EXHIBIT 2.1
- ----------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
LONE STAR U.S. ACQUISITIONS LLC
U.S. RESTAURANT PROPERTIES OPERATING LIMITED PARTNERSHIP,
AND
LSF4 ACQUISITION, LLC
AND
SHONEY'S, INC.
DATED AS OF JANUARY 24, 2002
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I THE MERGER.................................................1
Section 1.01 The Merger...................................................1
Section 1.02 Effective Time of the Merger.................................1
Section 1.03 Articles of Incorporation and By-Laws of the Surviving
Corporation..................................................2
Section 1.04 Board of Directors and Officers of the Surviving Corporation.2
Section 1.05 Conversion of Shares.........................................2
Section 1.06 Dissenters' Rights...........................................3
Section 1.07 Stock Plans of the Company...................................3
Section 1.08 Payment for Merger Shares....................................4
Section 1.09 No Further Rights or Transfers...............................6
Section 1.10 Further Assurances...........................................6
ARTICLE II CLOSING....................................................6
Section 2.01 Generally....................................................6
Section 2.02 Deliveries at the Closing....................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................7
Section 3.01 Representations and Warranties of the Company................7
Section 3.02 Representations and Warranties of the Buyers and the Buyer
Subsidiary..................................................30
ARTICLE IV CONDUCT AND TRANSACTIONS BEFORE THE EFFECTIVE TIME........32
Section 4.01 Operation of Business of the Company until Effective Time...32
Section 4.02 Company Shareholders' Meeting; Proxy Statement and Proxy....35
Section 4.03 No Shopping.................................................36
Section 4.04 Access to Information.......................................38
Section 4.05 Amendment of the Company's Employee Plans...................39
Section 4.06 HSR Act.....................................................39
Section 4.07 Confidentiality Agreement...................................39
Section 4.08 Company Rights Agreement....................................39
Section 4.09 Best Efforts; Further Assurances............................39
Section 4.10 Notification of Certain Matters.............................40
Section 4.11 Voting Agreements...........................................41
Section 4.12 Tax Matters.................................................41
Section 4.13 Options.....................................................42
Section 4.14 Pension, Benefit and Welfare Plans..........................42
ARTICLE V CONDITIONS PRECEDENT......................................42
Section 5.01 Conditions to the Obligations of the Buyers and the Buyer
Subsidiary..................................................42
Section 5.02 Conditions to the Obligations of the Company................43
ARTICLE VI CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME.........44
Section 6.01 Indemnification.............................................44
Section 6.02 Directors and Officers Liability Insurance..................44
ARTICLE VII TERMINATION AND ABANDONMENT...............................45
Section 7.01 Termination.................................................45
Section 7.02 Effect of Termination.......................................46
Section 7.03 Fees and Expenses...........................................47
ARTICLE VIII MISCELLANEOUS PROVISIONS..................................48
Section 8.01 Performance of Covenants; Non-Survival of Representations
and Warranties..............................................48
Section 8.02 Amendment and Modification..................................48
Section 8.03 Waiver of Compliance; Consents..............................48
Section 8.04 Press Releases and Public Announcements.....................49
Section 8.05 Certain Definitions.........................................49
Section 8.06 Additional Agreements.......................................52
Section 8.07 Notices.....................................................53
Section 8.08 Assignment..................................................54
Section 8.09 Interpretation..............................................54
Section 8.10 Governing Law; Enforcement..................................54
Section 8.11 Counterparts................................................54
Section 8.12 Headings; Internal References...............................55
Section 8.13 Entire Agreement............................................55
Section 8.14 Severability................................................55
Section 8.15 Other Remedies..............................................55
Section 8.16 Waiver of Jury Trial........................................55
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of January 24, 2002 (the
"Agreement"), is by and among Shoney's, Inc., a Tennessee corporation (the
"Company"), Lone Star U.S. Acquisitions LLC, a Delaware limited liability
company ("LS"), U.S. Restaurant Properties Operating Limited Partnership, a
Delaware limited partnership ("USRPOLP" and with LS, each a "Buyer" and,
collectively, the "Buyers"), and LSF4 Acquisition, LLC, a Delaware limited
liability company formed solely for the purpose of effecting the Merger (as
defined herein) (the "Buyer Subsidiary").
RECITALS
WHEREAS, the Buyers desire to acquire the Company by effecting a merger
(the "Merger") of the Buyer Subsidiary with and into the Company under the
terms hereof, whereby the shareholders of the Company will receive cash for
their shares of capital stock of the Company; and
WHEREAS, the Board of Directors or other governing body of each of the
Company, the Buyers and the Buyer Subsidiary deem the Merger desirable and in
the best interests of their respective shareholders, partners and members of
each of the Company, the Buyers and the Buyer Subsidiary.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties, and agreements herein contained, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 THE MERGER. At the Effective Time (as defined in Section
1.02), and in accordance with the terms of this Agreement, the Tennessee
Business Corporation Act (the "Tennessee Act") and the Limited Liability
Company Act of the State of Delaware (the "Delaware Act"), the Buyer
Subsidiary shall be merged with and into the Company, the separate corporate
existence of the Buyer Subsidiary shall thereupon cease, and the Company
shall be the surviving corporation in the Merger (sometimes referred to as
the "Surviving Corporation"). At the Effective Time, the Merger shall have
the other effects provided in the applicable provisions of the Tennessee Act
and the Delaware Act.
SECTION 1.02 EFFECTIVE TIME OF THE MERGER. Subject to, and promptly
following (but not more than one (1) Business Day (as defined herein) (unless
the Company and the Buyers shall otherwise mutually agree)), the receipt of
the vote of the shareholders of the Company approving this Agreement and the
satisfaction or waiver of all other conditions to the consummation of the
Merger set forth in Article V of this Agreement, the Company and the Buyer
Subsidiary shall (a) execute in the manner required by the Tennessee Act and
deliver for filing to the Secretary of State of the State of Tennessee,
articles of merger with respect to the
Merger (the "Articles of Merger") and (b) execute in the manner required by
the Delaware Act and deliver for filing to the Secretary of State of the
State of Delaware, a certificate of merger with respect to the Merger (the
"Certificate of Merger"). The Merger shall become effective upon the filing
of the Articles of Merger with the Secretary of State of the State of
Tennessee in accordance with Section 48-21-107 of the Tennessee Act and the
filing of the Certificate of Merger with the Secretary of State of the State
of Delaware in accordance with Section 204 of the Delaware Act. The date and
time of the filing of the Articles of Merger and Certificate of Merger, or
such later date and time as may be specified in the Articles of Merger and
the Certificate of Merger by mutual agreement of the Buyers, the Buyer
Subsidiary and the Company, is hereinafter referred to as the "Effective
Time."
SECTION 1.03 ARTICLES OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION. The Charter (as defined herein) of the Company in effect
immediately prior to the Effective Time shall be the Charter of the Surviving
Corporation, until amended in accordance with the laws of the State of
Tennessee and such Charter. The By-Laws of the Company in effect immediately
prior to the Effective Time shall be the By-Laws of the Surviving
Corporation, until further amended in accordance with the laws of the State
of Tennessee, the Charter of the Surviving Corporation and such By-Laws.
SECTION 1.04 BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION. The directors of the Buyer Subsidiary immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each of
such directors to hold office, subject to the applicable provisions of the
Articles of Incorporation and By-Laws of the Surviving Corporation, until the
expiration of the term for which such director was elected and until such
director's successor is elected and has qualified or as otherwise provided in
the Articles of Incorporation or By-Laws of the Surviving Corporation. The
officers of the Buyer Subsidiary immediately prior to the Effective Time
shall be the officers of the Surviving Corporation until their respective
successors are chosen and have qualified or as otherwise provided in the By-
Laws of the Surviving Corporation.
SECTION 1.05 CONVERSION OF SHARES. The manner and basis of converting
the shares of stock of each of the Company and the Buyer Subsidiary shall be
as follows:
(a) At the Effective Time, each share of common stock of the Company,
par value $1.00 per share (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (the "Merger Shares")
(other than (i) Dissenting Shares (as defined herein) and (ii) shares of
Company Common Stock held of record by the Buyers or the Buyer Subsidiary or
any other direct or indirect wholly-owned subsidiary of a Buyer or by the
Company immediately before the Effective Time), shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into, and represent the right to receive, $.36 in cash (the "Merger
Consideration"), without interest. Unless the context otherwise requires,
each reference in this Agreement to shares of Company Common Stock or Merger
Shares shall include the associated Company Rights (as defined herein) issued
pursuant to the Company Rights Agreement (as defined herein). Without
limiting any other provision of this Agreement, the Merger Consideration
shall be adjusted to reflect fully the effect of any stock split, reverse
split, stock dividend (including any dividend or distribution of securities
convertible into Company Common Stock), reorganization, recapitalization or
other like change with respect to Company Common Stock occurring after the
date hereof and prior to the Effective Time. No
2
share of Company Common Stock shall be deemed to be outstanding or to have
any rights other than payment therefor pursuant to the terms of this
Agreement after the Effective Time.
(b) At the Effective Time, all of the membership interests of the Buyer
Subsidiary, issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and exchanged for 100 fully paid and
nonassessable shares of common stock of the Surviving Corporation, which
shall constitute the only issued and outstanding shares of capital stock of
the Surviving Corporation immediately subsequent to the Effective Time.
(c) At the Effective Time, each share of Company Common Stock held of
record by the Buyers or the Buyer Subsidiary or any other direct or indirect
wholly-owned subsidiary of a Buyer or by the Company immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be canceled and cease to exist, and no payment
shall be made with respect thereto.
SECTION 1.06 DISSENTERS' RIGHTS.
(a) Notwithstanding Section 1.05 hereof, shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time, if any, that
are held of record or beneficially owned by a Person (as defined herein) who
has properly exercised and preserved and perfected dissenters' rights with
respect to such shares under Sections 48-23-202 and 48-23-204 of the
Tennessee Act and has not withdrawn or lost such rights (the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration for such shares, but instead shall be treated in
accordance with Sections 48-23-206 and 48-23-208 of the Tennessee Act, unless
and until such Person effectively withdraws or loses such Person's right to
payment under Section 48-23-206 of the Tennessee Act (through failure to
preserve or protect such right or otherwise). If, subsequent to the
Effective Time, any such Person shall effectively withdraw or lose such
right, then each such Dissenting Share held of record or beneficially owned
by such Person will thereupon be treated as if it had been converted into, at
the Effective Time, the right to receive the Merger Consideration, without
interest, except as may be required by law.
(b) Each Person holding of record or beneficially owning Dissenting
Shares who becomes entitled, under the provisions of Sections 48-23-102 and
48-23-202 of the Tennessee Act, to payment of the fair value of such
Dissenting Shares shall receive payment therefor (plus interest determined in
accordance with Section 48-23-206 of the Tennessee Act) from the Surviving
Corporation.
(c) The Company shall give the Buyers prompt written notice upon
receipt by the Company at any time prior to the Effective Time of any notice
of intent to demand the fair value of any shares of Company Common Stock
under Section 48-23-206 of the Tennessee Act and any withdrawal of any such
notice. The Company will not, except with the prior written consent of the
Buyers, negotiate, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand at any time prior to the Effective Time.
SECTION 1.07 STOCK PLANS OF THE COMPANY.
(a) Pursuant to the Merger, at the Effective Time, to the maximum
extent permitted by applicable law and the applicable agreements and plans,
each outstanding option or right to
3
purchase or receive shares of Company Common Stock (the "Options") under any
of the Company's stock option plans, stock purchase plans, deferred
compensation plans or other arrangements (collectively, the "Stock Plans")
will, with respect to each share of Company Common Stock subject thereto,
become an option to receive the Merger Consideration on payment of the
exercise price of such Option, and will otherwise remain outstanding in
accordance with its terms; provided, to the maximum extent permitted by
applicable law and the applicable Options and Stock Plans, if the exercise
price per share under any Option exceeds the Merger Consideration, then that
Option will be terminated automatically and will cease to exist as of the
Effective Time.
(b) Prior to the Effective Time, the Company shall use its commercially
reasonable efforts, to the extent permitted by law and the applicable Options
and Stock Plans: (i) to obtain any consents from holders of the Options and
(ii) to make any amendments to the terms of Stock Plans and Options that, in
case of either (i) or (ii), are necessary or appropriate to give effect to
the transactions contemplated by this Section 1.07.
(c) The Company shall take no action to accelerate the vesting of any
outstanding Option or any other warrant or right to acquire shares of Company
Common Stock, other than as is required by the terms of such Options,
warrants or rights, as a result of the transactions contemplated by this
Agreement.
SECTION 1.08 PAYMENT FOR MERGER SHARES.
(a) Immediately prior to the Effective Time, the Buyers or the Buyer
Subsidiary shall deposit or cause to be deposited in immediately available
funds with Registrar and Transfer Company or any other disbursing agent
having capital, surplus and undivided profits in excess of $500 million that
is selected by the Buyers and reasonably satisfactory to the Company (the
"Disbursing Agent"), cash in an amount equal to the product (rounded up or
down to the nearest $.01) of (i) the number of Merger Shares times (ii) the
Merger Consideration (such amount being referred to as the "Fund").
(b) At or prior to the Effective Time, the Buyers shall deliver
irrevocable written instructions to the Disbursing Agent, in form and
substance reasonably satisfactory to the Company, to make, out of the Fund,
the payments referred to in Section 1.05(a) in accordance with Section
1.08(c). The Fund shall not be used for any other purpose, except as
provided in this Agreement. Any amounts remaining in the Fund including,
without limitation, all interest and other income received by the Disbursing
Agent in respect of amounts in the Fund six (6) months after the Closing Date
(as defined herein) may be refunded to the Surviving Corporation, at its
option; provided, however, that the Surviving Corporation shall continue to
be liable for any payments required to be made thereafter under Section
1.05(a) hereof. If any Merger Consideration shall not have been disbursed
prior to two (2) years after the Effective Time (or immediately prior to such
earlier date on which any Merger Consideration payable to the former holders
of Company Common Stock would otherwise escheat to, or become the property
of, any Governmental Authority (as defined herein)), any such Merger
Consideration shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or
interest of any Person previously entitled thereto.
(c) As soon as practicable after the Effective Time, the Disbursing
Agent shall mail to each record holder of certificate(s) representing Merger
Shares a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to any certificate
4
representing Merger Shares shall pass, only upon actual delivery of such
certificate to the Disbursing Agent) for return to the Disbursing Agent, and
instructions for use in effecting the surrender of such certificate or
certificates and the receipt of the Merger Consideration for each of such
holder's Merger Shares under Section 1.05(a). For purposes of the
immediately preceding sentence, the Buyers may rely conclusively on the
shareholder records of the Company in determining the identity of, and the
number of canceled Merger Shares held by, each holder of a certificate or
certificates representing Merger Shares at the Effective Time. The
Disbursing Agent, as soon as practicable following receipt of any such
certificate or certificates together with a duly executed letter of
transmittal and any other items specified in the letter of transmittal, shall
pay by cashier's check of the Disbursing Agent to the Persons entitled
thereto (subject to any required withholding of taxes by the Surviving
Corporation) the amount (rounded up or down to the nearest $.01) determined
by multiplying the number of Merger Shares represented by the certificate or
certificates so surrendered by the Merger Consideration. No interest will be
paid or accrued on the cash payable upon the surrender of any such
certificate or certificates. If payment is to be made to a Person other than
the Person in whose name the certificate or certificates surrendered is
registered, it shall be a condition of payment that the certificate or
certificates so surrendered be properly endorsed or otherwise be in proper
form for transfer and that the Person requesting such payment pay any
transfer or other taxes required by reason of the payment to a Person other
than the registered holder of the certificate or certificates surrendered, or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable.
(d) If any certificate or certificates representing Merger Shares shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact and such indemnification against loss as the Disbursing Agent may
reasonably require by the Person claiming such certificate or certificates to
have been lost, stolen or destroyed, the Disbursing Agent will pay in
exchange for such lost, stolen or destroyed certificate or certificates to
the Persons entitled thereto (subject to any required withholding of taxes by
the Surviving Corporation) the applicable Merger Consideration in respect
thereof, calculated pursuant to Section 1.08(c), upon receipt by the
Disbursing Agent of such affidavit and indemnification against loss.
(e) None of the Buyers, the Buyer Subsidiary, the Company or the
Surviving Corporation shall be liable to any holder of shares of Company
Common Stock for any consideration from the Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(f) The Buyers or the Disbursing Agent will be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement
or the transactions contemplated hereby to any holder of Company Common Stock
such amounts as the Buyers (or any Affiliate (as defined herein) thereof) or
the Disbursing Agent are 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 applicable provision of federal, state, local or foreign
Tax Law (as defined herein). To the extent that amounts are so properly
withheld by the Buyers (or any Affiliate thereof) or the Disbursing Agent,
such withheld amounts will be treated for all purposes of this Agreement as
having been paid to the holder of the Company Common Stock in respect of whom
such deduction and withholding were made by the Buyers (or any Affiliate
thereof) or the Disbursing Agent.
5
SECTION 1.09 NO FURTHER RIGHTS OR TRANSFERS. At the Effective Time,
all shares of Company Common Stock issued and outstanding immediately prior
to the Effective Time shall be canceled and cease to exist, and each holder
of a certificate or certificates that represented shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time shall
cease to have any rights as a shareholder of the Company with respect to the
shares of Company Common Stock represented by such certificate or
certificates, except for the right to surrender such certificate or
certificates in exchange for the payment provided under Section 1.05(a) or to
preserve and perfect such holder's right to receive payment for such holder's
shares under Section 48-23-202 of the Tennessee Act and Section 1.06 hereof
if such holder has validly exercised and not withdrawn or lost such right,
and no transfer of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be made on the stock transfer
books of the Surviving Corporation.
SECTION 1.10 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company, the Buyers or
the Buyer Subsidiary, any deeds, bills of sale, assignments or assurances and
to take and do, in the name and on behalf of the Company, the Buyers or the
Buyer Subsidiary, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger.
ARTICLE II
CLOSING
SECTION 2.01 GENERALLY. Subject to Articles V and VII, the closing
(the "Closing") of the Merger shall occur not later than the Business Day
next following the special meeting of the shareholders of the Company to be
called pursuant to Section 4.02, or at such other time as the Company and the
Buyers may mutually agree (the "Closing Date"). The Closing shall be held at
10:00 a.m., local time, at the offices of Jenkens & Gilchrist, a Professional
Corporation, 1445 Ross Avenue, Suite 3200, Dallas, Texas 75202, or at such
other time and place as the Company and the Buyers may mutually agree.
