EXHIBIT 2.1
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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and among
Friendly Ice Cream Corporation,
Freeze Operations Holding Corp.
and
Freeze Operations, Inc.
Dated as of June 17, 2007
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.............................................2
Section 1.1 Definitions.......................................2
ARTICLE II THE MERGER; CLOSING; EFFECTIVE TIME.....................9
Section 2.1 The Merger........................................9
Section 2.2 Closing...........................................9
Section 2.3 Effective Time....................................9
ARTICLE III THE SURVIVING CORPORATION..............................10
Section 3.1 Articles of Organization.........................10
Section 3.2 By-Laws..........................................10
Section 3.3 Directors and Officers...........................10
ARTICLE IV EFFECT OF THE MERGER ON STOCK; EXCHANGE OF
CERTIFICATES...........................................10
Section 4.1 Effect on Stock..................................10
Section 4.2 Exchange of Certificates for Merger
Consideration....................................11
Section 4.3 Treatment of Options and Restricted Shares.......13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........14
Section 5.1 Corporate Status.................................15
Section 5.2 Company Subsidiaries.............................15
Section 5.3 Capitalization...................................16
Section 5.4 Authority for Agreements.........................17
Section 5.5 Consents and Approvals; No Violations............17
Section 5.6 Company Financial Statements; SEC Reports........19
Section 5.7 Absence of Certain Changes.......................21
Section 5.8 Litigation.......................................21
Section 5.9 Absence of Undisclosed Liabilities...............21
Section 5.10 Taxes............................................22
Section 5.11 Real Property; Title to Property.................23
Section 5.12 Insurance........................................24
Section 5.13 Information in Proxy Statement...................24
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Section 5.14 Brokers..........................................24
Section 5.15 Employee Benefit Plans; ERISA....................25
Section 5.16 Labor Matters....................................26
Section 5.17 Intellectual Property Rights.....................27
Section 5.18 Contracts........................................28
Section 5.19 Compliance with Laws; Permits....................30
Section 5.20 Environmental Laws and Regulations...............30
Section 5.21 Opinion of Financial Advisor.....................31
Section 5.22 Affiliate Transactions...........................31
Section 5.23 Franchise Matters................................31
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB.........................................33
Section 6.1 Corporate Status.................................33
Section 6.2 Authority for Agreements.........................33
Section 6.3 Consents and Approvals; No Violations............34
Section 6.4 Information in Proxy Statement...................34
Section 6.5 Brokers..........................................35
Section 6.6 Litigation.......................................35
Section 6.7 Financing........................................35
Section 6.8 Ownership of Common Shares.......................35
Section 6.9 Interest in Competitors..........................35
Section 6.10 Management Agreements............................36
ARTICLE VII CONDUCT OF BUSINESS BY COMPANY.........................36
Section 7.1 Conduct of Business by the Company Pending the
Merger...........................................36
Section 7.2 Conduct of Parent and Merger Sub Pending the
Merger...........................................39
ARTICLE VIII ADDITIONAL AGREEMENTS..................................40
Section 8.1 Access and Information...........................40
Section 8.2 Proxy Statement..................................41
Section 8.3 Company Stockholders' Meeting....................41
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PAGE
Section 8.4 Acquisition Proposals............................42
Section 8.5 Filings; Other Action............................44
Section 8.6 Public Announcements; Public Disclosures;
Privacy Laws.....................................45
Section 8.7 Employee Matters.................................45
Section 8.8 Company Indemnification Provisions...............46
Section 8.9 State Takeover Laws..............................47
Section 8.10 Solvency Letter..................................47
Section 8.11 Financing........................................48
Section 8.12 Rule 16b-3.......................................48
Section 8.13 Control of Operations............................48
Section 8.14 Additional Matters...............................48
Section 8.15 Debt Offer.......................................49
Section 8.16 Resignation of Directors.........................49
Section 8.17 Stockholder Litigation...........................49
ARTICLE IX CONDITIONS TO CONSUMMATION OF THE MERGER...............50
Section 9.1 Conditions to Each Party's Obligation to Effect
the Merger.......................................50
Section 9.2 Conditions to Obligation of the Company to Effect
the Merger.......................................50
Section 9.3 Conditions to Obligations of Parent and Merger Sub
to Effect the Merger.............................51
Section 9.4 Frustration of Closing Conditions................51
ARTICLE X TERMINATION............................................51
Section 10.1 Termination......................................51
Section 10.2 Effect of Termination............................53
Section 10.3 Fees and Expenses................................53
ARTICLE XI MISCELLANEOUS..........................................55
Section 11.1 Survival of Representations, Warranties and
Agreements.......................................55
Section 11.2 Notices..........................................55
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Section 11.3 Descriptive Headings.............................56
Section 11.4 Entire Agreement; Assignment.....................56
Section 11.5 Governing Law and Venue; Waiver of Jury Trial....56
Section 11.6 Expenses.........................................57
Section 11.7 Amendment........................................57
Section 11.8 Waiver...........................................57
Section 11.9 Counterparts; Effectiveness......................58
Section 11.10 Severability; Validity; No Third-Party
Beneficiaries....................................58
Section 11.11 Enforcement of Agreement.........................58
Exhibit A: Articles of Organization
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of this 17th day of June, 2007 by and among Friendly Ice Cream
Corporation, a Massachusetts corporation (the "Company"), Freeze Operations
Holding Corp., a Delaware corporation ("Parent"), and Freeze Operations, Inc., a
Massachusetts corporation and wholly-owned subsidiary of Parent ("Merger Sub").
RECITALS
WHEREAS, the parties intend that Merger Sub will be merged with and into
the Company (the "Merger"), with the Company surviving the Merger as a
wholly-owned subsidiary of Parent in accordance with the Massachusetts Business
Corporation Act (the "MBCA");
WHEREAS, the board of directors of the Company (the "Company Board") has
(i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and fair to, and in the best interests of,
the Company and its stockholders, (ii) adopted and declared advisable this
Agreement and the transactions contemplated hereby, including the Merger, (iii)
directed that this Agreement be submitted to the Company's stockholders for
their approval and (iv) resolved to recommend that the Company's stockholders
approve this Agreement;
WHEREAS, the board of directors of Merger Sub has unanimously adopted this
Agreement and the board of directors of Parent has adopted this Agreement and
the transactions contemplated hereby, including the Merger;
WHEREAS, immediately following the execution of this Agreement, the board
of directors of Merger Sub will submit this Agreement for the approval by
Parent, as the sole stockholder of Merger Sub, and Parent shall, as the sole
stockholder of Merger Sub, approve this Agreement;
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby, including the Merger, and also to prescribe
certain conditions to the transactions contemplated hereby, including the
Merger, as set forth herein;
WHEREAS, concurrently with the execution of this Agreement, Sun Capital
Partners IV, L.P., an affiliate of Parent and Merger Sub (the "Sponsor") has
entered into a commitment letter, dated as of the date hereof (the "Financing
Commitment"); and
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain stockholders of the Company are entering into stockholders agreements
with Parent (the "Stockholders Agreements") pursuant to which such stockholders
have irrevocably agreed, among other things, to vote or cause to be voted in
favor of the approval of this Agreement all Common Shares beneficially owned by
such stockholders in accordance with and subject to the terms set forth in the
Stockholders Agreements.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
(a) Certain Terms. For purposes of this Agreement (including in
the Company Disclosure Letter, the Parent Disclosure Letter and the Exhibits),
the following terms shall have the respective meanings given to them below:
"Affiliate" means any Person that, directly or indirectly, controls, is
controlled by or is under common control with another Person. For the purposes
of this definition, "control" (including the terms "controlled", "controlled by"
and "under common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise.
"Alternative Transaction Proposal" means any inquiry, proposal or offer
from any Person (other than Parent or any Parent Subsidiaries) relating to any
transaction or series of related transactions that would result in (i) an
acquisition of assets of the Company and the Company Subsidiaries (including
securities of Company Subsidiaries) equal to twenty percent (20%) or more of the
Company's consolidated assets, (ii) an acquisition of twenty percent (20%) or
more of the outstanding Common Shares, (iii) a tender offer (including a
self-tender offer) or exchange offer that if consummated would result in any
Person beneficially owning twenty percent (20%) or more of the outstanding
Common Shares, (iv) a merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any Company Subsidiaries whether or not the Company or
any of its Subsidiaries is the surviving entity, or (v) any dividend on, or
repurchase of, capital stock of the Company involving payments to the holders of
the capital stock of the Company in an aggregate amount greater than twenty
percent (20%) of the value of the consolidated assets of the Company and the
Company Subsidiaries (including any such dividend or repurchase that is financed
through the sale, or incurrence of indebtedness secured by, any Company Real
Property), in each case, other than the Merger.
"Applicable Law" means any applicable order, writ, law (including common
law), regulation, rule, ruling, injunction, ordinance, statute, judgment,
decree, constitution, determination, aware, decree or treaty enacted,
promulgated, issued, enforced or entered by any Governmental Entity applicable
to the parties, or any of their respective Affiliates, Subsidiaries, properties
or assets, as the case may be.
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"Business Day" means any day other than a Saturday, Sunday or a day on
which banks in the City of New York are permitted or obligated by law to be
closed for regular banking business.
"Common Share" means one share of common stock, par value $0.01 per share,
of the Company.
"Company Benefit Plans" means each employee benefit plan, scheme, program,
policy, arrangement, agreement and contract (including any "employee benefit
plan," as defined in Section 3(3) of ERISA, whether or not subject to ERISA and
any bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, change in
control and severance plan, program, policy, arrangement and contract, written
or oral, whether legally enforceable or not) for the benefit of any current or
former officer, employee, agent, director, consultant or independent contractor
of the Company or any of the Company Subsidiaries that is maintained,
contributed to, or required to be contributed to, by the Company, any of the
Company Subsidiaries, or with respect to which any of them could incur material
liability.
"Company Material Adverse Effect" means any event, occurrence, fact,
condition, change, development or effect that, individually or in the aggregate
with all other events, occurrences, facts, conditions, changes, developments or
effects, is, or would reasonably be expected to be, materially adverse to the
business, assets, properties, liabilities, results of operations or condition
(financial or otherwise) of the Company and the Company Subsidiaries, taken as a
whole, except to the extent that such event, occurrence, fact, condition,
change, development or effect results from (i) general economic conditions or
changes therein, (ii) financial or security market fluctuations or conditions,
(iii) changes in or events affecting the restaurant or retail industries
generally, (iv) any change in GAAP or Applicable Law, (v) the announcement or
pendency of this Agreement and the transactions contemplated hereby (including
losses or threatened losses of relationships of the Company or any Company
Subsidiary with customers, distributors, suppliers or franchisees to the extent
due to such announcement or pendency), (vi) changes in the market price or
trading volume of the Common Shares on the American Stock Exchange (it being
understood that the underlying facts or occurrences giving rise or contributing
to such changes shall be taken into account in determining whether there has
been a Company Material Adverse Effect), (vii) any failure by the Company to
meet internal or published estimates of revenues, earnings or other financial
projections (it being understood that the underlying facts or occurrences giving
rise or contributing to such failure shall be taken into account in determining
whether there has been a Company Material Adverse Effect), (viii) natural
disasters, (ix) national or international political conditions, including any
engagement in hostilities, whether or not pursuant to the declaration of a
national emergency or war, or the occurrence of any military or terrorist attack
occurring prior to, on or after the date hereof, (x) availability or cost of
financing to Parent or Merger Sub or (xi) any litigation arising from or
relating to this Agreement or the transactions contemplated hereby; provided, in
the case of clauses (i) through (ix), that such events, occurrences, facts,
conditions, changes, developments or effects do not disproportionately affect
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the Company and the Company Subsidiaries relative to other Persons in the
restaurant or retail industries.
"Company Option Plans" means the Company's 1997 Stock Option Plan and the
Company's 2003 Incentive Plan and any other plan pursuant to which outstanding
Options have been granted.
"Company Related Person" means any trade or business, whether or not
incorporated, that, together with the Company or any of the Company
Subsidiaries, is, or would have been at any date of determination occurring
within the preceding six (6) years, treated as a single employer under Section
414 of the Code.
"Constituent Documents" means, with respect to any entity, the certificate
of incorporation or articles of organization and by-laws of such entity, or any
similar organizational documents of such entity.
"Encumbrance" means any mortgage, claim, security interest, encumbrance,
license, lien, charge, agreement to sell or other similar restriction or
limitation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles.
"Governmental Entity" means any court or tribunal or administrative,
governmental or regulatory body, agency, commission, board, legislature,
department or other authority of any nation or government or any political
subdivision thereof, whether foreign or domestic and whether national, state or
local.
"Hazardous Material" means any substance, material or waste that is
regulated, classified, or otherwise characterized under, or pursuant to, any
Environmental Law as "hazardous," "toxic," a "pollutant" or "contaminant,"
"radioactive," or words of similar meaning or effect, including, without
limitation, petroleum and its by-products, toxic mold, asbestos and
polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"IRS" means the United States Internal Revenue Service.
"Knowledge of Parent" means the actual knowledge of the officers of
Parent.
"Knowledge of the Company" means the actual knowledge of the individuals
listed on Section 1.1(a) of the Company Disclosure Letter as of the date hereof.
"Losses" means any claim, liability, loss, fines, costs, deficiencies or
damages of any kind (whether absolute, accrued, contingent or otherwise).
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"Option" means each option to purchase Common Shares granted pursuant to a
Company Option Plan that is outstanding and unexercised immediately prior to or
as of the Effective Time.
"Parent Material Adverse Effect" means any event, occurrence, fact,
condition, change, development, or effect that does, or would be reasonably
expected to (i) prevent or materially delay consummation of the Merger or the
transactions contemplated hereby or (ii) otherwise materially adversely affect
the ability of Parent to perform its obligations hereunder and the other
transactions contemplated hereby.
"Permitted Encumbrances" means (i) Encumbrances reflected in the Company
Financial Statements or listed on Section 1.1(b) of the Company Disclosure
Letter, (ii) Encumbrances for Taxes which have been properly accrued on the
financial statements of the Company and (x) are not yet due and payable or (y)
are being contested in good faith by appropriate proceedings, (iii) Encumbrances
for warehousemen, mechanics and materialmen and other similar Encumbrances
incurred in the ordinary course of business consistent with past practice, (iv)
non-exclusive licenses of Intellectual Property and (v) Encumbrances and other
matters that do not materially interfere with the current use, value or
marketability of the assets of the business conducted by the Company and the
Company Subsidiaries, taken as a whole.
"Person" means any individual, corporation (including not-for-profit),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, Governmental Entity or other entity of
any kind or nature.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material.
"Rights Agreement" means the rights agreement by and between the Company
and The Bank of New York, as Rights Agent.
"SEC" means the United States Securities and Exchange Commission
"Securities Act" means the Securities Act of 1933, as amended.
"Solvent" when used with respect to any Person means that, as of any date
of determination, (i) the amount of the "present fair saleable value" of the
assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise," as of such date, as such
quoted terms are generally determined in accordance with applicable federal laws
governing determinations of the insolvency of debtors, (ii) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (iii) such Person will not
have, as of such date, an unreasonably small amount of capital with which to
conduct its business and (iv) such Person will be able to pay its debts as they
mature. For purposes of this definition, (a) "debt" means liability on a
"claim," and (b) "claim" means any (1) right to payment, whether or not such a
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
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matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (2) right to an equitable remedy for breach of performance if such breach
gives rise to a right to payment, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured or unmatured,
disputed, undisputed, secured or unsecured.
"Subsidiary" of any Person means another Person, in which such Person (i)
owns, directly or indirectly, more than fifty percent (50%) of the outstanding
voting securities, equity securities, profits interest or capital interest or
(ii) is entitled to elect at least a majority of the board of directors, board
of managers or similar governing body.
"Superior Proposal" means any bona fide written Alternative Transaction
Proposal which the Company Board determines in good faith (after consultation
with a financial advisor of nationally recognized reputation and the Company's
outside legal advisor) (i) is reasonably capable of being consummated without
undue delay (taking into account all legal, financial, regulatory, timing and
similar aspects of, and conditions to, the proposal and the likelihood of
obtaining any necessary financing) and (ii) if consummated, would be more
favorable to the holders of Common Shares than the Merger (after taking into
account any changes to the terms of this Agreement proposed by Parent); provided
that for purposes of the definition of "Superior Proposal," the references to
"twenty percent (20%)" in the definition of Alternative Transaction Proposal
shall be deemed to be "fifty percent (50%)."
"Tax Return" means any declaration, return, report, schedule, certificate,
statement or other similar document (including relating or supporting
information) required to be filed or, where none is required to be filed with a
Taxing Authority, the statement or other document issued by a taxing authority
in connection with any Tax, including any information return, claim for refund,
amended return or declaration of estimated Tax.
"Taxes" means any and all federal, state, local or foreign taxes, rates,
levies, assessments and other governmental charges of any kind whatsoever
whether imposed directly or through withholding (together with any and all
interest, penalties, additions to tax and additional amounts applicable with
respect thereto), including income, franchise, premium, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation,
net worth, excise, withholding, bank shares, deed, stamp, escheat, unclaimed
property, alternative or add-on minimum, environmental, ad valorem and value
added taxes.
"Taxing Authority" means, with respect to any Tax, the Governmental Entity
that imposes such Tax, and the agency (if any) charged with the collection of
such Tax for such entity.
