessary corporate action on
the part of the Company, subject to Company Shareholder Approval. This Agreement
has been duly and validly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
judicial decisions now or hereafter in effect relating to creditors' rights
generally, (ii) the remedy of specific performance and injunctive relief may be
subject to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought and (iii) the enforceability of any
indemnification provision contained herein may be limited by applicable federal
or state securities laws. The execution and delivery of this Agreement by the
Company do not, and the consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement 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 termination, cancellation or
acceleration of or "put" right with respect to any obligation or to loss of a
material benefit under, or result in the creation of any Lien, upon any of the
properties or assets of the Company or any of its significant subsidiaries under,
any provision of (i) the Articles of Incorporation or By-laws of the Company or
any provision of the comparable organizational documents of its significant
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease, or other agreement, instrument, permit, concession, franchise or license
applicable, to the Company or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation or arbitration award applicable to
the Company or any of its subsidiaries or their respective properties or assets,
other than, in the case of clause (ii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not have a Material
Adverse Effect on the Company and would not materially impair the ability of the
Company to perform its obligations hereunder or prevent the consummation of any
of the transactions contemplated by this Agreement.
(e) Government Approval. No consent, approval, order or authorization of, or
registration, declaration, or filing with, any court, administrative agency or
commission or other governmental authority or agency, domestic or foreign,
including local authorities (each a "Governmental Entity"), is required by or
with respect to the Company in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the filing by the Company of a
pre-merger notification and report form under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") (if required), (ii) the
filing with the SEC of (A) a proxy statement relating to the Company Shareholder
Approval (such proxy statement as amended or supplemented from time to time, the
"Proxy Statement") and (B) such reports under Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions contemplated hereby, and
(iii) the filing of the Articles of Merger with the Colorado Secretary of State
with respect to the Merger as provided in the CBCA and appropriate documents with
the relevant authorities of other states in which the Company is qualified to do
business and such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not have a Material Adverse Effect on the Company.
(f) SEC Documents. The Company has filed all required reports, schedules,
forms, statements and other documents with the SEC since December 31, 1997 (such
documents, together with all exhibits and schedules thereto and documents
incorporated by reference therein, collectively referred to herein as the
"Company SEC Documents"). As of their respective dates, the Company SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 ("Securities Act") or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents, and none of the Company SEC Documents 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. The consolidated
financial statements of the Company included in the Company SEC Documents
complied in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
Exchange Act) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited statements,
as permitted by Exchange Act Regulation S-X) and fairly present the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and other adjustments described therein).
(g) Absence of Certain Changes or Events. Except as disclosed in the Company
SEC Documents, since June 30, 2001, the Company has conducted its business only
in the ordinary course consistent with past practice, and there has not been any
entry by the Company or any of its subsidiaries into any employment, severance or
termination agreement with any such executive officer other than in the ordinary
course of business, consistent with past practice.
(h) State Takeover Statutes. The Company has taken all action to assure that
no takeover or similar provision of the CBCA, will apply to the Merger or any of
the other transactions contemplated hereby. Except for the Company Shareholder
Approval, no other shareholder action on the part of the Company is required for
approval of the Merger, this Agreement and the transactions contemplated by this
Agreement. The Company has also taken such other action with respect to any
anti-takeover provisions in its By-laws or Articles of Incorporation to the
extent necessary to consummate the Merger on the terms set forth in this
Agreement.
(i) Brokers. Except for Tucker Anthony Sutro Capital Markets, Inc. ("Tucker"),
whose fees are to be paid by the Company, no broker, any investment banker or
other Person, is entitled to receive from the Company or any of its subsidiaries
any investment banking, broker's, finder's or other similar fee or commission in
connection with this Agreement or the transactions contemplated by this
Agreement, including any fee for any opinion rendered by any investment banker.
The engagement letter dated May 1, 2001, between the Company and Tucker, which
was provided to Newco prior to the date of this Agreement, constitutes the
entire understanding of the Company and Tucker with respect to the matters
referred to therein, and has not been amended or modified, nor will it be amended
or modified prior to the Effective Time.