SECTION 2.02 DELIVERIES AT THE CLOSING. Subject to Articles V and VII,
at the Closing:
(a) there shall be delivered to the Buyers, the Buyer Subsidiary and
the Company the certificates and other documents and instruments, the
delivery of which is contemplated under Article V;
(b) the Company and the Buyer Subsidiary shall cause the Articles of
Merger and the Certificate of Merger to be filed as provided in Section 1.02
and shall take all other lawful actions and do all other lawful things
necessary to cause the Merger to become effective; and
(c) subject to the right of the Surviving Corporation to receive a
refund of amounts remaining in the Fund six (6) months after the Closing Date
pursuant to Section 1.08(b), the Buyers and/or the Buyer Subsidiary shall
irrevocably deposit with the Disbursing Agent the amount designated as the
Fund in Section 1.08(a).
6
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to the Buyers and the Buyer Subsidiary,
subject to such exceptions as are disclosed in writing in the disclosure
letter supplied by the Company to the Buyers and the Buyer Subsidiary, dated
as of the date hereof (the "Disclosure Letter"), as follows:
(a) Organization.
(i) The Company and each of its Subsidiaries is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all the
requisite corporate power and authority, and is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
consents, waivers, qualifications, certificates, Orders (as defined
herein) and approvals (collectively, "Approvals") necessary to own,
lease and operate its properties and to carry on its business as it
is now being conducted, except for such Approvals, the failure of
which to possess, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect (as defined
herein). The Company and each of its Subsidiaries is duly qualified
or licensed to do business, and is in good standing, in each
jurisdiction in which the character of the properties owned, leased
or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be
so duly qualified or licensed or in good standing that, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. The Company has heretofore furnished
or made available to the Buyers true and complete copies, including
all amendments, of each of the Charter (as defined herein) and
By-Laws (or other equivalent governing documents), as currently in
effect for the Company and each Subsidiary.
(ii) Section 3.01(a)(ii) of the Disclosure Letter sets forth a
true and complete list of all of the Company's directly and
indirectly owned Subsidiaries, together with the jurisdiction of
incorporation or organization of each Subsidiary and the percentage
of each Subsidiary's outstanding capital stock or other equity or
other interest owned by the Company or another Subsidiary of the
Company. Except as set forth in the SEC Reports (as defined herein)
and in Section 3.01(a)(ii) of the Disclosure Letter, neither the
Company nor any of its Subsidiaries owns any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, directly or indirectly, any equity or similar
interest in, any Person.
(iii) Except as set forth in Section 3.01(a)(iii) of the
Disclosure Letter, neither the Company nor any Subsidiary is the
general partner of a partnership or holds an ownership interest in
any other entity that could result in the holder of that ownership
interest being liable for the debts or obligations of that entity.
(b) Capitalization.
(i) The authorized capital of the Company consists of 200,000,000
shares of Company Common Stock. As of January 22, 2002, there are,
(A) 51,709,122 shares of Company Common Stock issued and outstanding,
including the associated Rights; (B) no
7
shares of Company Common Stock held in the treasury of the Company;
(C) no shares of Company Common Stock held by the Subsidiaries of the
Company; (D) 3,534,652 shares of Company Common Stock duly reserved
for future issuance pursuant to Options granted pursuant to the Stock
Plans; (E) 5,884,695 shares of Company Common Stock duly reserved for
future issuance pursuant to the Company's Stock Plans (including
322,126 shares that will be issued in January 2002 for withholdings
during 2001 under the Company's stock purchase plan); (F) 804,489
shares of Company Common Stock duly reserved for issuance upon
conversion of certain Liquid Yield Option Notes due 2004 and certain
8.25% convertible subordinated debentures due 2002 (collectively, the
"Convertible Debt"); and (G) 12,927,281 shares of Company Common
Stock duly reserved for issuance pursuant to the exercise of Rights.
None of the outstanding shares of Company Common Stock were issued
by the Company in violation of any purchase option, call option,
right of first refusal, preemptive right, subscription right or any
similar right. Except as set forth above, as of the date hereof, no
shares of voting or non-voting capital stock, other equity interests,
or other voting securities of the Company are issued, reserved for
issuance or outstanding. All outstanding Options to purchase Company
Common Stock were granted under the Stock Plans. No outstanding
Options or other outstanding securities convertible, exercisable or
exchangeable for Company Common Stock, have exercise prices of less
than $0.36 per share of Company Common Stock. Except as set forth
above, there are no bonds, debentures, notes or other indebtedness
of the Company with voting rights (or convertible into, or
exchangeable for, securities with voting rights) on any matters on
which shareholders of the Company may vote.
(ii) Except as set forth in Section 3.01(a)(ii) of the Disclosure
Letter, the Company is the direct or indirect owner of all of the
authorized and outstanding shares of capital stock, other equity
securities or securities convertible, exercisable or exchangeable for
equity securities, of each of the Company's Subsidiaries. All of the
outstanding shares of capital stock or other equity securities of
each of the Subsidiaries have been duly authorized and validly
issued, and are fully paid and nonassessable, and not subject to, and
were not issued in violation of, any preemptive (or similar) rights,
and are owned, of record and beneficially, by the Company or one of
its direct or indirect Subsidiaries, free and clear of all Liens (as
defined herein). Except as set forth in the Captain D's Documents
(as defined herein) and the FFCA Documents (as defined herein), there
are no restrictions of any kind that prevent the payment of dividends
by any of the Company's Subsidiaries, and neither the Company nor any
of its Subsidiaries is subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan
or capital contribution or otherwise) to or in any Person.
(iii) Except for this Agreement, the Rights, the Options, the
Convertible Debt and as described in the SEC Reports, as of the date
hereof, there are no outstanding securities, options, warrants,
calls, rights, convertible or exchangeable securities, commitments,
agreements, arrangements or undertakings of any kind (contingent or
otherwise) to which the Company or any of its Subsidiaries is a party
or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity
securities of the Company or of any of its Subsidiaries or obligating
the Company or any of its Subsidiaries to issue, grant, extend or
enter into any such security, option, warrant,
8
call, right, commitment, agreement, arrangement or undertaking.
There are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock or other equity securities (or Options
or warrants to acquire any such shares or other equity securities)
of the Company or its Subsidiaries. Except as set forth in Section
3.01(b)(iii) of the Disclosure Letter, as of the date hereof, there
are no stock-appreciation rights, stock-based performance units,
"phantom" stock rights or other agreements, arrangements or
commitments of any character (contingent or otherwise), pursuant to
which any Person is or may be entitled to receive any payment or
other value based on the revenues, earnings or financial performance,
stock price performance, assets or other attributes of the Company
or any of its Subsidiaries or calculated in accordance therewith
(other than ordinary course payments, commissions or bonus plans to
employees or sales representatives of the Company based upon revenues
or profits generated by them without augmentation as a result of the
transactions contemplated hereby) (collectively, "Stock-Based
Rights") or to cause the Company or any of its Subsidiaries to file
a registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), or which otherwise relate to the registration
of any securities of the Company or any of its Subsidiaries. Except
as set forth in Section 3.01(b)(iii) of the Disclosure Letter, and
except as set forth in the SEC Reports and for that certain Voting
Trust Agreement, dated as of September 26, 2000, by and among the
Company, Wilmington Trust Company, Captain D's, Inc. and Bank of
America, N.A., there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which
the Company or any of its Subsidiaries or, to the knowledge of the
Company, any of the Company's shareholders is a party or by which any
of them is bound with respect to the issuance, holding, acquisition,
voting or disposition of any shares of capital stock or other equity
interests of the Company or any of its Subsidiaries.
(c) Authorization; Execution and Enforceability. The Company has all
the necessary corporate power and authority to execute and deliver this
Agreement, subject to the approval by holders of the Company Common Stock at
the special meeting of shareholders referred to in Section 4.02, and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by the Company have been duly authorized by the
Board of Directors of the Company and, other than the approval of this
Agreement by its shareholders, no further corporate action of the Company is
necessary to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, assuming the
accuracy of the representations and warranties set forth in Section 3.02(b),
constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally, and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a Court (as defined herein)
of law or equity).
(d) No Conflicts. Neither the execution and delivery of this Agreement
by the Company, subject to the approval of this Agreement by the Company's
shareholders, nor the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof will (i) conflict
with or result in a breach of the Charter, By-Laws (or other equivalent
governing documents), as currently in effect, of the Company or any of its
Subsidiaries; (ii) except for compliance with the requirements of the Hart-
Scott-Rodino Antitrust
9
Improvements Act of 1976, as amended (the "HSR Act"), the Exchange Act, the
filing of the Articles of Merger with the Secretary of State of the State of
Tennessee and the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware, require any filing with, or consent or
approval of, any Governmental Authority (as defined herein) having
jurisdiction over any of the business or assets of the Company or any of its
Subsidiaries, except for any consent, filing or authorization, the failure of
which to obtain, and for any filing or registration, the failure of which to
make, could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; (iii) violate any statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any injunction, judgment, order, writ or decree to which the
Company or any of its Subsidiaries has been specifically identified as
subject, except for such violations that could not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or (iv)
except (A) for such breaches or defaults that could not, individually or in
the aggregate, materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement, or (B) that could reasonably be
expected to result in a Material Adverse Effect, or (C) as set forth in
Section 3.01(d) of the Disclosure Letter, or (D) for consents required
pursuant to the terms of the FFCA Documents and the Shoney's Revolver (as
defined herein), result in a breach of, or constitute a default or an event
that, with the passage of time or the giving of notice, or both, could
constitute a default, give rise to a right of termination, cancellation or
acceleration, create any entitlement of any third party to any payment or
benefit, require the consent of any third party, or result in the creation of
any Lien on the assets of the Company or any of its Subsidiaries under, any
Material Contract (as defined herein).
(e) SEC Reports; Financial Statements; No Undisclosed Liabilities.
(i) The Company has filed all SEC Reports. No SEC Report, as of
its filing date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein
or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading, except to the extent that information contained in any
SEC Report has been revised or superseded by a later filed SEC Report
filed prior to the date of this Agreement. Each SEC Report at the
time of its filing (or if amended or superseded by a filing prior to
the date hereof, then on the date of such filing) complied in all
material respects as to form with all applicable requirements of the
Securities Act, the Exchange Act, and the rules and regulations of
the SEC promulgated thereunder. None of the Company's Subsidiaries
has filed, or is obligated to file, any report, registration
statement or other filing with the United States Securities and
Exchange Commission (the "SEC").
(ii) The consolidated financial statements contained in the SEC
Reports (A) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted
by applicable instructions or regulations of the SEC relating to the
preparation of quarterly reports on Form 10-Q); (B) fairly present
in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates thereof and
the consolidated results of operations and consolidated cash flows
of the Company and its Subsidiaries for the periods indicated,
subject, in the case of interim financial statements, to normal
year-end adjustments, none of which are material; and
10
(C) complied as of their respective dates as to form in all material
respects with applicable accounting requirements and the published
regulations of the SEC.
(iii) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether absolute, accrued,
fixed, contingent or otherwise) that are material to the financial
condition of the Company and its Subsidiaries, taken as a whole, and
there is no existing fact, condition or circumstance known to the
Company that could reasonably be expected to result in such
liabilities or obligations, except liabilities or obligations (A)
reflected in the SEC Reports filed and publicly available prior to
the date hereof; (B) disclosed in Section 3.01(e)(iii) of the
Disclosure Letter; (C) reflected in the Draft Financials (as defined
herein); or (D) incurred in the ordinary course of business.
(iv) Section 3.01(e)(iv) of the Disclosure Letter contains a
draft of the Company's financial statements for the fiscal year ended
October 28, 2001 (the "Draft Financials"). Subject to the
qualifications set forth in the Draft Financials, the draft
consolidated balance sheet of the Company and its consolidated
Subsidiaries as of October 28, 2001 included in the Draft Financials
(including any related notes or schedules) fairly presents in all
material respects the consolidated financial position of the Company
and its consolidated Subsidiaries as of that date, and the
consolidated results of operations and cash flows included in the
Draft Financials (including any related notes and schedules) fairly
present in all material respects the results of operations and cash
flows, as the case may be, of the Company and its consolidated
Subsidiaries for the period then ended (subject to changes routinely
anticipated in the preparation of the final financial statements for
the fiscal year ended October 28, 2001), in each case in accordance
with GAAP, consistently applied during the periods involved, except
as may be noted therein and except as could not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(f) Absence of Certain Changes or Events. Except as disclosed in the
SEC Reports, as set forth in the Draft Financials, or as set forth in Section
3.01(f) of the Disclosure Letter, since January 1, 2001, and up to and
including the date of this Agreement, the Company and its Subsidiaries have
conducted their respective businesses and operations in the ordinary course
consistent with past practices, and neither the Company nor any of its
Subsidiaries has (i) split, combined or reclassified any shares of its
capital stock or other equity interests or made any other changes in its
equity capital structure; (ii) purchased, redeemed or otherwise acquired,
directly or indirectly, any shares of its capital stock or other equity
interests or any options, rights or warrants to purchase any such capital
stock or other equity interests or any securities convertible into or
exchangeable for any such capital stock or other equity interests; (iii)
declared, set aside or paid any dividend or made any other distribution in
respect of shares of its capital stock or other equity interests, except for
dividends or distributions by any Subsidiary to the Company or to another
Subsidiary; (iv) purchased any business, purchased any stock of any
corporation, or merged or consolidated with any Person (other than
intercompany transactions); (v) except for the sale of properties not
exceeding $5 million in the aggregate, sold, other than in any intercompany
transaction, leased or otherwise disposed of any assets or properties that
were material to the Company and its Subsidiaries, taken as a whole; (vi)
incurred, assumed or guaranteed any indebtedness for borrowed money
(including, without limitation, pursuant to or resulting in exposure from
interest rate swaps, caps, floors or option
11
agreements or any other interest rate risk management arrangement, foreign
exchange contract or other derivative contract or arrangement) other than
intercompany indebtedness, additional indebtedness incurred under the
Shoney's Revolver, additional indebtedness incurred under the Captain D's
Agreement (as defined herein), and the addition of Subsidiaries as guarantors
of the indebtedness evidenced by the Captain D's Agreement; (vii) changed or
modified in any respect any existing accounting method, principle or
practice, other than as required by reason of a concurrent change in GAAP or
Regulation S-X promulgated by the SEC; (viii) amended any terms of any of its
outstanding securities, including, without limitation, any debt instruments,
other than amendments to the Shoney's Revolver, Amendment No. 4 to the
Captain D's Agreement and collateral substitutions under the FFCA Documents;
(ix) created or assumed any Lien on any material asset; (x) (A) entered into
any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, executive
officer or Key Employee (as defined herein), including, without limitation,
any change of control or parachute agreements; (B) increased benefits payable
under any existing severance or termination pay policies or employment
agreements with any director, executive officer or Key Employee; or (C)
increased compensation, bonus or other benefits payable to directors,
executive officers or Key Employees; (xi) cancelled any material debts or
claims or waived any material rights; (xii) amended its Charter or By-Laws
(or other equivalent governing documents); (xiii) made any loans, advances or
capital contributions to, or other investments in, any other Person, other
than to any direct or indirect wholly-owned Subsidiary; (xiv) experienced a
material and adverse change with respect to a material supplier, franchisee
or distributor relationship; (xv) made any material revaluation of any of its
significant assets; (xvi) disposed of, other than in any intercompany
transaction, or failed to keep in effect any rights in, to or for the use of,
any Marks (as defined herein); (xvii) except for this Agreement, entered into
any oral or written agreement or commitment to do any of the foregoing; or
(xviii) suffered any business interruption, damage to or destruction of its
properties or other incident, occurrence or event, which interruption,
damage, destruction, incident, occurrence or event, with respect to this
clause (xviii) only, has had, or could reasonably be expected to have, a
Material Adverse Effect.
(g) Tax Matters.
(i) All Tax Returns (as defined herein) required to be filed by
or on behalf of the Company, each of its Subsidiaries, and each
affiliated, combined, consolidated or unitary group of which the
Company or any of its Subsidiaries is a member have, to the extent
required to be filed on or before the date hereof, been timely filed
(by the due date including any applicable extension period), and all
such Tax Returns are true, complete and correct in all respects.
(ii) All Taxes (as defined herein) due and payable by or with
respect to the Company and each of its Subsidiaries, whether or not
shown on any Tax Return, have been timely paid. The amount of the
Company's and each of its Subsidiaries' liability for unpaid Taxes
for all periods ending on or before the consolidated financial
statement contained in the SEC Reports does not, in the aggregate,
exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes) reflected on the date of such
financial statements, and the amount of the Company's and each
Subsidiary's liability for unpaid Taxes for all periods ending on or
before the Closing Date shall not, in the aggregate, exceed the
amount of the liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected on such financial
statements, as
12
adjusted for operations and transactions in the ordinary course of
the business of the Company and its Subsidiaries since the date of
the financial statements in accordance with past custom and
practices. All assessments for Taxes due and owing by or with
respect to the Company and each of its Subsidiaries with respect to
completed and settled examinations or concluded litigation have been
paid. Neither the Company nor any of its Subsidiaries has incurred
a Tax liability from October 28, 2001, other than a Tax liability in
the ordinary course of business. No claim for unpaid Taxes has
become a Lien against the property of the Company or any of its
Subsidiaries or is being asserted against the property of the Company
or any of its Subsidiaries other than Liens for Taxes not yet due and
payable or for Taxes contested in good faith and for which adequate
reserves have been established.
(iii) Except for notices received from the State of Virginia and
Mississippi regarding the intention by both states to audit both the
income and sales and use tax returns of the Company and/or its
Subsidiaries and a notice from the State of Michigan regarding its
intent to audit both the single business tax and sales and use tax
returns of the Company, no action, suit, proceeding, investigation,
claim or audit has commenced and no written notice has been received
that such audit or other proceeding is pending or threatened by any
Governmental Authority with respect to the Company or any of its
Subsidiaries or any group of corporations of which any of the Company
and its Subsidiaries has been a member, with regard to years or
periods during which the Company or its Subsidiaries were a member
thereof in respect of any Taxes, and all deficiencies proposed as a
result of such actions, suits, proceedings, investigations, claims
or audits have been paid, reserved against or settled.
(iv) Except for an extension of the statute of limitations until
March 31, 2002, granted by the Company to the Internal Revenue
Service for the Company's federal income taxes for the tax years
ending October 26, 1997 and October 25, 1998, neither the Company nor
any of its Subsidiaries has requested, or been granted any waiver of
any federal, state, local or foreign statute of limitations with
respect to, or any extension of a period for the assessment of, any
Tax. No extension or waiver of time within which to file any Tax
Return of, or applicable to, the Company or any of its Subsidiaries
has been granted or requested which has not since expired.
