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EXHIBIT 1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
By and among
GRR HOLDINGS, LLC,
GRR MERGER CORP.
and
GROUND ROUND RESTAURANTS, INC.
Dated as of August 29, 1997
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of August 29, 1997, among Ground Round Restaurants, Inc., a New York
corporation (the "Company"),GRR Merger Corp., a New York corporation (the
"Purchaser"), and GRR Holdings, LLC, a Delaware limited liability company
("Parent").
WHEREAS, the respective Boards of Directors of the Purchaser and the
Company have determined that it is advisable and in the best interests of their
respective shareholders, and the managing member of Parent has determined that
it is advisable and in the best interests of Parent's members, for the Purchaser
to acquire the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, the Company, Parent and the Purchaser desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes to
cause the Purchaser to make the Offer (as defined in Section 1.01) to purchase
all of the issued and outstanding shares of common stock of the Company, par
value $.16 2/3 per share (the "Common Stock"), upon the terms and subject to the
conditions of this Agreement, and the Board of Directors of the Company has
approved the Offer and determined to recommend that the Company's shareholders
accept the Offer; and
WHEREAS in furtherance of such acquisition, Christian R. Gunther and
David T. DiPasquale (the "Significant Shareholders") have agreed to tender an
aggregate of 3,102,100 shares of Common Stock into the Offer upon the terms and
subject to the conditions of a Shareholder Agreement dated as of August 29, 1997
by and among Parent, the Purchaser and the Significant Shareholders.
WHEREAS, to complete such acquisition, the respective Boards of
Directors of the Purchaser and the Company, the managing member of Parent and
Parent acting as the sole stockholder of the Purchaser, have approved the Offer
and the Merger (as defined in section 2.01) of the Purchaser with and into the
Company upon the terms and subject to the conditions of this Agreement; and
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
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ARTICLE I
THE TENDER OFFER
1.01 The Offer. (a) Provided that this Agreement shall not have been
terminated in accordance with Article IX and none of the events or conditions
set forth in Annex A shall have occurred and be existing, then, not later than
the first Business Day (as defined in Rule 14d-1(c)(6) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after execution of this
Agreement, Parent and the Company shall issue a public announcement of the
execution of this Agreement, and within five Business Days of the date of the
public announcement of the execution of this Agreement the Purchaser shall,
subject to the provisions of this Agreement, commence (within the meaning of
Rule 14d-2(a) of the Exchange Act) a tender offer (the "Offer") for all of the
outstanding shares of Common Stock (the "Shares") at a price of $1.65 per Share,
net to the seller in cash. The Purchaser shall accept for payment and pay for
all Shares that have been validly tendered and not withdrawn pursuant to the
Offer at the earliest time following expiration of the Offer that all conditions
to the Offer set forth in Annex A hereto shall have been satisfied or waived by
the Purchaser. The obligation of the Purchaser to accept for payment, purchase
and pay for Shares tendered pursuant to the Offer shall be subject to the
conditions set forth in Annex A hereto, including the condition that a number of
Shares which, when aggregated with the 554,900 Shares owned by Parent to be
contributed to the Purchaser ("the Contributed Shares"), represents at least 90%
of the outstanding Shares shall have been validly tendered (and not withdrawn)
prior to the expiration date of the Offer (the "Minimum Condition"). The
Purchaser expressly reserves the right to increase the price per Share payable
in the Offer or to make any other changes in the terms and conditions of the
Offer; provided, however, that, unless previously approved by the Company in
writing, no change may be made that (i) decreases the price per Share payable in
the Offer, (ii) changes the form of consideration to be paid in the Offer, (iii)
imposes conditions to the Offer in addition to those set forth in Annex A
hereto, (iv) increases the minimum number of Shares that must be tendered as a
condition to the acceptance for payment and payment for Shares in the Offer, (v)
waives the Minimum Condition if such waiver would result in the purchase
pursuant to the Offer of less than that number of Shares which, together with
the Contributed Shares, would constitute less than 50.1% of the outstanding
Shares, or (vi) extends the Offer, provided, however, that the Purchaser may,
without the consent of the Company, extend the Offer (A) from time to time, but
not beyond 12 midnight, New York City time, on October 22, 1997, if, at the
scheduled expiration date of the Offer, any of the conditions to the Purchaser's
obligation to purchase Shares are not satisfied or waived, until such time as
such conditions are satisfied, or (B) as provided in Section 9.03(a). The
Purchaser hereby agrees that, in the event that the Minimum Condition is not
satisfied or waived at the initial expiration date of the Offer, the Purchaser
will, upon written request of the Company, extend the Offer for a period of up
to ten further Business Days. It is agreed that the conditions set forth in
Annex A are for the sole benefit of Parent and the Purchaser and may be asserted
by Parent or the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by Parent or the Purchaser,
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in whole or in part, in its sole discretion. The failure by Parent or the
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time. The Purchaser agrees to comply with
provisions of the Exchange Act, and the rules and regulations promulgated
thereunder, applicable to the Offer.
(b) On the commencement date of the Offer, Parent and the Purchaser
shall file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 with respect to the Offer, which shall contain
an offer to purchase and related letter of transmittal and summary advertisement
(such Schedule 14D-1 and the documents therein pursuant to which the Offer will
be made, together with any supplements or amendments thereto, the "Offer
Documents"). The Offer Documents shall comply as to form in all material
respects with the requirements of the Exchange Act, and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the holders of Shares, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company in writing specifically for
inclusion in the Offer Documents. Each of Parent, the Purchaser and the Company
agrees promptly to correct any information supplied by it specifically for
inclusion in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and each of
Parent and the Purchaser further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and the Purchaser agree to provide the Company
and its counsel in writing with any comments Parent, the Purchaser or their
counsel may receive from the SEC or its Staff, including, but not limited to,
comments with respect to the Offer Documents, promptly after the receipt of such
comments. The Company and its counsel shall be given a reasonable opportunity to
review and comment upon the Offer Documents and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to the shareholders
of the Company.
1.02 Company Action. (a) The Company hereby approves of and consents
to the Offer and represents and warrants that the Board of Directors of the
Company (the "Board"), at a meeting duly called and held, has adopted
resolutions (i) determining that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as defined in Section
2.01), are fair to, and in the best interests of, the shareholders of the
Company, (ii) approving and adopting this Agreement and the transactions
contemplated hereby, including the Offer and the Merger and the transactions
contemplated thereby, in all respects and that such approval constitutes
approval of the Offer, this Agreement and the Merger and the transactions
contemplated hereby and thereby, for purposes of Sections 902 and 912 of the New
York Business Corporation Law (the "NYBCL"), and similar provisions of any other
similar state statutes applicable to the transactions contemplated hereby, (iii)
recommending that the shareholders of the Company accept the Offer, tender their
Shares
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thereunder to the Purchaser and approve and adopt this Agreement and the Merger,
subject to the provisions of Section 6.08, and (iv) providing for the
cancellation of all Options (as defined in Section 3.05) as provided in Section
3.05.
(b) The Company has been advised by each of its executive officers
and each of its Directors, that such person intends to tender pursuant to the
Offer all Shares owned or controlled by such person. The Company represents that
the Board has received the written opinion of Rothschild, Inc. ("Rothschild")
that the consideration to be received by holders of Shares pursuant to the Offer
and the Merger is fair to such holders from a financial point of view, and the
Company has provided a copy of such opinion to Parent.
(c) The Company shall file with the SEC a Solicitation/
Recommendation Statement on Schedule 14D-9 with respect to the Offer (such
Schedule 14D-9, as amended from time to time, the "Schedule 14D-9") on the date
the Offer Documents are filed with the SEC and the Offer is commenced,
containing the recommendation described in Section 1.02(a) and shall mail the
Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 shall
comply in all material respects with the requirements of the Exchange Act and
the rules and regulations promulgated thereunder on the date filed with the SEC
and on the date first published, sent or given to the Company's shareholders,
and shall not 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 information supplied in writing by Parent or the Purchaser
specifically for inclusion or incorporation by reference in the Schedule 14D-9.
Each of the Company, Parent and the Purchaser agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
shareholders, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given a reasonable opportunity
to review and comment upon the Schedule 14D-9 and all amendments and supplements
thereto prior to their filing with the SEC or dissemination to shareholders of
the Company.
(d) In connection with the Offer, the Company will, and will cause
its transfer agent (the "Transfer Agent") to, furnish promptly to Parent and the
Purchaser mailing labels containing the names and addresses of all record
holders of Shares as of the most recent practicable date and of those persons
becoming record holders after such date, together with copies of all lists of
shareholders and security position listing and computer files and all other
information in the Company's possession and control regarding the beneficial
ownership of Shares. The Company shall promptly furnish to Parent and the
Purchaser such additional information (including, but not limited to, updated
lists of holders of Shares and their addresses, mailing labels and security
position listings and computer files) and such other assistance as Parent and
the Purchaser or their agents may reasonably request in
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communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of law, and except for such steps as are necessary or
advisable to disseminate the Offer and any other documents necessary to
consummate the Merger and to solicit tenders of Shares and the approval of the
Merger, Parent and the Purchaser and each of their affiliates shall hold in
confidence the information contained in any of such labels, lists and additional
information, shall use such information in connection with the Offer and the
Merger, and, if this Agreement shall be terminated, shall deliver to the Company
all copies of such information then in their possession or under their control.
1.03 Composition of the Board of Directors. (a) Promptly upon the
acceptance for payment of, and payment by the Purchaser in accordance with the
Offer for, Shares pursuant to the Offer, provided the Purchaser shall have
purchased not less than 50.1% of the outstanding Shares, the Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number, equal to that number of directors which equals the product of the total
number of directors on the Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that such number of
Shares owned in the aggregate by the Purchaser or Parent, upon such acceptance
for payment, bears to the number of Shares outstanding; provided, however, that
until the Effective Time (as defined in Section 2.02) there shall be at least
three Continuing Directors (as defined in Section 1.03(c)). The Company, shall
upon the written request of the Purchaser, use its best efforts to cause the
Purchaser's designees to be so elected. Notwithstanding the foregoing, it is the
parties present intention to have a Board of seven directors following
consummation of the Offer and prior to the Effective Time, the Board to consist
of four designees of the Purchaser and three Continuing Directors, and the
Company shall, upon the written request of the Purchaser, use its best efforts
to cause the resignation of such current directors as necessary, and the
election of the Purchaser's designees, to result in such seven member Board.
(b) The Company's obligations to cause designees of the Purchaser to
be elected or appointed to the Board of Directors of the Company shall be
subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all actions required pursuant to
Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this
Section 1.03, and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-1. Parent and the Purchaser will supply to the
Company any information with respect to any of them and their nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1 and
such other rules and regulations as are applicable.
(c) After the time that the Purchaser's designees constitute at
least a majority of the Board and until the Effective Time, any amendment or
termination of this Agreement or the Restated Certificate of Incorporation (the
"Certificate of Incorporation") or By-laws of the Company and any extension for
the performance or waiver of the obligations or other acts of Parent or the
Purchaser or waiver of the Company's rights hereunder shall also
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require the approval of a majority of the then serving directors, if any, who
are directors as of the date hereof (the "Continuing Directors", who shall
include each member of the Special Committee of the Board formed to consider the
Merger for so long as he wishes to serve) except to the extent that applicable
law requires that such action be acted upon by the full Board, in which case
such action will require the concurrence of a majority of the Board, which
majority shall include each of the Continuing Directors. If the number of
Continuing Directors prior to the Effective Time is reduced below three for any
reason, the remaining Continuing Directors or Director shall be entitled to
designate persons to fill such vacancies who shall be deemed Continuing
Directors for all purposes of this Agreement. The Board shall not delegate any
matter set forth in this Section 1.03(c) to any committee of the Board.
ARTICLE II
THE MERGER
2.01 The Merger. Subject to the terms and conditions of this
Agreement, and in accordance with New York law, at the Effective Time (as
defined in Section 2.02), Parent shall cause the Purchaser to merge (the
"Merger") with and into the Company and as a result thereof the separate
corporate existence of the Purchaser shall thereupon cease. The Company shall
continue as the surviving corporation (the "Surviving Corporation") of the
Merger (the Purchaser and the Company are sometimes hereinafter referred to as
the "Constituent Corporations") and shall, following the Merger, continue to be
governed by the laws of the State of New York, and the separate corporate
existence of the Company, with all its rights, privileges, immunities, powers
and franchises, of a public as well as of a private nature, shall continue
unaffected by the Merger. From and after the Effective Time, the Merger shall
have the effects specified in the NYBCL including, without limitation, Section
906 thereof.
2.02 Effective Time. At the Closing contemplated in Section 8.01,
the Company and Parent will cause a Certificate of Merger to be filed with the
state of New York ( the "Certificate of Merger") to be executed and filed by the
Company and the Purchaser with the New York Department of State, as provided in
and in accordance with the NYBCL. The Merger shall become effective as of the
date and at the time the Certificate of Merger has been duly filed with the
Department of State of the State of New York or such later time as is agreed
upon by the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time."
2.03 Certificate of Incorporation. The Certificate of Incorporation
of the Company, as amended at the Effective Time to read as set forth in Exhibit
A hereto, shall be the certificate of incorporation of the Surviving Corporation
until duly amended in accordance with the terms thereof and the NYBCL.
2.04 By-laws. The By-laws of the Company as in effect on the date
hereof, except as amended as set forth in Exhibit B hereto, shall be the By-laws
of the Surviving Corporation, until duly amended in accordance with the terms
thereof and the NYBCL.
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Promptly following the Effective Time, Parent shall approve such amendment to
the By-laws as the sole shareholder of the Surviving Corporation.
2.05 Directors and Officers. At the Effective Time, the directors of
the Purchaser 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 Certificate of Incorporation and By-Laws of the
Surviving Corporation, until their respective successors shall be duly elected
or appointed and qualified. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
2.06 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper: (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the proper officers and directors of the Surviving Corporation are
hereby authorized on behalf of the respective Constituent Corporations to
execute and deliver, in the name and on behalf of the respective Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and do,
in the name and on behalf of the Constituent Corporations, all such other acts
and things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of the Constituent Corporations and otherwise
to carry out the purposes of this Agreement.