(j) Litigation. Except as publicly disclosed, there is no claim, suit, action,
proceeding or investigation pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of its subsidiaries that could
reasonably be expected to have a Material Adverse Effect on the Company or
prevent, hinder or materially delay the ability of the Company to consummate the
transactions contemplated by this Agreement, nor is there any judgment, decree,
injunction, rule or order by any Governmental Entity or arbitrator outstanding
against the Company or any of its subsidiaries having any such effect.
(k) Taxes. Each of the Company and each of its subsidiaries, and any
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which the Company or any of its subsidiaries is or has been a member,
has timely filed all Tax Returns (as defined below) required to be filed by it
and has timely paid or deposited (or the Company has paid or deposited on its
behalf) all Taxes which are required to be paid or deposited except where the
failure to do so would not have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole. Each of the Tax Returns filed by the Company or
any of its subsidiaries is accurate and complete in all material respects. The
most recent consolidated financial statements of the Company contained in the
filed Company SEC Documents reflect an adequate reserve for all Taxes payable by
the Company and its subsidiaries for all taxable periods and portions thereof
through the date of such financial statements whether or not shown as being due
on any Tax Returns. No deficiencies for any Taxes have been proposed, asserted
or assessed against the Company or any of its subsidiaries; no requests for
waivers of the time to assess any such Taxes have been granted or are pending;
and there are no tax liens upon any assets of the Company or any of its
subsidiaries. There are no current examinations of any Tax Return of the Company
or any of its subsidiaries being conducted and there are no settlements or any
prior examinations which could reasonably be expected to adversely affect any
taxable period for which the statute of limitations has not run. As used herein,
"Tax" or "Taxes" will mean all taxes of any kind, including, without limitation,
those on or measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment,
estimated, excise, severance, stamp, occupation, premium, value added, property
or windfall profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any Governmental Entity,
domestic or foreign. As used herein, "Tax Return" will mean any return, report,
statement or information required to be filed with any Governmental Entity with
respect to Taxes.
Section 3.2 Representations and Warranties of Newco and the Fagan Parties. Newco
and the Fagan Parties each represent and warrant to the Company as follows,
except as expressly contemplated by this Agreement:
(a) Organization; Standing and Power. Newco is a corporation duly organized,
validly existing and in good standing under the laws of the State of [Colorado]
and has the requisite corporate power and authority to carry on its business as
now being conducted. Newco is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary, other
than in such jurisdictions where the failure to be so qualified to do business
(individually or in the aggregate) would not have a Material Adverse Effect on
Newco.
(b) Subsidiaries. Newco does not own, directly or indirectly, any capital
stock or other ownership interest in any subsidiary.
(c) Capital Structure. The authorized capital stock of Newco consists of
________ (__________) shares of Newco Common Stock, _____ par value ("Newco
Common Stock"). As of the date of this Agreement, ____________ (_____) shares of
Newco Common Stock are issued and outstanding and the sole shareholders of Newco
are __________________ and __________________. Except as stated, no shares of
capital stock or other equity or voting securities of Newco are reserved for
issuance or outstanding. All outstanding shares of capital stock of Newco are
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as described above, as of the date of this Agreement there are no
outstanding or authorized securities, options, warrants, calls, rights,
commitments, preemptive rights, agreements, arrangements or undertakings of any
kind to which Newco is a party, or by which it is bound, obligating Newco to
issue, deliver or sell, or cause to be issued, delivered or sold, any shares of
capital stock or other equity or voting securities of, or other ownership
interests in, Newco or obligating Newco to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking.