(v) Except for TPI Restaurants, Inc., TPI Insurance Corporation,
TPI Transportation, Inc., TPI Commissary, Inc., and TPI
Entertainment, Inc. that had filed a consolidated tax return with
another affiliated group of corporations prior to their acquisition
by the Company in September, 1996, none of the Company or any of its
Subsidiaries has been a member of an affiliated, consolidated,
combined or unitary group (other than a group, the common parent of
which was the Company). None of the Company or any of its
Subsidiaries has any liability for the Taxes of any Person under
Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign Law), as a transferee or successor, by
contract or otherwise.
(vi) Except for a current tax sharing agreement between the
Company and its Subsidiaries that are part of its affiliated group
of corporations (as defined by Code Section 1504), none of the
Company or any of its Subsidiaries is a party to, or is bound by or
has any obligation under any Tax sharing agreement or similar
contract or arrangement. No closing agreement pursuant to Section
7121 of the Code (or any similar
13
provision of state, local or foreign Law) has been entered into by
the Company or any of its Subsidiaries.
(vii) The Company and its Subsidiaries have not made any
payments, are not obligated to make any payments, and are not a party
to any agreements that under any circumstances, including the
consummation of the transactions contemplated hereby, could obligate
any of them to make any payments, that will not be deductible by
operation of Section 280G or Section 162(m) of the Code.
(viii) The Company and each of its Subsidiaries have complied
with all applicable Laws relating to the payment, collection,
withholding and deposit, as the case may be, of Taxes (including,
without limitation, withholding of Taxes pursuant to Sections 1441,
1442 and 3406 of the Code or similar provisions under any state,
local or foreign laws) and, to the extent required, have paid all
amounts to the relevant Governmental Authority, and have, within the
time and in the manner required by such Laws, withheld from employee
wages and paid over to the proper Governmental Authorities all
amounts required to be so withheld and paid over under all applicable
Laws. The Company and its Subsidiaries have collected all sales and
use Taxes required to be collected, and have remitted, or will remit
on a timely basis, such amounts to the appropriate Governmental
Authorities, or have been furnished properly completed exemption
certificates and have maintained all such records and supporting
documents in the manner required by all applicable sales and use Tax
statutes and regulations for all periods for which the statute of
limitations has not expired.
(ix) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Code.
(x) None of the Company and its Subsidiaries will be required to
include any amount in taxable income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any
"closing agreement" as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax laws) entered
into prior to the Closing Date, deferred intercompany gain described
in Treasury Regulations under Section 1502 of the Code (or any
corresponding or similar provision of state, local or foreign Tax
law), any sale reported on the installment method or as an open
transaction that occurred prior to the Closing Date, or any taxable
income attributable to any amount that is economically accrued or a
prepaid amount that is received prior to the Closing Date.
(xi) None of the Company nor any of its Subsidiaries has been a
party to any distribution by the Company occurring during the last
two (2) years in which the parties to the distribution treated the
distribution as one to which Section 355 of the Code is applicable.
(xii) The Company has effected a valid change in its accounting
method for incidental repairs and maintaining its property that will
increase the Company's deductions by an additional $1.6 million for
the tax year ending October 28, 2001. Neither the Company nor any
of its Subsidiaries will be required to include any item of income
in, or exclude any item of deduction from, taxable income for a
taxable period on, prior to or after the Closing Date as a result of
any change in method of accounting prior
14
to the Closing Date under Section 481(c) of the Code (or any
corresponding or similar provision of state, local or foreign income
Tax Law).
(xiii) There are no material elections with respect to Taxes
affecting the Company or its Subsidiaries as of the date hereof,
other than elections that have been made or are reflected on the
Company's Tax Returns filed for the last three taxable years.
(xiv) None of the assets of the Company or its Subsidiaries is
property which such party is required to treat as being owned by any
other person pursuant to the "safe harbor lease" provisions of
Section 168(f)(8) of the Code.
(xv) None of the assets of the Company or its Subsidiaries is
"tax-exempt use property" within the meaning of Section 168(h) of the
Code.
(xvi) Except for $5.8 million in industrial revenue bonds that
are currently outstanding on certain of the Company's assets, none
of the assets of the Company or its Subsidiaries directly or
indirectly secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code.
(xvii) Neither the Company nor its Subsidiaries maintains nor
have they had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the United
States and such foreign country.
(xviii) The unused federal income tax net operating loss (as
defined in Code Section 172) for the Company's affiliated group (as
defined by Code Section 1504) for the taxable year ended October 28,
2001 and all prior taxable years that is carried forward to the
Company's affiliated group's taxable years ending after October 28,
2001 will not be less than $12 million. The unused federal income
tax charitable contribution for the Company's affiliated group (as
defined by Code Section 1504) for the taxable years ended October 28,
2001 and all prior taxable years that is carried forward to the
Company's affiliated group's taxable years ending after October
28, 2001 will not be less than $1.5 million.
(xix) The unused work opportunity tax credit (as defined in Code
Section 51) carryforwards, unused FICA tips credit (as defined in
Code Section 45B) carryforwards and unused alternative minimum tax
credit (as defined in Code Section 53) carryforwards, all as computed
for federal income tax purposes, for the Company's affiliated group
(as defined by Code Section 1504) for the taxable year ended October
28, 2001 that are carried forward to the Company's affiliated group's
taxable years ending after October 28, 2001 will not be less than
$5.4 million, $3.6 million, and $900,000 respectively.
(xx) Neither the Company nor any member of the Company's
affiliated group (as defined by Code Section 1504) has any deferred
gain or loss allocable to the Company and its Subsidiaries arising
out of any intercompany transactions (as defined by Treasury
Regulation Section 1.1502-13(b)(1)).
(xxi) The adjusted tax basis of the Company's and its
Subsidiaries' assets (including the stock of any of the Company's
Subsidiaries and the adjusted tax basis of any of the Company's or
its Subsidiaries' interest in any partnership or limited liability
company) as determined for federal and state income tax purposes
shall be the same as that tax basis calculations as of October 29,
2000, previously provided to the Buyers, as
15
adjusted for depreciation and normal retirements and dispositions for
the period after October 29, 2000.
(xxii) Except for an excess loss account of $32 million relating
to the stock of Captain D's, Inc., as of October 28, 2001, neither
the Company nor any of its Subsidiaries has any excess loss account
(as defined in Treasury Regulation Section 1.1502-19) with respect
to the stock of any Subsidiary.
(xxiii) The Company's member capital account balances as of
October 28, 2001, for Shoney's Properties Group 1, LLC, Shoney's
Properties Group 2, LLC, Shoney's Properties Group 3, LLC, Shoney's
Properties Group 4, LLC, Shoney's Properties Group 5, LLC, and
Shoney's Properties Group 6, LLC shall not be lower than a negative
cumulative balance of $15 million.
(xxiv) Except for the Company's limited partnership interest of
approximately 25% in the capital and profits of Shoney's/Captain D's
Winchester, Limited Partnership and the Sho-Lodge Agreement, neither
the Company nor any corporation with respect to which it satisfies
the stock ownership requirements described in Section 856(l)(2) of
the Code directly or indirectly either (y) operates or manages a
lodging facility (as defined in Section 856(d)(9)(D)(ii) of the Code)
or health care facility (as defined in Section 856(e)(6)(D)(ii) of
the Code) or (z) provides to any other person (under a franchise,
license, or otherwise) rights to any brand name under which any
lodging facility or health care facility is operated.
(h) Real and Personal Property.
(i) Owned Property; Personality. The Company has heretofore
furnished or made available to the Buyers a true and correct list of
all real property owned in fee by the Company or any Subsidiary. All
such real property (including all buildings, fixtures and other
improvements thereto, the "Owned Real Property"), is free and clear
of all Liens, except (A) Liens for Taxes, common area maintenance
assessments or payments, assessments and other governmental charges
that are not due and payable or that are being contested in good
faith and in respect of which adequate reserves have been
established; (B) mechanics', materialmen's, workmen's, repairmen's,
landlord's or other similar Liens securing obligations that are being
contested in good faith and in respect of which adequate reserves
have been established; (C) Liens evidenced by any loan or credit
facility or as described in the SEC Reports filed before the date of
this Agreement; (D) imperfections of title, easements, covenants,
conditions, restrictions and Liens that do not materially detract
from the value of, or materially interfere with, the present use of
the Owned Real Property subject thereto or affected thereby; and (E)
the Space Leases (as defined herein) (the matters "Permitted
Encumbrances"). The Company and its Subsidiaries have good and
marketable title to, or the right to use, all of their other
material tangible properties and assets necessary to operate and
maintain the Owned Real Property and to conduct their respective
businesses as currently conducted, except for such defects in title
or right that would not, individually or in the aggregate, be
reasonably expected to result in a Material Adverse Effect. None of
the Owned Real Property is subject to any purchase option, reverter,
right of first refusal or right of first offer, or is subject to any
other limitation, restriction, easement, burden, right or other
encumbrance which would
16
or may affect the ability of the Company or any of its Subsidiaries
to continue to use such real property as it is currently being used
in the normal course of their respective businesses, except for such
limitations, restrictions, easements, burdens or other encumbrances
that could not, individually or in the aggregate, be reasonably
expected to result in a Material Adverse Effect. The Company is not
aware of any action to enforce any limitation, restriction, easement,
burden, right or other encumbrance pertaining to the Owned Real
Property that could or may materially and adversely affect the
ability of the Company or any of its Subsidiaries to continue to use
such real property as it is currently being used in the normal course
of its business, except for such limitations, restrictions,
easements, burdens, rights or other encumbrances that, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(ii) Leased Real Property. The Company has heretofore furnished
or made available to the Buyers a true and correct list of all
leases, subleases and other agreements concerning the occupancy of
real property with total annual payments in excess of $20,000 (each
a "Real Property Lease" and, collectively, the "Real Property
Leases") under which the Company or any Subsidiary uses or occupies
or has the right to use or occupy, now or in the future, any real
property that is not Owned Real Property (the land, buildings and
other improvements covered by the Real Property Leases being herein
called the "Leased Real Property"). The Company has provided or made
available to the Buyers a true and correct copy of each Real Property
Lease and any amendments thereto. Each Real Property Lease, insofar
as the Company is concerned, is valid, binding and in full force and
effect. Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any landlord under any Real Property Lease
is in breach of or, in default under, any of the Real Property
Leases, except for such breaches or defaults that, individually or
in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. Except for Permitted Encumbrances and Liens
described in Section 3.01(h)(i), the Company's and its Subsidiaries'
interest in the Leased Real Property is free and clear of Liens. A
Subsidiary of the Company or the Company is the tenant under all of
the Real Property Leases.
(iii) Entire Premises. Neither the Company nor any of its
Subsidiaries has any material interests in real property other than
the Owned Real Property or the Leased Real Property. The Leased Real
Property and the Owned Real Property are hereinafter collectively
referred to as the "Real Property."
(iv) Space Leases. The Company has heretofore furnished or made
available to the Buyers a true, correct and complete list of all
leases, subleases and other agreements concerning the occupancy of
real property with total annual payments in excess of $20,000 (each
a "Space Lease" and, collectively, the "Space Leases") granting to
any Person other than the Company or any of its Subsidiaries any
right to the possession, use, occupancy or enjoyment of the Real
Property or any portion thereof. The Company has provided or made
available to the Buyers a true and correct copy of each Space Lease.
Except as set forth in Section 3.01(h)(iv) of the Disclosure Letter,
to the Company's knowledge, no notice of default or termination under
any Space Lease is outstanding and no termination event or condition
or uncured default on the part of the Company, any of the
Subsidiaries or any tenant under any Space Lease exists under any
Space Lease. Neither the Company, nor any of its Subsidiaries nor,
to the knowledge of the Company,
17
any other party to any Space Lease is in breach of or in default
under, any of the Space Lease, except for such breaches or defaults
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(v) Condemnation; Takings. Except as set forth in Section
3.01(h)(v) of the Disclosure Letter, neither the Company nor any
Subsidiary has received notice of, and to the knowledge of the
Company, there is not any pending, threatened or contemplated
condemnation, requisition, taking or other proceeding affecting the
Real Property or any part thereof, or any sale or other disposition
of the Real Property or any part thereof in lieu of condemnation,
requisition or other taking, except for such condemnations,
requisitions, takings or other proceedings, sales or dispositions
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(i) Material Contracts. Except as set forth in, or as filed as an
exhibit to, the SEC Reports filed before the date of this Agreement or as set
forth in Section 3.01(i) of the Disclosure Letter, neither the Company nor
any of its Subsidiaries is a party to or bound by any:
(i) employment agreement (other than those that are terminable
at will by the Company or such Subsidiary without cost or penalty);
(ii) contract, whether as licensor or licensee, for the license
of any patent, know-how, trademark, trade name, service mark,
copyright or other intangible asset (other than non-negotiated
licenses of commercial off-the-shelf computer software), except for
the Franchise Agreements (as defined herein) and the Sho-Lodge
Agreement (as defined herein);
(iii) loan or guaranty agreement, indenture or other instrument,
contract or agreement under which any money has been borrowed or
loaned or any note, bond or other evidence of indebtedness has been
issued;
(iv) (other than the agreements listed in clause (iii), the Real
Property Leases, the Space Leases or the Permitted Encumbrances)
mortgage, security agreement, conditional sales contract, capital
lease or similar agreement with total payments in excess of $50,000
per year or that effectively creates a Lien on any assets of the
Company or any of its Subsidiaries;
(v) contract restricting the Company or any of its Subsidiaries
in any material respect from engaging in business or from competing
with any other parties, including, but not limited to, geographic
limitations on the Company's or any of its Subsidiaries' activities,
except for the Franchise Agreements and the Sho-Lodge Agreement;
(vi) written agreement relating to the reorganization or merger
of the Company or any Subsidiary that has not been consummated as of
the date hereof;
(vii) partnership or joint venture agreement;
(viii) collective bargaining agreement;
(ix) contract that is a "material contract" (as defined in Item
601(b)(10) of Regulation S-K under the Securities Act);
(x) restaurant services, management, royalty or similar agreement
with total payments by the Company or any Subsidiary in excess of
$50,000 per year;
18
(xi) agreements relating to the acquisition of any material
assets or relating to the merger or consolidation with any other
entity that have (A) not been consummated as of the date hereof or
(B) that, if consummated as of the date hereof, have any remaining
outstanding material monetary obligations;
(xii) investment banking agreement of any kind or nature
whatsoever;
(xiii) except for negotiable instruments in the process of
collection, power of attorney outstanding or contract, commitment or
liability (whether absolute, accrued, contingent or otherwise) as
guarantor, surety, cosigner, endorser, co-maker, or indemnitor for
obligations for funded debt in respect of the contract or commitment
of any other Person in excess of $50,000; (xiv) except for Ordinary
Course Contracts (as defined herein), other contracts (other than
those listed in clauses (i) through (xiii) above) (A) with a term
longer than one (1) year from the date hereof that involve payments
by the Company and/or its Subsidiaries in excess of $50,000 per year;
or (B) with a term less than one (1) year from the date hereof that
involve payments by the Company and/or its Subsidiaries in excess of
$100,000 that are not terminable without premium or penalty on less
than 30 days' notice;
(xv) agreements or insurance policies providing for
indemnification of any officer or director of the Company or any of
its Subsidiaries, other than the existing directors' and officers'
insurance policy and the Company's and Subsidiaries' Charters and
By-Laws; and
(xvi) agreements evidencing a loan to any officer or director of
the Company or any of its Subsidiaries, other than advances for
expenses pursuant to the Company's standard expense reimbursement
policies.
All of the foregoing, along with the Ordinary Course Contracts, are
collectively called "Material Contracts." To the extent any Material
Contract, other than an Ordinary Course Contract, is evidenced by a document,
true and complete copies thereof have been delivered or made available to the
Buyers. Each Material Contract is in full force and effect. Neither the
Company, nor any of its Subsidiaries nor, to the knowledge of the Company,
any other party to any Material Contract is in breach of or in default under,
any of the Material Contracts, except for such breaches or defaults that have
not had and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(j) Intellectual Property. The Company believes that all registered
trademarks, service marks and tradenames (the "Marks"), and all licenses held
by the Company and its Subsidiaries related to such Marks and licenses
constitute all such rights that are required or reasonably necessary for the
conduct of the business of the Company or its Subsidiaries as currently
conducted. All Marks (and all applications therefor) are currently in
compliance in all material respects with all legal requirements (including,
without limitation, timely filings, proofs and payments of all fees), and are
valid and enforceable, and are not subject to any filings, fees or other
actions falling due within ninety (90) days after the date hereof. Except as
could not be reasonably expected to result in a Material Adverse Effect, the
Company and its Subsidiaries own or otherwise possess adequate licenses or
other valid rights to use, sell and license, free and clear of any and all
adverse claims (including by current and former employees and contractors),
Liens, restrictions or other obligation to pay royalties, honoraria or other
fees, any and all
19
Intellectual Property (as defined herein) (including the Marks) used in the
conduct of the respective businesses of the Company and the Subsidiaries as
currently conducted or proposed to be conducted. No Marks have been within
the preceding three (3) years or are now the subject of any Litigation (as
defined herein) and, to the knowledge of Company and its Subsidiaries, no
Litigation related thereto is threatened. The Company and each of its
Subsidiaries have taken all reasonable steps to maintain, police and protect
the Marks that they own or use. The conduct of the Company's and its
Subsidiaries' businesses as currently conducted or planned to be conducted
does not infringe or otherwise impair or conflict with ("Infringe") any third
party proprietary rights of any third party, and the Intellectual Property is
not being Infringed by any third party, except for such Infringements, the
occurrence of which, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect. There is no Litigation or
Order pending or outstanding, or to the knowledge of the Company, threatened,
that seeks to limit or challenge or that concerns the ownership, use,
validity or enforceability of any Marks. The consummation of the transactions
contemplated hereby will not result in the alteration, loss or impairment of
the validity, enforceability or the Company's or any of its Subsidiaries'
right to own or use any Intellectual Property. The Company has made available
to the Buyers a list of all software (other than generally commercially
available, non-custom, off-the-shelf software application programs having a
retail acquisition price of less than $25,000) that is owned or used by the
Company or any of its Subsidiaries, and identified which software is owned,
otherwise used and/or licensed or otherwise distributed by the Company or any
of its Subsidiaries to any third party, as the case may be.
(k) Litigation. Except as described in the SEC Reports filed prior to
the date hereof or as set forth in Section 3.01(k) of the Disclosure Letter,
and other than personal injury and other routine tort litigation arising from
the ordinary course of operations of Company and its Subsidiaries (i) which
are covered by adequate insurance; (ii) for which adequate reserves have been
established in the Draft Financials; or (iii) for which all material costs
and liabilities arising therefrom are reimbursable pursuant to common area
maintenance or similar agreements; no Litigation is pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary
that, in the event of a final adverse determination thereof, could reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect or that seeks to enjoin or otherwise challenge the consummation of the
transactions contemplated by this Agreement. Neither the Company nor any of
its Subsidiaries is specifically identified as a party subject to any
restrictions or limitations under any injunction, writ, judgment, Order or
decree of any court, administrative agency or commission or other
Governmental Authority, that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
(l) Compliance with Laws, Licenses and Permits.