2.07 Shareholders' Meeting. (a) If required by applicable law in
order to consummate the Merger following expiration of the Offer and acceptance
for payment and purchase of Shares by the Purchaser pursuant to the terms of the
Offer, the Company shall (and Parent and the Purchaser shall use all reasonable
efforts to cause the Company to) take all action to the extent necessary to
consummate the Merger in accordance with applicable law, its Certificate of
Incorporation and By-Laws, including:
(i) duly call, give notice of, convene and hold an annual or special
meeting of its shareholders (the "Shareholders' Meeting"), to be held as soon as
practicable, for the purpose of approving this Agreement, the Merger and the
transactions contemplated hereby and thereby;
(ii) include in the Proxy Statement (as defined in Section 4.07) the
recommendation of the Board that shareholders of the Company vote in favor of
the approval and adoption of this Agreement and the Merger and the other
transactions contemplated hereby and thereby and the determination of the Board
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company; and
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(iii) as soon as practicable after Parent's request, prepare and
file a preliminary Proxy Statement with the SEC and, after consultation with
Parent and the Purchaser, respond promptly to any comments made by the SEC with
respect to the Proxy Statement and any preliminary version thereof and cause the
Proxy Statement to be mailed to its shareholders at the earliest practicable
time after responding to all such comments to the satisfaction of the Staff of
the SEC and to obtain the necessary approvals by its shareholders of this
Agreement. Without limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to this Section 2.07(a) shall not be affected by
either the commencement, public proposal, public disclosure or other
communication to the Company by any third party of any offer to acquire some or
all of the Shares or all or any substantial portion of the assets of the Company
or any change in the recommendation of the Board.
(b) The Company, Parent and the Purchaser, as the case may be, shall
promptly prepare and file any other filings required under the Exchange Act or
any other Federal or state securities or corporate laws relating to the Merger
and the transactions contemplated herein (the "Other Filings"). Each of the
parties hereto shall notify the other parties hereto promptly of the receipt by
it of any comments from the SEC or its Staff and of any request of the SEC for
amendments or supplements to the Proxy Statement or by the SEC or any other
governmental officials with respect to any Other Filings or for additional
information and will supply the other parties hereto with copies of all
correspondence between it and its representatives, on the one hand, and the SEC
or the members of its Staff or any other governmental officials, on the other
hand, with respect to the Proxy Statement, any Other Filings or the Merger. The
Company, Parent and the Purchaser each shall use all reasonable efforts to
obtain and furnish the information required to be included in the Proxy
Statement, any Other Filings or the Merger. If at any time prior to the time of
approval of this Agreement by the Company's shareholders there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its shareholders such
amendment or supplement. The Company shall not mail the Proxy Statement or,
except as required by the Exchange Act or the rules and regulations promulgated
thereunder, any amendment or supplement thereto, to the Company's shareholders
unless the Company has first obtained the consent of Parent to such mailing.
(c) At the Shareholders' Meeting, Parent, the Purchaser, their
affiliates and Permitted Assigns (as defined in Section 10.07) will vote all
Shares owned by them in favor of approval and adoption of this Agreement, the
Merger, and the transactions contemplated hereby and thereby.
(d) Notwithstanding the foregoing, in the event that the Purchaser
or any Permitted Assigns shall acquire at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, the parties hereto agree, at the request of
the Purchaser, to take all necessary and appropriate action to cause the Merger
to become effective, in accordance with Section 905 of the NYBCL, as soon as
reasonably practicable after such acquisition and the satisfaction or waiver of
the conditions of Article VII, without a meeting of the shareholders of the
Company.
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ARTICLE III
CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS
3.01 Conversion or Cancellation of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by Parent, the Purchaser or any other
wholly-owned subsidiary of Parent, Dissenting Shares (as defined in Section
3.03) and any Shares held in the treasury of the Company or by any subsidiary of
the Company) shall be converted into and represent the right to receive an
amount in cash equal to the greater of $1.65 or any greater amount per Share
paid pursuant to the Offer as it may be amended, without interest (the "Merger
Consideration"), upon surrender of the certificate that, immediately prior to
the Effective Time, represented such issued and outstanding Share (a
"Certificate"). As of the Effective Time, all such Shares shall no longer be
outstanding, shall be automatically canceled and shall cease to exist, and each
holder of a Certificate which formerly represented any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Merger Consideration without interest for such Shares upon
the surrender of such Certificate or Certificates in accordance with Section
3.02.
(b) Each Share issued and outstanding immediately prior to the
Effective Time and owned by Parent, the Purchaser or any other wholly owned
subsidiary of Parent or held in the Company's treasury or by any subsidiary of
the Company, shall be canceled without payment of any consideration therefor and
shall cease to exist, and each holder of a Certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares.
(c) Each share of Common Stock, $0.01 par value, of the Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become that number of fully-paid and non-assessable shares of
Common Stock, par value $.16-2/3 per share, of the Surviving Corporation as
shall equal the quotient of (i) the number of Shares issued and outstanding at
the Effective Time divided by (ii) 1,000.
3.02 Exchange of Certificates; Paying Agent. (a) Prior to the
Effective Time, Parent shall select a bank or trust company to act as paying
agent (the "Paying Agent") for the payment of the cash consideration specified
in Section 3.01 upon surrender of Certificates for Shares converted into the
right to receive the Merger Consideration pursuant to the Merger. Immediately
prior to the Effective Time, Parent shall make available, or cause the Purchaser
or the Surviving Corporation to make available, to the Paying Agent immediately
available funds in amounts and at times necessary for the payment of the Merger
Consideration (the "Funds") upon surrender of Certificates pursuant to Section
3.01, it being
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understood that any and all interest earned on the Funds shall be paid over by
the Paying Agent as Parent shall direct.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each person who was, at the Effective Time, a holder of record of a
Certificate or Certificates, other than the Parent, Company or any of their
respective subsidiaries, a letter of transmittal and instructions for use in
effecting the surrender, in exchange for payment in cash therefor, of the
Certificates. The letter of transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery to
and receipt of such Certificates by the Paying Agent and shall be in such form
and have such provisions as Parent and the Company shall reasonably specify and
(ii) include instructions for use in effecting the surrender of the Certificates
in exchange for payment of the Merger Consideration. Upon surrender to the
Paying Agent of such Certificates, together with the letter of transmittal, duly
executed and completed in accordance with the instructions thereto and such
other documents as may be reasonably required by the Paying Agent, the Paying
Agent shall promptly pay to the persons entitled thereto, out of the Funds, a
check in the amount to which such persons are entitled pursuant to Section
3.01(a), after giving effect to any required tax withholdings, and such
Certificate shall forthwith be canceled. No interest will accrue or be paid on
the amount payable upon the surrender of any such Certificates. If payment is to
be made to a person other than the registered holder of any Certificate
surrendered, it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish to the satisfaction of the
Surviving Corporation or the Paying Agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the amount of cash, without
interest, into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 3.01(a).
(c) One hundred eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any Funds (including any interest, dividends, earnings or distributions
received with respect thereto which shall be paid as directed by Parent) made
available to the Paying Agent by Parent which have not been disbursed, and
thereafter holders of Certificates who have not theretofore complied with the
instructions for exchanging their Certificates shall be entitled to look only to
the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) for payment as general creditors thereof with respect to the cash
in the amount of the Merger Consideration payable upon due surrender of their
Certificates.
(d) Notwithstanding anything to the contrary in this Section 3.02,
none of the Paying Agent, Parent, the Company, the Surviving Corporation or the
Purchaser shall be liable to any holder of a Certificate formerly representing
Shares for any amount properly
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delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
3.03 Dissenters' Rights. Notwithstanding the provisions of Section
3.01 or any other provision of this Agreement to the contrary, Shares that have
not been voted in favor of the approval and adoption of the Merger and with
respect to which dissenters' rights shall have been demanded and perfected in
accordance with Sections 623 and 910 of the NYBCL (the "Dissenting Shares") and
not withdrawn shall not be converted into the right to receive cash at or after
the Effective Time, but such Shares shall become the right to receive such
consideration as may be determined to be due to holders of Dissenting Shares
pursuant to the laws of the State of New York unless and until the holder of
such Dissenting Shares withdraws his or her demand for such appraisal or becomes
ineligible for such appraisal. If a holder of Dissenting Shares shall withdraw
his or her demand for such appraisal or shall become ineligible for such
appraisal under applicable law (through failure to perfect or otherwise), then,
as of the Effective Time or the occurrence of such event, whichever last occurs,
such holder's Dissenting Shares shall automatically be converted into and
represent the right to receive the Merger Consideration, without interest, as
provided in Section 3.01(a) and in accordance with the NYBCL. The Company shall
give Parent (i) prompt notice of any demands for appraisal of Shares received by
the Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The Company shall
not, without the prior written consent of Parent, make any payment with respect
to, or settle, offer to settle or otherwise negotiate, any such demands.
3.04 Transfer of Shares After the Effective Time. No transfers of
Shares shall be made in the stock transfer books of the Surviving Corporation at
or after the Effective Time. If, after the Effective Time, Certificates formerly
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the amount of cash, without interest, into which the
Shares theretofore represented by such Certificates shall have been converted
pursuant to Section 3.01(a), subject to the provisions of Section 3.01(b).
3.05 Company Stock Rights. (a) At or immediately prior to the
Effective Time, each outstanding option (an "Option") to purchase shares of
Common Stock of the Company pursuant to the Company's 1989 Amended and Restated
Stock Option Plan (the "Stock Option Plan"), the Company's 1992 Equity Incentive
Plan (the "Equity Incentive Plan") or otherwise (collectively, the "Stock
Plans"), as set forth on Schedule 4.03 of the disclosure letter delivered to
Parent as of the date of this Agreement (the "Company Disclosure Letter"),
whether or not then exercisable, shall be canceled by the Company, and each
holder of a canceled Option shall have the right to receive at the Effective
Time from the Company, in consideration for the cancellation of such Option (i)
in the case of Options that are "in the money", an amount in cash equal to the
product of (A) the number of Shares previously subject to such Option and (B)
the excess, if any, of the Merger Consideration over the exercise price per
Share previously subject to such Option and (ii) in the case of Options that are
not "in the money", an amount of cash set forth on the Schedule of Option
Payments authorized and approved by the Compensation Committee of the Board as
set forth in the
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minutes of a meeting thereof, a copy of which has been delivered to the
Purchaser. The Company shall upon the payment of the consideration described in
the preceding sentence withhold from such payments any applicable federal,
state, local or foreign taxes.
(b) All Stock Plans shall terminate as of the Effective Time and the
provisions in any other Company Benefit Plan (as defined in Section 4.12)
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
amended as of the Effective Time to provide no continuing rights to acquire,
hold, transfer or grant any capital stock of the Company or any interest in
capital stock of the Company (other than an interest in any cash payments in
respect of Shares pursuant to Section 3.01(a) or as contemplated in Section
3.05(a)), and the Company shall ensure that following the Effective Time no
holder of an Option or any participant in any Stock Plans shall have any right
thereunder to acquire any capital stock of the Company, Parent or the Surviving
Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the
Purchaser that:
4.01 Organization, Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, and the Company has all requisite corporate power and authority to
own, lease and operate its properties and carry on its business as now being
conducted. The Company is duly qualified to do business and is in good standing
in each jurisdiction in which the nature of the Company's business or the
location of its properties makes such qualification necessary, except as set
forth on Schedule 4.01 of the Company Disclosure Letter. The Company has
heretofore made available to Parent and has filed with the SEC pursuant to the
Exchange Act, complete and correct copies of the Certificate of Incorporation
and By-Laws of the Company, as currently in effect. Schedule 4.01 of the Company
Disclosure Letter lists each jurisdiction in which the Company is, or is
required to be, duly qualified.
4.02 Company Subsidiaries. (a) Schedule 4.02 of the Company
Disclosure Letter lists all subsidiaries of the Company. Except as indicated
therein, all of the outstanding shares of capital stock of each such subsidiary
are owned by the Company either directly or indirectly through another of its
subsidiaries. Except as set forth in Schedule 4.02 of the Company Disclosure
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Letter, there are no contracts, commitments, understandings or arrangements by
which any subsidiary of the Company is bound to issue (other than to the
Company) additional shares of its capital stock or securities convertible into
or exchangeable for shares of its capital stock or subscriptions, options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for shares of its capital
stock. Except as set forth in Schedule 4.02 of the Company Disclosure Letter,
there are no contracts, commitments, understandings or arrangements by which the
Company or any of its subsidiaries is or may be obligated to transfer any shares
of the capital stock of any subsidiary of the Company. Except as set forth in
Schedule 4.02 of the Company Disclosure Letter, all of the shares of capital
stock of each subsidiary of the Company held by the Company or any subsidiary of
the Company are fully paid and nonassessable and are owned by the Company or
such subsidiary of the Company free and clear of any claim, lien or encumbrance
other than restrictions on transferability under federal and any applicable
state securities laws. Each subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized, has the corporate power and authority necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted, and is duly qualified to do business and in good
standing in the states of the United States in which the ownership of its
property or the conduct of its business requires it to be so qualified, except
as set forth on Schedule 4.02 of the Company Disclosure Letter. As used in this
Agreement, the term "subsidiary" of a specified person means (i) any corporation
of which equity securities possessing a majority of the ordinary voting power in
electing the board of directors are, at the time as of which such determination
being made, owned or controlled by such specified person either directly or
indirectly or in combination with one or more subsidiaries of such specified
person or (ii) any person (other than a corporation) in which such specified
person either directly or indirectly through or in combination with one or more
subsidiaries, at the time as of which such determination is being made, (x) is a
general partner, or (y) owns or controls more than a 50% ownership interest and
has the right to elect a majority of the members of the governing authority of
such specified person.
(b) Except for interests in the Company's subsidiaries and except as
set forth in Schedule 4.02 of the Company Disclosure Letter, neither the Company
nor any of the Company's subsidiaries owns, directly or indirectly, any interest
or investment (whether equity or debt) in any corporation, company, partnership,
joint venture, business, trust or entity, other than investments in marketable
securities acquired in the ordinary course of business, nor has the Company or
any of its subsidiaries made any loan or advance to any other entity.