(b) Terms Generally. The words "hereby," "herein," "hereof,"
"hereunder" and words of similar import refer to this Agreement (including any
Exhibits hereto and the Parent Disclosure Letter and Company Disclosure Letter
delivered herewith) and not merely to the specific section, paragraph or clause
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in which such word appears. All references herein to Sections, Exhibits, the
Parent Disclosure Letter and Company Disclosure Letter shall be deemed
references to Sections of, Exhibits to and the Parent Disclosure Letter and
Company Disclosure Letter delivered with this Agreement unless the context shall
otherwise require. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The definitions given
for terms in this Section 1.1 and elsewhere in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. Except as otherwise expressly provided herein, all
references to "Dollars" or "$" shall be deemed references to the lawful money of
the United States of America. All references herein to "parties" shall be to the
parties hereto unless the context shall otherwise require.
(c) Additional Terms. The following terms are defined in the
corresponding Sections of this Agreement:
Term Section
- ---- -------
Adverse Recommendation Change........................... Section 8.4(b)
Adverse Recommendation Change Notice.................... Section 8.4(b)
Agreement............................................... Introduction
Articles of Merger...................................... Section 2.3
Articles of Organization................................ Section 3.1
Benefits Continuation Period............................ Section 8.7(a)
By-Laws................................................. Section 3.2
Certificate............................................. Section 4.1(b)
Closing................................................. Section 2.2
Closing Date............................................ Section 2.2
Code.................................................... Section 4.2(e)
Company................................................. Introduction
Company Board........................................... Recitals
Company Contracts....................................... Section 5.18(a)
Company Disclosure Letter............................... Article V
Company Employees....................................... Section 8.7(a)
Company Financial Statements............................ Section 5.6(b)
Company Real Property................................... Section 5.11(b)
Company Reports......................................... Section 5.6(c)
Company Stockholder Approval............................ Section 5.4(a)
Company Stockholders' Meeting........................... Section 8.3
Company Subsidiaries.................................... Section 5.2(a)
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Company Termination Fee................................. Section 10.3(a)
Confidentiality Agreement............................... Section 8.1
Debt Offer.............................................. Section 8.15
Effective Time.......................................... Section 2.3
Environmental Claims.................................... Section 5.20(b)
Environmental Laws...................................... Section 5.20(a)
Excluded Shares......................................... Section 4.1(a)
Expenses................................................ Section 10.3(e)
Filed Company Reports................................... Article V
Financing............................................... Section 6.7
Financing Commitment.................................... Recitals
Franchise Agreement..................................... Section 5.18(a)
Franchisee.............................................. Section 5.18(a)
Governmental Requirements............................... Section 5.5(a)
Holder.................................................. Section 4.2(a)
Indemnified Parties..................................... Section 8.8(a)
Indenture Amendments.................................... Section 8.15
Intellectual Property................................... Section 5.17(d)
Leased Real Property.................................... Section 5.11(b)
MBCA.................................................... Recitals
Merger.................................................. Recitals
Merger Consideration.................................... Section 4.1(a)
Merger Fund............................................. Section 4.2(a)
Merger Sub.............................................. Introduction
New Plans............................................... Section 8.7(b)
Old Plans............................................... Section 8.7(b)
Option Cash Payment..................................... Section 4.3(a)
Outside Date............................................ Section 10.1(b)
Owned Real Property..................................... Section 5.11(a)
Parent.................................................. Introduction
Parent Disclosure Letter................................ Article VI
Paying Agent............................................ Section 4.2(a)
Owned Real Property..................................... Section 5.11(a)
Permits................................................. Section 5.19
Preferred Stock......................................... Section 5.3(a)
Proxy Statement......................................... Section 8.2(a)
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Real Property Leases.................................... Section 5.11(b)
Recommendation.......................................... Section 5.4(b)
Representatives......................................... Section 8.1
Requisite Stockholder Vote ............................. Section 5.4(a)
Restricted Share........................................ Section 4.3(b)
Restricted Stock Unit .................................. Section 5.3(a)
Senior Notes............................................ Section 8.15
Sponsor................................................. Recitals
Stockholders Agreements................................. Recitals
Surviving Corporation................................... Section 2.1
Title IV Plan........................................... Section 5.15
UFOC.................................................... Section 5.23(b)
Voting Company Debt..................................... Section 5.3(b)
ARTICLE II
THE MERGER; CLOSING; EFFECTIVE TIME
Section 2.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, Merger Sub shall be merged with
and into the Company and the separate corporate existence of Merger Sub shall
thereupon cease. The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"), and the
separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger. At
the Effective Time, the effect of the Merger shall have the effect set forth in
Section 11.07 of the MBCA.
Section 2.2 Closing. The closing of the Merger (the "Closing") shall
take place (a) at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York, at 9:00 a.m. (New York time) on the second (2nd) Business
Day after all of the conditions set forth in Article IX have been fulfilled or
waived (other than those conditions that by their nature are to be satisfied at
the Closing, but subject to the fulfillment or waiver of those conditions) in
accordance with this Agreement or (b) at such other place and time and/or on
such other date as the Company and Parent may agree in writing (the "Closing
Date").
Section 2.3 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file articles of
merger as contemplated by the MBCA (the "Articles of Merger"), together with any
required related certificates, with the Secretary of State of the Commonwealth
of Massachusetts, in such form as required by, and executed in accordance with
the relevant provisions of, the MBCA. The Merger shall become effective upon the
filing of the Articles of Merger with the Secretary of State of the Commonwealth
of Massachusetts or at such later date and time as the Company and Parent may
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agree upon and as is set forth in such Articles of Merger (such time, the
"Effective Time").
ARTICLE III
THE SURVIVING CORPORATION
Section 3.1 Articles of Organization. The Articles of Organization of
the Surviving Corporation shall be amended at the Effective Time to be in the
form of Exhibit A, and as so amended, such Articles of Organization shall be the
Articles of Organization of the Surviving Corporation (the "Articles of
Organization") until thereafter amended as provided therein or by Applicable
Law.
Section 3.2 By-Laws. The By-Laws of Merger Sub in effect immediately
prior to the Effective Time shall be the By-Laws of the Surviving Corporation
(the "By-Laws") until thereafter amended as provided therein or by Applicable
Law.
Section 3.3 Directors and Officers. From and after the Effective Time,
(a) the directors of Merger Sub immediately prior to the Effective Time, as set
forth on a schedule delivered by Parent to the Company prior to the Effective
Time, shall be the directors of the Surviving Corporation and (b) the officers
of the Company immediately prior to the Effective Time shall be the officers of
the Surviving Corporation, in each case, until their respective successors have
been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Articles of Organization and the
By-Laws.
ARTICLE IV
EFFECT OF THE MERGER ON STOCK;
EXCHANGE OF CERTIFICATES
Section 4.1 Effect on Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the Company, Parent, Merger Sub or
the holder of any capital stock of the Company or Merger Sub:
(a) Merger Consideration. Each Common Share issued and outstanding
immediately prior to the Effective Time (other than (i) Common Shares (A) held
in treasury by the Company or (B) held by any wholly-owned Company Subsidiary
(collectively, "Excluded Shares") and (ii) Restricted Shares) shall be converted
into the right to receive, in accordance with this Article IV, $15.50 in cash
(the per share cash consideration to be issued to the holders of such Common
Shares, the "Merger Consideration").
(b) Cancellation of Common Shares.
(i) At the Effective Time, each Common Share converted into
the Merger Consideration pursuant to Section 4.1(a) shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate that immediately prior to the Effective Time
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represented any such Common Shares (each, a "Certificate") shall thereafter
represent only the right to receive the Merger Consideration, without interest,
upon surrender of such Certificate in accordance with this Article IV.
(ii) Each Excluded Share issued and outstanding immediately
prior to the Effective Time, other than any shares described in Section
4.1(a)(i)(B), shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be outstanding, be canceled and retired without
payment of any consideration therefor and shall cease to exist.
(c) Merger Sub. At the Effective Time, each share of common stock,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one newly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
Section 4.2 Exchange of Certificates for Merger Consideration.
(a) Paying Agent and Procedures.
(i) Prior to the Effective Time, Parent shall select a bank
or trust company reasonably acceptable to the Company, as paying agent (the
"Paying Agent"). At or prior to the Effective Time, Parent shall deposit, or at
the Effective Time, Parent shall cause the Surviving Corporation to deposit,
with the Paying Agent, separate and apart from its other funds, cash in an
amount equal to the aggregate Merger Consideration which the holders of record
of Certificates (each a "Holder") are entitled to receive pursuant to this
Article IV plus cash to pay for Options and Restricted Shares pursuant to
Section 4.3(a) and Section 4.3(b), respectively (such deposited cash being
hereinafter referred to as the "Merger Fund").
(ii) As promptly as practicable after the Effective Time, but
in no event more than five (5) Business Days following the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail (and to make
available for collection by hand) to each Holder (other than a Holder of
Certificates representing Excluded Shares, but including Certificates
representing Restricted Shares) (A) a letter of transmittal (which shall be in
customary form and which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Paying Agent) and which shall be in such form and have
such other customary provisions as Parent and the Surviving Corporation may
reasonably specify and (B) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration to be received by such
Holder pursuant to Section 4.1(a) or Section 4.3(b), as applicable.
(iii) Each Holder of a Certificate representing any Common
Shares that have been converted into a right to receive the Merger Consideration
pursuant to Section 4.1(a) or Section 4.3(b) shall, upon surrender of such
Certificate for cancellation to the Paying Agent, together with a properly
completed letter of transmittal, duly executed in accordance with the
11
instructions thereto and such other documents as may be required pursuant to
such instructions, be entitled to receive in exchange therefor the Merger
Consideration, without interest, for each Common Share formerly represented by
such Certificate, in the form of a check, to be promptly mailed (or made
available for collection by hand if so elected by the surrendering Holder of a
Certificate) and the Certificate so surrendered shall forthwith be marked
canceled. No interest will be paid or accrued on any amount payable upon due
surrender of the Certificates. The Paying Agent shall accept such Certificates
upon compliance with such reasonable terms and conditions as the Paying Agent
may impose to effect an orderly exchange thereof in accordance with normal
exchange practices.
(iv) In the event of the surrender of a Certificate that is
not registered in the transfer records of the Company under the name of the
Person surrendering such Certificate, the Merger Consideration shall be paid to
such a transferee if such Certificate is presented to the Paying Agent and such
Certificate is duly endorsed or is accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer Taxes have been paid. If any Merger Consideration is to be delivered to
a Person whose name is other than that in which the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such delivery that
the Person requesting such delivery shall pay any transfer or other Taxes
required to be paid by reason of such delivery to a Person whose name is other
than that of the Holder of the Certificate surrendered or shall establish to the
reasonable satisfaction of Parent that such Tax has been paid or is not
applicable.
(v) The Merger Consideration paid in accordance with the
terms of this Article IV in respect of Certificates that have been surrendered
in accordance with the terms of this Agreement shall be deemed to have been paid
in full satisfaction of all rights pertaining to the Common Shares represented
thereby.
(b) Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Common Shares outstanding immediately prior to
the Effective Time thereafter on the records of the Company. If, after the
Effective Time, any Certificates are presented to the Surviving Corporation or
the Paying Agent for any reason, they shall be marked canceled and exchanged as
provided in this Article IV.
(c) Termination of Merger Fund. Any portion of the Merger Fund
(including any interest and other income resulting from any investment of the
Merger Fund) that remains unclaimed by the Holders and other eligible Persons in
accordance with this Article IV following six (6) months after the Effective
Time shall be delivered to the Surviving Corporation, upon demand, and any
Holder who has not previously complied with this Article IV shall thereafter
look only to Parent and the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) for, and Parent and the Surviving
Corporation shall remain liable for, payment of its claim for Merger
Consideration (without interest) upon due surrender of their Certificates.
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(d) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will issue the Merger
Consideration in exchange for such lost, stolen or destroyed Certificate.
Delivery of such affidavit and the posting of such bond shall be deemed delivery
of a Certificate with respect to the relevant Common Shares for purposes of this
Article IV.
(e) Withholding Taxes. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the Merger
Consideration or other amounts otherwise payable pursuant to this Agreement to
any former holder of Common Shares (including Restricted Shares) or Options such
amounts as Parent, the Surviving Corporation or the Paying Agent, as the case
may be, is required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any
provision of state, local or foreign Tax law. To the extent that amounts are so
withheld by Parent, the Surviving Corporation or the Paying Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the former holder of the Common Shares (including Restricted Shares) or
Options in respect of which such deduction and withholding was made by Parent,
the Surviving Corporation or the Paying Agent, as the case may be.
(f) No Liability. None of Parent, Merger Sub, the Surviving
Corporation or the Paying Agent shall be liable to any Person in respect of any
portion of the Merger Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Investment of Merger Fund. The Paying Agent shall invest any
cash included in the Merger Fund, as directed by Parent, on a daily basis;
provided that in the case of any losses incurred as a result of such
investments, Parent shall take all actions necessary to ensure that the Merger
Fund includes at all times cash sufficient to satisfy Parent's obligations under
this Article IV. Any interest and other income resulting from such investments
shall be paid to Parent.
(h) Adjustments. Without limiting the other provisions of this
Agreement, if at any time during the period between the date of this Agreement
and the Effective Time, any change in the number of outstanding Common Shares
(or securities convertible or exchangeable into or exercisable for Common
Shares) shall occur as a result of a reclassification, recapitalization, stock
split (including a reverse stock split), or combination, exchange or
readjustment of shares, merger or any stock dividend or stock distribution with
a record date during such period, other than as permitted by Section 7.1, the
Merger Consideration shall be correspondingly adjusted to reflect such change.
13
Section 4.3 Treatment of Options and Restricted Shares.
(a) Options. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
further action on the part of Parent, Merger Sub, the Company or any holder of
any Common Shares or Options, each Option that is outstanding and unexercised as
of the Effective Time (whether vested or unvested) shall be canceled and
converted into the right to receive, subject to Section 4.2(e), an amount in
cash, without interest, equal to the product of (i) the total number of Common
Shares subject to such Option (assuming full vesting of such Option) and (ii)
the excess, if any, of (A) the Merger Consideration over (B) the exercise price
per Common Share subject to the Option, with the aggregate amount of such
payment rounded up to the nearest cent (the "Option Cash Payment"). As of the
Effective Time, all Options shall no longer be outstanding and shall
automatically cease to exist and each holder of an Option shall cease to have
any rights with respect thereto, except the right to receive the Option Cash
Payment.
(b) Restricted Shares. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
further action on the part of Parent, Merger Sub, the Company or any holder of
any restricted shares, including restricted shares that are converted from
Restricted Stock Units into restricted shares at the Effective Time (each, a
"Restricted Share"), each Restricted Share (whether vested or unvested)
outstanding immediately prior to the Effective Time shall vest and become free
of all restrictions immediately prior to the Effective Time and shall be
canceled, retired and shall cease to exist and the Certificates that immediately
prior to the Effective Time represented Restricted Shares shall be converted
into the right to receive, in respect of each underlying Common Share, the
Merger Consideration, without interest, upon surrender of such Certificate in
accordance with this Article IV.
(c) Paying Agent. Parent shall, or shall cause the Surviving
Corporation to, provide the Paying Agent with a list of all holders of Options
certified by an officer of the Surviving Corporation or the Surviving
Corporation's transfer agent. As promptly as practicable after the Effective
Time, but in no event more than five (5) Business Days following the Effective
Time, Parent shall cause the Paying Agent to mail to each holder of Options a
letter of transmittal (which shall be in customary form) and instructions for
use in obtaining the value of such Options as contemplated by Section 4.3(a).
All payments with respect to canceled Options shall be made by the Paying Agent
(and Parent shall cause the Paying Agent to make such payments) as promptly as
practicable after the receipt by the Paying Agent of a properly completed letter
of transmittal, duly executed in accordance with the instructions thereto and
such other documents as may be required pursuant to such instructions from funds
deposited by or at the direction of Parent (in order to pay such amounts) in
accordance with Section 4.2(a).
14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as otherwise disclosed to Parent in a letter (the
"Company Disclosure Letter") delivered to it by the Company prior to the
execution of this Agreement, it being understood and agreed that each item in a
particular section of the Company Disclosure Letter applies only to such section
and to any other section to which its relevance is reasonably apparent on the
face of such disclosure, and (ii) other than with respect to Section 5.3, as
disclosed in the Company Reports publicly available prior to the date hereof
(the "Filed Company Reports") and only as and to the extent disclosed therein
(other than any disclosures set forth in any risk factor section, any
disclosures in any section relating to forward looking statements and any other
disclosures included therein to the extent they are primarily predictive or
forward-looking in nature), it being understood and agreed that each such
disclosure in the Filed Company Reports applies only to such sections of this
Article V to which its relevance is reasonably apparent on the face of such
disclosure, the Company represents and warrants to Parent and Merger Sub as
follows:
Section 5.1 Corporate Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as is now being conducted. The Company is duly qualified or licensed to own,
lease and operate its properties and to carry on its business as is now being
conducted and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so qualified, licensed and in good standing does not have and would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company has delivered or made available to Parent
or Merger Sub complete and correct copies of its Constituent Documents, as
amended and in effect on the date hereof. The Company is not in material
violation of any of the provisions of its Constituent Documents.