(i) Except as set forth in Section 3.01(l) of the Disclosure
Letter, the Company and each of its Subsidiaries is in compliance
with, and is not under investigation with respect to, and has not
been threatened in writing to be charged with or given written notice
of any violation of, any statute, Law, rule, regulation, judgment,
decree, Order, permit, license or other governmental authorization
or Approval applicable to the Company or any of its Subsidiaries or
by which any property, asset or operation of the Company or any of
its Subsidiaries is bound or effected, except for failures to comply
or violations that have not resulted in, or could not reasonably be
expected to result in, the imposition of a criminal fine, penalty or
sanction against the Company, any of its
20
Subsidiaries or any of their respective officers or directors, or
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. The Company and its
Subsidiaries are in compliance with the material terms of all
Approvals.
(ii) To the knowledge of the Company, as of the date hereof,
neither the Company nor any of its Subsidiaries nor any director,
officer, employee or agent of the Company or any of its Subsidiaries
has, (A) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments relating to political
activity; (B) made any unlawful payment to any foreign or domestic
government official or employee or to any foreign or domestic
political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; (C) consummated any
transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended; or (D) made any
other unlawful payment.
(iii) Each of the Company and the Subsidiaries has obtained, and
is in compliance in all material respects with, all necessary
licenses, permits, consents, Approvals, Orders, certificates,
authorizations, declarations and filings required by all Governmental
Authorities and all Courts and other tribunals for the conduct of the
businesses and operations of the Company and such Subsidiary as now
conducted (collectively, the "Required Licenses"), except where the
failure to have a Required License could not reasonably be expected
to result in a Material Adverse Effect. There are no proceedings
pending or, to the knowledge of the Company, threatened which may
result in the revocation, cancellation or suspension, or any adverse
modification, of any such Required License, except for such
revocations, cancellations, suspensions or adverse modifications
that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(m) No Brokers or Finders. No broker, financial advisor, finder or
investment banker or other Person (excluding real estate brokers, food
brokers and insurance brokers) (a "Broker") is entitled to any broker's,
financial advisor's, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of the Company. The Company has heretofore furnished to the
Buyers a true and complete copy of, all agreements between the Company and
any Broker pursuant to which any Broker could be entitled to any payment
relating to the transactions contemplated hereunder or pursuant to which any
Broker is entitled to any payment from the Company.
(n) Pension, Welfare and Benefit Plans.
(i) True and complete copies of each employee pension benefit
plan document ("Pension Plan"), as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), each employee welfare benefit plan ("Welfare Plan"), as
defined in Section 3(1) of ERISA, and each deferred compensation,
bonus, incentive, stock incentive, option, stock purchase, severance
or other material employee benefit plan, agreement, commitment or
arrangement ("Benefit Plan"), which is currently maintained by the
Company or any Subsidiary or to which the Company or any Subsidiary
currently contributes or is under any current obligation to
contribute or that has been sponsored or contributed to by the
Company or any Subsidiary within three (3) years preceding the date
hereof, or under which the Company or any
21
Subsidiary has any current liability (individually, an "Employee
Plan" and collectively, the "Employee Plans"), have been delivered
or made available to the Buyers. In addition, summaries of all oral
agreements, copies of the annual report (Form 5500 Series) required
to be filed with any governmental agency with respect to each Pension
Plan and Welfare Plan for the most recent plan year of such plan for
which reports have been filed, the three (3) most recent Internal
Revenue Service determination letters, and audited or unaudited
financial statements, actuarial valuations, summary annual reports,
and summary plan descriptions for each Employee Plan, have been
delivered or made available to the Buyers.
(ii) The Company and each Subsidiary has made on a timely basis
all contributions or payments required to be made by it under the
terms of the Employee Plans, ERISA, the Code or other applicable
laws, unless such contributions or payments that have not been made
are immaterial in amount and the failure to make such payments or
contributions will not materially and adversely affect the Employee
Plans.
(iii) Except as set forth in Section 3.01(n)(iii) of the
Disclosure Letter, each Employee Plan (and any related trust or other
funding instrument) has been administered in all material respects
in compliance with its terms and in both form and operation is in
compliance in all material respects with the applicable provisions
of ERISA, the Code and other applicable laws and regulations (other
than adoption of any plan amendments for which the deadline has not
yet expired), and all material reports required to be filed with any
governmental agency with respect to each Employee Plan have been
timely filed.
(iv) Except as set forth in Section 3.01(n)(iv) of the Disclosure
Letter, each Employee Plan that is intended to be qualified within
the meaning of Section 401(a) of the Code is so qualified and has
received a favorable determination letter from the Internal Revenue
Service as to its qualification, and nothing has occurred, whether
by action or failure to act, that could reasonably be expected to
cause the loss of such qualification.
(v) Except as set forth in Section 3.01(n)(v) of the Disclosure
Letter, no Employee Plan exists that could result in the payment to
any present or former employee of the Company or any Subsidiary of
any money or other property or accelerate or provide any other rights
or benefits to any present or former employee of the Company or its
Subsidiaries as a result of the transaction contemplated by this
Agreement, whether or not such payment would constitute a parachute
payment within the meaning of Section 280G of the Code.
(vi) Except as set forth in Section 3.01(n)(vi) of the Disclosure
Letter, none of the Company or the Subsidiaries has any obligation,
liability or contingent liability under a "multiple employer welfare
arrangement," as defined in Section 3(40) of ERISA, or a Welfare Plan
that provides medical, dental or life insurance benefits with respect
to current or former employees of the Company beyond their
termination of employment other than required by COBRA or other
applicable laws, and all Welfare Plans that are "group health plans"
(as defined in Section 500(b)(1) of the Code) are in substantial
compliance with the requirements of Sections 4980B and 4980D of the
Code, to the extent applicable.
22
(vii) Except as set forth in Section 3.01(n)(vii) of the
Disclosure Letter, there is no Litigation, arbitration or
administrative proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary or, to the
knowledge of the Company, any plan fiduciary, by the Internal Revenue
Service, the U.S. Department of Labor, the Pension Benefit Guaranty
Corporation, any participant or beneficiary, or any other
governmental agency, with respect to any Employee Plan. None of the
Company, any Subsidiary, any ERISA Affiliate (as defined herein), or
to the knowledge of the Company, any plan fiduciary of any Pension
Plan or Welfare Plan, has engaged in any transaction in violation of
Section 406(a) or (b) of ERISA for which no exemption exists under
Section 408 of ERISA or any "prohibited transaction" (as defined in
Section 4975(c)(1) of the Code) for which no exemption exists under
Sections 4975(c)(2) or 4975(d) of the Code, or is subject to any
excise Tax imposed by the Code or ERISA with respect to any Employee
Plan.
(viii) Neither the Company nor any Subsidiary nor any ERISA
Affiliate (as defined below) currently maintains, nor at any time in
the previous six (6) calendar years maintained or had an obligation
to contribute to, any voluntary employees' beneficiary association,
Pension Plan subject to Title IV of ERISA, or any "multiemployer
plan" as defined in Section 3(37) of ERISA.
(ix) Neither the Company nor any Subsidiary has any liability
with respect to any plan, program or arrangement maintained or
contributed to by any ERISA Affiliate that would be an Employee Plan
if it were maintained by the Company.
(x) For purposes of this Section 3.01(n), "ERISA Affiliate" means
(A) any trade or business with which the Company is under common
control within the meaning of Section 4001(b) of ERISA; (B) any
corporation with which the Company is a member of a controlled group
of corporations within the meaning of Section 414(b) of the Code; (C)
any entity with which the Company is under common control within the
meaning of Section 414(c) of the Code; (D) any entity with which the
Company is a member of an affiliated service group within the meaning
of Section 414(m) of the Code; and (E) any entity with which the
Company is aggregated under Section 414(o) of the Code.
(o) Environmental Matters.
(i) For purposes of this Section 3.01(o):
(A) "Environmental Law" means the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq.; ("CERCLA") the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act,
33 U.S.C. Section 1201 et seq.; the Clean Water Act, 33 U.S.C.
Section 1321 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; and any other federal, state, local or other governmental,
regulation, Law or ordinance dealing with the protection of human
health, natural resources or the environment; and
(B) "Hazardous Substance" means any pollutant, contaminant,
hazardous substance or waste, solid waste, petroleum or any fraction
thereof, or any other chemical, substance or material listed or
identified in or regulated by any Environmental Law.
23
(ii) Except as described in the SEC Reports filed prior to the date
of this Agreement or as set forth in Section 3.01(o) of the
Disclosure Letter:
(A) The Company and each of its Subsidiaries are in compliance
in all respects with all applicable Environmental Laws, including all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all
applicable Environmental Laws, except for such failures to comply
with such Environmental Laws that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(B) The Company and each of its Subsidiaries have obtained, are
in compliance with, and have made all appropriate filings for
issuance or renewal of, all permits, Required Licenses,
authorizations, registrations and other governmental consents
required by applicable Environmental Laws ("Environmental Permits"),
including, without limitation, those regulating emissions, discharges
or releases of Hazardous Substances, or the use, storage, treatment,
transportation, release, emission and disposal of raw materials,
by-products, wastes and other substances used or produced by or
otherwise relating to the business of the Company or any of its
Subsidiaries, except for such Environmental Permits, the failure of
which to obtain or with which to comply, individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect.
(C) Neither the Company nor any Subsidiary has released any
Hazardous Substances onto any Real Property in such a manner so as
to create any liability for the Company or any of its Subsidiaries,
except for such releases that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
(D) There are no claims, notices, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries,
Orders or proceedings pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries that are
based on or related to the failure to have any required Environmental
Permits.
(E) To the knowledge of the Company, there are no past or
present conditions, events, circumstances, facts, activities,
practices, incidents, actions, omissions or plans (1) that are
reasonably likely to give rise to any liability or other obligation
for the Company or any of its Subsidiaries under any Environmental
Laws; or (2) that are reasonably likely to form the basis of any
claim, action, suit, proceeding, hearing, investigation or inquiry
against or involving the Company or any of its Subsidiaries resulting
in liability for the Company or any of its Subsidiaries under any
Environmental Laws, except for such claims, actions, suits,
proceedings, hearings, investigations or inquiries that, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(F) Neither the Company nor any of its Subsidiaries has
received written notice from any Governmental Authority that any of
them have any
24
liability with respect to the release of any Hazardous Substances
from any underground or aboveground storage tanks.
(G) Neither the Company nor any of its Subsidiaries has
received any written notice that any of them is or may be a
potentially responsible Person under CERCLA, or any similar state or
local Law, in connection with any waste disposal site allegedly
containing any Hazardous Substances, or other location used for the
disposal of any Hazardous Substances.
(H) Neither the Company nor any of its Subsidiaries has
received any written notice that it has any liability pursuant to any
failure of the Company or any of its Subsidiaries to comply in any
respect with any Environmental Law or the requirements of any
Environmental Permit.
(I) Since January 1, 2001, neither the Company nor any of its
Subsidiaries has been requested or required by any Governmental
Authority to perform any investigatory or remedial activity or other
action in connection with any actual or alleged release of Hazardous
Substances or any other environmental matter.
(p) Insurance. The Company has delivered or made available to the
Buyers true and correct copies of all insurance policies and bonds maintained
by the Company and its Subsidiaries as of the date of this Agreement. Except
as set forth in Section 3.01(p) of the Disclosure Letter, to the knowledge of
the Company, there is no claim in excess of $100,000 by the Company or any of
its Subsidiaries pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of such
policies or bonds. All premiums payable under all such policies and bonds
have been paid and the Company and its Subsidiaries are in material
compliance with the terms of such policies and bonds. To the knowledge of
the Company, there is not any threatened termination of or premium increase
with respect to any of such policies or bonds.
(q) Labor Matters. Section 3.01(q) of the Disclosure Letter sets forth
the names, titles, and job descriptions of all employees of the Company and
each of its Subsidiaries whose salary and bonus equaled or exceeded $100,000
in the calendar year ended December 31, 2001 (the "Key Employees"), and which
sets out a summary of the salary, wages, bonuses, benefits and any additional
compensation provided to each Key Employee in calendar year 2001. To the
knowledge of the Company, the relationship between the Company and its
Subsidiaries and each of their respective Key Employees is good, and neither
the Company nor any of its Subsidiaries has reason to believe that any of
their respective Key Employees will terminate their employment relationship
as a result of the transactions contemplated by this Agreement. With respect
to each of the employees of the Company and its Subsidiaries, except as set
forth in the SEC Reports:
(i) the Company and each of its Subsidiaries are, and have been,
in compliance, in all material respects, with all applicable Laws,
regulations, policies, procedures and contractual obligations
relating to employment, employment practices, wages, hours,
compensation, discrimination, employee safety and health, collective
bargaining, workers compensation, unemployment insurance, withholding
of wages, withholding and payment of social security and other
payroll taxes, and terms and conditions of employment, including, but
not limited to, Title VII of the Civil Rights Act
25
of 1964, as amended, 42 U.S.C. Section 2000 et. seq.; the Civil
Rights Act of 1866, 42 U.S.C. Section 1981; the Civil Rights Act of
1991, 42 U.S.C. Section 1981a; the Age Discrimination in Employment
Act, 29 U.S.C. Section 621 et. seq.; the Americans With Disabilities
Act, 42 U.S.C. Section 12101 et. seq.; the Fair Labor Standards Act,
29 U.S.C. Section 201, et. seq.; the Occupational Safety and Health
Act; the Employee Retirement Income Security Act, 29 U.S.C. Section
1000 et. seq.; the Family and Medical Leave Act, 29 U.S.C. Section
2601, et. seq.; and the National Labor Relations Act, except for such
failures to comply that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(ii) except as set forth in Section 3.01(q)(ii) of the Disclosure
Letter, there has not existed during the past two (2) years, does not
currently exist, and is not, to the knowledge of the Company,
currently threatened, any grievance, arbitration, proceeding, charge
or complaint filed by or on behalf of any employee, past or present,
or any labor organization, before the National Labor Relations Board,
the Equal Employment Opportunity Commission, any state or local civil
rights agencies, any federal or state departments of labor, the
various occupational health and safety agencies, or any other
governmental agency or judicial or arbitration forum, against the
Company or any of its Subsidiaries, arising out of the activities or
conduct of the Company or any of its Subsidiaries, except for such
grievances, arbitrations, proceedings, charges or complaints that,
individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect;
(iii) neither the Company nor any of its Subsidiaries has entered
into any collective bargaining agreement, contingent or otherwise,
with a labor union, and no employee of the Company or any of its
Subsidiaries are covered by a collective bargaining agreement or
other contract with a labor union, or otherwise represented by any
labor union, and there is no collective bargaining agreement binding
on the Company or any of its Subsidiaries that restricts from
relocating or closing any or all of its business or operations. To
the Company's knowledge, there are no organizational efforts
currently being made or threatened by or on behalf of any labor union
with respect to any employees of the Company or any of its
Subsidiaries. There is not currently pending, and during the past
five (5) years there has not been, any strike, lockout, picketing,
slow-downs or work stoppages with respect to the Company or any of
its Subsidiaries, and, to the knowledge of the Company, no such
strikes, picketing, lockouts, slow-downs or work stoppages have been
threatened. Additionally, there is not currently pending, and during
the past five (5) years there has not been, any campaign to solicit
cards or authorization from employees of the Company or any of its
Subsidiaries to be represented by any labor organization, and, to the
knowledge of the Company, no such campaign has been threatened;
(iv) except as set forth in Section 3.01(q)(iv) of the Disclosure
Letter, there are no management, employment, severance, "golden
parachute" or other contracts between the Company or any of its
Subsidiaries and any of their respective officers, consultants,
directors, employees or any other Person that are not by their terms
terminable at will and which have not been filed as exhibits to the
SEC Reports;
(v) except as set forth in Section 3.01(q)(v) of the Disclosure
Letter, there is no valid basis for any claim by any past or present
employee of the Company or any of its Subsidiaries for any severance
pay or other payments due to the termination of
26
employment, nor will there be any valid basis for any claim under any
benefit or severance plan, policy, practice, program or agreement
which exists or may be deemed to exist under any applicable law, as
a result of the transactions contemplated hereunder; and
(vi) neither the Company nor any of its Subsidiaries: (A) has
effected, or intends to effect, any mass layoff of employees, as
defined under the Workers Adjustment and Retraining Notification Act
("WARN") (or other similar state law); or (B) has implemented during
the past three (3) years, or intends to implement, any early mass
retirement or mass separation program.
(r) Vote Required. The only vote of the holders of any class or series
of Company capital stock necessary to approve the Merger is the affirmative
vote of the holders of not less than a majority of the votes entitled to be
cast by the holders of all of the outstanding shares of Company Common Stock.
(s) Fairness Opinion of Financial Advisor. The Board of Directors of
the Company has received the opinion of McDonald Investments Inc., to the
effect that, as of the date of this Agreement, the consideration to be
received in the Merger by the holders of shares of Company Common Stock is
fair to such holders, from a financial point of view. Upon receipt a copy of
such opinion will be provided to the Buyers.
(t) State Takeover Statutes. Assuming for purposes of this Section
3.01(t) that no Person associated or affiliated with the Buyers is an
"interested shareholder" (as such term is defined in Section 48-103-203 of
the Tennessee Act) of the Company who has not continuously been an interested
shareholder of the Company during the five-year period preceding the Merger,
Section 48-103-205 of the Tennessee Act applicable to a "business
combination" does not, and will not, prohibit the transactions contemplated
hereunder, and the restrictions contained in the Tennessee Control Share
Acquisition Act applicable to "control share acquisitions" will not prohibit
the authorization, execution, delivery and performance of this Agreement or
the consummation of the Merger by the Company. The Company has taken all
necessary action to exempt the transactions contemplated by this Agreement
from any applicable "moratorium," "control share," "fair price," "business
combination," or other anti-takeover laws and regulations of the State of
Tennessee, including, without limitation, the relevant provisions of Chapter
48 of the Tennessee Act.
(u) Affiliate Transactions. Except to the extent disclosed in any SEC
Report filed prior to the date of this Agreement, there are no other
transactions, agreements, arrangements or understandings between the Company
or any Subsidiary, on the one hand, and the Company's directors and executive
employees or other Persons, on the other hand, that would be required to be
filed or described pursuant to Items 402 or 404 of Regulation S-K.
(v) Change of Control Agreements. Except as set forth in the SEC
Reports or as set forth in Section 3.01(v) of the Disclosure Letter, neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated by this Agreement, will (either alone or in
conjunction with any other event) obligate the Company to make, result in,
cause the accelerated vesting or delivery of (except as contemplated by
Section 1.07), or increase the amount or value of, any payment or benefit to
any director, officer or employee of the Company.