4.03 The Company's Capitalization. The authorized capital stock of
the Company consists of (i) 35,000,000 Shares and (ii) 30,000 shares of
Preferred Stock, $.01 par value ("Preferred Stock"). As of the close of business
on August 7, 1997, there were (i) 11,173,421 Shares issued and outstanding and
no Shares held in the Company's treasury or by any of its subsidiaries, and (ii)
no shares of Preferred Stock issued and outstanding. All outstanding Shares have
been duly authorized and validly issued, are fully paid and nonassessable and
were issued free of preemptive rights. There are not now, except for the
Options, approximately $1.36 million principal amount of amended and restated
convertible loan notes of the Company (the "Convertible Loan Notes"),
convertible into up to 501,500 Shares, subject to adjustment as provided
therein, and as set forth in Schedule 4.03 of the Company Disclosure Letter, and
at the Effective Time there will not be, (i) any options, warrants, calls,
subscriptions, convertible securities or other rights (including preemptive
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rights), agreements, understandings, arrangements or commitments of any
character obligating the Company now or at any time in the future to issue or
sell any of its capital stock or other equity interest in the Company or any of
its subsidiaries, (ii) any obligations, contingent or otherwise, of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock or other equity interests of the Company or any of its
subsidiaries, (iii) any outstanding bonds, debentures, notes or other
obligations of the Company or any of its subsidiaries, the holders of which have
the right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the holders of Shares on any matter, (iv) any
obligations, contingent or otherwise, guaranteeing the value of any of the Share
or the capital stock of any of its subsidiaries either not or at any time in the
future, or (v) any voting trusts, proxies or other agreements or understandings
to which the Company is a party or is bound with respect to the voting of any
capital stock or other equity interest of the Company or any other securities
convertible into or exchangeable for Shares or any other equity interests of the
Company, or options to acquire Shares or securities convertible into Share or
equity interests of the Company are held by any of the Company's subsidiaries.
4.04 Authority. The Company has full corporate power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
approved by the Board, and the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
including, without limitation, the Sale and Leaseback Letter of Intent (as
defined in Section 6.01) and the transactions contemplated thereby, the Bank
Letter of Intent (as defined in Section 6.01) and Bank Standstill Agreement and
the transactions contemplated thereby, and the other actions required to be
performed by the Company hereunder, including without limitation the Exchange
Act filings, the holding of the Shareholders' Meeting, if required, the HSR
Filing, and the cancellation of Options contemplated by Section 3.05, have been
duly and validly authorized by the Board and, except for any approval of the
Merger by the holders of the Shares required by the NYBCL, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby, including the acquisition
of Shares pursuant to the Offer and the Merger. The Company has taken all
actions necessary to render the prohibitions of Section 912 of the NYBCL to be
inapplicable to the execution and delivery of this Agreement and the
transactions contemplated hereby, including the entry of Parent, the Purchaser
and the Significant Shareholders into the Shareholder Agreement and the
acquisition of the Shares pursuant to the Offer and the Merger. This Agreement
has been duly and validly executed and delivered by the Company and, assuming
due authorization, execution and delivery by Parent and the Purchaser,
constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
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4.05 Consents, Approvals and Governmental Filings; No Violations.
(a) No notices, reports or other filings are required to be made by the Company
with, nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company from, any public, governmental, or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality of the United States, any state thereof or any
foreign jurisdiction (each a "Governmental Authority") in connection with the
execution and delivery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby, the failure to make or
obtain any or all of which could prevent, delay or burden the transactions
contemplated by this Agreement, except (A) in connection with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) in connection with the Exchange Act, (C) in connection with Article
16 of the NYBCL and (D) such consents, approvals, registrations, licenses and
permits with respect to Liquor Licenses listed in Exhibit 4.05B to Schedule 4.05
of the Company Disclosure Letter (together with the consents and approvals with
respect to Liquor Licenses listed on the Purchaser Disclosure Letter (as defined
in Section 5.06) the "Liquor License Approvals").
(b) Except as set forth on Schedule 4.05 of the Company Disclosure
Letter, and except for any required approval of the Merger by the shareholders
of the Company and the filing of the Certificate of Merger in accordance with
the NYBCL, neither the execution, delivery and performance of this Agreement by
the Company nor the consummation by it of the transactions contemplated hereby
will (i) violate, conflict with or result in any breach of any provision of the
Certificate of Incorporation or By-Laws of the Company; (ii) require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (A) in connection with the HSR Act, (B)
in connection with the Exchange Act or (C) in connection with Article 16 of the
NYBCL; (iii) constitute a violation or breach of, or result (with or without due
notice or lapse of time or both) in a default or loss of any material benefit
under, or give rise to any right of termination, amendment, cancellation or
acceleration under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, franchise agreement, lease, license, contract,
agreement or other instrument or obligation of any kind to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of its or their respective assets may be bound, except as
any such breach, default or right as to which requisite waivers or consents have
been obtained, (iv) require the creation or imposition of any lien upon or with
respect to any properties of the Company or any of its subsidiaries or (v)
assuming compliance with the NYBCL, the Exchange Act, and the HSR Act, violate
any order, writ, injunction, judgment, decree, law, statute, rule, regulation or
governmental permit or license applicable to the Company or any of its
subsidiaries or any of its or their respective assets.
4.06 SEC Reports; Financial Statements. The Company has filed all
required forms, reports and documents with the SEC since October 1, 1993
(collectively, together with all forms, reports and documents to be filed with
the SEC on or after the date hereof, the "SEC Reports"), each of which, as
amended, has complied or will comply in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, each as in effect on the dates so
filed. None of such
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forms, reports or documents, including, without limitation, any financial
statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company has
heretofore made available complete and correct copies of the SEC Reports, and
any amendments to any SEC Report, filed to date, and promptly will make
available to Parent a complete and correct copy of any SEC Report filed
hereafter and any amendment to any SEC Report. The consolidated financial
statements of the Company and its subsidiaries included in such reports complied
as of the respective dates thereof as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC and with respect thereto, were prepared in accordance with United
States generally accepted accounting principles ("GAAP") as in effect on their
respective dates applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited interim financial statements, as permitted by Form 10-Q of the SEC)
and fairly presented (subject, in the case of the unaudited interim financial
statements, to normal, year-end audit adjustments) the consolidated financial
position of the Company and its subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Since September 29, 1996, neither the Company nor any of its subsidiaries
has incurred any liabilities or obligations (whether absolute, accrued, fixed,
contingent, liquidated, unliquidated or otherwise and whether due or to become
due) of any nature, which would be required by GAAP, as of the date hereof, to
be set forth on a consolidated balance sheet of the Company and its subsidiaries
or in the notes thereto except liabilities, obligations or contingencies (a)
which are disclosed reflected or reserved for on the unaudited balance sheet of
the Company and its subsidiaries as of June 30, 1997 (including the notes
thereto) or in this Agreement or in Schedule 4.06 of the Company Disclosure
Letter or (b) which (i) were incurred in the ordinary course of business after
September 29, 1996 and consistent with past practices or (ii) are disclosed or
reflected or reserved for in the Company SEC Reports filed after September 29,
1996 and prior to the date hereof, or (c) which were incurred as a result of
actions taken or refrained from being taken (i) in furtherance of the
transactions contemplated by this Agreement, or (ii) at the request of Parent
and the Purchaser. Since September 29, 1996, there has been no change in any of
the significant accounting (including tax accounting) policies, practices or
procedures of the Company or any of its subsidiaries except as required by GAAP
or applicable law.
4.07 Proxy Statement; Offer Documents. Any proxy statement or
similar materials distributed to the Company's shareholders in connection with
the Merger, including any amendments or supplements thereto (the "Proxy
Statement"), will comply in all material respects with applicable federal
securities laws and will not contain any untrue statements of a material fact
required to be stated therein 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 information supplied by
Parent or the Purchaser in writing for inclusion in the Proxy Statement. None of
the information supplied by the
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Company in writing for inclusion in the Offer Documents or provided by the
Company in the Schedule 14D-9 will, at the respective times that the Offer
Documents and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, 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.
4.08 Absence of Certain Changes or Events. Except as set forth in
the SEC Reports filed prior to the date hereof or in Schedule 4.08 of the
Company Disclosure Letter, since September 29, 1996 (i) the business of the
Company and its subsidiaries has been conducted in the ordinary course
consistent with past practice (except as otherwise contemplated by this
Agreement); (ii) no events have occurred which, in the reasonable opinion of the
Company, are likely, individually or in the aggregate, to have a Material
Adverse Effect (as defined in Section 9.03(d)) or adversely affect the ability
of the Company to consummate the transactions contemplated by this Agreement;
(iii) neither the Company nor any of its subsidiaries has incurred or will incur
any material liabilities (direct, contingent or otherwise) or engaged in any
material transaction or entered into any material agreement outside the ordinary
course of business; (iv) there has been no declaration, setting aside or payment
of any dividend or other distribution with respect to any capital stock of the
Company and (v) neither the Company nor any of its subsidiaries has taken any
action described in Section 6.01.
4.09 Title, Etc.. (a) Schedule 4.09 of the Company Disclosure Letter
sets forth a list of all of the land, which includes the buildings, structures
and other improvements located thereon (the "Real Property"), which is owned in
fee by the Company or any of its subsidiaries. The Company or such subsidiary,
as the case may be, has, with respect to personal property, good, and, with
respect to real property, good, marketable and insurable, title to all of the
properties and assets which it purports to own and which are material to the
business, operation or financial condition of the Company or such subsidiary
free and clear of all mortgages, security interests, liens, claims, charges or
other encumbrances of any nature whatsoever, except for (i) any liens,
encumbrances or defects reflected in the most recent financial statements
included in the SEC Reports filed prior to the date hereof or disclosed in the
notes thereto; (ii) any liens, encumbrances or defects which do not materially
detract from the fair market value (free of such liens, encumbrances or defects)
of the property or assets subject thereto or materially interfere with the
current use by the Company and its subsidiaries of the property or assets
subject thereto or affected thereby; (iii) any liens or encumbrances for taxes
not delinquent or which are being contested in good faith, provided that
adequate reserves for the same have been established on the most recent
financial statements included in the SEC Reports to the extent required by GAAP
applied on a consistent basis; (iv) any liens or encumbrances for current taxes
and assessments not yet past due; (v) any inchoate mechanic's and materialmen's
liens and encumbrances for construction in progress; (vi) any workmen's,
repairmen's, warehousemen's and carriers' liens and encumbrances arising in the
ordinary course of business, so long as such liens have not been filed; and
(vii) any liens of
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the type referred to in (vi) above that have been filed, so long as such liens
do not aggregate in excess of $50,000;
(b) Schedule 4.09 of the Company Disclosure Letter sets forth a list
of all of the leases and subleases (the "Real Property Leases") under which, as
of the date hereof, the Company or any of its subsidiaries has the right to
occupy space. The summary of the Real Property Leases, including all amendments
thereto, attached to such Schedule, together with the spreadsheets attached to
such Schedule, are correct and complete in all material respects. Except as set
forth in Schedule 4.09, all Real Property Leases and material leases pursuant to
which the Company or any of its subsidiaries leases personal property from
others are, in all material respects, valid, binding and enforceable in
accordance with their terms and the Company, or the applicable subsidiary of the
Company, has good and valid leasehold title to all property leased pursuant to
each of the Real Property Leases; neither the Company nor any of its
subsidiaries has received notice of any default by the Company or any of its
subsidiaries under any Real Property Lease; there are no existing defaults, or
any condition or event known to the Company or any subsidiary which with the
giving of notice or lapse of time would constitute a default, by the Company or
any of its subsidiaries thereunder and, with respect to the Company's or any of
its subsidiaries' obligations thereunder without qualification and with respect
to the obligations of all other parties thereto, to the knowledge of the
Company, no uncured default or event or condition on the part of any landlord
exists under any Real Property Lease which with the giving of notice or the
lapse of time would constitute a default thereunder. Except as set forth in
Schedule 4.09 of the Company Disclosure Letter, the Company has not suspended
any Real Property Leases nor is the Company in any negotiations with any lessors
regarding any Real Property Leases.
(c) All of the land, buildings, structures and other improvements
occupied by the Company and its subsidiaries in the conduct of its business are
included in the Real Property or the Real Property Leases.
(d) Except as set forth in Schedule 4.09 of the Company Disclosure
Letter, neither the Company nor any subsidiary owns or holds, nor is obligated
under or a party to, any option, right of first refusal or other contractual
right to purchase, acquire, sell lease or dispose of any Real Property or any
Real Property Leases or any portion thereof or interest therein.
4.10 Patents, Trademarks, Etc.. Schedule 4.10 of the Company
Disclosure Letter identifies all registered trademarks, copyrights and patents
owned or licensed by the Company and its subsidiaries as of the date hereof. The
Company and its subsidiaries own, or are licensed or otherwise have adequate
right to use, all patents, patent rights, trademarks, trademark rights, service
marks, service mark rights, trade names, trade name rights, copyrights,
know-how, technology, trade secrets and other proprietary information which are
material to the conduct of the business of the Company and its subsidiaries
(collectively, the "Intellectual Property"). Except as set forth in Schedule
4.10 of the Company Disclosure Letter, no claims have been asserted by any
person, and neither the Company nor any of its
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subsidiaries has asserted a claim against any person, with respect to any of the
Intellectual Property owned or used by the Company or any of its subsidiaries or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto to which the Company or any of its subsidiaries is a
party, nor, to the Company's knowledge, are any such claims threatened.
4.11 Insurance. Schedule 4.11 of the Company Disclosure Letter
identifies all property, general liability and casualty insurance policies which
currently insure the Company or any of its subsidiaries ("Insurance Policies").
4.12 Employee Benefit Plans. (a) For purposes of this Section 4.12,
"Company Benefit Plans" means all employee benefit plans, agreements and
arrangements described in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), maintained by the Company or any of
its subsidiaries to which the Company or any of its subsidiaries has contributed
or been required to contribute, or with respect to which the Company or any
subsidiary of the Company has a liability, whether direct or indirect, actual or
contingent, and all employment, bonus, deferred compensation, severance,
incentive, stock option, change of control and similar plans, policies or
arrangements (whether written or oral) maintained by the Company or any of its
subsidiaries (including descriptions of the number and level of employees
covered thereby).
(b) Schedule 4.12 of the Company Disclosure Letter sets forth a list
of all Company Benefit Plans. The Company has delivered or made available to
Parent accurate and complete copies of (i) all Company Benefit Plan documents
currently in effect and all amendments thereto, and all summary plan
descriptions thereof which have been distributed to employees of the Company or
any subsidiary, (ii) the most recent determination or opinion letter issued by
the Internal Revenue Service with respect to each Company Benefit Plan, (iii)
for the three most recent plan years, Annual Reports on Form 5500 Series filed
with any governmental agency for each Company Benefit Plan and (iv) a
description setting forth the amount of any material liability of the Company as
of the Closing Date for payments more than thirty (30) calendar days past due
with respect to each "employee welfare benefit plan" as defined in ERISA section
3(1) which covers or has covered employees of the Company or any subsidiary.