(d) Authority; Non-contravention. Newco has the requisite corporate power and
authority to enter into this Agreement, to consummate the transactions
contemplated hereby and to take such actions, if any, as shall have been taken
with respect to the matters referred to in Section 3.2(g). The execution and
delivery of this Agreement by Newco and the consummation by Newco of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Newco. This Agreement has been duly executed and
delivered by Newco and each of the Fagan Parties and constitutes a valid and
binding, obligation of Newco and the Fagan Parties, enforceable against Newco and
the Fagan Parties in accordance with its terms, except that (i) such enforcement
may be subject to bankruptcy, insolvency, reorganization, moratorium or other
similar laws or judicial decisions now or hereafter in effect relating to
creditors' rights generally, (ii) the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought and (iii) the
enforceability of any indemnification provision contained herein may be limited
by applicable federal and state securities laws. The execution and delivery of
this Agreement by Newco and the Fagan Parties do not, and the consummation of the
transactions contemplated hereby and compliance with the provisions hereof 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 termination,
cancellation or acceleration of or "put" right with respect to any obligation or
to loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Newco or any Fagan Party, under any provision
of (i) the Articles of Incorporation or By-laws of Newco or any Fagan Party or
any provision of any comparable organizational documents of any of their
respective subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise or
license applicable to Newco or any Fagan Party or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred to
in the following sentence, any judgment, order, decree, statute, law, ordinance,
rule or regulation or arbitration award applicable to Newco or any Fagan Party or
their respective properties or assets, other than, in the case of clause (ii),
any such conflicts, violations, defaults, rights or Liens that individually or in
the aggregate would not have a Material Adverse Effect on Newco or any Fagan
Party and would not materially impair the ability of Newco or any Fagan Party to
perform its obligations hereunder or prevent the consummation of any of the
transactions contemplated hereby.
(e) Government Approval. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Newco or any Fagan Party in connection with the execution and
delivery of this Agreement by Newco or any Fagan Party or the consummation by
Newco or any Fagan Party of the transactions contemplated hereby, except for the
filing of the Articles of Merger with the Colorado Secretary of State with
respect to the Merger as provided in the CBCA and appropriate documents with the
relevant authorities of other states in which Newco is qualified to do business
and such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the "takeover" or "blue sky"
laws of various states and such other consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not have a Material Adverse Effect on Newco.
(f) New Entity. Newco was formed on December ___, 2001 and since the date of
inception, Newco has not conducted any business other than action taken in
connection with the Merger.
(g) State Takeover Statutes; Absence of Supermajority Provision. Newco has
taken all action to assure that no takeover or similar provision of any
applicable state law, will apply to the Merger or any of the other transactions
contemplated hereby. No additional shareholder action on the part of Newco is
required for approval of the Merger, this Agreement and the transactions
contemplated hereby. There are no anti-takeover provisions in the By-laws or
Articles of Incorporation of Newco applicable to the transactions.
(h) Brokers. No broker, investment banker or other Person, is entitled to
receive from Newco any investment banking, broker's, finder's or other similar
fee or commission in connection with this Agreement or the transactions
contemplated by this Agreement, including any fee for any opinion rendered by any
investment banker.
(i) Litigation. There is no claim, suit, action, proceeding or investigation
pending or, to the best of Newco's knowledge, threatened against or affecting
Newco, nor is there any judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator outstanding against Newco.
(j) Employee Benefit Matters. As used in this Section 3.2(j), "Newco" will
include Newco as defined in the preamble of this Agreement and any member of a
controlled group or affiliated service group, as defined in Section 414(b), (c),
(m) and (o) of the Code, of which Newco is a member. Newco has no employee
benefit plan or arrangement.
(k) Taxes. Newco has not filed any Tax Returns.
(l) Title to Properties. Newco does not own or lease any real or personal
property.
(m) Undisclosed Liabilities. Newco does not have any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
required by GAAP to be set forth on a financial statement or in the notes thereto
or which, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect on Newco.
(n) Board and Stockholder Recommendation. The Board of Directors of Newco, at
a meeting duly called and held, has by vote of those directors present (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger and the transactions contemplated thereby, are fair to and
in the best interests of the shareholders of Newco, and (ii) resolved to
recommend that the holders of the Newco Common Stock approve the Merger and the
transactions contemplated thereby.