27
(w) Franchise Matters.
(i) The Company has heretofore furnished or made available to
the Buyers true and correct copies of each agreement, including each
franchise agreement, license agreement, subfranchise agreement,
sublicense agreement, master franchise agreement, development
agreement and reserved area agreement which grants or purports to
grant to a third party the right to operate or license others to
operate or to develop within a geographic area, "Shoney's"
restaurants, "Captain D's" restaurants, or other concept operated or
franchised by the Company or any Subsidiary (each a "Franchise") or
to use any Mark in connection with the operation of a Franchise or
similar business (each a "Franchise Agreement" and, collectively, the
"Franchise Agreements") that is currently in effect between (A) the
Company, any of its Subsidiaries, and any third party, including
franchisees, licensees, subfranchisees, sublicensees, master
franchisees and developers (collectively, the "Franchisees"); or (B)
any Franchisee and any third party (a "Subfranchisee"). Neither the
Company or any of its Subsidiaries nor, to the Company's knowledge,
any of its representatives or any Franchisee or Subfranchisee have
made any written or oral statements or representations that are
inconsistent with the information provided in the applicable
franchise offering circular or that violate any applicable Law.
(ii) Each Franchise Agreement is in full force and effect and
constitutes a valid and binding agreement, enforceable against the
Company or its Subsidiary, as the case may be, according to its terms
subject to applicable bankruptcy and other Laws affecting creditors
rights generally and subject to general principles of equity. No
Person holds any option or right to acquire from the Company or any
of its Subsidiaries any of the Franchise Agreements.
(iii) Except as set forth in Section 3.01(w)(iii) of the
Disclosure Letter, there are no existing defaults by the Company, any
of its Subsidiaries, or, to the knowledge of the Company, any
Franchisee or Subfranchisee under any of the Franchise Agreements,
and no event has occurred which, with notice or lapse of time, or
both, would constitute a default by the Company, any of its
Subsidiaries, or, to the knowledge of the Company, any Franchisee or
Subfranchisee under any such agreement, which default could
reasonably be expected to have a Material Adverse Effect or give rise
to a right on the part of any Franchisee to terminate any such
agreement, where the termination of such agreement could reasonably
be expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries has received any fees pursuant to any
Franchise Agreement that is currently, or which, with the execution
of this Agreement, the consummation of the transactions contemplated
herein, the passage of time, or the giving of notice, would be
subject to a claim of refund by a Franchisee or licensee.
(iv) Neither the Company nor any of its Subsidiaries has
transmitted or received any currently effective notices of
termination, nonrenewal or disapproval of transfer to or from any
Franchisee or Subfranchisee, that could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
(v) Except as set forth in Section 3.01(w)(v) of the Disclosure
Letter, no Franchisee or Subfranchisee currently holds any right or
option to operate, develop or locate a Franchise or to exclude the
Company, its Subsidiaries or others from operating or
28
licensing a third party to operate a Franchise in any geographic
area. The Internet website, that the Company maintains at
www.shoneys.com and www.captainds.com do not violate or Infringe the
territorial rights or competitive protection of any Franchisee,
licensee, Subfranchisee or sublicensee under any Franchise Agreement.
(vi) The Company has heretofore furnished or made available to
the Buyers a true and correct list of the jurisdictions in which
either the Company or its Subsidiaries is registered to offer and
sell franchises, which list indicates the date that each such
registration became effective and expires. Except as otherwise
disclosed in Section 3.01(w)(vi) of the Disclosure Letter, during the
period covered by any applicable statute of limitations that has not
expired, neither the Company, any of its Subsidiaries nor, to the
Company's knowledge, any Franchisee has offered or executed a
Franchise Agreement or offered or sold the rights granted therein in
any jurisdiction in which such offer and sale was not duly registered
(if required by law to be registered) or exempt from registration at
the time the offer was made and the sale occurred, except where such
failure to register or obtain an exemption could not reasonably be
expected to have a Material Adverse Effect, and the Company, its
Subsidiaries and, to the knowledge of the Company, all Franchisees
have otherwise complied with all applicable franchise offering
circular and Franchise Agreement delivery requirements under
applicable state, federal and foreign Laws, obtained all required
receipts with respect to delivery thereof and maintained books and
records regarding franchise sales activities in compliance with
applicable Law, except for such failures that could not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect. All salesman disclosure forms and advertising
materials have been properly filed and all franchise brokers have
been properly registered, except for such failures to file or
register that could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. All franchise
registration applications and other materials submitted to state and
foreign franchise registration authorities were complete and accurate
in all material respects, when filed. Neither the Company, any of
its Subsidiaries nor, to the Company's knowledge, any Franchisee has
otherwise engaged in the offer or execution of Franchise Agreements
in violation of applicable state, federal or foreign franchise Law,
business opportunity Law, or unfair or deceptive trade practices Law
or regulation or similar Law or regulation except for such violations
that could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Neither the Company, any of
its Subsidiaries nor, to the Company's knowledge, any Franchisee is
subject to any currently effective Order, injunction or similar
mandate with respect to the offer or execution of Franchise
Agreements or the offer or sale of the rights granted therein in any
jurisdiction. Since January 1, 2000, no Franchisee or Subfranchisee
has asserted a claim in writing seeking the rescission of any
Franchise Agreement, and neither the Company nor any of its
Subsidiaries has outstanding any offer to rescind or repurchase any
Franchise Agreement or all or any portion of the rights granted
therein. Each disclosure document that the Company or its
Subsidiaries delivered to a prospective Franchisee or Subfranchisee
at any time during the period covered by any applicable statute of
limitations that has not expired complied in all material respects
with the Uniform Franchise Offering Circular Guidelines promulgated
by the North American Securities Administrators Association, the
Trade Regulation Rule on Disclosure Requirements and Prohibitions
Concerning Franchising and Business Opportunity Ventures promulgated
by
29
the U.S. Federal Trade Commission and applicable state Law, except
where failure to do so could not reasonably be expected to have a
Material Adverse Effect, and no such disclosure document contained
a material misstatement of fact or omitted any material fact
necessary to make the information therein fair, accurate, complete
and not misleading.
(vii) To the knowledge of the Company, neither the Company nor
any of its Subsidiaries has, directly or indirectly, paid or
delivered any fees, commissions or other sums of money or items of
property, however designated or characterized, to any finders,
agents, customers, suppliers, government officials or other parties
that constituted illegal payments under any federal, state or local
Law.
(x) Company Rights Agreement. The Company Board of Directors has
provided its interpretation and has approved and duly authorized, if
necessary, the amendment the Company Rights Agreement to the effect that
neither of the Buyers nor the Buyer Subsidiary or any of their respective
Affiliates shall become an Acquiring Person (as defined in the Company Rights
Agreement). Prior to the Effective Time, no Distribution Date (as defined in
the Company Rights Agreement) will occur, and the Company Rights will not
separate from the underlying shares of Company Common Stock or give the
holders thereof the right to acquire securities of any party hereto, in each
case as a result of the approval, execution or delivery of this Agreement, or
the consummation of the transactions contemplated hereby.
(y) Accuracy of Information. None of the representations, warranties or
statements of the Company contained in this Agreement or in the exhibits
hereto contains any untrue statement of a material fact or, taken as a whole
together with the SEC Reports and the Disclosure Letter, omits to state any
material fact necessary in order to make any of such representations,
warranties or statements not misleading.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF THE BUYERS AND THE BUYER
SUBSIDIARY. The Buyers and the Buyer Subsidiary, jointly and severally,
represent and warrant to the Company as follows:
(a) Organization, Standing, and Qualification. Each of the Buyers and
the Buyer Subsidiary is a limited partnership or limited liability company,
as the case may be, duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all the requisite power and
authority, and is in possession of all Approvals necessary to own, lease and
operate its properties and to carry on its business as it is now being
conducted. Each of the Buyers and the Buyer Subsidiary is duly qualified or
licensed as a foreign limited partnership or limited liability company, as
the case may be, to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated
by it or the nature of its activities makes such qualification or licensing
necessary. The Buyer Subsidiary is a newly-formed single purpose entity
which has been formed solely for the purposes of the Merger and has not and
will not carry on any business or engage in any activities other than those
reasonably related to the Merger.
(b) Authorization and Execution. Each of the Buyers and the Buyer
Subsidiary has all the necessary partnership and limited liability company
power and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of the Buyers and the Buyer Subsidiary have been duly
authorized by the respective governing body of each of the Buyers and the
Buyer
30
Subsidiary and by the Buyers as the only members of the Buyer Subsidiary, and
no further partnership or limited liability company action of the Buyers or
the Buyer Subsidiary is necessary to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by each of the
Buyers and the Buyer Subsidiary and, assuming the accuracy of the
representations and warranties set forth in Section 3.01(a), constitutes the
legal, valid and binding obligation of each of the Buyers and the Buyer
Subsidiary, enforceable against the Buyers and the Buyer Subsidiary in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar Laws affecting the
enforcement of creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a Court of law or equity).
(c) No Conflicts. Neither the execution and delivery of this Agreement
by the Buyers and the Buyer Subsidiary, nor the consummation by the Buyers
and the Buyer Subsidiary of the transactions contemplated hereby, will (i)
conflict with or result in a breach of the Charter, by-laws or similar
organizational documents as currently in effect, of the Buyers or the Buyer
Subsidiary; (ii) except for the requirements under the HSR Act, compliance
with the Exchange Act, the filing of the Articles of Merger with the
Secretary of State of the State of Tennessee and filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, require any
filing with, or consent or approval of, any Governmental Authority having
jurisdiction over any of the business or assets of the Buyers or the Buyer
Subsidiary, except for any consent, filing or authorization, the failure of
which to obtain, and for any filing or registration, the failure of which to
make, could not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the Buyers; (iii) violate any
statute, Law, ordinance, rule or regulation applicable to the Buyers or the
Buyer Subsidiary or any injunction, judgment, Order, writ or decree to which
the Buyers or the Buyer Subsidiary has been specifically identified as
subject, except for such violations that, individually or in the aggregate,
could not reasonably be expected to have a material adverse effect on the
Buyers; or (iv) result in a breach of, or constitute a default or an event
that, with the passage of time or the giving of notice, or both, would
constitute a default, give rise to a right of termination, cancellation or
acceleration, create any entitlement of any third party to any payment or
benefit, require the consent of any third party, or result in the creation of
any Lien on the assets of the Buyers or the Buyer Subsidiary under, any
contract of either.
(d) Litigation. No Litigation is pending or, to the knowledge of the
Buyers or the Buyer Subsidiary, threatened against the Buyers or the Buyer
Subsidiary that seeks to enjoin or otherwise challenge the consummation of
the transactions contemplated by this Agreement. None of the Buyers nor the
Buyer Subsidiary is specifically identified as a party subject to any
restrictions or limitations under any injunction, writ, judgment, Order or
decree of any Court, administrative agency or commission or other
Governmental Authority that, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on the Buyers.
(e) No Brokers or Finders. No broker, financial advisor, finder or
investment banker or other Person is entitled to any broker's, financial
advisor's, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Buyers or the Buyer Subsidiary.
(f) Availability of Funds. At the date hereof and at the Effective
Time, the Buyer Subsidiary shall have sufficient funds available to pay the
Merger Consideration, the expenses
31
related to the Merger and all amounts which may become due as a result of the
consummation of the Merger.
(g) Ownership of Stock. None of the Buyers or the Buyer Subsidiary owns
any shares of Company Common Stock.
ARTICLE IV
CONDUCT AND TRANSACTIONS BEFORE THE EFFECTIVE TIME
SECTION 4.01 OPERATION OF BUSINESS OF THE COMPANY UNTIL EFFECTIVE TIME.
The Company covenants and agrees that, between the date hereof and the
Effective Time, except as expressly required or permitted by this Agreement
or unless the Buyers shall otherwise agree in writing, the Company shall
conduct and shall cause the business of itself and each of its Subsidiaries
to be conducted only in, and the Company and its Subsidiaries shall not take
any action except in, the ordinary course of business and in a manner
consistent with past practice and in compliance with applicable laws. The
Company shall use its best efforts (i) to preserve intact the business
organization and assets of the Company and each of its Subsidiaries; (ii) to
keep available the services of the present officers, employees and
consultants of the Company and each of its Subsidiaries; and (iii) to
maintain in effect Material Contracts and to preserve the present
relationships of the Company and each of its Subsidiaries with customers,
licensees, Franchisees, suppliers, distributors and other Persons with whom
the Company or any of its Subsidiaries has material business relations. In
addition to, and not in limitation of the foregoing, neither the Company nor
any of its Subsidiaries shall, between the date hereof and the Effective
Time, directly or indirectly do, or propose to do, any of the following
without the prior written consent of the Buyers:
(a) amend or otherwise change the Charter or By-Laws or equivalent
organizational documents of the Company or any of its Subsidiaries or alter
through merger, liquidation, reorganization, restructuring or in any other
fashion the corporate structure or ownership of the Company or any of its
Subsidiaries;
(b) issue, grant, sell, transfer, deliver, pledge, promise, dispose of
or encumber, or authorize the issuance, grant, sale, transfer, deliverance,
pledge, promise, disposition or encumbrance of, any shares of capital stock
or other equity interests of any class, or any options, warrants, convertible
or exchangeable securities or other rights of any kind to acquire any shares
of capital stock or any other equity interest or Stock-Based Rights of the
Company or any of its Subsidiaries (except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights described
in Section 3.01(b)(i) and limited to the equity interests described in such
Section 3.01(b)(i)); or redeem, purchase or otherwise acquire, directly or
indirectly, any of the capital stock or other equity interests of the Company
or any of its Subsidiaries;
(c) declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of any of
its capital stock or other equity interests (except that a Subsidiary may
declare and pay a dividend or distribution to its parent); split, combine or
reclassify any of its capital stock or other equity interests, or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of its capital stock or other equity interests;
or amend the terms of, repurchase, redeem or otherwise acquire, or permit any
Subsidiary to repurchase, redeem or otherwise acquire, any of its
32
securities, including debt securities, or any securities, including debt
securities, of its Subsidiaries; or propose to do any of the foregoing;
(d) sell, transfer, deliver, lease, license, sublicense, mortgage,
pledge, encumber or otherwise dispose of (in whole or in part), or create,
incur, assume or subject any Lien on, any of the assets of the Company or any
of its Subsidiaries (excluding any Company Intellectual Property) other than
(i) in the ordinary course of business consistent with past practice, but in
no event shall such dispositions exceed $100,000 individually or $1,000,000
in the aggregate, (ii) pursuant to the terms of contracts entered into as of
the date of this Agreement, or (iii) intercompany transfers.
(e) acquire (by merger, consolidation, lease, acquisition of stock or
assets or otherwise) any corporation, limited liability company, partnership,
joint venture, trust or other entity or any business organization or division
thereof or any material amount of the assets of any of the foregoing; incur
any indebtedness for borrowed money, other than net increases in the
principal balances outstanding as of the date of this Agreement of less than
or equal to: (i) $3 million under the Amended and Restated Credit Agreement,
dated as of September 6, 2000, by and among the Company, the Initial Lenders
(as defined therein), Bank of America, N.A., as initial issuing bank, Bank of
America, N.A., as Administrative Agent, and Banc of America Securities,
L.L.C., as lead arranger and sole book manager and as syndication agent, as
in effect on the date hereof (the "Shoney's Revolver"), and (ii) $2 million
under the Credit Agreement, dated as of September 6, 2000, as amended, by and
among Captain D's, Inc., the Initial Lenders (as defined therein), Bank of
America, N.A., as the initial issuing bank swing line bank, administrative
agent and collateral agent, and Banc of America Securities LLC, as sole lead
arranger and sole book manager, as in effect on the date hereof (the "Captain
D's Agreement") (the Buyers agreeing that if the Company requests consent to
exceed such limitations, such consent shall not be unreasonably withheld or
delayed), or issue any debt securities or any warrants or rights to acquire
any debt security or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any Person; make any
loans, advances or enter into any financial commitments, including, without
limitation, commitments, related to any interest rate swaps, caps, floors or
option agreements or any other interest rate risk management arrangement,
foreign exchange contracts or other derivative contracts or arrangements; or,
authorize or make any capital expenditures in excess of $3,000,000 in the
aggregate;
(f) terminate any employee or consultant whose salary and bonus equaled
or exceeded $100,000 in the calendar year ended December 31, 2001 or hire any
employee or consultant whose salary and bonus are expected to equal or exceed
$100,000 in the calendar year ended December 31, 2002; except in the ordinary
course of business consistent with past practice, increase the compensation
or fringe benefits (including, without limitation, bonus) payable or to
become payable to its directors or officers, or loan or advance any money or
other asset or property to, or grant any bonus, severance or termination pay
not required under existing severance plans to; or enter into any employment
or severance agreement with, any director, officer or other employee of the
Company or any of its Subsidiaries; or establish, adopt, enter into,
terminate or amend, or accelerate the payment, right to payment or vesting
under, any Employee Plan or any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, stock purchase, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
33
for the benefit of any current or former directors, officers or employees of
the Company or any Subsidiary, other than as required by the terms thereof or
applicable Law;
(g) change any accounting policies or procedures (including procedures
with respect to reserves, revenue recognition, payments of accounts payable
and collection of accounts receivable) or method of Tax accounting unless
required by a change in Law or GAAP used by it;
(h) (i) enter into any agreement that if entered into prior to the date
hereof would be a Material Contract required to have been disclosed pursuant
to Section 3.01(i); or (ii) modify, amend in any material respect, transfer,
terminate or waive any material rights under any Material Contract in any
manner adverse to the Company or any of its Subsidiaries;
(i) make or change any material Tax election, file any amended Tax
Return other than that which is deemed necessary to correct a non-material
error or seek a refund, settle or compromise any federal, state, local or
foreign income tax liability, agree to an extension of a statute of
limitations, enter into any closing agreement relating to any Tax or
surrender any right to claim a Tax refund;
(j) pay, discharge, satisfy or settle any Litigation, except any
settlement that would not: (i) impose any injunctive or similar Order on the
Company or any of its Subsidiaries; or restrict in any way the business of
the Company or any of its Subsidiaries; or (ii) exceed $50,000 in cost or
value to the Company or any of its Subsidiaries in the aggregate for all such
settlements. The Company and its Subsidiaries shall not pay, discharge or
satisfy any liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), except in the ordinary course of
business consistent with past practice;
(k) enter into or amend any Contract, transaction, indebtedness or other
arrangement with, directly or indirectly, any of the directors or other
Affiliates of the Company and its Subsidiaries, or any of their respective
Affiliates or family members;
(l) fail to use best efforts to maintain in full force and effect all
self-insurance and insurance, as the case may be, currently in effect unless
simultaneously with the termination or cancellation thereof replacement
policies providing substantially the same coverage (without any gap) are in
full force and effect;
(m) cease the operation of any office or other premises of the Company
or any of its Subsidiaries, except as set forth in Section 4.01(m) of the
Disclosure Letter;
(n) file a petition under the Title 11 of the United States Code (the
"Bankruptcy Code"), adopt or enter into a plan of complete or partial
liquidation, dissolution, winding up, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries, other than liquidations, dissolutions, mergers, consolidations,
restructurings, recapitalizations, or other reorganizations involving only
wholly-owned Subsidiaries of the Company and no other Person;
(o) plan, announce, implement or effect any mass reduction in force,
mass lay-off, mass early retirement program, mass severance program or other
program or effort concerning the mass termination of employment of employees
of the Company or its Subsidiaries, except for terminations of employees as
a result of the cessation of the operation of offices or premises pursuant to
Section 4.01(m);
34
(p) fail to maintain its Intellectual Property as currently maintained,
or allow any Mark to expire or to become abandoned, canceled or otherwise
terminated;
(q) transfer, license, sell or otherwise dispose of any material
Intellectual Property, except pursuant to a franchise agreement; or
(r) except as set forth in Section 4.01(r) of the Disclosure Letter,
authorize, recommend, propose or announce an intention to do any of the
foregoing, or agree, orally or in writing, negotiate the terms of, or enter
into, or amend any Material Contract or arrangement to do any of the
foregoing.