(c) Except as set forth in Schedule 4.12 of the Company Disclosure
Letter with respect to each Company Benefit Plan: (i) each Company Benefit Plan
has been administered and enforced in all material respects in accordance with
its terms and, both as to form and in operation, with the requirements
prescribed by ERISA, the Internal Revenue Code of 1986, as amended (the "Code"),
and all other applicable statutes, orders, rules and regulations; (ii) to the
knowledge of the Company, no breach of fiduciary duty or non-exempt prohibited
transaction has occurred; (iii) no actions, suits, claims or disputes are
pending or, to the knowledge of the Company, threatened, other than routine
claims for benefits; (iv) all contributions and premiums due have been made on a
timely basis; and (v) such Company Benefit Plan is not a multiemployer plan (as
defined in ERISA section 3(37)), a multiple
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employer plan within the meaning of the Code or ERISA, a defined benefit plan
within the meaning of ERISA section 3(35), a plan subject to section 302 of
ERISA or section 412 of the Code or Title IV of ERISA, or funded through a
"welfare benefit fund" (as defined in section 419(e) of the Code).
(d) Except as set forth in Schedule 4.12 of the Company Disclosure
Letter or as specifically provided in Section 3.05, the consummation of the
transactions contemplated by this Agreement will not (i) entitle any individual
to severance pay, or (ii) accelerate the time of payment or vesting, or increase
the amount, of compensation due to any individual.
(e) Neither the Company nor any of its subsidiaries has any unfunded
liability with respect to retiree medical or retiree life insurance benefits or
other post-termination welfare benefits under the Company Benefit Plans or
otherwise, not reserved for in the Company's financial statements included in
the SEC Reports filed prior to the date hereof.
(f) Each Company Benefit Plan intended to be qualified under section
401(a) of the Code is so qualified, and each trust or other funding vehicle
related thereto is exempt from federal income tax under section 501(a) of the
Code.
(g) Except as set forth on Exhibit 4.06A to Schedule 4.06 of the
Company Disclosure Letter, with respect to any insurance policy providing
funding for benefits under any Company Benefit Plan, (i) there is no material
liability of the Company or any subsidiary of the Company in the nature of a
retroactive or retrospective rate adjustment, loss sharing arrangement, or other
actual or contingent liability, nor would there be any such material liability
if such insurance policy were terminated, and (ii) to the knowledge of the
Company, no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding, and no such proceeding with
respect to any insurer is imminent.
(h) Schedule 4.12 of the Company Disclosure Letter sets forth the
name and current rates of salary, bonuses, benefits (including, but not limited
to, all employee welfare benefits) and any other form of employment compensation
(collectively "Compensation") of each officer, director or employee of the
Company and its subsidiaries whose current annual rate of Compensation from the
Company exceeds $60,000 and each Regional Director not otherwise included.
(i) Each "employee welfare benefit plan" as defined by ERISA section
3(1) which covers employees or former employees of the Company or any subsidiary
and which is a "group health plan," as defined in section 607(1) of ERISA, has
been operated in compliance with provisions of Part 6 of Title I, Subtitle B of
ERISA and section 4980B of the Code at all times except where any failure,
individually or in the aggregate, would not be reasonably expected to result in
material liability.
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(j) The Company has not announced generally any plan, nor does it
have any legally binding commitment, to create any additional Company Benefit
Plans which are intended to cover employees or former employees of the Company
or any subsidiary (with respect to their relationship with such entities) or to
amend or modify any existing Company Benefit Plan which covers or has covered
employees or former employees of the Company or any subsidiary (with respect to
their relationship with such entities).
(k) Except as set forth in Schedule 4.12 of the Company Disclosure
Letter, and except as provided by law, the employment of all persons employed or
retained by the Company or any of its subsidiaries is terminable at will. Except
as set forth in Schedule 4.12 of the Company Disclosure Letter, there is no
contract, agreement, plan or arrangement covering any employee that,
individually or collectively, provides for the payment of any amount (i) that is
not deductible under section 162(a)(l) or 404 of the Code or (ii) that is an
"excess parachute payment" pursuant to section 280G of the Code.
(l) To the knowledge of the Company, neither the Company, nor any of
its subsidiaries, nor any Company Benefit Plan, directly or indirectly, is, or
is reasonably likely to be, subject to any material unfunded liability (except
as reserved for in the Company's financial statements included in the SEC
Reports filed prior to the date hereof) (i) with respect to any employee benefit
plan, program, policy, agreement or arrangement (whether or not terminated) that
is or was maintained or contributed to by any entity during the past six years
that is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with or otherwise required to be
aggregated with the Company or any of its subsidiaries, as set forth in sections
414(b), (c) and (o) of the Code, (ii) pursuant to the penalty, excise or joint
and several liability provisions of ERISA or the Code as they relate to employee
benefit plans or (iii) pursuant to any obligation of the Company or any
subsidiary to indemnify any person against any liability referred to in (i) or
(ii) above.
4.13 Legal Proceedings, Etc.. Except as set forth in Schedule 4.13
of the Company Disclosure Letter, (i) there is no material claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or relating to the Company or any subsidiary before any court
or tribunal in any jurisdiction (domestic or foreign) or any Governmental
Authority, and (ii) neither the Company nor any subsidiary is subject to any
outstanding order, writ, judgment, injunction or decree of any court or
Governmental Authority or body.
4.14 Taxes.
(a) Filing of Tax Returns. The Company (which term shall include,
for purposes of this Section 4.14, each of its subsidiaries from time to time)
has timely filed with the appropriate taxing or other Governmental Authorities
all returns (including, without limitation, information returns and other
Tax-related information) in respect of Taxes (as such term is defined in Section
4.14(f)) required to be filed through the date hereof. Such returns and
information filed are complete, correct and accurate in all material respects.
The
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Company has made available to Parent copies of the Company's federal Tax
returns filed for its taxable years ended October 1, 1995 and September 29, 1996
and selected state and local Tax returns and will make available to Parent
copies of all the Company federal, state and local Tax returns filed for its
taxable years ended December 1990 and September 1991, 1992, 1993, 1994, 1995 and
1996, to the extent not previously provided, as requested by Parent.
(b) Payment of Taxes. Except as set forth in Schedule 4.14(b), all
Taxes required to be paid by the Company for any period or portion thereof
ending on or before the Closing Date, have been paid, or an adequate reserve (in
conformity with GAAP applied on a consistent basis and with the Company's past
custom and practice) has been established therefor, and the Company has no
material liability for Taxes in excess of the amounts so paid or reserves so
established. All material Taxes that the Company has been required to collect or
withhold have been duly collected or withheld and, to the extent required when
due, including extensions, have been or will be duly paid to the proper taxing
or Governmental Authority.
(c) Audit History. Except as set forth in Schedule 4.14(c) of
the Company Disclosure Letter:
(i) No deficiencies for Taxes of the Company or, to the
knowledge of the Company, of any other person with respect to which the Company
would be liable to make a payment under a tax sharing agreement have been
claimed, proposed or assessed by any taxing or Governmental Authority.
(ii) No extension of a statute of limitations relating to
Taxes is in effect with respect to the Company.
(d) Additional Tax Representations. Except as set forth in Schedule
4.14(d) of the Company Disclosure Letter:
(i) There are no material elections with respect to Taxes
affecting the Company.
(ii) The Company is not a party to or bound by any binding tax
sharing, tax indemnity or tax allocation agreement or other similar arrangement
with any other person or entity.
(iii) There are no liens for Taxes (other than for current
Taxes not yet due and payable) upon the assets of the Company.
(iv) The Company has never been a member of an affiliated
group of corporations within the meaning of Section 1504 of the Code (an
"affiliated group"), nor has the Company or any present or former subsidiary, or
any predecessor or affiliate of any of them, become liable (whether by contract,
as transferee or successor, by law or otherwise) for
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the Taxes of any other person or entity under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law other than the
group of which the Company is the parent, except for the affiliated group of
which HM Holdings, Inc. was the parent (the "HMH group") as disclosed in
Schedule 4.14(d). The Company (A) has no knowledge of any liens for Taxes, any
Tax deficiency assessment against, or any audit or claimed or proposed Tax
deficiency assessment by any taxing authority against it or any member or former
member of the HMH group with respect to the Company's period of affiliation with
the HMH group, (B) is not liable to any member or former member of the HMH group
for Taxes (or any indemnity payments, make whole payments or like amounts)
attributable to such period under a tax sharing, tax indemnity, tax allocation
or similar agreement, and (C) has no knowledge of any member or former member of
the HMH group entering into any waivers or extensions of a statute of
limitations on assessment or collection of Taxes attributable to such period..
(e) Definition of Taxes. For purposes of this Agreement, the term
"Taxes" shall mean all federal, state, local, foreign and other taxes,
assessments or other government charges, including, without limitation, income,
estimated income, gross receipts, profits, occupation, franchise, capital stock,
real or personal property, sales, use, value added, transfer, license,
commercial rent, payroll, employment or unemployment, social security,
disability, withholding, alternative or add-on minimum, customs, excise, stamp
or environmental taxes, and further including all interest, penalties and
additions in connection therewith for which the Company or any of its
subsidiaries may be liable.
4.15 Material Agreements. Except as set forth in Schedule 4.15 of
the Company Disclosure Letter and except for agreements made for the purpose of
completing the transactions contemplated by this Agreement, neither the Company
nor any of its subsidiaries is a party to, or bound by, any material agreement
of any kind to be performed in whole or in part after the Effective Time. Solely
for the purpose of this Section 4.15, the term "material agreement" shall mean
any agreement which (i) is outside of the ordinary course of business of the
Company or its subsidiaries, (ii) involves the payment or receipt by the Company
or any of its subsidiaries, subsequent to the date of this Agreement and for so
long as such contract is in effect, of more than $50,000 (or $100,000 if the
agreement is for the purchase or sale of food or beverage items included in the
current menu at the Company's restaurants) or (iii), is not terminable without
penalty by the Company or the subsidiary party thereto on 60 days notice. Except
as set forth in Schedule 4.15 of the Company Disclosure Letter, to the best
knowledge of the Company, there is no breach or default and there are no facts
which with notice or the passage of time would constitute a breach or default
under, or give rise to any right of termination, amendment, cancellation or
acceleration under, whether as a result of the consummation of the transactions
contemplated hereby or otherwise, any obligation to be performed by any party to
a material agreement to which the Company or any subsidiary is a party.
4.16 Compliance with Law. Except as set forth in Schedule 4.16 of
the Company Disclosure Letter, the business of the Company and its subsidiaries
is being conducted and the properties and assets of the Company and its
subsidiaries are currently
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owned and operated in substantial compliance with all applicable laws,
ordinances, regulations, orders, judgments, injunctions, awards and decrees of
any Governmental Authority or court, tribunal or arbitrator.
4.17 Insider Interests. Except as set forth in the SEC Reports filed
prior to the date hereof or in Schedule 4.12 of the Company Disclosure Letter,
Schedule 4.17 of the Company Disclosure Letter sets forth all material
contracts, agreements of the Company with and other obligations of the Company
to any officer or director of the Company or any of its subsidiaries. Except as
set forth in Schedule 4.17 of the Company Disclosure Letter, no officer or
director of the Company or any of its subsidiaries and, to the knowledge of the
Company, no entity controlled by any such officer or director and no relative or
spouse who resides with any such officer or director (i) owns, directly or
indirectly, any material interest in any person that is, or is engaged in
business as, a competitor, lessor, lessee, customer or supplier of the Company
or any of its subsidiaries or (ii) owns, in whole or in part, any tangible or
intangible property that the Company or any of its subsidiaries uses in the
conduct of the business of the Company or any such subsidiary.
4.18 Environmental Matters.
The following definitions shall apply to this section:
A. "Environmental Claims" shall mean all notices of violation,
liens, claims, demands, suits, or causes of action for any damage, including,
without limitation, personal injury, property damage, lost use of property or
consequential damages, arising directly or indirectly out of Environmental
Conditions or Environmental Laws. By way of example only, Environmental Claims
include (i) violations of or obligations under any contract related to
Environmental Laws or Environmental Conditions, (ii) actual or threatened
damages to natural resources, (iii) claims for nuisance or its statutory
equivalent, (iv) claims for the recovery of response costs, or administrative or
judicial orders directing the performance of investigations, responses or
remedial actions under any Environmental Laws, (v) requirements to implement
"corrective action" pursuant to any order or permit issued pursuant to
Environmental Laws, (vi) fines, penalties or liens of any kind against property
related to Environmental Laws or Environmental Conditions, and (vii) with regard
to any present or former employees, claims relating to exposure to or injury
from Environmental Conditions.
B. "Environmental Conditions" shall mean the state of the
environment, including natural resources, soil, surface water, ground water, or
ambient air, relating to or arising out of the use, storage, treatment,
transportation, release, disposal, dumping or threatened release of Hazardous
Substances.
C. "Environmental Laws" shall mean all applicable federal, state,
district, local and foreign laws, all rules or regulations promulgated
thereunder, and all orders, consent orders, judgments, notices, permits or
demand letters issued to or entered into by the Company or any of its
subsidiaries pursuant thereto, relating to pollution or protection of the
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environment (e.g., ambient air, surface water, ground water, or soil).
Environmental Laws shall include, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Toxic Substances Control Act, as amended, the Hazardous Materials Transportation
Act, as amended, the Resource Conservation and Recovery Act, as amended, the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Atomic Energy Act of 1954, as amended, the Occupational
Safety and Health Act, as amended, and all analogous laws promulgated or issued
by any state or other Governmental Authority.
D. "Environmental Reports" shall mean any and all written analyses,
audits, assessments, summaries or explanations, in the possession or control of
the Company or any subsidiary, of (a) any Environmental Conditions in, on or
about the Properties (defined below) of, or any property or facility formerly
owned, leased or operated by, the Company or any of its subsidiaries or (b) the
Company's or any such subsidiary's compliance with Environmental Laws.
E. "Hazardous Substances" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials subject to regulation,
control or remediation under Environmental Laws, including but not limited to
petroleum, urea formaldehyde, flammable, explosive and radioactive materials,
PCBs, pesticides, herbicides, asbestos, sludge, slag, acids, metals, and
solvents.
Except as set forth in Schedule 4.18 the Company Disclosure Letter, (i) the
Company and each of its subsidiaries are currently in material compliance with
all applicable Environmental Laws, including without limitation all permits or
licenses required thereunder; (ii) neither the Company nor any of its
subsidiaries has received any written notice that the Company or any such
subsidiary is not in compliance with, or is in material violation of, any such
Environmental Laws; (iii) there are no Environmental Claims pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries; (iv) no underground storage tank for Hazardous Substances, no
PCBs, and, to the knowledge of the Company, no asbestos containing material is
currently located at or on any of the properties or facilities owned, leased or
operated by the Company or any of its subsidiaries (the "Properties"); and (v)
to the best knowledge of the Company and each of its subsidiaries, there have
been no releases of Hazardous Substances in quantities exceeding the reportable
quantities as defined under Environmental Laws on, upon or into the Properties
other than those authorized by Environmental Laws. In addition, true and correct
copies of the Environmental Reports have been made available to Purchaser, and a
list of all such Environmental Reports is set forth in Schedule 4.18 of the
Company Disclosure Letter.