Section 5.2 Company Subsidiaries.
(a) Section 5.2(a) of the Company Disclosure Letter sets forth the
name of each Subsidiary owned (whether directly or indirectly) by the Company
(collectively, the "Company Subsidiaries") and the state or jurisdiction of its
organization. Each Company Subsidiary is a corporation, limited liability
company or partnership, as the case may be, duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has all requisite corporate, limited
liability company or partnership power and authority, as the case may be, to
own, lease and operate its properties and to carry on its business as is now
being conducted. Each Company Subsidiary is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
15
so licensed, qualified and in good standing has not had and would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company has delivered or made available to Parent
or Merger Sub complete and correct copies of the Constituent Documents of each
of the Company Subsidiaries, as amended and in effect on the date hereof.
(b) The Company is, directly or indirectly, the record and
beneficial owner of all of the outstanding shares of capital stock or other
equity interests of each of the Company Subsidiaries. All of such shares and
other equity interests so owned by the Company are validly issued, fully paid
and nonassessable and are owned free and clear of any Encumbrances other than
Permitted Encumbrances.
(c) Other than shares of capital stock or other equity interests
of the Company Subsidiaries, neither the Company nor any Company Subsidiary owns
any shares of capital stock or other equity interests in any entity.
Section 5.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists of Fifty Million (50,000,000) Common Shares and One Million
(1,000,000) shares of preferred stock, par value $0.01 per share ("Preferred
Stock") of which 15,000 shares are designated as Series A Junior Preferred Stock
and have been reserved for issuance upon the exercise of the rights under the
Rights Plan. At the close of business on June 11, 2007, (i) 8,176,121 Common
Shares were issued and outstanding (of which 41,747 were Restricted Shares),
(ii) no shares of Preferred Stock were issued or outstanding, (iii) no Common
Shares were held in treasury by the Company, (iv) 556,897 Common Shares were
subject to outstanding Options and (v) 267,735 Common Shares were reserved for
issuance (but not yet issued) pursuant to the Company's stock plans listed on
Section 5.3(a) of the Company Disclosure Letter, including 60,000 Common Shares
issuable pursuant to (A) restricted stock units held by the Company's directors
and (B) those Restricted Stock Unit Award Agreements issued to certain officers
of the Company listed on Section 5.3(a) of the Company Disclosure Letter
(collectively, the "Restricted Stock Units"). Except as set forth above, at the
close of business on June 11, 2007, no shares of capital stock of the Company
were issued, reserved for issuance or outstanding. All issued and outstanding
Common Shares have been, and all shares which may be issued pursuant to the
exercise of Options or pursuant to the Company's stock plans listed on Section
5.3(a) of the Company Disclosure Letter will be (when issued in accordance with
the respective terms thereof), duly authorized, validly issued, fully paid and
nonassessable. From the close of business on June 11, 2007 until the date of
this Agreement, no options to purchase shares of Common Shares or Preferred
Stock have been granted and no Common Shares or Preferred Stock have been
issued, except pursuant to the exercise of Options in accordance with their
terms.
(b) There are no preemptive or similar rights granted by the
Company or any Company Subsidiary on the part of any holders of any class of
securities of the Company or any Company Subsidiary. Neither the Company nor any
Company Subsidiary has outstanding any bonds, debentures, notes or other
16
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the stockholders of the Company or any such Company Subsidiary on any matter
("Voting Company Debt"). Except as set forth above or as listed on Section
5.3(b) of the Company Disclosure Letter, there are not, as of the date hereof,
any options, warrants, rights, convertible or exchangeable securities, "phantom"
stock rights, stock appreciation rights, stock-based performance units,
commitments, contracts, arrangements or undertakings of any kind to which the
Company or any of the Company Subsidiaries is a party or by which any of them is
bound (i) obligating the Company or any of the Company Subsidiaries to issue,
deliver or sell or cause to be issued, delivered or sold, additional shares of
capital stock of, or other equity interests in, or any security convertible or
exercisable for or exchangeable into any capital stock of, or other equity
interest in, the Company, any Company Subsidiary or any Voting Company Debt,
(ii) obligating the Company or any Company Subsidiary to issue, grant, extend or
enter into any such option, warrant, call, right, security, commitment,
contract, arrangement or undertaking or (iii) that give any Person the right to
receive any economic benefit or right similar to or derived from the economic
benefits and rights accruing to holders of capital stock of, or other equity
interests in, the Company or any Company Subsidiary. As of the date hereof,
there are not any outstanding obligations of the Company or any of the Company
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of the Company Subsidiaries or to provide funds to
or make any investment in (in the form of a loan, capital contribution or
otherwise) in any Person. There are no proxies, voting trusts or other
agreements or understandings to which the Company or any of the Company
Subsidiaries is a party or is bound with respect to the voting of the capital
stock of, or other equity interests in, the Company or any of the Company
Subsidiaries.
Section 5.4 Authority for Agreements.
(a) The Company has the corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance of this Agreement and consummation of the
transactions contemplated hereby, including the Merger, have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of the Company are necessary for it to authorize this
Agreement or to consummate the transactions contemplated hereby, including the
Merger, except for approval of this Agreement (the "Company Stockholder
Approval") by the holders of at least two-thirds of the outstanding Common
Shares entitled to vote in accordance with the MBCA (the "Requisite Stockholder
Vote"). This Agreement has been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery by Parent and
Merger Sub, as applicable, constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws effecting or relating to enforcement of creditors' rights generally or by
general principles of equity.
(b) The Company Board has unanimously (i) determined that this
Agreement and the transactions contemplated hereby, including the Merger, are
17
advisable and fair to, and in the best interests of, the Company and its
stockholders, (ii) adopted and declared advisable this Agreement and the
transactions contemplated hereby, including the Merger, (iii) directed that this
Agreement be submitted to the Company's stockholders for their approval and (iv)
resolved to recommend that the Company's stockholders approve this Agreement
(collectively, the "Recommendation").
Section 5.5 Consents and Approvals; No Violations.
(a) The execution, delivery and performance of this Agreement by
the Company and consummation of the transactions contemplated hereby, including
the Merger, by the Company and the consummation of the transactions contemplated
by the Stockholders Agreements do not and will not require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except for (i) the pre-merger notification requirements
under the HSR Act, (ii) the applicable requirements of the Exchange Act, (iii)
the filing of the Articles of Merger pursuant to the MBCA (the requirements in
clauses (i), (ii) and (iii) collectively, the "Governmental Requirements") and
(iv) any such consent, approval, authorization, permit, filing, or notification,
the failure of which to make or obtain would not, individually or in the
aggregate, reasonably be expected to (A) have a Company Material Adverse Effect
or (B) prevent or materially delay consummation of the Merger or the
transactions contemplated hereby or otherwise materially adversely affect the
ability of the Company to perform its obligations hereunder and the other
transaction contemplated hereby.
(b) Except for the Requisite Stockholder Vote, as set forth in
Section 5.5(b) of the Company Disclosure Letter or as contemplated by Section
5.5(a), no consent or approval of any other Person is required to be obtained by
the Company for the execution, delivery or performance of this Agreement by the
Company and consummation by the Company of the transactions contemplated hereby,
including the Merger, except where the failure to obtain any such consent or
approval would not reasonably be expected to (A) have a Company Material Adverse
Effect or (B) prevent or materially delay consummation of the Merger or the
transactions contemplated hereby or otherwise materially adversely affect the
ability of the Company to perform its obligations hereunder and the other
transaction contemplated hereby.
(c) None of the execution, delivery or performance of this
Agreement by the Company or, subject to the receipt of the Requisite Stockholder
Vote, consummation by the Company of the transactions contemplated hereby,
including the Merger, or compliance by the Company with any provisions hereof,
nor the consummation of the transactions contemplated by the Stockholders
Agreements, will (i) violate any provision of the Constituent Documents of the
Company or any Company Subsidiary, (ii) result in a violation or breach of any
provision of, or constitute (with or without the giving of due notice or the
lapse of time or both) a default under, or give rise to any right of
termination, cancellation, payment, acceleration or revocation, or result in the
loss of any benefits by the Company or any Company Subsidiary, under, any
agreement, undertaking, commitment or obligation to which the Company or any
Company Subsidiary is a party or by which the Company or any Company Subsidiary
or any of their respective assets may be bound, (iii) result in the creation or
imposition of any Encumbrance upon any property or asset of the Company or any
18
Company Subsidiary or (iv) violate or conflict with any Applicable Law to which
the Company or any Company Subsidiary, is subject, except, in the case of
clauses (ii), (iii) and (iv), for violations, breaches, defaults, terminations,
cancellations, payments, accelerations, revocations, creations, impositions or
conflicts which would not, individually or in the aggregate, (A) have or be
reasonably expected to have, a Company Material Adverse Effect or (B) be
reasonably expected to prevent or materially delay consummation of the Merger or
the transactions contemplated hereby or otherwise materially adversely affect
the ability of the Company to perform its obligations hereunder and the other
transaction contemplated hereby.
(d) The Company has taken all action necessary to render the
Rights Agreement inapplicable to the execution of this Agreement and the
Stockholders Agreements and consummation of the transactions contemplated hereby
and thereby, including the Merger, such that none of the execution of this
Agreement or the Stockholders Agreements, and consummation of the transactions
contemplated hereby and thereby, including the Merger, will result in the grant
of any rights to any person under the Rights Plan or enable or require any
rights outstanding thereunder to be exercised, distributed or triggered.
(e) Takeover Statutes. The provisions of Massachusetts General
Laws Chapter 110D do not apply to the Company, the Merger, this Agreement, the
Stockholders Agreements or the transactions contemplated hereby or thereby. The
Company Board has taken all actions necessary such that the restrictions
contained in Massachusetts General Laws Chapter 110C and 110F do not apply to
the Merger, this Agreement, the Stockholders Agreements and the transactions
contemplated hereby and thereby; provided, that, for purposes hereof, Parent and
Merger Sub hereby specifically represent and warrant to the Company that neither
of them is an "interested stockholder" in the Company, as such term is defined
in Massachusetts General Laws Chapter 110F. To the Knowledge of the Company,
there is no other "control share acquisition," "fair price," "business
combination", "control share acquisition" statute or other similar statute or
regulation that applies to the Merger, this Agreement, the Stockholders
Agreements or any of the transactions contemplated hereby or thereby.
Section 5.6 Company Financial Statements; SEC Reports.
(a) The Company Financial Statements have been derived from the
accounting books and records of the Company and the Company Subsidiaries, have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods presented, subject, in the case of interim unaudited Company
Financial Statements, only to normal, recurring year-end adjustments, and comply
in all material respects with all applicable accounting requirements and with
the published rules and regulations of the SEC. The consolidated balance sheets
included in the Company Financial Statements present fairly in all material
respects the financial position of the Company and the Company Subsidiaries as
at the respective dates thereof, and the consolidated statements of income,
consolidated statements of shareholders' equity and consolidated statements of
cash flows included in such Company Financial Statements present fairly in all
19
material respects the results of operations, shareholders' equity and cash flows
of the Company and the Company Subsidiaries for the respective periods
indicated. All of the Company Subsidiaries are consolidated for accounting
purposes.
(b) The term "Company Financial Statements" means the consolidated
financial statements of the Company and the Company Subsidiaries included in the
Company Reports together, in the case of year-end statements, with reports
thereon by Ernst & Young LLP, the independent auditors of the Company, including
in each case a consolidated balance sheet, a consolidated statement of income, a
consolidated statement of stockholders' equity and a consolidated statement of
cash flows, and accompanying notes.
(c) The Company and each Company Subsidiary has timely filed or
furnished, as applicable, all reports, schedules, forms, statements and other
documents required to be filed or furnished by it to the SEC since January 1,
2005 (the "Company Reports"). As of its respective date, each Company Report
complied in all material respects with the requirements of the Exchange Act or
the Securities Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company Report, and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date hereof, there are no outstanding or unresolved
comments in comment letters received from the SEC staff with respect to any
Company Report. No Company Subsidiary is required to file any form, report or
other document with the SEC.
(d) Each of the then-acting principal executive officer and the
principal financial officer of the Company has made all certifications required
by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and the rules and
regulations of the SEC promulgated thereunder with respect to the Company
Reports.
(e) Since the enactment of the Sarbanes-Oxley Act of 2002 and the
rules and regulations of the SEC promulgated thereunder, the Company has been
and is in compliance in all material respects with the applicable provisions
thereunder.
(f) The Company has implemented and maintains a system of internal
control over financial reporting that is designed to ensure (i) that
transactions are recorded as necessary to permit preparation of the Company
Financial Statements in conformity with GAAP and to maintain accountability for
the Company consolidated assets, (ii) that transactions, receipts and
expenditures are executed only in accordance with the authorization of
management, (iii) access to the Company's assets is permitted only with
management's authorization and the prevention or timely detection of the
unauthorized acquisition, use or disposition of the Company's assets that could
materially affect the Company Financial Statements and (iv) accounts, notes and
other receivables and inventory are recorded accurately and collected on a
current and timely basis. The Company's principal executive officer and
principal financial officer have disclosed, based on their most recent
evaluation, to the Company's outside auditors and the audit committee of the
Company Board (i) all significant deficiencies and material weaknesses in the
20
design or operation of internal control over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) which are reasonably expected to adversely
affect the Company's ability to record, process, summarize and report financial
data and (ii) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's internal control
over financial reporting
(g) The Company's "disclosure controls and procedures" (as defined
in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are reasonably designed
in all material respects to ensure that (i) information (both financial and
non-financial) required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the SEC and
(ii) all such information is accumulated and communicated to the Company's
management as appropriate to allow timely decisions regarding disclosure and to
make the certifications of the principal executive officer and principal
financial officer of the Company required under the Exchange Act with respect to
such reports.
Section 5.7 Absence of Certain Changes. Except as set forth on Section
5.7 of the Company Disclosure Letter, since December 31, 2006, (a) there has
been no event, occurrence, fact, condition, change, development or effect which,
individually or in the aggregate, (i) has had, or would reasonably be expected
to have, a Company Material Adverse Effect or (ii) would reasonably be expected
to prevent or materially delay consummation of the Merger or the transactions
contemplated hereby or otherwise materially adversely affect the ability of the
Company to perform its obligations hereunder and the other transaction
contemplated hereby; and (b) the Company and the Company Subsidiaries have in
all material respects conducted their businesses in the ordinary course
consistent with past practice.
Section 5.8 Litigation. As of the date hereof, there (a) is no suit,
action, proceeding or, to the Knowledge of the Company, investigation or inquiry
(whether at law or in equity, before or by any Governmental Entity or before any
arbitrator) pending or, to the Knowledge of the Company, threatened against or
affecting the Company or any of the Company Subsidiaries or any of their
respective properties, assets or rights, the outcome of which, individually or
in the aggregate, would reasonably be expected to (i) have a Company Material
Adverse Effect or (ii) prevent or materially delay consummation of the Merger or
the transactions contemplated hereby or otherwise materially adversely affect
the ability of the Company to perform its obligations hereunder and the other
transaction contemplated hereby and (b) is not any judgment, decree, injunction,
rule, writ or order of any Governmental Entity or arbitrator outstanding against
the Company or any of the Company Subsidiaries which, individually or in the
aggregate, would reasonably be expected to (i) have a Company Material Adverse
Effect or (ii) prevent or materially delay consummation of the Merger or the
transactions contemplated hereby or otherwise materially adversely affect the
ability of the Company to perform its obligations hereunder and the other
transaction contemplated hereby. Except as set forth on Section 5.8 of the
Company Disclosure Letter, to the Knowledge of the Company, no officer or
director of the Company is a defendant in any suit, action or proceeding
21
commenced by shareholders of the Company with respect to the performance of his
or her duties as an officer and/or director of the Company.
Section 5.9 Absence of Undisclosed Liabilities. The Company and the
Company Subsidiaries do not have any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise), except for (a) liabilities
reflected on or reserved against in the Company's consolidated balance sheet as
of December 31, 2006 included in the Company Financial Statements, (b)
liabilities incurred in the ordinary course of business consistent with past
practice since December 31, 2006, (c) liabilities incurred in connection with
the transactions contemplated hereby and (d) liabilities which, individually or
in the aggregate, have not had or would not reasonably be expected to have a
Company Material Adverse Effect.
Section 5.10 Taxes.
(a) Except as set forth in Section 5.10(a) of the Company
Disclosure Letter, the Company and the Company Subsidiaries have (i) duly and
timely filed (or caused to be timely filed on their behalf) with the appropriate
Taxing Authorities all income Tax Returns and all other material federal, state,
local and foreign Tax Returns required to be filed by them on or prior to the
date hereof (taking into account any applicable extensions), and all such Tax
Returns are correct and complete in all material respects and (ii) duly and
timely paid in full all material Taxes due and owing (whether or not shown on
any Tax Return) and has made provision in accordance with GAAP in the Company
Financial Statements most recently filed with the SEC for the payment of all
Taxes not yet due and owing for all periods or portions thereof ending on the
date hereof;
(b) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to a material amount of Taxes or any material Tax Returns of the Company
or any Company Subsidiary;
(c) The Company has provided Parent with written schedules of (i)
the taxable years of the Company for which the statutes of limitations with
respect to federal income Taxes have not expired, (ii) with respect to federal
income Taxes and any material other Taxes, for all taxable years for which the
statute of limitations has not yet expired, those years for which examinations
have not yet been initiated and (iii) any requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes with respect to any income Tax Returns and all other
material federal, state, local and foreign Tax Returns of the Company or any of
the Company Subsidiaries, in each case which have been requested in writing by
Parent;
(d) As of the Closing Date, neither the Company nor any Company
Subsidiaries will be a party to, be bound by or have any obligation under any
tax allocation, tax sharing, tax indemnity or similar agreement with respect to
a material amount of Taxes.