SECTION 4.02 COMPANY SHAREHOLDERS' MEETING; PROXY STATEMENT AND PROXY.
(a) The Company shall promptly after the date of this Agreement take all
actions necessary in accordance with the Tennessee Act and its Charter and
By-Laws to duly call, give notice of and hold the Company Shareholders'
Meeting (as defined herein) as soon as reasonably practicable. Once the
Company Shareholders' Meeting has been called and noticed, the Company shall
not postpone or adjourn (other than for the absence of a quorum and then only
to a future date specified by the Buyers) the Company Shareholders' Meeting
without the written consent of the Buyers, unless otherwise required by Law
or by a Governmental Authority. The Board of Directors of the Company has
declared that this Agreement is advisable and, subject to Section 4.03(c),
shall recommend that this Agreement and the transactions contemplated hereby
be approved and authorized by the shareholders of the Company and include in
the Proxy Statement a copy of such recommendations; provided, however, that
the Board of Directors of the Company shall submit this Agreement to the
shareholders of the Company whether or not the Board of Directors of the
Company at any time subsequent to making such declaration takes any action
permitted by Section 4.03(c). The Company shall solicit from its
shareholders proxies voting in favor of this Agreement and the Merger and
shall take all other action reasonably necessary or advisable to secure the
vote or consent of its shareholders to authorize and approve this Agreement
and the Merger; provided, however, that the Board of Directors obligations
shall be subject to Section 4.03(c). Without limiting the generality of the
foregoing, (i) the Company agrees that its obligation to duly call, give
notice of, convene and hold the Company Shareholders' Meeting as required by
this Section 4.02(a), shall not be affected by the withdrawal, amendment or
modification of the Board of Directors' recommendation of approval and
adoption of this Agreement and the transactions contemplated hereby, and (ii)
the Company agrees that its obligations under this Section 4.02(a) shall not
be affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal (as defined in
Section 4.03(a)).
(b) In connection with the Company Shareholders' Meeting (as defined
herein), the Company shall promptly after the date of this Agreement prepare
and file with the SEC a preliminary proxy statement relating to the
transactions contemplated by this Agreement and the Merger (the "Preliminary
Proxy Statement") and shall use its best efforts to respond to the comments
of the SEC and to cause a definitive proxy statement (such proxy statement,
together with any amendments thereof or supplements thereto, the "Proxy
Statement") to be mailed to the Company's shareholders as soon as reasonably
practicable after the Proxy Statement is available for mailing; provided,
however, that prior to the filing of each of the Preliminary Proxy Statement
and the Proxy Statement, the Company shall consult with the Buyers with
respect to such filings and shall afford the Buyers reasonable opportunity to
comment thereon. The Buyers
35
and the Buyer Subsidiary shall provide the Company with any information for
inclusion in the Preliminary Proxy Statement and the Proxy Statement that may
be required under applicable Law with respect to the Buyers and the Buyer
Subsidiary as is reasonably requested by the Company.
(c) The Company agrees that the Proxy Statement will not, at the time
the Proxy Statement is mailed, at the time of the meeting of shareholders
(the "Company Shareholders' Meeting") to which the Proxy Statement relates,
or at the Effective Time, as then amended or supplemented, contain any untrue
statement of a material fact, or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading (except
that no representation is made by the Company with respect to statements made
in, or incorporated by reference into the Proxy Statement based on
information about the Buyers or the Buyer Subsidiary furnished by the Buyers
or the Buyer Subsidiary in writing specifically for inclusion in the Proxy
Statement).
(d) The Buyers agree that none of the information furnished or to be
furnished by the Buyers or the Buyer Subsidiary with respect to the Buyers or
the Buyer Subsidiary (as opposed to comments and/or written materials
provided with respect to the text of the Proxy Statement) in writing
specifically for inclusion in the Proxy Statement will, at the time the Proxy
Statement is mailed, at the time of the Company Shareholders' Meeting, or at
the Effective Time, as then amended or supplemented, contain any untrue
statement of a material fact, or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.03 NO SHOPPING.
(a) From the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement in accordance with its terms,
subject to Section 4.03(b), the Company shall not, nor shall it permit any of
its Affiliates or Subsidiaries to, nor shall it authorize or permit any of
its or their respective shareholders, directors, officers, employees,
representatives or agents (collectively, the "Company Representatives"), to
directly or indirectly, (i) solicit, actively and knowingly facilitate,
initiate, encourage or take any action to solicit, actively and knowingly
facilitate, initiate, or encourage, any inquiries or communications or the
making of any proposal or offer that constitutes or may constitute an
Acquisition Proposal (as defined herein), or (ii) participate or engage in
any discussions or negotiations with, or provide any information to or take
any other action with the intent to facilitate the efforts of, any Person
concerning any possible Acquisition Proposal or any inquiry or communication
which might reasonably be expected to result in an Acquisition Proposal. For
purposes of this Agreement, the term "Acquisition Proposal" shall mean any
inquiry, proposal or offer from any Person (other than the Buyers, the Buyer
Subsidiary or any of their Affiliates or permitted assigns) relating to (A)
any tender offer, exchange offer, merger, consolidation, recapitalization,
liquidation or other direct or indirect business combination, involving the
Company or any Material Subsidiary (as defined herein); (B) the issuance or
acquisition of shares of capital stock or other equity interests of the
Company or any Material Subsidiary representing fifteen percent (15%) or more
of the outstanding capital stock or other equity interests of the Company or
such Material Subsidiary or any tender or exchange offer that if consummated,
would result in any Person, together with all Affiliates thereof,
beneficially owning shares of capital stock or other equity interests of the
Company or any Material Subsidiary representing fifteen percent (15%) or more
of the outstanding capital stock or other equity interests of the Company or
such Material Subsidiary;
36
or (C) the sale, lease, exchange, license (whether exclusive or not),
franchise, or other disposition of any significant portion of the business or
assets of the Company or any Material Subsidiary. In no event shall an
Acquisition Proposal include any transaction involving or that could involve
(1) the commencement by the Company or any of its Subsidiaries of a case
under the Bankruptcy Code; (2) any proceeding under the Bankruptcy Code
involving a reorganization, adjustment of debt, relief of debtors,
dissolution insolvency or liquidation; (3) the appointment of a receiver or
custodian for any substantial part of the Company's or any Subsidiary's
property; or (4) the making of a general assignment for the benefit of
creditors (each, a "Bankruptcy Proposal"). The Company shall immediately
cease and cause to be terminated, and shall cause its Subsidiaries and all
Company Representatives to immediately cease and cause to be terminated, all
existing discussions or negotiations with any Persons conducted heretofore
with respect to, or that could to lead to, an Acquisition Proposal or a
Bankruptcy Proposal. The Company shall promptly notify each Company
Representative of its obligations under this Section 4.03.
(b) Notwithstanding Section 4.03(a), the Company may participate in
discussions or negotiations with, or furnish information with respect to the
Company pursuant to a confidentiality agreement with terms no less favorable
to the Company than those in effect between the Company and the Buyers to,
any Person if and only if (i) such Person has submitted an unsolicited bona
fide written Acquisition Proposal to the Company, (ii) neither the Company
nor any of the Company Representatives shall have violated Section 4.03(a),
(iii) the Board of Directors of the Company (A) determines by a majority vote
in its good faith judgment, after consultation with outside counsel, that
taking such action is necessary in order to act in a manner consistent with
the fiduciary duties of such Board under applicable laws, and (B)
contemporaneously with furnishing any such nonpublic information to, or
entering into discussions or negotiations with, such Person, the Company
gives the Buyers written notice of the identity of such Person and of the
Company's intention to furnish nonpublic information to, or enter into
discussions or negotiations with, such Person, and (iv) contemporaneously
with furnishing any such information to such Person, the Company furnishes
such information to the Buyers (to the extent such information has not been
previously furnished by the Company). In addition to the foregoing, the
Company shall (1) provide the Buyers with at least forty-eight (48) hours
prior notice (or such lesser prior notice as provided to the members of the
Company's Board of Directors) of any meeting of the Company's Board of
Directors at which the Company's Board of Directors is reasonably expected to
consider a Superior Proposal (as defined herein) and (ii) provide the Buyers
with at least three (3) Business Days prior written notice (or such lesser
prior notice as provided to the members of the Company's Board of Directors)
of a meeting of the Company's Board of Directors at which the Company's Board
of Directors is reasonably expected to recommend a Superior Proposal to its
shareholders and together with such notice a copy of the definitive
documentation relating to such Superior Proposal.
(c) Except as set forth in the following sentence, neither the Board of
Directors of the Company nor any committee thereof shall (i) approve or
recommend any Acquisition Proposal other than the Merger, (ii) withdraw or
modify in a manner adverse to the Buyers or the Buyer Subsidiary its approval
or recommendation of the Merger, this Agreement or the transactions
contemplated hereby, (iii) upon a written request by the Buyers to reaffirm
its approval or recommendation of this Agreement or the Merger following the
delivery, making or announcement of an Acquisition Proposal, fail to do so
within two (2) Business Days after such request is made, (iv) approve, enter,
or permit or cause the Company or any Material Subsidiary to enter, into any
letter of intent, agreement in principle, acquisition agreement or other
similar
37
agreement related to any Acquisition Proposal, or (v) resolve or announce its
intention to do any of the foregoing. The immediately preceding sentence
notwithstanding, in the event that prior to the Company Shareholders' Meeting
the Board of Directors of the Company receives a Superior Proposal, the Board
of Directors of the Company may (A) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to the Buyers or the Buyer Subsidiary
its approval or recommendation of the Merger, this Agreement or the
transactions contemplated hereby, (B) fail to reaffirm its approval or
recommendation of this Agreement or the Merger within two (2) Business Days
after a written request by the Buyers to do so, or (C) resolve or announce
its intention to do any of the actions set forth in the preceding clauses (A)
or (B), if (1) after consultation with outside counsel, the Board of
Directors determines by a majority vote of directors in their good faith
judgment that taking such action is necessary in order to act in a manner
consistent with the fiduciary duties of the Board of Directors under
applicable Law, and (2) the Company furnishes the Buyers contemporaneous
written notice of the taking of such action (which notice shall include a
description of the material terms and conditions of the Superior Proposal and
identify the Person making the same). For purposes of this Agreement,
"Material Subsidiary" means any Subsidiary of the Company whose consolidated
revenues, net income or assets constitute ten percent (10%) or more of the
revenues, net income or assets of the Company and its Subsidiaries, taken as
a whole, and the term "Superior Proposal" means any bona fide written
Acquisition Proposal that is on terms which the Board of Directors of the
Company determines by a majority vote of its directors in their good faith
judgment (after consultation with its outside counsel and financial
advisors), after taking into account all relevant factors, including any
conditions to such Acquisition Proposal, the form of consideration
contemplated by such Acquisition Proposal, the timing of the closing thereof,
the risk of nonconsummation, the ability of the Person making the Acquisition
Proposal to finance the transactions contemplated thereby and any required
filings or approvals, to be more favorable to the shareholders of the Company
than the Merger (or any revised proposal made by the Buyers).
(d) In addition to the other obligations of the Company set forth in
this Section 4.03, the Company shall promptly (and in any event within one
(1) day after receipt thereof) advise the Buyers orally and in writing of any
request for information with respect to any Acquisition Proposal, or any
inquiry with respect to or which could result in an Acquisition Proposal, the
material terms and conditions of such request, Acquisition Proposal or
inquiry, and the identity of the Person making the same. The Company shall
inform the Buyers on a prompt and current basis of the status, terms and
content of any discussions regarding any Acquisition Proposal with a third
party. Nothing contained in this Section 4.03(d) shall prevent the Board of
Directors of the Company from complying with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act.
SECTION 4.04 ACCESS TO INFORMATION. From the date of this Agreement
until the Effective Time, the Company will give the Buyers and its counsel,
financial advisers, auditors, potential financing sources, potential
acquirors of certain of the assets of the Company and other authorized
representatives reasonable access to the offices, properties, books and
records of the Company and each Subsidiary at all reasonable times and upon
reasonable notice, and will instruct the employees, counsel, financial
advisers and auditors of the Company and each Subsidiary to cooperate with
the Buyers and each such representative in all reasonable respects in its
investigation of the business of the Company and its Subsidiaries. The
Buyers and each such representative will conduct such investigation in a
manner so as not to unreasonably interfere with the operations of the Company
and its Subsidiaries and will take all necessary
38
precautions (including obtaining the written agreement of its respective
employees or representatives involved in such investigation) to protect the
confidentiality of any information of the Company and its Subsidiaries
disclosed to such Persons during such investigation.
SECTION 4.05 AMENDMENT OF THE COMPANY'S EMPLOYEE PLANS. The Company
will, effective at or immediately before the Effective Time, cause any
Employee Plans that it may have to be amended, to the extent, if any,
reasonably requested by the Buyers, for the purpose of permitting such
Employee Plan to continue to operate in conformity with ERISA and the Code
following the Merger.
SECTION 4.06 HSR ACT. Each of the Company, the Buyers and the Buyer
Subsidiary will, promptly after the execution of this Agreement, file all
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the HSR Act, will exercise its
reasonable best efforts to obtain an early termination of the applicable
waiting period, and will make any further filings pursuant thereto that may
be necessary or advisable.
SECTION 4.07 CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement
between the Company and Lone Star Fund (III) (U.S.), L.P., dated June 27,
2001, shall remain in full force and effect until the Effective Time, subject
to the express provisions of this Agreement. Until the Effective Time, the
Company, the Buyers and the Buyer Subsidiary shall comply with the terms of
the Confidentiality Agreement as if they were parties thereto.
SECTION 4.08 COMPANY RIGHTS AGREEMENT. The Board of Directors of the
Company shall take all action necessary or desirable (in addition to that
referred to in Section 3.01(x)) (including amending the Company Rights
Agreement, to the extent permitted thereunder) in order to render the Company
Rights inapplicable to the Merger and the other transactions contemplated by
this Agreement. Except in connection with the foregoing sentence or after
the termination of this Agreement, the Board of Directors of the Company
shall not, without the prior written consent of the Buyers, (a) amend the
Company Rights Agreement or (b) take any action with respect to, or make any
determination under, the Company Rights Agreement, in each case in order to
facilitate any Acquisition Proposal with respect to the Company.
SECTION 4.09 BEST EFFORTS; FURTHER ASSURANCES.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each party hereto shall use its best efforts to take, or cause to
be taken, all actions, and do, or cause to be done, and to assist and
cooperate with the other party or parties in doing, all things necessary,
proper or advisable to consummate and make effective, the Merger and the
other transactions contemplated hereby as soon as reasonably practicable
after the date hereof. The Company and the Buyers shall use their best
efforts to (i) as promptly as practicable, obtain all Approvals; (ii) make
all filings under applicable Law required in connection with the
authorization, execution and delivery of this Agreement by the Company and
the Buyers and the consummation by them of the transactions contemplated
hereby, including the Merger (in connection with which the Buyers and the
Company will cooperate with each other in connection with the making of all
such filings, including providing copies of all such documents to the non-
filing party and its advisors prior to filings and, if requested, will accept
all reasonable additions, deletions or changes suggested in connection
therewith; and (iii) furnish all information required for any application or
other filing to be made pursuant to the Tennessee Act, the Delaware Act or
any other Law or any applicable regulations of any Governmental Authority
(including all
39
information required to be included in the Preliminary Proxy Statement or the
Proxy Statement) in connection with the transactions contemplated by this
Agreement. Anything in this Agreement to the contrary notwithstanding,
neither the Buyers nor any of their Affiliates shall be under any obligation
to (x) make proposals, execute or carry out agreements or submit to Orders
providing for the sale or other disposition or holding separate (through the
establishment of a trust or otherwise) of any assets or categories of assets
of the Buyers, any of their Affiliates, the Company, or any of the
Subsidiaries or the holding separate of the Company Common Stock or imposing
or seeking to impose any limitation on the ability of the Buyers or any of
their Affiliates, to conduct their business or own such assets or to acquire,
hold or exercise full rights of ownership of Company Common Stock; or (y)
otherwise take any step to avoid or eliminate any impediment which may be
asserted under any Law governing competition, monopolies or restrictive trade
practices which, in the reasonable judgment of the Buyers, might result in a
limitation of the benefit expected to be derived by the Buyers as a result of
the transactions contemplated hereby or might adversely affect the Company,
any of the Subsidiaries or the Buyers or any of the Buyers' Affiliates.
Anything in this Agreement to the contrary notwithstanding, without the prior
written consent of the Buyers, neither the Company nor any of its
Subsidiaries will take any action specified in clause (x) or clause (y) of
the immediately preceding sentence.
(b) The parties hereto shall use their best efforts to satisfy or cause
to be satisfied all of the conditions precedent that are set forth in Article
V, as applicable to each of them, and to cause the transactions contemplated
by this Agreement to be consummated as soon as reasonably practicable after
the date hereof. Each party hereto, at the reasonable request of another
party hereto, shall execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable for the
consummation of this Agreement and the transactions contemplated hereby.
(c) The Company and the Buyers shall cooperate with one another:
(i) in connection with the preparation of the Preliminary Proxy
Statement or the Proxy Statement;
(ii) in determining whether any action by or in respect of, or
filing with, any Governmental Authority or other third party, is
required, or any Approvals are required to be obtained from parties
in connection with the consummation of the transactions contemplated
hereby; and
(iii) in seeking any Approvals or making any filings, including
furnishing information required in connection therewith or with the
Preliminary Proxy Statement or the Proxy Statement, and seeking
timely to obtain any such Approvals, or making any filings.