4.19 Labor Matters. None of the employees of the Company or any of
its subsidiaries are covered by a collective bargaining agreement. Neither the
Company nor any of its subsidiaries knows of any activity or proceedings of any
labor union (or representatives thereof) to organize any unorganized employees
employed by the Company or any of its subsidiaries, nor of any strikes,
slowdowns, work stoppages, lockouts or threats thereof, by or
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with respect to any of the employees of the Company or any of its subsidiaries.
Except as set forth in Schedule 4.19 of the Company Disclosure Letter, neither
the Company nor any of its subsidiaries has received any notice of any claim, or
has knowledge of any facts which, in the reasonable judgment of the Company, are
likely to give rise to any claim, that it has not complied in any material
respect with any laws relating to the employment of labor, including, without
limitation, any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination or employment safety.
4.20 Certain Undisclosed Violations. Except as set forth in Schedule
4.20 of the Company Disclosure Letter, neither the Company nor any of its
subsidiaries is in violation, or has received notice or claim with respect to
such a violation, of any sale/lease back agreement, credit agreement or
franchise agreement ("Franchise Agreement") to which the Company or any of its
subsidiaries is a party. All liquor licenses held by the Company or any of its
subsidiaries (each a "Liquor License" and collectively the "Liquor Licenses")
are valid and in force, and neither the Company nor any of its subsidiaries has
(after reasonable inquiry) knowledge of any violation of any obligations set
forth under any Liquor License or of any facts which constitute any such
violation or has received any notice or claim with respect to any such
violation, which violation, individually or in the aggregate, would be likely to
result in the termination of any one or more Liquor Licenses covering restaurant
operations generating, individually or in the aggregate, for the three months
ended June 30, 1997, average weekly gross food and beverage revenues in excess
of $300,000.
4.21 Brokers and Finders. Neither the Company nor any of its
subsidiaries nor any of their respective officers, directors or employees has
employed any broker, finder or investment banker or incurred any liability for
any brokerage fees, commissions, finders' fees or banking fees in connection
with the transactions contemplated herein, except that the Company has employed,
and will pay the fees and expenses of Rothschild pursuant to a letter agreement
dated as of July 14, 1997, and Jones, Lang, Wootton USA as broker in connection
with solicitation of a sale and leaseback transaction as contemplated in the
Sale and Leaseback Letter of Intent pursuant to a letter agreement dated April
14, 1997, copies of which have been delivered to Parent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND THE PURCHASER
5.01 Corporation Organization. Parent is a limited liability company
duly organized and validly existing and in good standing under the laws of the
State of Delaware, and the Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the State of New York. Parent
and the Purchaser each has all requisite
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corporate power and authority to own its assets and carry on its business as now
being conducted or proposed to be conducted.
5.02 Authorized Capital. The authorized capital stock of the
Purchaser consists of 1,000 shares of Common Stock, $0.01 par value, of which
1,000 shares are outstanding and are owned, beneficially and of record, by
Parent. All of the issued and outstanding shares of capital stock of the
Purchaser are validly issued, fully paid and nonassessable and free of
preemptive rights and all liens.
5.03 Authority. Parent has the necessary limited liability company
power and authority, and the Purchaser has the necessary corporate power and
authority, to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement by each of Parent and
the Purchaser, the performance by Parent and the Purchaser of their respective
obligations hereunder and the consummation by Parent and the Purchaser of the
transactions contemplated hereby have been duly authorized by the managing
member of Parent and the board of directors of the Purchaser and approved by
Parent as sole stockholder of the Purchaser, and no other limited liability
company or corporate proceeding on the part of Parent or the Purchaser is
necessary for the execution and delivery of this Agreement by Parent and the
Purchaser and the performance by Parent and the Purchaser of their respective
obligations hereunder and the consummation by Parent and the Purchaser of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by each of Parent and the Purchaser and, assuming the due
authorization, execution and delivery hereof by the Company, is a legal, valid
and binding obligation of Parent and the Purchaser, enforceable against each of
Parent and the Purchaser in accordance with its terms, except to the extent that
its enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
5.04 No Prior Activities. Neither Parent nor the Purchaser has
incurred, directly or indirectly, any liabilities or obligations, except those
incurred in connection with its incorporation or with the negotiation of this
Agreement, the Bank Standstill Agreement, the Bank Letter of Intent, the
performance of its obligations hereunder and the consummation of the
transactions contemplated hereby and thereby. Neither Parent nor the Purchaser
has engaged, directly or indirectly, in any business or activity of any type or
kind, or entered into any agreement or arrangement with any person or entity,
and is not subject to or bound by any obligation or undertaking, that is not
contemplated by or in connection with this Agreement, the Offer Documents and
the transactions contemplated hereby and thereby.
5.05 No Financing Contingency. Parent has or will have and will make
available to the Purchaser or the Paying Agent, as applicable, sufficient funds
in sufficient time to consummate the Offer and the Merger in accordance with the
terms of this Agreement.
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5.06 Governmental Filings; No Violations. (a) Provided that the
Company's representations in Sections 4.04 and 4.05 hereof are true and correct,
except as set forth in the disclosure letter delivered to the Company as of the
date of this Agreement (the "Purchaser Disclosure Letter") no notices, reports
or other filings are required to be made by Parent or the Purchaser with, nor
are any consents, registrations, approvals, permits or authorizations required
to be obtained by Parent or the Purchaser from, any governmental or regulatory
authorities of the United States, the several States or any foreign
jurisdictions in connection with the execution and delivery of this Agreement by
Parent and the Purchaser and the consummation by Parent and the Purchaser of the
transaction contemplated hereby, the failure to make or obtain any or all of
which would adversely affect the ability of the Parent or the Purchaser to
consummate the transactions contemplated by this Agreement, except (A) in
connection with the HSR Act, (B) in connection with the Exchange Act, (C) in
connection with Article 16 of the NYBCL and (D) the Liquor License Approvals.
(b) Provided that the Company's representations in Sections 4.04 and
4.05 hereof are true and correct, except as set forth in the Purchaser
Disclosure Letter neither the execution and delivery of this Agreement by Parent
and the Purchaser nor the consummation by Parent and the Purchaser of the
transactions contemplated hereby nor compliance by Parent and the Purchaser with
any of the provisions hereof will: (i) violate, conflict with or result in any
breach of any provision of the Certificate of Incorporation or By-Laws of Parent
or the Purchaser; (ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, except (A) in
connection with HSR, (B) in connection with the Exchange Act, (C) in connection
with Article 16 of the NYBCL or (D) the Liquor License Approvals; (iii)
constitute a violation or breach of, or result (with or without due notice or
lapse of time or both) in a default or loss of any material benefit under, or
give rise to any right of termination, amendment, cancellation or acceleration
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, franchise agreement, lease, license, contract, agreement or other
instrument or obligation of any kind to which Parent or the Purchaser is a party
or by which Parent or the Purchaser or their respective assets may be bound,
except as any such breach, default or right as to which requisite waivers or
consents have been obtained, (iv) require the creation or imposition of any lien
upon or with respect to any properties of the Parent and the Purchaser or (v)
assuming compliance with the NYBCL and the HSR Act, violate any order, writ,
injunction, judgment, decree, law, statute, rule, regulation or governmental
permit or license applicable to Parent and the Purchaser or any of its or their
respective assets, with such exceptions with respect to the matters referred to
in clauses (ii) through (vi) as would not, individually or in the aggregate,
adversely affect the ability of the Parent or the Purchaser to consummate the
transactions contemplated by this Agreement.
5.07 Brokers and Finders. Neither Parent, the Purchaser nor any of
its officers, directors or employees has employed any broker, finder or
investment banker or incurred any liability for any brokerage fees, commissions,
finders fees or banking fees in connection with the transactions contemplated
herein.
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5.08 Information. All information supplied in writing by Parent or
the Purchaser specifically for inclusion in the Proxy Statement or the Schedule
14D-9 or provided by Parent or the Purchaser in the Schedule 14D-1 or the Offer
Documents will, at the respective times that such documents or any amendments or
supplements thereto are filed with the SEC and are first published, sent or
given to holders of shares, comply in all material respects with applicable
federal securities laws and will not contain any untrue statements of a material
fact required to be stated therein or omit to state, with respect to information
supplied by Parent and the Purchaser, any material fact required to be stated
therein or necessary in order to make the statements supplied by Parent and the
Purchaser, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Parent or the Purchaser
with respect to information supplied by the Company.
5.09 Legal Proceedings, Etc.. There is no claim, action, proceeding
or investigation pending or, to the knowledge of Parent or the Purchaser,
threatened against or relating to Parent or the Purchaser before any court or
tribunal in any jurisdiction (domestic or foreign) or any Governmental Authority
which could individually or in the aggregate adversely affect the ability of the
Parent or the Purchaser to consummate the transactions contemplated by this
Agreement and neither Parent nor the Purchaser is subject to any outstanding
order, writ, judgment, injunction or decree of any court or Governmental
Authority or body that could, individually or in the aggregate, materially
effect Parent's or the Purchaser's ability to consummate the transactions
contemplated by this Agreement.
5.10 Ownership of Shares. Parent beneficially owns 554,900 Shares,
which it will contribute to the Purchaser prior to the Merger, and has the sole
right to receive net proceeds of any sale of such Shares.
ARTICLE VI
COVENANTS OF THE PARTIES
6.01 Conduct of Business of the Company. The Company shall, and
shall cause each of its subsidiaries to, use its reasonable efforts in light of
the Company's present financial condition to preserve intact the business
organization of the Company and each of its subsidiaries, to keep available,
consistent with this Agreement, the services of their respective operating
personnel and to preserve the goodwill of those having a business relationship
with each of them, including, without limitation, suppliers. Except as
contemplated by this Agreement, during the period from the date of this
Agreement to the Effective Time, the Company and each of its subsidiaries will
conduct their respective businesses and operations only in the ordinary and
usual course of business consistent with past practice. Without limiting the
generality of the foregoing, and except as a result of entering into this
Agreement or as contemplated by this Agreement or as set forth in Schedule 6.01
of the Company Disclosure Letter, during the period from the date of this
Agreement to the Effective Time, without the advance written consent of Parent,
the Company will not and will cause each of its subsidiaries not to:
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(a) amend its certificate of incorporation or by-laws or
similar governing documents;
(b) (i) create, incur or assume any indebtedness for borrowed money
(including obligations in respect of capital leases, other than obligations of
not more than $50,000, individually or in the aggregate, created or incurred in
the ordinary course of business), except indebtedness for borrowed money
incurred under the Credit Agreement (as defined in Section 6.01(g)) or pursuant
to a new credit agreement refinancing such borrowing in conformity with the
terms of that certain letter of intent dated August 29, 1997, by and among the
Company and the Lenders (as defined therein) (the "Bank Letter of Intent"), or
the letter agreement dated August 29, 1997, by and among the Company and the
Lenders (the "Bank Standstill Agreement"), or (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person other than any subsidiary of
the Company set forth in Schedule 4.02 of the Company Disclosure Letter;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock other than on capital stock of subsidiaries set forth in
Schedule 4.02 of the Company Disclosure Letter.
(d) issue, sell, grant, purchase or redeem, whether by dividend or
otherwise, any shares of its capital stock or securities convertible into or
exercisable for, or options with respect to, or warrants to purchase or rights
to subscribe to or otherwise purchase, or subdivide or in any way reclassify,
any shares of its capital stock, except for the issuance of Shares issuable upon
conversion of the Convertible Loan Notes in accordance with their terms or the
exercise of Options outstanding on the date hereof;
(e) except in respect of regularly scheduled raises or raises which
have been approved by the compensation committee of the Board prior to the date
hereof in the ordinary course of business consistent with past practice, or as
disclosed in Schedule 6.01 of the Company Disclosure Letter, (i) increase the
aggregate amount of compensation payable or to become payable to any of its
directors, officers or employees whose compensation required to be disclosed on
Schedule 4.12 of the Company Disclosure Letter, whether by salary or bonus, (ii)
increase the rate or term of, or otherwise alter, amend or nullify any, or enter
into any new, employment agreement, bonus, insurance, pension, severance or
other Company Benefit Plan, payment or arrangement made to, for or with any such
directors, officers or employees;
(f) enter into any agreement, commitment or transaction which, if
entered into prior to the date hereof, would have been required to be disclosed
on Schedule 4.15 of the Company Disclosure Letter, except as required or
permitted by subsection (k) or (l) of this Section 6.01, provided, however, that
nothing herein shall prohibit the Company or any
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subsidiary from purchasing food and beverage items and restaurant supplies from
its vendors as of the date hereof in the ordinary course and in quantities
consistent with past practice;
(g) sell, transfer, mortgage, pledge, grant any security interest
in, or permit the imposition of any lien or other encumbrance on, any asset
other than in the ordinary course of business consistent with past practice and
except (i) pursuant to the Credit Agreement, as amended, dated as of September
12, 1996 between the Company and Bank of America Illinois, NBD Bank, N.A.,
Credit Lyonnais New York Branch and The Bank of New York, as Agent, and The
Chase Manhattan Bank, as Co-Agent (the "Credit Agreement"), or (ii) pursuant to
the refinancing of borrowings under the Credit Agreement pursuant to a new
credit agreement in conformity with the terms set forth in the Bank Letter of
Intent or (iii) pursuant to that certain letter of intent between the Company
and CNL Fund Advisers, Inc. pursuant to which the Company intends to enter into
a sale and leaseback transaction in respect of all or substantially all of the
Real Property owned in fee by the Company (the "Sale and Leaseback Letter of
Intent");
(h) waive any material right under any contract or other
agreement identified in Schedule 4.15 of the Company Disclosure Letter;
(i) other than as required by any change in GAAP, make any material
change in its accounting methods or practices or make any material change in
depreciation or amortization policies or rates adopted by it for accounting
purposes or, other than normal writedowns or writeoffs consistent with past
practice, make any writeoffs of notes or accounts receivable;
(j) make any loan or advance to any of its shareholders, officers,
directors or employees (other than vacation advances, relocation advances and
travel advances, in each case in the ordinary course of business consistent with
past practice, and other advances up to $10,000 in the aggregate) or make any
other loan or advance to any other person (other than any subsidiary of the
Company set forth in Schedule 4.02 of the Company Disclosure Letter) or group
otherwise than in the ordinary course of business consistent with past practice;
(k) terminate or fail to renew, where such renewal is at the
Company's or a subsidiary's option, or fail to replace on substantially similar
or more favorable terms, any contract or other agreement other than in the
ordinary course of business, which termination or failure to renew or so
replace, individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect;
(l) fail to maintain all Insurance Policies in full force and effect
or fail to renew or replace with equivalent coverage any Insurance Policy which
has expired;
(m) take any action which constitutes a violation of any Liquor
License which violation, individually or in the aggregate, would, in the
reasonable judgment of the Restaurant Company, be likely to result in the
termination of any one or more Liquor Licenses
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covering restaurant operations generating, individually or in the aggregate, for
the three months ended June 30,1997, average weekly gross food and beverage
revenues in excess of $300,000;
(n) fail to operate, maintain, repair or otherwise preserve the Real
Property substantially in accordance with current practice in light of the
Company's present financial condition and not to exceed the capital expenditure
budget of the Company previously disclosed to Parent ;
(o) fail to comply with all applicable filing, payment and
withholding obligations under all applicable federal, state, local and foreign
Tax laws except where such failure to comply would not have a Material Adverse
Effect;
(p) breach, terminate or amend the Bank Standstill Agreement or
terminate or amend either the Bank Letter of Intent or the Sale and Leaseback
Letter of Intent or take any action not otherwise permitted or required pursuant
to such agreements that directly results in any counterparty to the Bank Letter
of Intent or the Sale and Leaseback Letter of Intent terminating or stating an
intention to terminate the same; or
(q) agree in writing to, or otherwise take or authorize, any of
the foregoing actions.