(o) Shareholder Approval. The shareholders of Newco have authorized the
execution and delivery of this Agreement and have approved the Merger and the
transactions contemplated by this Agreement.
(p) Absence of Special Rights. Newco and each of the Fagan Parties
acknowledges and agrees that as of the Effective Time (i) the securities of the
Surviving Corporation shall be delisted from Nasdaq Stock Market and shall cease
to trade in any public securities market, (ii) the Surviving Corporation will
terminate its reporting obligations under the Securities Exchange Act of 1934, as
amended, (iii) the Surviving Corporation shall have no obligation to register its
securities under the Securities Act of 1933, as amended (the "Act") or take any
other action which would result in the development of a public market for its
securities, (iv) the Fagan Parties shall be minority shareholders of the
Surviving Corporation and (v) except for its rights under this Agreement and its
rights generally as a shareholder under Colorado law or other applicable laws,
the Fagan Parties shall have no contractual rights or other arrangements with the
Surviving Corporation or any of its Affiliates which relate to the securities
owned by the Fagan Parties. Without limitation, the Fagan Parties shall not have
the right to cause the Surviving Corporation or any other person to redeem or
purchase the securities of the Surviving Corporation owned by the Fagan Parties.
(q) Transfer Restrictions. The Fagan Parties agree that any transfer of the
Surviving Corporation's securities which they or any of them may propose must be
to a single purchaser and must relate to all securities of the Surviving
Corporation then owned by them or any of them. Newco and the Fagan Parties agree
that a legend describing the restrictions contained in this Section 3.2(q) shall
appear on all certificates representing securities of the Surviving Corporation
and that any subsequent holder of such certificates shall be bound by such
restrictions.
ARTICLE IV
Covenants Relating to Conduct of Business
Section 4.1 Conduct of Business of the Company.
Ordinary Course. During the period from the date of this Agreement
to the Effective Time (except as otherwise specifically contemplated by the terms
of this Agreement), the Company will and will cause its subsidiaries to carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their current
business organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them, in each
case consistent with past practice, to the end that their goodwill and ongoing
businesses will be unimpaired to the fullest extent possible at the Effective
Time.
Section 4.2 Conduct of Business of Newco.
(a) Ordinary Course. Newco has been formed specifically to complete the
transactions contemplated by this Agreement. During the period from the date of
this Agreement to the Effective Time (except as otherwise specifically
contemplated by the terms of this Agreement), Newco will not carry on any
business other than business required to consummate the Merger and other
transactions contemplated by this Agreement.
(b) Other Actions. Newco will not take, and will cause its Affiliates not to
take, any action that would, or that could reasonably be expected to, result in
any of the representations and warranties of Newco set forth in this Agreement
becoming untrue.
ARTICLE V
Additional Agreements
Section 5.1 Shareholder Approval; Preparation of Proxy Statement.
(a) Shareholder Meetings. The Company will, as soon as practicable following
the execution and delivery of this Agreement on dates to be agreed upon between
Newco and the Company, which dates will be set taking into account the status of
pending regulatory matters pertaining to the transactions contemplated hereby,
duly call, give notice of, convene and hold the Company Shareholders Meeting, in
accordance with applicable law, for the purpose of approving the Merger, this
Agreement and the transactions contemplated hereby. Subject to the provisions of
Section 6.1 and Section 6.2 the Company will, through its Board of Directors,
recommend to its shareholders the approval and adoption of the Merger. The
Company and Newco will coordinate and cooperate with respect to the timing of the
Company Shareholders Meeting and will endeavor to hold such meetings as soon as
practical after the date hereof.
(b) Board Recommendation. The Board may modify its recommendation of the
merger if the Board determines in good faith that the failure to modify its
recommendation could be expected to constitute a breach of the Board's fiduciary
duties to the Company's shareholders under applicable law.