SECTION 4.10 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice to the Buyers, and the Buyers
shall give prompt notice to the Company, of the occurrence, or non-
occurrence, of any event the occurrence, or non-occurrence, of which results
in any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect (or, in the case of any representation or
warranty qualified by its terms by materiality or Material Adverse Effect,
then untrue or inaccurate in any respect) and any failure of the Company, the
Buyers, or the Buyer
40
Subsidiary, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
by it hereunder or under Article VI hereof; provided, however, that the
delivery of any notice pursuant to this Section 4.10 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
(b) Each of the Company and the Buyers shall give prompt notice to the
other of (i) any notice or other communication from any Person alleging that
the Approval of such Person is or may be required in connection with the
Merger, (ii) any notice or other communication from any Governmental
Authority in connection with the Merger; (iii) any Litigation, relating to or
involving or otherwise affecting the Company or its Subsidiaries or the
Buyers or their Affiliates that relates to the Merger; and (iv) any change
that could reasonably be expected to have a Material Adverse Effect on the
Company or is likely to delay or impede the ability of either the Buyers or
the Company to consummate the transactions contemplated by this Agreement or
to fulfill their respective obligations set forth herein.
(c) Each of the Company and the Buyers shall give (or shall cause their
respective Subsidiaries to give) any notices to third Persons, and use, and
cause their respective Subsidiaries to use, their reasonable best efforts to
obtain any consents from third Persons (i) necessary, proper or advisable to
consummate the transactions contemplated by this Agreement, (ii) otherwise
required under any Contracts in connection with the consummation of the
transactions contemplated hereby (the "Company Consents") or (iii) required
to prevent a Material Adverse Effect on the Company from occurring. If any
party shall fail to obtain any such consent from a third Person, such party
shall use its reasonable best efforts, and will take any such actions
reasonably requested by the other parties, to limit the adverse effect upon
the Company and the Buyers, their respective Subsidiaries, and their
respective businesses resulting, or which would result after the Effective
Time, from the failure to obtain such consent.
SECTION 4.11 VOTING AGREEMENTS. The Company shall use its best efforts
to deliver to the Buyers executed voting agreements from any executive
officers and directors who have not executed voting agreements as of the date
hereof, in substantially the form executed by certain officers and directors
as of the date hereof.
SECTION 4.12 TAX MATTERS.
(a) Between the date hereof and the Closing Date, to the extent the
Company or its Subsidiaries has knowledge of the commencement or scheduling
of any Tax audit, the assessment of any material Tax, the issuance of any
notice of material Tax due or any bill for collection of material Tax, or the
commencement or scheduling of any other administrative or judicial proceeding
with respect to the determination, or assessment of any material Tax, the
Company shall timely provide Buyers notice of such matters, setting forth
information describing the asserted liability in reasonable detail.
(b) The Company and its Subsidiaries, as applicable, shall prepare and
timely file all Tax Returns and amendments thereto required to be filed on or
before the Closing Date. The Buyers shall have reasonable opportunity to
review all such Tax Returns and amendments thereto. The Company and its
Subsidiaries shall pay and discharge all Taxes shown as due on such Tax
Returns.
41
SECTION 4.13 OPTIONS. The Company shall use its best efforts to obtain
the termination of any outstanding Option that is exercisable for 50,000 or
more shares of Company Common Stock and which has a per share exercise price
of less than the Merger Consideration.
SECTION 4.14 PENSION, BENEFIT AND WELFARE PLANS. The Company shall file
a request for a determination letter for its 401(k) Retirement Savings Plan
with the Internal Revenue Service on or before February 28, 2002.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 CONDITIONS TO THE OBLIGATIONS OF THE BUYERS AND THE BUYER
SUBSIDIARY. The obligations of the Buyers and the Buyer Subsidiary to effect
the Merger shall be subject to the fulfillment at or before the Effective
Time of the following conditions, any one or more of which (except for the
conditions set forth in Sections 5.01(b) and (e)) may be waived by the Buyers
and the Buyer Subsidiary:
(a) (i) The representations and warranties of the Company contained in
this Agreement that are qualified as to Material Adverse Effect shall be true
and correct as of the date of this Agreement and as of immediately prior to
the Effective Time (other than representations and warranties which address
matters only as of a particular date, in which case such representations and
warranties shall be true and correct, on and as of such particular date),
with the same force and effect as if then made; and (ii) the representations
and warranties of the Company contained in this Agreement that are not
qualified as to Material Adverse Effect shall be true and correct as of the
date of this Agreement and as of immediately prior to the Effective Time
(other than representations and warranties which address matters only as of
a particular date, in which case such representations and warranties shall be
true and correct, on and as of such particular date), with the same force and
effect as if then made, except where the failure of such representations and
warranties (other that the representation contained in Section 3.01(b), which
shall be true and correct in all material respects) to be true and correct
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company; and the Buyers and the Buyer
Subsidiary shall have received a certificate to such effect signed by the
president and by the chief financial officer of the Company. The Company
shall have performed and complied in all material respects with the
agreements and obligations contained in this Agreement required to be
performed and complied with by it immediately prior to the Effective Time,
and the Buyers and the Buyer Subsidiary shall have received a certificate to
such effect signed by the president and by the chief financial officer of the
Company.
(b) This Agreement shall have been approved at the Company Shareholders'
Meeting referred to in Section 4.02 by the vote required by the Tennessee Act
and the Company's Charter.
(c) No change, occurrence, development or series of changes, occurrences
or developments (whether related or unrelated) shall have occurred, been
threatened or become known to the Buyers that could, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
(d) There shall not be pending any action or proceeding brought by any
Governmental Authority requesting or threatening an injunction, writ, order,
judgment or decree that, in the reasonable judgment of the Buyers, could
reasonably likely, if issued, restrain or
42
prohibit the consummation of any of the transactions contemplated hereby,
require rescission of this Agreement or any such transactions, or result in
material damages to the Buyers, the Buyer Subsidiary or the Surviving
Corporation or their respective officers or directors if the transactions
contemplated hereby are consummated, nor shall there be in effect any
provision of applicable Law prohibiting the consummation of the Merger or any
injunction, writ, judgment, preliminary restraining order or other order or
decree of any nature issued by a court or governmental agency of competent
jurisdiction directing that any of the transactions provided for herein not
be consummated as so provided.
(e) All applicable waiting periods (and any extensions thereof) under
the HSR Act shall have expired or otherwise been terminated.
(f) No Company Rights shall have become exercisable under the Rights
Agreement.
(g) The holders of not more than ten percent (10%) of the outstanding
shares of Company Common Stock shall have exercised dissenters' rights in
accordance with the Tennessee Act.
(h) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of
the Merger shall have been made or obtained.
SECTION 5.02 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger shall be subject to the
fulfillment at or before the Effective Time of the following conditions, any
one or more of which (except for the conditions set forth in Section 5.02(b)
and (d)) may be waived by the Company:
(a) (i) The representations and warranties of the Buyers and the Buyer
Subsidiary contained in this Agreement that are qualified as to material
adverse effect shall be true and correct as of the date of this Agreement and
as of immediately prior to the Effective Time (other than representations and
warranties which address matters only as of a particular date, in which case
such representations and warranties shall be true and correct, on and as of
such particular date), with the same force and effect as if then made; and
(ii) the representations and warranties of the Buyers and the Buyer
Subsidiary contained in this Agreement that are not qualified as to material
adverse effect shall be true and correct as of the date of this Agreement and
as of immediately prior to the Effective Time (other than representations and
warranties which address matters only as of a particular date, in which case
such representations and warranties shall be true and correct, on and as of
such particular date), with the same force and effect as if then made, except
where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be expected
to have a material adverse effect on the Buyers; and the Company shall have
received a certificate to such effect signed by an executive officer of the
Buyers and the Buyer Subsidiary. Each of the Buyers and the Buyer Subsidiary
shall have performed and complied in all material respects with the
agreements and obligations contained in this Agreement required to be
performed and complied with by it immediately before the Effective Time, and
the Company shall have received a certificate to such effect signed by an
executive officer of each of the Buyers and the Buyer Subsidiary.
(b) This Agreement shall have been approved at the Company Shareholders'
Meeting referred to in Section 4.02 by the vote required by the Tennessee Act
and the Company's Charter.
43
(c) There shall not be pending any action or proceeding brought by any
Governmental Authority requesting or threatening an injunction, writ, order,
judgment or decree that, in the reasonable judgment of the Company, could
reasonably likely, if issued, restrain or prohibit the consummation of any of
the transactions contemplated hereby, require rescission of this Agreement or
any such transactions, result in material damages to the Company, the
Subsidiaries, or their respective officers or directors if the transactions
contemplated hereby are consummated or limit the benefit expected to be
derived by the Company's stockholders as a result of the transactions
contemplated hereby, nor shall there be in effect any provision of applicable
law prohibiting the consummation of the Merger or any injunction, writ,
judgment, preliminary restraining order or other order or decree of any
nature issued by a court or governmental agency of competent jurisdiction
directing that any of the transactions provided for herein not be consummated
as so provided.
(d) All applicable waiting periods (and any extension thereof) under the
HSR Act shall have expired or otherwise been terminated.
(e) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of
the Merger shall have been made or obtained.
ARTICLE VI
CONDUCT AND TRANSACTIONS AFTER THE EFFECTIVE TIME
SECTION 6.01 INDEMNIFICATION. All rights to indemnification, expense
advancement and exculpation existing in favor of any present or former
director, officer or employee of the Company or any of its Subsidiaries as
provided in the Charter, By-Laws or similar organizational documents of the
Company or any of its Subsidiaries or by law as in effect on the date hereof
shall survive the Merger for a period of at least six (6) years after the
Effective Time (or, in the event any relevant claim is asserted or made
within such six-year period, until final disposition of such claim) with
respect to matters occurring at or before the Effective Time.
SECTION 6.02 DIRECTORS AND OFFICERS LIABILITY INSURANCE. For a period
of at least six (6) years after the Effective Time, the Surviving Corporation
shall, and the Buyers (for so long as one or more of the Buyers or their
Affiliates shall control the Surviving Corporation) shall cause the Surviving
Corporation to, maintain in effect either (a) the current policy of
directors' and officers' liability insurance maintained by the Company
(provided that the Buyers or the Surviving Corporation may substitute
therefor policies with companies rated equivalent to or better than the
Company's current carriers of at least the same coverage and amounts
containing terms and conditions which are no less advantageous in any
material respect to the insured parties thereunder) with respect to claims
arising from facts or events that occurred at or before the Effective Time
(including consummation of the Merger), or (b) a run-off (i.e., "tail")
policy or endorsement with respect to the current policy of directors' and
officers' liability insurance covering claims asserted within six (6) years
after the Effective Time arising from facts or events that occurred at or
before the Effective Time (including consummation of the Merger); and such
policies or endorsements shall name as insureds thereunder all present and
former directors and officers of the Company or any of its Subsidiaries;
provided, however, that the Surviving Corporation shall not be obligated to
spend more than two hundred percent (200%) of the
44
average annual premium in effect during the last three (3) years prior to the
Merger in connection with this Section 6.02. Notwithstanding the foregoing,
if the annual premium for the amount of the coverage required by this Section
6.02 exceeds two hundred percent (200%) of the amount of the average annual
premium in effect during the last three (3) years prior to the Merger, the
Buyers and the Surviving Corporation shall use all reasonable efforts to
maintain the most advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to no more than such amount. If the
Buyers or the Surviving Corporation or any of their respective successors or
assigns (x) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or
merger, or (y) transfers all or substantially all of its properties and
assets to any Person, proper provisions shall be made so that the successors
and assigns of the Buyers and/or the Surviving Corporation are bound by the
obligations of the respective party set forth in Section 6.01 and this
Section 6.02.
ARTICLE VII
TERMINATION AND ABANDONMENT
SECTION 7.01 TERMINATION.
This Agreement may be terminated and the Merger contemplated hereby may
be abandoned at any time prior to the Effective Time, notwithstanding
approval thereof by the shareholders of the Company:
(a) By mutual written consent duly authorized by the Boards of Directors
or other governing body of the Buyers, the Buyer Subsidiary and the Company;
(b) By either the Buyers or the Company if the Merger shall not have
been consummated on or before October 31, 2002; provided, however, that the
right to terminate this Agreement under this Section 7.01(b) shall not be
available to any party whose failure to fulfill any material obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Merger to have been consummated on or before such date;
(c) By either the Buyers or the Company, if a Court of competent
jurisdiction or Governmental Authority shall have issued an Order or taken
any other action, in each case which has become final and non-appealable and
which permanently restrains, enjoins or otherwise prohibits the Merger;
(d) By either the Buyers or the Company, if, at the Company
Shareholders' Meeting (including any adjournment or postponement thereof),
the requisite vote of the shareholders of the Company to approve and adopt
this Agreement and to consummate the Merger shall not have been obtained;
(e) By the Buyers, if the Board of Directors of the Company or any
committee thereof shall have (i) approved or recommended, or proposed to
approve or recommend, any Acquisition Proposal other than the Merger, (ii)
failed to present and recommend the approval and adoption of this Agreement
and the Merger to the shareholders of the Company, or withdrawn or modified,
or proposed to withdraw or modify, in a manner adverse to the Buyers or the
Buyer Subsidiary, its recommendation or approval of the Merger, this
Agreement or the transactions contemplated hereby, (iii) failed to mail the
Proxy Statement to the shareholders of the Company within five (5) Business
Days of when the Proxy Statement was available for
45
mailing or failed to include therein such approval and recommendation
(including the recommendation that the shareholders of the Company vote in
favor of the adoption of this Agreement), (iv) upon a written request by the
Buyers to publicly reaffirm the approval and recommendation of the Merger,
this Agreement and the transactions contemplated hereby following the
delivery, failed to do so within five (5) Business Days after such request is
made, (v) entered, or caused the Company or any Material Subsidiary to enter,
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Acquisition Proposal other than the
Merger, (vi) taken any other action prohibited by Section 4.03, or (vii)
resolved or announced its intention to do any of the foregoing;
(f) By the Buyers, if any Person (other than a Buyer or an Affiliate of
a Buyer) acquires beneficial ownership of or the right to acquire fifteen
percent (15%) or more of the outstanding shares of capital stock or other
equity interests of the Company;
(g) By the Buyers, if neither the Buyers nor the Buyer Subsidiary is in
material breach of its obligations under this Agreement, and if (i) at any
time any of the representations and warranties of the Company herein become
untrue or inaccurate such that Section 5.01(a) would not be satisfied
(treating such time as if it were the Effective Time for purposes of this
Section 7.01(g)), or (ii) there has been a breach on the part of the Company
of any of its covenants or agreements contained in this Agreement such that
Section 5.01(a) would not be satisfied (treating such time as if it were the
Effective Time for purposes of this Section 7.01(g)), and, in both case (i)
and case (ii), such breach (if curable) has not been cured thirty (30) days
after notice to the Company;
(h) By the Company, if it is not in material breach of its obligations
under this Agreement, and if (i) at any time that any of the representations
and warranties of the Buyers or the Buyer Subsidiary herein become untrue or
inaccurate such that Section 5.02(a) would not be satisfied (treating such
time as if it were the Effective Time for purposes of this Section 7.01(h)),
or (ii) there has been a breach on the part of the Buyers or the Buyer
Subsidiary of any of their respective covenants or agreements contained in
this Agreement such that Section 5.02(a) would not be satisfied (treating
such time as if it were the Effective Time for purposes of this Section
7.01(h)), and such breach (if curable) has not been cured within thirty (30)
days after notice to the Buyers;
(i) By the Buyers, if (1) any change, occurrence, development, or series
of changes, occurrences or developments (whether related or unrelated) shall
have occurred, been threatened or become known to the Buyers that,
individually or in the aggregate, could reasonably be expected to result in
a Material Adverse Effect; or (2) there shall have been a material adverse
development in any pending Litigation that, in the reasonable good faith
judgment of the Buyers, after consultation with legal counsel, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect; or
(j) By the Company, pursuant to the terms of Section 7.03(d).
SECTION 7.02 EFFECT OF TERMINATION. Except as provided in this Section
7.02, in the event of the termination of this Agreement pursuant to Section
7.01, this Agreement (other than Sections 7.02, 4.07, and 7.03, and Article
VIII, which shall survive such termination) will forthwith become void, and
there will be no liability on the part of the Buyers, the Buyer Subsidiary or
the Company or any of their respective officers or directors to the other and
all rights and obligations of any party hereto will cease, except that
nothing herein will relieve any
46
party from liability for any breach, prior to termination of this Agreement
in accordance with its terms, of any representation, warranty, covenant or
agreement contained in this Agreement, other than as set forth in Sections
7.03(b) and 7.03(d).
SECTION 7.03 FEES AND EXPENSES.
(a) Except as set forth in this Section 7.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; provided, however, that the Buyers and the Company
shall share equally all fees and expenses, other than attorneys' fees,
incurred in relation to the printing and filing of the Proxy Statement
(including any preliminary materials related thereto), and any amendments or
supplements thereto and all filing fees payable in connection with filings
made under the HSR Act.
(b) If (i) (A) the Buyers shall terminate this Agreement pursuant to (1)
Section 7.01(d) or Section 7.01(g), or (2) pursuant to Section 7.01(b)
without the Company Shareholders' Meeting having occurred, (B) at any time
after the date of this Agreement and before such termination an Acquisition
Proposal with respect to the Company shall have been publicly announced or
otherwise communicated to the Board of Directors and shareholders of the
Company and not withdrawn prior to (1) the Company Shareholders' Meeting
having occurred, in the case of a termination pursuant to Section 7.01(d)
only, or (2) such termination in the case of a termination pursuant to
Section 7.01(g) or Section 7.01(b) only and (C) within twelve (12) months of
such termination the Company or any of its Subsidiaries enters into a
definitive agreement with respect to, or consummates, any Acquisition
Proposal, or (ii) the Buyers shall terminate this Agreement pursuant to
Section 7.01(e) or Section 7.01(f); then the Company shall promptly, but in
no event later than two (2) Business Days after the date of such termination
(or in the case of clause (i), if later, the date the Company or its
Subsidiary enters into such agreement with respect to, or consummates, such
Acquisition Proposal), pay the Buyers an amount equal to $2 million by wire
transfer of immediately available funds. The payment of such amount by the
Company, along with the payment of any amounts owing pursuant to the terms of
Section 7.03(c), shall be in satisfaction of all amounts and claims that the
Buyers and the Buyer Subsidiary may have for any breach of any
representation, warranty, covenant or agreement contained herein or in any
documents executed in connection herewith; provided, however, that any
document executed in connection with the transfer of the Captain D's
Agreement shall expressly be deemed not to be executed in connection herewith
for purposes of this Section 7.03.