22
(e) Neither the Company nor any Company Subsidiary has engaged in
any transaction that could give rise to a disclosure obligation as a "listed
transaction" under Section 6011 of the Code and the promulgated regulations
thereunder.
(f) With respect to requests for changes in method of accounting
and ruling request: (i) neither the Company nor any Company Subsidiary has
agreed to make any adjustment pursuant to Section 481(a) of the Code (or any
predecessor provision) by reason of any change in any accounting method; (ii)
neither the Company nor any Company Subsidiary has pending any application with
any Taxing Authority requesting permission for any change in any accounting
method, except for an automatic change in accounting method which is expected to
be filed with the Company's 2006 Federal income Tax Return which will allow the
Company to defer the recognition of gift cards sold but not redeemed for one
year; and (iii) there are no outstanding rulings or requests for rulings with
any Taxing Authority addressed, directly or indirectly, to the Company or any
Company Subsidiary.
(g) Each Company Subsidiary, other then Restaurant Insurance
Corporation and Friendly's International, Inc., is treated as a "disregarded
entity" for U.S. federal income tax purposes and, to the Knowledge of the
Company, under applicable state and local income or franchise Tax law.
Restaurant Insurance Corporation is an insurance company licensed as such under
Vermont law.
Section 5.11 Real Property; Title to Property.
(a) Section 5.11(a) of the Company Disclosure Letter sets forth
the location and description of all real property owned in fee by the Company or
any of the Company Subsidiaries (the "Owned Real Property"). Except as would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, each of the Company and the Company Subsidiaries (as
applicable) has good, valid and marketable fee title to each parcel of Owned
Real Property, including all buildings, structures, fixtures and improvements
located thereon, in each case, free and clear of all Encumbrances, except for
Permitted Encumbrances. There is no material default or claim of material
default under any Real Property Lease by the Company or the Company Subsidiary
party thereto, or to the Knowledge of the Company, by any other party thereto,
and, to the Knowledge of the Company, no event has occurred which, with the
passage of time or the giving of notice (or both), would constitute a material
default thereunder by the Company or the Company Subsidiary party thereto or by
any other party thereto, or would permit material modification, acceleration or
termination thereof. Neither the Company nor any Company Subsidiary has received
any written, nor to the Knowledge of the Company, any oral, communication from
any party to a Real Property Lease or on behalf of any such party that such
party intends to cancel, terminate or fail to renew such Real Property Lease.
(b) Section 5.11(b) of the Company Disclosure Letters sets forth,
in all material respects, a correct and complete list of all leases, subleases,
licenses and other agreements under which the Company or any of the Company
Subsidiaries leases, subleases, licenses, uses or occupies, or has the right to
use or occupy any real property (the "Leased Real Property" and together with
23
the Owned Real Property, the "Company Real Property"). The leases, subleases,
sub-subleases, licenses and other agreements governing such Leased Real Property
are referred to herein as the "Real Property Leases." The Company has delivered
or made available to Parent or Merger Sub correct and complete copies of all
Real Property Leases, as amended and in effect on the date hereof. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, each of the Company and the Company
Subsidiaries (as applicable) has a good and valid leasehold interest in the
Leased Real Property, in each case, free and clear of all Encumbrances, except
for Permitted Encumbrances.
(c) All material buildings, structures, improvements, fixtures,
building systems and equipment, and all components thereof, included in the
Company Real Property are in good condition, ordinary wear and tear excepted and
except for such failures to be in good condition as, individually or in the
aggregate, has not, and would not, reasonably be expected to have a Company
Material Adverse Effect.
(d) Each of the Company and the Company Subsidiaries (a) has good
and valid title to all of the properties, assets and other rights that would not
constitute real property (other than Intellectual Property) as reflected on the
Company's consolidated balance sheet (including in any related notes thereto) as
of December 31, 2006, free and clear of all Encumbrances and (b) owns, has valid
leasehold interests in or valid contractual rights to use, all of the assets,
tangible and intangible (other than Intellectual Property), used by its
business, in the case of clause (a) and (b), except for Permitted Encumbrances
or where the failure to have such good and valid title, own such assets, have
such valid leasehold interests or have such valid contractual rights have not
had or would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. All of the tangible assets (other than
Intellectual Property) used by the Company or any of the Company Subsidiaries is
in good condition, ordinary wear and tear excepted and except for such failures
to be in good condition as, individually or in the aggregate, has not, and would
not, reasonably be expected to have a Company Material Adverse Effect.
Section 5.12 Insurance. Copies of all material insurance policies
maintained by the Company and the Company Subsidiaries as of the date hereof
have been provided or made available to Parent or Merger Sub. Except as would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect: (a) all such policies are in full force and effect and
were in full force and effect during the periods of time such insurance policies
are purported to be in effect, (b) neither the Company nor any Company
Subsidiary is in breach or default, and to the Knowledge of the Company, no
event has occurred which, with or without the giving of due notice or the lapse
of time or both, would constitute such a breach or default, or permit
termination or modification under any policy, (c) all premiums due thereon have
been paid and the Company has not received any notice of cancellation,
termination or non-renewal of any such policy and (d) all appropriate insurers
under such policies have been notified of all potentially insurable losses and
pending litigation and legal matters, and no such insurer has informed the
24
Company or any of the Company Subsidiaries of any denial of coverage or
reservation of rights thereto.
Section 5.13 Information in Proxy Statement. None of the information
contained or incorporated by reference in the Proxy Statement, as of the date it
is first mailed to stockholders of the Company, and at the time of the Company
Stockholders' Meeting, will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading, except that no representation is made by the
Company with respect to statements made therein based on information supplied by
Parent or Merger Sub expressly for inclusion in the Proxy Statement. The Proxy
Statement will comply in all material respects with the Exchange Act.
Section 5.14 Brokers. No Person other than Goldman, Sachs & Co. is
entitled to any brokerage, financial advisory, finder's or similar fee or
commission payable by the Company or any Company Subsidiary in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or any Company Subsidiary.
Section 5.15 Employee Benefit Plans; ERISA.
(a) Section 5.15(a) of the Company Disclosure Letter sets forth a
complete and correct list of each Company Benefit Plan. With respect to each
Company Benefit Plan, the Company has provided or made available to Parent and
Merger Sub complete and correct copies of (i) such Company Benefit Plan, if
written, or a description of such Company Benefit Plan if not written and (ii)
to the extent applicable with respect to Company Benefit Plans sponsored or
maintained by the Company, the most recent actuarial valuation reports; the most
recent Forms 5500 with all attachments required to have been filed with the IRS
or the Department of Labor or any similar report filed with any comparable
governmental authority in any non-U.S. jurisdiction having jurisdiction over any
Company Benefit Plan, and all schedules thereto; all current summary plan
descriptions; all material written communications received from or sent to the
IRS, the Pension Benefit Guaranty Corporation or the Department of Labor; and
all amendments and modifications to any such document.
(b) Each Company Benefit Plan intended to be qualified under
Section 401(a) of the Code, and the trust (if any) forming a part thereof, has
received a favorable determination letter from the IRS as to its qualification
under the Code and nothing has occurred since the date of such letter that could
reasonably be expected to adversely affect such qualification. Each Company
Benefit Plan has been operated in accordance with its terms and Applicable Law
(including ERISA and the Code), except as would not reasonably be expected to
have, either individually or in the aggregate, a Company Material Adverse
Effect.
(c) Liability; Compliance.
25
(i) Except as would not reasonably be expected to have,
either individually or in the aggregate, a Company Material Adverse Effect or as
set forth on Section 5.15(c) of the Company Disclosure Letter, neither the
Company, nor any Company Subsidiary, nor any Company Related Person has in the
past six (6) years maintained, sponsored or been required to contribute to a
plan subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the
Code. Neither the Company, nor any Company Subsidiary, nor any Company Related
Person has in the past six (6) years been required at any time or is required
currently to contribute to any "multiemployer plan" (as defined in Section 3(37)
of ERISA).
(ii) All contributions and premiums required to have been
paid by the Company or any of the Company Subsidiaries to any Company Benefit
Plan under the terms of any such plan or its related trust, insurance contract
or other funding arrangement, or pursuant to any Applicable Law have been paid
within the time prescribed by such plan, agreement or Applicable Law, except to
the extent that failure to do so would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(iii) No disputes are pending before, or to the Knowledge of
the Company, are threatened by any Governmental Entity or by or on behalf of any
participant or beneficiary against any Company Benefit Plan, other than routine
claims for benefits or claims that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(iv) Except as set forth in Section 5.15(c) of the Company
Disclosure Letter, with respect to each Company Benefit Plan that is subject to
Part 3 of Title I or Title IV of ERISA (a "Title IV Plan"): (A) no reportable
event under Section 4043 of ERISA for which the notice requirement has not been
waived has occurred; (B) no accumulated funding deficiency, whether or not
waived under Code Section 412 has been incurred; (C) no liability to the Pension
Benefit Guaranty Corporation has been incurred and all premiums required to be
paid thereto have been paid on behalf of each Title IV Plan; and (D) no event or
condition exists which (1) would constitute grounds for termination by the
Pension Benefit Guaranty Corporation or (2) has caused or would give rise to a
partial termination of any such Title IV Plan.
(v) No non-exempt prohibited transaction (as defined in
Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to
any Company Benefit Plan that, individually or in the aggregate, would
reasonably be expected to have a Company Material Adverse Effect.
(vi) Except as disclosed in Section 5.15(c) of the Company
Disclosure Letter, the Company and Company Subsidiaries have no liability with
respect to any "employee welfare benefit plan" within the meaning of Section
3(1) of ERISA that provides benefits to retired employees (other than as
required by Section 601 of ERISA).
(vii) Except as disclosed in Section 5.15(c) of the Company
Disclosure Letter, the consummation of the transactions contemplated by this
Agreement will not (A) entitle any Company Employee (as defined in Section 8.7)
26
to severance pay, (B) accelerate the time of payment or vesting of, or increase
the amount of, compensation or benefits due to any Company Employee, (C) result
in any sale bonus, stay bonus or other transaction-based bonus being due to any
Company Employee or (D) result in the payment to any Company Employee of any
amount that would be an "excess parachute payment" within the meaning of Section
280G of the Code.
(viii) Except as disclosed in Section 5.15(c) of the Company
Disclosure Letter, the Company and Company Subsidiaries have no material
unfunded liabilities for benefits or claims accrued pursuant to any Company
Benefit Plan which is not intended to be qualified under Section 401(a) of the
Code that, individually or in the aggregate, would reasonably be expected to
have a Company Material Adverse Effect.
Section 5.16 Labor Matters. None of the Company or any of the Company
Subsidiaries is a party to or bound by, and none of their employees is subject
to, any collective bargaining agreement and, to the Knowledge of the Company,
there are no labor unions or other organizations representing, or purporting to
represent, any employees employed by the Company or any of the Company
Subsidiaries. To the Knowledge of the Company, no labor union is currently
engaged in or threatening organizational efforts with respect to any employees
of the Company or any of the Company Subsidiaries. Since January 1, 2005, to the
Knowledge of the Company, there has not occurred or been threatened, any strike,
slowdown, picketing, work stoppage, concerted refusal to work overtime or other
similar labor activity with respect to any employees of the Company or any of
the Company Subsidiaries. There are no labor disputes currently subject to any
pending grievance procedure, arbitration or litigation and there is no
representation petition pending or, to the Knowledge of the Company, threatened
with respect to any employee of the Company or any of the Company Subsidiaries,
except as would not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. There are no controversies pending or,
to the Company's Knowledge, threatened between the Company and/or any Company
Subsidiary on the one hand and any of their employees or former employees on the
other hand, which controversies have or would reasonably be expected to result
in an action, suit, proceeding, claim, arbitration or investigation before any
agency, court or tribunal, foreign or domestic that, individually or in the
aggregate, would reasonably be expected to have a Company Material Adverse
Effect.
Section 5.17 Intellectual Property Rights.
(a) Section 5.17 of the Company Disclosure Letter lists all
registrations or applications for registration of any Intellectual Property used
in the business as presently conducted and as presently anticipated to be
conducted. The Company and the Company Subsidiaries own, free of all
Encumbrances other than Permitted Encumbrances, or have a right to use, all
Intellectual Property material to the conduct of their respective businesses (as
applicable). All material Intellectual Property is valid, subsisting and
enforceable in all material respects and is sufficient to operate the businesses
of the Company and the Company Subsidiaries as presently conducted.
27
(b) Except for defaults and infringements which would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, (i) neither the Company nor any Company Subsidiary is
in default (or with the giving of notice or lapse of time or both, would be in
default) under any license to use such Intellectual Property, (ii) none of the
Intellectual Property is being infringed by any third party and (iii) neither
the Company nor any Company Subsidiary is infringing, misappropriating or
violating any Intellectual Property of any third party and no such claim has
been asserted or, to the Knowledge of the Company, has been threatened.
(c) Except as would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect, (i) there is
no pending or, to the Knowledge of the Company, threatened claim or dispute
regarding the ownership of, or use by, the Company or any Company Subsidiary of
any Intellectual Property and (ii) consummation by the Company of the
transactions contemplated hereby will not result in the loss of use of any
Intellectual Property necessary for the business of the Company or any of the
Company Subsidiaries as currently conducted.
(d) For purposes of this Agreement, "Intellectual Property" means
(i) all patents, trademarks, trade names, service marks, copyrights, domain
names relating to the Company's and each of the Company Subsidiary's respective
businesses or owned by the Company or any of the Company Subsidiaries, and all
pending applications for and registrations of any of the foregoing; (ii)
copyrights and copyrightable works (including databases, software and Internet
site content), brand names and logos; and (iii) all computer software programs
and trade secrets, inventions, formulae, data, improvements, know-how,
confidential information, engineering and technical drawings, processes,
methodologies, trade dress and other proprietary intellectual property rights.
Section 5.18 Contracts.
(a) Section 5.18(a) of the Company Disclosure Letter sets forth a
correct and complete list of each contract (whether written or oral) to which
the Company or any of the Company Subsidiaries is a party or by which it is
bound which:
(i) contains outstanding obligations in excess of One
Million Dollars ($1,000,000) in any twelve (12)-month period or is otherwise
material (within the meaning of Item 601 of Regulation S-K under the Exchange
Act) to the business of the Company and the Company Subsidiaries taken as a
whole as currently conducted that cannot be terminated without penalty upon
sixty (60) days' prior written notice;
(ii) contains covenants that would obligate the Company or
any of the Company Subsidiaries to provide products or services to a
counterparty on terms at least as favorable to such counterparty as those which
are offered to any other third party;
(iii) contains covenants limiting the freedom of the Company
or any of the Company Subsidiaries to engage in any line of business or to
provide any products or services generally or in any market segment or in any
geographic area, or to compete with any Person or restricting the ability of the
28
Company or any of the Company Subsidiaries to acquire equity securities of any
Person;
(iv) the Company or any of the Company Subsidiaries has (a)
incurred, or may incur, any indebtedness for borrowed money or (b) given any
guarantee in respect of indebtedness for borrowed money;
(v) provides for a joint venture or partnership (without
regard to legal form);
(vi) is a standby letter of credit, performance or payment
bond, or surety bond of any nature;
(vii) with respect to Section 5.18(a)(vii) of the Company
Disclosure Letter, the Company has set forth the name of each Person (each a
"Franchisee"), and the number and location of each Friendly's restaurant
(whether traditional or non-traditional) operated by such Franchisee; each such
Franchisee is a party to or is otherwise bound by a currently effective
franchise agreement related to each Friendly's restaurant it operates and, as
indicated on Section 5.18(a)(vii) of the Company Disclosure Letter, may also be
a party to a development agreement (each, a "Franchise Agreement" and
collectively, the "Franchise Agreements") which grants or purports to grant to
such Franchisee the right to operate Friendly's restaurants and, if so indicated
on Section 5.18(a)(vii) of the Company Disclosure Letter, the right to develop
one or more "Friendly's" restaurants within a geographic area, and the Company
has previously made available to Parent forms that contain the substantive terms
of each type of Franchise Agreement; or
(viii) is an employment, severance, retention or
indemnification contract applicable to (A) any "named executive officer" (as
such term is defined in Item 402 of Regulation S-K under the Exchange Act) or
director of the Company, (B) any regional chief executive officer of the Company
or (C) any employee of the Company or any Company Subsidiary entitled to at
least one (1)-year's severance pay, in each case, that cannot be canceled by the
Company (or the applicable Company Subsidiary) upon sixty (60) days' notice
without liability, penalty or premium (each contract of the type described in
clauses (i) through (vii), the "Company Contracts"). The Company has delivered
or made available to Parent or Merger Sub complete and correct copies of each
Company Contract.