6.02 Notification of Certain Matters. (a) The Company shall
promptly notify Parent of any:
(i) notice or other communication from any Person (as defined in
Section 9.01) alleging that the consent of such Person is or may be
required in connection with the transactions contemplated by this
Agreement;
(ii) notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) action, suit, claim, investigation or proceeding commenced or,
to the best of the Company's knowledge threatened against, relating to or
involving or otherwise affecting the Company or any of its subsidiaries
which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Article IV or which relate to the
consummation of the transactions contemplated by this Agreement; and
(iv) change or event (A) having or which could reasonably be
expected to have a Material Adverse Effect; or (B) impairing the ability
of the Company to consummate the transactions contemplated hereby.
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(b) Between the date of this Agreement and the Effective Time, the
Company shall give prompt notice to Parent of: (i) the initiation of any audit
or other review by the Internal Revenue Service (the "IRS") or any other state,
local or foreign taxing or governmental authority with respect to any Tax return
or that may result in any additional liability for Taxes, and (ii) any proposed
settlement or similar agreement ("Settlement") with the IRS or any other state,
local or foreign taxing or governmental authority and shall not enter into any
Settlement with respect to Taxes without the prior written consent of Parent,
which consent shall not be unreasonably withheld.
6.03 Access to Information. (a) Between the date of this Agreement
and the Effective Time, the Company will during ordinary business hours and upon
reasonable advance notice, (i) give Parent and Parent's authorized
representatives all access Parent shall reasonably request to all of its and
each of its subsidiaries' books, records (including, without limitation, the
workpapers of the Company's outside accountants), contracts, commitments,
restaurants, offices and other facilities and properties, and its and each of
its subsidiaries' personnel, representatives, accountants and agents; (ii)
permit Parent to make such inspections thereof, except as set forth herein below
as it may reasonably request during normal business hours, and (iii) cause its
and each of its subsidiaries' officers and advisors to furnish to Parent its
financial and operating data and such other existing information with respect to
its business, properties, assets, liabilities and personnel (including, without
limitation, title insurance reports, real property surveys and Environmental
Reports, if any), as Parent may from time to time reasonably request, provided,
however, that any such investigation shall be conducted in such a manner as not
to interfere unreasonably with the operation of the business of the Company. The
Parent and Purchaser agree not to undertake or take any actions involving
exploration, drillings, borings or other independent subsurface environmental
testings or other "Phase II" environmental investigations including obtaining
subsurface environmental surveys or tests, relating to Environmental Conditions
at any Property.
(b) Any information provided pursuant to this Agreement shall be
held by Parent in accordance with and shall be subject to the terms of the
Confidentiality Agreement dated June 3, 1997 between the Company and Parent (the
"Confidentiality Agreement"). Notwithstanding anything herein or in the
Confidentiality Agreement to the contrary, Parent, the Purchaser or the Company
may disclose any information required to be disclosed pursuant to the Exchange
Act, or otherwise required or requested to be disclosed by the SEC after
consultation of the parties and upon advice of counsel or as otherwise permitted
by the Confidentiality Agreement.
6.04 Further Information. The Company and Parent shall give prompt
written notice to the other of (i) any representation or warranty made by the
Company or the Purchaser, respectively, contained in this Agreement becoming
untrue or inaccurate in any material respect or (ii) the failure by the Company
or the Purchaser, respectively, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied
under this Agreement and shall use reasonable efforts to notify the other
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promptly upon becoming aware of any event or circumstance which it believes is
reasonably likely to give rise to a failure of any condition to the Offer set
forth in Annex A; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.05 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, the Company, Parent and the Purchaser shall use their respective
reasonable best efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, subject to the terms of this Agreement, and
shall use their respective reasonable best efforts to satisfy the conditions to
the transactions contemplated hereby, to obtain all waivers, permits, consents
and approvals and to effect all registrations, filings and notices with or to
third parties or governmental or public bodies or authorities which are
necessary or desirable in connection with the transactions contemplated by this
Agreement, including, but not limited to, filings to the extent required under
the Exchange Act, the HSR Act and Article 16 of the NYBCL, filings and consents
with respect to Liquor Licenses (including without limitation the Liquor License
Approvals) and submissions of information requested by Governmental Authorities
and to defend against any lawsuit or proceeding, whether judicial or
administrative, challenging this Agreement or the consummation of any of the
transactions contemplated hereby. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers or directors of each of the parties hereto shall
take such action. Parent as the sole shareholder of the Purchaser, and the
Purchaser as a shareholder of the Company, will consent and/or vote in favor of
the transactions contemplated hereunder.
6.06 HSR Filings. The Company and Parent will file, or cause to be
filed, as promptly as possible and in no event later than ten Business Days
after the date hereof, with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
(the "Department of Justice") pursuant to the HSR Act the notification required
by the HSR Act, including all requisite documents, materials and information
therefor, and request early termination of the waiting period under the HSR Act.
Each of the Company and Parent shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. The Company and Parent shall each keep the other apprised of the status
of any inquiries or requests for additional information made by any governmental
authority and shall comply promptly with any such inquiry or request.
6.07 Public Announcements. The initial press release with respect to
the transactions contemplated hereby shall be a joint press release,
substantially in the form of Exhibit C hereto, and thereafter the Company and
Parent shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the
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transactions contemplated hereby and shall not issue any such press release or
make any such public statement prior to such consultation.
6.08 No Solicitation. (a) The Company will not, and will not permit
any of its officers, directors, advisors, agents or representatives to, directly
or indirectly, solicit or encourage the initiation or submission of any
inquiries, proposals or offers regarding any acquisition, merger, tender offer,
exchange offer, recapitalization (involving an equity investment other than
solely from existing shareholders) or similar transaction involving, sale of all
or a substantial portion of the assets of, or sale of shares of capital stock or
securities convertible into capital stock, (other than a sale only to existing
lenders in connection with a refinancing of debt) of the Company, whether or not
in writing and whether or not delivered to the shareholders of the Company, or
similar transactions involving the Company (any of the foregoing inquiries,
proposals or offers being referred to herein as an "Acquisition Proposal");
provided, however, that nothing contained in this Section 6.08 shall prevent the
Company's Board from (i) referring any third party to this provision, (ii)
considering, negotiating or participating in discussions regarding an
unsolicited bona fide written Acquisition Proposal or (iii) complying with Rule
14e-2(a) or Rule 14d-9 promulgated under the Exchange Act, if applicable, with
regard to an Acquisition Proposal made in the form of a tender offer by a third
party. If the Board of the Company after duly considering advice, written or
otherwise, of the Company's outside counsel and financial advisor, determines in
good faith that it would be consistent with its fiduciary responsibilities to
approve or recommend a Superior Proposal (as defined below), then (A) the
Company shall not enter into any agreement with respect to the Superior Proposal
and (B) any other obligation of the Company under this Agreement shall not be
affected unless this Agreement is terminated pursuant to Section 9.01(b)(v) and
all amounts payable pursuant to Section 9.03(a) are paid to Parent prior to or
concurrently with such termination. As used herein the term "Superior Proposal"
means a bona fide proposal made by a third party to acquire the Company pursuant
to a tender or exchange offer, a merger, a sale of all or substantially all of
its assets or otherwise that the Board determines in its good faith judgment to
be more favorable to the Company's shareholders than the Offer and the Merger
(after considering the advice, written or otherwise, of its outside counsel and
financial advisor).
(b) The Company shall promptly notify Parent after receipt of any
Acquisition Proposal or any request for nonpublic information relating to the
Company by any third party in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company that informs the Board
of Directors that such third party is considering making, or has made, an
Acquisition Proposal. Such notice to Parent shall be made orally and in writing
and shall indicate in reasonable detail the terms and conditions of such
proposal, inquiry or contact and, unless precluded by the terms of a
confidentiality agreement, the identity of the offeror.
(c) If the Company's Board of Directors receives a request for
material nonpublic information by a third party who makes or who states in
writing that it intends,
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subject to satisfactory review of such nonpublic information, to make a bona
fide Acquisition Proposal, the Company may, subject to the execution of a
confidentiality agreement substantially similar to that then in effect between
the Company and Parent but allowing for disclosure to Parent as required in
paragraph (b) of this Section 6.08, provide such third party with access to such
information.
6.09 Indemnity; D&O Insurance.
(a) The certificate of incorporation of the Surviving Corporation
shall, for a period of six years from the Effective Time, contain provisions no
less favorable with respect to indemnification than are set forth in the
Certificate of Incorporation, as amended as set forth in Exhibit A hereto, which
provisions shall not be amended, repealed or otherwise modified for such period
in any manner that would affect adversely the rights thereunder of individuals
who at any time prior to the Effective Time were directors, officers, employees
or agents of the Company, unless such modification shall be required by law.
(b) The Company shall, to the fullest extent permitted under New
York law and regardless of whether the Merger becomes effective, indemnify and
hold harmless, and after the Effective Time the Surviving Corporation shall, to
the fullest extent permitted under New York law, indemnify and hold harmless,
each present and former director and officer of the Company and each of its
subsidiaries (collectively, the "Indemnified Parties") against judgments, fines,
reasonable amounts paid in settlement and reasonable expenses, including
attorneys' fees, costs and charges incurred as a result of any action or
proceeding (whether arising before or after the Effective Time), or any appeal
therefrom, whether civil or criminal, arising out of or pertaining to any action
or omission in their capacity as an officer or director prior to or at the
Effective Time, for a period of six years after the Effective Time (or with
respect to claims arising from service as an officer or director prior to the
Effective Time and asserted or made prior to such sixth anniversary which have
not been resolved prior to such sixth anniversary, until the time such matters
are finally resolved). In the event of any such action or proceeding (i) the
Company or the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Company or the Surviving
Corporation, promptly after statements therefor are received, provided that an
agreement has been entered into by such Indemnified Party agreeing to repay such
amounts to the Company if the Indemnified Party is ultimately found by a final
judgment (not subject to further appeal) of a court of competent jurisdiction
not to be entitled to indemnification, or to the extent such amount exceeds the
indemnification to which such Indemnified Party is entitled, under New York law,
and (ii) the Company and the Surviving Corporation shall cooperate and provide
access to all documents necessary beneficial to the defense of any such matter;
provided, however, that neither the Company nor the Surviving Corporation shall
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld, delayed or conditioned); and provided,
further that neither the Company nor the Surviving Corporation shall be
obligated pursuant to this Section 6.10(b) above to pay the fees
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and expenses of more than one counsel for all Indemnified Parties in any single
action except to the extent that two or more of such Indemnified Parties shall
have conflicting interests in the outcome of such action.
(c) The Surviving Corporation shall use its best efforts to maintain
in effect for six years from the Effective Time, if available, the current
directors' and officers' liability insurance policies maintained by the Company
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms and conditions which are not materially
less favorable) with respect to matters occurring prior to the Effective Time;
provided, however, that the Surviving Corporation shall not be required to
maintain such insurance to the extent the annual premium therefor exceeds 120%
of the annual premiums currently paid by the Company in respect of the current
policy or policies (the "Maximum Amount") but in such case shall purchase as
much comparable coverage as available for the Maximum Amount.
(d) In the event the Company or the Surviving Corporation or any of
their respective successors (i) is consolidated with or merges into another
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any other person in a single transaction or a series of
related transactions, then in each such case the Parent shall make or cause to
be made proper provision so that the successor or transferee of the Company or
the Surviving Corporation, as the case may be, shall comply in all material
respects with the terms of this Section 6.09.
6.10 Employee Benefits Matters.
(a) From and after the date of purchase of Shares pursuant to the
Offer, the Company or the Surviving Corporation, as applicable, will, and Parent
will cause the Company or the Surviving Corporation to, honor, in accordance
with their terms, all individual employment, severance and change of control
agreements between the Company and any officer, director or employee of the
Company including, without limitation, bonuses, incentive or deferred
compensation in existence on the date hereof and disclosed to Parent in Schedule
4.12 of the Company Disclosure Letter.
(b) From and after the date of purchase of Shares pursuant to the
Offer, the Company or the Surviving Corporation, as applicable, will, and Parent
will cause the Company, the Surviving Corporation or the Company Benefit Plans
to, provide or pay when due to employees and former employees of the Company all
benefits and compensation pursuant to the Company Benefit Plans, policies and
arrangements in effect on the date hereof and disclosed to Parent in Section
4.12 of the Company Disclosure Letter (other than with respect to stock and
stock-based plans or programs, including stock grants, options to purchase
stock, stock investment alternatives, or other stock-based benefits or awards)
earned or accrued through, and to which such individuals are entitled as of, the
Effective Time (or such
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later time as such Company Benefit Plans as in effect at the Effective Time are
terminated or canceled by the Surviving Corporation subject to compliance with
this Section 6.10).