(c) If this Agreement is terminated (i) by the Buyers pursuant to
Section 7.01(b) (provided the Company does not also have the right to
terminate this Agreement pursuant to such Section), Section 7.01(d), Section
7.01(e), Section 7.01(f) or Section 7.01(g), or (ii) by the Company pursuant
to Section 7.01(b) (provided Buyers do not also have the right to terminate
this Agreement pursuant to such Section) or Section 7.01(h), then, in the
case of (i) above, the Company shall reimburse the Buyers for all their
Expenses (as defined below) not later than two (2) Business Days after the
date of such termination, and in the case of (ii) above, the Buyers shall
reimburse the Company for its Expenses not later than two (2) Business Days
after such termination. As used in this Agreement, the term "Expenses" shall
mean those fees and expenses actually incurred by the Buyers, the Buyer
Subsidiary or the Company, respectively, in connection with this Agreement
and the transactions contemplated hereby, including fees and
47
expenses of outside counsel, investment bankers, accountants, experts,
consultants and other representatives.
(d) If, on or before October 31, 2002, all of the conditions to the
Buyers' and the Buyer Subsidiary's obligations to effect the Merger set forth
in Section 5.01 have been satisfied, and the Buyers and the Buyer Subsidiary
shall fail or refuse to consummate the transactions contemplated herein, then
five (5) Business Days after receipt of written notice from the Company
stating that all conditions set forth in Section 5.01 have been satisfied and
a demand being made to consummate the transactions contemplated herein (the
"Nonconsummation Notice"), this Agreement shall be terminated and the Buyers
and the Buyer Subsidiary shall, collectively, pay to the Company an amount
equal to $5 million in immediately available funds. The payment of such
amount by the Buyers and the Buyer Subsidiary shall be in satisfaction of all
amounts and claims that the Company may have for any breach of any
representation, warranty, covenant or agreement contained herein or in any
documents executed in connection herewith.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 8.01 PERFORMANCE OF COVENANTS; NON-SURVIVAL OF REPRESENTATIONS
AND WARRANTIES. None of the representations and warranties in this Agreement
or in any document delivered pursuant to this Agreement, nor any covenants of
the parties hereunder to be performed on or prior to the Effective Time,
shall survive the Effective Time, and none of the Company, the Buyers, or the
Buyer Subsidiary, nor any of their respective officers, directors, employees,
advisors or shareholders or other equity holders shall have any liability
whatsoever with respect to any such representation, warranty or covenant
after such time. This Section 8.01 shall not limit any covenant or agreement
of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 8.02 AMENDMENT AND MODIFICATION. To the extent permitted by
applicable Law, this Agreement may be amended, modified or supplemented only
by written agreement of the parties hereto at any time prior to the Effective
Time with respect to any of the terms contained herein, except that after the
Company Shareholders' Meeting contemplated by Section 4.02, the amount of the
Merger Consideration shall not be decreased and the form of the Merger
Consideration shall not be altered without the approval of the shareholders.
SECTION 8.03 WAIVER OF COMPLIANCE; CONSENTS. Any failure of the Buyers
or the Buyer Subsidiary, on the one hand, or the Company, on the other hand,
to comply with any obligation, covenant, agreement or condition herein
(except the conditions in Sections 5.01(b) and (e) and 5.02(b) and (d) of
this Agreement) may be waived in writing by the Company or by the Buyers and
the Buyer Subsidiary, respectively, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. Whenever this Agreement requires or permits consent by or
on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set
forth in this Section 8.03.
48
SECTION 8.04 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No party to this
Agreement shall issue any press release or make any public announcement
relating to the subject matter of this Agreement without prior written
approval of the other parties, which approval shall not be unreasonably
withheld or delayed; provided, however, that each of the Company , the Buyers
and the Buyer Subsidiary may make any public disclosure it believes in good
faith is required by applicable law or any listing or trading agreement
concerning its publicly traded securities (in which case the disclosing party
will provide the other parties to this Agreement with a draft of the proposed
disclosure sufficiently in advance to permit such other parties to provide
comments to the disclosure and the disclosing party will revise such
disclosure to reflect all reasonable comments before making the disclosure).
SECTION 8.05 CERTAIN DEFINITIONS.
For purposes of this Agreement, the term:
"Affiliate" means any Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first mentioned Person, including, with respect to the Company, any
corporation, partnership, limited liability company or joint venture in which
the Company (either alone, or through or together with any other Subsidiary)
has, directly or indirectly, an interest of ten percent (10%) or more.
"beneficial owner" (including the terms "beneficial ownership" and "to
beneficially own") with respect to a Person's ownership of any securities
means such Person or any of such Person's Affiliates or associates (as
defined in Rule 12b-2 under the Exchange Act) is deemed to beneficially own,
directly or indirectly, within the meaning of Rule 13d-3 under the Exchange
Act.
"Business Day" means any day other than a Saturday, Sunday or day on
which banks are permitted to close in the State of Delaware.
"Charter" with respect to any corporation, means the charter,
certificate of incorporation or articles of incorporation of such
corporation; with respect to any limited partnership, means the certificate
of limited partnership of such limited partnership; and with respect to any
limited liability company, means the certificate or articles of formation or
organization of such limited liability company.
"Company Rights" means the rights issued pursuant to the Company Rights
Agreement.
"Company Rights Agreement" means that certain Amended and Restated
Rights Agreement, dated as of December 4, 2000, as subsequently amended,
between the Company and Registrar and Transfer Company.
"Contract" means any contract, plan, undertaking, understanding,
agreement, license, lease, note, mortgage or other binding commitment,
whether written or oral.
"control" (including the terms "controlled by" and "under common control
with" means the possession, directly or indirectly, of the power to direct or
cause the direction of the
49
management or policies of a Person, whether through the ownership of stock,
as trustee or executor, by Contract or otherwise.
"Court" means any court or arbitration tribunal of the United States,
any domestic state, or any foreign country, and any political subdivision or
agency thereof.
"FFCA Documents" means the "Loan Documents" as defined in the Amended
and Restated Loan Agreement, dated as of October 1, 2001, as amended, between
the Company and FFCA Acquisition Corporation; the "Loan Documents" as defined
in the Loan Agreement, dated as of September 6, 2000, as amended, between
Shoney's Properties Group 1, LLC and FFCA Funding Corporation; the "Loan
Documents" as defined in the Loan Agreement, dated as of September 6, 2000,
as amended, between Shoney's Properties Group 2, LLC and FFCA Funding
Corporation; the "Loan Documents" as defined in the Loan Agreement, dated as
of September 6, 2000, as amended, between Shoney's Properties Group 3, LLC
and FFCA Acquisition Corporation; the "Loan Documents" as defined in the Loan
Agreement dated as of September 6, 2000, as amended, between Shoney's
Properties Group 4, LLC and FFCA Acquisition Corporation; the "Loan
Documents" as defined in the Loan Agreement, dated as of September 6, 2000,
as amended, between Shoney's Properties Group 5, LLC and FFCA Funding
Corporation; and the "Loan Documents" as defined in the Loan Agreement, dated
as of September 6, 2000, as amended, between Shoney's Properties Group 6, LLC
and FFCA Funding Corporation, together with all modifications, supplements,
amendments, assignments and waivers of or to any of the foregoing, and all
letter agreements and letters of forbearance issued with respect to any of
the foregoing.
"Governmental Authority" means any Court, governmental agency or
authority of the United States, any domestic state, or any foreign country,
and any political subdivision or agency thereof, and includes any authority
having governmental or quasi-governmental powers, including any
administrative agency or commission.
"Intellectual Property" means all domestic and foreign trademarks,
service marks, trade names, corporate and business names, brand names,
Internet domain names, universal resource locators, designs, logos, trade
dress, slogans, and general intangibles of like nature, together with all
goodwill, registrations and applications related to the foregoing; patents
and industrial designs (including any continuations, divisionals,
continuations-in-part, renewals, provisionals, reissues, and applications for
any of the foregoing); copyrights (including any registrations and
applications for any of the foregoing); software; "mask works" (as defined
under 17 U.S.C. Section 901) and any registrations and applications for "mask
works"; inventions (whether or not patentable), invention disclosures, moral
and economic rights of authors and inventors (however denominated), technical
data and customer lists; technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models,
and methodologies (whether or not patentable); all improvements and
refinements of any of the foregoing; rights of publicity and privacy relating
to the use of the names, likenesses, voices, signatures and biographical
information of real persons; in each case used in or necessary for the
business of the Company and any Subsidiary.
"Law" means all laws, statutes, ordinances and Regulations of any
Governmental Authority including all decisions of Courts having the effect of
law in each such jurisdiction.
50
"Lien" means with respect to any asset or right, any mortgage, deed of
trust, lien (statutory or other), pledge, hypothecation, assignment, claim,
charge, security interest, conditional sale agreement, option, right of first
offer or refusal, transfer restriction, or any other right of another to or
adverse claim of any kind in respect of such asset or right, including,
without limitation, under any shareholder agreement.
"Litigation" means any claim, suit, action, arbitration, cause of
action, claim, complaint, criminal prosecution, investigation, demand letter,
or proceeding, whether at law or at equity, before or by any Court or
Governmental Authority, any arbitrator or other tribunal.
"Material Adverse Effect" means any fact, event, change, development,
circumstance, effect or any combination of the foregoing that, individually
or in the aggregate, has or could reasonably be expected to result in (A) a
decrease in the earnings before interest, taxes, depreciation and
amortization of the Company, on a consolidated basis, of at least $2,500,000,
or (B) a decrease in the net assets of the Company, on a consolidated basis,
of at least $2,500,000; provided, however, that a Material Adverse Effect
shall not include any fact, event, change, development, circumstance, effect
or any combination of the foregoing resulting from (x) general economic
conditions, (y) conditions generally effecting the restaurant industry
(provided that the Company is not materially and disproportionately affected
thereby), or (z) potential Litigation that is filed subsequent to the date of
this Agreement, that is referenced as Item 1. in Section 3.01(f)(G) of the
Disclosure Letter.
"Order" means any judgment, order, writ, injunction, ruling or decree
of, or any settlement under the jurisdiction of, any Court or Governmental
Authority.
"Ordinary Course Contracts" means those contracts of the Company or its
Subsidiaries (A) that are entered into in the ordinary course of business,
consistent with past practice, (B) that would otherwise be required to be, or
is, set out in Section 3.01(i) of the Disclosure Letter by virtue of Section
3.01(i)(xiv) hereof, and (C) whose subject matter encompasses primarily any
of the following: cell phone service, uniforms/linens, maintenance (i.e.,
landscaping, window cleaning, cleaning supplies, dishwashers, and cleaning
crew), music/tv/satellite service, credit card/merchant services, food
products/condiments/paper supplies, trash collection/removal, security,
marketing/advertising/billboards, banking services/brinks (excluding lending
and related items), CO2 contracts, office supplies/copying, and
telecommunications.
"Person" means an individual, corporation, partnership, association,
trust, unincorporated organization, limited liability company, other entity
or group (as defined in Section 13(d)(3) of the Exchange Act).
"Regulation" means any rule or regulation of any Governmental Authority
having the effect of Law.
"SEC Report" means any required reports, schedules, forms, statements
and other documents filed with the SEC since January 1, 1998, other than
Preliminary proxy Statement and the Proxy Statement. "SEC Reports" shall
mean two or more of such reports.
51
"Sho-Lodge Agreement" means the Amended and Restated License Agreement,
dated as of September 27, 2000, between the Company and ShoLodge Franchise
Systems, Inc.
"subsidiary" means, with respect to any Person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by a subsidiary of such Person, or by such Person and
one or more subsidiaries of such Person; (b) a partnership in which such
Person or a subsidiary of such Person is, at the date of determination, a
general partner of such partnership; or (c) any other Person (other than a
corporation) in which such Person, a subsidiary of such Person or such Person
and one or more subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has (i) at least a majority ownership
interest; (ii) the power to elect or direct the election of the directors or
other governing body of such Person; or (iii) the power to direct or cause
the direction of the affairs or management of such Person. For purposes of
this definition, a Person is deemed to own any capital stock or other
ownership interest if such Person has the right to acquire such capital stock
or other ownership interest, whether through the exercise of any purchase
option, conversion privilege or similar right.
"Subsidiary" means a subsidiary of the Company.
"Tax" or "Taxes" means taxes and governmental impositions of any kind in
the nature of (or similar to) taxes, payable to any federal, state, local or
foreign taxing authority, including those on or measured by or referred to as
income, franchise, profits, gross receipts, capital, ad valorem, custom
duties, alternative or add-on minimum taxes, estimated, environmental
(including amounts payable under Section 59A of the Code), disability,
registration, value added, sales, use, service, real or personal property,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer
and gains taxes, and interest, penalties and additions to tax imposed with
respect thereto, and including any transferee or secondary liability in
respect to any tax (whether imposed by law, contract or otherwise) and any
liability in respect of any tax as a result of being a member of any
affiliated, consolidated, unitary or similar group.
"Tax Returns" means returns, reports and information statements,
including any schedule or attachment thereto, with respect to Taxes required
to be filed with the Internal Revenue Service or any other governmental or
taxing authority or agency, domestic or foreign, including consolidated,
combined and unitary tax returns.
"to the knowledge of the Company" or "known to the Company" or similar
phrases means the actual knowledge of any fact or circumstance of any of the
officers, directors or Key Employees of the Company, after reasonable inquiry
and investigation.
SECTION 8.06 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
of this Agreement, each of the parties agrees to use all reasonable efforts
to take or cause to be taken all action, and do or cause to be done all
things necessary, proper or advisable under applicable laws and regulations,
to ensure that the conditions set forth in Article V are satisfied and to
consummate and make effective the transactions contemplated by this
Agreement. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the
52
purposes of this Agreement, the proper officers and directors of each
corporation that is a party to this Agreement shall take all such necessary
action.
SECTION 8.07 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
effective when delivered, or if delivered by express delivery service,
effective when delivered, or if delivered via facsimile, effective when such
facsimile transmission is sent (with a confirmed receipt thereof) or if
mailed by registered or certified mail (return receipt requested), effective
three (3) Business Days after mailing, to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to LS or the Buyer Subsidiary, to it at:
600 North Pearl Street
Suite 1550
Dallas, Texas 75201
Attn: JD Dell
Leigh Rea
Facsimile No.: (214) 754-8401
If to USRPOLP, to it at:
c/o U.S. Restaurant Properties, Inc.
12240 Inwood Road, Suite 300
Dallas, Texas 75244
Attn: President
Facsimile No.: (972) 490-9119
with a copy to:
Jenkens & Gilchrist, P.C.
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202-2799
Attn: Robert G. McCormick, Esq.
Gregory J. Schmitt, Esq.
Facsimile No.: (214) 855-4300
(b) If to the Company, to it at:
1727 Elm Hill Pike
Nashville, TN 37210
Attn: William M. Wilson
Facsimile No.: (615) 231-2734
53
with a copy to:
Dinsmore & Shohl LLP
Bank of America Plaza, Suite 1100
414 Union Street
Nashville, TN 37219
Attn: Gary M. Brown, Esq.
Facsimile No.: 615-313-3310
SECTION 8.08 ASSIGNMENT. This Agreement and all of the provisions
hereof shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any party hereto without the prior written consent of
the other parties; provided, however, that the Buyers and the Buyer
Subsidiary may assign all or any of their rights hereunder to any of their
respective Affiliates or to any Person providing financing to the Buyers or
the Buyer Subsidiary; provided, further, however, that no such assignment
shall relieve the assigning party of its obligations hereunder. Except for
the provisions of Sections 6.01 and 6.02, this Agreement is not intended to
confer upon any other Person except the parties hereto any rights or remedies
hereunder.
SECTION 8.09 INTERPRETATION. As used in this Agreement, (a) "including"
means "including without limitation", and (ii) all dollar amounts are
expressed in United States funds. This Agreement shall not be construed more
strongly against either party hereto regardless of who is responsible for its
preparation. The parties acknowledge that each party hereto contributed to,
and is equally responsible for, the preparation of this Agreement.
SECTION 8.10 GOVERNING LAW; ENFORCEMENT. This Agreement and the rights
and duties of the parties hereunder shall be governed by, and construed in
accordance with the Law of the State of Delaware applicable to contracts
executed and to be performed entirely within that state; provided, however,
that any questions with respect to the fiduciary duties of the Company's
directors or other matters of corporate law relating to the Company shall be
governed by Tennessee law. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in the United States
District Court for the District of Delaware, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto, (a) consents to submit itself to the personal
jurisdiction of the United States District Court for the District of Delaware
in the event any dispute arises out of this Agreement or any transaction
contemplated hereby, (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court, and (c) agrees that it will not bring any action relating to this
Agreement or any transaction contemplated hereby in any other Court.
SECTION 8.11 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute the same instrument.
54
SECTION 8.12 HEADINGS; INTERNAL REFERENCES. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
and are not part of the agreement of the parties and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 8.13 ENTIRE AGREEMENT. This Agreement, including the exhibits
hereto, and the Confidentiality Agreement described in Section 4.07, embody
the entire agreement and understanding of the parties hereto in respect of
the subject matter contained herein, and supersede all prior agreements and
understandings among the parties with respect to such subject matter. There
are no restrictions, promises, representations, warranties (express or
implied), covenants or undertakings of the parties, other than those
expressly set forth or referred to in this Agreement or such Confidentiality
Agreement.
SECTION 8.14 SEVERABILITY. If any term, provision, covenant, agreement
or restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants, agreements and restrictions of this Agreement will continue in
full force and effect and will in no way be affected, impaired or
invalidated.
SECTION 8.15 OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with, and not exclusive of, any other remedy conferred hereby, or
by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy.
SECTION 8.16 WAIVER OF JURY TRIAL. EACH OF THE BUYERS, THE COMPANY AND
THE BUYER SUBSIDIARY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF
PARENT, COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
AND ENFORCEMENT HEREOF.
55
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
LSF4 ACQUISITION, LLC
By: /s/ J.D. Dell
------------------------------------------
Name: J.D. Dell
Title: President
LONE STAR U.S. ACQUISITIONS LLC
By: /s/ J.D. Dell
------------------------------------------
Name: J.D. Dell
Title: Senior Vice President
U.S. RESTAURANT PROPERTIES OPERATING
LIMITED PARTNERSHIP
By: U.S. Restaurant Properties, Inc.,
its General Partner
By: /s/ Robert Stetson
--------------------------------------
Name: Robert Stetson
Title: CEO
SHONEY'S, INC.
By: /s/ William M. Wilson
-----------------------------------------
Name: William M. Wilson
Title: Chairman
56