(b) Except as set forth on Section 5.18(b) of the Company
Disclosure Letter:
(i) each Company Contract is (assuming due power and
authority of, and due execution and delivery by, the other party or parties
thereto) valid and binding upon the Company or the Company Subsidiary party
thereto, and to the Knowledge of the Company, each other party thereto, except
as may be limited by bankruptcy, insolvency, moratorium or other similar laws
29
affecting or relating to enforcement of creditors' rights generally or by
general principles of equity, and is in full force and effect; and
(ii) there is no material default or claim of material
default under any Company Contract by the Company or the Company Subsidiary
party thereto, or to the Knowledge of the Company, by any other party thereto,
and, to the Knowledge of the Company, no event has occurred which, with the
passage of time or the giving of notice (or both), would constitute a material
default thereunder by the Company or the Company Subsidiary party thereto or by
any other party thereto, or would permit material modification, acceleration or
termination thereof. Neither the Company nor any Company Subsidiary has received
any written nor, to the Knowledge of the Company, any oral communication from
any party to a Company Contract or on behalf of any such party that such party
intends to cancel, terminate or fail to renew such Company Contract.
(c) Except as listed on Section 5.18(c) of the Company Disclosure
Letter, to the Knowledge of the Company, the Company has filed each contract
required to be filed by the Company as a "material contract" pursuant to Item
601(b)(10) of Regulation S-K under the Securities Act or disclosed by the
Company on a Current Report on Form 8-K.
Section 5.19 Compliance with Laws; Permits. Neither the Company nor any
Company Subsidiary is in violation of and, to the Knowledge of the Company, no
investigation is pending with respect to or has been threatened to be charged
with or given notice of any violation of, any Applicable Law, except for any
violation or possible violation that, individually or in the aggregate, (a) has
not had, and would not reasonably be expected to have, a Company Material
Adverse Effect and (b) would not be reasonably expected to prevent or materially
delay consummation of the Merger or the transactions contemplated hereby or
otherwise materially adversely effect the ability of the Company to perform its
obligations hereunder and the other transaction contemplated hereby. The Company
and the Company Subsidiaries hold all permits, licenses, consents,
authorizations, certificates, variances, exemptions, orders and approvals
("Permits") of and from, and has made all material declarations and filings
with, each Governmental Entity necessary for the lawful conduct of their
respective businesses, as presently conducted, and to own, lease, license and
use their respective properties and assets, except where the failure hold such
Permits or make such declarations and filings do not have and would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. All such Permits are valid and in full force and
effect, except where the failure to be valid or in full force and effect,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Company Material Adverse Effect. Neither the Company nor any
Company Subsidiary has received any written notice from any Governmental
Authority that the Company or such Company Subsidiary is or may become party to
or subject of any proceeding seeking to revoke, suspend or otherwise limit any
such Permit.
Section 5.20 Environmental Laws and Regulations. :
30
(a) The Company and each of the Company Subsidiaries and their
respective properties and operations are in compliance with all, and neither the
Company nor any Company Subsidiary has any liability under any, Applicable Laws
relating to pollution, protection of the environment (including ambient air,
surface water, ground water, land surface or subsurface strata), worker health
and safety, as related to exposure to Hazardous Materials (collectively,
"Environmental Laws"), which compliance includes the possession by the Company
and the Company Subsidiaries of all permits and other authorizations of
Governmental Entities required under applicable Environmental Laws, and
compliance with the terms and conditions thereof, except for instances of
non-compliance which, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Company Material Adverse Effect.
(b) Neither the Company nor any of the Company Subsidiaries has
received written notice of any actions, causes of action, claims, demands,
notices or, to the Knowledge of the Company, investigations by any Person
asserting or alleging actual or potential liability under or non-compliance with
any Environmental Laws (collectively, "Environmental Claims") that, individually
or in the aggregate, has had, or would reasonably be expected to have, a Company
Material Adverse Effect.
(c) To the Knowledge of the Company, there are no facts,
circumstances or conditions in connection with the operation of the business of
the Company and the Company Subsidiaries, or otherwise that have led to, or are
reasonably expected to lead to, any Environmental Claims against the Company or
any Company Subsidiary, which, individually or in the aggregate, has had, or
would reasonably be expected to have, a Company Material Adverse Effect.
(d) No Releases of Hazardous Materials have occurred at, from, in,
to, on, or under any currently or formerly owned or leased real property and no
Hazardous Materials are present in, on, at, migrating from or, to the Knowledge
of the Company, migrating to any currently or, to the Knowledge of the Company,
formerly owned or leased real property that, individually or in the aggregate,
has had, or would reasonably be expected to have, a Company Material Adverse
Effect.
(e) To the Knowledge of the Company, there have been no material
environmental investigations, studies or reports conducted by, on behalf of the
Company or any of the Company Subsidiaries during the past ten (10) years, or
which are in the possession of the Company or any of the Company Subsidiaries
with respect to any currently or formerly owned or leased real property that
have not been made available to Parent prior to execution of this Agreement.
(f) Neither the Company nor any of the Company Subsidiaries has
entered into or is subject to, any judgment, decree, order or other similar
agreement with any Governmental Entity that has not otherwise been resolved
without any remaining material liability or material obligations under any
Environmental Laws.
The representations and warranties made by the Company and each of the
Company Subsidiaries in Sections 5.5, 5.6, 5.9 and this Section 5.20 are the
31
only representations and warranties made in this Agreement regarding matters
arising under, or regulated pursuant to, any Environmental Law.
Section 5.21 Opinion of Financial Advisor. The Company Board has
received an opinion from Goldman, Sachs & Co., dated as of the date hereof,
(which opinion will be confirmed in writing) to the effect that as of the date
of such opinion, the Merger Consideration is fair, from a financial point of
view, to the holders of Common Shares.
Section 5.22 Affiliate Transactions. There are no Contracts or
transactions between the Company or any of the Company Subsidiaries, on the one
hand, and any (a) executive officer or director of the Company or any of the
Company Subsidiaries, (b) record or beneficial owner of ten percent (10%) or
more of the voting securities of the Company or (c) Affiliate of any such
executive officer, director or record or beneficial owner, on the other hand, in
each case that are required to be disclosed under Item 404 of Regulation S-K
promulgated under the Exchange Act, except those of a type available to
employees of the Company generally.
Section 5.23 Franchise Matters.
(a) Section 5.23(a) of the Company Disclosure Letter lists each
state or other jurisdiction in which the Company and each Company Subsidiary is
currently registered as a franchisor, or with which the Company and each Company
Subsidiary filed an application for registration or an exemption from
registration, to sell franchises, and the effective date of each such
registration. Except as set forth in Section 5.23(a) of the Company Disclosure
Letter, all franchise registrations remain in full force and effect and are not
the subject of any existing or threatened government or other action intended,
in whole or in part, to result in the termination, revocation, modification,
suspension, conditioning or dissolution of any such franchise registration
and/or any other circumstance that would reasonably be expected to impair the
Company's or any Company Subsidiary's ability routinely to renew or amend any
such franchise registration and/or enter into Franchise Agreements in any
jurisdiction. Except as would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect, the Company and each
Company Subsidiary is currently in compliance with all laws relating to the
offer and sale of franchises in all jurisdictions where the Company or any of
the Company Subsidiaries is conducting franchise activities and has, without
limitation, prepared all disclosure documents and secured all registrations to
effectuate such franchise activities.
(b) The current Uniform Franchise Offering Circulars ("UFOCs")
used by the Company or any of the Company Subsidiaries do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except as set
forth in Section 5.23(b) of the Company Disclosure Letter, each current
Franchisee signed a UFOC Item 23 "receipt" at least ten (10) Business Days prior
to executing his/her/its Franchise Agreement.
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(c) Except as set forth in the UFOCs or in Section 5.23(c) of the
Company Disclosure Letter, (i) there is no franchise or franchise-related
action, suit, claim, proceeding or investigation pending against the Company or
any of the Company Subsidiaries, (ii) to Company's Knowledge there has not been
any Franchisee complaint, threats to initiate any action, suit, claim,
proceeding or investigations, threats to file complaints with any Governmental
Entity, (iii) there exists no formal complaint, inquiry, investigation, or
judicial or administrative action or proceeding, or injunction, writ or order
communicated, commenced or issued (as the case may be) by any Governmental
Entity to or against the Company or any of the Company Subsidiaries regarding
its offer and sale of franchises, the administration of its franchise network,
advancing or referring to any complaint received from any Franchisee, inquiring
of or contesting any element of the Company's franchise program or franchise
relationships, and/or otherwise related to the Company's and the Company
Subsidiary's compliance with any franchise law, and (iv) to Company's Knowledge,
there exists no material action, suit, claim proceeding or investigation by any
third party against any of the Franchisees in which the Company or any Company
Subsidiary is or may become a party thereto, including under a negligence or
"vicarious liability" theory.
(d) Except as set forth in Section 5.23(d) of the Company
Disclosure Letter, to Company's Knowledge, none of the Franchisees are currently
involved in a workout or other financial restructuring or any insolvency,
bankruptcy or similar proceeding; or contemplating or scheduled to undertake a
workout or other financial restructuring or any insolvency, bankruptcy or
similar proceeding.
(e) Except as set forth on Section 5.23(e) of the Company
Disclosure Letter, no Franchisee has a protected territory, exclusive territory,
right of first refusal, option or similar arrangement with respect to a
franchised location.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as otherwise disclosed to the Company in a letter (the
"Parent Disclosure Letter") delivered to it by Parent prior to the execution of
this Agreement, Parent and Merger Sub jointly and severally represent and
warrant to the Company as follows:
Section 6.1 Corporate Status. Each of Parent and Merger Sub is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as is now being conducted. Each of Parent and Merger Sub is duly qualified or
licensed to own, lease and operate its properties and to carry on its business
as is now being conducted in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except where the failure to be so
33
qualified or licensed would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Since their respective dates
of incorporation, neither Parent nor Merger Sub has engaged in any activities
other than in connection with the transactions contemplated hereby. Parent has
delivered or made available to the Company complete and correct copies of the
Constituent Documents of Parent and Merger Sub, as amended and currently in
effect.
Section 6.2 Authority for Agreements. Each of Parent and Merger Sub has
the corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby,
including the Merger, have been duly and validly authorized by all necessary
corporate or shareholder action of Parent and Merger Sub, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary for Parent or
Merger Sub to authorize this Agreement and to consummate the transactions
contemplated hereby, including the Merger. This Agreement has been duly and
validly executed and delivered by each of Parent and Merger Sub and, assuming
due authorization, execution and delivery by the Company, constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency, moratorium or other
similar laws effecting or relating to enforcement of creditors' rights generally
or by general principles of equity.
Section 6.3 Consents and Approvals; No Violations.
(a) Except (i) for the Governmental Requirements or (ii) where the
failure to make any filing with, or to obtain any permit, authorization, consent
or approval of, any Governmental Entity would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect, no
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the execution, delivery and performance of
this Agreement by Parent or Merger Sub or consummation by Parent or Merger Sub
of the transactions contemplated hereby.
(b) Except as contemplated by Section 6.3(a), no consent or
approval of any other Person is required to be obtained by Parent or Merger Sub
for the execution, delivery or performance of this Agreement by Parent or Merger
Sub or consummation by Parent or Merger Sub of the transactions contemplated
hereby, including Merger, except where the failure to obtain any such consent or
approval would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
(c) Subject to compliance with the Governmental Requirements, none
of the execution, delivery or performance of this Agreement by Parent or Merger
Sub, nor consummation by Parent or Merger Sub of the transactions contemplated
hereby, including the Merger, or compliance by Parent or Merger Sub with any
provisions hereof, will (i) violate any provision of the Constituent Documents
of Parent or Merger Sub, (ii) result in a violation or breach of any provision
of, or constitute (with or without the giving of due notice or lapse of time or
both) a default under, or give rise to any right of termination, cancellation,
payment, acceleration or revocation under, any agreement, undertaking,
commitment or obligation to which Parent or Merger Sub is a party or by which
34
any of them or any of their properties or assets may be bound, (iii) result in
the creation or imposition of any Encumbrance upon any property or asset of
Parent or Merger Sub, (iv) violate or conflict with any order, writ, injunction,
decree, statute, rule or regulation to which Parent or Merger Sub, or the
property or assets of Parent or Merger Sub, is subject or (v) cause the
suspension or revocation of any permit, license, governmental authorization,
consent or approval necessary for Parent or Merger Sub to conduct its business
as currently conducted, except, in the case of clauses (ii), (iii), (iv) and
(v), for violations, breaches, defaults, terminations, cancellations, vestings,
payments, exercises, accelerations, suspensions, revocations, creations,
impositions or conflicts which would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
Section 6.4 Information in Proxy Statement. None of the information
supplied or to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the Proxy Statement, at the date such Proxy
Statement is first mailed to stockholders of the Company, and at the time of the
Company Stockholders' Meeting, will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
Section 6.5 Brokers. No Person is entitled to any brokerage, financial
advisory, finder's or similar fee or commission payable by Parent or Merger Sub
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub.
Section 6.6 Litigation. There is no suit, action, proceeding or
investigation (whether at law or in equity, before or by any Governmental Entity
or before any arbitrator) pending or threatened against or affecting Parent or
any of its Affiliates, the outcome of which, individually or in the aggregate,
would reasonably be expected to have a Parent Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Parent or any of its Affiliates which,
individually or in the aggregate, would reasonably be expected to have a Parent
Material Adverse Effect.
Section 6.7 Financing. Parent has delivered to the Company a true and
complete copy of the executed Financing Commitment, pursuant to which the
Sponsor has committed, subject to the terms and conditions thereof, to invest
the amount set forth therein (the "Financing"). The Financing Commitment has not
been amended or modified in any material respect, and the commitment contained
in the Financing Commitment has not been withdrawn or rescinded. The Financing
Commitment is in full force and effect. The Financing Commitment, in the form so
delivered, is a legal, valid and binding obligation of the parties thereto.
There are no conditions precedent or other contingencies related to the funding
of the full amount of the Financing, other than as set forth in or contemplated
by the Financing Commitment. Subject to the terms and conditions of the
Financing Commitment, and subject to the terms and conditions of this Agreement,
the aggregate proceeds contemplated by the Financing Commitment will be
sufficient for Parent and Merger Sub to consummate the Merger and the other
35
transactions contemplated hereby. Parent does not have any Knowledge that any
event has occurred which, with or without the giving of due notice or the lapse
of time or both, would constitute a default or breach on the part of Parent
under any term or condition of the Financing Commitment. Parent does not have
any reason to believe that it will be unable to satisfy on a timely basis any
term or condition of closing to be satisfied by it and contained in the
Financing Commitment. For avoidance of doubt, it shall not be a condition to
Closing for Parent to obtain the Financing or any alternative financing.
Section 6.8 Ownership of Common Shares. Neither Parent nor Merger Sub,
nor, to the Knowledge of Parent, any of their respective Affiliates, owns
(beneficially or of record) any Common Shares or any option, warrant or other
right to acquire any Common Shares.
Section 6.9 Interest in Competitors. Except as set forth in Section 6.9
of the Parent Disclosure Letter, neither Parent nor Merger Sub owns any
interest(s), nor do any of their respective Affiliates insofar as such
Affiliate-owned interests would be attributed to Parent or Merger Sub under the
HSR Act, in any entity or Person that derives a substantial portion of its
revenues from a line of business within the Company's principal lines of
business.
Section 6.10 Management Agreements. Except as contemplated by this
Agreement, as of the date hereof, there are no contracts or understandings
between Parent or Merger Sub or any of their Affiliates, on the one hand, and
any of the Company's officers, employees or directors, on the other hand.
ARTICLE VII
CONDUCT OF BUSINESS BY COMPANY
Section 7.1 Conduct of Business by the Company Pending the Merger. From
the date hereof until the Effective Time, unless Parent shall otherwise consent
in writing, or except as set forth on Section 7.1 of the Company Disclosure
Letter or as otherwise expressly permitted by or provided for in this Agreement,
the Company shall, and shall cause each of the Company Subsidiaries to, conduct
its business in the ordinary course consistent with past practice and shall use
its commercially reasonable efforts to preserve intact its business organization
and goodwill and relationships with third parties and to keep available the
services of its current key employees, subject to the terms of this Agreement.