(c) Preparation of Proxy Statement/Schedule 13E-3. As soon as practicable
following the date of this Agreement, the Company will prepare and file with the
SEC the Proxy Statement/Schedule 13E-3. Newco will provide the Company with the
information concerning Newco required to be included in the Proxy
Statement/Schedule 13E-3. The Company will use its reasonable efforts to cause
the Proxy Statement/Schedule 13E-3 to be mailed to the Company's shareholders as
promptly as practicable after the Proxy Statement/Schedule 13E-3 has been
approved by the SEC. The Company will notify Newco promptly of the receipt of
any written or oral comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Newco with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement/Schedule
13E-3 or the Merger.
(d) Stock Transfer Records. The Company will cause the Transfer Agent to make
stock transfer records relating to the Company available to the extent reasonably
necessary to effectuate the intent of this Agreement.
Section 5.2 Reasonable Efforts; Notification.
(a) Reasonable Efforts. Upon the terms and subject to the conditions set forth
in this Agreement, except to the extent otherwise required by United States
regulatory considerations and otherwise provided in this Section 5.2(a), each of
the parties agrees to use reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger, and
the other transactions contemplated by this Agreement, including (i) the
obtaining of all necessary actions or non-actions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of 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,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity vacated or
reversed and (iv) the execution and delivery of any additional instruments
(including any required supplemental indentures) necessary to consummate the
transactions contemplated by this Agreement.
Notwithstanding the foregoing, neither party will be required to
agree to any consent, approval or waiver that would require such party to take an
action that would impair the value that such party reasonably attributes to the
Merger and the transactions contemplated thereby. In connection with and without
limiting the foregoing, each of the Company and Newco and its respective Board of
Directors will (i) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to the Merger,
(ii) if any state takeover statute or similar statute or regulation becomes
applicable to the Merger, take all action necessary to ensure that the Merger 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 (iii) reasonably cooperate with each other in the arrangements for
refinancing any indebtedness of, or obtaining any necessary new financing for,
the Company and the Surviving Corporation.
(b) Notice of Breach. The Company will give prompt notice to Newco, and Newco
will give prompt notice to the Company, of (i) any representation or warranty
made by it contained in this Agreement becoming untrue or inaccurate in any
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification will affect
the representations or warranties or covenants or agreements of the parties or
the conditions to the obligations of the parties hereunder.
Section 5.3 Indemnification.
(a) It is understood and agreed that, subject to the limitations on
indemnification contained in the CBCA, the Company shall, to the fullest extent
permitted under applicable law and regardless of whether the Merger becomes
effective, indemnify and hold harmless, and after the Effective Time, the
Surviving Corporation shall, to the fullest extent permitted under applicable
law, indemnify, defend and hold harmless each current or former director or
officer of the Company and its subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, liabilities, costs, fees and expenses, including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided, that any such
settlement is effected with the written consent of the Surviving Corporation,
such consent not to be unreasonably withheld) arising out of actions or omissions
occurring at or prior to the Effective Time to the full extent permitted under
applicable law, the terms of the Company's Articles of Incorporation or the
By-laws, as in effect at the date hereof.
(b) If the Surviving Corporation or any of its successors or assigns (i)
consolidates with or merges into any other Person and will not be the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any Person,
then and in each such case, proper provisions will be made so that the successors
and assigns of the Surviving Corporation, which will be financially responsible
Persons or entities, assume the obligations set forth in this Section 5.3.
(c) The Surviving Corporation shall maintain the Company's existing officers'
and directors' liability insurance for a period of not less than six (6) years
after the Effective Date, provided, that the Surviving Corporation may substitute
therefor policies of substantially equivalent coverage and amounts containing
terms no less favorable to such former directors or officers; provided, further,
that in no event shall the Surviving Corporation be required to pay aggregate
premiums for insurance under this Section 5.3 in excess of two hundred percent
(200%) of the aggregate premiums paid by the Company in the twelve months prior
to the date of this Agreement, on an annualized basis for such purpose; and
provided, further, that if the Surviving Corporation is unable to obtain the
amount of insurance required by this Section 5.3 for such aggregate premium, the
Surviving Corporation shall obtain as much insurance as can be obtained for an
annual premium not in excess of two hundred percent (200%) of the aggregate
premiums paid by the Company in the twelve months prior to the date of this
Agreement, on an annualized basis for such purpose.