(c) For a period ending two (2) years after the Effective Time, the
Company or the Surviving Corporation, as applicable, will, and Parent, will
cause the Company or the Surviving Corporation to, provide to Company employees
and former employees benefits under all Company Benefit Plans, programs and
arrangements that provide benefits which are no less favorable in the aggregate
to such persons than those provided to such persons under the Company Benefit
Plans, programs and arrangements of the Company in effect on the date hereof and
disclosed to Parent in Schedule 4.12 of the Company Disclosure Letter (other
than with respect to the agreements subject to Section 6.10 (a) above and other
than with respect to stock and stock-based plans or programs, including stock
grants, options to purchase stock, stock investment alternatives, or other
stock-based benefits or awards).
(d) Nothing in this Agreement shall require the continued employment
of any person, and except as expressly set forth in this Section 6.10, no
provision of this Agreement shall prevent Parent or Surviving Corporation from
amending or terminating any Company Benefit Plan.
6.11 Payment of Bonuses. Parent shall cause the Company to pay, in
accordance with their respective terms, all bonuses, payments of incentive
compensation pursuant to the Company's incentive compensation plans, severance
payments and other payments as disclosed on Schedule 4.12 of the Company
Disclosure Letter in accordance with the terms hereof.
ARTICLE VII
CONDITIONS TO THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, unless waived by all parties at or
prior to the Closing:
(a) the Purchaser shall have accepted for payment, and paid for,
Shares validly tendered and not withdrawn pursuant to the Offer representing
(together with Shares otherwise owned by Parent or the Purchaser) not less than
50.1% of the then outstanding Shares;
(b) this Agreement and the Merger shall have been approved and
adopted by the requisite vote or consent, if any, of the shareholders of the
Company required by the NYBCL; and
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(c) no order, statute, rule, regulation, execution order, stay,
decree, judgment, or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which prohibits
or restricts the consummation of the Merger.
7.02 Conditions to the Obligations of Parent and the Purchaser to
Effect the Merger. The obligations of Parent and the Purchaser to effect the
Merger shall be further subject to satisfaction of the condition, unless waived
by Parent, that all outstanding Options shall have been surrendered and canceled
prior to or simultaneously with the Effective Time.
ARTICLE VIII
CLOSING
8.01 Time and Place. The closing of the Merger (the "Closing") shall
take place at the offices of Latham & Watkins, 885 Third Avenue, New York, New
York, at 10 a.m. local time on a date to be specified by the parties which shall
be no later than the third Business Day after the date that all of the closing
conditions set forth in Article VII have been satisfied or waived (if waivable)
unless another time, date or place is agreed upon in writing by the parties
hereto. The date on which the Closing actually occurs is herein referred to as
the "Closing Date."
8.02 Filings at the Closing. At the Closing Date, the Purchaser
shall cause the Certificate of Merger to be filed and recorded with the
Secretary of State of the State of New York, in accordance with the provisions
of Section 904 or Section 905, as applicable, of the NYBCL and shall take any
and all other lawful actions and do any and all other lawful things necessary to
cause the Merger to become effective.
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
9.01 Termination. This Agreement may be terminated and the Offer (if
the Purchaser has not accepted Shares for payment) and the Merger may be
abandoned at any time prior to the Effective Time, whether prior to or after
approval of the Merger by the shareholders of the Company, if required:
(a) by mutual written consent of Parent, the Purchaser and the
Company;
(b) by the Company if:
(i) the Purchaser shall have failed to commence (within the meaning
of Rule 14d-2(a) of the Exchange Act) the Offer within five Business Days of the
public announcement
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thereof unless the failure to commence the Offer shall be due to (A) the failure
of the Company (or any of its subsidiaries) to perform in any material respect
any of its obligations under this Agreement then required to be performed or (B)
any occurrence or circumstance which would result in the failure of any
condition to the Offer set forth in Annex A hereto;
(ii) the Purchaser shall have (A) terminated the Offer, (B) allowed
the Offer to expire without the purchase of any Shares thereunder in accordance
with the terms of this Agreement or (C) failed to accept Shares for payment
pursuant to the Offer on or prior to October 22, 1997 unless (I) such
termination or expiration or failure shall be due to the failure of any
condition set forth in (1) paragraph (iv), (vii), (viii) or (ix) (with respect
to any consent or approval required to be obtained by the Company as provided in
Annex A) of Annex A or paragraph (ii) of Annex A (otherwise than in
circumstances that would entitle the Company to terminate this Agreement
pursuant to Section 9.01(d)) or (2) paragraph (i) of Annex A unless the
Purchaser shall have failed to accept Shares for payment on or prior to October
31, 1997 or (II) the provisions of the proviso in Section 9.03(a) are
applicable, unless the Purchaser shall have failed to accept Shares for payment
on or prior to October 31, 1997;
(iii) prior to the purchase of Shares pursuant to the Offer, the
Purchaser shall have breached or failed to perform in any material respect any
of its obligations under this Agreement which obligation is required to be
performed at such time and such breach or failure materially delays consummation
of the Offer, or materially and adversely affects the ability of the Purchaser
and Parent to consummate the Offer and the Merger on substantially the terms set
forth in the Agreement;
(iv) if the representations and warranties of the Purchaser set
forth in this Agreement are not true and correct in all material respects at any
time prior to the expiration or termination of the Offer (except as to those
representations and warranties which are made as of a specified date, which
shall be true and correct as of such date) and such failure materially delays
consummation of the Offer, or materially and adversely affects the ability of
the Purchaser and Parent to consummate the Offer and the Merger on substantially
the terms set forth in this Agreement;
(v) prior to the purchase of Shares pursuant to the Offer, a
corporation, partnership, person or other entity or group (each a "Person")
shall have made a Superior Proposal and the Board, after duly considering advice
written or otherwise of the Company's outside counsel and financial advisors,
determines in good faith that it would be consistent with its fiduciary
responsibilities to approve or recommend such Superior Proposal, provided that
such termination under this clause (v) shall not be effective until payment of
the Termination Fee and Expenses in the manner required by Section 9.03 (a); or
(vi) the Minimum Condition is not satisfied or waived as
permitted by this Agreement upon final expiration of the Offer;
(c) by Parent and the Purchaser if:
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(i) due to any occurrence or circumstance which would result in a
failure to satisfy any of the conditions set forth in Annex A hereto, the
Purchaser shall have failed to commence (within the meaning of Rule 14d-2(a) of
the Exchange Act) the Offer within five Business Days of the public announcement
thereof;
(ii) as a result any of the conditions set forth in Annex A hereto
not having been satisfied, the Purchaser shall have (A) terminated the Offer, or
(B) failed to accept Shares for payment pursuant to the Offer on or prior to
October 22, 1997;
(iii) the Effective Time shall not have occurred on or prior to
November 30, 1997, due to a failure of any of the conditions to the obligations
of the Purchaser to effect the Merger set forth in Sections 7.01(b), 7.01(c) or
7.02 otherwise than as a result of a breach or default by Parent or the
Purchaser hereunder;
(iv) the Company shall have breached its obligations under
Section 6.08; or
(v) the Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9), in a manner adverse to the Purchaser, its
approval or recommendation of the Offer, this Agreement or the Merger or shall
have recommended or approved another tender or exchange offer or other
Acquisition Proposal (whether or not a Superior Proposal), or shall have adopted
any resolution to effect any of the foregoing.
(d) by Parent and the Purchaser or the Company if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger or the acceptance for
payment and payment for the Shares in the Offer and such order, decree, ruling
or other action is or shall have become nonappealable.
9.02 Effect of Termination. In the event of the termination of this
Agreement and the abandonment of the Offer and the Merger pursuant to Section
9.01, this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or shareholders, provided that no such termination shall relieve any of the
Company, Parent or the Purchaser, as the case may be, from liability for damages
arising (a) from any willful or intentional breach of this Agreement or (b) from
their obligations under Sections 4.21, 5.07, 6.03(b), this Section 9.02, Section
9.03 and Article X. If this Agreement is terminated as provided herein, each
party (the "Redelivering Party") upon request therefor shall redeliver all
documents, work papers and other materials obtained (whether before or after
execution of this Agreement) by the Redelivering Party from the requesting party
in connection with the transaction contemplated hereby, together with all copies
thereof in the possession of the Redelivering Party.
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9.03 Fees and Expenses. In recognition of the significant time
and expense necessarily expended and to be expended by Parent and the
Purchaser in negotiation of this Agreement and furtherance of the
transactions contemplated hereby,
(a) in the event that:
(i) the Company terminates this Agreement pursuant to Section
9.01(b)(v); or
(ii) prior to the final expiration date ("Expiration Date") of the
Offer, (A) an Acquisition Proposal, or interest in or intention to pursue an
Acquisition Proposal, has been publicly announced or publicly confirmed by any
person (other than Parent or the Purchaser) (whether by press release or
Exchange Act filing or otherwise), and (B) on or prior to the 180th day
following the initial expiration date of the Offer (I) the Company enters into
any agreement with respect to any Acquisition Proposal or (II) any Acquisition
Proposal is commenced by way of tender offer or exchange offer;
then, in either such event, the Company shall pay to Parent a fee in the amount
of $1,100,000 (the "Termination Fee"), plus Expenses (as defined below), at the
time and manner hereinafter set forth. Notwithstanding the foregoing, no
Termination Fee will be payable in the case of clause (ii) above if the
Purchaser has not, prior to the Expiration Date, waived the Minimum Condition so
as to provide that the minimum number of Shares that must be validly tendered as
a condition to the Purchaser's acceptance for payment of Shares pursuant to the
Offer, together with the Contributed Shares, shall be no greater than 66-2/3% of
the outstanding Shares; provided, however, that in the event of such reduction
in the Minimum Condition, the Purchaser shall be entitled to extend the Offer
from time to time, for so long as the Bank Standstill Letter remains in effect,
but in no event beyond October 31, 1997, until Shares validly tendered (and not
withdrawn) in the Offer, together with the Contributed Shares, represent at
least 90% of the outstanding Shares. The Termination Fee and Expenses shall be
paid in immediately available funds concurrently with any termination described
only in clause (i) above. Expenses and the Termination Fee, if payable, shall be
paid only in the event of, and concurrently with, the consummation of any such
Acquisition Proposal in the case of clause (ii) above immediately in available
funds.
(b) if (i) this Agreement is terminated by the Purchaser and Parent
pursuant to Section 9.01(c)(i) or (ii) as a result of the Company's failure to
satisfy the condition set forth in paragraph (iv) of Annex A hereto and (ii) the
Company's breach of any of its representations and warranties under the
Agreement and/or its failure to perform its material obligations, covenants or
agreements under this Agreement resulting in the failure to satisfy such
condition set forth in paragraph (iv) of Annex A, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect,
the Company shall reimburse Parent and Purchaser for all Expenses. Expenses
payable pursuant to this Section 9.03(b)
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shall be paid in immediately available funds within one Business Day following
such termination.
(c) Upon the occurrence of any Event under clause (a) or (b) of this
Section 9.03 entitling Purchaser and Parent to payment of their Expenses,
Purchaser and Parent shall promptly provide the Company with invoices or other
reasonable evidence of the Expenses upon request, and Parent shall forthwith
return any portion of Expenses reimbursed by the Company as to which such
invoices or other evidence are not received.
(d) For purposes of this Agreement (i) "Material Adverse Effect"
means a material adverse effect on the business, assets, financial condition,
cash flow or results of operation of the Company and its subsidiaries,
considered on a consolidated basis, or a material adverse affect on the ability
of the Company, on the one hand, or Parent and Purchaser, on the other, to
consummate the transactions contemplated by this Agreement, provided, however,
that the Company's breach of its representation under Article IV that no more
than fifteen Real Property Leases require consents which have not been obtained
shall not be deemed to have such a Material Adverse Effect; and (ii) "Expenses"
shall mean out-of-pocket expenses incurred by Parent or the Purchaser or on
their behalf in connection with the Offer and the Merger and the consummation of
the transactions contemplated by this Agreement, (including, without limitation,
reasonable attorneys' fees and disbursements and other charges, solicitation
agent and depository fees and expenses, fees payable to the Lenders not paid by
the Company and accountants and filing fees and printing costs) up to a maximum
amount of $900,000.
ARTICLE X
MISCELLANEOUS
10.01 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties and agreements of the parties
contained in Sections 2.06, 3.01, 3.02 (but only to the extent that such Section
expressly relates to actions to be taken after the Effective Time), 3.03, 3.04,
3.05, 4.21, 6.05, 6.08, 6.09, 6.10, 6.11 and Article X hereof, shall survive the
consummation of the Offer and the Merger. The agreements of the parties
contained in Sections 4.21, 5.07, 6.03(b), 9.02, 9.03 and Article X shall
survive any termination of this Agreement. If this Agreement shall terminate
after acceptance for payment by the Purchaser of Shares pursuant to the Offer,
but prior to the Effective Time, the agreement of the parties contained in
Sections 6.09, 6.10 and 6.11 shall also survive the termination of this
Agreement, and Parent shall, or shall cause the Purchaser to, cause Article
NINTH of the Certificate of Incorporation and Article VII of the Company's
By-laws to be amended as provided in Exhibit A and Exhibit B, respectively. All
other representations, warranties, agreements and covenants in this Agreement
shall not survive the consummation of the Offer and the Merger or the
termination of this Agreement.
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10.02 Amendment and Modification. Subject to Section 1.03(c), if
applicable, and subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Parent (for itself and the
Purchaser) and the Company at any time prior to the Effective Time with respect
to any of the terms contained herein executed by duly authorized officers of the
respective parties, except that after the earlier of (a) the purchase by the
Purchaser of a majority of the Shares on a fully diluted basis, and (b) the
meeting of shareholders to approve the Merger contemplated by this Agreement,
the price per Share to be paid pursuant to this Agreement to the holders of
Shares shall in no event be decreased and the form of consideration to be
received by the holders of such Shares in the Merger shall in no event be
altered without the approval of such holders.
10.03 Waiver of Compliance; Consents. At any time prior to the
Effective Time, subject to Section 1.03(c) if applicable, the parties hereto may
extend the time for performance of any of the obligations or other acts or waive
any inaccuracies in the representations and warranties contained herein or in
the documents delivered pursuant hereto. Any failure of Parent (for itself and
the Purchaser), on the one hand, or the Company, on the other hand, to comply
with any obligation, covenant, agreement or condition herein may be waived in
writing by Parent (for itself and the Purchaser) or the Company, 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 or any
extensions, such consent or extension shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 10.03.