In the event the Closing shall not have occurred by November 19, 2007, the
Company shall extend the term of Rights Plan until the Outside Date. In addition
to and without limiting the generality of the foregoing, except as set forth on
Section 7.1 of the Company Disclosure Letter or as otherwise expressly permitted
by or provided for in this Agreement, from the date hereof until the Effective
Time, without the prior written consent of Parent (which consent shall (i) be in
the sole discretion of Parent with respect to those actions prohibited by
subsections (a), (b), (c), (d), (f)(i), (f)(ii), (f)(v), (g), (m), (n), (p), (r)
and (s) with respect to actions pertaining to the foregoing subsections and (ii)
not be unreasonably withheld with respect to those actions prohibited by the
remaining subsections with respect to actions pertaining thereto):
36
(a) the Company shall not adopt or propose, and shall not permit
any Company Subsidiary to adopt or propose, any change in its Constituent
Documents or the Rights Plan, except as expressly contemplated by this
Agreement;
(b) the Company shall not, and shall not permit any Company
Subsidiary to declare, set aside or pay any shareholder dividend or other
distribution except for any dividend or distribution by a Company Subsidiary to
the Company or another Company Subsidiary;
(c) the Company shall not, and shall not permit any Company
Subsidiary to, adopt a plan of complete or partial liquidation, dissolution,
restructuring, recapitalization or other material reorganization;
(d) the Company shall not, and shall not permit any Company
Subsidiary to merge or consolidate with any other Person or acquire the assets
or capital stock of any other Person, except (i) that a Company Subsidiary may
merge with another Company Subsidiary and (ii) for any acquisitions of inventory
in the ordinary course of business consistent with past practice;
(e) the Company shall not, and shall not permit any Company
Subsidiary to, sell, lease, license, subject to an Encumbrance, other than a
Permitted Encumbrance, or otherwise surrender, relinquish or dispose of any
assets or property of the Company or any Company Subsidiary other than in the
ordinary course of business consistent with past practice, except (i) pursuant
to existing written contracts or commitments (the terms of which have been
disclosed to Parent prior to the date hereof) or (ii) sales in the ordinary
course of business consistent with past practice and in an amount not in excess
of One Million Dollars ($1,000,000) in the aggregate;
(f) the Company shall not, and shall not permit any Company
Subsidiary to, (i) issue, sell, grant, pledge or otherwise encumber any shares
of its capital stock or other securities (including any options, warrants or any
similar security exercisable for, or convertible into, such capital stock or
similar security), or split, combine or reclassify any of its capital stock or
authorize the issuance of or issue securities (including options, warrants or
any similar security exercisable for, or convertible into, such capital stock or
similar security) in respect of, in lieu of, or in substitution for, its capital
stock, or enter into any amendment of any term of any of its outstanding
securities (except for issuances of Common Shares (A) in connection with the
exercise of Options outstanding on the date hereof and (B) pursuant to Options
required to be granted pursuant to preexisting contractual commitments or
pursuant to a Company Benefit Plan), (ii) incur, guarantee or assume (on its own
behalf or on behalf of another Person) any indebtedness (other than (A)
short-term borrowings under credit facilities existing on the date hereof in the
ordinary course of business consistent with past practice or (B) in connection
with any acquisition entered into pursuant to Section 7.1(c) or as set forth on
Section 7.1 of the Company Disclosure Letter), (iii) make any loans, advances or
capital contributions to, or investments in, any other Person (other than to
Company Subsidiaries or customary loans or advances to non-officers employees in
accordance with past practice), (iv) make any material capital expenditure or
37
commitment therefor other than in the ordinary course of business consistent
with past practice an in accordance with the Company's budgeted capital
expenditures for fiscal years 2007 and 2008, or (v) accelerate the vesting of
any Options or Restricted Shares (except as required pursuant to preexisting
contractual commitments);
(g) except as required by Applicable Law or by contract, the
Company shall not, and shall not permit any Company Subsidiary to, grant any
increase in compensation (whether base salary, wages or bonus opportunities or
amounts) of directors, officers, employees, consultants or agents of the Company
or any Company Subsidiary (other than increases in the ordinary course of
business consistent with past practice for employees and merit increases in base
salary for employees, in each case not exceeding the greater of three percent
(3%) and $10,000 and increases pursuant to previously existing contractual
arrangements);
(h) except as required by Applicable Law or in connection with any
acquisition entered into pursuant to Section 7.1(c) or as set forth on Section
7.1 of the Company Disclosure Letter, the Company shall not, and shall not
permit any Company Subsidiary to, (i) enter into or amend or modify, in any
material respect, any Company Benefit Plan or any severance, consulting,
retention or employment agreement (other than with respect to agreements for new
hires in the ordinary course of business consistent with past practice or which
are terminable at will by the Company or a Company Subsidiary before and after
the Effective Time without any penalty or cost to the Company, such Company
Subsidiary or any Affiliate thereof) or (ii) other than in the ordinary course
of business consistent with past practice, hire or terminate the employment or
contractual relationship of any officer, employee, consultant or agent of the
Company or any Company Subsidiary, as the case may be (other than (A) with
respect to consultants, agents or employees below the level of vice president,
any such termination as a result of "cause" or which the maximum amount paid and
payable by the Company or such Company Subsidiary, as the case may be, in
respect of applicable severance or similar benefits shall not exceed One Hundred
Thousand Dollars ($100,000), individually, or Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate with respect to all such terminations or (B) any
termination to avoid statutory disqualification under the Exchange Act);
(i) the Company shall not change any method of accounting or
accounting principles or practices by the Company or any Company Subsidiary,
except for any such change required by a change in GAAP as agreed by Ernst &
Young LLP, the Company's independent auditors;
(j) the Company shall not, and shall not permit any Company
Subsidiary to, pay, discharge, settle or satisfy any (i) material litigation,
arbitrations, proceedings, claims, liabilities or obligations (whether absolute,
accrued, asserted or unasserted, contingent or otherwise) or (ii) claim under
any insurance policy in excess of $20,000 for a single claim or $125,000 in the
aggregate;
(k) the Company shall not, and shall not permit any Company
Subsidiary to, (i) make or rescind any election relating to a material amount of
Taxes, (ii) settle or compromise any claim, action, suit, litigation,
38
proceeding, arbitration, investigation, audit or controversy relating to a
material amount of Taxes, (iii) make a request for a written ruling of a Taxing
Authority relating to Taxes, other than any request for a determination
concerning qualified status of any Company Benefit Plan intended to be qualified
under Code Section 401(a), (iv) enter into a written and legally binding
agreement with a Taxing Authority relating to a material amount of Taxes or (v)
other than as required by Applicable Law and except for the automatic change
contemplated by Section 5.10(f), change any of its methods of reporting income
or deductions for federal income tax purposes from those employed in the
preparation of its federal income tax returns for the taxable year ending
December 31, 2005;
(l) the Company shall not, and shall not permit any Company
Subsidiary to, terminate, cancel, materially modify or fail to maintain in full
force and effect any material insurance policy maintained by it or any Company
Subsidiary, which (in the event of a termination or cancellation) is not
replaced by a comparable amount of insurance coverage, other than in the
ordinary course of business consistent with past practice;
(m) the Company shall not, and shall not permit any Company
Subsidiary to, purchase or redeem any shares of the capital stock of the Company
or any Company Subsidiary, or any other equity interests or any rights, warrants
or options to acquire any such shares or interests, other than (i) as otherwise
contractually required or (ii) for any such purchases or redemptions by a
wholly-owned Company Subsidiary with respect to such Company Subsidiary's own
capital stock or other equity interests;
(n) the Company shall not, and shall not permit any Company
Subsidiary to, engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of the Company's
Affiliates, other than transactions solely among the Company and the Company's
Subsidiaries;
(o) the Company shall not, and shall not permit any Company
Subsidiary to, (i) enter into any contract, agreement or arrangement (whether
written or oral) that if existing on the date hereof would be a "Company
Contract" other than Contracts with suppliers and customers in the ordinary
course consistent with past practice, or (ii) terminate, amend, supplement or
modify in any material respect, or waive any material term under, any Company
Contract to which the Company or any of the Company Subsidiaries is a party;
(p) the Company shall not, and shall not permit any Company
Subsidiary to, waive, fail to enforce or grant any consent under any provision
of any confidentiality agreement or standstill or similar agreement (or any
agreement containing a standstill or similar provision) to which it is a party
or otherwise has rights;
(q) the Company shall not, and shall not permit any Company
Subsidiary to, enter into any material line of business other than the line of
business in which the Company and the Company Subsidiaries are currently engaged
as of the date of hereof;
39
(r) the Company shall not, and shall not permit any Company
Subsidiaries to, take or agree to take any action (including entering into
agreements with respect to acquisitions, mergers, consolidations or business
combinations) which would reasonably be expected to materially delay or impede
the consummation of the Merger; and
(s) the Company shall not, and shall not permit any Company
Subsidiary to, agree or commit to do any of the foregoing.
Section 7.2 Conduct of Parent and Merger Sub Pending the Merger.
(a) During the period from the date of this Agreement through the
Effective Time, Parent shall not, and shall not permit any of its Subsidiaries
or Affiliates to, take or agree to take any action (including entering into
agreements with respect to acquisitions, mergers, consolidations or business
combinations) which would reasonably be expected to materially delay or impede
the consummation of the Merger.
(b) During the period from the date of this Agreement through the
Effective Time, Merger Sub shall not engage in any activity of any nature except
as provided in or contemplated by this Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 Access and Information. Upon reasonable prior notice and
subject to Applicable Law, the Company shall, and shall cause the Company
Subsidiaries to, afford to Parent and its financial advisors, legal counsel,
financing sources, accountant or other advisor, agent or authorized
representative (collectively, "Representatives") reasonable access during normal
business hours and without undue disruption of normal business activity
throughout the period prior to the Effective Time to all of its books, records,
properties, premises, personnel and advisors during such period and shall
furnish, and shall cause to be furnished, as promptly as reasonably practicable
to Parent, (a) a copy of each report, schedule and other document filed or
received by the Company or any Company Subsidiary pursuant to the requirements
of the federal securities laws or a Governmental Entity, except, with respect to
examination reports, as is restricted by Applicable Law, and (b) all other
information as Parent reasonably may request; provided that the Company and the
Company Subsidiaries shall not be obligated to disclose (A) any competitively
sensitive information or (B) any information that, in the reasonable judgment of
outside counsel to the Company, would result in the loss of attorney-client
privilege with respect to such information. The Company shall give prompt
written notice to Parent, and Parent shall give prompt written notice to the
Company, upon obtaining knowledge of (i) any notice or other communication
received by such party from any Governmental Entity in connection with this
Agreement, the Merger or the transactions contemplated hereby, or from any
person alleging that the consent of such person is or may be required in
connection with the Merger or the transactions contemplated hereby, (ii) any
suits, actions, proceedings or investigations commenced or, to such party's
40
knowledge, threatened against, relating to or involving or otherwise affecting
such party or any of its subsidiaries which relate to this Agreement, the Merger
or the transactions contemplated hereby, and (iii) any event, occurrence, fact,
condition, change, development or effect known to it that (a) in the case of the
Company, individually or taken together with all other events, occurrences,
facts, conditions, changes, developments or effects known to it, has had, or
would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect and (b) would cause or constitute, or would
reasonably be expected to cause or constitute, a breach in any material respect
of any of such person's representations, warranties, covenants or agreements
contained herein. Notwithstanding the foregoing, neither any investigation
pursuant to this Section 8.1 nor the delivery of any notice pursuant to this
Section 8.1 shall limit or otherwise affect any remedies available to Parent or
the Company, as applicable, or prevent or cure any misrepresentations, breach of
warranty or breach of covenant or the conditions to the obligations of the
parties under this Agreement. Each party shall continue to abide by the terms of
the confidentiality agreement between Sun Capital Partners Group IV, Inc. and
the Company, dated March 30, 2007 (the "Confidentiality Agreement").
Section 8.2 Proxy Statement.
(a) As soon as reasonably practicable, and in any event within 14
days, following the date hereof, the Company shall prepare and file with the
SEC, a proxy statement relating to the approval of this Agreement by the
Company's stockholders (as amended or supplemented from time to time, the "Proxy
Statement"). Parent shall cooperate with the Company in connection with the
preparation of the Proxy Statement and shall furnish all information concerning
Parent as the Company may reasonably request in connection with the preparation
of the Proxy Statement. The Company shall use its reasonable best efforts to
have the Proxy Statement cleared by the SEC as promptly as reasonably
practicable after such filing. The Company will use commercially reasonable
efforts to cause the Proxy Statement to be mailed to the Company's stockholders
as promptly as reasonably practicable after the Proxy Statement is cleared by
the SEC.
(b) The Company shall as promptly as practicable notify Parent of
(i) the receipt of any comments from the SEC and all other written
correspondence and oral communications with the SEC relating to the Proxy
Statement and (ii) any request by the SEC for any amendment or supplement to the
Proxy Statement or for additional information with respect thereto; provided
that the Company shall give Parent copies of all written materials contemplated
by clause (i) or (ii). All filings by the Company with the SEC in connection
with the transactions contemplated hereby, including the Proxy Statement and any
amendment or supplement thereto, shall be subject to the prior review and
comment of Parent, and all mailings to the Company's stockholders in connection
with the Merger and transactions contemplated by this Agreement shall be subject
to the prior review and comment of Parent.
(c) If at any time prior to the Effective Time any information
relating to the Company, Parent or Merger Sub, or any of their respective
Affiliates, directors or officers, which should be set forth in an amendment or
41
supplement to the Proxy Statement, so that the Proxy Statement would not include
any misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, is discovered by the Company, Parent or Merger Sub,
the party that discovers such information shall promptly notify the other
parties and an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required by Applicable
Law, disseminated to the stockholders of the Company.
Section 8.3 Company Stockholders' Meeting. The Company, acting through
the Company Board, shall, in accordance with its Constituent Documents, promptly
and duly call, give notice of, convene and hold as soon as practicable following
the date upon which the Proxy Statement is cleared by the SEC, a meeting of the
holders of Common Shares (the "Company Stockholders' Meeting") for the sole
purpose of seeking the Company Stockholder Approval and shall (a) except as
otherwise provided in Section 8.4(b), recommend approval of this Agreement and
include in the Proxy Statement the Recommendation and (b) use its commercially
reasonable efforts to solicit the approval of this Agreement by the holders of
the Common Shares. Unless this Agreement has been terminated, nothing contained
in this Agreement (including any Adverse Recommendation Change) will limit the
Company's obligation to convene and hold the Company Stockholders Meeting
(regardless of whether the Company Board shall have made an Adverse
Recommendation Change); provided, that the Company Board may fail to include the
Recommendation in the Proxy Statement if the Company Board shall have made an
Adverse Recommendation Change.
Section 8.4 Acquisition Proposals.
(a) The Company shall not, nor shall it authorize or permit any
Company Subsidiary, or any of their respective directors, officers or employees
or any Representatives retained by it or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or knowingly induce, encourage or facilitate
(including by way of furnishing non-public information or providing access to
its properties, books, records or personnel) any inquiries regarding, or the
making, submission or announcement of any proposal that constitutes or could
reasonably be expected to lead to, an Alternative Transaction Proposal or (ii)
enter into, continue or otherwise participate in any discussions or negotiations
(other than with Parent, Merger Sub or their respective directors, officers or
employees or Representatives) regarding, or furnish to any Person any
information with respect to, or otherwise cooperate in any way with, any
Alternative Transaction Proposal. The Company and the Company Subsidiaries will
immediately cease and cause to be terminated any and all existing activities,
discussions or negotiations (including any such activities, discussions or
negotiations conducted by Affiliates or representatives of the Company or the
Company Subsidiaries) with respect to consideration of any Alternative
Transaction Proposal. The Company will exercise any rights under any
confidentiality or non-disclosure agreements with any such third parties to
require the return or destruction of non-public information provided prior to
the date of this Agreement by the Company, the Company Subsidiaries or their
agents and representatives to any such third parties. Notwithstanding the
foregoing, at any time prior to obtaining the Company Stockholder Approval, in
42
response to an unsolicited bona fide written Alternative Transaction Proposal
that the Company Board determines in good faith (i) after consultation with a
financial advisor of nationally recognized reputation and the Company's outside
legal advisor, that such Alternative Transaction Proposal constitutes or is
reasonably expected to lead to a Superior Proposal and (ii) after consultation
with outside counsel, that the failure to take the actions set forth in clauses
(x) and (y) below with respect to such Alternative Transaction Proposal would be
inconsistent with its fiduciary duties to the holders of the Common Shares under
Applicable Law, the Company may in response to such Alternative Transaction
Proposal, subject compliance with Section 8.4(d), and after giving Parent
written notice of such action, (x) furnish information with respect to the
Company and the Company Subsidiaries to the Person making such Alternative
Transaction Proposal (and its Representatives) pursuant to an executed
confidentiality agreement containing terms no more favorable to such person than
those contained in the Confidentiality Agreement, including in respect to any
standstill provisions; provided that a copy of all such information not
previously provided to Parent (or its Representatives) is promptly provided to
Parent, and (y) participate in discussions or negotiations with the Person
making such Alternative Transaction Proposal (and its Representatives) regarding
such Alternative Transaction Proposal. Notwithstanding the foregoing, nothing in
this Section 8.4(a) shall prohibit the Company from contacting and engaging in
discussions with any Person who has made an unsolicited bona fide written
Alternative Transaction Proposal solely for the purpose of clarifying such
Alternative Transaction Proposal and any material terms, and the conditions to
consummation, thereof so as to determine whether it could be reasonably expected
for such Alternative Transaction Proposal to lead to a Superior Proposal.