(d) All rights and obligations under this Section 5.3 will be in addition to
any rights that an Indemnified Party may have under the Articles of Incorporation
or By-Laws of the Company as in effect on the date hereof, or pursuant to any
other agreement, arrangement or document in effect prior to the date hereof. The
provisions of this Section 5.3 are intended to be for the benefit of, and will be
enforceable by, the parties hereto and each Indemnified Party, his or her heirs
and his or her representatives. This Section 5.3 will be binding upon all
successors and assigns of the Company, Newco and the Surviving Corporation.
Section 5.4 Fees and Expenses. Except as provided in Article VII and Article
VIII, all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated hereby will be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
Section 5.5 Public Announcements. Newco, the Fagan Parties and the Company will
consult with each other before issuing any press release or otherwise making any
public statements with respect to the transactions contemplated by this Agreement
and will not issue any such press release or make any such public statement prior
to such consultation, except that each party may respond to questions from
shareholders and may respond to inquiries from financial analysts and media
representatives in a manner consistent with its past practice and each party may
make such disclosure as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange without
prior consultation to the extent such consultation is not reasonably practicable.
Section 5.6 Purchases of Common Stock of the Other Party. During the period from
the date hereof through the Effective Time, except as otherwise allowed under
this Agreement, neither Newco nor any of its Affiliates will purchase any Company
Shares, and neither the Company nor any of its subsidiaries or other Affiliates
will purchase any shares of Newco Common Stock.
Section 5.7 Characterization for Federal Income Tax Purposes. For federal income
tax purposes, it is intended that the formation of Newco be ignored and that the
entire transaction contemplated by this Agreement be treated as a redemption of
certain shares of the Company for cash within the meaning of Section 302(b) of
the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE VI
Conditions Precedent
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Shareholder Approval. The Company Shareholder Approval shall have been
obtained.
(b) No Injunctions or Restraints. No final restraining order or permanent
injunction or other final order issued by any court of competent jurisdiction or
other legal prohibition preventing the consummation of the Merger are in effect;
provided, however, that the parties hereto will, subject to Section 5.2(a), use
reasonable efforts to have any such injunction, order, restraint or prohibition
vacated.
Section 6.2 Conditions of the Company. The obligation of the Company to
consummate the Merger is further subject to the satisfaction at the Effective
Time of the following condition: Tucker shall not have revoked, modified or
changed its fairness opinion in any manner adverse to the holders of the Company
Shares to whom the fairness opinion is addressed.
ARTICLE VII
Termination, Amendment and Waiver
Section 7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of matters presented in
connection with the Merger by the shareholders of the Company or by the
shareholders of Newco:
(a) by mutual written consent of Newco and the Company; or
(b) by either Newco or the Company:
(i) if the shareholders of the Company fail to give any required approval of
the Merger and the transactions contemplated hereby upon a vote at a duly
held meeting of shareholders of the Company or at any adjournment thereof;
or
(ii) if any court of competent jurisdiction or any governmental, administrative
or regulatory authority, agency or body shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Merger; or
(c) by Newco, if the Company fails to perform in any material respect any of
its covenants, agreements or obligations under this Agreement which breach is
incapable of being cured or cannot be or has not been cured within 20 days after
Newco has given written notice of such breach to the Company; provided that no
breach by the Company shall relieve Newco from closing if the breach was
previously known to Newco or its Affiliates prior to the date of this Agreement
or is the result of actions by Newco or its Affiliates; or
(d) by the Company, if Newco breaches in any material respect any of its
representations or warranties herein or fails to perform in any material respect
any of its covenants, agreements or obligations under this Agreement which
breach is incapable of being cured or cannot be or has not been cured within 20
days after the non-breaching party has given written notice of such breach; or
(e) by the Company, if the Merger shall not have been consummated on or before
February 28, 2002, unless the failure to consummate the Merger is the result of a
material breach of this Agreement by the Company; or
(f) by the Company if its Board of Directors determines, in good faith, after
consultation with and based upon the advice of legal counsel, that the failure to
change its recommendation of the adoption of this Agreement and the Merger could
be expected to constitute a breach of its fiduciary duties to the Company's
shareholders under applicable law.