10.04 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
10.05 Governing Law; Submission to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of New York
without regard to its conflicts of laws rules. Each party hereto hereby (i)
irrevocably and unconditionally submits in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the general jurisdiction of the state and federal courts
in the state of New York, and appellate courts thereof and (ii) consents that
any action or proceeding may be brought in such courts and waives any objection
that it may now or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same.
10.06 Notices. All notices and other communications hereunder shall
be in writing (except as otherwise specified in Section 6.08(b)) and shall be
deemed given if delivered personally, or mailed by registered or certified mail
(return receipt requested) or by
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overnight courier service or transmitted by facsimile (effective upon
confirmation of transmission) 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 the Company, to:
Ground Round Restaurants, Inc.
35 Braintree Hill Office Park
P.O. Box 9078
Braintree MA 02184-9078
Attention: President
Fax: (617) 380-3100
with copies to:
Kane Kessler, P.C.
1350 Avenue of the Americas
26th Floor
New York, New York 10019
Attention: Jeffrey S. Tullman, Esq.
Fax: (212) 245-3009
(b) if to Parent or the Purchaser, to:
GRR Holdings, LLC
c/o Boston Ventures Management, Inc.
21 Custom House Street
Boston, MA 02110
Attention: Barbara M. Ginader
Fax: (617) 737-3709
with copies to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Attention: Erica H. Steinberger, Esq.
Fax: (212) 751-4864
10.07 Entire Agreement, Assignment Etc.. This Agreement, which
hereby incorporates the Company Disclosure Letter, and the Confidentiality
Agreement embodies the entire agreement and understanding of the parties hereto
in respect of the subject matter
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hereof. This Agreement supersedes all prior agreements and understanding of the
parties with respect to the subject matter hereof other than the Confidentiality
Agreement. This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and Permitted Assigns, but neither this Agreement nor any of the rights,
interest or obligations hereunder shall be assigned by any party hereto, except
that Parent shall have the right to assign the rights of the Purchaser to any
other (directly or indirectly) wholly-owned subsidiary of Parent (the "Permitted
Assigns").
10.08 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
10.09 Headings; Certain Definitions. The Articles and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not affect in any way the
meaning or interpretation of this Agreement.
10.10 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Sections 2.03, 2.04, 6.09, 6.10 and 6.11 (each of which is
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
[Signatures on the following page]
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
GRR HOLDINGS, LLC
By: Boston Ventures Limited Partnership V,
its Managing Member
By: Boston Ventures Company V, L.L.C.,
its General Partner
By: /s/Barbara M. Ginader
-----------------------------------
Name: Barbara M. Ginader
Title: Managing Director
GRR MERGER CORP.
By: /s/Barbara M. Ginader
-----------------------------------
Name: Barbara M. Ginader
Title: President
GROUND ROUND RESTAURANTS, INC.
By: /s/Daniel R. Scoggin
-----------------------------------
Name: Daniel R. Scoggin
Title: Chairman, President
and Chief Executive Officer
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ANNEX A
The capitalized terms used herein have the meanings set forth in the
Agreement and Plan of Merger to which this Annex A is attached.
Notwithstanding any other provision of the Agreement and Plan of
Merger to which this Annex A is attached (the "Merger Agreement") or the Offer,
the Purchaser shall not be required to accept for payment, purchase or pay for
any Shares tendered pursuant to the Offer, may postpone the acceptance for
payment of and payment for any tendered Shares and may terminate or, subject to
the terms of the Merger Agreement, amend the Offer if (a) there shall not have
been validly tendered to the Purchaser (and not withdrawn) that number of Shares
which, when aggregated with the Contributed Shares, represents at least 90% of
the Shares outstanding (the "Minimum Condition"); or (b) on or after the date of
the Merger Agreement and at or before the time of acceptance for payment of any
such Shares (whether or not any Shares have theretofore been accepted for
payment or paid for pursuant to the Offer) any of the following shall occur
(each of paragraphs (i) through (ix) providing a separate and independent
condition to the Purchaser's obligation pursuant to the Offer):
(i) any waiting period applicable to the Offer and the
Merger pursuant to the HSR Act shall not have expired or been
terminated; or
(ii) there shall have been instituted or be pending any
action, proceeding, application, claim or counterclaim by any
government or governmental authority or agency, domestic or foreign,
before any court or governmental regulatory or administrative
agency, authority or tribunal, domestic or foreign (a "Claim"),
challenging the acquisition by Parent or the Purchaser of the
Shares, restraining or prohibiting the making or consummation of the
Offer or the Merger or seeking to obtain from Parent or the
Purchaser any damages that would result in a Material Adverse Effect
if such were assessed against the Company, restraining or
prohibiting, or limiting in any material respect, the ownership or
operation by Parent or the Purchaser of any material portion of the
business or assets of the Company or any of its subsidiaries or
seeking to compel Parent or the Purchaser to dispose of or forfeit
material incidents of control of all or any material portion of the
business or assets of the Company or any of its subsidiaries or
imposing limitations on the ability of Parent or the Purchaser of
effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired
or owned by Parent or the Purchaser on all matters properly
presented to the Company's shareholders; or seeking to require
divestiture by Parent or the Purchaser of any Shares; or
(iii) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, promulgated, entered, enforced or
deemed applicable to the Offer, the Merger or the Merger Agreement,
or any other action shall have been taken by any government,
governmental authority or court, domestic or foreign,
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other than the routine application to the Offer or the Merger of
waiting periods under the HSR Act, and other than relating to the
Liquor License Approvals, which are addressed in paragraph (ix)
below, that has, or has a substantial likelihood of resulting in,
any of the consequences referred to in paragraph (ii) above; or
(iv) the Company shall have breached or failed to perform in
any material respect any of its material obligations, covenants or
agreements contained in the Merger Agreement, or any of the
representations and warranties of the Company set forth in the
Merger Agreement shall not have been true and correct in any
material respect when made or, except for any representations and
warranties made as of a specific date, shall have ceased to be true
and correct in any material respect (or, in the case of
representations and warranties that are specifically qualified as to
materiality, shall not have been true and correct when made or shall
have ceased to be true and correct) and if curable, the Company
shall have failed to cure such breach within three (3) Business Days
after written notice from Purchaser of such failure; or
(v) there shall have occurred (A) (1) any general suspension
of trading in, or limitation on prices for, securities on the New
York Stock Exchange, Inc., any other national securities exchange or
NASDAQ, (2) the declaration of a banking moratorium or any mandatory
suspension of payments in respect of banks in the United States (3)
the commencement of or escalation of a war, armed hostilities or
other international or national calamity directly or indirectly
involving the United States, (4) in the case of any of the foregoing
existing on August 29, 1997, a material acceleration or worsening
thereof, and (B) such occurrence has a Material Adverse Effect; or
(vi) the Merger Agreement shall have been terminated in
accordance with its terms; or
(vii) the Company's Board of Directors shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) its approval
or recommendation of the Offer, the Merger Agreement or the Merger
or shall have approved or recommended any other tender or exchange
offer or other Acquisition Proposal, which, in the sole judgment of
Parent in any such case, and regardless of the circumstances
(including any action or omission by Parent) giving rise to such
condition, makes it inadvisable to proceed with such acceptance for
payment, except where as a result of the Company's receipt of an
unsolicited Acquisition Proposal from, or commencement of an
unsolicited tender or exchange offer by, a third party (A) the
Company issues to its shareholders a communication that contains
only the statements permitted by Rule 14d-9(e) under the Exchange
Act (and does not otherwise withdraw, modify or amend its approval
or recommendation of the Offer, the Merger or the Merger Agreement)
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and (B) within five Business Days of issuing such communication the
Company publicly reconfirms its approval and recommendation of the
Offer, the Merger and the Merger Agreement; or
(viii) either (A) any change or development, outside of the
ordinary course of business consistent with past practice of the
Company, not disclosed in the Company Disclosure Letter shall have
occurred in the financial condition, assets, capitalization,
prospects, shareholders' equity, licenses, permits, business or
results of operations of the Company and its subsidiaries which in
the reasonable judgment of the Purchaser is or is likely,
individually or in the aggregate, to be materially adverse to the
Company or any of its subsidiaries taken as a whole, or the
Purchaser shall become aware of any fact (including, but not limited
to, any such change or development) which is likely to have
materially adverse significance with respect to the Company and its
subsidiaries taken as a whole; provided, however, that no change,
development or fact shall be deemed to be materially adverse for the
purpose of this clause (A) unless, individually or when combined
with all other changes, developments or facts, it is, in the
reasonable judgment of the Purchaser, likely to result in losses
(after taking into account any amounts recovered or insurance
proceeds receivable by the Company in compensation for such losses)
in excess of $4,500,000, or (B) the average gross sales of the
Company as reported by the Company in any 21 day period after the
date of the Merger Agreement shall be less than $3,000,000 per week;
or
(ix) (A) the Company and/or the Purchaser shall not have
obtained (1) any Liquor License Approval required to be obtained
prior to Parent's and the Purchaser's obtaining control of the
Company through the Purchaser's acceptance for payment of Shares
pursuant to the Offer (or Parent and the Purchaser shall not have
made arrangements reasonably satisfactory to them to allow any
Liquor License subject to any such Liquor License Approval to
continue in full force and effect following consummation of the
Offer and the Merger pending receipt of such Liquor License
Approval), other than any Liquor License Approvals with respect to
Liquor Licenses that, individually or in the aggregate, cover
restaurant operations (I) generating, individually or in the
aggregate, for the three months ended June 30, 1997, average weekly
gross food and beverage revenues of less than $300,000 and (II) with
average profit after controllables in any 21 day period after the
date of the Merger Agreement which, when deducted from the average
profit after controllables of the Company in the same 21 day period,
would not result in such average profit after controllables of the
Company totaling less than $540,000 per week, or (2) any consent or
approval which is legally required to be obtained prior to
consummation of the Offer and the Merger and was not disclosed in
the Company Disclosure Letter which, if not obtained, would,
individually or in the aggregate, have a Material Adverse Effect, or
(B) Parent and the Purchaser shall not have obtained continuing
assurances from the
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appropriate authority in any of the Commonwealth of Massachusetts,
State of New York or State of Ohio, or otherwise made arrangements
with such authority, satisfactory to Parent and the Purchaser in
their sole discretion, that there is no legal impediment to their
obtaining control of the Company under such Commonwealth's or
State's tied-house statute (see Section 16 of the Offer to
Purchase).
The foregoing conditions are for the sole benefit of the Purchaser
and may be asserted by the Purchaser regardless of the circumstances (including
any action or inaction by Parent or the Purchaser) giving rise to any such
condition and may be waived by the Purchaser, in whole or in part in its sole
discretion. The failure by the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
such right with respect to any particular facts or circumstances shall not be
deemed a waiver with respect to any other facts or circumstances, and each such
right will be deemed an ongoing right which may be asserted at any time and from
time to time.
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EXHIBIT A
The Restated Certificate of Incorporation is hereby amended by
deleting Article NINTH in its entirety and substituting the following new
Article NINTH in lieu thereof:
"NINTH: (a) To the fullest extent permitted by the New York Business
Corporation Law as exists on the date hereof, or as it may hereafter be
amended, no director or officer of the Corporation shall be liable to
the Corporation or its shareholders for damages for any breach of duty
as a director or officer.
(b) The Corporation shall, to the fullest extent permitted by
applicable law, as amended from time to time, indemnify any present or
former officer or director of the Corporation or the personal
representatives thereof, made or threatened to be made a party in any
civil, criminal, administrative or investigative action, suit or
proceeding (other than any action, suit or proceeding brought by such
person except as authorized by the Corporation's Board of Directors or
to enforce such persons indemnification rights under this Article NINTH
or the Bylaws of the Corporation), by reason of the fact that he, his
testator or intestate is or was a director or officer of the
Corporation, or served any other corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise in any
capacity at the request of the Corporation (collectively, "Actions"),
against judgments, fines (including excise tax assessed on such a
person in connection with service to an employee benefit plan), amount
paid in settlement and expenses, including without limitation, court
costs, attorneys' fees and disbursement and those of accountants and
other experts and consultants incurred as a result of such Action.
(c) Expenses (including attorneys' fees) incurred by an
officer or director in defending any Action shall be paid by the
Corporation in advance of the final disposition of such Action upon
receipt of an undertaking by or on behalf of such director or officer
to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation authorized in this
Article NINTH, and shall be paid by the Corporation within twenty days
of a written request therefor by a director or officer accompanied with
appropriate documentation supporting such request, unless the Board of
Directors of the Corporation acting in good faith affirmatively
determines that the acts of such director or officer were committed in
bad faith or were the result of active and deliberate dishonesty and
were material to the cause of action for which the director is being
sued, in which case the Corporation is not required to pay expenses in
advance of adjudication of such suit.
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(d) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other sections of this Article NINTH
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any applicable law (including, but not limited to the New York
Business Corporation Law as it exists on the date hereof, or as it may
hereafter be amended), by-law, agreement, vote of shareholders or
disinterested directors or otherwise.
(e) For purposes of this Article NINTH, references to "the
Corporation" shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had power and authority to
indemnify its directors or officers so that any person who is or was a
director or officer of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position
under the provisions of this Article NINTH with respect to the
resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(f) This indemnification and advancement of expenses provided
by, or granted pursuant to, this Article NINTH shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of
the heirs, executors and administrators of such a person.
(g) Any repeal or modification of this Article NINTH by the
directors or the shareholders of the Corporation shall not adversely
affect the right or protection of a director or officer or former
director or officer of the Corporation existing at the time of such
repeal or modification.
(h) The foregoing provisions of this Article NINTH shall be
deemed to be a contract between the Corporation and each director and
officer who serves in such capacity at any time while this Article
NINTH and the relevant provisions of the New York Business Corporation
law, if any, are in effect, and, except to the extent otherwise
required by law, any repeal or modification thereof shall not affect
any rights or obligations then existing or thereafter arising with
respect to any state of facts then existing or any Actions theretofore
or thereafter brought or threatened based in whole or in part upon any
such state of facts."
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EXHIBIT B
Article VII of the By-Laws of the Corporation are hereby
amended by inserting the following new Section 13:
Section 13. Notwithstanding anything to the contrary contained
in ARTICLE XVI hereof, any repeal or modification of this ARTICLE VII by the
directors or the shareholders of the Corporation shall not adversely affect the
right or protection of a director or officer of the Corporation, who is serving
or has served in such capacity on or prior to August 29, 1997, existing at the
time of such repeal or modification.