(b) Neither the Company Board nor any committee thereof shall,
directly or indirectly, (i) withdraw (or amend or modify in a manner adverse to
Parent) or publicly propose to withdraw (or amend or modify in a manner adverse
to Parent), the Recommendation (any action described in this clause (i) being
referred to as an "Adverse Recommendation Change"), (ii) recommend, adopt or
approve, or propose publicly to recommend, adopt or approve, any Alternative
Transaction Proposal or (iii) approve or recommend, or publicly propose to
approve or recommend, or allow the Company or any Company Subsidiary to execute
or enter into, any letter of intent, memorandum of understanding, agreement in
principle, merger agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other similar agreement, arrangement
or understanding (A) relating to any Alternative Transaction Proposal or (B)
requiring it to abandon, delay, terminate or fail to consummate the Merger or
any other transaction contemplated by this Agreement; provided that in the case
of clause (iii), that the Company shall not be prohibited from entering into a
confidentiality agreement pursuant to Section 8.4(a). Notwithstanding the
foregoing, at any time prior to obtaining the Company Stockholder Approval, the
Company Board may make an Adverse Recommendation Change if the Company Board
determines in good faith, after consultation with outside counsel, that the
failure to make such Adverse Recommendation Change would be inconsistent with
its fiduciary duties to the holders of the Common Shares under Applicable Law;
provided that the Company Board may not effect an Adverse Recommendation Change
unless (i) the Company Board shall have first provided three (3) Business Days
43
prior written notice to Parent (an "Adverse Recommendation Change Notice") that
it is prepared to effect an Adverse Recommendation Change, which notice shall
contain, with reasonable detail, the facts and conclusions that led the Company
Board to conclude that the failure to take such action could reasonably be
expected to be inconsistent with its fiduciary duties to the Company's
stockholders under Applicable Law (it being understood and agreed that any
material change to such facts and conclusions shall require a new Adverse
Recommendation Change Notice and a new three (3) Business Day notice period) and
(ii) in making a determination to make an Adverse Recommendation Change, the
Board shall have taken into account any changes to the terms of this Agreement
proposed by Parent (in response to an Adverse Recommendation Change Notice or
otherwise). No Adverse Recommendation Change shall change the approval of the
Board for purposes of causing any state takeover statute or other state law to
be inapplicable to the transactions contemplated by this Agreement.
(c) Notwithstanding anything to the contrary contained herein, the
Company or the Company Board shall be permitted to comply with Rule 14d-9 and
14e-2 promulgated under the Exchange Act, including by taking and disclosing to
the Company's stockholders a position with respect to a tender offer by a third
party if, in the good faith judgment of the Company Board (after consultation
with outside counsel), failure to so disclose would be inconsistent with its
obligations under Applicable Law.
(d) In addition to the obligations of the Company listed in
Section 8.4(a) and Section 8.4(b), the Company shall promptly (and, in any
event, within 24 hours) advise Parent orally and in writing of any Alternative
Transaction Proposal, the terms and conditions of any such Alternative
Transaction Proposal (including any changes thereto) and the identity of the
Person making any such Alternative Transaction Proposal and of any discussions,
explorations or negotiations sought to be entered into or continued by such
Person with the Company, any Company Subsidiary or any of their respective
directors, officers, employees or Representatives. The Company shall keep Parent
reasonably informed of the status (including any change to the terms and
conditions thereof) of any such Alternative Transaction Proposal.
Section 8.5 Filings; Other Action. Subject to the terms and conditions
herein provided the Company and Parent shall (a) promptly, but in no event later
than ten (10) Business Days after the date hereof, make all filings and
submissions required under the HSR Act with respect to the Merger and the other
transactions contemplated hereby, and use best efforts to cause the expiration
or termination of any applicable waiting periods under the HSR Act, (b) use
reasonable best efforts to cooperate with each other in (i) determining which
filings are required to be made prior to the Effective Time with, and which
material consents, approvals, permits, notices or authorizations are required to
be obtained prior to the Effective Time from, Governmental Entities in
connection with the execution and delivery of this Agreement and related
agreements and consummation of the transactions contemplated hereby and thereby
and (ii) promptly making all such filings and timely seeking all such consents,
approvals, permits, notices or authorizations, and (c) use reasonable best
efforts to take, or cause to be taken, all other actions and do, or cause to be
done, all other things necessary or appropriate to consummate the transactions
44
contemplated hereby, including the Merger, as soon as practicable, including
using best efforts to take all such further action as may be necessary (A) to
resolve such objections, if any, as any Governmental Entity may assert under any
Applicable Law with respect to the transactions contemplated hereby, including
the Merger, and (B) to avoid or eliminate each and every impediment under any
Applicable Law that may be asserted by any Governmental Entity with respect to
the transactions contemplated hereby, including the Merger and, so as to enable
the Closing to occur as promptly as practicable and in any event no later than
the Outside Date; provided, that Parent shall not be required to consent to the
divestiture or other disposition of any of its or its Affiliates' assets, except
as would have an immaterial impact on Parent and its Affiliates taken as a
whole, or to consent to any other structural or conduct remedy and shall have no
obligation to contest, administratively or in court, any ruling, order or other
action of any Governmental Entity respecting the transactions contemplated by
this Agreement. In connection with the foregoing, the Company, on the one hand,
will provide Parent, and Parent, on the other hand, will provide the Company,
with copies of material correspondence, filings or communications (or oral
summaries or memoranda setting forth the substance thereof) between such party
or any of its Representatives, on the one hand, and any Governmental Entity or
members of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby.
Section 8.6 Public Announcements; Public Disclosures; Privacy Laws.
Parent and the Company will consult with each other before issuing any press
release or making any public statement with respect to this Agreement or the
transactions contemplated hereby and, except for any press release or public
statement as may be required by Applicable Law or by obligations pursuant to any
listing agreement with or rules of any securities exchange, will not issue any
such press release or make any such public statement without the consent of the
other party (not to be unreasonably delayed, conditioned or withheld).
Section 8.7 Employee Matters.
(a) Until the twelve (12)-month anniversary of the Effective Time
(the "Benefits Continuation Period"), and subject to the last sentence of this
Section 8.7(a), Parent shall provide, or shall cause the Surviving Corporation
or any of their respective Subsidiaries to provide, for those employees of the
Company and the Company Subsidiaries who continue as employees of Parent, the
Surviving Corporation or any of their respective Subsidiaries during the
Benefits Continuation Period (the "Company Employees"), (i) at least the same
level of base salary and wages and (ii) employee benefits that are comparable in
the aggregate to those currently provided by the Company or the applicable
Company Subsidiary to such employees pursuant to the Company Benefit Plans set
forth on Section 5.15(a) of the Company Disclosure Letter (excluding any equity
or equity-based plans and severance, retention or change of control plans or
agreements). Without limiting the generality of the foregoing, Parent shall
provide, or shall cause the Surviving Corporation or any of their respective
Subsidiaries to provide, severance and any similar benefits to Company Employees
which are comparable in the aggregate to the severance and similar benefits
currently provided under the Company Benefit Plans for the Benefit Continuation
45
Period, including by recognizing all service currently recognized for such
purposes under the applicable Company Benefit Plan.
(b) For purposes of determining eligibility to participate,
vesting and entitlement to benefits where length of service is relevant (but not
for purposes of benefit accrual under any defined benefit pension plan) under
any benefit plan or arrangement of Parent, the Surviving Corporation or any of
their respective Subsidiaries providing benefits to any Company Employee after
the Effective Time (collectively, the "New Plans"), the employees (including
officers) of the Company and the Company Subsidiaries shall receive service
credit for service with the Company and the Company Subsidiaries (and any
respective predecessors) to the same extent such service credit was granted
under the Company Benefit Plans, except to the extent any such service credit
would result in the duplication of benefits. In addition and without limiting
the generality of the foregoing: (i) each Company Employee shall be immediately
eligible to participate, without any waiting time or satisfaction of any other
eligibility requirements, in any and all New Plans to the extent that (A)
coverage under such New Plan replaces coverage under a Company Benefit Plan in
which such Company Employee participated immediately before the Effective Time
(collectively, the "Old Plans") and (B) such Company Employee has satisfied all
waiting time and other eligibility requirements under the Old Plan being
replaced by the New Plan; and (ii) for purposes of each New Plan providing
medical, dental, pharmaceutical and/or vision benefits to any Company Employee,
Parent shall cause (x) all pre-existing condition exclusions and
actively-at-work requirements of such New Plan to be waived for such employee
and his or her covered dependents to the extent such exclusions and requirements
were not applicable under the Old Plan and (y) any expenses incurred by any
Company Employee and his or her covered dependents during the portion of the
plan year of the Old Plan ending on the date such employee's participation in
the corresponding New Plan begins to be taken into account under such New Plan
for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year as if such amounts had been paid in accordance with
such New Plan.
(c) From and after the Effective Time, Parent shall, and shall
cause the Surviving Corporation to, assume and honor in accordance with their
terms the employment, severance and termination plans and agreements (including
change in control provisions) with employees or independent contractors of the
Company and the Company Subsidiaries set forth in Section 8.7 of the Company
Disclosure Letter.
(d) Nothing in this Section 8.7 or any other provision of this
Agreement shall be construed to modify, amend or establish any employee benefit
plan, program or arrangement or in any way affect the ability of the parties
hereto or any other Person to modify, amend or terminate any of its employee
benefit plans, programs or arrangements. This Section 8.7 is not intended to,
and shall not be construed to, confer upon any person other than the parties to
this Agreement any rights or remedies hereunder.
Section 8.8 Company Indemnification Provisions.
46
(a) Parent shall or shall cause the Surviving Corporation to
maintain the Company's existing indemnification provisions as of the date hereof
with respect to present and former directors, officers, employees and agents of
the Company and all other Persons who may presently serve or have served at the
Company's request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
(collectively, the "Indemnified Parties") under (i) Applicable Law, (ii) the
Company's Constituent Documents in effect on the date hereof (to the extent
consistent with Applicable Law) and (iii) indemnification agreements of the
Company or any Company Subsidiary in effect on the date hereof (to the extent
consistent with Applicable Law) for a period of not less than six (6) years
after the Effective Time, and Parent shall cause the Surviving Corporation to
perform its obligations under such indemnification provisions in accordance with
their respective terms.
(b) Immediately prior to the Effective Time, Parent shall or shall
cause the Surviving Corporation to purchase a single payment, run-off policy or
policies of directors' and officers' liability insurance covering the Persons
currently covered by the Company's existing directors' and officers' liability
insurance policies for claims currently covered by the Company's existing
directors' and officers' liability insurance policies arising in respect of acts
or omissions occurring prior to the Effective Time (but only in respect thereof)
in amount and scope at least as favorable, in the aggregate, as the Company's
existing policies, such policy or policies to become effective at the Effective
Time and remain in effect for a period of six (6) years after the Effective
Time; provided, however, that the premium for such run-off policy or policies
shall not exceed three hundred percent (300%) of the aggregate annual amounts
currently paid by the Company to maintain its existing directors' and officers'
liability insurance policies (which amount is disclosed in Section 8.8(b) of the
Company Disclosure Letter); provided, further, that, if such run-off policy or
policies cannot be obtained or can be obtained only by paying aggregate premiums
in excess of three hundred percent (300%) of such amount, Parent or the
Surviving Corporation, as the case may be, shall only be required to obtain as
much coverage as can be obtained by paying a premium equal to three hundred
percent (300%) of such amount.
(c) If Parent, the Surviving Corporation or any of its or their
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to any individual, corporation or
other entity, then and in each such case, proper provisions shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume all of the obligations set forth in this Section 8.8.
(d) The provisions of this Section 8.8 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
47
Section 8.9 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to the Merger, this Agreement, the
Stockholders Agreements or the transactions contemplated hereby or thereby, the
parties shall use commercially reasonable efforts to (a) take such actions as
are reasonably necessary so that the transactions contemplated hereunder may be
consummated as promptly as practicable on the terms contemplated hereby and (b)
otherwise take all such actions as are reasonably necessary to eliminate or
minimize the effects of any such statute or regulation on the Merger, this
Agreement, the Stockholders Agreements or the transactions contemplated hereby
or thereby.
Section 8.10 Solvency Letter. The parties shall engage, at the expense
of the Company (except that, if the Closing does not occur, the Company and
Merger Sub shall share such expense equally), an appraisal firm of national
reputation reasonably acceptable to Parent and the Company to deliver a letter
in a form reasonably acceptable to the Company Board and addressed to the
Company Board and the board of directors of Parent and, if requested by them,
the lenders providing any financing to Parent, Merger Sub or the Surviving
Corporation indicating that, immediately after the Effective Time, and after
giving effect to the Merger and the other transactions contemplated hereby,
including any financing contemplated by Parent and the payment of the aggregate
Merger Consideration and all related fees and expenses, the Company will be
Solvent. Without limiting the generality of the foregoing, each of Parent and
the Company shall use their respective reasonable best efforts to (a) make
available to such appraisal firm their respective officers, employees and
advisors upon reasonable notice and (b) provide or make available such
information concerning the business, properties, assets and liabilities of the
Company, in each case as may be reasonably requested by such appraisal firm in
connection with the delivering of such letter.
Section 8.11 Financing. The Company shall and shall cause its
subsidiaries, directors, officers, employees and Representatives (including its
outside legal advisors and independent accountants) provide to Parent and Merger
Sub all cooperation reasonably requested by Parent that is necessary, proper or
advisable in connection with any financing contemplated by Parent (including the
Financing or any alternative financing), including (i) participation in
meetings, (ii) assisting with the preparation of materials required in
connection with any such financing, (iii) executing and delivering definitive
financing documentation (including pledge and security documents); provided that
no obligation of the Company or any of its subsidiaries under any such document,
agreement or pledge shall be effective until the Effective Time; (iv) furnishing
Parent and its financing sources, as promptly as practicable, with financial and
other pertinent information regarding the Company as may be reasonably requested
by Parent; and (v) taking all corporate actions, subject to the occurrence of
the Effective Time, reasonably requested by Parent to permit the consummation of
any such financing; provided that notwithstanding anything in this Agreement to
the contrary, neither the Company nor any of its subsidiaries shall have any
liability or obligation under any loan agreement or any related document or any
other agreement or document related to any financing unless and until the
Closing has occurred.
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Section 8.12 Rule 16b-3. Prior to the Effective Time, the Company shall
be permitted to take such steps as may be reasonably necessary or advisable
hereto to cause dispositions of Company equity securities (including derivative
securities) pursuant to the transactions contemplated by this Agreement by each
individual who is a director or officer of the Company to be exempt under Rule
16b-3 promulgated under the Exchange Act.
Section 8.13 Control of Operations. Without in any way limiting any
party's rights or obligations under this Agreement, the parties understand and
agree that (i) nothing contained in this Agreement shall give Parent or Merger
Sub, directly or indirectly, the right to control or direct the Company's
operations prior to the Effective Time and (ii) prior to the Effective Time, the
Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its operations.
Section 8.14 Additional Matters. Subject to the terms and conditions
herein provided, each of the parties agrees to use all reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under Applicable Laws and regulations to
consummate and make effective the transactions contemplated hereby, including
using all reasonable best efforts to obtain all necessary waivers, consents and
approvals in connection with the Governmental Requirements and any other third
party consents and to effect all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, Parent, Merger Sub and the
Surviving Corporation shall take all such necessary action.
Section 8.15 Debt Offer. At such time as requested by Parent, the
Company shall (i) commence a cash tender offer (the "Debt Offer") to purchase
any and all of the 8 3/8% Senior Notes of the Company due 2012 (the "Senior
Notes") and (ii) solicit the consent of the holders of the Senior Notes
regarding certain amendments (the "Indenture Amendments") to the covenants
contained in the Indenture, dated as of March 8, 2004, by and between the
Company and the Bank of New York, as trustee. Such offer to purchase and consent
solicitation shall be made in accordance with the written terms and conditions
provided, from time to time, by Parent to the Company and Applicable Law;
provided that in any event, the parties agree that the terms and conditions of
the Debt Offer and Indenture Amendments shall provide that the closing and
effectiveness, respectively, thereof shall be contingent upon the Closing of the
Merger. The Company shall not, without Parent's and Merger Sub's prior consent,
waive any condition to the Debt Offer described in the written terms and
conditions provided by Parent to the Company from time to time. In the event
that this Agreement is terminated pursuant to Section 10.1(a), 10.1(b) (other
than as a result of a breach of this Agreement by the Company), Section 10.1(e)
or Section 10.1(f), Parent shall reimburse the Company for all reasonable
out-of-pocket fees and expenses incurred by the Company that are directly
related to the Debt Offer (including, any reasonable and customary fees and
expenses paid by the Company to any dealer manager, information agent,
depository or other agent retained in connection with the Debt Offer) (the "Debt
Tender Fees"); provided, however, (A) the Company shall be required to return to
Parent any Debt Tender Fees previously paid by Parent to the Company if the
49
Company subsequently uses the materials prepared for the Debt Offer and (B) in
the event that Parent has reimbursed the Company for the Debt Tender Fees and
the Company subsequently becomes obligated to pay Parent the Company Termination
Fee or to reimburse Parent for its Expenses, the Company shall also be required
to return to Parent any Debt Tender Fees previously paid by Parent to the
Company and such return of the Debt Tender Fees shall not be deemed to be Parent
Expenses for the purposes of Section 10.3. The Company shall not enter into any
arrangements in connection with the Debt Offer (including any engagement or
similar agreements with any dealer manager, information agent, depository or
other agent) without the prior written consent of Parent.
Section 8.16 Resignation of Directors. At the Closing, the Company shall
deliver to Parent evidence reasonably satisfactory to Parent of the resignation
of all directors of the Company and, as specified by Parent reasonably in
advance of the Closing, all directors of each subsidiary of the Company, in each
case, effective at the Effective Time.
Section 8.17 Stockholder Litigation. The Company shall give Parent
reasonable opportunity to consult in the defense of any stockholder litigation
against the Company and its directors relating to the transactions contemplated
by this Agreement. The Company shall not settle any such stockholder litigation
without the prior consent of Parent, which consent shall not be unreasonably
withheld or delayed.