Section 7.2 Effect of Termination.
(a) In the event of termination of this Agreement by the Company as provided in
Section 7(e), the Company shall pay to Newco within five business days of such
termination all out-of-pocket expenses incurred by Newco and its Affiliates in
connection with this Agreement and not otherwise reimbursed or paid by the
Company.
(b) In the event of termination of this Agreement by either the Company or
Newco as provided in Section 7.1, this Agreement will forthwith become void and
have no effect, without any liability or obligation on the part of Newco or the
Company, other than (i) the provisions of Section 5.5, Section 7.2(a) and Article
VIII and (ii) such termination will not relieve any party hereto for any
intentional breach prior to such termination by a party hereto of any of its
representations or warranties or any of its covenants or agreements set forth in
this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties at any time
before or after any required approval of matters presented in connection with the
Merger by the shareholders of the Company or the shareholders of Newco; provided,
however, that after any such approval, there will be made no amendment that by
law requires further approval by such shareholders without the further approval
of such shareholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 7.4 Extension; Waiver. At any time prior to the Effective Time, the
parties may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or the other acts of the other parties, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto or (c) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in an instrument in writing signed on behalf of
such party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise will not constitute a waiver of such
rights.
ARTICLE VIII
General Provisions
Section 8.1 Nonsurvival of Representations and Warranties. None of the
representations, warranties, covenants or agreements in this Agreement or in any
instrument delivered by the Company or Newco pursuant to this Agreement will
survive the Effective Time, except any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time, including but not
limited to the covenants and agreements contained in Sections 3.2(p) and 3.2(q).
Section 8.2 Notices. Any notice and similar communications concerning this
Agreement ("Notice") will be in writing and will be either (a) delivered in
person (including by a nationally recognized courier service such as Federal
Express); or (b) sent to the other party by certified mail with return receipt
requested. Notices will be delivered or sent as follows or to such other address
as a party may hereafter establish by Notice given in the manner prescribed in
this Section.
(a) if to Newco or any Fagan Party, to
[-------------------]
5201 North O'Connor Boulevard, Suite 440
Irving, Texas 75039
with a copy to:
Schulte Roth & Zabel LLP
919 Third Avenue
New York, New York 10022
Attention: Andre Weiss
(b) if to the Company, to
The Quizno's Corporation
1415 Larimer Street
Denver, Colorado 80202
Attn: Patrick Meyers
and:
Brobeck, Phleger & Harrison
370 Interlocken Blvd. Suite 500
Broomfield, Colorado 80021
Attn: Richard Plumridge
Section 8.3 Definitions. For purposes of this Agreement:
(a) an "Affiliate" is any person who controls, is controlled by, or is under
common control with the designated person;
(b) "knowledge" means, with respect to any matter stated herein to be "to the
Company's knowledge," or similar language, the actual knowledge of the Chairman
of the Board, the Chief Executive Officer, President, any Vice President, Chief
Financial Officer or General Counsel of the Company, and with respect to any
matter stated herein to be "to Newco's knowledge," or similar language, the
actual knowledge of the Chairman of the Board, the Chief Executive Officer,
President, any Vice President or Chief Financial Officer of Newco.
(c) "Material Adverse Effect" or "Material Adverse Change" means, when used in
connection with any Person, any change or effect that is materially adverse to
the business, properties, assets, financial condition or results of operations of
that Person and its subsidiaries, taken as a whole; provided, however, that none
of the following conditions or events shall be deemed in themselves, either alone
or in combination, to constitute a Material Adverse Effect or a Material Adverse
Change in the Company: (i) the announcement or pendency of the Merger, (ii)
conditions affecting the general industry in which the Company participates or
the U.S. economy as a whole, (iii) compliance with the terms of, or the taking of
any action required or contemplated by, this Agreement, or (iv) a change in the
market price or trading volume of the Company common stock.