ARTICLE IX
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 9.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Any waiting period applicable to consummation of the Merger
under the HSR Act shall have expired or been terminated, and no action shall
have been instituted by the United States Department of Justice or the United
States Federal Trade Commission challenging or seeking to enjoin consummation of
this transaction, which action shall not have been withdrawn or terminated;
(b) No statute, rule, regulation, executive order, decree, ruling,
restraining order or preliminary or permanent injunction of any Governmental
Entity having jurisdiction which prohibits, restrains or enjoins consummation of
the Merger shall be in effect; and
(c) The Company Stockholder Approval shall have been obtained.
Section 9.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction or waiver by the Company at or prior to the Effective Time of
the following additional conditions:
50
(a) Each of Parent and Merger Sub shall have performed in all
material respects their respective obligations under this Agreement required to
be performed at or prior to the Effective Time;
(b) The representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all respects when made
and as of the Effective Time as if made at such time (except to the extent such
representations and warranties speak as of a specified date, which need only be
true and correct in all respects as of such specified date), interpreted without
giving effect to the words "materially" or "material" or to any qualifications
based on such terms or based on the defined term Parent Material Adverse Effect,
except where the failure of all such representations and warranties to be true
and correct, in the aggregate, has not had, or would not reasonably be expected
to have a Parent Material Adverse Effect;
(c) The Company shall have received a certificate of an executive
officer of Parent as to the satisfaction of the conditions set forth in Section
9.2(a) and (b); and
(d) The Company Board shall have received the solvency opinion
referred to in Section 8.10.
Section 9.3 Conditions to Obligations of Parent and Merger Sub to Effect
the Merger. The obligations of Parent and Merger Sub to effect the Merger shall
be subject to the satisfaction or waiver by Parent at or prior to the Effective
Time of the following additional conditions:
(a) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed at or prior to the
Effective Time;
(b) (i) the representations and warranties of the Company
contained in Section 5.4 shall be true and correct in all respects when made and
as of the Effective Time as if made at such time, (ii) the representations and
warranties of the Company contained in Section 5.3 (except for deviations of not
more than 0.3% of the number of the outstanding Common Shares disclosed in
Section 5.3) shall be true and correct when made and as of the Effective Time as
if made at such time, and (iii) the representations and warranties of the
Company contained in this Agreement, other than those specified in the foregoing
clauses (i) and (ii), shall be true and correct in all respects when made and as
of the Effective Time as if made at such time (except to the extent such
representations and warranties speak as of a specified date, which need only be
true and correct in all respects as of such specified date), interpreted without
giving effect to the words "materially" or "material" or to any qualifications
based on such terms or based on the defined term Company Material Adverse
Effect, except where the failure of all such representations and warranties to
be true and correct, in the aggregate, has not had, or would not reasonably be
expected to have, a Company Material Adverse Effect; and
51
(c) Parent and Merger Sub shall have received a certificate of the
chief executive officer and chief financial officer of the Company as to the
satisfaction of the conditions set forth in Section 9.3(a) and (b).
Section 9.4 Frustration of Closing Conditions. None of the Company,
Parent or Merger Sub may rely on the failure of any condition set forth in
Section 9.1, Section 9.2 or Section 9.3, as the case may be, to be satisfied if
such failure was caused by such party's failure to act in good faith or to use
its reasonable best efforts to consummate the Merger and the other transactions
contemplated by this Agreement, as required by and subject to Section 8.5.
ARTICLE X
TERMINATION
Section 10.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, whether before or after the Company Stockholder Approval is obtained:
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have
been consummated on or before the date that is six (6) months (the "Outside
Date") after the date hereof (other than due principally to the failure of the
party seeking to terminate this Agreement to perform any obligations under this
Agreement required to be performed by it at or prior to the Effective Time);
provided, that the Outside Date may be extended for a period not to exceed
forty-five (45) days by either party by written notice to the other party if the
Merger shall not have been consummated as a result of the condition set forth in
Section 9.1(a) failing to have been satisfied and the extending party reasonably
believes that the relevant approvals will be obtained during such extension
period;
(c) By Parent, if (i) an Adverse Recommendation Change shall have
occurred, (ii) the Company Board shall have recommended, adopted or approved, or
proposed publicly to recommend, adopt or approve, any Alternative Transaction
Proposal or acquisition agreement related thereto, (iii) the Company Board shall
have failed to reaffirm the Recommendation within three (3) Business Days
following receipt from Parent of a written request for such a reaffirmation or
(iv) the Company, any Company Subsidiary or the Company Board knowingly and
willfully breaches any of its obligations under Section 8.4;
(d) By Parent or the Company, if the Company Stockholder Approval
shall not have been obtained by reason of the failure to obtain the Requisite
Stockholder Vote at the Company Stockholders' Meeting or at any adjournment or
postponement thereof;
(e) By Parent or the Company, if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action is or shall have become final and non-appealable;
52
provided that the party seeking to terminate this Agreement pursuant to this
Section 10.1 shall not have taken any action that would cause it to be in
material violation of any of its representations, warranties or covenants set
forth in this Agreement;
(f) By the Company, if prior to the Closing Date there shall have
been a breach or inaccuracy of any representation, warranty, covenant or
agreement on the part of Parent or Merger Sub contained in this Agreement, which
breach or inaccuracy would (A) give rise to the failure of a condition set forth
in Section 9.2 and (B) is incapable of being cured prior to the Closing Date by
Parent or Merger Sub, as the case may be, or is not cured within sixty (60) days
of written notice of such breach or inaccuracy;
(g) By Parent, if prior to the Closing Date there shall have been
a breach or inaccuracy of any representation, warranty, covenant or agreement on
the part of the Company contained in this Agreement, which breach or inaccuracy
would (A) give rise to the failure of a condition set forth in Section 9.3 and
(B) is incapable of being cured prior to the Closing Date by the Company or is
not cured within sixty (60) days of written notice of such breach or inaccuracy;
and
(h) By the Company if, at any time prior to receipt of the Company
Stockholder Approval, (i) the Company Board has effected an Adverse
Recommendation Change in accordance with Section 8.4(b) as the result of the
Company's receipt of an Alternative Transaction Proposal that the Board
determines in good faith (after consultation with a financial advisor of
nationally recognized reputation and the Company's outside legal advisor)
constitutes or is reasonably expected to lead to a Superior Proposal and (ii)
simultaneously with such termination, the Company pays to Parent the Company
Termination Fee pursuant to the terms of Section 10.3(a).
Section 10.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 10.1, this Agreement shall forthwith become
null and void and have no effect and the obligations of the parties under this
Agreement shall terminate, except for the obligations in the last sentence of
Section 8.1, all of the provisions of Section 5.14, Section 6.5, this Section
10.2, Section 10.3, Article I and Article XI and there shall be no liability on
the part of any party hereto; provided, however, that no party shall be relieved
or released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
Section 10.3 Fees and Expenses.
(a) In the event that this Agreement is terminated by Parent
pursuant to Section 10.1(c) or by the Company pursuant to Section 10.1(h), then
the Company shall pay Parent a fee equal to $5,000,000 (the "Company Termination
Fee") (i) in the case of a termination pursuant to Section 10.1(c) as promptly
as reasonably practicable (and, in any event, within two Business Days following
such termination) by wire transfer of same day funds and (ii) in the case of a
termination pursuant to Section 10.1(h), simultaneously with such termination by
wire transfer of same day funds; provided that the provisions of this Section
10.3(a) shall be subject to Section 10.3(e).
53
(b) In the event that this Agreement is terminated by Parent or
the Company pursuant to Section 10.1(b), Section 10.1(d) or by Parent pursuant
to Section 10.1(g), and (A) if at any time after the date of this Agreement and
prior to such termination (in the case of a termination pursuant to Section
10.1(b) or Section 10.1(g)) or prior to the taking of a vote to adopt this
Agreement at the Company Stockholders' Meeting or any postponement or
adjournment thereof (in the case of a termination pursuant to Section 10.1(d)),
an Alternative Transaction Proposal shall have been made or communicated to the
Company or shall have been publicly announced or publicly made known to the
stockholders of the Company and (B) within twelve (12) months after such
termination, the Company shall have entered into a definitive agreement with
respect to, or shall have consummated, an Alternative Transaction Proposal,
then, in any such event, the Company shall pay to Parent the Company Termination
Fee, such payment to be made upon the earlier of the Company entering into an
agreement providing for, or consummating, such Alternative Transaction Proposal,
by wire transfer of same day funds; provided that the provisions of this Section
10.3(c) shall be subject to Section 10.3(e).
(c) In the event that the conditions set forth in Section 9.1 and
Section 9.3 have been satisfied (unless the failure to satisfy any such
conditions is due to the failure by Parent or Merger Sub to satisfy their
respective obligations set forth therein) and, in the event that this Agreement
is terminated by the Company pursuant to Section 10.1(f) as a result of the
breach by Parent of its obligation under Sections 2.2 and 2.3 to consummate the
Merger, Parent shall pay a fee equal to $5,000,000 (the "Parent Termination
Fee") to the Company or as directed by the Company as promptly as reasonably
practicable (and, in any event, within two (2) Business Days following such
termination), payable by wire transfer of same day funds; provided that the
provisions of this Section 10.3(c) shall be subject to Section 10.3(e).
(d) Each of the Company and Parent acknowledges that the
agreements contained in this Section 10.3 are an integral part of the
transactions contemplated by this Agreement and that, without these agreements,
neither Parent nor the Company would have entered into this Agreement.
Accordingly, in the event that the Company shall fail to pay the Company
Termination Fee when due or Parent shall fail to pay the Parent Termination Fee
when due, and in order to obtain such payment, the Company or Parent, as the
case may be, commences a suit which results in a judgment against such other
party for such fee, then the Company or Parent, as the case may be, shall pay to
the other party such other party's reasonable costs and expenses (including
reasonable attorneys' fees and expenses of enforcement) in connection with such
suit, together with interest on the amounts owed at the prime lending rate
prevailing at such time, as published in The Wall Street Journal, plus two
percent (2%) per annum from the date such amounts were required to be paid until
the date actually received by such party. Each party acknowledges that in the
event it receives the Parent Termination Fee (in the case of the Company) or the
Company Termination Fee (in the case of Parent), as the case may be, such Parent
Termination Fee or Company Termination Fee, as the case may be, (plus any
additional amounts pursuant to the second sentence of this Section 10.3(c) or
payable pursuant to Section 10.3(e)) shall constitute such party's sole and
exclusive remedy for, and such amount shall constitute liquidated damages in
respect of, the breach or termination of this Agreement regardless of the
circumstances giving rise to such breach or termination and such party shall
54
have no further rights, directly or indirectly, against any other party hereto
or any of their respective Affiliates, stockholders, partners, members,
directors, officers and agents or against any party to the Financing Commitment,
whether at law or equity, in contract, in tort or otherwise.
(e) Except as otherwise specifically provided herein, each party
shall bear its own Expenses in connection with this Agreement and the
transactions contemplated hereby, except that in the event this Agreement is
terminated (i) pursuant to Section 10.1(d) or Section 10.1(g) in addition to any
payments it may be required to make to Parent in respect of such termination,
promptly following such termination the Company, shall reimburse Parent for all
of Parent's Expenses in an amount not to exceed $4,000,000; provided, however,
if a Company Termination Fee is subsequently payable to Parent, the Company
Termination Fee shall equal the lesser of (A) $5,000,000 and (B) $6,500,000
minus the amount of Parent Expenses previously reimbursed to the Company
pursuant to this Section 10.3(e), (ii) pursuant to Section 10.1(c) or Section
10.1(h), in addition to any payments it may be required to make to Parent in
respect of such termination, the Company shall promptly reimburse Parent for all
of Parent's Expenses in an amount not to exceed $1,500,000 and (iii) pursuant to
Section 10.1(b) and Parent subsequently becomes entitled to receive the Company
Termination Fee, in addition to any payments it may be required to make to
Parent in respect of such termination, promptly following the time that Parent
becomes entitles to receive the Company Termination Fee the Company shall
reimburse Parent for all of Parent's Expenses in an amount not to exceed
$1,500,000. As used in this Agreement, "Expenses" includes all reasonable,
documented out-of-pocket expenses (including all reasonable fees and expenses of
counsel, accountants, financial advisors, experts and consultants to a party
hereto and its Affiliates) actually incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby, including the preparation, printing, filing and mailing of the Proxy
Statement and the solicitation of stockholder approvals and all other matters
related to the transactions contemplated hereby (but shall not include the Debt
Tender Expenses).
ARTICLE XI
MISCELLANEOUS
Section 11.1 Survival of Representations, Warranties and Agreements. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Effective Time except as set
forth in Section 10.3. This Section 11.1 shall not limit any covenant or
agreement set forth in this Agreement that by its terms contemplates performance
after the Effective Time, which covenants and agreements shall survive the
Effective Time.
Section 11.2 Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (a) upon
confirmation of receipt of a facsimile transmission or (b) when sent by an
internationally recognized overnight carrier (providing proof of delivery) or
when delivered by hand, addressed to the respective parties at the following
55
addresses (or such other address for a party as shall be specified by like
notice):
(a) If to Parent or Merger Sub, to:
c/o Sun Capital Partners, Inc.
5200 Town Center Circle
Suite 470
Boca Raton, Florida 33486
Attention: Gary Talarico and Deryl Couch
Facsimile: (561) 394-0540
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile: (212) 309-6001
Attn: Steven A. Navarro, Esq.
(b) If to the Company, to:
Friendly Ice Cream Corporation
1855 Boston Road
Wilbraham, Massachusetts 01095
Facsimile: (413) 543-3282
Attention: Gregory Pastore, General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Facsimile: (212) 310-8007
Attn: Michael J. Aiello, Esq.
Section 11.3 Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 11.4 Entire Agreement; Assignment. This Agreement (including the
Exhibits, Disclosure Letters and other documents and instruments referred to
herein) constitutes the entire agreement and supersedes all other prior
agreements and understandings (other than those contained in the Confidentiality
Agreement, which is hereby incorporated by reference herein), both written and
oral, among the parties or any of them, with respect to the subject matter
hereof, including any transaction between or among the parties. This Agreement
shall not be assigned by operation of law or otherwise, except that Merger Sub
may, with the prior written consent of the Company (not to be unreasonably
56
withheld), assign all of its rights and obligations hereunder to any wholly
owned Subsidiary of Parent, which Subsidiary shall thereupon be substituted for
Merger Sub for all purposes hereof.
Section 11.5 Governing Law and Venue; Waiver of Jury Trial.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES OF CONFLICTS OF LAW
EXCEPT TO THE EXTENT THAT THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS IS
MANDATORILY APPLICABLE TO THE MERGER. The parties hereby irrevocably submit to
the jurisdiction of the courts of the County and State of New York and the
Commonwealth of Massachusetts and the Federal courts of the United States of
America located in the County and State of New York or the Commonwealth of
Massachusetts solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to herein, and in
respect of the transactions contemplated hereby, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a New York State, Massachusetts
Commonwealth or Federal court. The parties hereby consent to and grant any such
court jurisdiction over the person of such parties solely for such purpose and
over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 11.2 or in such other manner as may be permitted by law
shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 11.5.
57
Section 11.6 Expenses. Subject to Section 10.3, whether or not the
Merger is consummated, all costs and expenses incurred in connection with this
Agreement, and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expenses.
Section 11.7 Amendment. This Agreement may not be amended except prior
to the Effective Time by an instrument in writing signed on behalf of each of
the parties in accordance with Applicable Law.
Section 11.8 Waiver. At any time prior to the Effective Time, Parent, on
the one hand, and the Company on the other may (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto of the Company in the case of Parent, or Parent or
Merger Sub, in the case of the Company, and (c) waive compliance with any of the
agreements or conditions contained herein of the Company, in the case of Parent,
or Parent or Merger Sub, in the case of the Company. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. No failure or
delay by any party in exercising any right, power or privilege hereunder shall
act as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
Section 11.9 Counterparts; Effectiveness. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same instrument. This Agreement shall
become effective when each party shall have received counterparts thereof signed
and delivered (by facsimile or otherwise) by all of the other parties.
Section 11.10 Severability; Validity; No Third-Party Beneficiaries. If
any provision of this Agreement, or the application thereof to any Person or
circumstance is held invalid or unenforceable, the remainder of this Agreement,
and the application of such provision to other Persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement are
agreed to be severable. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible. Except as
provided in Section 8.8, nothing in this Agreement, express or implied, is
intended to confer upon any Person not a party to this Agreement any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 11.11 Enforcement of Agreement. The parties agree that
irreparable damage would occur in the event that any provision of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
58
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
[Signature Page Follows]
59
IN WITNESS WHEREOF, each of Parent, Merger Sub and the Company has caused
this Agreement to be executed as of the date first above written.
FREEZE OPERATIONS HOLDING CORP.
By: /s/ Gary Talarico
---------------------------------
Name: Gary Talarico
Title: Vice President
FREEZE OPERATIONS, INC.
By: /s/ Gary Talarico
---------------------------------
Name: Gary Talarico
Title: President
FRIENDLY ICE CREAM CORPORATION
By: /s/ Paul V. Hoagland
---------------------------------
Name: Paul V. Hoagland
Title: Executive Vice President and Chief
Financial Officer
..
SIGNATURE PAGE TO
AGREEMENT AND PLAN OF MERGER
EXHIBIT A
ARTICLES OF ORGANIZATION
OF THE SURVIVING CORPORATION