(d) "Person" means an individual, corporation, partnership, joint venture,
limited liability company, association, trust, unincorporated organization or
other entity; and
(e) a "subsidiary" of a Person means any corporation, partnership or other
legal entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are directly or indirectly owned by such first
mentioned Person.
Section 8.4 Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference will be to a Section of, or an
Exhibit or Schedule to, this Agreement unless otherwise indicated. The titles
and headings herein are for convenience only. In case of ambiguity or
inconsistency, the text rather than the titles or headings will control.
Whenever the word "include", "includes" or "including" are used in this
Agreement, they will be deemed to be followed by the words "without limitation".
Section 8.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and will
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
Section 8.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and (b) except for the provisions of
Article II and Section 5.3, are not intended to confer upon any Person other than
the parties any rights or remedies hereunder.
Section 8.7 Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Colorado, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Section 8.8 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder will be assigned by any of the parties without the prior
written consent of the other parties. This Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
Section 8.9 Enforcement of the Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties will be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
located in the State of Colorado or in any other Colorado state court, this being
in addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal or state court sitting in the District of
Colorado in the event any dispute between the parties hereto arises out of this
Agreement solely in connection with such a suit between the parties, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement in any court other than a Federal or
state court sitting in the State of Colorado or in the District of Colorado. The
parties agree that any action or proceeding arising out of this Agreement will be
heard by a court sitting without a jury and thus hereby waive all rights to a
trial by jury.
Section 8.10 Attorneys' Fees. In the event of any dispute hereunder, or any
default in the performance of any term or condition of this Agreement, the
prevailing party will be entitled to recover all costs and expenses associated
therewith, including reasonable attorneys' fees.
Section 8.11 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein will not in any way be affected or impaired thereby.
The parties will endeavor in good faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect of
which comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
DENSERV1\RRP\41683.03
IN WITNESS WHEREOF, Newco and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
NEWCO CORP. THE QUIZNO'S CORPORATION
By:_________________________________ By:_________________________________
Title: _______________________________ Title: _______________________________
Acknowledged and Agreed to this _______ day of December 2001.
......
William Fagan
......
Laura Fagan
FAGAN CAPITAL INC.
......
Title: ......
SCHEDULE 2.1
(Surviving Owners)
Richard E. Schaden
Richard F. Schaden
Frederick Schaden
Timothy M. Schaden
Patricia Wisdom
Patrick Meyers
Levine Leichtman Capital Partners II, L.P.
Voting Trust Agreement dated July 14, 1994, as amended
Fagan Capital, Inc.
William Fagan
Laura Fagan
SCHEDULE 3.1(b)
(Liens on Subsidiary Stock)
All issued and outstanding shares of capital stock in the Company's subsidiaries
have been pledged to secure the repayment of debt owed to Levine Leichtman
Capital Partners II, L.P. and to Amresco Commercial Finance, Inc.
SCHEDULE 3.1(c)
(Capital Structure, Shareholder Agreements, Voting Agreements, Voting Trusts)
Capital Structure
Common Stock, $.001 par value; 9,000,000 shares authorized; 2,337,439 shares
issued and outstanding at June 21, 2001.
Preferred Stock, $.001 par value; 1,000,000 shares authorized;
146,000 Series A shares issued and outstanding;
57,000 Series C shares issued and outstanding;
3,000 Series D shares issued and outstanding; and
59,000 Series E shares issued and outstanding.
Except as disclosed in the Company SEC Documents, there are no (i) subscriptions,
options, puts, calls, warrants or other rights or commitments to issue, redeem or
purchase any of the Company's authorized capital stock or securities convertible
into or exchangeable for authorized capital stock or (ii) shareholder agreements,
voting agreements, voting trusts or similar arrangements to which the Company is
a party which have the effect of restricting or limiting the transfer, voting or
other rights associated with the Company's capital stock.
